ARTICLES OF INCORPORATION
 
                                                              OF
 
                                                 EASTGROUP PROPERTIES II, INC.
 
     The undersigned, being a natural person and acting as incorporator, does
hereby form a business corporation in the State of Maryland, pursuant to the
provisions of the Maryland General Corporation Law.
 
                                   ARTICLE I
 
                                  INCORPORATOR
 
     The name of the incorporator is Kayla E. Klos.
 
     The incorporator's address, including the street and number, if any,
including the county or municipal area, and including the state or county, is:
800 Fleet Bank Building, Twelve Fountain Plaza, Buffalo, New York 14202.
 
     The incorporator is at least eighteen years of age.
 
     The incorporator is forming the corporation named in this Charter under the
general laws of the State of Maryland, to wit, the Maryland General Corporation
Law.
 
                                   ARTICLE II
 
                               NAME AND DURATION
 
     The name of the corporation (hereinafter, the "Corporation") is EastGroup
Properties II, Inc. The duration of the Corporation shall be perpetual.
 
                                  ARTICLE III
 
                                    PURPOSES
 
     (a) The purposes for which the Corporation is formed are:
 
          (1) To engage in the business of a real estate investment trust
     ("REIT") as that term is defined in the Internal Revenue Code of 1986, as
     amended, or any successor statute (the "Code"), and to engage in any lawful
     act or activity for which corporations may be organized under the general
     laws of the State of Maryland now or hereafter in force including the
     Maryland General Corporation Law; and
 
          (2) To engage in any one or more businesses or transactions, or to
     acquire all or any portion of any entity engaged in any one or more
     businesses or transactions which the Board of Directors may from time to
     time authorize or approve, whether or not related to the business described
     elsewhere in this Article III or to any other business at the time or
     theretofore engaged in by the Corporation.
 
     (b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other Article of the Charter of the Corporation, and each
shall be regarded as independent; and they are intended to be and shall be
construed as powers as well as purposes and objects of the Corporation and shall
be in addition to and not in limitation of the general powers of corporations
under the General Laws of the State of Maryland.
 
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                                   ARTICLE IV
 
                          PRINCIPAL OFFICE IN MARYLAND
                               AND RESIDENT AGENT
 
     The present address of the principal office of the Corporation in the State
of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
the State of Maryland is The Corporation Trust Incorporated, a Maryland
corporation, 32 South Street, Baltimore, Maryland 21202.
 
                                   ARTICLE V
 
                                 CAPITAL STOCK
 
SECTION 1.  AUTHORIZED CAPITAL STOCK.
 
     (a) Authorized Shares.  The total number of shares of capital stock of all
classes that the Corporation has authority to issue is 100,000,000, initially
classified as 70,000,000 shares of common stock, par value $0.0001 per share
(the "Common Stock"), and 30,000,000 shares of excess stock, par value $0.0001
per share (the "Excess Stock").
 
     The Common Stock and the Excess Stock shall each constitute a separate
class of capital stock of the Corporation.
 
     (b) Terminology and Aggregate Par Value.  All classes of capital stock
(except Excess Stock) are referred to herein as "Equity Stock;" all classes of
capital stock (including Excess Stock) are referred to herein as "Stock." The
aggregate par value of all of the Corporation's authorized Stock is $10,000.
 
SECTION 2.  REIT-RELATED RESTRICTIONS AND LIMITATIONS ON THE EQUITY STOCK.
 
     Until the "Restriction Termination Date," as defined below, all Equity
Stock shall be subject to the following restrictions and limitations intended to
preserve the Corporation's status as a REIT.
 
     (a) Definitions.  As used in this Article V, the following terms shall have
the indicated meanings:
 
          "Beneficial Ownership" shall mean ownership of Equity Stock by a
     Person who would be treated as an owner of such Equity Stock either
     directly or constructively through the application of Section 544 of the
     Code, as modified by Section 856(h)(1)(B) of the Code. The terms
     "Beneficially Own" and "Beneficially Owned" and "Beneficial Owner" shall
     have the correlative meanings.
 
          "Beneficiary" shall mean a beneficiary of the Trust as determined
     pursuant to Section 5(b) of this Article V.
 
          "Constructive Ownership" shall mean ownership of Equity Stock by a
     Person who would be treated as an owner of such Equity Stock either
     directly or indirectly through the application of Section 318 of the Code,
     as modified by Section 856(d)(5) of the Code. The terms "Constructively
     Own," "Constructively Owned" and "Constructive Owner" shall have the
     correlative meanings.
 
          "Market Price" shall mean the last reported sales price reported on
     the New York Stock Exchange, Inc. (the "NYSE"), of Equity Stock on the
     trading day immediately preceding the relevant date, or if not then traded
     on the NYSE, the last reported sales price of Equity Stock on the trading
     day immediately preceding the relevant date as reported on any exchange or
     quotation system over which Equity Stock may be traded, or if not then
     traded over any exchange or quotation system, then the market price of
     Equity Stock on the relevant date as determined in good faith by the Board
     of Directors of the Corporation.
 
          "Ownership Limit" shall mean 9.8% in value or in number of the
     outstanding Equity Stock, whichever is more restrictive. The number and
     value of the Equity Stock of the Corporation shall be
 
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     determined by the Board of Directors in good faith, which determination
     shall be conclusive for all purposes.
 
          "Person" shall mean an individual, corporation, partnership, estate,
     trust (including a trust qualified under Section 401(a) or 501(c)(17) of
     the Code), a portion of a trust permanently set aside for or to be used
     exclusively for the purposes described in Section 642(c) of the Code,
     association, private foundation within the meaning of Section 509(a) of the
     Code, joint stock company or other entity and also includes a group as that
     term is used for purposes of Section 13(d)(3) of the Securities Exchange
     Act of 1934, as amended; but does not include an underwriter that
     participated in a public offering of any Equity Stock for a period of 25
     days following the purchase by such underwriter of such Equity Stock.
 
          "Purported Beneficial Transferee" shall mean, with respect to any
     purported Transfer that results in Excess Stock as defined below in Section
     5 of this Article V, the purported beneficial transferee for whom the
     Purported Record Transferee would have acquired Equity Stock if such
     Transfer had been valid under Section 2(b) of this Article V.
 
          "Purported Record Transferee" shall mean, with respect to any
     purported Transfer which results in Excess Stock, the Person who would have
     been the record holder of Equity Stock if such Transfer had been valid
     under Section 2(b) of this Article V.
 
          "Restriction Termination Date" shall mean the effective date, if any,
     for revocation or termination of the Corporation's REIT election pursuant
     to Section 856(g) of the Code, as specified in a resolution of the Board of
     Directors of the Corporation determining that it is no longer in the best
     interests of the Corporation to attempt to, or continue to, qualify as a
     REIT. If no such effective date is specified in such resolution, the
     Restriction Termination Date shall be the date such revocation or
     termination otherwise becomes effective.
 
          "Transfer" shall mean any sale, transfer, gift, assignment, devise or
     other disposition of Equity Stock (including (i) the granting of any option
     or entering into any agreement for the sale, transfer or other disposition
     of Equity Stock or (ii) the sale, transfer, assignment or other disposition
     of any securities or rights convertible into or exchangeable for Equity
     Stock), whether voluntary or involuntary, whether of record beneficially or
     constructively (including but not limited to transfers of interests in
     other entities that result in changes in Beneficial Ownership or
     Constructive Ownership of Equity Stock), and whether operation of law or
     otherwise. The terms "Transfers" and "Transferred" shall have the
     correlative meanings.
 
          "Trust" shall mean the trust created pursuant to Section 5(b) of this
     Article V.
 
          "Trustee" shall mean the Corporation as trustee of the Trust, and any
     successor trustee appointed by the Corporation.
 
     (b) Ownership Limitation and Transfer Restrictions with Respect to Equity
Stock.
 
          (i) Except as provided in Section 2(f) of this Article V, prior to the
     Restriction Termination Date, no Person shall Beneficially Own or
     Constructively Own shares of Equity Stock in excess of the Ownership Limit.
 
          (ii) Except as provided in Section 2(f) of this Article V, prior to
     the Restriction Termination Date, any Transfer that, if effective, would
     result in any Person Beneficially Owning or Constructively Owning Equity
     Stock in excess of the Ownership Limit shall be void ab initio as to the
     Transfer of such Equity Stock that would be otherwise Beneficial Owned or
     Constructively Owned (as the case may be) by such Person in excess of the
     Ownership Limit; and the Purported Record Transferee (and the Purported
     Beneficial Transferee, if different) shall acquire no rights in such excess
     shares of Equity Stock.
 
          (iii) Except as provided in Section 2(f) of this Article V, prior to
     the Restriction Termination Date, any Transfer that, if effective, would
     result in the outstanding Equity Stock being Beneficially Owned by less
     than 100 Persons (determined without reference to any rules of attribution)
     shall be void ab initio as to the Transfer of such Equity Stock which would
     be otherwise Beneficially Owned by the transferee; and
 
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<PAGE>   43
 
     the Purported Record Transferee (and the Purported Beneficial Transferee,
     if different) shall acquire no rights in such shares of Equity Stock.
 
          (iv) Prior to the Restriction Termination Date, any Transfer that, if
     effective, would result in the Corporation being "closely held" within the
     meaning of Section 856(h) of the Code, or would otherwise result in the
     Corporation failing to qualify as a REIT, shall be void ab initio as to the
     Transfer of the shares of Equity Stock that would cause the Corporation to
     be "closely held" within the meaning of Section 856(h) of the Code or
     otherwise to fail to qualify as a REIT, as the case may be; and the
     Purported Record Transferee (and the Purported Beneficial Transferee, if
     different) shall acquire no rights in such shares of Equity Stock.
 
          (v) If the Board of Directors or its designee shall at any time
     determine in good faith that a Transfer of Equity Stock has taken place in
     violation of this Section 2(b) or that a Person intends to acquire or has
     attempted to acquire Beneficial Ownership (determined without reference to
     any rules of attribution) or Constructive Ownership of any Equity Stock of
     the Corporation in violation of this Section 2(b), the Board of Directors
     or its designee shall take such action as it deems advisable to refuse to
     give effect to or to prevent such Transfer, including but not limited to,
     refusing to give effect to such Transfer on the books of the Corporation or
     instituting proceedings to enjoin such Transfer; provided, however, that
     any Transfers or attempted Transfers in violation of Section 2(b)(ii),
     Section 2(b)(iii) or Section 2(b)(iv) of this Article V shall automatically
     result in the conversion and exchange described in Section 2(c),
     irrespective of any action (or non-action) by the Board of Directors,
     except as provided in Section 2(f) of this Article V.
 
     (c) Automatic Conversion of Equity Stock into Excess Stock.
 
     Subject to Section 5(a) of this Article V below,
 
          (i) If, notwithstanding the other provisions contained in this Article
     V, at any time prior to the Restriction Termination Date there is a
     purported Transfer or other change in the capital structure of the
     Corporation such that any Person would Beneficially Own or Constructively
     Own Equity Stock in excess of the Ownership Limit, then, except as
     otherwise provided in Section 2(f) of this Article V, such shares of Equity
     Stock in excess of the Ownership Limit (rounded up to the nearest whole
     share) shall automatically (and without action by the Corporation or by any
     purported Transferor, Purported Record Transferee or Purported Beneficial
     Transferee of such Equity Stock, in the case of a Transfer) be converted
     into and exchanged for an equal number of Excess Stock. Such conversion and
     exchange shall be effective as of the close of business on the business day
     prior to the date of the purported Transfer or change in capital structure.
 
          (ii) If, notwithstanding the other provisions in this Article V, at
     any time prior to the Restriction Termination Date there is a purported
     Transfer or other change in the capital structure of the Corporation that,
     if effective, would cause the Corporation to become "closely held" within
     the meaning of Section 856(h) of the Code or otherwise to fail to qualify
     as a REIT, then the shares of Equity Stock being Transferred, or resulting
     from any other change in the capital structure of the Corporation, that
     would cause the Corporation to be closely held" within the meaning of
     Section 856(h) of the Code or otherwise to fail to qualify as a REIT, as
     the case may be, (rounded up to the nearest whole share) shall
     automatically (and without any action by the Corporation or by any
     purported Transferor, Purported Record Transferee or Purported Beneficial
     Transferee of such Equity Stock, in the case of a Transfer) be converted
     into and exchanged for an equal number of shares of Excess Stock. Such
     conversion and exchange shall be effective as of the close of business on
     the business day prior to the date of the purported Transfer or change in
     capital structure.
 
     (d) The Corporation's Right to Redeem Stock.  The Corporation shall have
the right to redeem any Stock that is Transferred, or is attempted to be
Transferred, in violation of Section 2(b) of this Article V, at a price per
share equal to the lesser of (i) the price per share in the transaction that
created such violation or attempted violation (or, in the case of a devise or
gift, the Market Price at the time of such devise or gift) and (ii) the Market
Price of the class of Equity Stock to which such shares of Excess Stock relate
on the date the
 
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<PAGE>   44
 
Corporation, or its designee, gives notice of such redemption. The Corporation
shall have the right to redeem any Stock described in this Section for a period
of 90 days after the later of (i) the date of the Transfer or attempted Transfer
or (ii) the date the Board of Directors determines in good faith that a Transfer
has occurred, if the Corporation does not receive a notice of such Transfer
pursuant to Section 2(e) of this Article V.
 
     (e) Notice Requirements and General Authority of the Board of Directors to
Implement REIT-Related Restrictions and Limitations.
 
          (i) Any Person who acquires or attempts to acquire shares of Equity
     Stock in violation of Section 2(b) of this Article V, and any Person who is
     a Purported Record Transferee or a Purported Beneficial Transferee such
     that Equity Stock proposed to be acquired is converted into Excess Stock
     under Section 2(c) of this Article V, shall immediately give written notice
     or in the event of a proposed or attempted Transfer, give at least 15 days'
     prior written notice to the Corporation, of such event and shall provide to
     the Corporation such other information as the Corporation may request in
     order to determine the effect, if any, of such Transfer or attempted
     Transfer on the Corporation's status as a REIT.
 
          (ii) Prior to the Restriction Termination Date, every Beneficial Owner
     or Constructive Owner of more than 5.0% (or such other percentage, between
     0.5% and 5.0%, as provided in the income tax regulations promulgated under
     the Code) of the number or value of outstanding Equity Stock of the
     Corporation shall, within 30 days after January 1 of each year, give
     written notice to the Corporation stating the name and address of such
     Beneficial Owner or Constructive Owner, the number of shares of Equity
     Stock Beneficially Owned or Constructively Owned, and a description of how
     such shares are held. Each such Beneficial Owner or Constructive Owner
     shall provide to the Corporation such additional information that the
     Corporation may reasonably request in order to determine the effect, if
     any, of such Beneficial Ownership or Constructive Ownership on the
     Corporation's status as a REIT; and
 
          (iii) Prior to the Restriction Termination Date, each Person who is a
     Beneficial Owner or Constructive Owner of Equity Stock and each Person
     (including the stockholder of record) who is holding Equity Stock for a
     Beneficial Owner or Constructive Owner shall provide to the Corporation
     such information that the Corporation may reasonably request in order to
     determine the Corporation's status as a REIT, to comply with the
     requirements of any taxing authority or governmental agency or to determine
     any such compliance.
 
          (iv) Each certificate for Equity Stock shall bear substantially the
     following legends:
 
          "The Corporation will furnish to any stockholder on request and
     without charge a full statement of the designations and any preferences,
     conversion and other rights, voting powers, restrictions, limitations as to
     dividends, qualifications, and terms and conditions of redemption of the
     stock of each class which the Corporation is authorized to issue, of the
     differences in the relative rights and preferences between the shares of
     each series of a preferred or special class in series which the Corporation
     is authorized to issue, to the extent they have been set, and of the
     authority of the Board of Directors to set the relative rights and
     preferences of subsequent series of a preferred or special class of stock.
     Such request may be made to the secretary of the Corporation or to its
     transfer agent."
 
          "Keep this certificate in a safe place. If it is lost, stolen or
     destroyed, the Corporation will require a bond of indemnity as a condition
     to the issuance of a replacement certificate."
 
          "The securities represented by this certificate are subject to
     restrictions on ownership and transfer for the purpose of the Corporation's
     maintenance of its status as a "real estate investment trust" under the
     Internal Revenue Code of 1986, as amended. Except as otherwise provided
     pursuant to the Charter of the Corporation, no Person may Beneficially Own
     or Constructively Own Equity Stock in excess of 9.8%, (in value or in
     number of shares of Equity Stock, whichever is more restrictive) of the
     outstanding Equity Stock of the Corporation, with further restrictions and
     exceptions set forth in the Charter of the Corporation. There shall be no
     Transfer that would cause a violation of the Ownership Limit, that would
     result in Equity Stock of the Corporation being Beneficially Owned by fewer
     than 100 persons or that
 
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<PAGE>   45
 
     would result in the Corporation's being "closely held" under section 856(h)
     of the Code. Any Person who attempts or proposes to own, Beneficially Own
     or Constructively Own Equity Stock in excess of the above limitation must
     notify the Corporation in writing at least 15 days prior to such proposed
     or attempted Transfer to such Person. If attempt is made to violate these
     restrictions on Transfers, (i) any purported Transfer will be void and will
     not be recognized by the Corporation, (ii) the Corporation will have the
     right to redeem the Stock proposed to be Transferred, and (iii) the Stock
     represented hereby will be automatically converted into and exchanged for
     Excess Stock (having no dividend or voting rights), which will be held in
     trust by the Corporation. All capitalized terms in this legend have the
     meanings defined in the Charter of the Corporation, a copy of which,
     including the restrictions on ownership and transfer, will be sent without
     charge to each stockholder who directs a request to the Secretary of the
     Corporation."
 
          (v) Subject to Section 2(f)(iii) of this Article V, nothing contained
     in this Article V shall limit the authority of the Board of Directors to
     take such other action as it deems necessary or advisable to protect the
     Corporation and the interests of its stockholders by preservation of the
     Corporation's status as a REIT.
 
     (f) Exemptions.
 
          (i) The Board of Directors, upon receipt of a ruling from the Internal
     Revenue Service or an opinion of counsel or other evidence satisfactory to
     the Board of Directors and upon at least 15 days' written notice from a
     Transferee prior to a proposed Transfer that, if consummated, would result
     in the intended Transferee Beneficially Owning Equity Stock in excess of
     the Ownership Limit, and upon such other conditions as the Board of
     Directors may direct, may in its sole and absolute discretion exempt a
     Person from the Ownership Limit.
 
          (ii) The Board of Directors, upon receipt of a ruling from the
     Internal Revenue Service or an opinion of counsel or other evidence
     satisfactory to the Board Directors, may in its sole and absolute
     discretion exempt a Person from the limitation on a Person Constructively
     Owning Equity Stock in excess of the Ownership Limit, if (x) such Person
     does not and represents that it will not directly own or Constructively Own
     more than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the
     Code) in a tenant of the Corporation; (y) the Corporation obtains such
     representations and undertakings from such Person as are reasonably
     necessary to ascertain this fact; and (z) such Person agrees that any
     violation or attempted violation of such representations, undertakings and
     agreement will result in such Equity Stock in excess of the Ownership Limit
     being converted into and exchanged for Excess Stock in accordance with
     Section 2(c) of this Article V.
 
          (iii) Nothing in this Article V shall preclude the settlement of a
     transaction entered into through the facilities of any interdealer
     quotation system or national securities exchange upon which Equity Stock is
     traded. Notwithstanding the previous sentence, certain transactions may be
     settled by providing Excess Stock as set forth in this Article V.
 
          (iv) The ownership restrictions set forth in this Section 2 of this
     Article V shall not apply until the effective date of the merger between
     the Corporation and EastGroup Properties, a Maryland real estate investment
     trust.
 
SECTION 3.  CLASSIFICATION AND RECLASSIFICATION OF STOCK.
 
     (a) Power of Board to Classify or Reclassify Stock.  The Board of Directors
shall have the power, in its sole discretion and without limitation, to classify
or reclassify any unissued Stock, whether now or hereafter authorized, by
setting, altering or eliminating in any one or more respects, from time to time,
before the issuance of such Stock, any feature of such Stock, including, but not
limited to, the designation, preferences, conversion or other rights, voting
powers, qualifications and terms and conditions of redemption of, and
limitations as to dividends and any other restrictions on, such Stock. The power
of the Board of Directors to classify and reclassify any of the shares of
capital stock shall include, without limitation, subject to the provisions of
the Charter, authority to classify or reclassify any unissued shares of such
stock into a class or
 
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<PAGE>   46
 
classes of preferred stock, preference stock, special stock or other stock, and
to divide and classify shares of any class into one or more series of such
class, by determining, fixing or altering one or more of the following:
 
          (i) The distinctive designation of such class or series and the number
     of shares which constitute such class or series; provided that, unless
     otherwise prohibited by the terms of such or any other class or series, the
     number of shares of any class or series may be decreased by the Board of
     Directors in connection with any classification or reclassification of
     unissued shares and the number of shares of such class or series may be
     increased by the Board of Directors in connection with any such
     classification or reclassification, and any shares of any class or series
     which have been redeemed, purchased, otherwise acquired or converted into
     shares of Common Stock or any other class or series shall become part of
     the authorized capital stock and be subject to classification and
     reclassification as provided in this subparagraph.
 
          (ii) Whether or not and, if so, the rates, amounts and times at which,
     and the conditions under which, dividends shall be payable on shares of
     such class or series, whether any such dividends shall rank senior or
     junior to or on a parity with the dividends payable on any other class or
     series of stock, and the status of any such dividends as cumulative,
     cumulative to a limited extent or non-cumulative and as participating or
     non-participating.
 
          (iii) Whether or not shares of such class or series shall have voting
     rights, in addition to any voting rights provided by law and, if so, the
     terms of such voting rights.
 
          (iv) Whether or not shares of such class or series shall have
     conversion or exchange privileges and, if so, the terms and conditions
     thereof, including provision for adjustment of the conversion or exchange
     rate in such events or at such times as the Board of Directors shall
     determine.
 
          (v) Whether or not shares of such class or series shall be subject to
     redemption and, if so, the terms and conditions of such redemption,
     including the date or dates upon or after which they shall be redeemable
     and the amount per share payable in case of redemption, which amount may
     vary under different conditions and at different redemption dates; and
     whether or not there shall be any sinking fund or purchase account in
     respect thereof, and if so, the terms thereof.
 
          (vi) The rights of the holders of shares of such class or series upon
     the liquidation, dissolution or winding up of the affairs of, or upon any
     distribution of the assets of, the Corporation, which rights may vary
     depending upon whether such liquidations dissolution or winding up is
     voluntary or involuntary and, if voluntary, may vary at different dates,
     and whether such rights shall rank senior or junior to or on a parity with
     such rights of any other class or series of stock.
 
          (vii) Whether or not there shall be any limitations applicable, while
     shares of such class or series are outstanding, upon the payment of
     dividends or making of distributions on, or the acquisition of, or the use
     of moneys for purchase or redemption of, any stock of the Corporation, or
     upon any other action of the Corporation, including action under this
     subparagraph, and, if so, the terms and conditions thereof.
 
          (viii) Any other preferences, rights, restrictions, including
     restrictions on transferability, and qualifications of shares of such class
     or series, not inconsistent with law and the Charter of the Corporation.
 
     (b) Ranking of Stock.  For the purposes hereof and of any articles
supplementary to the Charter providing for the classification or
reclassification of any shares of capital stock or of any other charter document
of the Corporation (unless otherwise provided in any such articles or document),
any class or series of stock of the Corporation shall be deemed to rank:
 
          (i) Prior to another class or series either as to dividends or upon
     liquidation, if the holders of such class or series shall be entitled to
     the receipt of dividends or of amounts distributable on liquidation,
     dissolution or winding up, as the case may be, in preference or priority to
     holders of such other class or series.
 
          (ii) On a parity with another class or series either as to dividends
     or upon liquidation, whether or not the dividend rates, dividend payment
     dates or redemption or liquidation price per share thereof be
 
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<PAGE>   47
 
     different from those of such others, if the holders of such class or series
     of stock shall be entitled to receipt of dividends or amounts distributable
     upon liquidation, dissolution or winding up, as the case may be, in
     proportion to their respective dividend rates or redemption or liquidation
     prices, without preference or priority over the holders of such other class
     or series.
 
          (iii) Junior to another class or series either as to dividends or upon
     liquidation, if the rights of the holders of such class or series shall be
     subject or subordinate to the rights of the holders of such other class or
     series in respect of the receipt of dividends or the amounts distributable
     upon liquidation, dissolution or winding up, as the case may be.
 
SECTION 4.  COMMON STOCK.
 
     Subject to the provisions of Sections 2 and 5 of this Article V, the Common
Stock shall have the following preferences, rights, powers, restrictions,
limitations and qualifications, and such others as may be afforded by law:
 
     (a) Voting Rights.  Except as may otherwise be required by law, and subject
to action, if any, by the Board of Directors, pursuant to Section 3 of this
Article V, each holder of Common Stock shall have one vote in respect of each
share of Common Stock held of record on all matters to be voted upon by the
stockholders. Holders of shares of Common Stock shall not have cumulative voting
rights.
 
     (b) Dividend Rights.  After provision(s) with respect to preferential
dividends on any then outstanding classes of preferred stock, if any, fixed by
the Board of Directors pursuant to Section 3 of this Article V, shall have been
satisfied, and after satisfaction of any other requirements, if any, including
with respect to redemption rights and preferences, of any such classes of
preferred stock, then and thereafter the holders of Common Stock shall be
entitled to receive, pro rata in relation to the number of shares of Common
Stock held by them, such dividends or other distributions as may be declared
from time to time by the Board of Directors out of funds legally available
therefor.
 
     (c) Liquidation Rights.  In the event of the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, after distribution in
full of the preferential amounts, if any, fixed pursuant to Section 3 of this
Article V, to be distributed to the holders of any then outstanding preferred
stock, and subject to the right, if any, of the holders of any outstanding
preferred stock to participate further in any liquidating distributions, all of
the assets of the Corporation, if any, remaining, of whatever kind available for
distribution to stockholders after the foregoing distributions have been made
shall be distributed to the holders of the Common Stock, ratably in proportion
to the number of shares of Common Stock held by them. For purposes of making
liquidating distributions pursuant to this Section 4(c) of this Article V,
Excess Stock shall be included as part of the preferred stock and the Common
Stock to the extent provided in Section 5(e) of this Article V below.
 
     (d) Conversion Rights.  Each share of Common Stock is convertible into
Excess Stock as provided in Section 2(c) of this Article V.
 
SECTION 5.  EXCESS STOCK.
 
     (a) Condition to Issuance.  The provisions of this Article V to the
contrary notwithstanding, the automatic conversion and exchange of certain
Equity Stock into Excess Stock in the circumstances provided for in Section 2(c)
of this Article V shall be deemed not to have occurred, nunc pro tunc, if the
Corporation shall have determined, in the sole and absolute discretion of the
Board of Directors, that the issuance by the Corporation of Excess Stock would
cause the Corporation to fail to satisfy the organizational and operational
requirements that must be met for the Corporation to qualify for treatment as a
REIT.
 
     (b) Ownership of Excess Stock in Trust.  Upon any purported Transfer that
results in Excess Stock pursuant to Section 2(c) of this Article V, such Excess
Stock shall not be issued in certificated form but shall be held by the
Corporation, in book entry form, as Trustee in Trust for the exclusive benefit
of such Beneficiary or Beneficiaries to whom an interest in such Excess Stock
may later be transferred pursuant to Section 5(f) of this Article V. Excess
Stock so held in Trust shall be issued and outstanding Stock of the
 
                                       B-8
<PAGE>   48
 
Corporation. The Purported Record Transferee shall have no rights in such Excess
Stock except the right to designate a transferee of such Excess Stock upon the
terms specified in Section 5(f) of this Article V. The Purported Beneficial
Transferee shall have no rights in such Excess Stock except as provided in
Section 5(f) of this Article V.
 
     (c) No Voting Rights.  Except as required by law, Excess Stock shall not be
entitled to vote on any matters.
 
     (d) No Dividend Rights.  Excess Stock shall not be entitled to any
dividends. Any dividend or distribution paid prior to the discovery by the
Corporation that Equity Stock had been converted into Excess Stock shall be
repaid to the Corporation upon demand.
 
     (e) Liquidation Rights.  In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation, each holder of share(s) of Excess Stock shall be entitled to
receive that portion of the assets of the Corporation that would have been
distributed to the Equity Stock in respect of which the Excess Stock was issued.
The Corporation, as holder of the Excess Stock in Trust or, if the Corporation
has been dissolved, any trustee appointed by the Corporation prior to its
dissolution, shall distribute ratably to the Beneficiaries of the Trust, when
determined, any such assets received in respect of the Excess Stock in any
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation.
 
     (f) Restrictions on Transfer; Designation of Beneficiary.
 
          (i) Excess Stock shall not be transferable. The Purported Record
     Transferee may freely designate a Beneficiary of an interest in the Trust
     (representing the number of shares of Excess Stock held by the Trust
     attributable to a purported Transfer that resulted in Excess Stock), if the
     Excess Stock held in the Trust would not be Excess Stock in the hands of
     such Beneficiary and the Purported Record Transferee does not receive a
     price for designating such Beneficiary that reflects a price per share of
     Excess Stock that exceeds (x) the price per share that such Purported
     Record Transferee paid for the Equity Stock in the purported Transfer that
     resulted in the Excess Stock; or (y) if the Purported Record Transferee did
     not give value for such Excess Stock (through a gift, devise or other
     transaction), the price per share equal to the Market Price on the date of
     the purported Transfer that resulted in the Excess Stock. Upon such
     transfer of an interest in the Trust, the corresponding shares of Excess
     Stock in the Trust shall automatically be exchanged for an equal number of
     shares of Equity Stock, and such shares of Equity Stock shall be
     transferred of record to the transferee of the interest in the Trust if
     such Equity Stock would not be Excess Stock in the hands of such
     Beneficiary. Prior to any transfer of any interest in the Trust, the
     Purported Record Transferee must give advance notice to the Corporation of
     the intended transfer and the Corporation must have waived in writing its
     redemption rights under Section 2(d) of this Article V.
 
          (ii) Notwithstanding the foregoing, if a Purported Record Transferee
     receives a price for designating a Beneficiary of an interest in the Trust
     that exceeds the amounts allowable under Section 5(f)(i) of this Article V,
     such Purported Record Transferee shall pay, or cause such Beneficiary to
     pay, such excess to the Corporation.
 
     (g) Conversion Right.  Each share of Excess Stock is convertible into
Equity Stock as provided in Section 2(c) of this Article V.
 
SECTION 6.  GENERAL PROVISIONS.
 
     (a) Interpretation and Ambiguities.  The Board of Directors shall have the
power to interpret and to construe the provisions of this Article V, including
any definition contained in Section 1, and the Board of Directors shall have the
power to determine the application of the provisions of this Article V with
respect to any situation based on the facts known to it, and any such
interpretation, construction and determination shall be final and binding on all
interested parties, including the stockholders.
 
                                       B-9
<PAGE>   49
 
     (b) Severability.  If any provision of this Article V or any application of
any such provision is determined to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
 
                                   ARTICLE VI
 
                             THE BOARD OF DIRECTORS
 
SECTION 1.  AUTHORIZED NUMBER AND INITIAL DIRECTORS.
 
     The business and affairs of the Corporation shall be managed by a Board of
Directors. The authorized number of directors of the Corporation initially shall
be seven, which number may be increased or decreased pursuant to the Bylaws of
the Corporation, but shall never be less than the minimum number permitted by
the General Laws of the State of Maryland now or hereafter in force. The persons
who shall serve as directors effectively immediately and until the first annual
meeting of stockholders and until their successors are duly elected and qualify
are as follows:
 
                              Alexander G. Anagnos
                                H.C. Bailey, Jr.
                               David H. Hoster II
                                Harold B. Judell
                                 David M. Osnos
                                 John N. Palmer
                                Leland R. Speed
 
SECTION 2.  GENERAL TERM OF OFFICE.
 
     Each director shall serve for a term of one year and until such director's
successor is elected and qualified or until such director's death, retirement,
resignation or removal.
 
SECTION 3.  REMOVAL OF DIRECTORS.
 
     A director may be removed from office but only for cause and only by the
affirmative vote of the holders of at least two-thirds of the combined voting
power of all shares of capital stock entitled to be cast in the election of
directors voting together as a single class.
 
SECTION 4.  FILLING VACANCIES.
 
     Except as may otherwise be provided with respect to any rights of holders
of preferred stock to elect additional directors, or in any agreement relating
to the right to designate nominees for election to the Board of Directors,
should a vacancy on the Board of Directors occur or be created (whether arising
through death, retirement resignation or removal), other than through an
increase but not a decrease, in the number of authorized directors, such vacancy
shall be filled by the affirmative vote of a majority of the remaining
directors, even though less than a quorum of the Board of Directors. A vacancy
on the Board of Directors resulting from an increase in the number of directors
shall be filled by the affirmative vote of a majority of the entire Board of
Directors. By the vote required to elect a director, the stockholders may fill
any vacancy on the Board of Directors resulting from the removal of a director.
 
SECTION 5.  BOARD AUTHORIZATION OF SHARE ISSUANCES.
 
     The Board of Directors of the Corporation may authorize the issuance from
time to time of Stock of any class, whether now or hereafter authorized, or
securities convertible into Stock of any class, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem advisable,
subject to such restrictions or limitations, if any, as may be set forth in the
Charter or the Bylaws of the Corporation.
 
                                      B-10
<PAGE>   50
 
SECTION 6.  PREEMPTIVE RIGHTS.
 
     No holder of any Stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preemptive right to subscribe for or
purchase any Stock or any other securities of the Corporation other than such,
if any, as the Board of Directors, in its sole discretion, may determine and at
such price or prices and upon such other terms as the Board of Directors, in its
sole discretion, may fix; and any Stock or other securities which the Board of
Directors may determine to offer for subscription may, as the Board of Directors
in its sole discretion shall determine, be offered to the holders of any class,
series or type of Stock or other securities at the time outstanding to the
exclusion of the holders of any or all other classes, series or types of stock
or other securities at the time outstanding.
 
SECTION 7.  AMENDMENTS TO THE BYLAWS.
 
     In furtherance and not in limitation of the power conferred by statute, the
Board of Directors is expressly authorized to adopt, alter or repeal Bylaws of
the Corporation by vote of two-thirds of the Board of Directors. The
stockholders may adopt, alter and repeal Bylaws of the Corporation only by the
affirmative vote of 80% of the aggregate votes entitled to be cast with respect
thereto.
 
SECTION 8.  CERTAIN OTHER DETERMINATIONS BY THE BOARD OF DIRECTORS.
 
     The determination as to any of the following matters, made in good faith by
or pursuant to the direction of the Board of Directors consistent with the
Charter and in the absence of actual receipt of an improper benefit in money,
property or services or active and deliberate dishonesty established by a court,
shall be final and conclusive and shall be binding upon the Corporation and
every holder of Stock: the amount of the net income of the Corporation for any
period and the amount of assets at any time legally available for the payment of
dividends, redemption of Stock or the payment of other distributions on Stock;
the amount of paid-in surplus, net assets, annual or other net profit, net
assets in excess of capital, undivided profits or excess of profits over losses
on sales of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation nor liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; and any matters relating to the
acquisition, holding and disposition of any assets of the Corporation.
 
SECTION 9.  RESERVED POWERS OF THE BOARD OF DIRECTORS.
 
     The enumeration and definition of particular powers of the Board of
Directors included in this Article VI shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other provision of the charter of the Corporation, or construed or deemed by
inference or otherwise in any manner to exclude or limit the powers conferred
upon the Board of Directors under the general laws of the State of Maryland as
now or hereafter in force.
 
                                  ARTICLE VII
 
                PROVISIONS FOR DEFINING, LIMITING AND REGULATING
                  CERTAIN POWERS OF THE CORPORATION AND OF THE
                           STOCKHOLDERS AND DIRECTORS
 
SECTION 1.  RELATED PARTY TRANSACTIONS.
 
     Without limiting any other procedure available by law or otherwise to the
Corporation, the Board of Directors may authorize any agreement or other
transaction with any person, corporation, association, company, trust,
partnership (limited or general) or other organization, although one or more of
the directors or officers of the Corporation may be a party to any such
agreement or any officer, director, stockholder or member of such other party
(an "Interested Officer/Director"), and no such agreement or transaction shall
be
 
                                      B-11
<PAGE>   51
 
   
invalidated or rendered void or voidable solely by reason of the existence of
any such relationship if: (i) the existence is disclosed or known to the Board
of Directors, and the contract or transaction is authorized, approved or
ratified by the affirmative vote of a majority of the disinterested directors,
even if they constitute less than a quorum of the Board of Directors; or (ii)
the existence is disclosed to the stockholders entitled to vote, and the
contract or transaction is authorized, approved or ratified by a majority of the
votes cast by the stockholders entitled to vote, other than the votes of the
stock held of record by the Interested Officers/Directors; or (iii) the contract
or transaction is fair and reasonable to the Corporation. Any Interested
Officer/Director of the Corporation or the stock owned by them or by a
corporation, association, company, trust, partnership (limited or general) or
other organization in which an Interested Officer/Director may have an interest,
may be counted in determining the presence of a quorum at a meeting of the Board
of Directors or a committee of the Board of Directors or at a meeting of the
stockholders, as the case may be, at which the contract or transaction is
authorized, approved or ratified.
    
 
SECTION 2.  REIT QUALIFICATION.
 
     After the Corporation has initially elected to qualify as a REIT under the
Code, the Board of Directors shall use its reasonable best efforts to cause the
Corporation and its stockholders to qualify for U.S. federal income tax
treatment in accordance with the provision of the Code applicable to a REIT. In
furtherance of the foregoing, the Board of Directors shall use its reasonable
best efforts to take such actions as are necessary, and may take such actions as
in its sole judgment and discretion are desirable, to preserve the status of the
Corporation as a REIT, provided, however, that if the Board of Directors
determines in its discretion, that it is no longer in the best interests of the
Corporation to continue to have the Corporation qualify as a REIT, the Board of
Directors may revoke or otherwise terminate the Corporation's REIT election
pursuant to Section 856(g) of the Code. Nothing contained in the Charter shall
limit the authority of the Board of Directors to take such action as it in its
sole discretion deems necessary or advisable to protect the Corporation and the
interests of the stockholders by maintaining the Corporation's eligibility to
be, and preserving the Corporation's status as, a qualified REIT under the Code.
 
SECTION 3.  STOCKHOLDER ACTIONS.
 
     (a) Stockholder Meetings.  Action shall be taken by the stockholders only
at annual or special meetings of stockholders, or by unanimous written consent
of the holders of all Equity Stock entitled to vote on such action at a meeting
of stockholders, if such written consent is accompanied by a written waiver of
any right to dissent signed by each stockholder entitled to notice of the
meeting but not entitled to vote at such meeting.
 
     (b) Special Meetings of the Stockholders.  Special meetings of the
stockholders of the Corporation for any purpose or purposes may be called at any
time by the President, the Chief Executive Officer, the Chairman of the Board of
Directors, or by a majority of the members of the Board of Directors. Special
meetings of stockholders of the Corporation shall be called at the request of
the holders of a majority of all the votes entitled to be cast at the meeting.
 
SECTION 4.  OTHER CONSIDERATIONS.
 
     The Board of Directors shall, in connection with the exercise of its
business judgment involving a Business Combination (as defined in Section 3-601
of the Corporations and Associations Article of the Annotated Code of Maryland)
or any actual or proposed transaction which would or may involve a change in
control of the Corporation (whether by purchases of shares of stock or any other
securities of the Corporation in the open market, or otherwise, tender offer,
merger, consolidation, dissolution, liquidation, sale of all or substantially
all of the assets of the Corporation, proxy solicitation or otherwise), in
determining what is in the best interests of the Corporation and its
stockholders and in making any recommendation to its stockholders, give due
consideration to all relevant factors, including, but not limited to (a) the
economic effect, both immediate and long-term, upon the Corporation's
stockholders, including stockholders, if any, who do not participate in the
transaction; (b) the social and economic effect on the employees, customers of,
and others dealing with, the Corporation and its subsidiaries and on the
communities in which the Corporation and its subsidiaries operate or are
located; (c) whether the proposal is acceptable based on the historical and
current
 
                                      B-12
<PAGE>   52
 
operating results or financial condition of the Corporation; (d) whether a more
favorable price could be obtained for the Corporation's stock or other
securities in the future; (e) the reputation and business practices of the
offeror and its management and affiliates as they would affect the employees of
the Corporation and its subsidiaries; (f) the future value of the stock or any
other securities of the Corporation; (g) any antitrust or other legal and
regulatory issues that are raised by the proposal; and (h) the business and
financial condition and earnings prospects of the acquiring person or entity,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition, and other likely financial obligations of the acquiring person or
entity. If the Board of Directors determines that any proposed Business
Combination (as defined in Section 3-601 of the Corporations and Associations
Article of the Annotated Code of Maryland) or actual or proposed transaction
which would or may involve a change in control of the Corporation should be
rejected, it may take any lawful action to defeat such transaction, including,
but not limited to, any or all of the following: advising stockholders not to
accept the proposal; instituting litigation against the party making the
proposal; filing complaints with governmental and regulatory authorities;
acquiring the stock or any of the securities of the Corporation; selling or
otherwise issuing authorized but unissued stock, other securities or granting
options or rights with respect thereto; acquiring a company to create an
antitrust or other regulatory problem for the party making the proposal; and
obtaining a more favorable offer from another individual or entity.
 
SECTION 5.  STOCKHOLDER PROPOSALS.
 
     For any stockholder proposal to be presented in connection with an annual
meeting of stockholders of the Corporation, including any proposal relating to
the nomination of a director to be elected to the Board of Directors of the
Corporation, the stockholders must have given timely written notice thereof in
Writing to the Secretary of the Corporation in the manner and containing the
information required by the Bylaws. Stockholder proposals to be presented in
connection with a special meeting of stockholders will be presented by the
Corporation only to the extent required by Section 2-502 of the Corporations and
Associations Article of the Annotated Code of Maryland.
 
SECTION 6.  VOTING REQUIREMENTS.
 
     Notwithstanding any provision of law requiring the authorization of any
action by a greater proportion than a majority of the total number of shares of
all classes of capital stock or the total number of shares of any class of
capital stock, such action shall be valid and effective if authorized by the
affirmative vote of the holders of a majority of the total number of shares of
all classes and entitled to vote thereon, except as otherwise provided in the
Charter of the Corporation. All mergers, consolidations, share exchanges,
recapitalizations or dissolutions to which the Corporation is a party and all
sales of all or substantially all the assets of the Corporation shall not be
valid and effective unless advised by at least two-thirds of the Board of
Directors.
 
                                  ARTICLE VIII
 
                           INDEMNIFICATION OF AGENTS
             AND LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS
 
SECTION 1.  INDEMNIFICATION.
 
     The Corporation shall provide any indemnification permitted by the laws of
Maryland and shall indemnify directors, officers, agents and employees as
follows: (a) the Corporation shall indemnify its directors and officers, whether
serving the Corporation or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures and
to the full extent permitted by law and (b) the Corporation shall indemnify
other employees and agents, whether serving the Corporation or at its request
any other entity, to such extent as shall be authorized by the Board of
Directors or the Corporation's Bylaws and be permitted by law. The foregoing
rights of indemnification shall not be exclusive of any other rights to which
those
 
                                      B-13
<PAGE>   53
 
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
Charter of the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal or shall limit or
eliminate the rights granted under indemnification agreements entered into by
the corporation and its directors, officers, agents and employees.
 
SECTION 2.  LIMITATION OF LIABILITY.
 
     To the fullest extent permitted by Maryland statutory or decisional law, as
amended or interpreted, no director or officer of the Corporation shall be
liable to the Corporation or its stockholders for money damages. No amendment of
the Charter of the Corporation or repeal any of its provisions shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or omission which occurred prior to such amendment or repeal.
 
                                   ARTICLE IX
 
                                   AMENDMENTS
 
     (a) Right to Amend Charter.  The Corporation reserves the right to amend,
alter, change or repeal any provision contained in the Charter, including any
amendments changing the terms or contract rights, as expressly set forth in the
Charter, of any of its outstanding stock by classification, reclassification or
otherwise, by a majority of the directors' adopting a resolution setting forth
the proposed change, declaring its advisability, and either calling a special
meeting of the stockholders entitled to vote on the proposed change, or
directing the proposed change to be considered at the next annual stockholders
meeting. Unless otherwise provided herein, the proposed change will be effective
only if it is adopted upon the affirmative vote of the holders of not less than
a majority of the aggregate votes entitled to be cast thereon (considered for
this purpose as a single class); provided, however, that any amendment to,
repeal of or adoption of any provision inconsistent with Article VI, Article
VIII or this Article IX will be effective only if it is also advised by at least
two-thirds of the Board of Directors.
 
     (b) Certain Amendments Requiring Special Stockholder Vote.  Any provision
of the Charter of the Corporation to the contrary notwithstanding:
 
          (i) no term or provision of the Charter of the Corporation may be
     added, amended or repealed in any respect that would, in the determination
     of the Board of Directors, cause the Corporation not to qualify as a REIT
     under the Code;
 
          (ii) Article VI, Section 3 (removal of directors) and Section 6
     (amendments of Bylaws); Article VIII (indemnification of agents and
     limitation of liability of officers and directors); and this Article IX
     shall not be amended or repealed; and
 
          (iii) no provision imposing cumulative voting in the election of
     directors may be added to the Charter of the Corporation;
 
unless in each such case, in addition to any vote required by the terms of then
outstanding preferred stock, such action is approved by the affirmative vote of
the holders of not less than eighty percent (80%) of all of the votes entitled
to be cast on the matter.
 
     IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
 
Dated: April 3, 1997
                                                     /s/ Kayla E. Klos
 
                                            ------------------------------------
                                                Kayla E. Klos, Incorporator