Document:

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                                                                   EXHIBIT 10.42

                                   RECORDATION REQUESTED BY:
                                       tr:200005160096060           05/16/2000

                                       Pages:6   Fee:$30.00   12@04PM
    Cornerstone Bank                   Richard B. Metcalf     T20000063831
    28 East Main Street                Franklin County Recorder   BXLAVINSKY
    PO Box 719
    Springfield, OH 45501

WHEN RECORDED MAIL TO:
Cornerstone Bank
28 East Main Street
PO BOX 719
Springfield, OH 45501

SEND TAX NOTICES TO:
Cornerstone Bank
28 East Main Street
PO BOX 719
Springfield, OH 45501

SPACE ABOVE THIS LINE IS FOR RECORDER'S USE ONLY
------------------------------------------------

OPEN-END MORTGAGE

MAXIMUM LIEN: The Maximum Amount of Loan Indebtedness secured by this Open-End
Mortgage is $3,900,000.00. The words "Maximum Amount of Loan Indebtedness' as
used in this Mortgage mean the maximum unpaid balance of loan advances made
under the Note which may be outstanding at any one time.  The Maximum Amount of
Loan Indebtedness does not include any (A) interest, (B) taxes, (C) assessments,
(D) insurance premiums, or (E) costs incurred for the protection of the
Property.  Grantor and Lender intend that, in addition to any other indebtedness
or obligations secured hereby, this Mortgage shall secure indebtedness arising
from loan advances made by Lender after this Mortgage is delivered to the
recorder for record.

THIS MORTGAGE dated May 16, 2000, is made and executed between Jameson Inns,
Inc., whose address Is 8 Perimeter Center East, Suite 8050, Atlanta, GA 30346
(referred to below as "Grantor") and Cornerstone Bank, whose address Is 28 East
Main Street, PO Box 719, Springfield, OH 45501 (referred to below as "Lender").

GRANT OF MORTGAGE.  For valuable consideration, Grantor grants, mortgages and
conveys to Lender, with mortgage covenants and upon the statutory condition, all
of Grantor's right, title, and Interest in and to the following described real
property, together with all existing or subsequently erected or affixed
buildings, improvements and fixtures; all easements, rights of way, and
appurtenances; all water, water rights, watercourses and ditch rights (including
stock in utilities with ditch or irrigation rights); and all other rights,
royalties, and pr fits relating to the real party, including without limitation
all minerals, oil, gas, geothermal and similar matters, (the "Real Property")
located in Franklin County, State of Ohio:

See Exhibit A, which is attached to this Mortgage and made a part of this
Mortgage as If fully set forth herein.

The Real Property or its address is commonly known as 6767 Schrock Hill Ct.,
Columbus, OH 43229.

Grantor presently assigns to Lender all of Grantor's right, title, and interest
in and to all present and future leases of the Property and all Rents from the
Property.  In addition, Grantor grants to Lender a Uniform Commercial Code
security interest In the Personal Property and Rents.
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THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN
THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE
INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE, THE
RELATED DOCUMENTS, AND THIS MORTGAGE.  THIS MORTGAGE IS GIVEN AND ACCEPTED ON
THE FOLLOWING TERMS:

PAYMENT AND PERFORMANCE.  Except as otherwise provided in this Mortgage, Grantor
shall pay to Lender all amounts secured by this Mortgage as they become due and
shall strictly perform all of Grantor's obligations under this Mortgage.

POSSESSION AND MAINTENANCE OF THE PROPERTY.  Grantor agrees that Grantor's
possession and use of the Property shall be governed by the following
provisions:

Possession and Use.  Until the occurrence of an Event of Default, Grantor may
(1) remain in possession and control of the Property; (2) use, operate or manage
the Property; and (3) collect the Rents from the Property.

Duty to Maintain.  Grantor shall maintain the Property in tenantable condition
and promptly perform all repairs, replacements, and maintenance necessary to
preserve its value.

Compliance With Environmental Laws.  Grantor represents and warrants to Lender
that: (1) During the period of Grantor's ownership of the Property, there has
been no use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under, about or
from the Property; (2) Grantor has no knowledge of, or reason to believe that
there has been, except as previously disclosed to and acknowledged by Lender in
writing, (a) any breach or violation of any Environmental Laws, (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the Property by any
prior owners or occupants of the Property, or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters; and (3)
Except as previously disclosed to and acknowledged by Lender in writing, (a)
neither Grantor nor any tenant, contractor, agent or other authorized user of
the Property shall use, generate, manufacture, store, treat, dispose of or
release any Hazardous Substance on, under, about or from the Property; and lb)
any such activity shall be conducted In compliance with all applicable federal,
state, and local laws, regulations and ordinances, including without limitation
all Environmental Laws.  Grantor authorizes Lender and its agents to enter upon
the Property to make such inspections and tests, at Grantor's expense, as Lender
may deem appropriate to determine compliance of the Property with this section
of the Mortgage.  Any inspections or tests made by Lender shall be for Lender's
purposes only and shall not be construed to create any responsibility or
liability on the part of Lender to Grantor or to any other person.  The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Property for Hazardous Substances. Grantor hereby
(1) releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other costs
under any such laws; and (2) agrees to indemnify and hold harmless Lender
against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Mortgage or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
occurring prior to Grantor's ownership or interest in the Property, whether or
not the same was or should have been known to Grantor.  The provisions of this
section of the Mortgage, including the obligation to indemnify, shall survive
the payment of the Indebtedness and the satisfaction and reconveyance of the
lien of this Mortgage and shall not be affected by Lender's acquisition of any
interest in the Property, whether by foreclosure or otherwise.

Nuisance, Waste.  Grantor shall not cause, conduct or permit any nuisance nor
commit, permit, or suffer any stripping of or waste on or to the Property or any
portion of the Property.  Without limiting the generality of the foregoing,
Grantor will not remove, or grant to any other party the right to remove, any
timber, minerals (including oil and gas), coal, clay, scoria, soil, gravel or
rock products without Lender's prior written consent.

Removal of Improvements.  Grantor shall not demolish or remove any Improvements
from the Real Property without Lender's prior written consent.  As a condition
to the removal of any Improvements, Lender may require Grantor to make
arrangements satisfactory to Lender to replace such Improvements with
Improvements of at least equal value.

Lender's Right to Enter.  Lender and Lender's agents and representatives may
enter upon the Real Property at all reasonable times to attend to Lender's
interests and to inspect the Real Property for purposes of Grantor's compliance
with the terms and conditions of
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this Mortgage.

Compliance with Governmental Requirements.  Grantor shall promptly comply with
all laws, ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the use or occupancy of the Property,
including without limitation, the Americans With Disabilities Act.  Grantor may
contest in good faith any such law, ordinance, or regulation and withhold
compliance during any proceeding, including appropriate appeals, so long as
Grantor has notified Lender in writing prior to doing so and so long as, in
Lender's sole opinion, Lender's interests in the Property are not jeopardized.
Lender may require Grantor to post adequate security or a surety bond,
reasonably satisfactory to Lender, to protect Lender's interest.

Duty to Protect.  Grantor agrees neither to abandon nor leave unattended the
Property.  Grantor shall do all other acts, in addition to those acts set forth
above in this section, which from the character and use of the Property are
reasonably necessary to protect and preserve the Property.

TAXES AND LIENS.  The following provisions relating to the taxes and liens on
the Property are part of this Mortgage:

Payment.  Grantor shall pay when due (and in all events prior to delinquency)
all taxes, payroll taxes, special taxes, assessments, water charges and sewer
service charges levied against or on account of the Property, and shall pay when
due all claims for work done on or for services rendered or material furnished
to the Property.  Grantor shall maintain the Property free of any liens having
priority over or equal to the interest of Lender under this Mortgage, except for
those liens specifically agreed to in writing by Lender, and except for the lien
of taxes and assessments not due as further specified In the Right to Contest
paragraph.

Right to Contest.  Grantor may withhold payment of any tax, assessment, or claim
in connection with a good faith dispute over the obligation to pay, so long as
Lender's interest in the Property is not jeopardized.  If a lien arises or is
filed as a result of nonpayment, Grantor shall within fifteen (15) days after
the lien arises or, if a lien is filed, within fifteen (15) days after Grantor
has notice of the filing, secure the discharge of the lien, or if requested by
Lender, deposit with Lender cash or a sufficient corporate surety bond or other
security satisfactory to Lender in an amount sufficient to discharge the lien
plus any costs and attorneys' fees, or other charges that could accrue as a
result of a foreclosure or sale under the lien.  In any contest, Grantor shall
defend itself and Lender and shall satisfy any adverse judgment before
enforcement against the Property.  Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings.

Evidence of Payment. Grantor shall upon demand furnish to Lender satisfactory
evidence of payment of the taxes or assessments and shall authorize the
appropriate governmental official to deliver to Lender at any time a written
statement of the taxes and assessments against the Property.

Notice of Construction.  Grantor shall notify Lender at least fifteen (15) days
before any work is commenced, any services are furnished, or any materials are
supplied to the Property, if any mechanic's lien, materialmen's lien, or other
lien could be asserted on account of the work, services, or materials.  Grantor
will upon request of Lender furnish to Lender advance assurances satisfactory to
Lender that Grantor can and will pay the cost of such improvements.

PROPERTY DAMAGE INSURANCE.  The following provisions relating to insuring the
Property are a part of this Mortgage:

Maintenance of Insurance.  Grantor shall procure and maintain policies of fire
insurance with standard extended coverage endorsements on a replacement basis
for the full insurable value covering all Improvements on the Real Property in
an amount sufficient to avoid application of any coinsurance clause, and with a
standard mortgagee clause in favor of Lender.  Grantor shall also procure and
maintain comprehensive general liability insurance in such coverage amounts as
Lender may request with Lender being named as additional insureds in such
liability insurance policies.  Additionally, Grantor shall maintain such other
insurance, including but not limited to hazard, business interruption and boiler
insurance as Lender may require.  Policies shall be written by such insurance
companies and in such form as may be reasonably acceptable to Lender.  Grantor
shall deliver to Lender certificates of coverage from each insurer containing a
stipulation that coverage will not be cancelled or diminished without a minimum
of
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thirty (30) days' prior written notice to Lender and not containing any
disclaimer of the insurer's liability for failure to give such notice.  Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person.  Should the Real Property be located in an area
designated by the Director of the Federal Emergency Management Agency as a
special flood hazard area, Grantor agrees to obtain and maintain Federal Flood
Insurance, if available, within 45 days after notice is given by Lender that the
Property is located in a special flood hazard area, for the full unpaid
principal balance of the loan and any prior liens on the property securing the
loan, up to the maximum policy limits set under the National Flood Insurance
Program, or as otherwise required by Lender, and to maintain such insurance for
the term of the loan.

Application of Proceeds.  Grantor shall promptly notify Lender of any loss or
damage to the Property.  Lender may make proof of loss if Grantor fails to do so
within fifteen (15) days of the casualty.  Whether or not Lender's security is
impaired, Lender may, at Lender's election, receive and retain the proceeds of
any insurance and apply the proceeds to the reduction of the Indebtedness,
payment of any lien affecting the Property, or the restoration and repair of the
Property.  If Lender elects to apply the proceeds to restoration and repair,
Grantor shall repair or replace the damaged or destroyed Improvements in a
manner satisfactory to Lender. Lender shall, upon satisfactory proof of such
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration if Grantor is not in default under this Mortgage.  Any
proceeds which have not been disbursed within 180 days after their receipt and
which Lender has not committed to the repair or restoration of the Property
shall be used first to pay any amount owing to Lender under this Mortgage, then
to pay accrued interest, and the remainder, if any, shall be applied to the
principal balance of the Indebtedness.  If Lender holds any proceeds after
payment in full of the Indebtedness, such proceeds shall be paid to Grantor as
Grantor's interests may appear.

Unexpired Insurance at Sale.  Any unexpired insurance shall inure to the benefit
of, and pass to, the purchaser of the Property covered by this Mortgage at any
trustee's sale or other sale held under the provisions of this Mortgage, or at
any foreclosure sale of such Property.

LENDER'S EXPENDITURES.  If any action or proceeding is commenced that would
materially affect Lender's interest in the Property or if Grantor fails to
comply with any provision of this Mortgage or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Mortgage or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Property and paying all costs
for insuring, maintaining and preserving the Property All such expenditures
Incurred or paid by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of
repayment by Grantor.  All such expenses will become a part of the Indebtedness
and, at Lender's option, will (A) be payable on demand; (B) be added to the
balance of the Note and be apportioned among and be payable with any installment
payments to become due during either (1) the term of any applicable insurance
policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note's maturity.  The Property also
will secure payment of these amounts.  Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon Default.

WARRANTY; DEFENSE OF TITLE.  The following provisions relating to ownership of
the Property are a part of this Mortgage:

Title.  Grantor warrants that: (a) Grantor holds good and marketable title of
record to the Property In fee simple, free and clear of all liens and
encumbrances other than those set forth in the Real Property description or in
any title insurance policy, title report, or final title opinion issued in favor
of, and accepted by, Lender in connection with this Mortgage, and (b) Grantor
has the full right, power, and authority to execute and deliver this Mortgage to
Lender.

Defense of Title.  Subject to the exception in the paragraph above, Grantor
warrants and will forever defend the title to the Property against the lawful
claims of all persons.  In the event any action or proceeding is commenced that
questions Grantor's title or the interest of Lender under this Mortgage, Grantor
shall defend the action at Grantor's expense.  Grantor may be the nominal party
In such proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of Lender's own
choice, and Grantor will deliver, or cause to be delivered, to Lender such
instruments as Lender may request from time to time to permit such
participation.

Compliance With Laws.  Grantor warrants that the Property and Grantor's use of
the Property complies with all existing applicable laws, ordinances, and
regulations of governmental authorities.
<PAGE>

Survival of Representations and Warranties.  All representations, warranties,
and agreements made by Grantor in this Mortgage shall survive the execution and
delivery of this Mortgage, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor's Indebtedness shall he paid in
full.

CONDEMNATION.  The following provisions relating proceedings are a part - of
this Mortgage:

Proceedings.  It any proceeding in condemnation is filed, Grantor shall promptly
notify Lender in writing, and Grantor shall promptly take such steps as may be
necessary to defend the action and obtain the award.  Grantor may be the nominal
party in such proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of Its own choice,
and Grantor will deliver or cause to be delivered to Lender such instruments and
documentation as may be requested by Lender from time to time to permit such
participation.

Application of Net Proceeds.  If all or any part of the Property is condemned by
eminent domain proceedings or by any proceeding or purchase in lieu of
condemnation, Lender may at its election require that all or any portion of the
net proceeds of the award be applied to the Indebtedness or the repair or
restoration of the Property.  The net proceeds of the award shall mean the award
after payment of all reasonable costs, expenses, and attorneys' fees incurred by
Lender in connection with the condemnation.

IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following
provisions relating to governmental taxes, fees and charges are a part of this
Mortgage:

Current Taxes, Fees and Charges.  Upon request by Lender, Grantor shall execute
such documents in addition to this Mortgage and take whatever other action is
requested by Lender to perfect and continue Lender's lien on the Real Property.
Grantor shall reimburse Lender for all taxes, as described below, together with
all expenses incurred in recording, perfecting or continuing this Mortgage,
including without limitation all taxes, fees, documentary stamps, and other
charges for recording or registering this Mortgage.

Taxes.  The following shall constitute taxes to which this section applies: (1)
a specific tax upon this type of Mortgage or upon all or any part of the
Indebtedness secured by this Mortgage; (2) a specific tax on Grantor which
Grantor is authorized or required to deduct from payments on the Indebtedness
secured by this type of Mortgage; (3) a tax on this type of Mortgage chargeable
against the Lender or the holder of the Note; and (4) a specific tax on all or
any portion of the Indebtedness or on payments of principal and interest made by
Grantor.

Subsequent taxes. If any tax to which this section applies is enacted subsequent
to the date of this Mortgage, this event shall have the same effect as an Event
of Default, and Lender may exercise any or all of its available remedies for an
Event of Default as provided below unless Grantor either (1) pays the tax before
it becomes delinquent, or (2) contests the tax as provided above in the Taxes
and Liens section and deposits with Lender cash or a sufficient corporate surety
bond or other security satisfactory to Lender.

SECURITY AGREEMENT; FINANCING STATEMENTS.  The following provisions relating to
this Mortgage as a security agreement are a part of this Mortgage:

Security Agreement.  This instrument shall constitute a Security Agreement to
the extent any of the Property constitutes fixtures or other personal property,
and Lender shall have all of the rights of a secured party under the Uniform
Commercial Code as amended from time to time.

Security Interest.  Upon request by Lender, Grantor shall execute financing
statements and take whatever other action is requested by Lender to perfect and
continue Lender's security interest in the Rents and Personal Property.  In
addition to recording this Mortgage in the real property records, Lender may, at
any time and without further authorization from Grantor, file executed
counterparts, copies or reproductions of this Mortgage as a financing statement.
Grantor shall reimburse Lender for all expenses Incurred In perfecting or
continuing this security interest.  Upon default, Grantor shall assemble the
Personal Property in a manner and at a place reasonably convenient to Grantor
and Lender and make it available to Lender within three (3) days after receipt
of written demand from Lender.
<PAGE>

Addresses.  The mailing addresses of Grantor (debtor) and Lender (secured party)
from which information concerning the security Interest granted by this Mortgage
may be obtained (each as required by the Uniform Commercial Code) are as stated
on the first page of this Mortgage.

FURTHER ASSURANCES; ATTORNEY-IN-FACT.  The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage:

Further Assurances.  At any time, and from time to time, upon request of Lender,
Grantor will make, execute and deliver, or will cause to be made, executed or
delivered, to Lender or to Lender's designee, and when requested by Lender,
cause to be filed, recorded, refiled, or rerecorded, as the case may be, at such
times and in such offices and places as Lender may deem appropriate, any and all
such mortgages, deeds of trust, security deeds, security agreements, financing
statements, continuation statements, instruments of further assurance,
certificates, and other documents as may, in the sole opinion of Lender, be
necessary or desirable in order to effectuate, complete, perfect, continue, or
preserve (1) Grantor's obligations under the Note, this Mortgage, and the
Related Documents, and (2) the liens and security interests created by this
Mortgage as first and prior liens on the Property, whether now owned or
hereafter acquired by Grantor.  Unless prohibited by law or Lender agrees to the
contrary in writing, Grantor shall reimburse Lender for all costs and expenses
incurred in connection with the matters referred to in this paragraph.

Attorney-in-Fact.  If Grantor fails to do any of the things referred to in the
preceding paragraph, Lender may do so for and in the name of Grantor and at
Grantor's expense.  For such purposes, Grantor hereby Irrevocably appoints
Lender as Grantor's attorney-in-fact for the purpose of making, executing,
delivering, filing, recording, and doing all other things as may be necessary or
desirable, In Lender's sole opinion, to accomplish the matters referred to in
the preceding paragraph.

FULL PERFORMANCE.  If Grantor pays all the Indebtedness when due, and otherwise
performs all the obligations imposed upon Grantor under this Mortgage, Lender
shall execute and deliver to Grantor a suitable satisfaction of this Mortgage
and suitable statements of termination of any financing statement on file
evidencing Lender's security Interest in the Rents and the Personal Property.
Grantor will pay, if permitted by applicable law, any reasonable termination fee
as determined by Lender from time to time.

EVENTS OF DEFAULT.  Each of the following, at Lender's option, shall constitute
an Event of Default under this Mortgage:
Payment Default.  Grantor fails to make any payment when due under the
Indebtedness.

Default on Other Payments.  Failure of Grantor within the time required by this
Mortgage to make any payment for taxes or insurance, or any other payment
necessary to prevent filing of or to effect discharge of any lien.

Other Defaults.  Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Mortgage or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Grantor.

False Statements.  Any warranty, representation or statement made or furnished
to Lender by Grantor or on Grantor's behalf under this Mortgage, the Note, or
the Related Documents is false or misleading in any material respect, either now
or at the time made or furnished or becomes false or misleading at any time
thereafter.

Defective Collateralization.  This Mortgage or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

Death or Insolvency.  The dissolution or termination of Grantor's existence as a
going business, the Insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.

Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any property securing the Indebtedness.  This includes a garnishment of any of
Grantor's accounts, including deposit accounts, with Lender.  However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding
<PAGE>

and deposits with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in Its sole discretion, as being
an adequate reserve or bond for the dispute.

Breach of Other Agreement.  Any breach by Grantor under the terms of any other
agreement between Grantor and Lender that is not remedied within any grace
period provided therein, including without limitation any agreement concerning
any Indebtedness or other obligation of Grantor to Lender, whether existing now
or later.

Events Affecting Guarantor.  Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes Incompetent, or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness . In the event of a death, Lender, at its
option, may, but shall not be required to, permit the guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of Default.

Adverse Change.  A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.

Insecurity.  Lender in good faith believes itself insecure.

Right to Cure.  If such a failure is curable and if Grantor has not been given a
notice of a breach of the same provision of this Mortgage within the preceding
twelve (12) months, it may be cured (and no Event of Default will have occurred)
if Grantor, after Lender sends written notice demanding cure of such failure:
(a) cures the failure within fifteen (15) days; or (b) if the cure requires more
than fifteen (15) days, immediately exercise any one or more of the following
rights and remedies, In addition to any other rights or remedies provided
by law:

Accelerate Indebtedness.  Lender shall have the right at its option without
notice to Grantor to declare the entire Indebtedness immediately due and
payable, including any prepayment penalty which Grantor would be required to
pay.

UCC Remedies.  With respect to all or any part of the Personal Property, Lender
shall have all the rights and remedies of a secured party under the Uniform
Commercial Code.

Collect Rents.  Lender shall have the right, without notice to Grantor, to take
possession of the Property and collect the Rents, including amounts past due and
unpaid, and apply the net proceeds, over and above Lender's costs, against the
Indebtedness.  In furtherance of this right, Lender may require any tenant or
other user of the Property to make payments of rent or use fees directly to
Lender.  If the Rents are collected by Lender, then Grantor irrevocably
designates Lender as Grantor's attorney-in-fact to endorse instruments received
in payment thereof in the name of Grantor and to negotiate the same and collect
the proceeds.  Payments by tenants or other users to Lender in response to
Lender's demand shall satisfy the obligations for which the payments are made,
whether or not any proper grounds for the demand existed.  Lender may exercise
its rights under this subparagraph either in person, by agent, or through a
receiver.

Appoint Receiver.  Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Property, with the power to protect
and preserve the Property, to operate the Property preceding foreclosure or
sale, and to collect the Rents from the Property and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. The receiver
may serve without bond if permitted by law. Lender's right to the appointment of
a receiver shall exist whether or not the apparent value of the Property exceeds
the Indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.

Judicial Foreclosure.  Lender may obtain a judicial decree foreclosing Grantor's
interest in all or any part of the Property.

Confession of Judgment.  Grantor hereby irrevocably authorizes and empowers any
attorney-at-law, including an attorney hired by Lender, to appear in any court
of record and to confess judgment against Grantor for the unpaid amount of this
Mortgage as
<PAGE>

evidenced by an affidavit signed by an officer of Lender setting forth the
amount then due, attorneys' fees plus costs of suit, and to release all errors,
and waive all rights of appeal. If a copy of this Mortgage, verified by an
affidavit, shall have been filed In the proceeding, it will not be necessary to
file the original as a warrant of attorney. Grantor waives the right to any stay
of execution and the benefit of all exemption laws now or hereafter in effect.
No single exercise of the foregoing warrant and power to confess judgment will
be deemed to exhaust the power, whether or not any such exercise shall be held
by any court to be invalid, voidable, or void; but the power will continue
undiminished and may be exercised from time to time as Lender may elect until
all amounts owing on this Mortgage have been paid in full. Grantor waives any
conflict of interest that an attorney hired by Lender may have in acting on
behalf of Grantor in confessing judgment against Grantor while such attorney Is
retained by Lender. Grantor expressly consents to such attorney acting for
Grantor in confessing judgment.

Deficiency Judgment.  If permitted by applicable law, Lender may obtain a
judgment for any deficiency remaining in the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights provided in
this section.

Tenancy at Sufferance.  If Grantor remains in possession of the Property after
the Property is sold as provided above or Lender otherwise becomes entitled to
possession of the Property upon default of Grantor, Grantor shall become a
tenant at sufferance of Lender or the purchaser of the Property and shall, at
Lender's option, either (1) pay a reasonable rental for the use of the Property,
or (2) vacate the Property immediately upon the demand of Lender.

Other Remedies.  Lender shall have all other rights and remedies provided in
this Mortgage or the Note or available at law or in equity.

Sale of the Property.  To the extent permitted by applicable law, Grantor hereby
waives any and all right to have the property marshalled.  In exercising its
rights and remedies, Lender shall be free to sell all or any part of the
Property together or separately, in one sale or by separate sales.  Lender shall
be entitled to bid at any public sale on all or any portion of the Property.

Notice of Sale.  Lender shall give Grantor reasonable notice of the time and
place of any public sale of the Personal Property or of the time after which any
private sale or other intended disposition of the Personal Property is to be
made.  Reasonable notice shall mean notice given at least tan (10) days before
the time of the sale or disposition.

Election of Remedies.  A waiver by any party of a breach of a provision of this
Mortgage shall not constitute a waiver of or prejudice the party's rights
otherwise to demand strict compliance with that provision or any other
provision.  Election by Lender to pursue any remedy will not bar any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Grantor under this Mortgage, after Grantor's failure to perform,
shall not affect Lender's right to declare a default and exercise its remedies.
Nothing under this Mortgage or otherwise shall be construed so as to limit or
restrict the rights and remedies available to Lender following an Event of
Default, or in any way to limit or restrict the rights and ability of Lender to
proceed directly against Grantor and/or against any other co-maker, guarantor,
surety or endorser and/or to proceed against any other collateral directly or
indirectly securing the Indebtedness.

Attorneys' Fees; Expenses.  If Lender institutes any suit or action to enforce
any of the terms of this Mortgage, Lender shall be entitled to recover such sum
as the court may adjudge reasonable as attorneys' fees at trial and upon any
appeal.  Whether or not any court action is involved, and to the extent not
prohibited by law, all reasonable expenses Lender incurs that in Lender's
opinion are necessary at any time for the protection of its interest or the
enforcement of its rights shall become a part of the Indebtedness payable on
demand and shall bear interest at the Note rate from the date of the expenditure
until repaid.  Expenses covered by this paragraph include, without limitation,
however subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses, whether or not there is a lawsuit, Including attorneys'
fees and expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services, the cost of searching records, obtaining title
reports (including foreclosure reports), surveyors' reports, and appraisal fees
and title insurance, to the extent permitted by applicable law.  Grantor also
will pay any court costs, In addition to all other sums provided by law.

NOTICES.  Any notice required to be given under this Mortgage, including without
limitation any notice of default and any notice of sale shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of
<PAGE>

this Mortgage. All copies of notices of foreclosure from the holder of any lien
which has priority over this Mortgage shall be sent to Lender's address, as
shown near the beginning of this Mortgage. Any party may change its address for
notices under this Mortgage by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change the party's
address. For notice purposes, Grantor agrees to keep Lender informed at all
times of Grantor's current address. Unless otherwise provided or required by
law, If there is more than one Grantor, any notice given by Lender to any
Grantor is deemed to be notice given to all Grantors.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of
this Mortgage:

Amendments.  This Mortgage, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Mortgage.  No alteration of or amendment to this Mortgage shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.

Annual Reports.  If the Property is used for purposes other than Grantor's
residence, Grantor shall furnish to Lender, upon request, a certified statement
of not operating income received from the Property during Grantor's previous
fiscal year in such form and detail as Lender shall require.  "Net operating
Income" shall mean all cash receipts from the Property less all cash
expenditures made In connection with the operation of the Property.

Caption Headings.  Caption headings in this Mortgage are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Mortgage.

Governing Law.  This Mortgage will be governed by, construed and enforced In
accordance with federal law and the laws of the State of Ohio.  This Mortgage
has been accepted by Lender In the State of Ohio.

Choice of Venue.  If there is a lawsuit, Grantor agrees upon Lender's request to
submit to the jurisdiction of the courts of Clark County, State of Ohio.

No Waiver by Lender.  Lender shall not be deemed to have waived any rights under
this Mortgage unless such waiver is given in writing and signed by Lender.  No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right.  A waiver by Lender of a provision of
this Mortgage shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Mortgage.  No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions.  Whenever the
consent of Lender is required under this Mortgage, the granting of such consent
by Lender in any Instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.

Severability.  If a 6o 'of competent jurisdiction finds any provision of this
Mortgage to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision Illegal, invalid, or
unenforceable as to any other circumstance.  If feasible, the offending
provision shall be considered modified so that it becomes legal, valid and
enforceable.  If the offending provision cannot be so modified, it shall be
considered deleted from this Mortgage.  Unless otherwise required by law, the
illegality, invalidity, or unenforceability of any provision of this Mortgage
shall not affect the legality, validity or enforceability of any other provision
of this Mortgage.

Merger.  There shall be no merger of the Interest or estate created by this
Mortgage with any other Interest or estate in the Property at any time held by
or for the benefit of Lender in any capacity, without the written consent of
Lender.

Successors and Assigns.  Subject to any limitations stated in this Mortgage on
transfer of Grantor's interest, this Mortgage shall be binding upon and inure to
the benefit of the parties, their successors and assigns.  If ownership of the
Property becomes vested in a person other than Grantor, Lender, without notice
to Grantor, may deal with Grantor's successors with reference to this Mortgage
and the Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Mortgage or liability under the
Indebtedness.

Time Is of the Essence.  Time is of the essence in the performance of this
Mortgage.
<PAGE>

Waive Jury.  All parties to this Mortgage hereby waive the right to any jury
trial in any action, proceeding, or. counterclaim brought by any party against
any other party.

DEFINITIONS.  The following capitalized words and terms shall have the following
meanings when used in this Mortgage.  Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America.  Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require.  Words and terms not otherwise defined in this Mortgage shall have
the meanings attributed to such terms in the Uniform Commercial Code:

Borrower.  The word "Borrower" means Jameson Inns, Inc., and all other persons
and entities signing the Note in whatever capacity.

Default.  The word "Default" means the Default set forth in this Mortgage in the
section titled "Default".

Environmental Laws.  The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, Including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, at seq. ("CERCLA), the Superfund Amendments
and Reauthorization Act of 1986, Pub.  L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant
thereto.

Event of Default.  The words "Event of Default" mean any of the Events of
Default set forth in this Mortgage in the Events of Default section of this
Mortgage.

Grantor.  The word "Grantor" means Jameson Inns, Inc.

Guaranty.  The word "Guaranty" means the guaranty from guarantor, endorser,
surety, or accommodation party to Lender, including without limitation a
guaranty of all or part of the Note.

Hazardous Substances.  The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled.  The words "Hazardous
Substances" are used In their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws.  The term "Hazardous Substances" also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.

Improvements.  The word "Improvements" means all existing and future
improvements, buildings, structures, mobile homes affixed on the Real Property,
facilities, additions, replacements and other construction on the Real Property.

Indebtedness.  The word "Indebtedness" means all principal, interest, and other
amounts, costs and expenses payable under the Note or Related Documents,
together with all renewals of, extensions of, modifications of, consolidations
of and substitutions for the Note or Related Documents and any amounts expended
or advanced by Lender to discharge Grantor's obligations or expenses incurred by
Lender to enforce Grantor's obligations under this Mortgage, together with
interest on such amounts as provided In this Mortgage.

Lender.  The word "Lender" means Cornerstone Bank, its successors and assigns.
Mortgage.  The word "Mortgage' means this Mortgage between Grantor and Lender.

Note.  The word "Note" means the promissory note dated May 16, 2000, In the
original principal amount of $3,900,000.00 from Grantor to Lender, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or agreement.  The
maturity date of the Note is May 16, 2007.
<PAGE>

Personal Property.  The words "Personal Property" mean all equipment, fixtures,
and other articles of personal property now or hereafter owned by Grantor, and
now or hereafter attached or affixed to the Real Property; together with all
accessions, parts, and additions to, all replacements of, and all substitutions
for, any of such property; and together with all proceeds (including without
limitation all Insurance proceeds and refunds of premiums) from any sale or
other disposition of the Property.

Property.  The word "Property" means collectively the Real Property and the
Personal Property.

Real Property.  The words "Real Property" mean the real property, interests and
rights, as further described in this Mortgage.

Related Documents.  The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

Rents.  The word "Rents" means all present and future rents, revenues, income,
issues, royalties, profits, and other benefits derived from the Property.

GRANTOR ACKNOWLEDGES H"ING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND GRANTOR
AGREES TO ITS TERMS.
GRANTOR:

JAMESON INNS, INC.

By:

Craig R. Kitchin, President & CFO of Jameson Inns,
Inc.
Signed,               In the presence of:
x
Witness
x
Witness
CORPORATE ACKNOWLEDGMENT

STATE OF OHIO

Ss

COUNTY OF FRANKLIN

On this                           day of                          20  , before
                                      --
me, the undersigned Notary Public, personally appeared Craig R. Kitchin,
President & CFO of Jameson Inns, Inc. and known to me to be an authorized agent
                                 ---
corporation that executed the Mortgage and acknowledged before me the Mortgage
to be the free and voluntary act and deed of the corporation, by authority of
its Bylaws or by resolution of its board of directors, for the uses and purposes
therein mentioned. Dated and executed Mortgage and in fact executed the Mortgage
on behalf of the corporation.

     By:  Craig R. Kitchin          Residing at
                                    My commission expires

EXHIBIT A

DESCRIPTION OF A 3.612 ACRE TRACT
SOUTH OF SCHROCK ROAD
<PAGE>

LOT 2 SCHROCK HILL CENTRE

Situated in the State of Ohio, County of Franklin, City of Columbus, and being
Lot two (2) of Schrock Hill Centre of record in Plot Book 62, Page 99, (all
references to deeds and plats being to records in the Recorder's Office,
Franklin County, Ohio) and being more particularly described as follows:

Beginning at an existing iron pin at the northeast corner of
said lot 2, being in the westerly right of way line of Schrock Hill Court;

Thence South 11'27'46" East a distance of 43.76 feet along the westerly right of
way line of said Schrock Hill Court, the easterly line of said Lot 2 to a point;

Thence along the arc of a curve to the left (radius=330-00 feet,
delta=19'34'01") a chord bearing South 21'14'46" East a distance of 112.15 to a
point;

Thence along the arc of a curve to the right (radius=320.00 feet,
delta=19'34'00') a chord bearing South 21'14'46' East a distance of 108.75 feet;

Thence South 11'27'46" East a distance of 309.66 feet along the easterly line of
said lot 2, to on existing iron pin at the southeasterly corner of said Lot 2,
the northerly right of way line of 1-270;

Thence South 71'44'36' West a distance of 279.50 feet along the southerly line
of said Lot 2, the northerly right of way line of said 1-270 to an existing iron
pin at the southwesterly corner of said Lot 2;

Thence North 11'27'46" West a distance of 604.17 feet along the westerly line of
said Lot 2, the easterly line of Barrington Square Purchase Company (Official
Record Volume 4685 815) to an existing iron pin at the northwesterly corner of
said Lot 2;

Thence North 78'32'14" East a distance of 240.00 feet along the northerly line
of said Lot 2 to the Point of Beginning containing 3.612 acres more or less.
<PAGE>

                               SECURITY AGREEMENT
                      EQUIPMENT, INVENTORY AND RECEIVABLES

   Jameson Inns, Inc., dba Signature Inns, Inc.
--------------------------------------------------------------------------------
Name

   8 Perimeter Center East, Suite 8050
--------------------------------------------------------------------------------
No. and Street

   Atlanta                                      , Georgia  30364-1603
------------------------------------------------- ------------------------------
City                                              State

a corporation organized under the laws of the State of Georgia, and authorized
to do business in the State of Ohio (hereinafter called "Debtor"), for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby grants, pledges and assigns to Cornerstone Bank, 28 East Main Street,
Springfield, Ohio (hereinafter called "Secured Party"), a security interest in
the following property, whether Debtor's interest therein as owner, co-owner,
lessee, consignee, secured party or otherwise be now owned or existing or
hereafter arising or acquired, and wherever located, together with all
substitutions, replacements, additions and accessions therefor or thereto, all
replacement and repair parts therefor, all negotiable documents relating
thereto, all products thereof and all cash and non-cash proceeds thereof
including, but not limited to, notes, drafts, checks, instruments, insurance
proceeds, indemnity proceeds, warranty and guaranty proceeds, and proceeds
arising in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the following property by any governmental
body, authority, bureau or agency (or any person acting under color of
governmental authority):

                       (i)         All of Debtor's machinery, equipment, tools,
                              furniture, furnishings and fixtures including, but
                              not limited to, all manufacturing, fabricating,
                              processing, transporting and packaging equipment,
                              power systems, heating, cooling and ventilating
                              systems, lighting and communication systems,
                              electric, gas and water distribution systems, food
                              service systems, fire prevention, alarm and
                              security systems, laundry systems and computing
                              and data processing systems (hereinafter sometimes
                              called the "Equipment"), some of which Equipment
                              may be more fully described in the schedule set
                              forth at the end of this agreement or in a
                              separate schedule attached hereto;

                       (ii)        All of Debtor's inventory including, but not
                              limited to, parts, supplies, raw materials, work
                              in process, finished goods, materials used or
                              consumed in Debtor's business, repossessed and
                              returned goods (hereinafter sometimes called the
                              "Inventory"), some or all of which Inventory may
                              be more fully described in the schedule set forth
                              at the end of this agreement or in a separate
                              schedule attached hereto;

                       (iii)      All of Debtor's accounts, accounts receivable,
                              contract rights, chattel paper, general
                              intangibles, income tax refunds,
<PAGE>

                              instruments, negotiable documents, notes, drafts,
                              acceptances and other forms of obligations and
                              receivables arising from or in connection with the
                              operation of Debtor's business including, but not
                              limited to, those arising from or in connection
                              with Debtor's sale, lease or other disposition of
                              Inventory (hereinafter sometimes called the
                              "Receivables"); and

                       (iv)        All of Debtor's trade names, trademarks,
                              deposit accounts and licenses (all of the
                              foregoing hereinafter sometimes called the
                              "Collateral").

          The security interest hereby granted is to secure the prompt and full
payment and complete performance of all Obligations of Debtor to Secured Party.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs and attorneys' fees) of
Debtor to Secured Party, whether now existing or hereafter arising, either
created by Debtor alone or together with another or others, primary or
secondary, secured or unsecured, absolute or contingent, liquidated or
unliquidated, direct or indirect, whether evidenced by note, draft, agreement
for letter of credit or otherwise, and any and all renewals of or substitutes
therefor.

          It is Debtor's express intention that this agreement and the
continuing security interest granted hereby, in addition to covering all present
Obligations of Debtor to Secured Party, shall extend to all future Obligations
of Debtor to Secured Party, whether or not such Obligations are reduced or
entirely extinguished and thereafter increased or reincurred, whether or not
such Obligations are related to the indebtedness identified above by class, type
or kind and whether or not such Obligations are specifically contemplated by
Debtor and Secured Party as of the date hereof.  The absence of any reference to
this agreement in any documents, instruments or agreements evidencing or
relating to any Obligation secured hereby shall not limit or be construed to
limit the scope or applicability of this agreement.

               i.         General Covenants. Debtor represents, warrants and
                          covenants as follows:

                       (i)         Except for such claims and interests, if any,
                              shown in the schedule set forth at the end of this
                              agreement or in any schedule attached hereto and
                              signed by both Debtor and Secured Party and the
                              security interest granted hereby, (i) Debtor is,
                              or as to Collateral arising or to be acquired
                              after the date hereof, shall be, the sole owner of
                              the Collateral free from any and all liens,
                              security interests, encumbrances, claims and
                              interests; and (ii) no security agreement,
                              financing statement, equivalent security or lien
                              instrument or continuation statement covering any
                              of the Collateral is on file or of record in any
                              public office.

                       (ii)        Debtor shall not create, permit or suffer to
                              exist, and shall take such action as is necessary
                              to remove, any claim to or interest in or lien or
                              encumbrance upon the Collateral, other than those,
                              if any, shown in the schedule set forth at the end
                              of this agreement or in any schedule attached
                              hereto and signed by both Debtor and Secured Party
                              and the security interest granted hereby, and
                              shall defend the right, title and interest of
                              Secured Party in and to the Collateral against all
                              claims and demands of all persons and entities at
                              any time claiming the same or any interest
                              therein.
<PAGE>

                       (iii)       Debtor's principal place of business and
                              chief executive office is located at the address
                              set forth at the beginning of this agreement;
                              Debtor has no other place of business except as
                              shown in the schedule set forth at the end of this
                              agreement or in any schedule attached hereto and
                              signed by both Debtor and Secured Party; and,
                              unless Secured Party consents in writing to a
                              change in the location of the Equipment, Inventory
                              or Debtor's records concerning the Receivables
                              prior to such a change in location, the Equipment,
                              Inventory and Debtor's records concerning the
                              Receivables shall be kept at that address or at
                              the locations set forth in such schedules.

                       (iv)        At least thirty (30) days prior to the
                              occurrence of any of the following events, Debtor
                              shall deliver to the loan officer who is handling
                              Debtor's Obligations on behalf of Secured Party
                              written notice of such impending events:  (i) a
                              change in Debtor's principal place of business or
                              chief executive office; (ii) the opening or
                              closing of any place of business; or (iii) a
                              change in Debtor's name, identity or corporate
                              structure.

                       (v)         Subject to any limitation stated therein or
                              in connection therewith, all information furnished
                              by Debtor concerning the Collateral or otherwise
                              in connection with the Obligations, is or shall be
                              at the time the same is furnished, accurate,
                              correct and complete in all material respects.

                       (vi)        The Collateral is and shall be used primarily
                              for business purposes.

               ii.            Collection of Receivables. Prior to the occurrence
                         of any event of default under this agreement Debtor
                         shall, unless otherwise directed by Secured Party,
                         collect all of Debtor's Receivables. Amounts received
                         by Secured Party representing payment of Receivables
                         may be applied by Secured Party to the payment of the
                         Obligations in such order or preference as Secured
                         Party may determine, or Secured Party may, at is
                         option, impound all or any portion of such amounts and
                         retain said amounts as security for the payment of the
                         Obligations, with the right on the part of Debtor, upon
                         approval by Secured Party, to obtain the release of all
                         or part of such impounded amounts. Secured Party may,
                         however, at any time, without notice, apply all or any
                         part of such impounded amounts as aforesaid.

          If any of Debtor's Receivables arise out of contracts with or orders
from the United States or any State or any department, agency or instrumentality
thereof, Debtor shall immediately notify Secured Party thereof in writing and
shall execute any instrument and take any steps required by Secured Party in
order that all money due and to become due under such contract or order shall be
assigned to Secured Party and due notice thereof given to the appropriate
governmental agency.

          Debtor agrees to execute, deliver, file and record all such notices,
affidavits, assignments, financing statements and other instruments as shall in
the judgment of Secured Party be necessary or desirable to evidence, validate
and perfect the security interest of Secured Party in the Receivables.  Secured
Party shall have the right to notify any
<PAGE>

persons or entities owing any Receivables and to demand and receive payment, but
Secured Party shall have no duty so to do. Upon request of Secured Party at any
time, Debtor shall notify such account debtors and shall indicate on all
invoices to such account debtors that the accounts are payable to Secured Party.

               iii.           Insurance.  Debtor shall have and maintain
                         insurance at all times with respect to all Equipment
                         and Inventory (i) insuring against risks of fire
                         (including so-called extended coverage), explosion,
                         theft, sprinkler leakage and such other casualties as
                         Secured Party may designate, and (ii) insuring against
                         liability for personal injury and property damage
                         relating to the Equipment and Inventory, containing
                         such terms, in such form, for such periods and written
                         by such companies as may be satisfactory to Secured
                         Party, such insurance to be payable to Secured Party
                         and Debtor as their interests may appear. The carrier
                         providing such insurance shall be chosen by Borrower,
                         subject to approval by Secured Party provided that
                         Secured Party shall not unreasonably withold such
                         approval. All policies of insurance shall provide for
                         twenty (20) days' written minimum cancellation notice
                         to Secured Party and, at request of Secured Party,
                         certificates or other evidence of such insurance shall
                         be delivered to and held by it. After the occurrence
                         and continuation of an event of default hereunder
                         Secured Party may act as attorney for Debtor in
                         obtaining, adjusting, settling and cancelling such
                         insurance and indorsing any drafts. In the event of
                         failure to provide insurance as herein provided,
                         Secured Party may, at its option, provide such
                         insurance and Debtor shall pay to Secured Party, upon
                         demand, the cost thereof. Should Debtor fail to pay
                         said sum to Secured Party upon demand, interest shall
                         accrue thereon, from the date of demand until paid in
                         full, at the highest rate set forth in any document or
                         instrument evidencing any of the Obligations.

               iv.            Inspection.  Debtor shall at all times keep
                         accurate and complete records of the Receivables and
                         Debtor shall, at all reasonable times and from time to
                         time, allow Secured Party, by or through any of its
                         officers, agents, attorneys or accountants, to examine,
                         inspect and make extracts from Debtor's books and
                         records and to arrange for verification of the
                         Receivables directly with account debtors or by other
                         methods and to examine and inspect the Collateral
                         wherever located. Debtor shall perform, do, make,
                         execute and deliver all such additional and further
                         acts, things, deeds, assurances and instruments as
                         Secured Party may require to more completely vest in
                         and assure to Secured Party its rights hereunder and in
                         or to the Collateral.

               v.             Preservation and Disposition of Collateral.

                       (i)         Except for such claims and interests, if any,
                              shown in the schedule set forth at the end of this
                              agreement or in any schedule attached hereto and
                              signed by both Debtor and Secured Party and the
                              security interest granted hereby, Debtor shall
                              keep the Collateral free from any and all liens,
                              security interests, encumbrances, claims and
                              interests.  Debtor shall advise Secured Party
                              promptly, in writing and in reasonable detail, (i)
                              of any material encumbrance upon or claim asserted
                              against any of the Collateral; (ii) of any
                              material change in the composition of the
                              Collateral; and (iii) of the occurrence of any
                              other event that would have a material effect upon
                              the aggregate value of the Collateral or upon the
                              security interest of Secured Party.
<PAGE>

                       (ii)        Debtor shall not sell or otherwise dispose of
                              the Collateral; provided, however, that until
                              default, Debtor may use the Collateral in any
                              lawful manner not inconsistent with this agreement
                              or with the terms or conditions of any policy of
                              insurance thereon and may also sell or otherwise
                              dispose of the Inventory in the ordinary course of
                              Debtor's business.  A sale in the ordinary course
                              of business shall not include a transfer in
                              partial or total satisfaction of a debt.

                       (iii)       Debtor shall keep the Collateral in good
                              condition and shall not misuse, abuse, secrete,
                              waste or destroy any of the same.

                       (iv)        Debtor shall not use the Collateral in
                              violation of any statute, ordinance, regulation,
                              rule, decree or order.

                       (v)         Debtor shall pay promptly when due all taxes,
                              assessments, charges or levies upon the Collateral
                              or in respect to the income or profits therefrom,
                              except that no such charge need be paid if (i) the
                              validity thereof is being contested in good faith
                              by appropriate proceedings; (ii) such proceedings
                              do not involve any danger of sale, forfeiture or
                              loss of any Collateral or any interest therein;
                              and (iii) such charge is adequately reserved
                              against in accordance with generally accepted
                              accounting principles.

                       (vi)        At its option after notice to Debtor, Secured
                              Party may discharge taxes, liens, security
                              interests or other encumbrances at any time levied
                              or placed on the Collateral and may pay for the
                              maintenance and preservation of the Collateral.
                              Debtor agrees to reimburse Secured Party upon
                              demand for any payment made or any expense
                              incurred (including reasonable attorneys' fees) by
                              Secured Party pursuant to the foregoing
                              authorization.  Should Debtor fail to pay said sum
                              to Secured Party upon demand, interest shall
                              accrue thereon, from the date of demand until paid
                              in full, at the highest rate set forth in any
                              document or instrument evidencing any of the
                              Obligations.

                       (vii)       Upon Secured Party's request at any time or
                              times, Debtor shall assign and deliver to Secured
                              Party any Collateral and shall furnish to Secured
                              Party additional collateral of value and character
                              satisfactory to Secured Party as security for the
                              Obligations.

               vi.            Extensions and Compromises.  With respect to any
                         Collateral held by Secured Party as security for the
                         Obligations, Debtor assents to all extensions or
                         postponements of the time of payment thereof or any
                         other indulgence in connection therewith, to each
                         substitution, exchange or release of Collateral, to the
                         addition or release of any party primarily or
                         secondarily liable, to the acceptance of partial
                         payments thereon and to the settlement, compromise or
                         adjustment thereof, all in such manner and at such time
                         or times as Secured Party may deem advisable. Secured
                         Party shall have no duty as to the collection or
                         protection of Collateral or any income therefrom, nor
                         as to the preservation of rights against prior parties,
                         nor as to the
<PAGE>

                         preservation of any right pertaining thereto, beyond
                         the safe custody of Collateral in the possession of
                         Secured Party.

               vii.           Financing Statements.  At the request of Secured
                         Party, Debtor shall join with Secured Party in
                         executing one or more financing statements in a form
                         satisfactory to Secured Party and shall pay the cost of
                         filing the same in all public offices wherever filing
                         is deemed by Secured Party to be necessary or
                         desirable. A carbon, photographic or other reproduction
                         of this agreement or of a financing statement shall be
                         sufficient as a financing statement.

               viii.          Secured Party's Appointment as Attorney-in-Fact.
                         Debtor hereby irrevocably constitutes and appoints
                         Secured Party and any officer or agent thereof, with
                         full power of substitution, as Debtor's true and lawful
                         attorney-in-fact with full irrevocable power and
                         authority in the place and stead of Debtor and in the
                         name of Debtor or in Secured Party's own name, from
                         time to time in Secured Party's discretion, for the
                         purpose of carrying out the terms of this agreement, to
                         take any and all appropriate action and to execute any
                         and all documents and instruments that may be necessary
                         or desirable to accomplish the purposes of this
                         agreement and, without limiting the generality of the
                         foregoing, hereby grants to Secured Party the power and
                         right, on behalf of Debtor, without notice to or assent
                         by Debtor:

                       (i)         To execute, file and record all such
                              financing statements, certificates of title and
                              other certificates of registration and operation
                              and similar documents and instruments, as Secured
                              Party may deem necessary or desirable to protect,
                              perfect and validate Secured Party's security
                              interest in such Collateral.

                       (ii)        Upon the occurrence and continuance of any
                              event of default under paragraph 9 hereof, (i) to
                              sign and indorse any invoices, freight or express
                              bills, bills of lading, storage or warehouse
                              receipts, drafts against debtors, assignments,
                              verifications and notices in connection with
                              accounts and other documents relating to the
                              Collateral; (ii) to commence and prosecute any
                              suits, actions or proceedings at law or in equity
                              in any court of competent jurisdiction to collect
                              the Collateral or any part thereof and to enforce
                              any other right in respect of any Collateral;
                              (iii) to defend any suit, action or proceeding
                              described above and, in connection therewith, to
                              make any agreement with respect to or otherwise
                              deal with any of the Collateral as fully and
                              completely as though Secured Party were the
                              absolute owner thereof for all purposes, and to
                              do, at Secured Party's option and Debtor's
                              expense, at any time or from time to time, all
                              acts and things which Secured Party deems
                              necessary to protect, preserve or realize upon the
                              Collateral and Secured Party's security interest
                              therein, in order to effect the intent of this
                              agreement, all as fully and effectively as Debtor
                              might do.

          Debtor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof.  This power of attorney is a power coupled
with an interest and shall be irrevocable as long as this agreement remains in
effect.
<PAGE>

          The powers conferred upon Secured Party hereunder are solely to
protect its interests in the Collateral and shall not impose any duty upon
Secured Party to exercise such powers and neither Secured Party nor any of its
officers, directors, employees or agents shall be responsible to Debtor for any
act or failure to act, except for Secured Party's own gross negligence or
willful misconduct.

               ix.            Default.  If any event of default in the payment
                         or performance of any of the Obligations secured by
                         this agreement or the performance of any covenant
                         contained herein shall occur and be continuing; or if
                         any warranty, representation or statement made or
                         furnished to Secured Party by Debtor proves to have
                         been false in any material respect when made or
                         furnished:

                       (i)         Secured Party may, at its option and without
                              notice, declare this agreement in default.

                       (ii)        All payments received by Debtor under or in
                              connection with any of the Collateral shall be
                              held by Debtor in trust for Secured Party, shall
                              be segregated from other funds of Debtor and shall
                              forthwith upon receipt by Debtor be turned over to
                              Secured Party in the same form as received by
                              Debtor (duly indorsed by Debtor to Secured Party,
                              if required).  Any and all such payments so
                              received by Secured Party (whether from Debtor or
                              otherwise) may, in the sole discretion of Secured
                              Party, be held by Secured Party as collateral
                              security for, and/or then or at any time
                              thereafter be applied in whole or in part by
                              Secured Party against, all or any part of the
                              Obligations in such order as Secured Party may
                              elect.  Any balance of such payments held by
                              Secured Party and remaining after payment in full
                              of all the Obligations shall be paid over to
                              Debtor or to whomsoever may be lawfully entitled
                              to receive the same.  Nothing set forth in this
                              subparagraph (b) shall authorize or be construed
                              to authorize Debtor to sell or otherwise dispose
                              of any Collateral except as provided in
                              subparagraph 5(b) hereof.

                       (iii)       Secured Party shall have the rights and
                              remedies of a secured party under this agreement,
                              under any other instrument or agreement securing,
                              evidencing or relating to the Obligations and
                              under the law of the State of Ohio. Without
                              limiting the generality of the foregoing, Secured
                              Party shall have the right to take possession of
                              the Collateral and all books and records relating
                              to the Collateral and for that purpose Secured
                              Party may enter upon, with or without breaking
                              into, any premises on which the Collateral or
                              books and records relating to the Collateral or
                              any part thereof may be situated and remove the
                              same therefrom. Debtor expressly agrees that
                              Secured Party, without demand of performance or
                              other demand, advertisement or notice of any kind
                              (except the notices specified below of time and
                              place of public sale or disposition or time after
                              which a private sale or disposition is to occur)
                              to or upon Debtor or any other person or entity
                              (all and each of which demands, advertisements
                              and/or notices are hereby expressly waived), may
                              forthwith collect, receive, appropriate and
                              realize upon the Collateral,
<PAGE>

                              or any part thereof, and/or may forthwith sell,
                              lease, assign, give option or options to purchase
                              or sell or otherwise dispose of and deliver the
                              Collateral (or contract to do so), or any part
                              thereof, in one or more parcels at public or
                              private sale or sales, at any of Secured Party's
                              offices or elsewhere at such prices as Secured
                              Party may deem best, for cash or on credit or for
                              future delivery without assumption of any credit
                              risk. Secured Party shall have the right upon any
                              such public sale or sales, and, to the extent
                              permitted by law, upon any such private sale or
                              sales, to purchase the whole or any part of the
                              Collateral so sold, free of any right or equity of
                              redemption in Debtor. Debtor further agrees, at
                              Secured Party's request, to assemble the
                              Collateral and to make it available to Secured
                              Party at such places as Secured Party may
                              reasonably select, whether at Debtor's premises or
                              elsewhere. Debtor further agrees to allow Secured
                              Party to use or occupy Debtor's premises, without
                              charge, for the purpose of effecting Secured
                              Party's remedies in respect of the Collateral.
                              Secured Party shall apply the net proceeds of any
                              such collection, recovery, receipt, appropriation,
                              realization or sale, after deducting all
                              reasonable costs and expenses of every kind
                              incurred in connection therewith or incidental to
                              the care or safekeeping of any or all of the
                              Collateral or in any way relating to the rights of
                              Secured Party hereunder, including reasonable
                              attorneys' fees and legal expenses, to the payment
                              in whole or in part of the Obligations, in such
                              order as Secured Party may elect, and only after
                              so paying over such net proceeds and after payment
                              by Secured Party of any other amount required by
                              any provision of law, including Ohio Revised Code
                              Section 1309.47(A)(3), need Secured Party account
                              for the surplus, if any, to Debtor. To the extent
                              permitted by applicable law, Debtor waives all
                              claims, damages and demands against Secured Party
                              arising out of the repossession, retention, sale
                              or disposition of the Collateral. Debtor agrees
                              that Secured Party need not give more than five
                              (5) days' notice (which notification shall be
                              deemed given when mailed, postage prepaid,
                              addressed to Debtor at Debtor's address set forth
                              at the beginning of this agreement, or when
                              telecopied or telegraphed to that address or when
                              telephoned or otherwise communicated orally to
                              Debtor or any agent of Debtor at that address) of
                              the time and place of any public sale or of the
                              time after which a private sale may take place and
                              that such notice is reasonable notification of
                              such matters. Debtor shall remain liable for any
                              deficiency if the proceeds of any sale or
                              disposition of the Collateral are insufficient to
                              pay all amounts to which Secured Party is
                              entitled. Debtor shall also be liable for the
                              reasonable costs of collecting any of the
                              Obligations or otherwise enforcing the terms
                              thereof or of this agreement including reasonable
                              attorneys' fees.

               x.             General.  Any provision of this agreement which is
                         prohibited or unenforceable in any jurisdiction shall,
                         as to such jurisdiction, be ineffective to the extent
                         of such prohibition or unenforceability without
                         invalidating the remaining provisions hereof, and any
                         such prohibition or unenforceability in any
                         jurisdiction shall
<PAGE>

                         not invalidate or render unenforceable such provision
                         in any other jurisdiction. Secured Party shall not be
                         deemed to have waived any of its rights hereunder or
                         under any other agreement, instrument or paper signed
                         by Debtor unless such waiver be in writing and signed
                         by Secured Party. No delay or omission on the part of
                         Secured Party in exercising any right shall operate as
                         a waiver of such right or any other right. All of
                         Secured Party's rights and remedies, whether evidenced
                         hereby or by any other agreement, instrument or paper,
                         shall be cumulative and may be exercised singularly or
                         concurrently. Any written demand upon or written notice
                         to Debtor shall be effective when deposited in the
                         mails addressed to Debtor at the address shown at the
                         beginning of this agreement. This agreement and all
                         rights and obligations hereunder including matters of
                         construction, validity and performance, shall be
                         governed by the law of the State of Ohio. The
                         provisions hereof shall, as the case may require, bind
                         or inure to the benefit of, the respective heirs,
                         successors, legal representatives and assigns of Debtor
                         and Secured Party.

                  Schedule of Additional Places of Business*

No. and Street                     City              County         State

8 Perimeter Center East, Suite 8050   Atlanta                Georgia  30364-1603
--------------------------------------------------------------------------------

6767 Schrock Hill Ct.                 Ohio          Franklin     Columbus  43229
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
*(Include all places of business, residences and locations of Collateral.)

                  Schedule of Additional Claims and Interests

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

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

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

                      Supplemental Schedule of Collateral

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

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

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

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

IN WITNESS WHEREOF, Debtor has signed this agreement this 16th day of May, 2000.

                         DEBTOR:    JAMESON INNS, INC.,
                                    dba Signature Inns, Inc.
<PAGE>

                                    By:
                                        ----------------------------------
                                        Craig R. Kitchin
                                        President
<PAGE>

                        ASSIGNMENT OF RENTS AS SECURITY
                        -------------------------------

     THIS AGREEMENT made this 16th day of May, 2000.

     WHEREAS, Jameson Inns, Inc., a Georgia corporation, as successor in
interest by merger to Signature Inns, Inc. an Indiana corporation,  whose
address is 8 Perimeter Center East, Suite 8050, Atlanta, Georgia  30364-1603,
(hereinafter referred to as "Owner"), is the present owner in fee simple of
property located in Franklin County, City of Columbus, and State of Ohio, and
more particularly described as:

     SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF.

     WHEREAS, Cornerstone Bank, whose address is 28 East Main Street,
Springfield, Ohio 45502-1306, (hereinafter called "Lender"), is, or is about to
be, the holder of a mortgage executed by Owner covering the said property, which
mortgage secures a guaranty which secures a note in the principal sum of
$3,900,000.00 Dollars, and

     WHEREAS, a part or all of said property has been demised under Lease dated
_____________ (hereinafter referred to as the "Lease") the Lessee being Jameson
Hospitality LLC, a  Georgia limited liability company, and

     WHEREAS, Lender, as a condition to making the aforesaid mortgage loan, has
required an assignment of the said Lease, and the rents, issues and proof its
therein provided, as additional security for said guaranty and mortgage loan,

     NOW, THEREFORE, in consideration of the foregoing, Owner hereby assigns,
transfers, and sets over unto Lender the said Lease, and the rents, issues and
profits therein provided, as additional security; and for the consideration
aforesaid, owner hereby covenants and agrees to and with Lender that owner will
not, without the written consent of Lender:

     (a)  Cancel or forfeit said Lease (by summary proceedings or otherwise);
     (b)  Accept a surrender thereof;
     (c)  Reduce the rent;
     (d)  Modify said Lease in any way, either orally or in writing;
     (e)  Grant any concession, in connection with said Lease, either orally or
          in writing;
     (f)  Consent to an assignment of the Lessee's interest in said Lease, or to
          a sub-letting;
     (g)  Collect, or accept payment of, rent under said Lease in advance,
          except as required to be paid in advance by the terms of the Lease;
     (h)  Subordinate, or consent to subordination of said Lease to the lien of
          said mortgage to Lender;
<PAGE>

and any of the above acts, if done without the written consent of Lender, shall
be null and void.

     1.   Lender, by acceptance of this assignment, covenants and agrees to and
with Owner, that, until a default shall occur in the performance of Owner's
covenants or in the making of the payments provided for in said mortgage or note
or in the terms and conditions of said mortgage or note, owner may receive,
collect and enjoy the rents, issues, and profits accruing under said Lease; but
it is covenanted and agreed by Owner that upon the happening of any default in
the performance of the covenants or in the making of the payments provided for
in said mortgage or note or in the event of any default in the terms and
conditions in the said mortgage or note, Lender may, at its option, receive and
collect all the said rents, issues, and profits so long as such default or
defaults shall exist, and during the pendency of any foreclosure proceedings and
during any redemption period.

     2.   Owner hereby covenants and agrees that Lender shall be entitled to all
the rights, remedies and benefits of Michigan and Federal law.

     3.   Owner, in the event of any such default or defaults under said
guaranty, mortgage or note, hereby authorizes Lender, at its option, to enter
upon the said mortgaged premises, by its officers, agents or employees, for the
collection of the rents and for the operation and maintenance of said mortgaged
premises, owner hereby authorizing the Lender, in general, to perform all acts
necessary for the operation and maintenance of said premises in the same manner
and to the same extent that owner might reasonably so act.  Lender shall, after
payment of all proper charges and expenses, credit the net amount of income
which it may receive by virtue of the within assignment and from the mortgaged
premises, to any amounts due Lender from Owner under the terms and provisions of
the aforesaid note and mortgage  and in the event of any foreclosure sale, to
any deficiency during any redemption period.  The manner of application of such
net income and the item which shall be credited shall be within the sole
discretion of Lender.

     4.   Owner hereby covenants and warrants to Lender (a) that said Lease is
in full force and effect according to its original terms and that there is no
default now existing under said Lease, and (b) that owner has not, (1) executed
any prior assignment of said Lease, or the rents thereunder, which is still
subsisting, (2) performed any acts or executed any other instrument which might
prevent Lender from operating under any of the terms or conditions of this
Assignment or which would limit Lender in such operation, (3) executed or
granted any modification whatever of said Lease, either orally or in writing, or
(4) subordinated the said Lease to the lien of said mortgage.

     5.   Owner hereby irrevocably authorizes and directs Lessee and any
successor to the interest of Lessee, upon receipt of any written request of
Lender stating that a default exists in the payments due under, or in the
performance of any of the terms, covenants or conditions of, the aforesaid
mortgage or note, to pay to Lender the rents due and to become due under the
Lease. owner agrees that Lessee shall have the right to rely upon any such
statement and request by Lender that Lessee shall pay such rents to Lender
without any obligation or right to inquire as to whether such default actually
exists and notwithstanding any notice from or claim of Owner to the contrary,
and that owner shall have no right or
<PAGE>

claim against Lessee for any such rents so paid by Lessee to Lender. Upon the
curing of all defaults, Lender shall give written notice thereof to Lessee and
thereafter, until the possible receipt of any further similar written requests
of Lender, Lessee shall pay the rents to Owner.

     All of the covenants and agreements herein above contained on the part of
either party shall apply to and bind their heirs, executors, or administrators,
successors or assigns.  The word "Owner" shall be construed to mean any one or
more person, corporations, firms, or parties who are holders of the legal title
or equity of redemption and those claiming under or through them to, or in, the
aforesaid mortgaged premises.

IN PRESENCE OF:               Owner:

                              JAMESON INNS, INC., a Georgia corporation, as
                              successor in interest by merger to Signature Inns,
                              Inc. an Indiana corporation

                              By:
--------------------------         ---------------------------------
                                   Craig R. Kitchin
                                   President

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

STATE OF OHIO         )  ss.
COUNTY OF FRANKLIN    )

     The foregoing instrument was acknowledged before me this __ day of May,
2000, by Craig R. Kitchin, President of Jameson Inns, Inc., a Georgia
corporation, as successor in interest by merger to Signature Inns, Inc. an
Indiana corporation who acknowledged that same was his free act and deed.

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

                              Notary Public
                              Franklin County, Ohio
                              My commission expires:

Drafted By:                                   After Recording Return To:
John D. Jolley
DINSMORE & SHOHL LLP
175 S. Third Street, Suite 1000
<PAGE>

Columbus, Ohio  43215
(614) 628-6880
<PAGE>

                             DEPOSITORY AGREEMENT
                             --------------------

     THIS DEPOSITORY AGREEMENT (the "Agreement") is made this 16th day of May,
2000, by, between and among Jameson Inns, Inc., a Georgia corporation, as
successor in interest by merger to Signature Inns, Inc. an Indiana corporation,
whose address is 8 Perimeter Center East, Suite 8050, Atlanta, Georgia  30364-
1603 ("Borrower"), and CORNERSTONE BANK, an Ohio corporation, whose principal
place of business is 28 East Main Street, Springfield, Ohio  45502-1306
("Lender").

                               R E C I T A L S:

          WHEREAS, Lender has agreed to lend to Borrower the sum of
     $3,900,000.00 (the "Loan") in accordance with a certain Commitment Letter
     dated April 11, 2000 issued by Lender to Borrower, and pertaining to the
     property commonly known as 6767 Schrock Hill Ct., Columbus, Ohio (the
     "Property"); and

          WHEREAS, more or less simultaneously with the execution hereof,
     Borrower has executed and delivered to Lender a Promissory Note, Mortgage
     Deed, and certain other documents (collectively the "Loan Documents") for
     the purpose of securing to Lender the repayment of the Loan by Borrower;
     and

          WHEREAS, as a condition of the Commitment Letter agreed to by
     Borrower, Borrower shall be required to retain an interest bearing account
     with Lender in order to ensure that necessary maintenance and refurbishing
     funds are available with respect to the Property; and

          WHEREAS, Borrower hereby desires to provide such a depository reserve
     by executing this Agreement.

     NOW, THEREFORE, as an inducement to Lender to make the aforesaid Loan to
Borrower, and for valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by the parties hereto, Lender and Borrower do hereby
agree as follows:

                      ESTABLISHMENT OF DEPOSITORY ACCOUNT

     1.   Borrower shall, more or less simultaneously with the execution hereof,
establish with Lender a depository account upon such terms and conditions
acceptable to Lender, and for the purposes and subject to the terms and
conditions set forth hereinafter:

          A. Borrower shall open an account with Lender (the "Depository
     Account"), and agrees to maintain within such account a minimum balance of
     four
<PAGE>

     percent (4%) of the average total annual revenues collected by Borrower
     resulting from the operation of the business located on the Property, as
     determined on a rolling basis in the sole discretion of the Lender (the
     "Minimum Balance"). In determining the Minimum Balance, Lender shall
     utilize the financial information of Borrower as is found on the monthly
     Summary Report of Income and Expenses pertaining to the business located on
     the Property, for which Borrower agrees to supply Lender with the same on
     at least a monthly basis. The Depository Account may be an interest-bearing
     account, and shall be allocated specifically for general items of
     maintenance and/or refurbishment of the Property during the term of the
     Loan.

          B.  Borrower shall have the right to withdraw funds from the
     Depository Account at any time during the term of this Loan, subject to the
     standard withdrawal procedures of the Lender.  The foregoing
     notwithstanding, Borrower agrees to maintain as an average monthly balance
     in this Depository Account funds equal to at least the Minimum Balance.

     2.   Lender shall not, except as is set forth in Paragraph 4 below, have
the right to withdraw funds from the Depository Account, nor require Borrower to
do the same.

     3.   Borrower shall be liable for the payment of any State, Federal and
local income taxes or any other taxes attributable to the Depository Account.

     4.   The Loan Documents are hereby incorporated by reference as if fully
rewritten herein.  A default in the performance of this Agreement shall be
deemed to be a default in the performance of the Loan Documents.  Upon the
occurrence of any default in the performance by Borrower of the terms and
conditions of the Loan Documents or this Agreement and the expiration of any
applicable notice period under the Loan Documents, and in addition to any other
remedies for the benefit of Lender as may be set forth herein, in the Loan
Documents, or in law or equity (including, but being not limited to, the right
of set-off), Lender shall have the right to withdraw from the Depository Account
such amount as may be necessary or appropriate to cure such default.  The
exercise by Lender of any one or more of the foregoing rights or remedies shall
be mutually exclusive of one another, and not cumulative.

                           TERMINATION OF AGREEMENT

     5.   Upon repayment of the Loan and performance in full of the Loan
Documents, this Agreement shall be null, void and of no effect whatsoever, and
each of the parties hereto agree to execute such documents as may be reasonably
necessary and appropriate in order to effectuate the termination of this
Agreement.
<PAGE>

                                 MISCELLANEOUS

     6.   The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

     7.   This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
or assigns, as the case may be, and may not be modified in any way except by
written instrument duly executed by the parties hereto.

     8.   Borrower is hereby prohibited from assigning to any third party the
rights of Borrower in the Depository Account.

     9.   This Agreement shall remain in full force and effect for so long as
the Loan remains unpaid in whole or in part, and for so long as the terms and
conditions of the Loan Documents are not fully performed.

     10.  Neither the failure nor any delay on the part of Lender to exercise
any right or power hereunder shall operate as a waiver thereof.

     11.  For purposes of State, Federal and local taxes, all funds in the
Account shall be deemed to be the property of Borrower.

     12.  This Agreement shall be interpreted in accordance with the laws of the
State of Ohio.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.

                                    BORROWER:
                                    Jameson Inns, Inc., a Georgia corporation,
                                    as successor in interest by merger to
                                    Signature Inns, Inc. an Indiana corporation

                                    BY:
                                        ----------------------------
                                        Craig R. Kitchin
                                        President

                                    LENDER:
                                    CORNERSTONE BANK,
                                    an Ohio corporation
<PAGE>

                                    BY:
                                        ----------------------------

                                    ITS:
                                        ----------------------------

<PAGE>

                                PROMISSORY NOTE

Borrower: Jameson Inns, Inc.                    Lender: Cornerstone Bank
          8 Perimeter Center East, Suite 8050           28 East Main Street
          Atlanta, GA 30346                             PO Box 71 9
                                                        Springfield, OH 45501
                                                        (937) 3254683

Principal Amount: $3,900,000.00

Initial Rate: 9.255%

Date of Note: May 16, 2000

PROMISE TO PAY.  Jameson Inns, Inc. ("Borrower") promises to pay to Cornerstone
Bank ("Lender"), or order, In lawful money of the United States of America, the
principal amount of Three Million Nine Hundred Thousand & 00/100 Dollars
($3,900,000.00), together with Interest on the unpaid principal balance from May
16, 2000, until paid In full.

PAYMENT.  Subject to any payment changes resulting from changes In the Index,
Borrower will pay this loan In 83 regular payments of $36,077.42 each and one
Irregular last payment estimated at $3,278,9SS.04. Borrower's first payment is
due June 16, 2000, and all subsequent payments are due on the same day of each
month after that.  Borrower's final payment will be due on May 16, 2007, and
will be for all principal and all accrued Interest not yet paid.  Payments
Include principal and Interest.  Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid Interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.  The annual Interest rate for this Note Is computed on a 366/360 basis;
that Is, by applying the ratio of the annual Interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance Is outstanding.  Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the 1 YEAR
US CONSTANT MATURITY TREASURY (the "Index").  The Index is not necessarily the
lowest rate charged by Lender on its loans.  If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower.  Lender will tell Borrower the current Index rate upon
Borrower's request.  The interest rate change will not occur more often than
each Year.  Borrower understands that Lender may make loans based on other rates
as well.  The Index currently Is 6.380% per annum.  The Interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 2.876
percentage points over the Index, resulting in an Initial rate of 9.255% per
annum.  NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.  Whenever Increases occur
in the interest rate, Lender, at its option, may do one or more of the
following: (A) increase Borrower's payments to ensure Borrower's loan will pay
off by its original final maturity date, (B) increase Borrower's payments to
cover accruing interest, (C) increase the number of Borrower's payments, and (D)
continue Borrower's payments at the same amount and increase Borrower's final
payment.

PREPAYMENT PENALTY.  Upon prepayment of this Note, Lender Is entitled to the
following prepayment penalty: In the event that the Borrower seeks to prepay
this loan using proceeds acquired from other financing prior to May 16, 2003,
the Borrower shall pay a prepayment penalty of 1% of the original loan balance.
Except for the foregoing, Borrower may pay all or a portion of the amount owed
earlier than it is due.  Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
under the payment schedule.  Rather, early payments will reduce the principal
balance due and may result in Borrower's making fewer payments.  Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language.  If Borrower sends such a payment, Lender may accept it
without losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender.  All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Cornerstone Bank, 28 East
Main Street, PO Box 719, Springfield, OH 45501.

LATE CHARGE.  If a payment is 15 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $45.00, whichever Is greater.
<PAGE>

INTEREST AFTER DEFAULT.  Upon default, including failure to pay upon final
maturity, Lender, at its option, may, If permitted under applicable law,
increase the variable interest rate on this Note to 9.875 percentage points over
the Index.  The interest rate will not exceed the maximum rate permitted by
applicable law.

DEFAULT.  Each of the following shall constitute an event of default ("Event of
Default") under this Note:
Payment Default.  Borrower fails to make any payment when due under this Note.

Other Defaults.  Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

False Statements.  Any warranty, representation or statement made or furnished
to Lender by Borrower or on Borrower's behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Insolvency.  The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender.  However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Events Affecting Guarantor.  Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes Incompetent, or revokes or disputes the validity of, or liability under,
any guaranty of the indebtedness . In the event of a death, Lender, at its
option, may, but shall not be required to, permit the guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of Default.

Change In Ownership.  Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.

Adverse Change.  A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.

Insecurity.  Lender in good faith believes itself insecure.

Cure Provisions.  If any default, other than a default in payment, is curable
and if Borrower has not been given a notice of a breach of the same provision of
this Note within the preceding twelve (12) months, it may be cured (and no event
of default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (1) cures the default within fifteen (15)
days; or (2) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.

LENDERIS RIGHTS.  Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help collect
the loan if Borrower does not pay.  Borrower will pay Lender that amount.  This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals.  If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.

JURY WAIVER.  Lender and Borrower hereby waive the right to any jury trial in
any action, proceeding, or counterclaim brought by either Lender or Borrower
against the other.
<PAGE>

GOVERNING LAW.  This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Ohio.  This Note has
been accepted by Lender in the State of Ohio.

CHOICE OF VENUE.  If there is a lawsuit, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of Clark County, State of Ohio.

PROMISSORY NOTE
(Continued)

CONFESSION OF JUDGMENT.  Borrower hereby irrevocably authorizes and empowers any
attorney-at-law, including an attorney hired by Lender, to appear in any court
of record and to confess judgment against Borrower for the unpaid amount of this
Note as evidenced by an affidavit signed by an officer of Lender setting forth
the amount then due, attorneys' fees plus costs of suit, and to release all
errors, and waive all rights of appeal.  If a copy of this Note, verified by an
affidavit, shall have been filed in the proceeding, it will not be necessary to
file the original as a warrant of attorney.  Borrower waives the right to any
stay of execution and the benefit of all exemption laws now or hereafter in
effect.  No single exercise of the foregoing warrant and power to confess
judgment will be deemed to exhaust the power, whether or not any such exercise
shall be held by any court to be invalid, voidable, or void; but the power will
continue undiminished and may be exercised from time to time as Lender may elect
until all amounts owing on this Note have been paid in full.  Borrower waives
any conflict of interest that an attorney hired by Lender may have in acting on
behalf of Borrower in confessing judgment against Borrower while such attorney
is retained by Lender.  Borrower expressly consents to such attorney acting for
Borrower in confessing judgment.

RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account).  This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law.  Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

COLLATERAL.  Borrower acknowledges this Note is secured by a Mortgage dated May
16, 2000, to Lender on real property located in Franklin County, State of Ohio,
all the terms and conditions of which are hereby incorporated and made a part of
this Note.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and Lender's successors and assigns.

GENERAL PROVISIONS.  If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note.  Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Ohio
(as applicable).  Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower.  Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them.  Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor.  Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability.  All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone.  All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.  The
obligations under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER AGREES TO
THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
<PAGE>

NOTICE: FOR THIS NOTICE "YOU" MEANS THE BORROWER AND "CREDITOR" AND "HIS" MEANS
LENDER.

WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL.  IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY

GOODS.  FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

BORROWER:

JAMESON INNS, INC.

By:
-Craig R. Kitchin, President & CFO of Jameson Inns, Inc.
<PAGE>

ADDENDUM TO PROMISSORY NOTE
---------------------------

Jameson Inns, Inc., a Georgia corporation, successor by merger to Signature
Inns, Inc., an Indiana corporation ("Borrower") entered into a Promissory Note
with Cornerstone Bank ("Lender") in the principal amount of Three Million Nine
Hundred Thousand & 00/100 Dollars, ($3,900,000.00), together with interest on
the unpaid balance from May 16, 2000, until paid in full (hereinafter, the
Promissory Note may be referred to as the "Note");

The Borrower and Lender now wish to amend the Note in order to clarify the
interest rate that will be charged in accordance with the Note;

Now, Therefore, for valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:

1.   The following shall be added to the end of the Paragraph entitled Variable
Interest Rate:

The foregoing notwithstanding, the maximum increase to the annual adjustment to
the annual interest rate to be charged under this Note shall be no more than one
percent (1 %) above the interest rate charged and in effect for the loan year
prior to the interest rate change.

2.   In all other respects, the Note shall remain in full force and effect.

In Witness Whereof, the undersigned Borrower executes this Addendum to
Promissory Note effective the date as is set forth below.

Dated: May 16, 2000      Borrower:

                         Jameson Inns, Inc., a Georgia corporation,
                         successor by merger to Signature Inns, Inc., an Indiana
                         corporation

                         By:
                         Craig R. Kitchin
                         President<PAGE>

                                                                   EXHIBIT 10.43

SOURCE OF TITLE:  Deed Book 1997, Page 10454
---------------

PREPARED BY:
CHARLES E. MOORE
P.O. BOX 951
MILLEDGEVILLE, GA 31061

                             REAL ESTATE MORTGAGE
                                  (LEASEHOLD)
             ____________________________________________________

STATE OF ALABAMA
COUNTY OF TUSCALOOSA

  THIS INDENTURE, made and entered into this _______ day of March, 2001, between
JAMESON ALABAMA, INC., 8 Perimeter Center East, Suite 8050, Atlanta, Georgia
30346, hereinafter called "Borrower", whether singular or plural, and EMPIRE
FINANCIAL SERVICES, INC., 121 Executive Parkway, Milledgeville, Georgia 31061,
hereinafter called "Lender":

                                      I.

  WITNESSETH; That for and in consideration of the sum of ONE MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS evidenced by one certain promissory note of
even date herewith payable to the order of Lender, receipt of said consideration
being hereby acknowledged, and in order to secure the indebtedness and other
obligations of Borrower hereinafter set forth, the Borrower does hereby bargain,
sell, grant, and convey unto the Lender, its successors and assigns all of
Borrower's right, title, interest, and possessory estate in an to the property
described on "Exhibit A" hereto acquired pursuant to that certain lease and
pursuant to any amendments or renewals thereof, which lease is also identified
on "Exhibit A" (hereinafter "the Leasehold Interest" and "the Lease") together
with any after-acquired right, title, and interest in the fee or other superior
estate.

  There is also hereby conveyed: All buildings, structures and improvements of
every kind and nature whatsoever now or hereafter situated on the above
described lands (or that may hereafter be erected thereon); all rights and
powers, easements, hereditaments and appurtenances in any way belonging,
relating, or appertaining thereto; all right, title and interest of Borrower in
all fixtures now or hereafter attached to said lands as well as any additions,
improvements, replacements, substitutions, or proceeds from the sale of same;
all income, rents, issues, profits and revenues of the Property from time to
time accruing (including without limitation all payments under leases or
tenancies, proceeds of insurance, condemnation payments, tenant security
deposits whether held by Borrower or in a trust account, and escrow funds), and
all the estate, right, title, interest, property, possession, claim and demand
whatsoever at law, as well as in equity, of Borrower, in and to the same;
reserving only the right to Borrower to collect the same so long as Borrower is
not in default hereunder; all such property of every kind and description
hereinabove granted and conveyed to be hereafter collectively identified as "the
Property".
<PAGE>

  Borrower also assigns and conveys to Lender any right, privilege or option to
extend or renew the Lease as well as Borrower's right of first refusal or option
to purchase the fee, if any.

  TO HAVE AND TO HOLD the Property unto the said Lender, its successors and
assigns, forever.  Upon condition, however, that if the Borrower shall well and
truly pay and discharge the indebtedness hereby secured as it shall become due
and payable and shall in all things do and perform all acts and agreements by
Borrower herein agreed to be done according to the tenor and effect hereof, then
and in that event only, this conveyance shall be and become null and void.

                                      II.

  Borrower covenants: that Borrower is lawfully seized and possessed of the
Lease and the Leasehold Interest; that Borrower has good right to convey same;
that the same is free from all encumbrances except such permitted matters as are
listed on Exhibit "B" hereto; and Borrower warrants and will defend the title
thereto, and every part thereof, against the claims of all persons whomsoever.
Should it ever appear that good and marketable leasehold title to any part of
the Property, free of all liens and unpermitted encumbrances, did not become
vested in Lender by virtue of this Instrument, then all debts secured hereby
shall become due and collectible at once, without notice, at Lender's option.

                                     III.

  THIS INSTRUMENT is intended to operate and is to be construed as a mortgage
passing title to the Lease, the Leasehold Interest and any after - acquired
interest in the Property to Lender and is made under those provisions of the
existing laws of the State of Alabama relating to leasehold mortgages and is
given to secure the payment of the following described indebtedness (hereinafter
referred to collectively as the "Indebtedness"):

     (a) The debt evidenced by that certain promissory note (hereinafter
referred to as the "Note") dated March ______, 2001, made by Borrower to the
order of Lender in the principal face amount of One Million Five Hundred
Thousand and No/100 Dollars ($1,500,000.00), with the final payment being due on
or before March 1, 2007; together with any and all renewals, modifications,
consolidations, replacements and extensions of the indebtedness evidenced by the
Note;

     (b) All interest on the principal amount of all such debt (including
interest that, but for the filing of a petition in bankruptcy, would accrue on
any such principal);

     (c) Any and all additional advances made by Lender to protect or preserve
the Property, the Leasehold Interest, the Lease, or the security interest
created hereby in the Property, the Leasehold Interest and the Lease, or for
taxes, assessments or insurance premiums as hereinafter provided or for
performance of any of Borrower's obligations hereunder or for any other purpose
provided herein (whether or not the original Borrower is a lessee or owner of
the Property at the time of such advances);

     (d) Any and all other indebtedness now owing or which may hereafter be
owing by Borrower to Lender, now existing or hereafter coming into existence,
however and whenever incurred or evidenced, whether expressed or implied, direct
or indirect, absolute or contingent, or due or to become due,

                                       2
<PAGE>

and all renewals, modifications, consolidations replacements and extensions
thereof; and

     (e) Any and all costs, expenses, and attorneys' fees which Lender, its
successors or assigns, may incur in the collection of all or any portion of said
indebtedness.

                                      IV.

  To further secure said indebtedness, Borrower covenants to procure, and to
maintain in full force and effect, for the benefit of Lender, its successors and
assigns, the following types of insurance, in companies acceptable to Lender:
(a)  "All-risk" hazard insurance in an amount not less than 100% of the full
replacement cost of the Property improvements, without deduction for
depreciation; provided, however, that hazard insurance with respect to
improvements under construction shall be in the form of "all-risk" builder's
risk insurance satisfactory to Lender; (b) rent insurance against loss of income
arising from hazards against which the Property is otherwise required to be
insured, in an amount not less than 100% of one year's gross rental income from
the Property; (c) such other insurance on the Property or any replacements or
substitutions therefor, in such amounts as may from time to time be required by
Lender against other insurable casualties which at the time are commonly insured
against in the case of properties of similar character and location, due regard
being given to the height and type of the improvements, their construction,
location, use and occupancy, or any replacements or substitutions therefor; (d)
and public liability insurance covering all liabilities incident to the
construction, ownership, possession and operation of the Property and naming
Lender as an additional insured thereunder.

  Lender is hereby authorized and empowered, at its option, to adjust or
compromise any loss under any insurance policies maintained pursuant hereto, and
to collect and receive the proceeds from any such policy or policies.  Each
insurance company is hereby authorized and directed to make payment for all such
losses directly to Lender, instead of to Borrower and Lender jointly.  In the
event any insurance company fails to disburse directly and solely to Lender but
disburses instead either solely to Borrower or to Borrower and Lender jointly,
Borrower agrees immediately to endorse and transfer such proceeds to Lender.
Upon the failure of Borrower to endorse and transfer such proceeds as aforesaid,
Lender may execute such endorsements or transfers for and in the name of
Borrower and Borrower hereby irrevocably appoints Lender as Borrower's agent and
attorney-in-fact so to do.  In the event of a loss of more than 50% of the pre-
loss value of the Property improvements, Lender, after deducting from said
insurance proceeds all of its expenses incurred in the collection and
administration of such sums, including attorneys' fees, may apply the net
proceeds or any part thereof, at its option, (a) to the payment of the
Indebtedness, whether or not due and in whatever order Lender elects, (b) to the
repair or restoration of the Property, or (c) for any other purposes or objects
for which Lender is entitled to advance funds under this Instrument, all without
affecting the security interest created by this Instrument; and any balance of
such moneys then remaining shall be paid to Borrower or the person or entity
lawfully entitled thereto.  In the event of a loss of less than 50% of the pre-
loss value of the Property improvements, and provided no event of default then
exists, Borrower shall be entitled to have said proceeds applied to the repair
or restoration of said improvements, upon consent of Lender, which consent shall
not be unreasonably withheld.  Lender shall not be held responsible for any
failure to collect any insurance proceeds due under the terms of any policy
regardless of the cause of such failure.

  At least thirty (30) days prior to the expiration date of each policy
maintained pursuant hereto, a renewal or replacement thereof satisfactory to
Lender shall be delivered to Lender.  Borrower shall deliver to Lender receipts
evidencing the payment for all such insurance policies and renewals or
replacements.

                                       3
<PAGE>

The delivery of any insurance policies hereunder shall constitute an assignment
of all unearned premiums as further security for the Indebtedness. In the event
of the foreclosure of this Instrument or any other transfer of title to the
Lease, the Leasehold Interest, or the Property in extinguishment or partial
extinguishment of the Indebtedness, all right, title and interest of Borrower in
and to all insurance policies then in force shall pass to the purchaser or to
Lender, as the case may be, and Lender is hereby irrevocably appointed by
Borrower as attorney-in-fact for Borrower to assign any such policy to said
purchaser or to Lender, as the case may be, without accounting to Borrower for
any unearned premiums thereon.

  All insurance policies maintained pursuant hereto shall provide that the
insurer give the Lender at least thirty (30) days prior written notice of
cancellation or termination, and provide that no act or thing done by the
insured shall invalidate or diminish the insurance provided to Lender and,
except for liability policies, contain mortgagee loss payable clauses
satisfactory to Lender.

                                      V.

  Borrower shall pay, on or before the due date thereof;  (a) all taxes,
assessments, license or permit fees, and all other charges of every character
whatsoever which may be a lien upon the Property, the Leasehold Interest, or the
Lease, or any part thereof, and shall promptly submit to Lender such evidence of
the payment thereof as Lender may require; (b) all premiums on policies of
insurance covering, affecting, or relating to the Property, the Leasehold
Interest and the Lease; (c) all premiums for mortgage insurance, if this
Instrument and the Note are so insured, and (d) all ground rentals, other lease
rentals and other sums, if any, owing by Borrower and becoming due under any
lease or rental contract affecting the Property, and shall promptly submit to
Lender such evidence of the payment of same as Lender may require.

                                      VI.

  At the option of Lender and to further secure the payment of the taxes,
premiums and assessments hereinabove mentioned, Borrower shall deposit with
Lender, on the due date of each installment under the Note, such amounts as, in
the estimation of Lender, shall be necessary to pay such charges as they become
due; said deposits to be held by Lender free of interest, and free of any liens
or claims on the part of creditors of Borrower, as part of Lender's security.
If said deposits are not sufficient to pay such charges in full as they become
payable, Borrower will promptly deposit with Lender such additional sums as may
be required to enable Lender to make full payment of same.

                                 VII.

  If all or any portion of the Property improvements or if all or a significant
portion of the real estate shall be damaged or taken through condemnation,
including transfer by private sale in lieu thereof, then the entire indebtedness
shall, at the option of Lender, become immediately due and payable.  Lender is
hereby authorized, at its option, to commence, appear in, or prosecute, through
counsel selected by it, in its own or Borrower's name, any action or proceeding
relating to any such condemnation and to settle or compromise any claim in
connection therewith.  All compensation, awards, damages, claims, rights of
action and proceeds arising from any such condemnation are hereby assigned by
Borrower to Lender.  Lender is authorized to apply any sums collected to the
payment of expenses of obtaining same, including its attorney fees, and may, at
its option, apply the remaining proceeds, or any portion thereof, to payment of
Borrower's

                                       4
<PAGE>

then outstanding indebtedness, provided, however, that if no event of default
then exists, and the damages involve less than 25% of the "pre-damage" value of
the Property, Borrower shall be entitled to have said proceeds, or such portion
thereof as may be required, applied to the repair and restoration of the
Property, upon consent of Lender, which consent shall not be unreasonably
withheld.

                                     VIII.

  Borrower will keep the buildings, parking areas, roads and walkways,
recreational facilities, landscaping and all other improvements of any kind now
or hereafter erected on the Property or any part thereof in good condition and
repair, will not commit or suffer any waste and will not do or suffer to be done
anything which would or could increase the risk of fire or other hazard to the
Property or any part thereof or which would or could result in the cancellation
of any insurance policy carried with respect to the Property.

  Borrower will not remove, demolish or alter the structural character of any
improvements located on the Property without the written consent of Lender.
Borrower shall not remove or permit to be removed from the Property any item or
items which are or may hereafter be in any way attached or affixed to the
Property or to any improvements thereon, provided, however, that Borrower may
replace, with items of comparable or greater value and utility such items as
require replacement due to normal wear and tear and routine obsolescence.

  Lender, its agents or representatives, are hereby authorized to enter upon and
inspect the Property at any time during normal business hours.

  Borrower will promptly comply with all present and future laws, ordinances,
rules and regulations of any governmental authority affecting the Property or
any part thereof, including those laws, ordinances, rules, and regulations
relating to the environment as set forth in the Environmental Warranty which is
attached as an exhibit hereto and incorporated by reference herein.

                                      IX.

  If all or any part of the Property shall be damaged by fire or other casualty,
Borrower will give immediate written notice thereof to Lender and will promptly
restore the Property to the equivalent of its original condition.  If a part of
the Property shall be damaged through condemnation, Borrower will promptly
restore, repair or alter the remaining portions of the Property in a manner
satisfactory to Lender.  Notwithstanding the foregoing, Borrower shall not be
obligated so to restore, repair or alter unless in each instance, Lender agrees
to make available to Borrower (pursuant to a procedure satisfactory to Lender)
any net insurance or condemnation proceeds actually received by Lender hereunder
in connection with such casualty loss or condemnation, to the extent such
proceeds are required to defray the expense of such restoration, repair or
alteration; provided, however that the insufficiency of any such insurance or
condemnation proceeds to defray the entire expense of restoration, repair or
alteration shall in no way relieve Borrower of its obligation to restore, repair
or alter.  In the event all or any portion of the Property shall be damaged or
destroyed by fire or other casualty or by condemnation, Borrower shall promptly

                                       5
<PAGE>

deposit with Lender a sum equal to the amount by which the estimated cost of the
restoration of the Property (as determined by Lender in its good faith judgment)
exceeds the actual net insurance or condemnation proceeds with respect to such
damage or destruction.

                                      X.

  Borrower will not suffer or permit any mechanics', materialmen's, laborer's,
statutory or other lien to be filed of record or to remain outstanding against
the Property, unless expressly subordinated to this security instrument, and, in
no event will any such lien be allowed where the presence of same could result
in a default in the Lease.

  Upon request by Lender, Borrower will execute, or cause to be executed, and
delivered to Lender such other mortgages, assignments, security agreements or
other documents as may, in the opinion of Lender, be necessary to perfect,
continue or preserve the obligation of Borrower under the Note, this mortgage or
any other security instrument executed in connection herewith, and, upon failure
of Borrower so to do, Lender, as agent and attorney-in-fact of Borrower may
execute, file, and record such documents.

  Borrower will pay or reimburse Lender, upon demand, for all attorneys' fees,
costs and expenses incurred by Lender in any suit, action, legal proceeding or
dispute of any kind in which Lender is made a party or appears as party
Plaintiff or Defendant, affecting the Indebtedness, this Instrument or the
interest created hereby, the Lease, Leasehold Interest or the Property,
(including, but not limited to, the exercise of the power of sale contained in
this Instrument), any condemnation action involving the Lease, Leasehold
Interest or the Property, any federal bankruptcy proceeding or state insolvency
proceeding or other proceeding involving the priorities or rights of creditors,
or any action to protect the security hereof, and any such amounts paid by
Lender shall be added to the Indebtedness and shall be secured by this
Instrument.

                                      XI.

  Borrower shall keep and maintain or shall cause to be kept and maintained, at
Borrower's cost and expense and in accordance with generally accepted accounting
principles, proper and accurate books, records and accounts reflecting all items
of income and expense in connection with the operation of the Property and in
connection with any services, equipment or furnishings provided in connection
with the operation of the Property. Lender, its agents, accountants, and
attorneys shall have the right from time to time to examine such books, records
and accounts at the office of the Borrower or wherever maintained, to make such
copies or extracts thereof as Lender shall desire and to discuss Borrower's
affairs, finances and accounts with Borrower and with the officers and
principals of Borrower, at such reasonable times as may be requested by Lender.
Upon request, Borrower will furnish to Lender, within ninety (90) days after the
end of Borrower's fiscal year, an audited financial statement for the Property
for such fiscal year prepared by an independent certified public accountant
satisfactory to Lender containing a profit and loss statement and all supporting
schedules covering the operation of the Property, all in reasonable detail,
prepared in accordance with generally accepted accounting standards.

                                     XII.

  Borrower shall not be permitted to alter or change the use of the Property or
to abandon the Property, or to modify, terminate, or surrender the Lease without
prior written consent of Lender.

                                       6
<PAGE>

  Borrower hereby acknowledges to Lender that:  (a) the identity and expertise
of Borrower were and continue to be material circumstances upon which Lender has
relied in connection with, and which constitute valuable consideration to Lender
for, the extending to Borrower of the funds evidenced by the Note and (b) any
change in such identity or expertise could materially impair or jeopardize the
security for the payment of the Note granted to Lender and secured by this
Instrument.  Borrower hereby covenants and agrees with Lender, as part of the
consideration for the extending to Borrower of the funds evidenced by the Note,
that Borrower shall not encumber, pledge, convey, transfer, assign or grant any
option with regard to any or all of its interest in the Property without the
prior written consent of Lender, and, if Borrower is a corporation, partnership
or other artificial entity, there shall be no encumbrance, pledge, conveyance,
transfer or assignment of any legal or beneficial interest including those
incident to liquidation, dissolution, merger, consolidation, or share exchange.
Such consent of Lender may be given or withheld by Lender at its sole
discretion.

                                     XIII.

  In the event (a) of a default in the payment of principal and interest
(including, without limitation, non-payment upon maturity) or default in any
other monetary obligation of the Borrower which such default(s) continue for a
period of five (5) days after notice of such default by Lender, or (b) upon
failure of the Borrower to comply with any other conditions or covenants
contained in the Note, this, or any other security instrument(s) which such
default(s) continue for a period of fifteen (15) days after notice of such
default by Lender, or (c) upon the liquidation or dissolution of a Borrower,
endorser or guarantor that is a corporation, partnership, or limited liability
company, or death of an individual Borrower, endorser or guarantor, or (d) upon
termination of the Lease or Borrower's Leasehold Interest or occurrence of any
default by Borrower under terms of the Lease, then, and in any such event(s)
(hereinafter identified as "Event" or "Events of Default"), the principal
indebtedness evidenced by the Note, all accrued interest thereon and any other
sums advanced pursuant to the Note or pursuant to any other loan documents
shall, at the option of Lender and, without further notice to the Borrower, at
once become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity.  No omission on the part of Lender to exercise such
option, when entitled to do so, shall be construed a waiver of such right.

                                     XIV.

  If an Event of Default occurs, Borrower, upon demand of Lender, shall
forthwith surrender to Lender the actual possession of the Property and, to the
extent permitted by law, Lender may enter and take possession of all of the
Property without the appointment of a receiver, or an application therefor, and
may exclude Borrower and its agents and employees wholly therefrom, and may have
joint access with Borrower to the books, papers and accounts of Borrower.

  Upon every such entering and taking of possession, Lender may hold, store,
use, operate, manage and control the Property and conduct the business thereof,
and, from time to time:  (a) make all necessary and proper repairs,
replacements, additions, and improvements thereto and thereon and purchase or
otherwise acquire additional fixtures, personalty and other property; (b) insure
or keep the Property insured; (c) manage and operate the Property and exercise
all the rights and powers of Borrower to the same extent as Borrower could act
with respect to the same; and (d) enter into any and all agreements with respect
to the exercise by others of any of the powers herein granted to Lender, all as
Lender from time to time may determine to be in its best interest.  Lender may
collect and receive all the income, rents, issues, profits and revenues from the
Property, including those past due as well as those accruing thereafter, and
Lender may apply any moneys and proceeds received by Lender, in whatever order
or priority Lender in its sole

                                       7
<PAGE>

discretion may determine, to the payment of (i) all expenses of taking, holding,
managing and operating the Property (including compensation for the services of
all persons employed for such purposes); (ii) the cost of maintenance, repairs,
renewals, replacements, additions, improvements, purchases and acquisitions;
(iii) the cost of insurance; (iv) such taxes, assessments and other similar
charges as Lender may at its option choose to pay; (v) other proper charges upon
the Property or any part thereof; (vi) the reasonable compensation, expenses and
disbursements of the attorneys and agents of Lender; (vii) accrued interest;
(viii) deposits and other sums required to be paid under this Instrument; or
(ix) overdue installments of principal.  Anything herein to the contrary
notwithstanding, Lender shall not be obligated to discharge or perform the
duties of a landlord to any tenant or incur any liability as the result of any
exercise by Lender of its rights under this Instrument, and Lender shall be
liable to account only for the rents, incomes, issues, profits and revenues
actually received by Lender.

  If an Event or Events of Default shall occur with regard to the payment,
performance or observance of any term, covenant or condition of this Instrument
or any other document or instrument evidencing, securing or otherwise relating
to the Indebtedness, Lender may, at its option, pay, perform or observe the
same, and all payments made or costs or expenses incurred by Lender in
connection therewith shall be secured hereby and shall be, without demand,
immediately repaid by Borrower to Lender with interest thereon at the default
rate provided in the Note.  Lender shall be the sole judge of the necessity for
any such actions and of the amounts to be paid.  Lender is hereby empowered to
enter and to authorize others to enter upon the Property or any part thereof for
the purpose of performing or observing any such defaulted term, covenant or
condition without thereby becoming liable to Borrower or any person in
possession holding under Borrower.

  If an Event or Events of Default shall have occurred, Lender, at Lender's
option, upon application to a court of competent jurisdiction, shall be entitled
as a matter of strict right, without notice and without regard to the adequacy
or value of any security for the Indebtedness or the solvency of any party bound
for its payment, to the appointment of a receiver to take possession of and to
operate the Property and to collect and apply the incomes, rents, issues,
profits and revenues thereof.  The receiver shall have all the rights and powers
permitted under the laws of the State of Alabama.  Borrower will pay to Lender
upon demand all expenses, including receiver's fees, attorneys' fees, costs and
agent's compensation, incurred pursuant to the provisions of this Paragraph, and
any such amounts paid by Lender shall be added to the Indebtedness and shall be
secured by this Instrument.

  If an Event or Events of Default shall have occurred, then the whole of the
unpaid Indebtedness hereby secured, with interest thereon, shall at once become
due and payable and Lender, at its option, and without further notice to
Borrower beyond that required by the Note or this Mortgage, (all such further or
additional notice being hereby expressly waived), may sell the Lease, the
Leasehold Interest, or the Property or any part of the Property at one or more
public sales before the main entrance door of the courthouse of the county in
which the land or any part of the land is situated, at public outcry, to the
highest bidder for cash, in order to pay the Indebtedness, and all expenses of
sale and of all proceedings in connection therewith, including reasonable
attorneys' fees, after advertising the description of the Property to be sold
and the time, place and terms of sale by publishing the same once a week for
three (3) consecutive weeks preceding such sale in a newspaper published in the
county in which the land or a part thereof is situated.  At any such public
sale, Lender may execute and deliver to the purchaser a good and sufficient deed
of conveyance of the Lease, the Leasehold Interest, or the Property or any part
of the Property, and to this end Borrower hereby constitutes and appoints Lender
the agent and attorney-in-fact of Borrower to make such sale and conveyance, and
all the acts and doings of said agent and attorney-in-fact are hereby ratified
and confirmed and any recitals in said conveyance or conveyances as to facts
essential to a valid sale shall be binding upon Borrower.  The aforesaid power
of sale and agency hereby granted are coupled with an

                                       8
<PAGE>

interest and are irrevocable by death or otherwise, are granted as cumulative of
the other remedies provided hereby or by law for collection of the Indebtedness
and shall not be exhausted by one exercise thereof but may be exercised until
full payment of all of the Indebtedness. In the event of any sale under this
Instrument by virtue of the exercise of the powers herein granted, or pursuant
to any order in any judicial proceeding or otherwise, the Lease, Leasehold
Interest and the Property may be sold as an entirety or in separate parcels and
in such manner or order as Lender in its sole discretion may elect, and one or
more exercises of the powers herein granted shall not extinguish nor exhaust
such powers, until the entire Property and Property rights are sold or the
Indebtedness is paid in full. If the Indebtedness is now or hereafter further
secured by any chattel mortgages, pledges, contracts of guaranty, assignments of
lease or other security instruments, Lender may, at its option, exhaust the
remedies granted under any of said security instruments either concurrently or
independently, and in such order as Lender may determine.

  If an Event or Events of Default shall have occurred, Lender may, in addition
to and not in abrogation of the rights covered under the preceding paragraph,
either with or without entry or taking possession as herein provided or
otherwise, proceed by a suit or suits in law or in equity or by any other
appropriate proceeding or remedy (a) to enforce payment of the Note or the
performance of any term, covenant, condition or agreement of this Instrument or
any other right, and (b) to pursue any other remedy available to it, all as
Lender at its sole discretion shall elect.

  Upon any foreclosure sale or sales of all or any portion of the Property or
Property rights under the power herein granted, Lender may bid for and purchase
the Lease, the Leasehold Interest and the Property and shall be entitled to
apply all or any part of the Indebtedness as a credit to the purchase price.

  In the event of a foreclosure or a sale of all or any portion of the Lease,
the Leasehold Interest and the Property under the power herein granted, the
proceeds of said sale shall be applied as follows: First, to the expenses of
such sale and of all proceedings in connection therewith, including
attorneys'fees; Second, to payment of insurance premiums, liens, assessments,
taxes and charges including utility charges advanced by Lender; Third, to
payment of the outstanding principal balance of the Indebtedness, and, where
permitted by law, the accrued interest on all of the foregoing; and, Fourth, the
remainder, if any, shall be paid to Borrower, or to the person or entity
lawfully entitled thereto.

  In the event of any such foreclosure sale or sales under the power herein
granted, Borrower shall be deemed a tenant holding over and shall forthwith
deliver possession to the purchaser or purchasers at such sale or be summarily
dispossessed according to provisions of law applicable to tenants holding over.

  Lender, at its option, is authorized to foreclose this Instrument subject to
the rights of any tenants of the Property, and the failure to make any such
tenants parties to any such foreclosure proceedings and to foreclose their
rights will not be, nor be asserted to be by Borrower, a defense to any
proceedings instituted by Lender to collect the Indebtedness.

                                      XV.

  No right, power or remedy conferred upon or reserved to Lender by this
Instrument is intended to be exclusive of any other right, power or remedy, but
each and every such right, power and remedy shall be cumulative and concurrent
and shall be in addition to any other right, power and remedy given hereunder or
now or hereafter existing at law, in equity or by statute.

  No delay or omission by Lender or by any holder of the Note to exercise any
right, power or remedy accruing upon any breach or Event or Events of Default
shall exhaust or impair any such right,

                                       9
<PAGE>

power or remedy or shall be construed to be a waiver of any such breach or
default, or acquiescence therein, and every right, power and remedy given by
this Instrument to Lender may be exercised from time to time and as often as may
be deemed expedient by Lender. No consent or waiver, expressed or implied, by
Lender to or of any breach or Event or Events of Default by Borrower in the
performance of the obligations of Borrower hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance of the same or any other obligations of Borrower hereunder. Failure
on the part of Lender to complain of any act or failure to act or to declare a
default, irrespective of how long such failure continues, shall not constitute a
waiver by Lender of its rights hereunder or impair any rights, powers or
remedies of Lender hereunder.

  No act or omission by Lender shall release, discharge, modify, change or
otherwise affect the original liability under the Note, this Instrument or any
other obligation of Borrower or any subsequent purchaser of the Lease, the
Leasehold Interest, the Property or any part thereof, or any maker, co-signer,
endorser, surety or guarantor, or preclude Lender from exercising any right,
power or privilege herein granted or intended to be granted upon the happening
of any Event or Events of Default, or alter the security title, security
interest or lien of this Instrument except as expressly provided in an
instrument or instruments executed by Lender.  Without limiting the generality
of the foregoing, Lender may:  (a) grant forbearance or an extension of time for
the payment of all or any portion of the Indebtedness; (b) take other or
additional security for the payment of the Indebtedness; (c) waive or fail to
exercise any right granted hereunder or in the Note; (d) release any part of the
Property or Leasehold Interest from the security interest or lien of this
Instrument or otherwise change any of the terms, covenants, conditions or
agreements of the Note or this Instrument; (e) consent to the filing of any map,
plat or replat affecting the Property; (f) consent to the granting of any
easement or other right affecting the Property; (g) make or consent to any
agreement subordinating the security title, security interest or lien hereof; or
(h) take or omit to take any action whatsoever with respect to the Note, this
Instrument, the Lease, the Leasehold Interest, the Property or any document or
instrument evidencing, securing or in any way relating to the Indebtedness; all
without releasing, discharging, modifying, changing or affecting any such
liability, or precluding Lender from exercising any such right, power or
privilege or affecting the security title, security interest or lien of this
Instrument.  In the event of the sale or transfer by operation of law or
otherwise of all or any part of the Lease, the Leasehold Interest or the
Property, Lender, without notice, is hereby authorized and empowered to deal
with any such vendee or transferee with reference to the Lease, the Leasehold
Interest, or the Property or the Indebtedness, or with reference to any of the
terms, covenants, conditions or agreements hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any liabilities, obligations or undertakings.

                                     XVI.

  This Instrument shall inure to the benefit of and be binding upon Borrower and
Lender and their respective heirs, executors, legal representatives, successors,
successors-in-title and assigns.  Whenever a reference is made in this
Instrument to "Borrower" or "Lender" such reference shall be deemed to include a
reference to the heirs, executors, legal representatives, successors,
successors-in-title and assigns of Borrower and Lender, as the case may be.
However, the provisions of this Paragraph are subject to the restrictions on
transfer contained herein.

                                       10
<PAGE>

                                     XVII.

  If any provisions of this Instrument or the application thereof to any person
or circumstance shall be invalid or unenforceable to any extent, the remainder
of this Instrument and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.

                                    XVIII.

   This Instrument shall be interpreted, construed and enforced according to the
laws of the State of Alabama.

                                     XIX.

  Any and all notices, elections, demands, requests and responses thereto
permitted or required to be given under this Instrument shall be in writing,
signed by or on behalf of the party giving the same, and shall be deemed to have
been properly given and shall be effective upon being personally delivered, or
upon being deposited in the United States mail, postage prepaid, certified with
return receipt requested, to the other party at the address of such other party
set forth below or at such other address as such other party may designate by
notice specifically designated as a notice of change of address.  Personal
delivery to a party or to any officer, or partner, or to any agent or employee
specifically designated to receive notice at said address shall constitute
receipt.  Rejection or other refusal to accept or inability to deliver because
of changed address of which no notice has been received shall also constitute
receipt.  Any such notice, election, demand, request or response, if given to
Lender, shall be addressed as follows:

                        EMPIRE FINANCIAL SERVICES, INC.
                             121 Executive Parkway
                         Milledgeville, Georgia 31061

and, if given to Borrower, shall be addressed as follows:

                             JAMESON ALABAMA, INC.
                      8 Perimeter Center East, Suite 8050
                          ATLANTA, GEORGIA 30346-1603

                                      XX.

  In the event that Borrower is the owner of a leasehold estate with respect to
any portion of the Property and, prior to the satisfaction of the Indebtedness
and the cancellation of this Instrument of record, Borrower obtains a fee estate
in such portion of the Property, then, such fee estate shall automatically, and
without further action of any kind on the part of Borrower, be and become
subject to the security title and lien of this Instrument, however, in no event
shall there be a merger of the leasehold and fee estates without the Lender's
express consent.

                                       11
<PAGE>

                                     XXI.

  This Instrument is assignable by Lender, and any assignment hereof by Lender
shall operate to vest in the assignee all rights and powers herein conferred
upon and granted to Lender.

                                     XXII.

  Time is of the essence with respect to each and every covenant, agreement and
obligation of Borrower under this Instrument, the Note and any and all other
instruments now or hereafter evidencing, securing or otherwise relating to the
Indebtedness.

  BY EXECUTION OF THIS INSTRUMENT BORROWER EXPRESSLY; (A) ACKNOWLEDGES THE RIGHT
OF LENDER TO ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE NOTE AND ANY OTHER
INDEBTEDNESS AND THE POWER OF ATTORNEY GIVEN HEREIN TO LENDER TO SELL THE LEASE,
THE LEASEHOLD INTEREST OR THE PROPERTY BY NONJUDICIAL FORECLOSURE UPON DEFAULT
BY BORROWER WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH
NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF
THIS INSTRUMENT; (B) WAIVES ANY AND ALL RIGHTS WHICH BORROWER MAY HAVE UNDER THE
CONSTITUTION OF THE UNITED STATES OF AMERICA (INCLUDING, WITHOUT LIMITATION, THE
FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE
CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW,
(1) TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY LENDER OF ANY
RIGHT OR REMEDY HEREIN PROVIDED TO LENDER, EXCEPT SUCH NOTICE (IF ANY) AS IS
SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS INSTRUMENT AND
(2) CONCERNING THE APPLICATION, RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION
OR ANY MORATORIUM, REINSTATEMENT, MARSHALLING, FORBEARANCE, APPRAISEMENT,
VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION LAWS; (C)
ACKNOWLEDGES THAT BORROWER HAS READ THIS INSTRUMENT AND ANY AND ALL QUESTIONS OF
BORROWER REGARDING THE LEGAL EFFECT OF THIS INSTRUMENT AND ITS PROVISIONS HAVE
BEEN EXPLAINED FULLY TO BORROWER, AND BORROWER HAS CONSULTED WITH COUNSEL OF
BORROWER'S CHOICE PRIOR TO EXECUTING THIS INSTRUMENT; AND (D) ACKNOWLEDGES THAT
ALL WAIVERS OF THE AFORESAID RIGHTS OF BORROWER HAVE BEEN MADE KNOWINGLY,
INTENTIONALLY AND WILLINGLY BY BORROWER AS PART OF A BARGAINED FOR LOAN
TRANSACTION AND THAT THIS INSTRUMENT IS VALID AND ENFORCEABLE BY LENDER AGAINST
BORROWER IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS HEREOF.

                                       12
<PAGE>

   IN WITNESS WHEREOF, Borrower has executed this Instrument under seal, as of
the day and year first above written.

                                   BORROWER:

                         JAMESON ALABAMA, INC. (SEAL)
                            An Alabama Corporation

                        BY:  __________________________
                               CRAIG R. KITCHIN
                                   President

                       ATTEST:  _______________________
                               STEVEN A. CURLEE
                                   Secretary

STATE OF GEORGIA
DEKALB COUNTY

  I, CHARLES E. MOORE, a Notary Public in and for said County, in said State,
hereby certify that CRAIG R. KITCHIN and STEVEN A. CURLEE whose names are signed
to the foregoing conveyance, respectively, as President and Secretary, and who
are known to me, acknowledged before me on this day that, being informed of the
contents of the conveyance, they, as such officers and, with full authority,
executed the same voluntarily for and as the act of said corporation on the day
the same bears date.  Given under my hand this _______ day of
__________________, 2001.

                         ____________________________
                                 NOTARY PUBLIC

                                       13
<PAGE>

SOURCE OF TITLE:  Deed Book 1997, Page 10454
----------------

Prepared By:
Charles E. Moore
P.O. Box 951
Milledgeville, GA 31061
Return to Above

                              ASSIGNMENT OF LEASE
                   ________________________________________

  THIS ASSIGNMENT, made and entered into this ______ day of March, 2001 by and
between JAMESON ALABAMA, INC., an Alabama Corporation, 8 Perimeter Center East,
Suite 8050, Atlanta, Georgia 30346 (hereinafter referred to as "Borrower"), and
EMPIRE FINANCIAL SERVICES, INC., a Georgia Corporation, 121 Executive Parkway,
Milledgeville, Georgia 31061 (hereinafter referred to as "Lender");

                             W I T N E S S E T H:

  THAT FOR AND IN CONSIDERATION of the sum of Ten and No/100ths Dollars ($10.00)
and other good and valuable consideration, as evidenced by a promissory note of
even date payable to the order of Lender, receipt of said consideration being
hereby acknowledged, and in order to secure the indebtedness and other
obligations of the Borrower, Borrower does hereby grant, transfer and assign to
Lender, its successors, successors-in-title and assigns, all of Borrower's
right, title and interest in, to and under that certain lease more particularly
described in Exhibit "A" attached hereto and by this reference made a part
             -----------
hereof, including any and all extensions, renewals and modifications thereof
(hereinafter referred to as the "Lease") which Lease covers certain property
located in Tuscaloosa, Tuscaloosa County, Alabama more particularly described in
Exhibit "A" attached hereto and by this reference made a part hereof
-----------
(hereinafter referred to as the "Premises").

  Borrower also grants, transfers, and assigns to Lender any right, privilege or
option to extend or renew the Lease as well as Borrower's right of first refusal
or option to purchase the fee.

  TO HAVE AND TO HOLD unto Lender, its successors and assigns forever, subject
to and upon the terms and conditions set forth herein.

                                   ARTICLE I
                                   ---------

                           WARRANTIES AND COVENANTS
                           ------------------------

1.01
  Warranties of Borrower.  Borrower hereby warrants and represents as follows:
  ----------------------

  (a) Borrower is the sole holder of the lessee's interest under the Lease,
(hereinafter referred to as the "Leasehold Interests"), and has the right to
sell, assign, transfer and set over the same and to grant to and confer upon
Lender the rights, interests, powers, and authorities herein granted and
conferred;

                                       14
<PAGE>

  (b) There is no assignment having priority over this Assignment of any of the
rights of Borrower under the Lease;

  (c) Borrower has neither done any act nor omitted to do any act which might
prevent Lender from, or limit Lender in, acting under any of the provisions of
this Assignment;

  (d) Rental will be paid in accordance with the terms of the Lease and there
shall be no deferrals of rent without Lender's permission;

  (e) So far as is known to Borrower, there exists no default or event of
default or any state of facts which would, with or without the passage of time
or the giving of notice, or both, constitute a default or event of default on
the part of Borrower or Lessor under the terms of the Lease, or under the terms
of superior leases and/or subleases, if any;

  (f) Neither the execution and delivery of this Assignment nor the performance
of each and every covenant of Borrower under this Assignment, nor the meeting of
each and every condition contained in this Assignment, conflicts with, or
constitutes a breach or default under any agreement, indenture or other
instrument to which Borrower is a party, or any law, ordinance, administrative
regulation or court decree which is applicable to Borrower;

  (g) No action has been brought or, so far as is known to Borrower, is
threatened, which would interfere in any way with the right of Borrower to
execute this Assignment and perform all of Borrower's obligations contained in
this Assignment and in the Lease; and

  (h) The Lease is valid, enforceable and in full force and effect, and has not
been modified or amended, except as may be expressly set forth in Exhibit "A".
                                                                  -----------

1.02
  Covenants of Borrower.  Borrower hereby covenants and agrees as follows:
  ---------------------

  (a) Borrower shall (i) fulfill, perform and observe each and every condition
and covenant of Lessee contained in the Lease; (ii) give prompt notice to Lender
of any claim of default under the Lease, whether given by the Lessor to
Borrower, or given by Borrower to the Lessor, together with a complete copy of
any such notice; (iii) at no cost or expense to Lender, enforce, short of
termination, the performance and observance of each and every covenant and
condition of the Lease to be performed or observed by the Lessor thereunder; and
(iv) appear in and defend any action arising out of, or in any manner connected
with the Lease, or the obligations or liabilities of Borrower thereunder, or of
the Lessor;

  (b) Borrower shall not, without the prior written consent of Lender, (i)
modify the Lease; (ii) terminate or surrender the Lease; (iii) waive or release
the Lessor from the performance or observance by the Lessor of any obligation or
condition of the Lease; (iv) defer the payment of any rents under the Lease; (v)
give any assignment or sublease; or (vi) assign its interest in, to or under the
Lease to any person or entity other than Lender;

  (c) Borrower shall take no action which will cause or permit the leasehold
estate to merge with the fee without the Lender's consent;

                                       15
<PAGE>

  (d) Borrower shall protect, indemnify and save harmless Lender from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, attorneys' fees and
expenses) imposed upon or incurred by Lender by reason of this Agreement and any
claim or demand whatsoever which may be asserted against Lender by reason of any
alleged obligation or undertaking to be performed or discharged by Lender under
this Assignment.  In the event Lender incurs any liability, loss, or damage by
reason of this Assignment, or in the defense of any claim or demand arising out
of or in connection with this Assignment, the amount of such liability, loss, or
damage shall be added to the Indebtedness, shall bear interest at the interest
rate specified in the Note from the date incurred until paid and shall be
payable on demand;

  (e) Borrower shall insure that the Lessor will recognize as its Lessee any
person or entity succeeding to the interest of the Borrower upon any
foreclosure, or other acquisition by the Lender of the Leasehold Interests.

1.03
  Covenants of Lender.  Lender covenants and agrees with Borrower as follows:
  -------------------

  (a) So long as there shall exist no Event of Default, as defined in Paragraph
2.01, below, on the part of Borrower.  Borrower shall be entitled to possession
of the Premises and the use and enjoyment thereof;

   (b) For purposes of this Assignment, "The Indebtedness" is identified as a
loan of even date herewith, as well as any renewals, modifications,
consolidations, or extensions thereof;

  (c) Upon the payment in full of the Indebtedness, as evidenced by the
recording or filing of an instrument of satisfaction or full release of the
Security Instruments without the recording of another security instrument in
favor of Lender affecting the Premises, this Assignment shall be terminated and
released of record by Lender and shall thereupon be of no further force or
effect.

                                  ARTICLE II
                                  ----------

                                    DEFAULT
                                    -------

2.01
  Event of Default.  The term, "Event of Default", wherever used in this
  ----------------
Assignment, shall mean any one or more of the following events:

  (a) The occurrence of any "default" or "event of default" under any of the
Security Instruments.  For purposes of this Assignment, the Security Instruments
shall include a Promissory Note, Leasehold Mortgage, Security Agreement, and any
and all other documents of even date herewith evidencing or securing Borrower's
indebtedness to Lender in the original principal amount of $1,500,000.00 as well
as any renewals, modifications, consolidations, and extensions thereof;

  (b) The failure by Borrower to comply, in all respects, with any covenant,
condition or agreement of this Assignment; or

                                       16
<PAGE>

  (c) The breach of any warranty by Borrower contained in this Assignment.

2.02
  Remedies.  Upon the occurrence of any Event of Default, Lender may, at its
  --------
option, after giving such notice or demand as may be required by this Assignment
or other Security Instruments, exercise any or all of the following remedies:

  (a) Declare any part or all of the Indebtedness to be due and payable,
whereupon the same shall become immediately due and payable;

  (b) Perform any and all obligations of Borrower under the Lease or this
Assignment and exercise any and all rights of Borrower herein or therein as
fully as Borrower could do, including without limiting the generality of the
foregoing: enforcing, modifying, extending or terminating the Lease; entering
into a new lease on the Premises on any terms and conditions deemed desirable by
Lender, and, to the extent Lender shall incur any costs in connection with the
performance of any such obligations of Borrower, including costs of litigation,
then all such costs shall become a part of the Indebtedness, shall bear interest
from the incurring thereof at the interest rate specified in the Note, and shall
be due and payable on demand;

  (c) In Borrower's or Lender's name, institute any legal or equitable action
which Lender in its sole discretion deems desirable to preserve The Lease.

  Lender shall have full right to exercise any or all of the foregoing remedies
without regard to the adequacy of security for any or all of the Indebtedness,
and with or without the commencement of any legal or equitable action or the
appointment of any receiver or trustee, and shall have full right to enter upon,
take possession of, use and operate all or any portion of the Premises which
Lender in its sole discretion deems desirable to effectuate any or all of the
foregoing remedies.

                                  ARTICLE III
                                  -----------

                              GENERAL PROVISIONS
                              ------------------

3.01
  Successors and Assigns.  This Assignment shall inure to the benefit of and be
  ----------------------
binding upon Borrower and Lender and their respective legal representatives,
successors and assigns.  Whenever a reference is made in this Assignment to
"Borrower" or "Lender", such reference shall be deemed to include a reference to
the legal representatives, successors and assigns of Borrower or Lender.

3.02
  Severability.  If any provision of this Assignment or the application thereof
  ------------
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Assignment and

                                       17
<PAGE>

the application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
law.

3.03
  Applicable Law.  This Assignment shall be interpreted, construed and enforced
  --------------
according to the laws of the State of Alabama.

3.04
  No Third Party Beneficiaries.  This Assignment is made solely for the benefit
  ----------------------------
of Lender and its assigns.  No other person or entity shall have standing to
bring any action against Lender as the result of this Assignment, or to assume
that Lender will exercise any remedies provided herein, and no person other than
Lender shall under any circumstances be deemed to be a beneficiary of any
provision of this Assignment.

3.05
  Cumulative Remedies.  The remedies herein provided shall be in addition to and
  -------------------
not in substitution for the rights and remedies vested in Lender in any of the
Security Instruments or in law or equity, all of which rights and remedies are
specifically reserved by Lender.  The remedies herein provided or otherwise
available to Lender shall be cumulative and may be exercised concurrently.  The
failure to exercise any of the remedies herein provided shall not constitute a
waiver thereof, nor shall use of any of the remedies herein provided prevent the
subsequent or concurrent resort to any other remedy or remedies.  It is intended
that this clause be broadly construed so that all remedies herein provided or
otherwise available to Lender shall continue and be each and all available to
Lender until the Indebtedness shall have been paid in full.

3.06
  Cross-Default.  An Event of Default by Borrower under this Assignment shall
  -------------
constitute an Event of Default under all other Security Instruments.

3.07
  The provisions of this Assignment shall extend and be applicable to all
renewals, amendments, extensions, consolidations and modifications of the
Security Instruments and the Lease, and any and all references herein to the
Security Instruments or the Lease shall be deemed to include any such renewals,
amendments, extensions, consolidations or modifications thereof.

                                       18
<PAGE>

  IN WITNESS WHEREOF, Borrower and Lender have executed this Assignment under
seal, as of the date first above written.

                                   BORROWER:

                         JAMESON ALABAMA, INC.  [SEAL]
                            An Alabama Corporation

                   By:  ___________________________________
                               CRAIG R. KITCHIN
                                   President

                 Attest:  ___________________________________
                               STEVEN A. CURLEE
                                   Secretary

STATE OF GEORGIA

DEKALB COUNTY

  I, CHARLES E. MOORE, a Notary Public in and for said County, in said State,
hereby certify that CRAIG R. KITCHIN and STEVEN A. CURLEE whose names are signed
to the foregoing conveyance, respectively, as President and Secretary, and who
are known to me, acknowledged before me on this day that, being informed of the
contents of the conveyance, they, as such officers and, with full authority,
executed the same voluntarily for and as the act of said corporation on the day
the same bears date.  Given under my hand this _______ day of ________________,
2001.

                         ____________________________
                                 NOTARY PUBLIC

                    Signatures continued on following page

                                       19
<PAGE>

                    Signatures continued from previous page

                                    LENDER:

                    EMPIRE FINANCIAL SERVICES, INC. (SEAL)
                             A Georgia Corporation

                    By:  __________________________________
                                 Its President

                    Attest:  ______________________________
                                 Its Secretary

STATE OF GEORGIA

BALDWIN COUNTY

  I, CHARLES E. MOORE, a Notary Public in and for said County, in said State,
hereby certify that J. DAVID DYER, JR. and LAVERNE C. ALLISON whose names are
signed to the foregoing conveyance, respectively, as President and Secretary,
and who are known to me, acknowledged before me on this day that, being informed
of the contents of the conveyance, they, as such officers and, with full
authority, executed the same voluntarily for and as the act of said corporation
on the day the same bears date.  Given under my hand this _____ day of
____________, 2001.

                         ____________________________
                                 NOTARY PUBLIC

                                       20
<PAGE>

SOURCE OF TITLE:  Deed Book 1997, Page 10454
----------------

Prepared By:
Charles E. Moore
P.O. Box 951
Milledgeville, GA 31061
Return to Above

                              ASSIGNMENT OF LEASE
                   ________________________________________

  THIS ASSIGNMENT, made and entered into this ______ day of March, 2001 by and
between JAMESON ALABAMA, INC., an Alabama Corporation, 8 Perimeter Center East,
Suite 8050, Atlanta, Georgia 30346 (hereinafter referred to as "Borrower"), and
EMPIRE FINANCIAL SERVICES, INC., a Georgia Corporation, 121 Executive Parkway,
Milledgeville, Georgia 31061 (hereinafter referred to as "Lender");

                             W I T N E S S E T H:

  THAT FOR AND IN CONSIDERATION of the sum of Ten and No/100ths Dollars ($10.00)
and other good and valuable consideration, as evidenced by a promissory note of
even date payable to the order of Lender, receipt of said consideration being
hereby acknowledged, and in order to secure the indebtedness and other
obligations of the Borrower, Borrower does hereby grant, transfer and assign to
Lender, its successors, successors-in-title and assigns, all of Borrower's
right, title and interest in, to and under that certain lease more particularly
described in Exhibit "A" attached hereto and by this reference made a part
             -----------
hereof, including any and all extensions, renewals and modifications thereof
(hereinafter referred to as the "Lease") which Lease covers certain property
located in Tuscaloosa, Tuscaloosa County, Alabama more particularly described in
Exhibit "A" attached hereto and by this reference made a part hereof
-----------
(hereinafter referred to as the "Premises").

  Borrower also grants, transfers, and assigns to Lender any right, privilege or
option to extend or renew the Lease as well as Borrower's right of first refusal
or option to purchase the fee.

  TO HAVE AND TO HOLD unto Lender, its successors and assigns forever, subject
to and upon the terms and conditions set forth herein.

                                   ARTICLE I
                                   ---------

                           WARRANTIES AND COVENANTS
                           ------------------------

1.01
  Warranties of Borrower.  Borrower hereby warrants and represents as follows:
  ----------------------

  (a) Borrower is the sole holder of the lessee's interest under the Lease,
(hereinafter referred to as the "Leasehold Interests"), and has the right to
sell, assign, transfer and set over the same and to grant to and confer upon
Lender the rights, interests, powers, and authorities herein granted and
conferred;

                                       21
<PAGE>

  (b) There is no assignment having priority over this Assignment of any of the
rights of Borrower under the Lease;

  (c) Borrower has neither done any act nor omitted to do any act which might
prevent Lender from, or limit Lender in, acting under any of the provisions of
this Assignment;

  (d) Rental will be paid in accordance with the terms of the Lease and there
shall be no deferrals of rent without Lender's permission;

  (e) So far as is known to Borrower, there exists no default or event of
default or any state of facts which would, with or without the passage of time
or the giving of notice, or both, constitute a default or event of default on
the part of Borrower or Lessor under the terms of the Lease, or under the terms
of superior leases and/or subleases, if any;

  (f) Neither the execution and delivery of this Assignment nor the performance
of each and every covenant of Borrower under this Assignment, nor the meeting of
each and every condition contained in this Assignment, conflicts with, or
constitutes a breach or default under any agreement, indenture or other
instrument to which Borrower is a party, or any law, ordinance, administrative
regulation or court decree which is applicable to Borrower;

  (g) No action has been brought or, so far as is known to Borrower, is
threatened, which would interfere in any way with the right of Borrower to
execute this Assignment and perform all of Borrower's obligations contained in
this Assignment and in the Lease; and

  (h) The Lease is valid, enforceable and in full force and effect, and has not
been modified or amended, except as may be expressly set forth in Exhibit "A".
                                                                  -----------

1.02
  Covenants of Borrower.  Borrower hereby covenants and agrees as follows:
  ---------------------

  (a) Borrower shall (i) fulfill, perform and observe each and every condition
and covenant of Lessee contained in the Lease; (ii) give prompt notice to Lender
of any claim of default under the Lease, whether given by the Lessor to
Borrower, or given by Borrower to the Lessor, together with a complete copy of
any such notice; (iii) at no cost or expense to Lender, enforce, short of
termination, the performance and observance of each and every covenant and
condition of the Lease to be performed or observed by the Lessor thereunder; and
(iv) appear in and defend any action arising out of, or in any manner connected
with the Lease, or the obligations or liabilities of Borrower thereunder, or of
the Lessor;

  (b) Borrower shall not, without the prior written consent of Lender, (i)
modify the Lease; (ii) terminate or surrender the Lease; (iii) waive or release
the Lessor from the performance or observance by the Lessor of any obligation or
condition of the Lease; (iv) defer the payment of any rents under the Lease; (v)
give any assignment or sublease; or (vi) assign its interest in, to or under the
Lease to any person or entity other than Lender;

  (c) Borrower shall take no action which will cause or permit the leasehold
estate to merge with the fee without the Lender's consent;

                                       22
<PAGE>

  (d) Borrower shall protect, indemnify and save harmless Lender from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, attorneys' fees and
expenses) imposed upon or incurred by Lender by reason of this Agreement and any
claim or demand whatsoever which may be asserted against Lender by reason of any
alleged obligation or undertaking to be performed or discharged by Lender under
this Assignment.  In the event Lender incurs any liability, loss, or damage by
reason of this Assignment, or in the defense of any claim or demand arising out
of or in connection with this Assignment, the amount of such liability, loss, or
damage shall be added to the Indebtedness, shall bear interest at the interest
rate specified in the Note from the date incurred until paid and shall be
payable on demand;

  (e) Borrower shall insure that the Lessor will recognize as its Lessee any
person or entity succeeding to the interest of the Borrower upon any
foreclosure, or other acquisition by the Lender of the Leasehold Interests.

1.03
  Covenants of Lender.  Lender covenants and agrees with Borrower as follows:
  -------------------

  (a) So long as there shall exist no Event of Default, as defined in Paragraph
2.01, below, on the part of Borrower.  Borrower shall be entitled to possession
of the Premises and the use and enjoyment thereof;

   (b) For purposes of this Assignment, "The Indebtedness" is identified as a
loan of even date herewith, as well as any renewals, modifications,
consolidations, or extensions thereof;

  (c) Upon the payment in full of the Indebtedness, as evidenced by the
recording or filing of an instrument of satisfaction or full release of the
Security Instruments without the recording of another security instrument in
favor of Lender affecting the Premises, this Assignment shall be terminated and
released of record by Lender and shall thereupon be of no further force or
effect.

                                  ARTICLE II
                                  ----------

                                    DEFAULT
                                    -------

2.01
  Event of Default.  The term, "Event of Default", wherever used in this
  ----------------
Assignment, shall mean any one or more of the following events:

  (a) The occurrence of any "default" or "event of default" under any of the
Security Instruments.  For purposes of this Assignment, the Security Instruments
shall include a Promissory Note, Leasehold Mortgage, Security Agreement, and any
and all other documents of even date herewith evidencing or securing Borrower's
indebtedness to Lender in the original principal amount of $1,500,000.00 as well
as any renewals, modifications, consolidations, and extensions thereof;

  (b) The failure by Borrower to comply, in all respects, with any covenant,
condition or agreement of this Assignment; or

                                       23
<PAGE>

  (c) The breach of any warranty by Borrower contained in this Assignment.

2.02
  Remedies.  Upon the occurrence of any Event of Default, Lender may, at its
  --------
option, after giving such notice or demand as may be required by this Assignment
or other Security Instruments, exercise any or all of the following remedies:

  (a) Declare any part or all of the Indebtedness to be due and payable,
whereupon the same shall become immediately due and payable;

  (b) Perform any and all obligations of Borrower under the Lease or this
Assignment and exercise any and all rights of Borrower herein or therein as
fully as Borrower could do, including without limiting the generality of the
foregoing: enforcing, modifying, extending or terminating the Lease; entering
into a new lease on the Premises on any terms and conditions deemed desirable by
Lender, and, to the extent Lender shall incur any costs in connection with the
performance of any such obligations of Borrower, including costs of litigation,
then all such costs shall become a part of the Indebtedness, shall bear interest
from the incurring thereof at the interest rate specified in the Note, and shall
be due and payable on demand;

  (c) In Borrower's or Lender's name, institute any legal or equitable action
which Lender in its sole discretion deems desirable to preserve The Lease.

  Lender shall have full right to exercise any or all of the foregoing remedies
without regard to the adequacy of security for any or all of the Indebtedness,
and with or without the commencement of any legal or equitable action or the
appointment of any receiver or trustee, and shall have full right to enter upon,
take possession of, use and operate all or any portion of the Premises which
Lender in its sole discretion deems desirable to effectuate any or all of the
foregoing remedies.

                                  ARTICLE III
                                  -----------

                              GENERAL PROVISIONS
                              ------------------

3.01
  Successors and Assigns.  This Assignment shall inure to the benefit of and be
  ----------------------
binding upon Borrower and Lender and their respective legal representatives,
successors and assigns.  Whenever a reference is made in this Assignment to
"Borrower" or "Lender", such reference shall be deemed to include a reference to
the legal representatives, successors and assigns of Borrower or Lender.

3.02
  Severability.  If any provision of this Assignment or the application thereof
  ------------
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Assignment and

                                       24
<PAGE>

the application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
law.

3.03
  Applicable Law.  This Assignment shall be interpreted, construed and enforced
  --------------
according to the laws of the State of Alabama.

3.04
  No Third Party Beneficiaries.  This Assignment is made solely for the benefit
  ----------------------------
of Lender and its assigns.  No other person or entity shall have standing to
bring any action against Lender as the result of this Assignment, or to assume
that Lender will exercise any remedies provided herein, and no person other than
Lender shall under any circumstances be deemed to be a beneficiary of any
provision of this Assignment.

3.05
  Cumulative Remedies.  The remedies herein provided shall be in addition to and
  -------------------
not in substitution for the rights and remedies vested in Lender in any of the
Security Instruments or in law or equity, all of which rights and remedies are
specifically reserved by Lender.  The remedies herein provided or otherwise
available to Lender shall be cumulative and may be exercised concurrently.  The
failure to exercise any of the remedies herein provided shall not constitute a
waiver thereof, nor shall use of any of the remedies herein provided prevent the
subsequent or concurrent resort to any other remedy or remedies.  It is intended
that this clause be broadly construed so that all remedies herein provided or
otherwise available to Lender shall continue and be each and all available to
Lender until the Indebtedness shall have been paid in full.

3.06
  Cross-Default.  An Event of Default by Borrower under this Assignment shall
  -------------
constitute an Event of Default under all other Security Instruments.

3.07
  The provisions of this Assignment shall extend and be applicable to all
renewals, amendments, extensions, consolidations and modifications of the
Security Instruments and the Lease, and any and all references herein to the
Security Instruments or the Lease shall be deemed to include any such renewals,
amendments, extensions, consolidations or modifications thereof.

                                       25
<PAGE>

  IN WITNESS WHEREOF, Borrower and Lender have executed this Assignment under
seal, as of the date first above written.

                                   BORROWER:

                         JAMESON ALABAMA, INC.  [SEAL]
                            An Alabama Corporation

                   By:  ___________________________________
                               CRAIG R. KITCHIN
                                   President

                 Attest:  ___________________________________
                               STEVEN A. CURLEE
                                   Secretary

STATE OF GEORGIA

DEKALB COUNTY

  I, CHARLES E. MOORE, a Notary Public in and for said County, in said State,
hereby certify that CRAIG R. KITCHIN and STEVEN A. CURLEE whose names are signed
to the foregoing conveyance, respectively, as President and Secretary, and who
are known to me, acknowledged before me on this day that, being informed of the
contents of the conveyance, they, as such officers and, with full authority,
executed the same voluntarily for and as the act of said corporation on the day
the same bears date.  Given under my hand this _______ day of ________________,
2001.

                         ____________________________
                                 NOTARY PUBLIC

                    Signatures continued on following page

                                       26
<PAGE>

                    Signatures continued from previous page

                                    LENDER:

                    EMPIRE FINANCIAL SERVICES, INC. (SEAL)
                             A Georgia Corporation

                    By:  __________________________________
                                 Its President

                    Attest:  ______________________________
                                 Its Secretary

STATE OF GEORGIA

BALDWIN COUNTY

  I, CHARLES E. MOORE, a Notary Public in and for said County, in said State,
hereby certify that J. DAVID DYER, JR. and LAVERNE C. ALLISON whose names are
signed to the foregoing conveyance, respectively, as President and Secretary,
and who are known to me, acknowledged before me on this day that, being informed
of the contents of the conveyance, they, as such officers and, with full
authority, executed the same voluntarily for and as the act of said corporation
on the day the same bears date.  Given under my hand this _____ day of
____________, 2001.

                         ____________________________
                                 NOTARY PUBLIC

                                       27
<PAGE>

SOURCE OF TITLE:  Deed Book 1997, Page 10454
----------------

Prepared By:
Charles E. Moore
P.O. Box 951
Milledgeville, GA 31061
Return to Above

                         ASSIGNMENT OF FEES AND INCOME
                         -----------------------------

  THIS ASSIGNMENT, made and entered into this _______ day of March, 2001, by and
between JAMESON ALABAMA, INC., an Alabama Corporation, C/o Jameson Inns, Inc., 8
Perimeter Center East, Suite 8050, Atlanta, Georgia 30346 (hereinafter referred
to as "Borrower"), and EMPIRE FINANCIAL SERVICES, INC., a Georgia Corporation,
121 Executive Parkway, Milledgeville, Georgia 31061 (hereinafter referred to as
"Lender");

                             W I T N E S S E T H:

  THAT FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency whereof
are hereby acknowledged, Borrower does hereby grant, transfer and assign to
Lender, its successors, successors-in-title and assigns, all of Borrower's
right, title and interest in and to all of those certain fees and items of
income more particularly described in Exhibit B attached hereto and by this
                                      ---------
reference made a part hereof (said fees and income being hereinafter referred to
collectively as the "Income", and which is generated by, or results from the
operation of an assisted living facility and related facilities and amenities on
certain property (the "Premises") more particularly described in Exhibit A
                                                                 ---------
attached hereto and by this reference made a part hereof).

  TO HAVE AND TO HOLD unto Lender, its successors and assigns forever, subject
to and upon the terms and conditions set forth herein.

                                   ARTICLE I
                           WARRANTIES AND COVENANTS

1.01  Warranties of Borrower.  Borrower hereby warrants and represents as
      ----------------------
follows:

  (a) Borrower is and will continue to be the sole recipient of the Income from
the Premises, and has good right to sell, assign, transfer and set over the same
and to grant to

                                       28
<PAGE>

and confer upon Lender the rights, interests, powers, and authorities herein
granted and conferred;

  (b) There is no assignment having priority over this Assignment of any of the
rights of Borrower in and to the Income or any part thereof;

  (c) Borrower has neither done any act nor omitted to do any act which might
prevent Lender from, or limit Lender in, acting under any of the provisions of
this Assignment;

  (d) Neither the execution and delivery of this Assignment, nor the performance
of each and every covenant of Borrower under this Assignment, nor the meeting of
each and every condition contained in this Assignment, conflicts with, or
constitutes a breach or default under any agreement, indenture or other
instrument to which Borrower is a party, or any law, ordinance, administrative
regulation or court decree which is applicable to Borrower; and

  (e) No action has been brought or, so far as is known to Borrower, is
threatened, which would interfere in any way with the right of Borrower to
execute this Assignment and perform all of Borrower's obligations contained in
this Assignment.

1.02  Covenants of Borrower.  Borrower hereby covenants and agrees as follows:
      ---------------------

  (a) Borrower shall, in keeping with the general plan of development proposed
for the Premises, aggressively market and promote its fee-generating services;

  (b) Borrower shall, consistent with good business practices applicable to
similar operations, charge and collect the Income promptly as same becomes due;

  (c) Borrower shall, at no cost or expense to Lender, enforce the performance
and observance of each and every obligation required of persons utilizing the
Premises;

  (d) Borrower shall protect, indemnify and save harmless Lender from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, attorneys' fees and
expenses) imposed upon or incurred by Lender by reason of this Agreement and any
claim or demand whatsoever which may be asserted against Lender by reason of any
alleged obligation or undertaking to be performed or discharged by Lender under
this Assignment. In the event Lender incurs any liability, loss or damage by
reason of this Assignment, or in the defense of any claim or demand arising out
of or in connection with this Assignment, the amount of such liability, loss or
damage shall be added to the Indebtedness, shall bear interest at the interest
rate specified in the Note from the date incurred until paid and shall be
payable on demand;

                                       29
<PAGE>

  (e) Borrower hereby authorizes and directs each and every individual or entity
responsible for payment of any of said fees and charges to pay same directly to
Lender upon written demand from Lender to so pay the same and further covenants
that Borrower's officers, agents, and representatives will, without the
necessity for further authorization, cooperate fully in collecting and remitting
the Income to Lender promptly upon receipt of written demand from Lender to so
pay the same; and

  (f) Borrower acknowledges that this instrument represents a present assignment
of fees and income, effective as of the date hereof. In the event Borrower ever
seeks any form of debt relief under provisions of State or Federal law,
including, but not limited to, the United States Bankruptcy Code, Borrower
agrees that Borrower will not consider any such fees and income as an asset of
Borrower nor claim any of said fees and income, nor authorize or support any
such claim by a receiver, trustee in bankruptcy or any other person or entity.

1.03  Covenants of Lender.  Lender covenants and agrees with Borrower as
      -------------------
follows:

  (a) Although this Assignment constitutes a present, current, absolute,
unconditional, irrevocable assignment of the Income from the Premises, so long
as there shall exist no Event of Default, as defined in Paragraph 2.01, below,
on the part of Borrower, Lender shall not demand that the Income be paid
directly to Lender, and Borrower shall have the right to collect same;

  (b) For purposes of this Assignment, the Indebtedness is identified as a loan
of even date herewith, as well as any renewals, modifications, consolidations or
extensions thereof; and

  (c) Upon the payment in full of the Indebtedness, as evidenced by the
recording or filing of an instrument of satisfaction or full release of the
Security Documents this Assignment shall be terminated and shall thereupon be of
no further force or effect.

                                  ARTICLE II
                                    DEFAULT

2.01  Event of Default.  The term, "Event of Default", wherever used in this
      ----------------
Assignment, shall mean any one or more of the following events:

  (a) The occurrence of any "default" or "event of default" under any of the
Loan Documents. For purposes of this Assignment, the Loan Documents shall
include a Promissory Note, Mortgage, Security Agreement, and any and all other
documents of even date evidencing Borrower's indebtedness to Lender in the
original principal amount of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS as well as any renewals, modifications, consolidations and extensions
thereof;

  (b) The failure by Borrower to comply with any covenant, condition or
agreement of this Assignment; or

                                       30
<PAGE>

  (c) The breach of any warranty by Borrower contained in this Assignment.

2.02  Remedies.  Upon the occurrence of any Event of Default, Lender may, at its
      --------
option, after giving such notice or demand as may be required by this Assignment
or other Loan Documents, exercise any or all of the following remedies:

  (a) Declare any part or all of the Indebtedness to be due and payable,
whereupon the same shall become immediately due and payable;

  (b) In Borrower's or Lender's name, institute any legal or equitable action
which Lender in its sole discretion deems desirable to collect and receive any
or all of the Income assigned herein;

  (c) Collect the Income and apply the same in such order as Lender in its sole
discretion may elect against (i) all costs and expenses, including reasonable
attorneys' fees, incurred in connection with the operation of the Premises; (ii)
all the costs and expenses, including reasonable attorneys' fees, incurred in
the collection of any or all of the Indebtedness, including all costs, expenses
and attorneys' fees incurred in seeking to realize on or to protect or preserve
Lender's interest in any collateral securing any or all of the Indebtedness; and
(iii) any or all unpaid principal and interest on the Indebtedness.

  Lender shall have full right to exercise any or all of the foregoing remedies
without regard to the adequacy of any security for any or all of the
Indebtedness, and with or without the commencement of any legal or equitable
action or the appointment of any receiver or trustee, and shall have full right
to enter upon, take possession of, use and operate all or any portion of the
Premises which Lender in its sole discretion deems desirable to effectuate any
or all of the foregoing remedies.

  Lender's right to the Income assigned hereby shall not be dependent upon any
further action, including the necessity of taking possession of the Income.

                                  ARTICLE III
                              GENERAL PROVISIONS

3.01  Successors and Assigns.  This Assignment shall inure to the benefit of and
      ----------------------
be binding upon Borrower and Lender and their respective legal representatives,
successors and assigns.  Whenever a reference is made in this Assignment to
"Borrower" or "Lender", such reference shall be deemed to include a reference to
the legal representatives, successors and assigns of Borrower or Lender.

3.02  Severability.  If any provision of this Assignment or the application
      ------------
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Assignment and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.

                                       31
<PAGE>

3.03  Applicable Law.  This Assignment shall be interpreted, construed and
      --------------
enforced according to the laws of the State of Alabama.

3.04  No Third Party Beneficiaries.  This Assignment is made solely for the
      ----------------------------
benefit of Lender and its assigns.  No other person shall have standing to bring
any action against Lender as the result of this Assignment, or to assume that
Lender will exercise any remedies provided herein, and no person other than
Lender shall under any circumstances be deemed to be a beneficiary of any
provision of this Assignment.

3.05  Cumulative Remedies.  The remedies herein provided shall be in addition to
      -------------------
and not in substitution for the rights and remedies vested in Lender in any of
the Loan Documents or in law or equity, all of which rights and remedies are
specifically reserved by Lender.  The remedies herein provided or otherwise
available to Lender shall be cumulative and may be exercised concurrently.  The
failure to exercise any of the remedies herein provided shall not constitute a
waiver thereof, nor shall use of any of the remedies herein provided prevent the
subsequent or concurrent resort to any other remedy or remedies.  It is intended
that this clause be broadly construed so that all remedies herein provided or
otherwise available to Lender shall continue and be each and all available to
Lender until the Indebtedness shall have been paid in full.

3.06  Cross-Default.  An Event of Default by Borrower under this Assignment
      -------------
shall constitute an Event of Default under all other Loan Documents.

3.07  The provisions of this Assignment shall extend and be applicable to all
renewals, amendments, extensions, consolidations and modifications of the Loan
Documents, and any and all references herein to the Loan Documents shall be
deemed to include any such renewals, amendments, extensions, consolidations or
modifications thereof.

  IN WITNESS WHEREOF, Borrower and Lender have executed this Assignment under
seal, as of the date first above written.

                                   BORROWER:
                         JAMESON ALABAMA, INC.  [SEAL]
                            An Alabama Corporation

               By:  ___________________________________________
                          CRAIG R. KITCHIN, President

              Attest:  __________________________________________
                          STEVEN A. CURLEE, Secretary

                                       32
<PAGE>

STATE OF GEORGIA
COUNTY OF DeKALB

  I, ______________, a Notary Public in and for said County, in said State,
hereby certify that __________________ and __________________ whose names are
signed to the foregoing conveyance, respectively, as ______________ and
_________________, and who are known to me, acknowledged before me on this day
that, being informed of the contents of the conveyance, they, as such officers
and, with full authority, executed the same voluntarily for and as the act of
said ______________ on the day the same bears date.  Given under my hand this
_____ day of ___________, 2001.

                    ______________________________________
                                 Notary Public

                                    LENDER:
                    EMPIRE FINANCIAL SERVICES, INC.  [SEAL]
                             A Georgia Corporation

              By:  _____________________________________________
                                   President
              Attest:  _________________________________________
                                   Secretary

STATE OF GEORGIA
COUNTY OF BALDWIN

  I, Charles E. Moore, a Notary Public in and for said County, in said State,
hereby certify that ________________________________ and
__________________________________ whose names are signed to the foregoing
conveyance, respectively, as ___________________ and _____________________, and
who are known to me, acknowledged before me on this day that, being informed of
the contents of the conveyance, they, as such officers and, with full authority,
executed the same voluntarily for and as the act of said corporation on the day
the same bears date.  Given under my hand this _____ day of ______________,
2001.

                    ______________________________________
                                 Notary Public

                                       33
<PAGE>

                              SECURITY AGREEMENT

  JAMESON ALABAMA, INC., hereinafter called "Borrower", (whether singular or
plural), for value received, hereby grants to EMPIRE FINANCIAL SERVICES, INC.,
hereinafter called "Secured Party", a security interest in all that Property
more fully described on Exhibit B which is attached hereto and by reference made
a part hereof and also any and all replacements of any such property (all of
which is hereinafter called "Collateral"), to secure the payment of that certain
indebtedness evidenced by a promissory note executed by Borrower in the amount
of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS, of even date herewith,
and any and all extensions or renewals thereof, and any and all other
liabilities or obligations of the Borrower to the Secured Party, direct or
indirect, absolute or contingent, now existing or hereafter arising, now due or
hereafter to become due (all hereinafter called the "Obligations").

  Borrower hereby warrants and agrees that:

  1. The Collateral is used primarily for business use at a motel located in
Tuscaloosa County, Alabama on property more fully described on Exhibit A hereto.
                                                               ---------

  2. Except for the security interest granted hereby, Borrower is the owner of
the Collateral free from any superior lien, security interest, or encumbrance,
and Borrower will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein.

  3. No superior Financing Statement covering any Collateral or any proceeds
thereof is on file in any public office, and Borrower authorizes Secured Party
to file, in jurisdictions where this authorization will be given effect, a
Financing Statement signed only by the Secured party describing the collateral
in the same manner as it is described herein; and from time to time at the
request of Secured Party, Borrower will execute one or more Financing Statements
and such other documents (and pay the cost of filing or recording the same in
all public offices deemed necessary or desirable by the Secured Party) and do
such other acts and things, all as the Secured Party may request to establish
and maintain a valid security interest in the Collateral (free of or superior to
all other liens and claims whatsoever) to secure the payment of the Obligations.

  4. Borrower will not sell, transfer, lease, or otherwise dispose of any of
the Collateral or any interest therein, or offer so to do, without the prior
written consent of Secured Party.  However, Borrower shall be entitled to
replace, with items of like quality and quantity, any collateral that requires
replacement in the ordinary course of business due to normal wear and tear or
obsolescence.

                                       34
<PAGE>

  5. Borrower will at all times keep the Collateral insured against loss,
damage, theft, and such other risks as Secured Party may require in such amounts
and with such conditions as shall be satisfactory to Secured Party.  Each such
policy shall provide that proceeds payable thereunder shall be payable to
Secured Party as its interest may appear (and Secured Party may apply any
proceeds of such insurance which may be received by Secured Party toward payment
of the Obligations, whether or not due, in such order of application as Secured
Party may determine) Each such policy shall also provide for thirty (30) days'
written minimum cancellation notice to Secured Party.  Upon request, the policy
or a true copy thereof shall be deposited with Secured Party.  Secured Party may
act as attorney for Borrower in obtaining, settling, and canceling such
insurance and endorsing any drafts.  Borrower agrees to assign to Secured Party
any proceeds it may receive from policies of insurance on the Collateral which
do not name Secured Party as a "loss payee", if Secured Party so directs, and to
the extent that Secured Party may have an interest therein.

  6. Borrower shall at all times keep the Collateral free from any superior
lien, security interest, or encumbrances and in good order and repair and will
not waste or destroy the Collateral or any part thereof; and Borrower will not
use or allow others to use the Collateral in violation of any statute,
ordinance, or applicable Franchise Agreement; and Secured Party may examine and
inspect the Collateral at any time.

  7. Borrower will pay promptly when due all taxes and assessments upon the
Collateral or for its use or operation or upon this Agreement or upon any note
or notes evidencing the obligations, or any of them.

  8. At its option, Secured Party may discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral,
may pay for insurance on the Collateral, and may pay for the maintenance and
preservation of the Collateral.  Borrower agrees to reimburse Secured Party on
demand for any payment made, or any expense incurred, by Secured Party, pursuant
to the foregoing authorization.  Until default, Borrower may have possession of
the Collateral and use it in any lawful manner not inconsistent with this
Agreement and not inconsistent with any policy of insurance thereon.

  9. Borrower shall be in default under this Agreement upon the happening of
any of the following events or conditions:  (a) failure or omission to pay when
due any Obligation (or any installment thereof or interest thereon), or default
in the payment or performance of any obligation contained herein, or in any
other document evidencing or securing Borrower's obligations to Secured Party;
(b) any warranty, representation, or statement made or furnished to Secured
Party by or on behalf of any Borrower proves to have been false in any material
respect when made or furnished; (c)  loss, theft, substantial damage,
destruction, sale or encumbrances to or of any of the Collateral, or the making
of any levy, seizure, or attachment thereof or thereon; (d)  any Obligor (which
term, as used herein, shall mean each Borrower and each other party primarily or
secondarily or contingently liable on any of the obligations) becomes insolvent
or unable to pay debts as they mature or makes an assignment for the benefit of
creditors, or any proceeding is instituted by or against any Obligor alleging
that such Obligor is insolvent or unable to pay debts as they mature; (e)  entry
of any

                                       35
<PAGE>

judgment against any Obligor; (f) violation by Borrower of any term of any
existing Franchise Agreement or any amendment thereto; (g) dissolution,
disassociation, merger, consolidation, or transfer of a substantial part of the
property of any Obligor which is a corporation, partnership, or limited
liability company; (h) appointment of a receiver for the Collateral or any part
thereof or for any property in which any Borrower has an interest.

  10. Upon the occurrence of (a) any default(s) involving a monetary obligation
of the Borrower, which such default(s) continue for a period of five (5) days
after notice of such default(s) by Secured Party; or (b) upon any non-monetary
default(s) or failure of the undersigned to comply with any other conditions or
covenants contained in this Security Agreement or any instrument(s) evidencing
or securing the indebtedness of Borrower which such default(s) continue for a
period of fifteen (15) days after notice of such default by Secured Party,
Secured Party may, at its option, declare all obligations secured hereby, or any
of them (notwithstanding any provisions thereof), immediately due and payable
without further demand or notice of any kind and the same thereupon shall
immediately become and be due and payable without further demand or notice (but
with such adjustments, if any, with respect to interest or other charges as may
be provided for in the promissory note or other writing evidencing such
liability), and Secured Party shall have and may exercise from time to time any
and all rights and remedies of a Secured Party under the Uniform Commercial Code
and any and all rights and remedies available to it under any other applicable
law; and upon request or demand of Secured party, Borrower shall, at its
expense, make the Collateral available to the Secured Party; and Borrower shall
promptly pay all costs of Secured party of collection of any and all of the
obligations, and enforcement of rights hereunder, including reasonable
attorney's fees and legal expenses and expenses of any repairs to any of the
Collateral and expenses of repairs to any realty or other property to which any
of the Collateral may be affixed or be a part.  Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give Borrower reasonable notice
of the time and place of any public sale thereof or of the time after which any
private sale or any other intended disposition thereof is to be made.  The
requirements of reasonable notice shall be met if such notice is mailed, postage
prepaid, to any Borrower at the address of Borrower shown on this Agreement or
at any other address shown on the records of Secured Party, at least (5) days
before the time of the sale or disposition.  The Secured Party may bid and buy
at any public sale or other public disposition of the Collateral.  Proceeds from
disposition of the Collateral will be applied in the order following to:  (a)
the reasonable expenses of retaking, holding, preparing for sale or lease,
selling, leasing, and the like and, where not prohibited by law, to payment of
the reasonable attorneys' fees and legal expenses incurred by the Secured Party;
and (b) the satisfaction of the indebtedness secured by this Agreement.  Upon
disposition of any Collateral after the occurrence of any default hereunder, or
if Secured Party feels insecure for any reason, Borrower shall be and remain
liable for any deficiency; and Secured Party shall account to Borrower for any
surplus, but Secured Party shall have the right to apply all or any part of such
surplus (or to hold the same as a reserve against) all or any obligations of
Borrower to Secured Party, whether or not they, or any of them, be then due, and
in such order of application as Secured Party may from time to time elect.

                                       36
<PAGE>

  11. No waiver by Secured Party of any default shall operate as a waiver of
any other default or of the same default on a future occasion.  No delay or
omission on the part of Secured Party in exercising any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by Secured Party
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy.  Time is of the essence of this
Agreement.  The provisions of this Agreement are cumulative and in addition to
the provisions of any note secured hereby.  If more than one party shall execute
this Agreement the term "Borrower" shall mean all parties signing this Agreement
and each of them, and all such parties shall be jointly and severally obligated
and liable hereunder.  The singular pronoun when used herein, shall include the
plural.  If this Agreement is not dated when executed by the Borrower, the
Secured Party is authorized, without notice to the Borrower, to date this
Agreement.  This Agreement shall become effective as of the date of this
Agreement.  All rights of Secured Party hereunder shall inure to the benefit of
its successors and assigns; and all obligations of Borrower shall bind the
heirs, executors, administrators, successors and assigns of each Borrower.

  12. This Agreement shall be construed in accordance with the laws of Alabama.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.

  IN WITNESS WHEREOF, this Agreement has been duly executed and the Borrower's
seal affixed on the _____ day of March, 2001.

                         JAMESON ALABAMA, INC.  [SEAL]
                            An Alabama Corporation

               By: _____________________________________________
                               Craig R. Kitchin
                                   President

               Attest: _________________________________________
                               Steven A. Curlee
                                   Secretary

Borrower's Address: 8 Perimeter Center, East, Suite 8050, Atlanta, Georgia 30346
   Lender's Address: Empire Financial Services, Inc., 121 Executive Parkway,
                          Milledgeville, Georgia 31061

                                       37
<PAGE>

                              ADJUSTABLE RATE NOTE

$1,500,000.00                                                 March ______, 2001

  FOR AND IN CONSIDERATION OF THE LOAN EVIDENCED BY THIS NOTE, the
undersigned promises to pay to the order of EMPIRE FINANCIAL SERVICES, INC., at
its main office in Milledgeville, Georgia, or at such place as the holder may
designate, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($1,500,000.00) plus interest from date on that part of the outstanding
principal which has not been paid.

  Beginning on the date of this Note, the undersigned will pay interest at a
yearly rate of eight and seven-eighths percent (8.875%) (the "Initial Interest
Rate") based on a 365-day year.  Interest shall accrue on all monies disbursed
from closing and all monies advanced from the Construction Loan Account from the
date of each such disbursement.  The Construction Period shall run from March
______, 2001 through December 31, 2001.  During that period, Borrower shall pay,
monthly, on or before the 15th day of each month, all interest accumulated
during the previous calendar month on monies disbursed, with the first payment
(due April 1, 2001) to be paid on or before April 15, 2001.  All such interest
shall be fully paid on or before January 15, 2002.  Between the first and fifth
day of each month, Noteholder will notify Borrower of the amount of interest due
on the 15th day of that month.

  Beginning with the payment due on the first day of February, 2002, monthly
payments will be calculated on the basis of a twenty (20) year amortization of
the total principal balance outstanding at the end of the Construction Period at
the Initial Interest Rate, and shall be paid on the first day of February, 2002,
and on the first day of each month thereafter continuing through the payment due
on April 1, 2002.

  Beginning on the first day of April, 2002, and on that day of the month every
twelve (12) months thereafter (the "Loan Adjustment Date"), the interest rate
applicable to the principal balance then outstanding will equal the "Prime Rate"
plus three-eighths of one

                                       38
<PAGE>

percent (.375%). Each annually adjusted interest rate will be in effect from
each Loan Adjustment Date (April 1st) through March 30th of the following year,
with monthly payments, at the adjusted rate, to be paid on the first day of each
month, beginning on the first day of May and continuing through the payment due
on the first day of April of the following year.

  For purposes of this Note, the term "Prime Rate" shall mean the interest rate
published in the Wall Street Journal, Eastern Edition, identified therein as the
                 -------------------
"Prime Rate" and currently described as "the base rate on corporate loans posted
by at least 75% of the nation's 30 largest banks".  The "Prime Rate" published
on the last publication date prior to each Loan Adjustment Date shall be the
index for interest rate adjustments.  In the event that the Wall Street Journal
                                                            -------------------
abandons the practice of publishing the Prime Rate, the Noteholder will
designate a comparable reference or index which shall thereafter be the Prime
Rate for this Note.  The Noteholder will round the amount of the change to the
nearest one-eighth (1/8) of one (1) percentage point.  Noteholder will notify
Borrower of the adjustment to be made and such notification, even if given after
the due date of the next monthly installment, shall apply to all monthly
installments due after each Loan Adjustment Date.  The monthly payments
calculated at each Loan Adjustment Date shall be in the amount that would
completely amortize the principal amount owed on each Loan Adjustment Date by
the first day of January, 2022, if such monthly payments were to continue until
that date.  Monthly payments shall continue until all of said interest and
principal have been paid in full except that any balance remaining unpaid on the
first day of March, 2007, shall be due and payable, with all accrued interest
thereon, on that date.

  Each payment shall be applied first to accrued interest and to other charges
or fees accruing under this Note or the Mortgage of even date herewith and the
residue to principal (except as heretofore specified for the Construction
Period).  Any amount may be prepaid on this Note at any time without premium or
fee; however, the monthly payments shall continue to be due without
interruption.  Time is of the essence of this contract.  Lender may collect a
late charge of 5 cents for each One Dollar ($1.00) of each principal

                                       39
<PAGE>

and interest payment, with a minimum charge of Five Dollars ($5.00), for each
such payment fifteen (15) days or more in arrears to cover the extra expense
involved in handling delinquent payment. In the event (a) of a default in the
payment of principal and interest as stipulated herein (including, without
limitation, non-payment upon maturity) or default in any other monetary
obligation of the undersigned which such default(s) continue for a period of
five (5) days after notice of such default by Noteholder, or (b) upon failure of
the undersigned to comply with any other conditions or covenants contained in
this Note or any instrument(s) securing it which such default(s) continue for a
period of fifteen (15) days after notice of such default by Noteholder, or (c)
upon the liquidation or dissolution of a Borrower, endorser or guarantor that is
a corporation, partnership or limited liability company, then, and in any such
event(s), the principal indebtedness evidenced hereby, all accrued interest and
any other sums advanced hereunder or pursuant to any other loan documents shall,
at the option of Noteholder and, without further notice to the undersigned, at
once become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. No omission on the part of Noteholder to exercise
such option, when entitled to do so, shall be construed a waiver of such right.
Upon the happening of any event of default the entire unpaid principal balance
shall bear interest at the contract rate then in effect until the entire amounts
in default have been paid by the undersigned. If this Note is collected by law
or through an attorney at law, the undersigned shall pay all costs of
collection, including reasonable attorney's fees. The undersigned (whether
maker, endorser, surety, guarantor, or other party hereto) severally waives
demand, protest and notice of demand, protest and non-payment. It is agreed that
this Note may be renewed or extended from time to time, in whole or in part,
without the consent of or notice to any endorser, maker, guarantor, surety, or
other party hereto and without affecting or lessening the liability of any such
person. The powers granted herein are coupled with an interest, and are
irrevocable by death or otherwise. This Note is the joint and several obligation
of all makers, sureties, guarantors, endorsers and other parties hereto, and
shall be binding upon them, their heirs, personal representatives and assigns.
In this Note and any instrument securing it, the singular shall include the
plural, and the masculine shall include the feminine and neuter.

                                       40
<PAGE>

  If from any circumstances whatsoever, fulfillment of any provision of this
Note or of any other instrument securing the indebtedness evidenced hereby, at
the time performance of such provision shall be due, shall involve transcending
the limit of validity presently prescribed by any applicable usury statute or
any other applicable law, with regard to obligations of like character and
amount, then ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity, so that in no event shall any exaction be possible under
this Note or under any other instrument securing the indebtedness evidenced
hereby, that is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity.

  This Note is secured by a Mortgage, Assignment of Operating Lease, Assignment
of Fees and Income, and Security Agreement of even date executed by the
undersigned to Empire Financial Services, Inc.

              CAUTION:  IT IS IMPORTANT THAT YOU THOROUGHLY READ
                         THE CONTRACT BEFORE YOU SIGN IT.

  Executed and given under the hand and seal of the undersigned.

                         JAMESON ALABAMA, INC.  [SEAL]
                            An Alabama Corporation

               By: _____________________________________________
                               Craig R. Kitchin
                                   President

               Attest: _________________________________________
                               Steven A. Curlee
                                   Secretary

                                       41
<PAGE>

  The undersigned guarantor and surety hereby guarantees payment and performance
and, to the extent allowed by law, waives the right to require the Noteholder to
proceed first against the Maker/Borrower.

                          JAMESON INNS, INC.  [SEAL]
                             A Georgia Corporation

               By: _____________________________________________
                               Craig R. Kitchin
                                   President

               Attest: _________________________________________
                               Steven A. Curlee
                                   Secretary

                                       42
<PAGE>

               UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE

  FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars and other good
and valuable considerations, paid or delivered to JAMESON INNS, INC. (hereafter
referred to, collectively, if more than one, as "Guarantor"), the receipt and
sufficiency whereof are hereby acknowledged by Guarantor, and for the purpose of
seeking to induce EMPIRE FINANCIAL SERVICES, INC. (hereinafter referred to as
"Lender") to extend credit to JAMESON ALABAMA, INC. (hereinafter referred to as
"Borrower"), which extension of credit will be to the direct interest, benefit,
and advantage of Guarantor, Guarantor, jointly and severally, if more than one,
does hereby unconditionally and absolutely guarantee to Lender and its
successors, successors-in-title and assigns (a) the full and prompt payment when
due, whether by acceleration or otherwise, with such interest as may accrue
thereon, either before or after maturity thereof, of that certain promissory
note dated March ________, 2001 made by Borrower to the order of Lender in the
principal amount of ONE MILLION FIVE HUNDRED THOUSAND AND N0/100 DOLLARS
($1,500,000.00) (hereinafter referred to as the "Note) together with any
renewals, modifications, consolidations and extensions thereof, (b) the full and
prompt payment and performance of any and all obligations of Borrower or any
other party to Lender under the terms of any and all deeds to secure debt,
mortgages, deeds of trust, collateral assignments, and security agreements now
or hereafter securing the indebtedness evidenced by the Note (hereinafter
referred to, collectively, if more than one, as the "Security Instrument"), (c)
the full and prompt payment and performance of all obligations of Borrower to
Lender under the terms of any construction loan agreement relating to the loan
evidenced by the Note (hereinafter referred to as the "Construction Loan
Agreement"), including, without limitation, the obligation to complete the
improvements described in the Construction Loan Agreement, if any, fully paid
for and free and clear of all mechanics' and materialmen's liens, (d) the full
and prompt payment and performance of any and all other obligations of Borrower
to Lender under any other documents or instruments now or hereafter evidencing,
securing, or otherwise relating to the indebtedness evidenced by the Note (the
Security Instrument, the Construction Loan Agreement, and said other documents
and instruments being hereinafter referred to collectively as the "Loan
Documents"), and (e) the full and prompt payment and performance of any and all
other obligations of Borrower to Lender currently in existence or arising while
this Guaranty is in effect.  Guarantor does hereby agree that if the Note is not
paid by Borrower in accordance with its terms, or if any and all sums which are
now or may hereafter become due from Borrower to Lender under the Loan Documents
are not paid by Borrower in accordance with their terms, Guarantor will
immediately make such payments.  Guarantor further agrees to pay Lender all
expenses (including reasonable attorneys' fees) paid or incurred by Lender in
endeavoring to collect the indebtedness, to enforce the obligations of Borrower
guaranteed hereby, or any portion thereof, or to enforce this Guaranty.

  Guarantor hereby consents and agrees that Lender may at any time, and from
time to time, without notice to or further consent from Guarantor, either with
or without consideration, surrender any property or other security of any kind
or nature whatsoever held by it or by any person, firm or corporation on its
behalf or for its account, securing any indebtedness or liability hereby
guaranteed, substitute for any collateral so held by it, other collateral of
like kind, or of any kind; agree to modify the terms of the Note or the Loan
Documents; extend or renew the Note for any period; grant releases, compromises
and indulgences with respect to the Note, or the Loan Documents and to any
person or entities now or hereafter liable thereunder or hereunder; release any
Guarantor or any other guarantor or endorser of the Note, the Security
Instrument, the Construction Loan Agreement, or any other of the Loan Documents;
or take or fail to take any action of any type whatsoever.  No such action which
Lender shall take or fail to take in connection with the Loan Documents, or any
of them, or any security for the payment of the indebtedness of Borrower to
Lender or for the performance of any obligations or undertakings of Borrower,
nor any course of dealing with Borrower or any other person, shall release
Guarantor's obligations hereunder, affect this Guaranty in any way or afford
Guarantor any recourse against Lender.  The provisions of this Guaranty shall
extend and be applicable to all renewals, amendments, extensions, consolidations
and modifications of the Loan Documents, and any and all references herein to
Loan Documents shall be deemed to include any such renewals, extensions,
amendments, consolidations or modifications thereof.  This Guaranty absolutely
and unconditionally guarantees the performance of all obligations to Lender made
on behalf of Borrower by any officer, partner, or agent of Borrower.

                                       43
<PAGE>

  Guarantor hereby subordinates any and all indebtedness of Borrower now or
hereafter owed to any Guarantor to all indebtedness of Borrower to Lender, and
agrees with Lender that Guarantor shall not demand or accept any payment of
principal or interest from Borrower, shall not claim any offset or other
reduction of Guarantor's obligations hereunder because of any such indebtedness
and shall not take any action to obtain any of the security described in and
encumbered by the Security Instrument; provided, however, that, if Lender so
requests, such indebtedness shall be collected, enforced and received by
Guarantor as trustee for Lender and be paid over to Lender on account of the
indebtedness of Borrower to Lender, but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty.

  Guarantor hereby waives and agrees not to assert or take advantage of (a) the
defense of the statute of limitations in any action hereunder or for the
collection of the indebtedness or the performance of any obligations hereby
guaranteed; (b) any defense that may arise by reason of the incapacity, lack of
authority, death or disability of Guarantor or any other person or entity, or
the failure of Lender to file or enforce a claim against the estate (either in
administration, bankruptcy, or any other proceedings) of Borrower or any other
person or entity; (c) any defense based on the failure of Lender to give notice
of the existence, creation or incurring of any new or additional indebtedness or
obligation or of any action or non-action on the part of any other person
whomsoever, in connection with any obligation hereby guaranteed; (d) any defense
based upon an election of remedies by Lender which destroys or otherwise impairs
any subrogation rights of Guarantor or the right of Guarantor to proceed against
Borrower for reimbursement; or both; (e) any defense based upon a failure of
Lender to commence an action against Borrower; (f) any duty on the part of
Lender to disclose to Guarantor any facts it may now or hereafter know regarding
Borrower; (g) acceptance or notice of acceptance of this Guaranty by Lender; (h)
notice of presentment and demand for payment of any of the indebtedness or
performance of any of the obligations hereby guaranteed; (i) protest and notice
of dishonor or of default to Guarantor or to any other party with respect to the
indebtedness or performance of obligations hereby guaranteed; (j) any and all
other notices whatsoever to which Guarantor might otherwise be entitled; (k) any
defense based on lack of due diligence by Lender in collection, protection or
realization upon any collateral securing the indebtedness evidenced by the Note;
and (l) any other legal or equitable defenses whatsoever to which Guarantor
might otherwise be entitled.  This Guaranty shall not be affected by any
litigation between Borrower and Lender nor shall it be impaired because of
termination of any relationship between Guarantor and Borrower.

  This is a guaranty of payment and performance and not of collection.  The
liability of Guarantor under this Guaranty shall be direct and immediate and not
conditional or contingent upon the pursuit of any remedies against Borrower or
any other person, nor against securities or liens available to Lender, its
successor, successors-in-title, endorsees or assigns.  Guarantor waives any
right to require that an action be brought against Borrower or any other person
or to require that resort be had to any security or to any balance of any
deposit account or credit on the books of Lender in favor of Borrower or any
other person.  In the event of a default under the Loan Documents, or any of
them, Lender shall have the right to enforce its rights, powers and remedies
thereunder or hereunder or under any other instrument now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced by the
Note or secured by the Security Instrument or relating to the transactions
contemplated by the Loan Agreement, in any order, and all rights, powers and
remedies available to Lender in such event shall be nonexclusive and cumulative
of all other rights, powers and remedies provided thereunder or hereunder by law
or in equity.  Accordingly, Guarantor hereby authorizes and empowers Lender upon
acceleration of the maturity of the Note, at its sole discretion, and without
notice to Guarantor, to exercise any right or remedy which Lender may have,
including, but not limited to, judicial foreclosure, exercise of rights of power
of sale, acceptance of a deed or assignment in lieu of foreclosure, appointment
of a receiver to collect rents and profits, exercise of remedies against
personal property, or enforcement of any assignment of leases, as to any
security, whether real, personal or intangible.  If the indebtedness guaranteed
hereby is partially paid by reason of the election of Lender, its successors,
endorsees or assigns, to pursue any of the remedies available to Lender, or if
such indebtedness is otherwise partially paid, this Guaranty shall nevertheless
remain in full force and effect, and Guarantor shall remain liable for the
entire unpaid balance of the indebtedness guaranteed hereby, even though any
rights which Guarantor may have against Borrower may be destroyed or diminished
by the exercise of any such remedy.  Until all of the obligations of Borrower to
Lender have been paid and performed in full, Guarantor shall have no right of
subrogation to Lender against

                                       44
<PAGE>

Borrower, and Guarantor hereby waives any rights to enforce any remedy which
Lender may have against Borrower and any rights to participate in any security
for the Note.

  In the event that the Lender selects non-judicial foreclosure as a remedy for
Borrower's default, the Guarantor's rights to subrogation can be destroyed and
Guarantor may, as a result thereof, be entitled to a defense against a
deficiency action.  Guarantor, nevertheless, knowingly and voluntarily waives
any such defense and acknowledges liability for any deficiency.

  Guarantor hereby authorizes Lender, without notice to Guarantor, to apply all
payments and credits received from Borrower or from Guarantor or realized from
any security in such manner and in such priority as Lender in its sole judgment
shall see fit to the indebtedness, obligations and undertakings which are the
subject of this Guaranty.

  The books and records of Lender showing the accounts between Lender and
Borrower shall be admissible in evidence in any action or proceeding hereon as
prima facie proof of the items set forth therein.

  Guarantor acknowledges that this Guaranty was negotiated, executed and
delivered in the State of Georgia, and shall be governed and construed in
accordance with the law of the State of Georgia, regardless of the situs of any
other Loan Documents.

  Guarantor hereby (a) submits to personal jurisdiction in the State of Georgia
for the enforcement of this Guaranty, and (b) waives any and all personal rights
under the law of any state to object to jurisdiction within the State of Georgia
for the purposes of litigation to enforce this Guaranty.  In the event that such
litigation is commenced, and Guarantor is not otherwise deemed a resident of the
State of Georgia, Guarantor agrees that service of process may be made and
personal jurisdiction over Guarantor obtained, by the serving of a copy of the
summons and complaint upon Guarantor's appointed agent for service of process in
the State of Georgia, who, unless otherwise designated as provided herein, shall
be the person then serving as President or Chief Executive Officer of Lender.

  Nothing contained herein, however, shall prevent Lender from bringing any
action or exercising any rights against any security or against Guarantor
personally, or against any property of Guarantor, within any other state.
Initiating such proceeding or taking such action in any other state shall in no
event constitute a waiver of the agreement contained herein that the law of the
State of Georgia shall govern the rights and obligations of Guarantor and Lender
hereunder or of the submission herein made by Guarantor to personal jurisdiction
within the State of Georgia.  The aforesaid means of obtaining personal
jurisdiction and perfecting service of process are not intended to be exclusive
but are cumulative and in addition to all other means of obtaining personal
jurisdiction and perfecting service of process now or hereafter provided by the
law of the State of Georgia.

  Each Guarantor warrants and represents to Lender that all financial statements
heretofore delivered by him to Lender are true and correct in all respects as of
the date hereof.

  Each Guarantor waives any and all homestead and exemption rights available by
virtue of the Constitution or the laws of the United States of America or of any
state as against this Guaranty, and renewal hereof, or any indebtedness
represented hereby, and does transfer, convey and assign to Lender a sufficient
amount of such homestead or exemption as may be allowed, including such
homestead or exemption as may be set apart in bankruptcy, to pay all amounts due
hereunder in full, with all costs of collection, and does hereby direct any
trustee in bankruptcy having possession of such homestead or exemption to
deliver to Lender a sufficient amount of property or money set apart as exempt
to pay the indebtedness guaranteed hereby, or any renewal thereof, and does
hereby, jointly and severally, appoint Lender the attorney-in-fact for each of
them, to claim any and all homestead exemptions allowed by law.

  As security for the liabilities and obligations of Guarantor hereunder, each
Guarantor hereby transfers and conveys to Lender any and all balances, credits,
deposits, accounts, items and monies of each Guarantor now or hereafter in the
possession or control of or otherwise with Lender, and Lender is hereby given a
lien upon, security

                                       45
<PAGE>

title to and a security interest in all property of Guarantor of every kind and
description now or hereafter in the possession or control of Lender for any
reason, including all dividends and distributions on or other rights in
connection therewith. Lender may, without demand or notice of any kind, at any
time, or from time to time, when any amount shall be due and payable hereunder
by such Guarantor, appropriate and apply toward the payment of such amount, and
in such order of application as Lender may from time to time elect, any
property, balances, credits, deposits, accounts, items or monies of any
Guarantor in the possession or control of Lender for any purpose.

  This Guaranty may not be changed orally, and no obligation of Guarantor can be
released or waived by Lender or any officer or agent of Lender, except by a
writing signed by a duly authorized officer of Lender and bearing the seal of
Lender.  This Guaranty shall be irrevocable by Guarantor so long as the Loan
Agreement shall remain in effect and until all indebtedness guaranteed hereby
has been completely repaid and all obligations and undertakings of Borrower
under, by reason of, or pursuant to the Loan Documents have been completely
performed.

  Any and all notices, elections, demands, requests and responses thereto
permitted or required to be given under this Guaranty shall be in writing,
signed by or on behalf of the party giving the same, and shall be deemed to have
been properly given and shall be effective upon being personally delivered, or
upon being deposited in the United States mail, postage prepaid, certified with
return receipt requested, to the party at the address of such party set forth
below or at such other address within the continental United States as such
other party may designate by notice specifically designated as a notice of
change of address and given in accordance herewith; provided, however, that the
time period in which a response to any such notice, election, demand or request
must be given shall commence on the date of receipt thereof; and provided
further that no notice of change of address shall be effective until the date of
receipt thereof.  Personal delivery to a party or to any officer, partner, agent
or employee of such party at said address shall constitute receipt.  Rejection
or other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt.  Any such
notice, election, demand, request or response, if given to Lender, shall be
addressed as follows:

                        EMPIRE FINANCIAL SERVICES, INC.
                             121 EXECUTIVE PARKWAY
                         MILLEDGEVILLE, GEORGIA 31061

and, if given to Guarantor, shall be addressed as follows:

                              JAMESON INNS, INC.
                            8 PERIMETER CENTER EAST
                                  SUITE 8050
                            ATLANTA, GEORGIA 30346

  The provisions of this Guaranty shall be binding upon each Guarantor and each
Guarantor's successors, successors-in-title, heirs, legal representatives and
assigns and shall inure to the benefit of Lender, its successors, successors-in-
title, heirs, legal representatives and assigns.  This Guaranty shall in no
event be impaired by any change which may arise by reason of the death of
Borrower or Guarantor, if individuals, or by reason of the dissolution of
Borrower or Guarantor, if Borrower or Guarantor is a corporation, or
partnership.

  As used herein, the terms "each Guarantor" and "any Guarantor" shall refer to
the undersigned single Guarantor, or, if more than one, shall refer respectively
to each or any separate member of the undersigned collective Guarantor.  If more
than one person or entity constitutes, collectively, Borrower, all of the
foregoing provisions referring to Borrower shall be construed to refer to each
such person or entity individually as well as collectively.  For example, if
there are two persons who are, collectively, Borrower, this Guaranty shall
guarantee the full and prompt payment and performance of all obligations under
the Loan Documents of Borrower, and of each of said two persons constituting
Borrower.

  Each Guarantor has executed this Guaranty individually and not as a partner of
Borrower or any other member of Guarantor.

                                       46
<PAGE>

  If from any circumstances whatsoever fulfillment of any provisions of this
Guaranty, at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law, with regard to obligations of like
character and amount, then ipso facto the obligation to be fulfilled shall be
reduced to the limit of such validity, so that in no event shall any exaction be
possible under this Guaranty that is in excess of the current limit of such
validity, but such obligation shall be fulfilled to the limit of such validity.
The provisions of this paragraph shall control every other provision of this
Guaranty.

  Any provisions of this Agreement to the contrary notwithstanding, Guarantor
hereby absolutely and unconditionally waives Guarantor's right to reimbursement,
contribution and subrogation with regard to any payments made by Guarantor
pursuant to the terms of this Unconditional Guaranty of Payment and Performance.
Guarantor further agrees to reimburse Lender for any payments made to Lender
that Lender is required to pay over to Borrower's Trustee in a bankruptcy case
or as a result of any other judicial proceeding.

  Notwithstanding the payment and satisfaction of the Note, Guarantor's
obligation to reimburse Lender for any payments that are avoided as a result of
being characterized, for bankruptcy purposes, as preferential, shall continue
for period of one year beyond the date of Borrower's last payment to Lender.

  Guarantor warrants and represents to Lender that all financial statements
given to Lender are accurate and that Guarantor is currently solvent and will
not be rendered insolvent by virtue of financial obligations, contingent or
otherwise, arising under terms of this Unconditional Guaranty of Payment and
Performance.

  The Guaranty is assignable by Lender, and any full or partial assignment
hereof by Lender shall operate to vest in the assignee all rights and powers
herein conferred upon and granted to Lender and so assigned by Lender.

  This Unconditional Guaranty and Payment of Performance contains the entire
  --------------------------------------------------------------------------
agreement between the parties hereto and there are no promises, agreements,
---------------------------------------------------------------------------
conditions, undertakings, warranties and representations, whether written or
----------------------------------------------------------------------------
oral, express or implied, between the parties, other than as set forth herien.
------------------------------------------------------------------------------

IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal as of the
_____ day of March, 2001.

                          JAMESON INNS, INC.  [SEAL]

                         _____________________________
                               CRAIG R. KITCHIN
                                   President

                         _____________________________
                               STEVEN A. CURLEE
                                   Secretary

  Guarantor designates the following individual, or entity, a resident of the
State of Georgia, as Guarantor's agent for service of process for purposes of
any litigation for enforcement of this Guaranty:

                           ________________________
                           ________________________
                           ________________________

                                       47

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