<PAGE>

                                                                     EXHIBIT 3.1

                             ARTICLES OF AMENDMENT

                             AMENDING AND RESTATING
                            ARTICLES OF INCORPORATION
                                       OF
                               JAMESON INNS, INC.

     Pursuant to O.C.G.A.(S). 14-2-1006 of the Georgia Business Corporation
Code, Jameson Inns, Inc., a Georgia corporation, hereby submits the following
Articles of Amendment, amending and restating in their entirety the
Corporation's Articles of Incorporation:

                                    ARTICLE I

                                      Name
                                      ----

               The name of the Corporation is Jameson Inns, Inc..

                                   ARTICLE II

                           Registered Office and Agent
                           ---------------------------

     The initial registered office of the Corporation is located at 1950 Century
Blvd. N.E., Suite 25, Atlanta, Georgia 30345-3317. The initial registered agent
of the Corporation at such office is Steven A. Curlee.

                                   ARTICLE III

                                Principal Office
                                ----------------

     The mailing address of the initial principal office of the corporation is
1950 Century Boulevard, N.E., Suite 25, Atlanta, Georgia 30345-3317.

                                   ARTICLE IV

                            Authorized Capital Stock
                            ------------------------

     The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 20,100,000, consisting of
20,000,000 shares of common stock, par value $.10 per share (the "Common Stock")
and 100,000 shares of preferred stock, par value $1.00 per share (the "Preferred
Stock").

     The following is a description of each of the classes of stock of the
Corporation and a statement of the powers, preferences and rights of such stock,
and the qualifications, limitations and restrictions thereof:

<PAGE>

     A. Authority of the Board of Directors. The Board of Directors of the
        -----------------------------------
Corporation shall be authorized, without action by the stockholders, to issue
such Preferred Stock, from time to time, in one or more series, and each series
shall be known and designated by such designations as may be stated and
expressed in a resolution or resolutions adopted by the Board of Directors of
the Corporation and as shall have been set forth in a certificate made,
executed, acknowledged, filed and recorded in the manner required by the laws of
the State of Georgia in order to make the same effective. For a period of five
years from the date of the filing of these Articles of Incorporation, a
resolution of the Board of Directors authorizing a series of Preferred stock
shall have the approval of a majority of the Independent Directors as that term
is defined in Paragraph A of Article V hereof. Each series shall consist of such
number of shares as shall be stated and expressed in such resolution or
resolutions providing for the issue of Preferred Stock of such series together
with such additional number of shares as the Board of Directors by resolution or
resolutions may from time to time determine to issue as a part of such series.
All shares of any one series of such Preferred Stock shall be alike in every
particular except that shares issued at different times may accumulate dividends
from different dates. The Board of Directors shall have power and authority to
state and determine in the resolution or resolutions providing for the issue of
each series of Preferred Stock the number of shares of each such series
authorized to be issued, the voting powers (if any) and the designations,
preferences and relative, participating, optional or other rights appertaining
to each such series, and the qualifications, limitations or restrictions thereof
(including, but not by way of limitation, full power and authority to determine
as to the Preferred Stock of each such series, the rate or rates of dividends
payable thereon, the times of payment of such dividends, the prices and manner
upon which the same may be redeemed, the amount or amounts payable thereon in
the event of liquidation, dissolution or winding up of the Corporation or in the
event of any merger or consolidation of or sale of assets by the Corporation,
the rights (if any) to convert the same into, and/or to purchase, stock of any
other class or series, the terms of any sinking fund or redemption or purchase
account (if any) to be provided for shares of such series of the Preferred
Stock, restrictions on ownership and transfer to preserve tax benefits, and the
voting powers (if any) of the holders of any series of Preferred Stock generally
or with respect to any particular matter, which may be less than, equal to or
greater than one vote per share, and which may, without limiting the generality
of the foregoing, include the right, voting as a series by itself or together
with the holders of any other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the Corporation
generally or under such specific circumstances and on such conditions, as shall
be provided in the resolution or resolutions of the Board of Directors adopted
pursuant hereto, including, without limitation, in the event there shall have
been a default in the payment of dividends on or redemption of any one or more
series of Preferred Stock). The Board of Directors may from time to time
decrease the number of shares of any series of Preferred Stock (but not below
the number thereof then outstanding) by providing that any unissued shares
previously assigned to such series shall no longer constitute part thereof and
may assign such unissued shares to an existing or newly created series. The
foregoing provisions of this Paragraph A with respect to the creation or
issuance of series of Preferred Stock shall be subject to any additional
conditions with respect thereto which may be contained in any resolutions then
in effect which shall have theretofore been adopted in accordance with the
foregoing provisions of this Paragraph A with respect to any then outstanding
series of Preferred Stock.


                                       2

<PAGE>

         B.       Voting Rights.
                  -------------

                  1.   Common. Except as may otherwise be required by law, and
                       ------
         subject to the provisions of such resolution or resolutions as may be
         adopted by the Board of Directors pursuant to Paragraph A of this
         Article IV granting the holders of one or more series of Preferred
         Stock exclusive voting powers with respect to any matter, each holder
         of Common Stock shall have one vote in respect of each share of Common
         Stock held on all matters voted upon by the stockholders. No holder of
         any Common Stock shall have cumulative voting rights.

                  2.   Preferred. The Preferred Stock shall have no voting
                       ---------
         rights and shall have no rights to receive notice of any meetings
         except as required by law or expressly provided in the resolution
         establishing any series thereof.

                  3.   Voting Stock. "Voting Stock" is herein defined as the
                       ------------
         outstanding shares of capital stock of the Corporation that pursuant to
         the Articles of Incorporation are entitled to vote generally in the
         election of directors of the Corporation, voting together as a single
         class.

         C.       Terms of Common Stock. The Common Stock shall be subject to
                  ---------------------
the express terms of the Preferred Stock and any series thereof. Each share of
Common Stock shall be equal to every other share of Common Stock.

                  1    Dividend Rights. After the provisions with respect to
                       ---------------
         preferential dividends on any series of Preferred Stock (fixed in
         accordance with the provisions of Paragraph A of this Article IV), if
         any, shall have been satisfied and after the Corporation shall have
         complied with all the requirements, if any, with respect to redemption
         of, or the setting aside of sums as sinking funds or redemption or
         purchase accounts with respect to, any series of Preferred Stock (fixed
         in accordance with the provisions of Paragraph A of this Article IV),
         and subject further to any other conditions that may be fixed in
         accordance with the provisions of Paragraph A of this Article IV, then,
         and not otherwise, the holders of Common Stock shall be entitled to
         receive such dividends as may be declared from time to time by the
         Board of Directors.

                  2.   Rights Upon Liquidation. In the event of the voluntary or
                       -----------------------
         involuntary liquidation, dissolution or winding-up of the Corporation,
         after distribution in full of the preferential amounts, if any (fixed
         in accordance with the provisions of Paragraph A of this Article IV),
         to be distributed to the holders of Preferred Stock by reason thereof,
         the holders of Common Stock shall, subject to the additional rights, if
         any (fixed in accordance with the provisions of Paragraph A of. this
         Article IV), of the holders of any outstanding shares of Preferred
         Stock, be entitled to receive all of the remaining assets of the
         Corporation, tangible and intangible, of whatever kind available for
         distribution to stockholders ratably in proportion to the number of
         shares of Common Stock held by them.


                                       3

<PAGE>

               3.    Authorized Shares of Common and Preferred Stock. The
                     -----------------------------------------------
     authorized number of shares of Common Stock and Preferred Stock may,
     without a class or series vote, be increased or decreased from time to
     time by the affirmative vote of the holders of a majority of the
     combined voting power of the then-outstanding Voting Stock.

               4.    Restrictions on Ownership and Transfer to Preserve Tax
                     ------------------------------------------------------
     Benefit; Redemption of Excess Stock.
     ------------------------------------

                     (a)      Definitions. For the purposes of Paragraphs C and
                              -----------
               D of this Article IV, the following terms shall have the
               following meanings:

                     "Beneficial Ownership" shall mean ownership of Common Stock
               by a Person who is or would be treated as an owner of such Common
               Stock either directly or constructively through the application
               of Section 544 of the Code, as modified by Section 856(h)(1)(B)
               of the Code. The terms "Beneficial Owner," "Beneficially Owns"
               and "Beneficially Owned" shall have the correlative meanings.

                     "Beneficiary" shall mean the beneficiary of the Trust as
               determined pursuant to subparagraph D.5 of this Article IV.

                     "Code" shall mean the Internal Revenue Code of 1986, as
               amended from time to time.

                     "Constructive Ownership" shall mean ownership of Common
               Stock by a Person who is or would be treated as an owner of such
               Common Stock either directly or constructively through the
               application of Section 318 of the Code, as modified by Section
               856(d)(5) of the Code. The terms "Constructive Owner,"
               "Constructively Owns" and "Constructively Owned" shall have the
               correlative meanings.

                     "Excess Stock" shall mean those shares of Common Stock
               Constructively Owned by a Person in excess of the Ownership
               Limit.

                     "Initial Public Offering" shall mean the sale of Common
               Stock pursuant to the Corporation's first effective registration
               statement for such Common Stock filed under the Securities Act of
               19ter [sic] would not result in the Corporation being "closely
               held" within the meaning of Section 856(h) of the Code, or would
               otherwise result in the Corporation failing to qualify as a REIT.

                     "NASDAQ" shall mean the National Association of Securities
               Dealers Automated Quotation National Market System.

                     "Ownership Limit" shall mean the lesser of: (i) with
               respect to Thomas W. Kitchin, not more than 20.75%, with respect
               to American Real Estate Investment Company, Ltd., not more than
               9.0%, and with respect to any other Person, not


                                       4

<PAGE>

          more than 6.75%, of the outstanding Common Stock (in value or in
          number of shares, whichever is more restrictive), or (ii) with respect
          to any Person (including those named in (i) above) who owns, directly
          or constructively (through the application of Section 318(a) of the
          Code, as modified by Section 856(d)(5) of the Code), 9.9% or more of a
          Person (in the case of a corporation, of the total combined total
          combined voting power of all classes of stock entitled to vote or the
          total number of shares of all classes of stock of such corporation
          and, in the case of any Person which is not a corporation, of the
          assets or net profits of such person), from which the Corporation
          derives gross income, not more than 9.9% of the total combined voting
          power of all classes of stock entitled to vote or of the number of
          shares of all classes of stock of the Corporation (the "Related Party
          Limit").

              "Purported Beneficial Transferee" shall mean, with respect to any
          purported Transfer which results in Excess Stock, the purported
          beneficial transferee or owner for whom the Purported Record
          Transferee would have acquired or owned shares of Common Stock, if
          such Transfer had been valid under subparagraph C.5(b) of this Article
          IV.

              "Purported Record Transferee" shall mean, with respect to any
          purported Transfer which results in Excess Stock, the record holder of
          the Common Stock if such Transfer had been valid under subparagraph
          C.5(b) of this Article IV.

              "REIT" shall mean a Real Estate Investment Trust under Section 856
          of the Code.

              "Transfer" shall mean any sale, transfer, gift, assignment, devise
          or other disposition of Common Stock, including (i) the granting of
          any option or entering into any agreement for the sale, transfer or
          other disposition of Common Stock, or (ii) the sale, transfer,
          assignment or other disposition of any securities (or rights
          convertible into or exchangeable for Common Stock), whether voluntary
          or involuntary, whether of record or beneficially or Beneficially or
          Constructively (including but not limited to transfers of interests in
          other entities which results in changes in Beneficial or Constructive
          Ownership of Common Stock), and whether by operation of law or
          otherwise.

              "Trust" shall mean the trust created pursuant to subparagraph D.1
          of this Article IV.

              "Trustee" shall mean the Corporation as Trustee for the Trust, and
          any successor trustee appointed by the Corporation.


                                        5

<PAGE>

             (b)   Restriction on Ownership and Transfer.
                   -------------------------------------

             (i)   Except as provided in subparagraph C.4(i) of this Article IV,
     from and after the date of the Initial Public Offering, no Person shall
     Beneficially Own or Constructively Own Common Stock in excess of the
     Ownership Limit.

             (ii)  Except as provided in subparagraph C.4(i) of this Article IV,
     from the date of the Initial Public Offering, any Transfer (whether or not
     such Transfer is the result of a transaction entered into through NASDAQ),
     that, if effective, would result in any Person Beneficially Owning Common
     Stock in excess of the Ownership Limit shall be void ab initio as to the
                                                          -- ------
     Transfer of such Common Stock which would be otherwise Beneficially Owned
     by such Person in excess of the Ownership Limit; and the intended
     transferee shall acquire no rights in such Common Stock.

             (iii) Except as provided in subparagraph C.4(i) of this Article IV,
     from and after the date of the Initial Public Offering, any Transfer
     (whether or not such Transfer is the result of a transaction entered into
     through the NASDAQ) that, if effective, would result in any Person
     Constructively Owning Common Stock in excess of the Ownership Limit shall
     be void ab initio as to the Transfer of such Common Stock which would be
             -- ------
     otherwise Constructively Owned by such Person in excess of the Ownership
     Limit; and the intended transferee shall acquire no rights in such Common
     Stock.

             (iv)  Except as provided in subparagraph C.4(i) of this Article IV,
     from and after the date of the Initial Public Offering, any Transfer
     (whether or not such Transfer is the result of a transaction entered into
     through the NASDAQ) that, if effective, would result in the Common Stock
     being beneficially owned by less than 100 Persons (determined without
     reference to any rules of attribution) shall be void ab initio as to the
                                                          -- ------
     Transfer of such Common Stock which would be otherwise beneficially owned
     by the transferee; and the intended transferee shall acquire no rights in
     such Common Stock.

             (v)   Notwithstanding any other provisions contained in this
     Article IV, from and after the date of the Initial Public Offering, any
     Transfer (whether or not such Transfer is the result of a transaction
     entered into through the NASDAQ) or other event that, if effective, would
     result in the Corporation being "closely held" within the meaning of
     Section 856(h) of the Code, or would otherwise result in the Corporation
     failing to qualify as a REIT (including, but not limited to, a Transfer or
     other event that would result in the Corporation owning (directly or
     Constructively) an interest in a tenant that is described in Section
     856(d)(2)(B) of the Code if the income derived by the Corporation from such
     tenant would cause the Corporation to fail to satisfy any of the gross
     income requirements of Section 856(c) of the Code), shall be void ab initio
                                                                       -- ------
     as to the Transfer of the Common Stock or other event which would cause the
     Corporation to be "closely held" within the meaning of Section 856(h) of
     the Code or would otherwise result in the


                                       6

<PAGE>

     Corporation failing to qualify as a REIT; and the intended transferee or
     owner or Constructive or Beneficial Owner shall acquire or retain no rights
     in such Common Stock.

             (c) Common Stock Deemed Excess Stock. If, notwithstanding the other
                 --------------------------------

     provisions contained in this Article IV, at any time after the date of the
     Initial Public Offering, there is a purported Transfer (whether or not such
     Transfer is the result of a transaction entered into through the NASDAQ),
     change in the capital structure of the Corporation or other event such that
     one or more of the restrictions on ownership and transfers described in
     subparagraph C.5(b), above, has been violated, then the Common Stock being
     Transferred (or in the case of an event other than a Transfer, the Common
     Stock owned or Constructively Owned or Beneficially Owned) which would
     cause one or more of the restrictions on ownership or transfer to be
     violated (rounded up to the nearest whole share) shall be deemed Excess
     Stock effective as of the closed [sic] of business on the business day
     prior to the date of such Transfer or other event.

             (d) Remedies For Breach. If the Board of Directors or its designees
                 -------------------

     shall at any time determine in good faith that a Transfer or other event
     has taken place in violation of subparagraph C.5(b) of this Article IV or
     that a Person intends to acquire, has attempted to acquire or may acquire
     direct ownership, beneficial ownership (determined without reference to any
     rules of attribution), Beneficial Ownership or Constructive Ownership of
     any shares of the Corporation in violation of subparagraph C.5(b) of this
     Article IV, the Board of Directors or its designees shall take such action
     as it deems advisable to refuse to give effect to or to prevent such
     Transfer or other event, including, but not limited to, refusing to give
     effect to such Transfer or other event on the books of the Corporation or
     instituting proceedings to enjoin such Transfer or other event.

             (e) Notice of Restricted Transfer. Any Person who acquires or
                 -----------------------------

     attempts to acquire Common Stock or other securities in violation of
     subparagraph C.5(b) of this Article IV, shall immediately give written
     notice to the Corporation of such event and shall provide to the
     Corporation such other information as the Corporation may request in order
     to determine the effect, if any, of such Transfer or attempted Transfer or
     other event on the Corporation's status as a REIT.

             (f) Owners Required To Provide Information. From and after the date
                 --------------------------------------

     of the Initial Public Offering, each Person who is a Beneficial Owner or
     Constructive Owner of more than 5% of Common Stock must file an affidavit
     with the Corporation within 30 days after January 1st of each year
     containing information that the Corporation may require, in order to
     determine the Corporation's status as a REIT. From and after the date of
     the Initial Public Offering, each Person who is a beneficial owner or
     Beneficial Owner or Constructive Owner of any Common Stock and each Person
     (including the stockholder of record) who is holding Common Stock for a
     Beneficial Owner or


                                       7

<PAGE>

     Constructive Owner shall provide to the Corporation such information that
     the Corporation may request, in good faith, in order to determine the
     Corporation's status as a REIT.

              (g)   Remedies Not Limited. Nothing contained in this Article IV
                    --------------------
     (but subject to Paragraph E of this Article IV) shall limit the authority
     of the Board of Directors to take such other action as it deems necessary
     or advisable to protect the Corporation and the interests of its
     stockholders by preservation of the Corporation's status as a REIT.

              (h)   Ambiguity. In the case of an ambiguity in the application of
                    ---------
     any of the provisions of subparagraph C.4 of this Article IV, including any
     definition contained in subparagraph C.4(a), the Board of Directors shall
     have the power to determine the application of the provisions of this
     subparagraph C.4 with respect to any situation based on the facts known to
     it (subject, however, to the provisions of Paragraph E of this Article IV).

              (i)   Exceptions.
                    ----------

              (i)   Subject to subparagraph C.4(b)(v), the Board of Directors,
     in its sole and absolute discretion, may exempt a Person from the Ownership
     Limit if such Person is not an individual for purposes of Section 542(a)(2)
     of the Code and the Board of Directors obtains such representations and
     undertakings from such Person as are reasonably necessary to ascertain that
     no individual's Beneficial Ownership of such Common Stock will violate the
     Ownership Limit and such Person agrees that any violation of such
     representations or undertaking (or other action which is contrary to the
     restrictions contained in this subparagraph C.4 of this Article IV) or
     attempted violation will result in Excess Stock in accordance with
     subparagraph C.4(c) of this Article IV.

              (ii)  Subject to subparagraph C.4(b)(v), the Board of Directors,
     in its sole and absolute discretion, may exempt a Person from the
     limitation on a Person Constructively Owning Common Stock in excess of the
     Ownership Limit, if such Person does not and represents that it will not
     own, directly or constructively (through the application of Section 318(a)
     of the Code, as modified by Section 856(d)(5) of the Code), more than a
     9.9% interest (within the meaning of Section 856(d)(2)(B)) in a Person from
     whom the Corporation derives gross income and the Board of Directors
     obtains such representations and undertakings from such Person as
     reasonably necessary to ascertain this fact and such Person agrees that any
     violation or attempted violation will result in such Common Stock in excess
     of the Ownership Limit being deemed Excess Stock in accordance with
     subparagraph C.4(c) of this Article IV.

              (iii) Prior to granting any exception pursuant to subparagraph
     C.4(i)(i) or (ii) of this Article IV, the Board of Directors may require a
     ruling from the Internal Revenue Service, or an opinion of counsel, in
     either case in form and


                                       8

<PAGE>

          substance satisfactory to the Board of Directors in its sole
          discretion as it may deem necessary or advisable in order to determine
          or ensure the Corporation's status as a REIT; provided, however, that
                                                        --------  -------
          obtaining a favorable ruling or opinion shall not be required for the
          Board of Directors to grant an exception hereunder.

          5.  Legend. Each certificate for Common Stock shall bear the following
              ------
     legend:

          "The Corporation is authorized to issue two classes of capital stock
     which are designated as Common Stock and Preferred Stock. The Board of
     Directors is authorized, without action by the Corporation's stockholders,
     to determine the preferences, limitations and relative rights of the
     Preferred Stock before the issuance of any Preferred Stock. The Corporation
     will furnish, without charge, to any stockholder making a written request
     therefor, a copy of the Corporation's articles of incorporation and a
     written statement of the designations, relative rights, preferences and
     limitations applicable to each class of stock. Requests for such written
     statement may be directed to Jameson Inns, Inc., 1950 Century Blvd., N.E.,
     Suite 25, Atlanta, Georgia 30345-3317.

          The shares of Common Stock represented by this certificate are subject
     to restrictions on ownership and transfer for the purpose of the
     Corporation's maintenance of its status as a Real Estate Investment Trust
     under the Internal Revenue Code of 1986, as amended. No Person (other than
     Thomas W. Kitchin, his heirs, legatees and the personal representative of
     his estate, as such, and American Real Estate Investment Company, Ltd.) may
     own, Beneficially Own or Constructively Own Common Stock in excess of 6.75%
     (in value or in number of shares, whichever is more restrictive) of the
     outstanding Common Stock of the Corporation, with certain further
     restrictions and exceptions set forth in the Corporation's articles of
     incorporation. Any Person who attempts to own, Beneficially Own or
     Constructively Own Common Stock in excess of the above limitations must
     immediately notify the Corporation. All capitalized terms in this legend
     have the meanings defined in the Corporation's articles of incorporation.
     Transfers in violation of the restrictions described above may be void ab
                                                                            --
     initio.
     ------

          In addition, upon the occurrence of certain events, if the
     restrictions on ownership are violated, the Common Stock represented hereby
     may be redeemed or held in trust by the Corporation. The Corporation has an
     option to acquire Excess Stock under certain circumstances. The Corporation
     will furnish to the holder hereof upon request and without charge a
     complete written statement of the terms and conditions of the Excess Stock.
     Requests for such statement may be directed to Jameson Inns, Inc., 1950
     Century Blvd., N.E., Suite 25, Atlanta, Georgia 30345-3317.

          Capitalized terms used herein shall, where the context permits, have
     the same meaning assigned to such terms as are assigned in the
     Corporation's articles of incorporation."

          6.  Separability. If any provision of this Article IV or any
              ------------
     application of any such provision is determined to be invalid by any
     federal or state court having

                                        9

<PAGE>

     jurisdiction, the validity of the remaining provisions shall not be
     affected and other applications of such provision shall be affected only to
     the extent necessary to comply with the determination of such court.

     D.   Excess Stock.
          ------------

          1.   Ownership In Trust. Upon any purported Transfer (whether or not
               ------------------
     such Transfer is the result of a transaction entered into through the
     NASDAQ) that results in Excess Stock pursuant to subparagraph C.4(c) of
     this Article IV, such Excess Stock shall be deemed to have been transferred
     to the Corporation, as Trustee of a Trust for the exclusive benefit of such
     Beneficiary or Beneficiaries to whom an interest in such Excess Stock may
     later be transferred pursuant to subparagraph D.4. The Purported Record
     Transferee shall have no rights in such Excess Stock except the right to
     designate a transferee of such Excess Stock upon the terms specified in
     subparagraph D.4 of this Article IV. The Purported Beneficial Transferee
     shall have no rights in such Excess Stock except as provided in
     subparagraph D.4.

          2.   Dividend Rights. Excess Stock shall not be entitled to any
               ---------------
     dividends. Any dividend or distribution paid prior to the discovery by the
     Corporation that shares of Common Stock have been converted into Excess
     Stock shall be repaid to the Corporation upon demand.

          3.   Rights Upon Liquidation. Subject to the preferential rights of
               -----------------------
     the Preferred Stock, if any, as may be determined by the Board of Directors
     of the Corporation pursuant to Paragraph A of this Article IV, in the event
     of any voluntary or involuntary liquidation, dissolution or winding up of,
     or any distribution of the assets of, the Corporation, each holder of
     Excess Stock shall be entitled to receive, ratably with each other holder
     of Common Stock, that portion of the assets of the Corporation available
     for distribution to its stockholders as the number shares of Excess Stock
     held by such holder bears to the total number of shares of Common Stock
     then outstanding. The Corporation, as holder of the Excess Stock in trust,
     or if the Corporation shall have been dissolved, any trustee appointed by
     the Corporation prior to its dissolution, shall distribute ratably to the
     Beneficiaries of the Trust, when and if determined in accordance with
     subparagraph D.4 of this Article IV, any such assets received in respect of
     the Excess Stock in any liquidation, dissolution or winding up of, or any
     distribution of the assets of the Corporation.

          4.   Restrictions On Transfer; Designation of Beneficiary.
               ----------------------------------------------------

               (a) Excess Stock shall not be transferable. Subject to the last
          sentence of this clause (a), the Purported Record Transferee may
          freely designate a Beneficiary of an interest in the Trust
          (representing the number of shares of Excess Stock held by the Trust
          attributable to a purported Transfer that resulted in Excess Stock),
          if (i) the Excess Stock held in the Trust would not be Excess Stock in
          the hands of such Beneficiary and (ii) the Purported Beneficial
          Transferee does not receive a price for designating such Beneficiary
          that reflects a price per share

                                       10

<PAGE>

          for such Excess Stock that exceeds (x) the price per share such
          Purported Beneficial Transferee paid for the Common Stock in the
          purported Transfer that resulted in Excess Stock, or (y) if the
          Transfer or other event that resulted in Excess Stock was not a
          transaction in which the Purported Beneficial Transferee gave full
          value for such Excess Stock, a price per share equal to the Market
          Price on the date of the purported Transfer or other event that
          resulted in the issuance of Excess Stock. Upon such transfer of an
          interest in the Trust, the corresponding shares of Excess Stock in the
          Trust shall automatically cease to be Excess Stock and such Common
          Stock shall be transferred of record to the transferee of the interest
          in the Trust if such Common Stock would not be Excess Stock in the
          hands of such transferee. Prior to any transfer of any interest in the
          Trust, the Purported Record Transferee must give advance notice to the
          Corporation of the intended transfer and the Corporation must have
          waived in writing its purchase rights under subparagraph D.5 of this
          Article IV.

               (b) Notwithstanding the foregoing, if a Purported Beneficial
          Transferee receives a price for designating a Beneficiary of an
          interest in the Trust that exceeds the amounts allowable under
          subparagraph D.4(a) of this Article IV, such Purported Beneficial
          Transferee shall pay, or cause such Beneficiary to pay, such excess to
          the Corporation.

          5.   Purchase Right in Excess Stock. Notwithstanding the provisions of
               ------------------------------
     subparagraph D.4, Excess Stock shall be deemed to have been offered for
     sale to the Corporation, or its designee, at a price per share equal to the
     lesser of (i) the price per share in the transaction that resulted in such
     Excess Stock (or, if the Transfer or other event that resulted in such
     Excess Stock was not a transaction in which the Purported Beneficial
     Transferee gave full value for such Excess Stock, a price per share equal
     to the Market Price on the date of the purported Transfer or other event
     that resulted in Excess Stock) and (ii) the Market Price on the date the
     Corporation, or its designee, accepts such offer. The Corporation shall
     have the right to accept such offer for a period of ninety days after the
     later of (i) the date of the Transfer or other event which resulted in such
     Excess Stock and (ii) the date the Board of Directors determines in good
     faith that a Transfer or other event resulting in such Excess Stock has
     occurred, if the Corporation does not receive a notice of such Transfer or
     other event pursuant to subparagraph C.4(e) of this Article II. The
     Corporation may appoint a special trustee of the trust established under
     subparagraph D.1 for the purpose of consummating the purchase of Excess
     Stock by the Corporation.

     E.   Settlement. Nothing in this Article IV shall preclude the settlement
          ----------
of any transaction entered into through the NASDAQ.

                                       11

<PAGE>

                                    ARTICLE V

                                Classified Board
                                ----------------

     A.   The business and affairs of the Corporation shall be managed by a
Board of Directors. The number of directors of the Corporation shall be fixed
from time to time by or pursuant to a resolution passed by the Board of
Directors of the Corporation or by holders of at least a majority of the
then-outstanding Voting Stock or the bylaws. A majority of the directors must be
persons who are not officers, employees or members of management of the
Corporation or of any other corporation in which any officer, employee or member
of management of the Corporation holds more than five percent of the voting
stock, or any member of the immediate family of any of the foregoing
("Independent Directors").

     B.   The directors of the Corporation (other than any directors who may be
elected by holders of Preferred Stock as provided for pursuant to Article IV
hereof) shall be and are divided into three classes: Class I, Class II and Class
III. The number of directors in each class shall be as nearly equal as the
then-authorized number of directors constituting the Board of Directors permits.
Each director shall serve for a term ending on the date of the third Annual
Meeting following the Annual Meeting at which such director was elected;
provided, however, that each initial director in Class I shall serve for a term
--------  -------
ending on the date of the Annual Meeting held in 1994, each initial director in
Class II shall serve for a term ending on the date of the Annual Meeting held in
1995, and each initial director in Class III shall serve for a term ending on
the date ending on the date of the Annual Meeting held in 1996. The Board of
Directors shall have the power to appoint each initial director among the three
classes so as to keep the number of directors in each class as nearly equal as
possible. Any director who may be elected by holders of Preferred Stock as
provided for pursuant to Article IV hereof shall serve for a term ending on the
date of the next Annual Meeting following the Annual Meeting at which such
director was elected.

     C.   In the event of any increase or decrease in the authorized number of
directors:

          1. Each director then serving shall nevertheless continue as a
     director of the class of which he is a member until the expiration of his
     term or his prior death, retirement, resignation or removal; and

          2. Except to the extent that an increase or decrease in the authorized
     number of directors occurs in connection with the rights of holders of
     Preferred Stock to elect additional directors, the newly-created or
     eliminated directorships resulting from any increase or decrease shall be
     apportioned by the Board of Directors among the three classes so as to keep
     the number of directors in each class as nearly equal as possible.

     D.   Notwithstanding the provisions of Paragraphs B and C of this Article
V, each director shall serve until his successor is elected and qualified or
until his death, retirement, resignation or removal.

                                       12

<PAGE>

     E. Except as may otherwise be provided pursuant to Article IV hereof with
respect to any rights of holders of Preferred Stock to elect additional
directors or any agreement relating to the right to designate nominees for
election to the Board of Directors, should a vacancy in the Board of Directors
occur or be created (whether arising through death, retirement, resignation or
removal or through an increase but not a decrease in the number of authorized
directors), such vacancy shall be filled by the affirmative vote of a majority
of the remaining directors, even though less than a quorum of the Board of
Directors; provided, however, that any vacancies created by an increase pursuant
to a vote of the stockholders in the number of authorized directors shall be
filled by the affirmative vote of holders of a majority of the combined voting
power of the then-outstanding Voting Stock. A director so elected to fill a
vacancy shall serve for the remainder of the term of the class to which he was
elected.

     F. During any period which the holders of any series of Preferred Stock
have the right to elect additional directors as provided for or fixed pursuant
to the provisions of Article IV hereof, then upon commencement and for the
duration of the period during which such right continues (i) the then otherwise
total and authorized number of directors of the Corporation shall automatically
be increased by such specified number of directors, and the holders of such
Preferred Stock shall be entitled to elect the additional directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional director
shall serve until such director's successor shall have been duly elected and
qualified, or until such director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to his earlier
death, disqualification, resignation or removal. Except as otherwise provided by
the Board of Directors in the resolution or resolutions establishing such
series, whenever the holders of any series of Preferred Stock having such right
to elect additional directors are divested of such right pursuant to the
provisions of such stick, the terms of office of all such additional directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
directors, shall forthwith terminate and the total and authorized number of
directors of the Corporation shall be reduced accordingly.

     G. Directors may be removed from office only (i) for cause upon the
affirmative vote of holders of at least a majority of the combined voting power
of the then-outstanding Voting Stock, or (ii) without cause upon the affirmative
vote of holders of at least 75% of the voting power of the then-outstanding
Voting Stock.

     H. No action by the Board of Directors to relinquish the status of the
Corporation as a REIT (as defined in Article IV) shall be valid except upon the
affirmative vote of (i) a majority of the Independent Directors and (ii) holders
of at least a majority of the combined voting power of the then-outstanding
Voting Stock, present and voting at a meeting, voting together as a single
class.

                                   ARTICLE VI

                       Director Liability Indemnification
                       ----------------------------------

     A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of duty of care
or other duty as a director, except

                                       13

<PAGE>

for liability (i) for any appropriation, in violation of his duties, of any
business opportunity of the Corporation, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for any type of liability set forth in Section 14-2-831 of the Official
Code of Georgia Annotated, or (iv) for any transaction from which the director
derived an improper personal benefit. If the Official Code of Georgia Annotated
hereafter is amended to authorize the further elimination or limitation of the
liability of the directors, including, but not limited to the amendments
contained in Section 14-2-202(b)(4) of the Official Code of Georgia Annotated,
then the liability of a director shall be eliminated or limited to the fullest
extent permitted by the Official Code of Georgia Annotated, as amended. In
addition to the limitation on personal liability of directors provided herein,
the Corporation shall, to the fullest extent permitted by the Official Code of
Georgia Annotated: (x) indemnify its officers and directors and (y) advance
expenses incurred by such officers or directors in relation to any action, suit
or proceeding. Any repeal or modification of this Article VI by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability or right to indemnification or advancement
of expenses hereunder existing at the time of such repeal or modification.

                                   ARTICLE VII

                            Meetings of Stockholders
                            ------------------------

     Meetings of stockholders may be held within or without the State of
Georgia, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Georgia at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation. Elections of directors
need not be by written ballot unless the bylaws of the Corporation shall so
provide.

                                  ARTICLE VIII

                         Certain Powers of Stockholders
                         ------------------------------

     A.   Any action which may be taken by the stockholders at annual or special
meetings of stockholders may be taken by written consent.

     B.   Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the Chairman of the Board of
Directors, or by a majority of the members of the Board of Directors, or by a
committee of the Board of Directors which has been duly designated by the Board
of Directors and whose powers and authority, as provided in a resolution of the
Board of Directors or in the bylaws of the Corporation, include the power to
call such meetings. Special meetings of stockholders of the Corporation may be
called by holders of at least 25% of the combined voting power of the
then-outstanding Voting Stock.

                                       14

<PAGE>

                                   ARTICLE IX

                             Amendment Of The Bylaws
                             -----------------------

     In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors by the affirmative vote required under the bylaws is
expressly authorized to make, alter or repeal the bylaws of the Corporation.

                                    ARTICLE X

                               Further Amendments
                               ------------------

     Subject to the provisions hereof, the Corporation reserves the right at any
time, and from time to time, to amend, alter, repeal, or rescind any provision
contained herein, in the manner now or hereafter prescribed by law, and other
provisions authorized by the laws of the State of Georgia at the time in force
may be added or inserted, in the manner now or hereafter prescribed by law; and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors, or any other persons whomsoever by and pursuant to
these Articles of Incorporation in its present form or as hereafter amended are
granted subject to this reservation.

                                   ARTICLE XI

                            Designation of Committees
                            -------------------------

     In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized by a majority of the whole Board
of Directors, to designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution or in the bylaws of the
Corporation, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
provided, however, the bylaws may provide that in the absence or
disqualification of any member of such committee on committees, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.

                                   ARTICLE XII

                Rights to Purchase Securities and Other Property
                ------------------------------------------------

     The Board of Directors is expressly authorized to create and issue rights
entitling the holders of such rights to purchase from the Corporation shares of
capital stock or other securities or property. The Board of Directors shall
have, in its sole discretion, the authority to determine

                                       15

<PAGE>

the time at which and terms upon which such rights are to be issued and set
forth in the contracts or instruments that evidence such rights.

                                  ARTICLE XIII

           Relevant Factors to be Considered by the Board of Directors
           -----------------------------------------------------------

     In determining what is in the best interest of the Corporation, a director
of the Corporation shall consider the interests of the stockholders of the
Corporation and, in his or her discretion, may consider (i) the interests of the
Corporation's employees, suppliers, creditors and customers, (ii) the economy of
the nation, (iii) community and societal interests and (iv) the possibility that
these interests may be best served by the continued independence of the
Corporation."

                                   ARTICLE XIV

             The Amendment was duly adopted as of January 26, 1994.

                                   ARTICLE XV

     The foregoing Amendment was duly approved by the shareholders of the
Corporation in accordance with the provisions of O.C.G.A. (S) 14-2-1003.


     IN WITNESS WHEREOF, the undersigned executes these Articles of
Incorporation as of the 26th day of January, 1994.

                                                   /s/
                                          ----------------------------
                                          Thomas W. Kitchin, President

                                       16

<PAGE>

                              ARTICLES OF AMENDMENT
                                       OF
                               JAMESON INNS, INC.

        In accordance with Section 14-2-602 of the Georgia Business Corporation
Code (O.C.G.A. (S)14-2-602), Jameson Inns, Inc. (the "Corporation") hereby
delivers these Articles of Amendment to the Secretary of State for filing.

                                       I.

         The name of the Corporation is Jameson Inns, Inc.

                                       II.

A.       The Amended and Restated Articles of Incorporation of the Corporation
(the "Articles") shall be amended by adding the following:

                 DESIGNATION OF PREFERENCES, RIGHTS, PRIVILEGES
                       AND RESTRICTIONS OF PREFERRED STOCK

         1. Designation and Initial Number. One million two hundred thousand
            ------------------------------
(1,200,000) shares of the preferred stock of Jameson Inns, Inc. (the
"Corporation"), par value $1.00 per share (the "Preferred Stock"), are hereby
classified into one series which shall be designated the 9.25% Series A
Cumulative Preferred Stock (the "Series A Preferred Stock"). In the event any
shares of Series A Preferred Stock have not been sold to third parties on or
before April 18, 1998, such shares shall automatically without further action by
the Board of Directors of the Corporation cease to be shares of Series A
Preferred Stock and shall revert to the status of authorized unclassifed shares
of Preferred Stock.

         2. Dividends. Holders of shares of the Series A Preferred Stock are
            ---------
entitled to the payment of dividends only in accordance with the following:

         (a)     Holders of shares of the Series A Preferred Stock are entitled
to receive, when and as declared by the Board of Directors, out of funds legally
available for the payment of dividends, preferential cumulative cash dividends
at the rate of 9.25% per annum of the Liquidation Preference per share (as
defined below)

                                      -1-

<PAGE>

         (b)      Dividends on the Series A Preferred Stock shall be cumulative
from the date of original issue and shall be payable quarterly in arrears on or
before the 20th day of January, April, July and October of each year, or, if not
a business day, the next succeeding business day (each, a "Dividend Payment
Date"). Dividends payable on the Series A Preferred Stock for any partial
dividend period shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. Dividends shall be payable to holders of record as they
appear in the stock records of the Corporation at the close of business on the
applicable record date, which shall be the last business day of December, March,
June and September, respectively, or on such other date designated by the Board
of Directors of the Corporation for the payment of dividends that is not more
than 45 nor less than 20 days prior to the applicable Dividend Payment Date
(each, a "Dividend Record Date").

         (c)      No dividends on shares of Series A Preferred Stock shall be
declared by the Board of Directors or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to the Corporation's indebtedness,
prohibits such declaration, payment or setting apart for payment or provides
that such declaration, payment or setting apart for payment would constitute a
breach thereof or a default thereunder, or if such declaration or payment shall
be restricted or prohibited by law.

         (d)      Notwithstanding subparagraph (c) above, dividends on the
Series A Preferred Stock shall accrue whether or not the Corporation has
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared. Accrued but
unpaid dividends on the Series A Preferred Stock will not bear interest and
holders of the Series A Preferred Stock will not be entitled to any
distributions in excess of full cumulative distributions described above.

         (e)      Except as set forth in the next sentence, no dividends will be
declared or paid or set apart for payment on any capital stock of the
Corporation or any other series of Preferred Stock ranking, as to dividends, on
a parity with or junior to the Series A Preferred Stock (other than a dividend
in shares of the Corporation's common stock, par value $.10 per share (the
"Common Stock") or in shares of any other class of stock ranking junior to the
Series A Preferred Stock as to dividends and upon liquidation) for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment on the Series A Preferred Stock for all past dividend periods and
the then current dividend period. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series A
Preferred Stock and the shares of any other series of Preferred Stock ranking on
a parity as to dividends with the Series A Preferred Stock, all dividends
declared upon the Series A Preferred Stock and any other series of Preferred
Stock ranking on a parity as to dividends with the Series A Preferred Stock
shall be declared pro rata so that the amount of dividends declared per share of
Series A Preferred Stock and such other series of Preferred Stock shall in all
cases bear to each other the same ratio that accrued dividends per share on the
Series A Preferred Stock and such other series of Preferred Stock (which shall

                                      -2-

<PAGE>

not include any accrual in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) bear to
each other.

         (f)     Except as provided in subparagraph (e) above, unless full
cumulative dividends on the Series A Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period: (i) no dividends (other than in shares of Common
Stock or other shares of capital stock ranking junior to the Series A Preferred
Stock as to dividends and upon liquidation) shall be declared or paid or set
aside for payment, (ii) no other distribution shall be declared or made upon the
Common Stock or any other capital stock of the Corporation ranking junior to or
on a parity with the Series A Preferred Stock as to dividends or upon
liquidation, and (iii) no shares of Common Stock, or any other shares of capital
stock of the Corporation ranking junior to or on a parity with the Series A
Preferred Stock as to dividends or upon liquidation, shall be redeemed,
purchased or otherwise acquired for any consideration (or any moneys paid to or
made available for a sinking fund for the redemption of any such shares) by the
Corporation except by conversion into or exchange for other capital stock of the
Corporation ranking junior to the Series A Preferred Stock as to dividends and
upon liquidation or redemption for the purpose of preserving the Corporation's
qualification as a real estate investment trust under sections 856 through 860
of the Internal Revenue Code of 1986, as amended ("REIT"). Holders of shares of
the Series A Preferred Stock shall not be entitled to any dividend, whether
payable in cash, property or stock, in excess of full cumulative dividends on
the Series A Preferred Stock as provided above. Any dividend payment made on
shares of the Series A Preferred Stock shall first be credited against the
earliest accrued but unpaid dividend due with respect to such shares which
remains payable.

         3. Liquidation Preference. In the event of the liquidation, dissolution
            ----------------------
or winding up of the Corporation, whether voluntary or involuntary, the holders
of the Preferred Stock shall be entitled to be paid out of the assets of the
Corporation legally available for distribution to its shareholders a liquidation
preference of $25 per share (the "Liquidation Preference"), plus an amount equal
to any accrued and unpaid dividends to the date of payment, but without
interest, before any distribution of assets is made to holders of Common Stock
or any other class or series of capital stock of the Corporation that ranks
junior to the Series A Preferred Stock as to liquidation rights. Holders of
Series A Preferred Stock shall be entitled to written notice of any event
triggering the right to receive such Liquidation Preference. After payment of
the full amount of the Liquidation Preference, plus any accrued and unpaid
dividends to which they are entitled, the holders of Series A Preferred Stock
shall have no right or claim to any of the remaining assets of the Corporation.
The consolidation or merger of the Corporation with or into any other
corporation, trust or entity or of any other corporation with or into the
Corporation, or the sale, lease or conveyance of all or substantially all of the
property or business of the Corporation, shall not for purposes of this
provision be deemed to constitute a liquidation, dissolution or winding up of
the Corporation.

                                      -3-

<PAGE>

         4.  Redemption.  Shares of Series A Preferred Stock shall be redeemable
             -----------
only in accordance with the following:

         (a)      At any time prior to March 18, 2003, the Corporation may, at
its option, upon the occurrence of a Change of Control Event (as defined below)
redeem allof the outstanding Series A Preferred Stock in accordance with the
following:

         (i)      The redemption price for shares of Series A Preferred Stock
         purchased pursuant to this subparagraph (a) shall be the applicable
         redemption price reflected below, plus accrued and unpaid dividends (if
         any) to the date of repurchase. Such repurchase price (excluding
         dividends) shall be as follows:

                                                                     Purchase
             Notice of Redemption        Notice of Redemption Given  Price per
             --------------------        --------------------------  ---------
                   Given From                    Through             Share
                   ----------                    -------             -----

         Closing of Initial Offering     March 31, 1998..............  $26.05
         (as defined below)..........

         April 1, 1998...............    June 30, 1998...............   26.00

         July 1, 1998................    September 30, 1998..........   25.95

         October 1, 1998.............    December 31, 1998...........   25.90

         January 1, 1999.............    March 31, 1999..............   25.85

         April 1, 1999...............    June 30, 1999...............   25.80

         July 1, 1999................    September 30, 1999..........   25.75

         October 1, 1999.............    December 31, 1999...........   25.70

         January 1, 2000.............    March 31, 2000..............   25.65

         April  1,  2000.............    June 30, 2000...............   25.60

         July 1,  2000...............    September 30, 2000..........   25.55

         October 1, 2000.............    December 31, 2000...........   25.50

         January 1, 2001.............    March 31, 2001..............   25.45

         April 1, 2001...............    June 30, 2001...............   25.40

         July 1, 2001................    September 30, 2001..........   25.35

         October 1, 2001.............    December 31, 2001...........   25.30

         January1, 2002..............    March 30, 2002..............   25.25

                                      -4-

<PAGE>

         April1, 2002.................  June 30, 2002...............    25.20

         July 1, 2002.................  September 30, 2002..........    25.15

         October 1, 2002..............  December 31, 2002...........    25.10

         January 1, 2003..............  March 17, 2003..............    25.05

       (ii)     Any such redemption may be consummated at any time prior to,
       contemporaneously with or after the Change of Control (as defined below),
       provided that notice of any such redemption pursuant to this subparagraph
       (a) is given no later than 90 days following the date upon which the
       Change of Control Event occurred, the repurchase date must be within 60
       days of the date of such notice and a sum sufficient to redeem the shares
       must be deposited in trust to effect the redemption.

       (iii)    As used herein, a "Change of Control Event" shall mean the
       execution by the Corporation or any of its subsidiaries or affiliates of
       any agreement with respect to any proposed transaction or event or series
       of transactions or events which, individually or in the aggregate, may
       reasonably be expected to result in a Change of Control.

       (iv)     A "Change of Control" shall be deemed to have occurred at such
       time as (i) a "person" or "group" (within the meaning of Sections 13(d)
       and 14(d) of the Securities and Exchange Act of 1934, as amended (the
       "Exchange Act")) becomes the ultimate "beneficial owner" (as defined in
       Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or
       group shall be deemed to have beneficial ownership of all shares of
       Voting Stock (as defined below) that such person or group has the right
       to acquire regardless of when such right is first exercisable), directly
       or indirectly, of Voting Stock representing more than 35% of the total
       voting power of the total Voting Stock of the Corporation on a fully
       diluted basis; (ii) the date the Corporation sells, transfers or
       otherwise disposes of all or substantially all of the assets of the
       Corporation; or (iii) the date of the consummation of a merger or share
       exchange of the Corporation with another corporation where the
       shareholders of the Corporation immediately prior to the merger or share
       exchange would not beneficially own immediately after the merger or share
       exchange, shares entitling such shareholders to 50% or more of all votes
       (without consideration of the rights of any class of stock to elect
       directors by a separate group vote) to which all shareholders of the
       corporation issuing cash or securities in the merger or share exchange
       would be entitled in the election of directors, or where members of the
       Board of Directors of the Corporation immediately prior to the merger or
       share exchange would not immediately after the merger or share exchange
       constitute a majority of the board of directors of the corporation
       issuing cash or securities in the merger or share exchange. "Voting
       Stock" shall mean capital stock of any class or kind having the power to
       vote generally for the election of directors of the Corporation.

                                      -5-

<PAGE>

       (b)        Other than upon the occurrence of a Change of Control Event
(as defined in subparagraph (a) (iv) of this Paragraph 4 or in the event a
shareholder acquires shares in excess of the Ownership Limit as described in
Paragraphs 7and 8 below, shares of Series A Preferred Stock are not redeemable
by the Corporation prior to March 18, 2003. On and after March 18, 2003, the
Corporation, at its option upon not less than 30 nor more than 60 days' written
notice, may redeem shares of the Series A Preferred Stock, in whole or in part,
at any time or from time to time, for cash at a redemption price of $25 per
share, plus all accrued and unpaid dividends thereon to the date fixed for
redemption, without interest.

       (c)        If the Corporation elects to redeem any or all of the shares
of Series A Preferred Stock, then:

       (i)        Holders of Series A Preferred Stock to be redeemed shall
       surrender such Series A Preferred Stock at the place designated in the
       notice given by the Corporation in accordance with subparagraph (a) or
       (b) above, as applicable, and shall be entitled to the redemption price
       and any accrued and unpaid dividends payable upon such redemption
       following such surrender. If notice of redemption of any shares of Series
       A Preferred Stock has been given and if the funds necessary for such
       redemption have been set aside by the Corporation in trust for the
       benefit of the holders of any shares of Series A Preferred Stock so
       called for redemption, then from and after the redemption date dividends
       will cease to accrue on such shares of Series A Preferred Stock, such
       shares of Series A Preferred Stock shall no longer be deemed outstanding
       and all rights of the holders of such shares will terminate, except the
       right to receive the redemption price. If less than all of the
       outstanding Series A Preferred Stock is to be redeemed, the Series A
       Preferred Stock to be redeemed shall be selected pro rata (as nearly as
       may be practicable without creating fractional shares) or by any other
       equitable method determined by the Corporation.

       (ii)       Unless full cumulative dividends on all shares of Series A
       Preferred Stock shall have been or contemporaneously are declared and
       paid or declared and a sum sufficient for the payment thereof set apart
       for payment for all past dividend periods and the then current dividend
       period, no shares of Series A Preferred Stock shall be redeemed unless
       all outstanding shares of Series A Preferred Stock are simultaneously
       redeemed and the Corporation shall not purchase or otherwise acquire
       directly or indirectly any shares of Series A Preferred Stock (except by
       exchange for capital stock of the Corporation ranking junior to the
       Series A Preferred Stock as to dividends and upon liquidation); provided,
       however, that the foregoing shall not prevent the redemption by the
       Corporation of shares of stock in order to ensure that the Corporation
       continues to meet the requirements for qualification as a REIT, or the
       purchase or acquisition of shares of Series A Preferred Stock pursuant to
       a purchase or exchange offer made on the same terms to holders of all
       outstanding shares of Series A Preferred Stock. So long as no dividends
       are in arrears, the Corporation shall be entitled at any time and from
       time to time to repurchase shares of Series A Preferred Stock in
       open-market transactions duly authorized by the Board of Directors and
       effected in compliance with applicable laws.

                                      -6-

<PAGE>

       (iii)     Notice of any redemption under this Paragraph 4 will be given
       by publication in a newspaper of general circulation in the City of New
       York, such publication to be made once a week for two successive weeks
       commencing not less than 30 nor more than 60 days prior to the redemption
       date. A similar notice will be mailed by the Corporation, postage
       prepaid, not less than 30 nor more than 60 days prior to the redemption
       date, addressed to the respective holders of record of the Series A
       Preferred Stock to be redeemed at their respective addresses as they
       appear on the stock transfer records of the Corporation. No failure to
       give such notice or any defect therein or in the mailing thereof shall
       affect the validity of the proceedings for the redemption of any shares
       of Series A Preferred Stock except as to the holder to whom notice was
       defective or not given. Each notice shall state: (A) the redemption date;
       (B) the redemption price; (C) the number of shares of Series A Preferred
       Stock to be redeemed; (C) the place or places where the Series A
       Preferred Stock is to be surrendered for payment of the redemption price;
       and (E) that dividends on the shares to be redeemed will cease to accrue
       on such redemption date. If less than all of the Series A Preferred Stock
       held by any holder is to be redeemed, the notice mailed to such holder
       shall also specify the number of shares of Series A Preferred Stock held
       by such holder to be redeemed.

       (iv)      Immediately prior to any redemption of shares of Series A
       Preferred Stock under this Paragraph 4, the Corporation shall pay, in
       cash, any accumulated and unpaid dividends through the redemption date,
       unless a redemption date falls after a Dividend Record Date and prior to
       the corresponding Dividend Payment Date, in which case each holder of
       Series A Preferred Stock at the close of business on such Dividend Record
       Date shall be entitled to the dividend payable on such shares on the
       corresponding Dividend Payment Date notwithstanding the redemption of
       such shares before such Dividend Payment Date.

       5. Voting Rights. Holders of the Series A Preferred Stock will not
          --------------
have any voting rights, except as set forth below or as otherwise from time to
time required by law.

       (a)       Whenever dividends on any shares of Series A Preferred Stock
shall be in arrears for six or more quarters (whether consecutive or not) (a
"Preferred Dividend Default"), the holders of such shares of Series A Preferred
Stock (voting separately as a voting group with all other series of Preferred
Stock ranking on a parity with the Series A Preferred Stock as to dividends or
upon liquidation ("Parity Preferred") upon which like voting rights have been
conferred and are exercisable) will be entitled to vote separately as a voting
group for the election of a total of two additional directors to serve on the
Board of Directors of the Corporation (the "Preferred Stock Directors") at a
special meeting called by the holders of record of at least 20% of the Series A
Preferred Stock and the holders of record of at least 20% of any series of
Parity Preferred so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until all dividends accumulated on such shares of
Series A Preferred Stock for the past dividend periods and the dividend for the
then current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside

                                      -7-

<PAGE>

for payment. A quorum for any such meeting shall exist if at least a majority of
the outstanding shares of Series A Preferred Stock and shares of Parity
Preferred upon which like voting rights have been conferred and are exercisable
are represented in person or by proxy at such meeting. Such Preferred Stock
Directors shall be elected upon the affirmative vote of a plurality of the
shares of Series A Preferred Stock and such Parity Preferred present and voting
in person or by proxy at a duly called and held meeting at which a quorum is
present. If and when all accumulated dividends and the dividend for the then
current dividend period on the Series A Preferred Stock shall have been paid in
full or set aside for payment in full, the holders thereof shall be divested of
the foregoing voting rights (subject to revesting in the event of each and every
Preferred Dividend Default) and, if all accumulated dividends and the dividend
for the then current dividend period have been paid in full or declared and set
aside for payment in full on all series of Parity Preferred upon which like
voting rights have been conferred and are exercisable, the term of office of
each Preferred Stock Director so elected shall terminate. Any Preferred Stock
Director may be removed at any time with or without cause by, and shall not be
removed otherwise than by the vote of, the holders of record of a majority of
the outstanding shares of the Series A Preferred Stock and such Parity Preferred
when they have the voting rights described above (voting separately as a voting
group with all series of Parity Preferred upon which like voting rights have
been conferred and are exercisable). So long as a Preferred Dividend Default
shall continue, any vacancy in the office of a Preferred Stock Director may be
filled by written consent of the Preferred Stock Director remaining in office,
or if none remains in office, by a vote of the holders of record of a majority
of the outstanding shares of Series A Preferred Stock and such Parity Preferred
when they have the voting rights described above (voting separately as a voting
group with all series of Parity Preferred upon which like voting rights have
been conferred and are exercisable). The Preferred Stock Directors shall each be
entitled to one vote per director on any matter.

       (b)    The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series A Preferred Stock
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such redemption.

       6. Conversion  Right.  The Series A Preferred Stock is not convertible
          ------------------
into or exchangeable for any other property or securities of the Corporation.

       7. Restrictions on Ownership and Transfer.
          --------------------------------------

       (a)    Definitions. For the purposes of Paragraphs 7 and 8 of this
              -----------
Designation of Preferences, Rights, Privileges and Restrictions of Preferred
Stock ("Designation"), the following terms shall have the following meanings:

          (i) "Beneficial Ownership" shall mean ownership of Series A Preferred
         Stock by a Person who is or would be treated as an owner of such Series
         A Preferred Stock either directly or constructively through the
         application of Section 544 of the Code, as modified

                                      -8-

<PAGE>

         by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner,"
         "Beneficially Owns" and "Beneficially Owned" shall have the correlative
         meanings.

         (ii)   "Beneficiary" shall mean the beneficiary of the Trust as
         determined pursuant to Paragraph 8 of this Designation.

         (iii)  "Code" shall mean the Internal Revenue Code of 1986, as amended
         from time to time.

         (iv)   "Constructive Ownership" shall mean ownership of Series A
         Preferred Stock by a Person who is or would be treated as an owner of
         such Series A Preferred Stock either directly or constructively through
         the application of Section 318 of the Code, as modified by Section
         856(d)(5) of the Code. The terms "Constructive Owner," "Constructively
         Owns" and "Constructively Owned" shall have the correlative meanings.

         (v)    "Excess Stock" shall mean those shares of Series A Preferred
         Stock Constructively Owned by a Person in excess of the Ownership
         Limit.

         (vi)   "Initial Offering" shall mean the first sale of Series A
         Preferred Stock pursuant to the Corporation's first effective
         registration statement for such Series A Preferred Stock filed under
         the Securities Act of 1933, as amended.

         (vii)  "Market Price" shall mean the value per share equal to the
         average of the closing price of a share of Series A Preferred Stock as
         reported by Nasdaq (or, if the Series A Preferred Stock is then
         reported on a stock exchange, the closing price as reported on such
         exchange) for the 10 calendar days preceding the relevant date, or if
         the Series A Preferred Stock is not then traded over any exchange or
         quotation system, then the market price of the Series A Preferred Stock
         on the relevant date as determined in good faith by the Board of
         Directors of the Corporation.

         (viii) "Ownership Limit" shall mean the lesser of: (i) with respect to
         Thomas W. Kitchin, not more than 20.75%, with respect to American Real
         Estate Investment Company, Ltd., not more than 9.0%, and with respect
         to any other Person, not more than 6.75%, of the outstanding Series A
         Preferred Stock (in value or in number of shares, whichever is more
         restrictive), or (ii) with respect to any Person (including those named
         in (i) above) who owns, directly or constructively (through the
         application of Section 318(a) of the Code, as modified by Section
         856(d)(5) of the Code), 9.9% or more of a Person (in the case of a
         corporation, of the total combined total combined voting power of all
         classes of stock entitled to vote or the total number of shares of all
         classes of stock of such corporation and, in the case of any Person
         which is not a corporation, of the assets or net profits of such
         person), from which the Corporation derives gross income, not more than
         9.9% of the total combined voting power of all classes of stock
         entitled to vote or of the number of shares of all classes of stock of
         the Corporation (the "Related Party Limit").

                                      -9-

<PAGE>

         (ix)   "Person" shall mean an individual, corporation, partnership,
         estate, trust (including a trust qualified under Section 401(a) or
         501(c)(17) of the Code), a portion of a trust permanently set aside for
         or to be used exclusively for the purposes described in Section 642(c)
         of the Code, association, private foundation within the meaning of
         Section 509(a) of the Code, joint stock corporation or other entity,
         and also includes a group as that term is used for purposes of Section
         13(d)(3) of the Exchange Act; but does not include an underwriter which
         participates in a public offering of the Series A Preferred Stock,
         provided that the ownership of Series A Preferred Stock by such
         underwriter would not result in the Corporation's being "closely held"
         within the meaning of Section 856(h) of the Code, or would otherwise
         result in the Corporation's failing to qualify as a REIT.

         (x)    "Purported Beneficial Transferee" shall mean, with respect to
         any purported Transfer which results in Excess Stock, the purported
         beneficial transferee or owner for whom the Purported Record Transferee
         would have acquired or owned shares of Series A Preferred Stock, if
         such Transfer had been valid under subparagraph (b) of this Paragraph
         7.

         (xi)   "Purported Record Transferee" shall mean, with respect to any
         purported Transfer which results in Excess Stock, the record holder of
         the Series A Preferred Stock if such Transfer had been valid under
         subparagraph (b) of this Paragraph 7.

         (xii)  "REIT" shall mean a Real Estate Investment Trust under Section
         856 of the Code.

         (xiii) "Transfer" shall mean any sale, transfer, gift, assignment,
         devise or other disposition of Series A Preferred Stock, including (i)
         the granting of any option or entering into any agreement for the sale,
         transfer or other disposition of Series A Preferred Stock, or (ii) the
         sale, transfer, assignment or other disposition of any securities (or
         rights convertible into or exchangeable for Series A Preferred Stock),
         whether voluntary or involuntary, whether of record or beneficially or
         Beneficially or Constructively (including but not limited to transfers
         of interests in other entities which results in changes in Beneficial
         or Constructive Ownership of Series A Preferred Stock), and whether by
         operation of law or otherwise.

         (xiv)  "Trust" shall mean the trust created pursuant to subparagraph
         (a) of Paragraph 8 of this Designation.

         (xv)   "Trustee" shall mean the Corporation as Trustee for the Trust,
         and any successor trustee appointed by the Corporation.

                                      -10-

<PAGE>

       (b)     Restrictions on Ownership and Transfer.
               --------------------------------------

         (i)   Except as provided in subparagraph (i) of this Paragraph 7, from
         and after the date of the Initial Offering, no Person shall
         Beneficially Own or Constructively Own Series A Preferred Stock in
         excess of the Ownership Limit.

         (ii)  Except as provided in subparagraph (i) of this Paragraph 7, from
         and after the date of the Initial Offering, any Transfer (whether or
         not such Transfer is the result of a transaction entered into through
         Nasdaq) that, if effective, would result in any Person Beneficially
         Owning Series A Preferred Stock in excess of the Ownership Limit shall
         be void ab initio as to the Transfer of such Series A Preferred Stock
                 -- ------
         which would be otherwise Beneficially Owned by such Person in excess of
         the Ownership Limit; and the intended transferee shall acquire no
         rights in such Series A Preferred Stock.

         (iii) Except as provided in subparagraph (i) of this Paragraph 7, from
         and after the date of the Initial Offering, any Transfer (whether or
         not such Transfer is the result of a transaction entered into through
         Nasdaq) that, if effective, would result in any Person Constructively
         Owning Series A Preferred Stock in excess of the Ownership Limit shall
         be void ab initio as to the Transfer of such Series A Preferred Stock
                 -- ------
         which would be otherwise Constructively Owned by such Person in excess
         of the Ownership Limit; and the intended transferee shall acquire no
         rights in such Series A Preferred Stock.

         (iv)  Except as provided in subparagraph (i) of this Paragraph 7, from
         and after the date of the Initial Offering, any Transfer (whether or
         not such Transfer is the result of a transaction entered into through
         Nasdaq) that, if effective, would result in the Series A Preferred
         Stock being beneficially owned by fewer than 100 Persons (determined
         without reference to any rules of attribution) shall be void ab initio
                                                                      -- ------
         as to the Transfer of such Series A Preferred Stock which would be
         otherwise beneficially owned by the transferee; and the intended
         transferee shall acquire no rights in such Series A Preferred Stock.

         (v)   Notwithstanding any other provisions contained in this
         Designation, from and after the date of the Initial Offering, any
         Transfer (whether or not such Transfer is the result of a transaction
         entered into through Nasdaq) or other event that, if effective, would
         result in the Corporation being "closely held" within the meaning of
         Section 856(h) of the Code, or would otherwise result in the
         Corporation failing to qualify as a REIT (including, but not limited
         to, a Transfer or other event that would result in the Corporation
         owning (directly or Constructively) an interest in a tenant that is
         described in Section 856(d)(2)(B) of the Code if the income derived by
         the Corporation from such tenant would cause the Corporation to fail to
         satisfy any of the gross income requirements of Section 856(c) of the
         Code), shall be void ab initio as to the Transfer of the Series A
                              -- ------
         Preferred Stock or other event which would cause the Corporation to be
         "closely held" within the meaning of Section 856(h) of the Code or
         would otherwise result in the Corporation failing to qualify as a REIT;
         and the intended transferee or owner or Constructive or Beneficial
         Owner shall acquire or retain no rights in such Series A Preferred
         Stock.

                                      -11-

<PAGE>

       (c) Series A Preferred Stock Deemed Excess Stock. If, notwithstanding the
           --------------------------------------------
other provisions contained in this Designation, at any time after the date of
the Initial Offering, there is a purported Transfer (whether or not such
Transfer is the result of a transaction entered into through Nasdaq), change in
the capital structure of the Corporation or other event such that one or more of
the restrictions on ownership and transfers described in subparagraph (b) of
this Paragraph 7 has been violated, then the Series A Preferred Stock being
Transferred (or in the case of an event other than a Transfer, the Series A
Preferred Stock owned or Constructively Owned or Beneficially Owned) which would
cause one or more of the restrictions on ownership or transfer to be violated
(rounded up to the nearest whole share) shall be deemed Excess Stock effective
as of the closed of business on the business day prior to the date of such
Transfer or other event.

       (d) Remedies For Breach. If the Board of Directors or its designees shall
           -------------------
at any time determine in good faith that a Transfer or other event has taken
place in violation of subparagraph (b) of this Paragraph 7 or that a Person
intends to acquire, has attempted to acquire or may acquire direct ownership,
beneficial ownership (determined without reference to any rules of attribution),
Beneficial Ownership or Constructive Ownership of any shares of the Corporation
in violation of subparagraph (b) of this Paragraph 7, the Board of Directors or
its designees shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer or other event, including, but not limited
to, refusing to give effect to such Transfer or other event on the books of the
Corporation or instituting proceedings to enjoin such Transfer or other event.

       (e) Notice of Restricted Transfer. Any Person who acquires or attempts to
           -----------------------------
acquire Series A Preferred Stock or other securities in violation of
subparagraph (b) of this Paragraph 7, shall immediately give written notice to
the Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or attempted Transfer or other event on the Corporation's
status as a REIT.

       (f) Owners Required To Provide Information. From and after the date of
           --------------------------------------
the Initial Offering, each Person who is a Beneficial Owner or Constructive
Owner of more than 5% of Series A Preferred Stock must file an affidavit with
the Corporation within 30 days after January 1st of each year containing
information that the Corporation may require, in order to determine the
Corporation's status as a REIT. From and after the date of the Initial Offering,
each Person who is a beneficial owner or Beneficial Owner or Constructive Owner
of any Series A Preferred Stock and each Person (including the stockholder of
record) who is holding Series A Preferred Stock for a Beneficial Owner or
Constructive Owner shall provide to the Corporation such information that the
Corporation may request, in good faith, in order to determine the Corporation's
status as a REIT.

                                      -12-

<PAGE>

      (g)       Remedies Not Limited. Nothing contained in this Designation (but
                --------------------
subject to subparagraph (f) of Paragraph 8 hereof) shall limit the authority of
the Board of Directors to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT.

      (h)       Ambiguity. In the case of an ambiguity in the application of any
                ---------
of the provisions of this Paragraph 7, including any definition contained in
subparagraph (a) of this Paragraph 7, the Board of Directors shall have the
power to determine the application of the provisions of this Paragraph 7 with
respect to any situation based on the facts known to it (subject, however, to
the provisions of subparagraph (f) of Paragraph 8 of this Designation).

      (i)       Exceptions.
                ----------

         (i)    Subject to subparagraph (b)(v) of this Paragraph 7, the Board of
         Directors, in its sole and absolute discretion, may exempt a Person
         from the Ownership Limit if such Person is not an individual for
         purposes of Section 542(a)(2) of the Code and the Board of Directors
         obtains such representations and undertakings from such Person as are
         reasonably necessary to ascertain that no individual's Beneficial
         Ownership of such Series A Preferred Stock will violate the Ownership
         Limit and such Person agrees that any violation of such representations
         or undertaking (or other action which is contrary to the restrictions
         contained in this Paragraph 7) or attempted violation will result in
         Excess Stock in accordance with subparagraph (c) of this Paragraph 7.

         (ii)   Subject to subparagraph (b)(v) of this Paragraph 7, the Board of
         Directors, in its sole and absolute discretion, may exempt a Person
         from the limitation on a Person Constructively Owning Series A
         Preferred Stock in excess of the Ownership Limit, if such Person does
         not and represents that it will not own, directly or constructively
         (through the application of Section 318(a) of the Code, as modified by
         Section 856(d)(5) of the Code), more than a 9.9% interest (within the
         meaning of Section 856(d)(2)(B)) in a Person from whom the Corporation
         derives gross income and the Board of Directors obtains such
         representations and undertakings from such Person as reasonably
         necessary to ascertain this fact and such Person agrees that any
         violation or attempted violation will result in such Series A Preferred
         Stock in excess of the Ownership Limit being deemed Excess Stock in
         accordance with subparagraph (c) of this Paragraph 7.

         (iii)  Prior to granting any exception pursuant to subparagraph (i)(A)
         or (i)(B) of this Paragraph 7, the Board of Directors may require a
         ruling from the Internal Revenue Service, or an opinion of counsel, in
         either case in form and substance satisfactory to the Board of
         Directors in its sole discretion as it may deem necessary or advisable
         in order to determine or ensure the Corporation's status as a REIT;
         provided, however, that obtaining a favorable ruling or opinion shall
         --------  -------
         not be required for the Board of Directors to grant an exception
         hereunder.

                                      -13-

<PAGE>

       (j)      Legend. Each certificate representing one or more shares of
                ------
Series A Preferred Stock shall bear the following legend:

                The Corporation is authorized to issue two classes of capital
       stock which are designated as Common Stock and Preferred Stock. The Board
       of Directors is authorized, without action by the Corporation's
       stockholders, to determine the preferences, limitations and relative
       rights of the Preferred Stock before the issuance of any Preferred Stock.
       The Corporation will furnish, without charge, to any stockholder making a
       written request therefor, a copy of the Corporation's articles of
       incorporation and a written statement of the designations, relative
       rights, preferences and limitations applicable to each class of stock.
       Requests for such written statement may be directed to Jameson Inns,
       Inc., 8 Perimeter Center East, Suite 8050, Atlanta, Georgia 30346-1603.

                The shares of 9.25% Series A Cumulative Preferred Stock
       ("Series A Preferred Stock") represented by this certificate are subject
       to restrictions on ownership and transfer for the purpose of the
       Corporation's maintenance of its status as a Real Estate Investment Trust
       under the Internal Revenue Code of 1986, as amended. No Person (other
       than Thomas W. Kitchin, his heirs, legatees and the personal
       representative of his estate, as such, and American Real Estate
       Investment Company, Ltd.) may own, Beneficially Own or Constructively Own
       Series A Preferred Stock in excess of 6.75% (in value or in number of
       shares, whichever is more restrictive) of the outstanding Series A
       Preferred Stock of the Corporation, with certain further restrictions and
       exceptions set forth in the Corporation's articles of incorporation. Any
       Person who attempts to own, Beneficially Own or Constructively Own Series
       A Preferred Stock in excess of the above limitations must immediately
       notify the Corporation. All capitalized terms in this legend have the
       meanings defined in the Corporation's articles of incorporation.
       Transfers in violation of the restrictions described above may be void ab
                                                                              --
       initio.
       ------

                In addition, upon the occurrence of certain events, if the
       restrictions on ownership are violated, the Series A Preferred Stock
       represented hereby may be redeemed or held in trust by the Corporation.
       The Corporation has an option to acquire Excess Stock under certain
       circumstances. The Corporation will furnish to the holder hereof upon
       request and without charge a complete written statement of the terms and
       conditions of the Excess Stock. Requests for such statement may be
       directed to Jameson Inns, Inc., 8 Perimeter Center East, Suite 8050,
       Atlanta, Georgia 30346-1603.

                Capitalized terms used herein shall, where the context
       permits, have the same meaning assigned to such terms as are assigned in
       the Corporation's articles of incorporation.

                                      -14-

<PAGE>

          (k)    Separability. If any provision of Paragraph 7 or 8 of this
                 ------------
       Designation or any application of any such provision is determined to be
       invalid by any federal or state court having jurisdiction, the validity
       of the remaining provisions shall not be affected and other applications
       of such provision shall be affected only to the extent necessary to
       comply with the determination of such court.

       8.  Excess Stock.
           ------------

          (a)    Ownership In Trust. Upon any purported Transfer (whether or not
                 ------------------
       such Transfer is the result of a transaction entered into through Nasdaq)
       that results in Excess Stock pursuant to subparagraph (c) of Paragraph 7
       of this Designation, such Excess Stock shall be deemed to have been
       transferred to the Corporation, as Trustee of a Trust for the exclusive
       benefit of such Beneficiary or Beneficiaries to whom an interest in such
       Excess Stock may later be transferred pursuant to subparagraph (d) of
       this Paragraph 8. The Purported Record Transferee shall have no rights in
       such Excess Stock except the right to designate a transferee of such
       Excess Stock upon the terms specified in subparagraph (d) of this
       Paragraph 8. The Purported Beneficial Transferee shall have no rights in
       such Excess Stock except as provided in subparagraph (d) of this
       Paragraph 8.

          (b)    Dividend Rights. Excess Stock shall not be entitled to any
                 ---------------
       dividends. Any dividend or distribution paid prior to the discovery by
       the Corporation that shares of Series A Preferred Stock have been
       converted into Excess Stock shall be repaid to the Corporation upon
       demand.

          (c)    Rights Upon Liquidation. Subject to the preferential rights of
                 -----------------------
       the Preferred Stock, if any, as may be determined by the Board of
       Directors in accordance with the articles of incorporation of the
       Corporation, as amended, in the event of any voluntary or involuntary
       liquidation, dissolution or winding up of, or any distribution of the
       assets of, the Corporation, each holder of Excess Stock shall be entitled
       to receive, ratably with each other holder of Series A Preferred Stock,
       that portion of the assets of the Corporation available for distribution
       to its stockholders as the number shares of Excess Stock held by such
       holder bears to the total number of shares of Series A Preferred Stock
       then outstanding. The Corporation, as holder of the Excess Stock in
       trust, or if the Corporation shall have been dissolved, any trustee
       appointed by the Corporation prior to its dissolution, shall distribute
       ratably to the Beneficiaries of the Trust, when and if determined in
       accordance with subparagraph (d) of this Paragraph 8, any such assets
       received in respect of the Excess Stock in any liquidation, dissolution
       or winding up of, or any distribution of the assets of the Corporation.

          (d)    Restrictions On Transfer; Designation of Beneficiary.
                 ----------------------------------------------------

                 (i)   Excess Stock shall not be transferable. Subject to the
         last sentence of this clause (a), the Purported Record Transferee may
         freely designate a Beneficiary of an

                                      -15-

<PAGE>

         interest in the Trust (representing the number of shares of Excess
         Stock held by the Trust attributable to a purported Transfer that
         resulted in Excess Stock), if (i) the Excess Stock held in the Trust
         would not be Excess Stock in the hands of such Beneficiary and (ii) the
         Purported Beneficial Transferee does not receive a price for
         designating such Beneficiary that reflects a price per share for such
         Excess Stock that exceeds (x) the price per share such Purported
         Beneficial Transferee paid for the Series A Preferred Stock in the
         purported Transfer that resulted in Excess Stock, or (y) if the
         Transfer or other event that resulted in Excess Stock was not a
         transaction in which the Purported Beneficial Transferee gave full
         value for such Excess Stock, a price per share equal to the Market
         Price on the date of the purported Transfer or other event that
         resulted in the issuance of Excess Stock. Upon such transfer of an
         interest in the Trust, the corresponding shares of Excess Stock in the
         Trust shall automatically cease to be Excess Stock and such Series A
         Preferred Stock shall be transferred of record to the transferee of the
         interest in the Trust if such Series A Preferred Stock would not be
         Excess Stock in the hands of such transferee. Prior to any transfer of
         any interest in the Trust, the Purported Record Transferee must give
         advance notice to the Corporation of the intended transfer and the
         Corporation must have waived in writing its purchase rights under
         subparagraph (e) of this Paragraph 8.

               (ii)   Notwithstanding the foregoing, if a Purported Beneficial
         Transferee receives a price for designating a Beneficiary of an
         interest in the Trust that exceeds the amounts allowable under
         subparagraph (d)(i) of this Paragraph 8, such Purported Beneficial
         Transferee shall pay, or cause such Beneficiary to pay, such excess to
         the Corporation.

         (e)   Purchase Right in Excess Stock.   Notwithstanding the provisions
               ------------------------------
       of subparagraph (d) of this Paragraph 8, Excess Stock shall be deemed to
       have been offered for sale to the Corporation, or its designee, at a
       price per share equal to the lesser of (i) the price per share in the
       transaction that resulted in such Excess Stock (or, if the Transfer or
       other event that resulted in such Excess Stock was not a transaction in
       which the Purported Beneficial Transferee gave full value for such Excess
       Stock, a price per share equal to the Market Price on the date of the
       purported Transfer or other event that resulted in Excess Stock) and (ii)
       the Market Price on the date the Corporation, or its designee, accepts
       such offer. The Corporation shall have the right to accept such offer for
       a period of ninety days after the later of (i) the date of the Transfer
       or other event which resulted in such Excess Stock and (ii) the date the
       Board of Directors determines in good faith that a Transfer or other
       event resulting in such Excess Stock has occurred, if the Corporation
       does not receive a notice of such Transfer or other event pursuant to
       subparagraph (e) of Paragraph 7 of this Designation. The Corporation may
       appoint a special trustee of the trust established under subparagraph (a)
       of this Paragraph 8 for the purpose of consummating the purchase of
       Excess Stock by the Corporation.

       (f)     Settlement.  Nothing in Paragraph 7 or Paragraph 8 of this
               ----------
 Designation shall preclude the settlement of any transaction entered into
 through Nasdaq.

                                      -16-



<PAGE>

B.     Article II of the Articles is hereby amended by deleting the text thereof
in its entirety and replacing it with the following text:


                  The registered office of the Corporation is located at 8
         Perimeter Center East, Suite 8050, Atlanta, Georgia 30346-1603. The
         registered agent of the Corporation at such office is Steven A. Curlee.


C.     Article III and Paragraph 5 of Article IV of the Articles are hereby
amended to accurately reflect the Corporation's address by deleting from such
Articles in each place where it appears the phrase "1950 Century Blvd, N.E.,
Suite 25, Atlanta, Georgia 30345-3317" and substituting in its place the phrase
"8 Perimeter Center East, Suite 8050, Atlanta, Georgia 30346-1603."

D.     Article IV of the Articles is hereby amended by deleting the numbers 20,
100,000, 20,000,000 and 100,000 in the first paragraph of such Article and
substituting in their places the numbers 50,000,000, 40,000,000 and 10,000,000,
respectively.

E.     Subparagraph C.4(a) of Article IV of the Articles is hereby amended as
follows:

       1. The definition of the term "Initial Public Offering" is hereby deleted
in its entirety and replaced by the following definition of such term:

                        "Initial Public Offering" shall mean the sale of
                  Common Stock pursuant to the Corporation's first effective
                  registration statement for such Common Stock filed under the
                  Securities Act of 1933, as amended.

         2. The following definition of the term "Market Price" is hereby added:

                        "Market Price" shall mean the value per share equal to
                  the average of the closing price of a share of Common Stock
                  as reported by the National Association of Securities Dealers
                  Automated Quotation System (or, if the Common Stock is then
                  reported on a stock exchange, the closing price as reported on
                  such exchange) for the 10 calendar days preceding the relevant
                  date, or if the Common Stock is not then traded over any
                  exchange or

                                      -17-

<PAGE>

                  quotation system, then the market price of the Common Stock on
                  the relevant date as determined in good faith by the Board of
                  Directors of the Corporation.

         3.  The following definition of the term "Person" is hereby added:

                           "Person" shall mean an individual, corporation,
                  partnership, estate, trust (including a trust qualified under
                  Section 401(a) or 501(c)(17) of the Code), a portion of a
                  trust permanently set aside for or to be used exclusively for
                  the purposes described in Section 642(c) of the Code,
                  association, private foundation within the meaning of Section
                  509(a) of the Code, joint stock company or other entity, and
                  also includes a group as that term is used for purposes of
                  Section 13(d)(3) of the Securities Exchange Act of 1934, as
                  amended; but does not include an underwriter which
                  participates in a public offering of the Common Stock,
                  provided that the ownership of Common Stock by such
                  underwriter would not result in the Corporation's being
                  "closely held" within the meaning of Section 856(h) of the
                  Code, or would otherwise result in the Corporation's failing
                  to qualify as a REIT.

         4.  The definitions of the terms "Purported Beneficial Transferee" and
         "Purported Record Transferee" are each hereby amended by deleting each
         reference therein to subparagraph C.5(b) and substituting therefor
         references to subparagraph C.4(b).

         5.  The following definition of the term "Related Entity" is hereby
         added:

                           "Related Entity" shall mean any entity whose income
                 is attributed to the Corporation for purposes of the REIT
                 gross income tests set forth in Section 856 of the Code.

   F.    Subparagraphs C.4(c), C.4(d) and C.4(e) of Article IV of the Articles
   are hereby amended by deleting each reference therein to subparagraph C.5(b)
   and substituting therefor references to subparagraph C.4(b).

   G.    Subparagraph  D.5 of Article IV of the Articles is hereby amended by
   deleting the reference to Article II in the second sentence of such
   subparagraph and substituting in its place a reference to Article IV.

                                      -18-

<PAGE>

                                      III.

      The amendment set forth in Section II.A of these Articles of Amendment was
duly adopted by the affirmative vote of a majority of the members of the Board
of of Directors of the Corporation on February 5, 1998. Pursuant to Section
14-2-602 of the Georgia Business Corporation Code, the shareholders of Jameson
Inns, Inc. were not required to take any action in connection herewith. The
amendments set forth in Section II.B through II.G of these Articles of Amendment
were (1) proposed by the Board of Directors of the Corporation and recommended
to the shareholders of the Corporation for adoption on December 12, 1997, and
(2) approved in accordance with Section 14-2-1003 of the Georgia Business Code
by a vote of the shareholders at a special meeting of shareholders of the
Corporation duly called and held on February 2, 1998.

      IN WITNESS WHEREOF, the Corporation as caused these Articles of Amendment
to be executed by its duly authorized officer on the 12th day of March, 1998.

                                          JAMESON INNS, INC.



                                          By:   /s/ Steven A Curlee
                                             ----------------------------------
                                                Steven A. Curlee, Secretary and
                                                Vice President - Legal

                                      -19-

<PAGE>

                              ARTICLES OF AMENDMENT
                                       OF
                               JAMESON INNS, INC.

     In accordance with Section 14-2-602 of the Georgia Business Corporation
Code (O.C.G.A.(S) 14-2-602), Jameson Inns, Inc. (the "Corporation") hereby
delivers these Articles of Amendment to the Secretary of State for filing.

                                       I.

     The name of the Corporation is Jameson Inns, Inc.

                                       II.

     The Amended and Restated Articles of Incorporation of the Corporation (the
"Articles") shall be amended by amending Part II.A of the Articles of Amendment
of the Corporation filed with the Secretary of State March 13, 1998, to-wit: the
DESIGNATION OF PREFERENCES, RIGHTS, PRIVILEGES AND RESTRICTIONS OF PREFERRED
STOCK (the "Designation"), as follows:

     A.  The first paragraph of the Designation is amended and restated in its
entirety to read as follows:

          1.  Designation and Initial Number.  One million two hundred seventy-
              -------------------------------
     two thousand seven hundred twenty-seven (1,272,727) shares of the preferred
     stock of Jameson Inns, Inc. (the "Corporation"), par value $1.00 per share
     (the "Preferred Stock"), are hereby classified into one series which shall
     be designated the 9.25% Series A Cumulative Preferred Stock (the "Series A
     Preferred Stock").

                                      III.

     This Amendment was duly adopted by the affirmative vote of a majority of
the members of the Board of Directors of the Corporation on November 3, 1998.
Pursuant to Section 14-2-602(e) of the Georgia Business Corporation Code, the
shareholders of Jameson Inns, Inc. were not required to take any action in
connection herewith.

                                       -1-

<PAGE>

     IN WITNESS WHEREOF, the Corporation as caused these Articles of Amendment
to be executed by its duly authorized officer on the 4th day of March, 1999.

                              JAMESON INNS, INC.


                              By: /s/ Thomas W. Kitchin
                                  ---------------------------
                                      Thomas W. Kitchin
                                      Chief Executive Officer

                                       -2-

<PAGE>


                              ARTICLES OF AMENDMENT
                                       OF
                               JAMESON INNS, INC.

         In accordance with Section 14-2-602 of the Georgia Business
Corporation Code (O.C.G.A. (S) 14-2-602), Jameson Inns, Inc. (the
"Corporation") hereby delivers these Articles of Amendment to the Secretary of
State for filing.

                                        I

         The name of the Corporation is Jameson Inns, Inc.

                                       II

         The Amended and Restated Articles of Incorporation of the Corporation
(the"Articles") shall be amended by adding the following:

                 DESIGNATION OF PREFERENCES, RIGHTS, PRIVILEGES
                       AND RESTRICTIONS OF $1.70 SERIES S
                     CUMULATIVE CONVERTIBLE PREFERRED STOCK

         1.    Designation and Initial Number. Two million two hundred
fifty-six thousand (2,256,000) shares of the preferred stock of the
Corporation, par value $1.00 per share (the "Preferred stock"), are hereby
classified into one series which shall be designated the $1.70 Series S

<PAGE>


Cumulative Convertible Preferred Stock (the "Series S Preferred Stock"). With
respect to matters of dividends and distribution on liquidation, the shares of
Series S Preferred Stock authorized hereby:

         (a) shall be senior to (i) all shares of the Corporation's common
stock, par value $.10 per share ("Common Stock"), and (ii) all shares of the
Corporation's non-cumulative preferred stock, if any, and all shares of any
other class of the Corporation's stock ranking junior to the Series S Preferred
Stock; and

         (b) shall be on a parity with the Corporation's 9.25% Series A
Cumulative Preferred Stock and any other series of shares of cumulative
preferred stock ranking on a parity with the Series S Preferred Stock ("Parity
Preferred").

         In no event shall any preferred stock senior to the Series S Preferred
Stock be authorized or issued without the affirmative vote of two-thirds of the
outstanding shares of Series S Preferred Stock.

         2.  Dividends. Holders of shares of the Series S Preferred Stock are
entitled to the payment of dividends only in accordance with the following:


         (a) The holders of Series S Preferred Stock, in preference to the
holders of Common Stock and of any other class of shares ranking junior to the
Series S Preferred Stock, shall be entitled to receive out of any funds legally
available for Series S Preferred Stock, when and as declared by the Board of
Directors, dividends in cash at the annual rate of $1.70 and no more, payable
quarterly in arrears on or before the 20th day of January, April, July and
October of each year, or if not a business day, the next succeeding business day
(each, a "Dividend Payment Date"). Such dividends shall accrue and be cumulative
from and after May 8, 1999 and the initial Dividend Payment Date shall be July
20, 1999. No dividends shall be paid upon or declared or set apart for any
Parity Preferred for any dividend period unless at the same time a like
proportionate dividend for the dividend periods terminating on the same or any
earlier date, ratably in proportion to the respective dividend rates fixed
therefor, shall have been paid upon or declared or set apart for the


<PAGE>

Series S Preferred Stock then issued and outstanding and entitled to receive
such dividend.

         (b) So long as the Series S Preferred Stock shall be outstanding, no
dividend, except a dividend payable in Common Stock or other shares ranking
junior to the Series S Preferred Stock, shall be paid or declared or any
distribution made, except as aforesaid, in respect of the shares of the
Corporation's Common Stock or any other shares ranking junior to the Series S
Preferred Stock, nor shall any Common Stock or any other shares ranking junior
to or on a parity with the Series S Preferred Stock be purchased, redeemed,
retired or otherwise acquired by the Corporation, except (i) out of the proceeds
of the sale of Common Stock or other shares of the Corporation ranking junior to
the Series S Preferred Stock received by the Corporation subsequent to the date
of first issuance of the Series S Preferred Stock or (ii) by conversion into or
exchange for other capital stock of the Corporation ranking junior to the Series
S Preferred Stock as to dividends and upon liquidation or redemption for the
purpose of preserving the Corporation's qualification as a real estate
investment trust under sections 856 through 860 of the Internal Revenue Code of
1986, as amended ("REIT"), unless: (x) all accrued and unpaid dividends on all
outstanding Series S Preferred Stock, including the full dividends for all
current dividend periods, shall have been declared and paid or a sum sufficient
for payment thereof set apart, and (y) there shall be no arrearages with respect
to the redemption of the Series S Preferred Stock.

         (c) No dividends on shares of Series S Preferred Stock shall be
declared by the Board of Directors or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to the Corporation's indebtedness,
prohibits such declaration, payment or setting apart for payment or provides
that such declaration, payment or setting apart for payment would constitute a
breach thereof or a default thereunder, or if such declaration or payment shall
be restricted or prohibited by law.

         (d) Notwithstanding subparagraph (c) above, dividends on the Series S
Preferred Stock shall accrue whether or not the Corporation has earnings,
whether or not there are funds legally available for the payment of such
dividends and whether or not such dividends are declared. Accrued but unpaid
dividends on the Series S Preferred Stock will not bear interest and holders of
the Series S Preferred Stock will not be entitled to any distributions in excess
of full cumulative distributions

                                       -2-

<PAGE>

described above. Any dividend payment made on shares of the Series S Preferred
Stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to such shares which remains payable.

         3.  Liquidation Preference.

         (a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
Series S Preferred Stock shall be entitled to receive in full out of the assets
of the Corporation, before any amount shall be paid or distributed among the
holders of Common Stock or any other shares ranking junior to the Series S
Preferred Stock, the sum of (i) $20.00 per share plus (ii) an amount equal to
all dividends accrued and unpaid thereon, whether or not declared, to the date
of payment of the amount due pursuant to such liquidation, dissolution or
winding up of the affairs of the Corporation. In the event the net assets of the
Corporation legally available therefor are insufficient to permit the payment
upon all outstanding Series S Preferred Stock and all Parity Preferred of the
full preferential amount to which they are respectively entitled, then such net
assets shall be distributed ratably upon all outstanding Series S Preferred
Stock and Parity Preferred in proportion to the full preferential amount to
which each such share is entitled.

         (b) After payment to the holders of Series S Preferred Stock of the
full preferential amounts as aforesaid, the holders of Series S Preferred Stock,
as such, shall have no right or claim to any of the remaining assets of the
Corporation.

         (c) The merger or consolidation of the Corporation into or with any
other corporation, the merger of any other corporation into it, or the sale,
lease or conveyance of all or substantially all the assets of the Corporation,
shall not be deemed to be a dissolution, liquidation or winding up for the
purposes of this Section.

         4.  Redemption. Shares of Series S Preferred Stock shall be
redeemable only in accordance with the following:

         (a) All or any part of the Series S Preferred Stock shall be redeemable
by the Corporation, at any time on or after February 1, 2000, at the option of
the Board of Directors, at the redemption prices set forth below, plus accrued
and unpaid dividends:

                                                      REDEMPTION
                         PERIOD                         PREMIUM        PRICE
                         ------                         -------        -----

         February 1, 2000 to January 31, 2001 .....    104.8572%       $20.97
         February 1, 2001 to January 31, 2002 .....    103.6429%       $20.73
         February 1, 2002 to January 31, 2003 .....    102.4286%       $20.49
         February 1, 2003 to January 31, 2004 .....    101.2143%       $20.24
         February 1, 2004 and thereafter ..........    100.0000%       $20.00

                                       -3-

<PAGE>

       (b)   Notice of any proposed redemption of Series S Preferred Stock shall
be given by the Corporation by mailing a copy of such notice, at least thirty
(30) days, and not more than sixty (60) days, prior to the date fixed for such
redemption, to the holders of record of the Series S Preferred Stock to be
redeemed, at their respective addresses then appearing upon the books of the
Corporation. In case of the redemption of a part only of the Series S Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected by
lot or pro rata, as the Board of Directors may determine. The Board of Directors
shall have full power and authority, subject to the limitations and provisions
herein contained, to prescribe the manner in which, and the terms and conditions
upon which, the shares of the Series S Preferred Stock shall be redeemed from
time to time. On or at any time before the redemption date specified in such
notice, the Corporation shall deposit in trust, for the account of the holders
of the shares to be redeemed, funds necessary for such redemption with a
national bank or trust company, organized under the laws of the United States of
America, in good standing and designated in such notice of redemption. Upon
mailing of the notice of redemption as above provided, or upon the making of
such deposit, whichever is later, all shares with respect to the redemption of
which such notice and deposit shall have been given and made shall be deemed to
be no longer outstanding for any purpose, and all rights with respect to such
shares shall thereupon cease and terminate, except only the right of the holders
of the certificates for such shares to receive, out of the funds so deposited in
trust, from and after the date of such deposit, the amount payable upon the
redemption thereof, without interest; provided, however, that no right of
conversion shall be impaired by the mailing of such notice or the making of such
deposit. The Corporation shall not purchase any shares of Common Stock, any
shares ranking junior to the Series S Preferred Stock, or any Parity Preferred
unless and except as provided in Paragraph 2.

       5.    Voting Rights. Holders of the Series S Preferred Stock will not
have any voting rights, except as set forth below or as otherwise from time to
time required by law.

       (a)   If, and so often as, the Corporation shall fail to declare and pay
dividends on the Series S Preferred Stock at the time outstanding at the rate
specified for such shares for six (6) Dividend Payment Dates (whether or not
consecutive) the holders of the Series S Preferred Stock (voting separately as a
voting group with all Parity Preferred upon which like voting rights have been
conferred and are exercisable ("Voting Parity Preferred") will be entitled to
vote separately as a voting group for the election, as herein provided, of two
additional members of the Board of Directors of the Corporation and the holders
of Common Stock, voting separately as a class, and all other series of Parity
Preferred upon which different voting rights have been conferred and are
exercisable, voting separately as a class, and all other classes or series upon
which voting rights have been conferred and are exercisable, shall elect the
remaining directors; provided, however, that the holders of the Series S
Preferred Stock and the holders of any Voting Parity Preferred shall exercise
such special voting rights only at the next annual meeting of shareholders or
any special meeting of shareholders held in lieu thereof after the sixth such
payment date at which directors are elected and at which the holders of not less
than one-third of the shares of Series S Preferred Stock and any Voting Parity
Preferred, then outstanding, are present in person or by proxy; and provided
further that the special class voting rights provided for in this subparagraph
(a) shall remain vested in the holders of Series S Preferred Stock and any
Voting Parity Preferred until all accrued and unpaid

                                       -4-

<PAGE>

dividends on the Series S Preferred Stock and any Voting Parity Preferred then
outstanding shall have been declared and paid, whereupon the holders of Series S
Preferred Stock and any Voting Parity Preferred shall be divested of their
special voting rights in respect of subsequent elections of directors, subject
to the revesting of such special class voting rights in the event above
specified in this subparagraph (a). The directors elected by the holders of the
Series S Preferred Stock and any Voting Parity Preferred shall not be removable
by vote of directors, but shall be removable by vote of the holders of the
Series S Preferred Stock and any Voting Parity Preferred, voting separately as a
combined class, with or without cause. In no event shall any voting or consent
rights be created with respect to any class or series of preferred stock of the
Corporation which would be senior to the voting or consent rights of the Series
S Preferred Stock, or those rights as set forth in this paragraph 5 and in
paragraph 9 of this Designation.

       (b)   At any meeting at which the holders of shares of Series S Preferred
Stock and any Voting Parity Preferred shall be entitled to elect directors, the
holders of one-third of the Series S Preferred Stock and any Voting Parity
Preferred, present in person or by proxy, shall be sufficient to constitute a
quorum, and the vote of holders of a plurality of such shares so present at any
such meeting at which there shall be such a quorum shall be sufficient to elect
the two members of the Board of Directors which such holders are entitled to
elect as herein provided. Nothing in this subparagraph (b) shall prevent any
change otherwise permitted in the total number of or classifications of
directors of the Corporation nor require the resignation of any director elected
other than pursuant to this subparagraph (b). Notwithstanding any classification
of the other directors of the Corporation, any directors elected by the holders
of Series S Preferred Stock and any Voting Parity Preferred shall be elected
annually for terms expiring at the next succeeding annual meeting of
shareholders, subject to earlier termination pursuant to the provisions of
subparagraph (c) below.

       (c)   Upon any divesting of the special class of voting rights of the
holders of the Series S Preferred Stock and any Voting Parity Preferred in
respect of elections of directors as provided in this Paragraph 5, the terms of
office of all directors then in office elected by such holders shall terminate
immediately. If the office of any director elected by such holders, voting as a
class, becomes vacant by reason of death, resignation, removal from office or
otherwise, the remaining director elected by such holders may elect a successor
who shall hold office for the unexpired term in respect of which such vacancy
occurred.

       6.    Conversion Rights. The holders of the Series S Preferred Stock
shall have the following conversion rights:

       (a)   Right to Convert. Each share of Series S Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such Series S Preferred Stock and before any redemption date in
respect thereof, at the office of the Corporation or any transfer agent for the
Series S Preferred Stock or Common Stock, into fully paid and nonassessable
shares of Common Stock, at the Conversion Price (as hereafter defined) therefor
in effect at the time of conversion determined as provided herein.

                                       -5-

<PAGE>

     (b) Conversion Price. Each share of Series S Preferred Stock shall be
convertible into (i) the number of shares of Common Stock that results from
dividing $20.00 by the Conversion Price, as hereinafter defined, plus (ii) the
right to receive a cash payment from the Corporation of $3.125 (the "Conversion
Cash Payment"). The Conversion Price as of the original date of issuance of the
Series S Preferred Stock shall be $19.20 per Share of Common Stock subject to
adjustment from time to time as provided herein. Holders of shares of Series S
Preferred Stock surrendered for conversion or redemption after the record date
for a dividend payment and prior to the next succeeding dividend payment date
shall be entitled to the dividend falling due on that next succeeding dividend
payment date notwithstanding such conversion or redemption.

     (c) Mechanics of Conversion. Any holder of Series S Preferred Stock shall
be entitled to convert the same into Common Stock by surrendering the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series S Preferred Stock or Common
Stock on a date prior to the close of business on the day before the date fixed
for redemption of such shares of Series S Preferred Stock called for redemption
(the "Conversion Date"), and shall give prior written notice by mail, postage
prepaid, to the Corporation at such office, that such holder elects to convert
the same and shall state therein the number of shares of Series S Preferred
Stock being converted and the name or names in which the certificate or
certificates for Common Stock are to be issued. Upon the Corporation's receipt
of notice of conversion and the holder's surrender of the certificate or
certificates on the Conversion Date, the Corporation shall promptly issue and
deliver at such office to such holder of Series S Preferred Stock or to the
nominee or nominees of such holder a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled together with
the Corporation's check in the amount of the aggregate Conversion Cash Payment
due. Such Conversion shall be deemed to have been made immediately prior to the
close of business on the Conversion Date of the Series S Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock on such date.

     (d) Adjustments for Stock Splits and Combinations. If the Corporation shall
at any time or from time to time after the original issue date of the Series S
Preferred Stock effect a subdivision or combination of any outstanding Common
Stock, including a dividend payable in Common Stock, the Conversion Price then
in effect immediately before such subdivision or combination shall be
proportionately adjusted by multiplying the then effective Conversion Price by a
fraction, (i) the numerator of which shall be the number of shares of Common
Stock issued and outstanding immediately prior to such subdivision or
combination, and (ii) the denominator of which shall be the number of shares of
Common Stock issued and outstanding immediately after such subdivision or
combination. The number of shares of Common Stock outstanding at any time shall,
for the purposes of this Designation, include the number of shares of Common
Stock into which any convertible securities of the Company, including the Series
S Preferred Stock, may be converted, or for which any warrant, option or rights
of the Corporation may be exercised or exchanged. Any adjustment under this
Designation shall become effective at the close of business on the date the
subdivision or combination becomes effective. Advance notice of events which
would give rise to

                                       -6-

<PAGE>

an adjustment in the Conversion Price shall be given to holders of the Series S
Preferred Stock, but failure to give such notice shall not affect the validity
or effectiveness of such event. No adjustment of the Conversion Price shall be
made for the issuance of shares of Common Stock to employees pursuant to the
Company's or any subsidiary's stock ownership, stock option or other benefit
plan. No adjustment of the Conversion Price will be required to be made in any
case until cumulative adjustments amount to one percent or more of the
Conversion Price. The Corporation reserves the right to make such changes in the
Conversion Price in addition to those required in the foregoing provisions as
the Corporation in its discretion shall determine to be advisable in order that
certain stock-related distributions hereafter made by the Corporation to its
shareholders shall not be taxable. There shall be no adjustment in the amount of
the Conversion Cash Payment except in connection with a split-up, combination,
reverse split or other event involving the outstanding shares of Series S
Preferred Stock which would result in a change in the amount of the liquidation
preference per share of Series S Preferred Stock set forth in Section 3(a)(i)
above, in which event the amount of the per share Conversion Cash Payment would
be adjusted proportionately to the adjustment in such liquidation preference
amount.

     (e) Adjustments for Other Dividends and Distributions. In the event the
Corporation at any time or from time to time after the original issue date of
the Series S Preferred Stock shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in (i) evidences of indebtedness of the Corporation,
(ii) assets of the Corporation (other than cash dividends or distributions paid
out of retained earnings), or (iii) securities of the Corporation other than
Common Stock, then and in each such event provision shall be made so that the
holders of Series S Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of such evidences, assets or securities that they would have received had
they held, on such record date, the maximum number of shares of Common Stock
into which their Series S Preferred Stock could then have been converted. The
Corporation reserves the right to make such changes in the Conversion Price in
addition to those required in the foregoing provisions as the Corporation in its
discretion shall determine to be advisable in order that certain stock-related
distributions hereafter made by the Corporation to its shareholders shall not be
taxable.

     (f) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Series S Preferred Stock shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Paragraph 6), then and in each such event the holders of
Series S Preferred Stock shall have the right thereafter to convert each such
share into the kind and amounts of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
by holders of the maximum number of shares of Common Stock into which such
Series S Preferred Stock could have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.

                                       -7-

<PAGE>

     (g) Reorganization, Mergers, Consolidations or Sales of Assets or Capital
Stock. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for in this Paragraph 6) or a
merger or consolidation of the Corporation with or into another corporation, or
the sale of all or substantially all the Corporation's properties and assets or
capital stock to any other person, then, as a part of such reorganization,
merger, consolidation or sale, provision shall be made so that each holder of
the Series S Preferred Stock shall thereafter be entitled to receive, upon
conversion of the Series S Preferred Stock, the number of shares of stock or
other securities or property of the Corporation, or of the successor corporation
resulting from such merger of consolidation or sale as though conversion of the
Series S Preferred Stock had occurred immediately prior to such event, provided
such holder (x) is not the entity with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be, or an affiliate of such an entity and
(y) failed to exercise its rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Paragraph 6 with respect to the
rights of the holders of the Series S Preferred Stock after the reorganization,
merger, consolidation or sale to the end that the provisions of this Paragraph 6
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series S Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.

     (h) Issue of Rights or Warrants to Subscribe for Common Stock at Less Than
Market Value. In the event the Corporation at any time or from time to time
after the original issue date of the Series S Preferred Stock shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, rights or warrants to subscribe for shares of Common Stock
at a price less than the then current market price for the Common Stock (the
"Subscription Price"), then, and in each such instance, the Conversion Price
shall be reduced as of the opening of business on the date of such issue of
rights or warrants to a price equal to the Subscription Price.

     (i) No Sinking Fund. The Series S Preferred Stock shall not be subject to
any sinking fund for the purchase or redemption of shares.

     (j) Accountant's Certificate of Adjustment. In each case of an adjustment
or readjustment of a Conversion Price for Common Stock issuable upon conversion
of Series S Preferred Stock, the Corporation, at its expense, shall cause
independent certified public accountants of recognized standing selected by the
Corporation (who shall be the independent certified public accountants then
reviewing or auditing the books of the Corporation) to compute such adjustment
or readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first-class
mail, postage prepaid, to each registered holder of that Series S Preferred
Stock, at the holder's address as shown in the Corporation's books. The
certificate shall set forth such adjustment or readjustment and show in detail
the facts upon which such adjustment or readjustment is based.

                                       -8-

<PAGE>

     (k)   Fractional Shares. No fractional share of Common Stock shall be
issued upon conversion of Series S Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to the product of such fraction multiplied by the fair market
value of one share of Common Stock on the date of conversion, as reasonably
determined in good faith by the Board of Directors.

     (l)   Reservation of Shares Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
Common Stock such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series S Preferred Stock.
As a condition precedent to the taking of any action which would cause an
adjustment to the Conversion Price for Series S Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to authorize such number of shares of Common Stock as shall be
issuable pursuant to such adjusted Conversion Price.

     (m)   Payment of Taxes. The Corporation will pay all transfer taxes and
other similar governmental charges (but not taxes measured by the revenue or
income of the holders of the Series S Preferred Stock) that may be imposed in
respect of the issue or delivery of Common Stock upon conversion of Series S
Preferred Stock.

     7.    Restrictions on Ownership and Transfer; Redemption of Excess Stock.

     (a)   Definitions. For the purposes of Sections 7 and 8 of this
Designation, the following terms shall have the following meanings:

     (i)   "Beneficial Ownership" shall mean ownership of Series S Preferred
Stock by a Person who is or would be treated as an owner of such Series S
Preferred Stock either directly or constructively through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall
have the correlative meanings.

     (ii)  "Beneficiary" shall mean the beneficiary of the Trust as determined
pursuant to Paragraph 8 of this Designation.

     (iii) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

     (iv)  "Constructive Ownership" shall mean ownership of Series S Preferred
Stock by a Person who is or would be treated as an owner of such Series S
Preferred Stock either directly or constructively through the application of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns" and "Constructively Owned" shall
have the correlative meanings.

                                       -9-

<PAGE>

     (v)    "Excess Stock" shall mean those shares of Series S Preferred Stock
            Constructively Owned by a Person in excess of the Ownership Limit.

     (vi)   "Initial Offering" shall mean the issuance of Series S Preferred
Stock pursuant to the merger of Signature Inns, Inc. with and into the
Corporation pursuant to that certain Agreement and Plan of Merger dated as of
January 27, 1999, as more fully described in that certain joint proxy
statement/prospectus of the Corporation and Signature Inns, Inc. dated as of
March 26, 1999 and which is Part I of the effective registration statement on
Form S-4 covering such Series S Preferred Stock filed under the Securities Act
of 1933, as amended.

     (vii)  "Market Price" shall mean the value per share equal to the average
of the closing price of a share of Series S Preferred Stock as reported by The
Nasdaq Stock Market ("Nasdaq") (or, if the Series S Preferred Stock is then
reported on a stock exchange, the closing price as reported on such exchange)
for the 10 calendar days preceding the relevant date, or if the Series S
Preferred Stock is not then traded over any exchange or quotation system, then
the market price of the Series S Preferred Stock on the relevant date as
determined in good faith by the Board of Directors of the Corporation.

     (viii) "Ownership Limit" shall mean the lesser of: (i) not more than 11.3%
of the outstanding Series S Preferred Stock (in value or in number of shares,
whichever is more restrictive), provided, however, no person shall own shares of
Series S Preferred Stock which, when aggregated with all other shares of the
capital stock of the Corporation owned by such Person within the Ownership
Limitations applicable thereto under these articles of incorporation results in
such Person owning greater than 9.9% of the outstanding capital stock of the
Corporation of all classes and all series (in value or in number of shares,
whichever is more restrictive), or (ii) with respect to any Person (including
those named in (i) above) who owns, directly or constructively (through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of
the Code), 9.9% or more of a Person (in the case of a corporation, of the total
combined total combined voting power of all classes of stock entitled to vote or
the total number of shares of all classes of stock of such corporation and, in
the case of any Person which is not a corporation, of the assets or net profits
of such person), from which the Corporation derives gross income, not more than
9.9% of the total combined voting power of all classes of stock entitled to vote
or of the number of shares of all classes of stock of the Corporation (the
"Related Party Limit").

     (ix)   "Person" shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Section 401(a) or 501(c)(17) of the
Code), a portion of a trust permanently set aside for or to be used exclusively
for the purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock
corporation or other entity, and also includes a group as that term is used for
purposes of Section 13(d)(3) of the Exchange Act; but does not include an
underwriter which participates in a public offering of the Series S Preferred
Stock, provided that the ownership of Series S Preferred Stock by such
underwriter would not result in the Corporation's being "closely held" within
the meaning of

                                      -10-

<PAGE>

Section 856(h) of the Code, or would otherwise result in the Corporation's
failing to qualify as a REIT.

     (x)    "Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the purported beneficial
transferee or owner for whom the Purported Record Transferee would have acquired
or owned shares of Series S Preferred Stock, if such Transfer had been valid
under subparagraph (b) of this Paragraph 7.

     (xi)   "Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the record holder of the
Series S Preferred Stock if such Transfer had been valid under subparagraph (b)
of this Paragraph 7.

     (xii)  "REIT" shall mean a Real Estate Investment Trust under Section 856
of the Code.

     (xiii) "Transfer" shall mean any sale, transfer, gift, assignment, devise
or other disposition of Series S Preferred Stock, including (i) the granting of
any option or entering into any agreement for the sale, transfer or other
disposition of Series S Preferred Stock, or (ii) the sale, transfer, assignment
or other disposition of any securities (or rights convertible into or
exchangeable for Series S Preferred Stock), whether voluntary or involuntary,
whether of record or beneficially or Beneficially or Constructively (including
but not limited to transfers of interests in other entities which results in
changes in Beneficial or Constructive Ownership of Series S Preferred Stock),
and whether by operation of law or otherwise.

     (xiv)  "Trust" shall mean the trust created pursuant to subparagraph (a) of
Paragraph 8 of this Designation.

     (xv)   "Trustee" shall mean the Corporation as Trustee for the Trust, and
any successor trustee appointed by the Corporation.

     (b)    Restriction on Ownership and Transfer.

            (i)    Except as provided in subparagraph (i) of this Paragraph 7,
from and after the date of the Initial Offering, no Person shall Beneficially
Own or Constructively Own Series S Preferred Stock in excess of the Ownership
Limit.

            (ii)   Except as provided in subparagraph (i) of this Paragraph 7,
from the date of the Initial Offering, any Transfer (whether or not such
Transfer is the result of a transaction entered into through Nasdaq), that, if
effective, would result in any Person Beneficially Owning Series S Preferred
Stock in excess of the Ownership Limit shall be void ab initio as to the
Transfer of such Series S Preferred Stock which would be otherwise Beneficially
Owned by such Person in excess of the Ownership Limit; and the intended
transferee shall acquire no rights in such Series S Preferred Stock.

                                      -11-

<PAGE>

     (iii) Except as provided in subparagraph (i) of this Paragraph 7, from and
after the date of the Initial Offering, any Transfer (whether or not such
Transfer is the result of a transaction entered into through Nasdaq) that, if
effective, would result in any Person Constructively Owning Series S Preferred
Stock in excess of the Ownership Limit shall be void ab initio as to the
Transfer of such Series S Preferred Stock which would be otherwise
Constructively Owned by such Person in excess of the Ownership Limit; and the
intended transferee shall acquire no rights in such Series S Preferred Stock.

     (iv)  Except as provided in subparagraph (i) of this Paragraph 7, from and
after the date of the Initial Offering, any Transfer (whether or not such
Transfer is the result of a transaction entered into through Nasdaq) that, if
effective, would result in the Series S Preferred Stock being beneficially owned
by less than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer of such Series S
Preferred Stock which would be otherwise beneficially owned by the transferee;
and the intended transferee shall acquire no rights in such Series S Preferred
Stock.

     (v)   Notwithstanding any other provisions contained in this Designation,
from and after the date of the Initial Offering, any Transfer (whether or not
such Transfer is the result of a transaction entered into through Nasdaq) or
other event that, if effective, would result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code, or would otherwise
result in the Corporation failing to qualify as a REIT (including, but not
limited to, a Transfer or other event that would result in the Corporation
owning (directly or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code if the income derived by the Corporation from
such tenant would cause the Corporation to fail to satisfy any of the gross
income requirements of Section 856(c) of the Code), shall be void ab initio as
to the Transfer of the Series S Preferred Stock or other event which would cause
the Corporation to be "closely held" within the meaning of Section 856(h) of the
Code or would otherwise result in the Corporation failing to qualify as a REIT;
and the intended transferee or owner or Constructive or Beneficial Owner shall
acquire or retain no rights in such Series S Preferred Stock.

     (c)   Series S Preferred Stock Deemed Excess Stock. If, notwithstanding the
other provisions contained in this Designation, at any time after the date of
the Initial Offering, there is a purported Transfer (whether or not such
Transfer is the result of a transaction entered into through Nasdaq), change in
the capital structure of the Corporation or other event such that one or more of
the restrictions on ownership and transfers described in subparagraph (b) of
this Paragraph 7 has been violated, then the Series S Preferred Stock being
Transferred (or in the case of an event other than a Transfer, the Series S
Preferred Stock owned or Constructively Owned or Beneficially Owned) which would
cause one or more of the restrictions on ownership or transfer to be violated
(rounded up to the nearest whole share) shall be deemed Excess Stock effective
as of the closed of business on the business day prior to the date of such
Transfer or other event.

     (d)   Remedies For Breach. If the Board of Directors or its designees shall
at any time determine in good faith that a Transfer or other event has taken
place in violation of subparagraph

                                      -12-

<PAGE>

(b) of this Paragraph 7 or that a Person intends to acquire, has attempted to
acquire or may acquire direct ownership, beneficial ownership (determined
without reference to any rules of attribution), Beneficial Ownership or
Constructive Ownership of any shares of the Corporation in violation of
subparagraph (b) of this Paragraph 7, the Board of Directors or its designees
shall take such action as it deems advisable to refuse to give effect to or to
prevent such Transfer or other event, including, but not limited to, refusing to
give effect to such Transfer or other event on the books of the Corporation or
instituting proceedings to enjoin such Transfer or other event.

     (e) Notice of Restricted Transfer. Any Person who acquires or attempts to
acquire Series S Preferred Stock or other securities in violation of
subparagraph (b) of this Paragraph 7, shall immediately give written notice to
the Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or attempted Transfer or other event on the Corporation's
status as a REIT.

     (f) Owners Required To Provide Information. From and after the date of the
Initial Offering, each Person who is a Beneficial Owner or Constructive Owner of
more than 5% of Series S Preferred Stock must file an affidavit with the
Corporation within 30 days after January 1st of each year containing information
that the Corporation may require, in order to determine the Corporation's status
as a REIT. From and after the date of the Initial Offering, each Person who is a
beneficial owner or Beneficial Owner or Constructive Owner of any Series S
Preferred Stock and each Person (including the stockholder of record) who is
holding Series S Preferred Stock for a Beneficial Owner or Constructive Owner
shall provide to the Corporation such information that the Corporation may
request, in good faith, in order to determine the Corporation's status as a
REIT.

     (g) Remedies Not Limited. Nothing contained in this Designation (but
subject to subparagraph (f) of Paragraph 8 hereof) shall limit the authority of
the Board of Directors to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT; provided, however, that no
action by the Board of Directors shall be authorized or allowed which would have
an adverse effect upon the preferences or voting or other rights of the Series S
Preferred Stock unless and until the Board of Directors obtains the consent of
the holders of two-thirds of the shares of such series pursuant to the
provisions of paragraph 9 hereof.

     (h) Ambiguity. In the case of an ambiguity in the application of any of the
provisions of Paragraph 7, including any definition contained in subparagraph
(a) of this Paragraph 7, the Board of Directors shall have the power to
determine the application of the provisions of this Paragraph 7 with respect to
any situation based on the facts known to it (subject, however, to the
provisions of subparagraph (f) of Paragraph 8 of this Designation).

     (i) Exceptions.

         (i) Subject to subparagraph (b)(v) of this Paragraph 7, the Board of
Directors, in its sole and absolute discretion, may exempt a Person from the
Ownership Limit if such Person is

                                      -13-

<PAGE>

not an individual for purposes of Section 542(a)(2) of the Code and the Board of
Directors obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain that no individual's Beneficial Ownership of
such Series S Preferred Stock will violate the Ownership Limit and such Person
agrees that any violation of such representations or undertaking (or other
action which is contrary to the restrictions contained in this Paragraph 7) or
attempted violation will result in Excess Stock in accordance with subparagraph
(c) of this Paragraph 7.

        (ii)  Subject to subparagraph (b)(v) of this Paragraph 7, the Board of
Directors, in its sole and absolute discretion, may exempt a Person from the
limitation on a Person Constructively Owning Series S Preferred Stock in excess
of the Ownership Limit, if such Person does not and represents that it will not
own, directly or constructively (through the application of Section 318(a) of
the Code, as modified by Section 856(d)(5) of the Code), more than a 9.9%
interest (within the meaning of Section 856(d)(2)(B)) in a Person from whom the
Corporation derives gross income and the Board of Directors obtains such
representations and undertakings from such Person as reasonably necessary to
ascertain this fact and such Person agrees that any violation or attempted
violation will result in such Series S Preferred Stock in excess of the
Ownership Limit being deemed Excess Stock in accordance with subparagraph (c) of
this Paragraph 7.

        (iii) Prior to granting any exception pursuant to subparagraph (i)(i) or
(i)(ii) of this Paragraph 7, the Board of Directors may require a ruling from
the Internal Revenue Service, or an opinion of counsel, in either case in form
and substance satisfactory to the Board of Directors in its sole discretion as
it may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT; provided, however, that obtaining a favorable
ruling or opinion shall not be required for the Board of Directors to grant an
exception hereunder.

    (j) Legend. Each certificate representing one or more shares of Series S
Preferred Stock shall bear the following legend:

        "The Corporation is authorized to issue two classes of capital stock
which are designated as Common Stock and Preferred Stock. The Board of Directors
is authorized, without action by the Corporation's stockholders, to determine
the preferences, limitations and relative rights of the Preferred Stock before
the issuance of any Preferred Stock. The Corporation will furnish, without
charge, to any stockholder making a written request therefor, a copy of the
Corporation's articles of incorporation and a written statement of the
designations, relative rights, preferences and limitations applicable to each
class of stock. Requests for such written statement may be directed to Jameson
Inns, Inc., 8 Perimeter Center East, Suite 8050, Atlanta, Georgia 30346-1603.

        "The shares of $1.70 Series S Cumulative Convertible Preferred
Stock("Series S Preferred Stock") represented by this certificate are subject to
restrictions on ownership and transfer for the purpose of the Corporation's
maintenance of its status as a Real Estate Investment Trust under the Internal
Revenue Code of 1986, as amended. No Person may own, Beneficially Own or
Constructively Own Series S Preferred Stock in excess of 11.3% (in value or in
number of shares, whichever is more restrictive) of the outstanding Series S
Preferred Stock of the Corporation, with

                                      -14-

<PAGE>

certain further restrictions and exceptions set forth in the Corporation's
articles of incorporation. Any Person who attempts to own, Beneficially Own or
Constructively Own Series S Preferred Stock in excess of the above limitations
must immediately notify the Corporation. All capitalized terms in this legend
have the meanings defined in the Corporation's articles of incorporation.
Transfers in violation of the restrictions described above may be void ab
initio.

        "In addition, upon the occurrence of certain events, if the restrictions
on ownership are violated, the Series S Preferred Stock represented hereby may
be redeemed or held in trust by the Corporation. The Corporation has an option
to acquire Excess Stock under certain circumstances. The Corporation will
furnish to the holder hereof upon request and without charge a complete written
statement of the terms and conditions of the Excess Stock. Requests for such
statement may be directed to Jameson Inns, Inc., 8 Perimeter Center East, Suite
8050, Atlanta, Georgia 30346-1603.

        "Capitalized terms used herein shall, where the context permits, have
the same meaning assigned to such terms as are assigned in the Corporation's
articles of incorporation."

    (k) Separability. If any provision of Paragraph 7 or 8 of this Designation
or any application of any such provision is determined to be invalid by any
federal or state court having jurisdiction, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.

     8. Excess Stock.

    (a) Ownership In Trust. Upon any purported Transfer (whether or not such
Transfer is the result of a transaction entered into through Nasdaq) that
results in Excess Stock pursuant to subparagraph (c) of Paragraph 7 of this
Designation, such Excess Stock shall be deemed to have been transferred to the
Corporation, as Trustee of a Trust for the exclusive benefit of such Beneficiary
or Beneficiaries to whom an interest in such Excess Stock may later be
transferred pursuant to subparagraph (d) of this Paragraph 8. The Purported
Record Transferee shall have no rights in such Excess Stock except the right to
designate a transferee of such Excess Stock upon the terms specified in
subparagraph (d) of this Paragraph 8. The Purported Beneficial Transferee shall
have no rights in such Excess Stock except as provided in subparagraph (d) of
this Paragraph 8. If the Corporation does not receive a notice pursuant to
subparagraph (e) of Paragraph 7 of a Transfer in violation of subparagraph (b)
of Paragraph 7, the Corporation will provide notice to the Purported Beneficial
Transferee within five business days after the Board of Directors determines in
good faith that a Transfer or other event resulting in Excess Stock has
occurred. Such notice will state that the shares Transferred are Excess Shares
and that the Purported Beneficial Transferee shall have no right to vote such
shares, realize any appreciation with respect thereto or receive any dividends
or other distributions on such Excess Shares and of the Corporation's right to
purchase such shares under subparagraph (e) of this paragraph 8 hereof.

                                      -15-

<PAGE>

     (b) Dividend Rights. Any dividends paid on Excess Shares shall be paid to
or retained by the Corporation as Trustee of the Trust and shall be held for the
benefit of and paid to the Beneficiary. Any dividend or distribution paid prior
to the discovery by the Corporation that shares of Series S Preferred Stock have
been converted into Excess Stock shall be repaid upon demand to the Corporation
as Trustee and held for the benefit of and paid to the Beneficiary.

     (c) Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation, each holder of Excess Stock shall be entitled to receive,
ratably with each other holder of Series S Preferred Stock, the amount provided
in Section 3 above. The Corporation, as holder of the Excess Stock in trust, or
if the Corporation shall have been dissolved, any trustee appointed by the
Corporation prior to its dissolution, shall distribute ratably to the
Beneficiaries of the Trust, when and if determined in accordance with
subparagraph (d) of this Paragraph 8, any such assets received in respect of the
Excess Stock in any liquidation, dissolution or winding up of, or any
distribution of the assets of the Corporation.

     (d) Restrictions On Transfer; Designation of Beneficiary.

        (i)  Excess Stock shall not be transferable. Subject to the last
sentence of this clause (i), the Purported Record Transferee may freely
designate a Beneficiary of an interest in the Trust (representing the number of
shares of Excess Stock held by the Trust attributable to a purported Transfer
that resulted in Excess Stock), if (1) the Excess Stock held in the Trust would
not be Excess Stock in the hands of such Beneficiary and (2) the Purported
Beneficial Transferee does not receive a price for designating such Beneficiary
that reflects a price per share for such Excess Stock that exceeds (x) the price
per share such Purported Beneficial Transferee paid for the Series S Preferred
Stock in the purported Transfer that resulted in Excess Stock, or (y) if the
Transfer or other event that resulted in Excess Stock was not a transaction in
which the Purported Beneficial Transferee gave full value for such Excess Stock,
a price per share equal to the Market Price on the date of the purported
Transfer or other event that resulted in the issuance of Excess Stock. Upon such
transfer of an interest in the Trust, the corresponding shares of Excess Stock
in the Trust shall automatically cease to be Excess Stock and such Series S
Preferred Stock and any dividends received in respect thereof shall be
transferred of record to the transferee of the interest in the Trust if such
Series S Preferred Stock would not be Excess Stock in the hands of such
transferee. Prior to any transfer of any interest in the Trust, the Purported
Record Transferee must give advance notice to the Corporation of the intended
transfer and the Corporation must have waived in writing its purchase rights
under subparagraph (e) of this Paragraph 8.

        (ii) Notwithstanding the foregoing, if a Purported Beneficial Transferee
receives a price for designating a Beneficiary of an interest in the Trust that
exceeds the amounts allowable under subparagraph (d)(i) of this Paragraph 8,
such Purported Beneficial Transferee shall pay, or cause such Beneficiary to
pay, such excess to the Corporation.

                                      -16-

<PAGE>

     (e) Purchase Right in Excess Stock. Notwithstanding the provisions of
subparagraph (d) of this Paragraph 8, Excess Stock shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share equal
to the price per share in the transaction that resulted in such Excess Stock
(or, if the Transfer or other event that resulted in such Excess Stock was not a
transaction in which the Purported Beneficial Transferee gave full value for
such Excess Stock, a price per share equal to the Market Price on the date of
the purported Transfer or other event that resulted in Excess Stock). The
Corporation shall have the right to accept such offer for a period of thirty
days after the later of (i) the date of the Transfer or other event which
resulted in such Excess Stock and (ii) the date the Board of Directors
determines in good faith that a Transfer or other event resulting in such Excess
Stock has occurred, if the Corporation does not receive a notice of such
Transfer or other event pursuant to subparagraph (e) of Paragraph 7 of this
Designation. The Corporation may appoint a special trustee of the trust
established under subparagraph (a) of this Paragraph 8 for the purpose of
consummating the purchase of Excess Stock by the Corporation.

     (f) Settlement. Nothing in Paragraph 7 or this Paragraph 8 of this
Designation shall preclude the settlement of any transaction entered into
through Nasdaq.

     9.  Required Consent. The affirmative vote or consent of the holders of
two-thirds of the shares of Series S Preferred Stock and all other series of
Parity Preferred and having similar consent rights as the Series S Preferred
Stock ("Consent Parity Preferred"), at the time outstanding, voting or
consenting separately as a class, given in person or by proxy either in writing
or at a meeting called for the purpose, shall be necessary to effect any one or
more of the following:

     (a) Any amendment, alteration or repeal, whether by merger, consolidation
or otherwise, of any of the provisions of the Amended and Restated Articles of
Incorporation or of the By-Laws of the Corporation which affects adversely the
preferences or voting or other rights of the holders of Series S Preferred
Stock; provided, however, that the amendment of the Amended and Restated
Articles of Incorporation or the By-Laws, as amended, so as to: (i) authorize,
create or change the authorized or outstanding number of shares of Series S
Preferred Stock, Parity Preferred, or of any shares ranking junior to the Series
S Preferred Stock, or (ii) change the number or classification of directors
shall not be deemed to affect adversely the preferences or voting or other
rights of the holders of Series S Preferred Stock;

     (b) The authorization, creation or the increase in the authorized number of
any shares, or of any security convertible into shares, in either case ranking
senior to the Series S Preferred Stock; or

     (c) The purchase or redemption of less than all of the Series S Preferred
Stock and all other shares ranking on a parity with the Series S Preferred Stock
upon purchase or redemption then outstanding except in accordance with a stock
purchase offer made to all holders of record of the Series S Preferred Stock and
all other shares ranking on a parity with the Series S Preferred Stock upon
purchase or redemption, unless all dividends on the Series S Preferred Stock
then outstanding

                                      -17-

<PAGE>

for all previous Dividend Payment Dates and for the dividend period ending on
the next Dividend Payment Date shall have been declared and paid or provision
made for payments thereof.

     10. General Provisions.

     (a) Notices. Any notice required by the provisions of this Designation to
be given to holders of record of Series S Preferred Stock shall be deemed given
when personally delivered to such holder or five business days after the same
has been deposited in the United States mail, certified or registered mail,
return receipt requested, postage prepaid, and addressed to that holder of
record at its address appearing on the books of the Corporation.

     (b) No Impairment. The Corporation shall not amend the Amended and Restated
Articles of Incorporation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, for the purpose of avoiding
or seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation.

     (c) Status of Series S Preferred Stock Upon Redemption or Conversion. Any
share of Series S Preferred Stock which is (1) redeemed by the Corporation, (2)
converted in accordance with the express terms thereof, or (3) otherwise
acquired by the Corporation, shall resume the status of authorized but unissued
Preferred Stock without designation.

                                       III

     The amendment set forth in Section II of these Articles of Amendment was
duly adopted by the affirmative vote of a majority of the members of the Board
of Directors of the Corporation on January 27, 1999. Pursuant to Section
14-2-602 of the Georgia Business Corporation Code, the shareholders of the
Corporation were not required to take any action in connection herewith.

     IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed by its duly authorized officer on the 7th day of May, 1999.

<PAGE>

                                    JAMESON INNS, INC.


                                    By: /s/ Steven A. Curlee
                                        -----------------------------------
                                         Steven A. Curlee, Secretary and
                                         Vice President-Legal

                                      -18-