<PAGE>
 
                           SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
                              (Amendment No. ____)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [  ]

Check the appropriate box:

[X]  Preliminary Proxy Statement      [  ]  Confidential, for Use of the
                                            Commission Only 
                                            (as permitted by Rule 14a-6(e)(2))
[  ]  Definitive Proxy Statement
[  ]  Definitive Additional Materials
[  ]  Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

                           REGENCY REALTY CORPORATION
                (Name of Registrant as Specified in its Charter)

                 ---------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]   $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
      Item 22(a)(2) of Schedule 14A.

[  ]  $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
      6(i)(3).

[  ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

      1)  Title of each class of securities to which transaction applies:

      2)  Aggregate number of securities to which transaction applies:

      3)  Per unit price or other underlying value of transaction computed
      pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
      filing fee is calculated and state how it was determined):
      
      4)  Proposed maximum aggregate value of transaction:

      5)  Total fee paid:

[  ]  Fee paid previously with preliminary materials.

[  ]  Check box if any part of the fee is offset as provided by Exchange Act
      Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
      paid previously. Identify the previous filing by registration statement
      number, or the Form or Schedule and the date of its filing.

      1)  Amount Previously Paid:
 
      2)  Form, Schedule or Registration Statement No.:
 
      3)  Filing Party:

      4)  Date Filed:

<PAGE>
 
                                PRELIMINARY COPY

                           REGENCY REALTY CORPORATION


                                      August 2, 1996

  Dear Shareholder:

            You are cordially invited to attend a Special Meeting of
  Shareholders of Regency Realty Corporation (the "Company") to be held on
  Tuesday, September 10, 1996, at 2:00 p.m. local time, at the Company's
  headquarters at 121 West Forsyth Street, Suite 200, Jacksonville, Florida.

            As described in the accompanying Proxy Statement, the Company has
  entered into a Stock Purchase Agreement with Security Capital U.S. Realty and
  Security Capital Holdings S.A. (together, "US Realty"), affiliates of Security
  Capital Group, providing for US Realty to invest a total of up to
  approximately $132 million in the Company.  The Board of Directors and
  management believe that this transaction represents an attractive opportunity
  to improve long-term shareholder value by providing the Company with access to
  significant equity capital at an attractive cost and additionally provides
  strategic resources not otherwise readily available to it, thereby enhancing
  the Company's short-term and long-term growth prospects and better positioning
  it to capitalize on shopping center opportunities in the southeastern United
  States.

            At the Special Meeting, you will be asked to approve the
  transactions contemplated by the Stock Purchase Agreement, including an
  amendment to the Company's charter expressly authorizing US Realty to own up
  to 45% of the Company's outstanding common stock, on a fully diluted basis,
  and making certain other modifications to facilitate the Company's continued
  qualification as a domestically controlled real estate investment trust.
  Details of the proposals are set forth in the accompanying Proxy Statement,
  which I urge you to read carefully.

            The matters to be considered and voted upon at the Special Meeting
  are of great importance to your investment and the future of the Company.
  YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSALS BEING SUBMITTED
  FOR APPROVAL BY THE SHAREHOLDERS AT THE SPECIAL MEETING AND HAS DETERMINED
  THAT THEY ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
  ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
                                                                            ---
  APPROVAL OF THE US REALTY TRANSACTION AND THE RELATED CHARTER AMENDMENT.

            Your vote is important.  I hope that you will be able to attend the
  meeting in person. However, whether or not you plan to attend the meeting,
  please indicate your vote, sign, date and return the enclosed proxy card
  promptly.  A prepaid envelope is provided for this purpose.  Your shares will
  be voted at the meeting in accordance with your proxy, if given.

            I look forward to seeing you at the Special Meeting.

                                      Sincerely,


                                      REGENCY REALTY CORPORATION


                                      ------------------------------------
                                      Martin E. Stein, Jr.
                                      President and Chief Executive Officer

<PAGE>
 
                           Regency Realty Corporation

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

                           NOTICE AND PROXY STATEMENT
                                ----------------

                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                         TO BE HELD SEPTEMBER 10, 1996


            NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
  "Special Meeting") of Regency Realty Corporation, a Florida corporation (the
  "Company"), will be held on September 10, 1996, at 2:00 p.m. local time, at
  the Company's headquarters at 121 West Forsyth Street, Suite 200,
  Jacksonville, Florida, for the following purposes:

            1.  To consider and vote upon the transactions (collectively, the
  "Transaction") contemplated by a Stock Purchase Agreement (the "Stock Purchase
  Agreement") among the Company, Security Capital U.S. Realty and Security
  Capital Holdings S.A., a wholly-owned subsidiary of Security Capital U.S.
  Realty (together with Security Capital U.S. Realty, "US Realty"), including
  (i) the investment of up to an aggregate of approximately $132 million in the
  Company by US Realty, to be effected through the sale by the Company of up to
  7,499,400 shares of common stock, par value $.01 per share ("Common Stock"),
  at a purchase price of $17.625 per share, plus a purchase price adjustment
  based on accrued dividends, such investment being comprised of (A) the sale by
  the Company to US Realty, completed on July 10, 1996, of 934,400 shares of
  Common Stock, representing an aggregate investment of approximately $16.5
  million, (B) the sale by the Company to US Realty, following shareholder
  approval, of an additional 2,717,400 shares of Common Stock, representing an
  additional aggregate investment of approximately $47.9 million, and (C) the
  sale by the Company from time to time following shareholder approval of up to
  an aggregate of 3,847,600 shares of Common Stock representing an additional
  aggregate investment of up to $67.8 million, as more fully described in the
  attached Proxy Statement; (ii) the grant to US Realty, under certain
  circumstances, of a right to nominate for election by shareholders its
  proportionate share of the members of the Board of Directors of the Company
  (but generally not fewer than two nor more than 49% of the directors); (iii)
  the grant to US Realty of certain rights to information regarding the Company;
  (iv) provisions that limit the ability of US Realty to acquire additional
  shares of the Company's capital stock, exercise its voting rights in its own
  discretion and engage in certain other actions during an initial five-year
  standstill period, subject to automatic one-year extensions; (v) limitations
  during the standstill period on the Company's ability to engage in certain
  corporate transactions without the consent of US Realty; (vi) provisions that
  restrict US Realty from transferring its shares of the Company's capital stock
  except in accordance with applicable securities laws and subject to the
  generally applicable ownership limits in the Company's charter, as amended,
  and to certain other restrictions; (vii) the grant to US Realty of rights to
  purchase, under certain circumstances, shares of the Company's capital stock
  in connection with future issuances by the Company; and (viii) the grant to US
  Realty of certain registration rights to enable US Realty to resell its shares
  of the Company's capital stock to the public under certain conditions
  (Proposal 1); and

            2.  To consider and vote upon the proposed amendment to the
  Company's charter to expressly authorize US Realty to acquire up to 45% of the
  Company's outstanding Common Stock, on a fully diluted basis, to permit
  individuals (and entities treated as individuals) who are treated as owning
  shares of Company capital stock as a result of the ownership of shares by US
  Realty and its affiliates to own up to 9.8% of the Company's outstanding
  capital stock and to make certain other modifications to facilitate the
  Company's continued qualification as a domestically controlled real estate
  investment trust for federal income tax purposes (Proposal 2).

<PAGE>
 
            The Company is seeking shareholder approval of the issuance of the
  shares of Common Stock in connection with the Transaction to comply with
  certain requirements of the New York Stock Exchange, Inc.  The Company is
  seeking shareholder approval of the proposed amendment to the Company's
  charter in accordance with Florida law and the Company's charter.  Approval of
  the Transaction (Proposal 1) and the proposed amendment to the Company's
  charter (Proposal 2) by the requisite votes of shareholders is a condition to
  consummation of the Transaction.  Proposal 1 and Proposal 2 are each
  conditioned upon the approval of the other and neither of such proposals may
  be approved independently.

            Pursuant to the Bylaws of the Company, the Company's Board of
  Directors has fixed the close of business on July 26, 1996 as the record date
  for the determination of shareholders of the Company entitled to notice of and
  to vote at the Special Meeting.  Therefore, only record holders of Common
  Stock at the close of business on that date are entitled to notice of and to
  vote at the Special Meeting.

            We urge you to review carefully the enclosed materials.  Your vote
  is important.  All shareholders are urged to attend the meeting in person or
  by proxy. If you receive more than one proxy card because your shares are
  registered in different names or at different addresses, please indicate your
  vote, sign, date and return each proxy card so that all of your shares will be
  represented at the Special Meeting.

                                      By Order of the Board of Directors,


                                      /s/ J. Christian Leavitt
                                      -----------------------------------------
                                      J. Christian Leavitt
                                      Vice President and Treasurer


  August 2, 1996


  IT IS IMPORTANT THAT ALL PROXIES BE RETURNED PROMPTLY.  THEREFORE, WHETHER OR
  NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE INDICATE YOUR VOTE, SIGN,
  DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.  YOU
  MAY, IF YOU WISH, REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED,
  INCLUDING BY VOTING AT THE MEETING.


<PAGE>
 
                           Regency Realty Corporation

                       121 West Forsyth Street, Suite 200
                          Jacksonville, Florida  32202

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

                     PROXY STATEMENT FOR SPECIAL MEETING OF
                   SHAREHOLDERS TO BE HELD SEPTEMBER 10, 1996

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


            This Proxy Statement is being furnished in connection with the
  solicitation of proxies by the Board of Directors (the "Board") of Regency
  Realty Corporation, a Florida corporation (the "Company"). The proxies will be
  used at a Special Meeting of Shareholders of the Company (the "Special
  Meeting") to be held on Tuesday, September 10, 1996, at 2:00 p.m. local time,
  at the Company's headquarters at 121 West Forsyth Street, Suite 200,
  Jacksonville, Florida, and at any adjournment thereof.

            At the Special Meeting, and at any adjournments thereof, holders of
  the common stock of the Company, par value $.01 per share (the "Common
  Stock"), will be asked to consider and vote upon the transactions
  (collectively, the "Transaction") contemplated by a Stock Purchase Agreement
  (the "Stock Purchase Agreement"), dated as of June 11, 1996, among the
  Company, Security Capital U.S. Realty and Security Capital Holdings S.A.
  ("Holdings"), a wholly-owned subsidiary of Security Capital U.S. Realty
  (Security Capital U.S. Realty and Holdings being collectively or individually,
  as the context requires, referred to herein as "US Realty"), including the
  investment of up to an aggregate of approximately $132 million in the Company
  by US Realty, to be effected through the sale by the Company of an aggregate
  of up to 7,499,400 shares of Common Stock at a purchase price of $17.625 per
  share (plus a purchase price adjustment based on accrued dividends).  The
  investment of up to $132 million is comprised of (i) the sale by the Company
  to US Realty, completed on July 10, 1996 (the "Initial Closing"), of 934,400
  shares, representing an aggregate investment of approximately $16.5 million,
  (ii) the sale by the Company to US Realty, following shareholder approval, of
  an additional 2,717,400 shares of Common Stock, representing an additional
  aggregate investment of approximately $47.9 million (the "Second Closing"),
  and (iii) the sale by the Company to US Realty of up to an additional
  3,847,600 shares of Common Stock, representing an additional aggregate
  investment of up to approximately $67.8 million (the "Subsequent Closings"),
  as more fully described in this Proxy Statement.  After the Initial Closing,
  US Realty owned approximately 13.4% of the outstanding Common Stock (9.5%
  based on the number of shares outstanding as of the record date, the maximum
  number of shares of Common Stock issuable upon conversion of convertible
  securities outstanding as of the record date and the number of shares of
  Common Stock issuable upon exercise of outstanding stock options ("fully-
  diluted basis")).  Following the Second Closing (and assuming no other change
  in the number of outstanding shares) US Realty will own approximately 27.3% of
  the outstanding Common Stock on a fully-diluted basis.  If US Realty acquires
  the additional 3,847,600 shares in the Subsequent Closings (and assuming no
  other change in the number of outstanding shares), US Realty will own
  approximately 43.2% of the outstanding Common Stock on a fully-diluted basis.

            The Transaction also involves a number of additional terms, as more
  fully described in this Proxy Statement, including, among others:  (i) the
  right of US Realty, under certain circumstances, to nominate for election by
  shareholders its proportionate share of the members of the Board (but
  generally not fewer than two nor more than 49% of the directors); (ii) the

                                       1

<PAGE>
 
  grant to US Realty of certain rights to information regarding the Company;
  (iii) provisions that limit the ability of US Realty to acquire additional
  shares of the Company's capital stock, exercise its voting rights in its own
  discretion and engage in certain other actions during an initial standstill
  period of five years, subject to automatic one-year extensions; (iv)
  limitations during the standstill period on the Company's ability to engage in
  certain corporate transactions without the consent of US Realty; (v)
  provisions that restrict US Realty from transferring its shares of the
  Company's capital stock except in accordance with applicable securities laws
  and subject to the generally applicable ownership limits in the Company's
  charter, as amended, and to certain other restrictions; (vi) the grant to US
  Realty of rights to purchase, under certain circumstances, shares of the
  Company's capital stock in connection with future issuances by the Company;
  and (vii) the grant to US Realty of certain registration rights to enable US
  Realty to resell its shares of the Company's capital stock to the public under
  certain conditions. Other than the addition to the Board of US Realty's
  nominees following receipt of shareholder approval of the Transaction, the
  Board and management of the Company are not expected to change as a result of
  the Transaction.

            As part of the Transaction, US Realty will make available to the
  Company certain strategic advice, information and expertise.  US Realty has
  informed the Company that it intends to designate _________________ and
  _________________, [DESCRIBE POSITIONS AND BACKGROUND], as its initial
  nominees to the Company's Board of Directors.

            At the Special Meeting, you will be asked to approve the Transaction
  and to approve an amendment to the Company's charter, as amended (the
  "Charter"), to, among other things, expressly authorize US Realty to own up to
  45% of the outstanding Common Stock, on a fully diluted basis, and to permit
  individuals (and entities treated as individuals) who are treated as owning
  shares of Company capital stock as a result of the ownership of shares by US
  Realty and its affiliates to own up to 9.8% of the outstanding capital stock.
  A vote in favor of the Transaction also will constitute a vote in favor of the
  issuance of shares of Common Stock to US Realty pursuant to the Stock Purchase
  Agreement and all of the other transactions contemplated thereby and the terms
  thereof, including each of the additional matters set forth above.

            For a discussion of the potential beneficial and adverse effects of
  the Transaction, see "Approval of the Transaction - Potential Beneficial
  Effects of the Transaction" and "--Potential Adverse Effects of the
  Transaction."

            This Proxy Statement and the accompanying form of proxy are first
  being mailed to the shareholders of the Company on or about August 2, 1996.

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

  IN DETERMINING WHETHER TO APPROVE THE TRANSACTION AND, THE AMENDMENTS TO THE
  CHARTER DESCRIBED HEREIN, SHAREHOLDERS SHOULD CAREFULLY CONSIDER ALL OF THE IN
  FORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT.

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

              The date of this Proxy Statement is August 2, 1996.

                                       2

<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
 
                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>             
SUMMARY                                                                                   1               
    The Special Meeting.................................................................  1
         General........................................................................  1
         Vote by Proxy..................................................................  3
         Voting of Shares; Quorum; Appraisal Rights.....................................  3
         Reasons for Soliciting Shareholder Approval....................................  3
         Votes Required.................................................................  3
    The Transaction.....................................................................  4
         Background of the Transaction..................................................  4
         Background of the Company......................................................  5
         Background of US Realty........................................................  5
         Terms of the Transaction.......................................................  6
         Potential Beneficial Effects of the Transaction................................ 10
         Potential Adverse Effects of the Transaction................................... 11
         Conflicts of Interest; Interests of Certain Persons............................ 13
         Potential Effects of Shareholder Approval or Disapproval
            of the Transaction.......................................................... 13
         Opinion of Financial Advisor................................................... 13
         Recommendation of the Board; Factors and Conclusions
            of the Board Involved in Its Determination.................................. 14
         Amending the Ownership Limitations (Proposal 2)................................ 14

THE SPECIAL MEETING..................................................................... 15
    Outstanding Shares and Voting Rights................................................ 15
         Record Date.................................................................... 15
         Quorum......................................................................... 15
         Voting Rights.................................................................. 15
         No Appraisal Rights............................................................ 15
         Reasons for Seeking Shareholder Approval....................................... 15
    Vote Required....................................................................... 15
         Vote Required to Approve the Transaction (Proposal 1).......................... 15
         Vote Required to Approve the Amendment to Article 5
            of the Charter (Proposal 2)................................................. 16
    Proxies............................................................................. 16

APPROVAL OF THE TRANSACTION (Proposal 1)................................................ 18
     Information About the Company...................................................... 18
     Information About US Realty........................................................ 18
     Background of the Transaction...................................................... 20
     Terms of the Transaction........................................................... 22
         Parties........................................................................ 22
         US Realty Investment........................................................... 22
         Use of Proceeds................................................................ 23
         Stockholders Agreement......................................................... 23
         Exclusive Investment Vehicle for Shopping Center Properties
            and Shopping Center Companies............................................... 26
         Extension and Termination of Stockholders Agreement............................ 26
         Registration Rights............................................................ 27
</TABLE>
 

                                       i

<PAGE>
 

<TABLE>
<S>                                                                                      <C>  


         Conditions to Closing..........................................................  28
         No Solicitation of Competing Transactions......................................  28
         Expenses; Break-Up Fee.........................................................  28
         Amendment or Termination of the Stock Purchase Agreement.......................  28
    Potential Beneficial Effects of the Transaction.....................................  29
         Large, Timely Infusion of Capital at Reasonable Cost...........................  29
         Indirect Affiliation with Security Capital Group...............................  29
         Improved Future Access to Capital..............................................  29
         Potential Enhancement of Shareholder Value.....................................  30
    Potential Adverse Effects of the Transaction........................................  30
         Concentration of Ownership of Common Stock.....................................  30
         Potential Dilution.............................................................  31
         Limitations on Corporate Actions...............................................  31
         Effects on Future Foreign Investment in the Company............................  32
    Conflicts of Interest; Interests of Certain Persons.................................  32
    Potential Effects of Shareholder Approval or Disapproval of the Transaction.........  33
         Effects of Shareholder Approval................................................  33
    Certain Federal Income Tax Considerations...........................................  33
         No Recognition of Taxable Gain.................................................  33
         Taxation of the Company as a REIT..............................................  33
         Possible Impact of the Transaction on Subsequent Sales of Stock
            by Non-U.S. Shareholders....................................................  34
         Effect of Amendments to Charter on Additional Purchases
            by Non-U.S. Holders.........................................................  35
    Recommendation of the Board; Factors and Conclusions of the Board
       Involved in Its Determination....................................................  38
    Beneficial Ownership of Common Stock Prior to and After the Transaction.............  39
    Information Regarding Directors to be Nominated by US Realty........................  43
    Required Vote and Related Matters...................................................  43

PROPOSAL TO AMEND THE OWNERSHIP RESTRICTIONS (Proposal 2)...............................  44
    Summary of Current Article 5........................................................  44
    Reasons for and Possible Effects of the Amendment...................................  44
    Required Vote and Related Matters...................................................  45

SHAREHOLDER PROPOSALS...................................................................  45

APPENDICES
Appendix A    Stock Purchase Agreement.................................................. A-1
Appendix B    Stockholders Agreement.................................................... B-1
Appendix C    Registration Rights Agreement............................................. C-1
Appendix D    Amendment to Article 5 of the Company's Charter........................... D-1
Appendix E    Opinion of Prudential Securities Incorporated............................. E-1
</TABLE>

          
                                                 ii
           

<PAGE>
 
                                    SUMMARY


                 The following is a summary of certain information contained in
         this Proxy Statement.  The summary is not intended to be complete and
         is qualified in its entirety by reference to the more detailed
         information set forth elsewhere in this Proxy Statement or incorporated
         by reference herein and the appendices attached hereto. Shareholders
         are urged to read this Proxy Statement in its entirety.  As used
         herein, the term the "Company" means Regency Realty Corporation and/or
         its subsidiaries and the term "US Realty" means Security Capital U.S.
         Realty and Security Capital Holdings S.A., collectively or
         individually, as the context requires.  Certain capitalized terms used
         in this Summary are defined elsewhere in this Proxy Statement.


                              THE SPECIAL MEETING

     GENERAL

            This Proxy Statement is furnished in connection with the
    solicitation of proxies by the Board of the Company.  The proxies will be
    used at the Special Meeting to be held on Tuesday, September 10, 1996, at
    2:00 p.m. local time, at the Company's headquarters at 121 West Forsyth
    Street, Suite 200, Jacksonville, Florida, and at any adjournment thereof.

            At the Special Meeting, and at any adjournments thereof,
    shareholders of the Company will be asked to consider and vote upon the
    transactions contemplated by the Stock Purchase Agreement, including the
    investment of up to an aggregate of approximately $132 million in the
    Company by US Realty, to be effected through the sale by the Company of up
    to 7,499,400 shares of Common Stock at a purchase price of $17.625 per share
    (plus a purchase price adjustment for accrued dividends).  The investment of
    approximately $132 million is comprised of (i) the sale by the Company to US
    Realty, completed on July 10, 1996, of 934,400 shares, representing an
    aggregate investment of approximately $16.5 million, as more fully described
    herein, (ii) the sale by the Company to US Realty, following shareholder
    approval, of an additional 2,717,400 shares, representing an additional
    aggregate investment of approximately $47.9 million, and (iii) the sale by
    the Company to US Realty from time to time of up to an additional 3,847,600
    shares of Common Stock, representing an additional aggregate investment of
    up to approximately $67.8 million, as more fully described herein (Proposal
    1). As of July 26, 1996, the record date for the Special Meeting (the
    "Record Date"), US Realty owned approximately 13.4% of the outstanding
    Common Stock (9.5% on a fully diluted basis). After the Second Closing
    (assuming no other change  in the number of outstanding shares), US Realty
    will own approximately 27.3% of the outstanding Common Stock on a fully
    diluted basis, and after the Subsequent Closings (assuming no other changes
    in the number of outstanding shares and that US Realty purchases all
    3,847,600 shares that may be purchased at such Subsequent Closings) US
    Realty will own approximately 43.2% of the outstanding Common Stock on a
    fully diluted basis.

            The Transaction also involves a number of additional terms
    established pursuant to the Stock Purchase Agreement and the related
    Stockholders Agreement, dated as of July 10, 1996, by and among the Company,

                                       1

<PAGE>
 
    Security Capital U.S. Realty, Holdings and The Regency Group, Inc. (the
    "Stockholders Agreement") and Registration Rights Agreement, dated as of
    July 10, 1996, by and among the Company, Security Capital U.S. Realty and
    Holdings (the "Registration Rights Agreement"), including, among others:
    (i) the grant of a right to US Realty, under certain circumstances, to
    nominate for election by shareholders its proportionate share of the members
    of the Board (but generally not fewer than two nor more than 49% of the
    directors); (ii) the grant to US Realty of certain rights to information
    regarding the Company; (iii) provisions that limit the ability of US Realty
    to acquire additional shares of the Company's capital stock, exercise its
    voting rights in its own discretion and engage in certain other actions
    during an initial standstill period of five years, subject to automatic one-
    year extensions; (iv) limitations during the standstill period on the
    Company's ability to engage in certain corporate transactions without the
    consent of US Realty; (v) limitations on US Realty's ability to transfer its
    shares of Company capital stock except in accordance with the securities
    laws and subject to the generally applicable ownership limitations in the
    Charter, as amended, and to certain other restrictions; (vi) the grant to US
    Realty of certain additional rights to purchase, under certain
    circumstances, shares of the Company's capital stock in connection with
    future issuances by the Company; and (vii) the grant to US Realty of certain
    registration rights to enable US Realty to resell its shares of Company
    capital stock to the public under certain conditions.

            As part of the Transaction, US Realty will make available to the
    Company certain strategic advice, information and expertise.  US Realty has
    informed the Company that it intends to designate ______________________ and
    _____________________, [DESCRIBE POSITIONS AND BACKGROUND], as its initial
    nominees to the Company's Board.  Other than the addition to the Board of US
    Realty's nominees following receipt of shareholder approval, the Board and
    management of the Company are not expected to change as a result of the
    Transaction.  See "Approval of the Transaction -- Terms of the Transaction."

            A vote in favor of the Transaction also will constitute a vote in
    favor of each of the additional matters set forth above.  Copies of the
    Stock Purchase Agreement, the  Stockholders Agreement and the Registration
    Rights Agreement are attached hereto as Appendix A, Appendix B and Appendix
    C, respectively.

            At the Special Meeting, shareholders also will be asked to approve a
    proposal to amend the Charter (the "Amendment") to expressly authorize US
    Realty to acquire up to 45% of the outstanding Common Stock, on a fully
    diluted basis, to permit individuals (and entities treated as individuals)
    who are treated as owning shares of Company capital stock as a result of the
    ownership of shares by US Realty and its affiliates to own up to 9.8% of the
    Company's outstanding capital stock and to make certain other modifications
    to facilitate the Company's continued qualification as a domestically
    controlled REIT (as defined herein) for federal income tax purposes.  A copy
    of the Amendment is attached hereto as Appendix D (Proposal 2).

            THE BOARD HAS UNANIMOUSLY APPROVED THE TRANSACTION AND THE CHARTER
    AMENDMENT AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
                                                                    ---         
    OF THE PROPOSALS.

                                       2

<PAGE>
 
     VOTE BY PROXY

            A proxy card is enclosed for use at the Special Meeting.  Unless
    otherwise instructed, shares represented by proxy will be voted FOR both of
    the proposals described herein.  The proxy may be revoked at any time before
    it is voted by (i) filing prior to the Special Meeting a written notice of
    revocation bearing a later date with J. Christian Leavitt, Vice President
    and Treasurer, Regency Realty Corporation, 121 West Forsyth Street, Suite
    200, Jacksonville, Florida, 32202, (ii) delivering to the Company a duly
    executed proxy bearing a later date, or (iii) attending the Special Meeting
    and voting in person.


     VOTING OF SHARES; QUORUM; APPRAISAL RIGHTS

            Only shareholders of record of the Common Stock at the close of
    business on July 26, 1996, are entitled to notice of and to vote at the
    Special Meeting or any adjournment thereof.  At the close of business on the
    Record Date, the Company had outstanding [7,882,802] shares of Common Stock.
    The securities that can be voted at the Special Meeting consist of
    [7,882,802] shares of issued and outstanding Common Stock, with each share
    entitling its owner to one vote on all matters.  Shareholders on the Record
    Date are eligible to vote at the Special Meeting, in person or by proxy.
    The presence, in person or by proxy, at the Special Meeting of shareholders
    entitled to cast a majority of all votes entitled to be cast at such
    meeting, shall constitute a quorum.

            Shareholders are not entitled under Florida law to appraisal rights
    with respect to the Transaction.


     REASONS FOR SOLICITING SHAREHOLDER APPROVAL

            The Company is seeking shareholder approval of the issuance of the
    shares in connection with the Transaction pursuant to certain requirements
    of the New York Stock Exchange, Inc. regarding the continued listing of the
    Common Stock on the New York Stock Exchange (the "NYSE").  Approval of the
    Transaction is not required by Florida law, the Charter or the Company's
    Bylaws (the "Bylaws").  The Company is seeking shareholder approval of the
    Amendment in accordance with Florida law and the Charter.


     VOTES REQUIRED

            The affirmative vote of a majority of the total votes cast by the
    shareholders, provided that the number of total votes cast represent over
    50% of the shares of Common Stock issued and outstanding on the Record Date,
    is required to approve the Transaction (Proposal 1). For this purpose,
    broker non-votes and abstentions will not be counted.  APPROVAL OF THE
    TRANSACTION BY THE REQUISITE VOTE OF THE SHAREHOLDERS OF THE COMPANY IS A
    CONDITION TO CONSUMMATION OF THE TRANSACTION (EXCEPT FOR THE INITIAL
    PURCHASE BY US REALTY OF 934,400 SHARES ON JULY 10, 1996).  APPROVAL OF
    PROPOSAL 1 IS CONDITIONED UPON APPROVAL OF PROPOSAL 2.

                                       3

<PAGE>
 
            The affirmative vote of a majority of the total votes cast by the
    shareholders is required to amend the Charter to expressly authorize US
    Realty to acquire up to 45% of the outstanding Common Stock, on a fully
    diluted basis, to permit individuals (and entities treated as individuals)
    who are treated as owning shares of Company capital stock as a result of the
    ownership of shares by US Realty and its affiliates to own up to 9.8% of the
    Company's outstanding capital stock and to make certain other modifications
    to facilitate the Company's qualification as a domestically controlled REIT
    for federal income tax purposes (Proposal 2).  For this purpose, broker non-
    votes and abstentions will not be counted.  APPROVAL OF THE AMENDMENT BY THE
    REQUISITE VOTE OF THE SHAREHOLDERS OF THE COMPANY IS A CONDITION TO
    CONSUMMATION OF THE TRANSACTION.  APPROVAL OF PROPOSAL 2 IS CONDITIONED UPON
    APPROVAL OF PROPOSAL 1.

            Joan W. Stein, Chairman of the Board of the Company, Martin E.
    Stein, Jr., President of the Company, Robert L. Stein, a director of the
    Company, The Regency Group, Inc., a shareholder of the Company, Regency
    Square II, a shareholder of the Company, Richard W. Stein, a shareholder of
    The Regency Group, Inc. and a partner of Regency Square II, and Bruce M.
    Johnson, Executive Vice President of the Company (the "Stein Group"), who as
    of the Record Date collectively owned 9.0% of the outstanding shares of
    Common Stock, have executed letter agreements with US Realty, pursuant to
    which they have agreed to vote all of their shares in favor of the
    transactions contemplated by the Stock Purchase Agreement, and they intend
    to vote in favor of Proposals 1 and 2.  US REALTY, WHICH AS OF THE RECORD
    DATE HELD 1,053,500 SHARES OF COMMON STOCK, REPRESENTING 13.4% OF THE TOTAL
    OUTSTANDING COMMON STOCK, IS EXPECTED TO VOTE ITS SHARES IN FAVOR OF BOTH
    PROPOSALS.


                                THE TRANSACTION


     BACKGROUND OF THE TRANSACTION

            The Company believes that the success of a REIT will be largely
    dependent on its ability to access capital markets consistently on favorable
    terms and that this access will depend upon the REIT's "critical mass," or
    asset size, operational sophistication, experience and operational history.
    Accordingly, the Company, which was aware of the reputation of Security
    Capital Group Incorporated ("Security Capital Group") in the real estate
    industry and its investments in other REITs, was interested in exploring an
    affiliation with Security Capital Group as a means of accessing additional
    capital.  Representatives of the Company had an introductory meeting in May
    1995 with officers of Security Capital Investment Research Incorporated
    ("SCIR"), a subsidiary of Security Capital Group.

            SCIR and the Company did not have further discussions until March
    1996, when representatives of SCIR, which is an advisor to US Realty's
    management, contacted the Company, and subsequently met with the Company's
    President at an industry conference on April 16, 1996.  During the next
    several weeks, the parties exchanged information and had a number of
    telephone discussions concerning strategy, philosophy, and possible
    structure and price.  On April 26, 1996, US Realty outlined a proposed
    structure modeled on its March 1996 agreement with Storage USA, Inc., a
    self-storage facilities REIT based in Columbia, Maryland. Over the next
    several weeks the parties discussed the terms of the proposed transaction,
    including price.

                                       4

<PAGE>
 
            During the ensuing month, transaction document drafts were prepared
    and numerous revised drafts circulated, with representatives of the Company
    and US Realty and their respective counsel conducting detailed negotiations
    concerning legal and business points in the documentation.  On May 31, 1996
    US Realty's Board of Directors approved the price and the proposed
    transaction terms and the approval was communicated to the Company.  At a
    meeting on June 11, 1996, after discussing the advantages of and
    alternatives to the Transaction and after receiving a written opinion from
    Prudential Securities, the Board voted unanimously in favor of the
    Transaction.

            On June 11, 1996, the day before the Transaction was publicly
    announced, the closing sale price for Common Stock as reported on the NYSE
    Composite Tape was $19.125. For the 60 trading days prior to June 12, 1996,
    the day the Transaction was announced, the average closing sale price for
    Common Stock was $17.72, and on July ___, the closing sale price was
    $________.


     BACKGROUND OF THE COMPANY

            The Company is a Florida-based, fully integrated, self-administered
    and self-managed real estate investment trust ("REIT") which owns, manages,
    and develops community and neighborhood shopping centers.  The Company's
    primary focus is grocery-anchored community and neighborhood shopping
    centers in the Southeastern United States.  As of June 1, 1996, the Company
    owns and operates 35 community and neighborhood shopping centers totalling
    approximately 4.0 million square feet and 4 suburban office complexes
    totalling approximately 298,000 square feet, located in Florida (74.8% of
    GLA), Alabama (12.3%), Georgia (8.5%) and Mississippi (4.4%).  The Company
    also manages and leases approximately 1.1 million square feet of properties
    for third parties and performs ancillary third party services (including
    tenant representation, site selection and construction management) on a
    selective basis.


     BACKGROUND OF US REALTY

            Security Capital U.S. Realty is a Luxembourg corporation that
    endeavors to become Europe's preeminent publicly-held real estate company
    with strategic ownership positions in leading "value-added" real estate
    operating companies in the United States (i.e., real estate operating
                                              ----                       
    companies in which opportunities exist to enhance asset cash flow by
    combining a strategically focused asset portfolio with synergistic marketing
    and other strategies that meet the special needs of customers).  US Realty's
    wholly-owned subsidiary, Security Capital Holdings S.A., endeavors to
    acquire 25% to 45% of the common stock of a limited number of U.S. real
    estate operating companies with specific market niches and the potential to
    be leaders in their respective peer groups.  US Realty endeavors to maximize
    shareholder returns in each of these companies by investing sufficient
    capital and, through representation on the board of directors and committees
    thereof, providing input to management in developing and implementing
    strategies for long-term growth in per share operating results.

            The Company will be the exclusive strategic investment of US Realty
    in the southeastern United States for the purchase, development or ownership

                                       5

<PAGE>
 
    of grocery-store, drugstore or general merchandise discount-store anchored
    shopping centers having less than 250,000 square feet of leasable area.


     TERMS OF THE TRANSACTION

             US Realty Investment.  Pursuant to the Stock Purchase Agreement,
    the Company will sell an aggregate of up to 7,499,400 shares of Common Stock
    to US Realty at a price of $17.625 per share, for an aggregate purchase
    price of up to approximately $132 million (the "Total Equity Commitment")
    (plus a purchase price adjustment equal to 85% of dividends accrued on the
    shares during the quarterly dividend period prior to issuance).  The
    purchase price per share was determined as a result of arm's length
    negotiations between the Company and its advisors on the one hand and US
    Realty and its advisors on the other hand and was based upon recent sale
    prices of the Common Stock at the time that representatives of the Company
    and US Realty agreed to negotiate the basic terms of the Transaction and
    agreed to proceed toward the negotiation and execution of definitive written
    agreements with respect thereto.  At the Initial Closing, the Company sold
    934,400 shares to US Realty at $17.625 per share (the "Initial Purchase"),
    for an aggregate purchase price of approximately $16.5 million.  As of the
    Record Date, US Realty owned approximately 13.4% of the outstanding Common
    Stock.

            Subject to shareholder approval, at a time to be selected by the
    Company but not later than December 1, 1996 (in the case of the Second
    Closing), and not later than June 1, 1997 (in the case of the Subsequent
    Closings), the Company may sell 2,717,400 shares of Common Stock to US
    Realty at a price of $17.625 per share, for an aggregate purchase price of
    approximately $47.9 million (plus the purchase price adjustment based on
    accrued dividends), and up to 3,847,600 shares at a price of $17.625 per
    share, for an aggregate purchase price of up to approximately $67.8 million
    (plus the purchase price adjustment based on accrued dividends),
    respectively (the Second Closing and the Subsequent Closings constituting
    the "Remaining Equity Commitment").  US Realty will have the right,
    exercisable on a one-time basis in each of December 1996 and June 1997, to
    purchase from the Company, at a price of $17.625 per share (plus the
    purchase price adjustment based on accrued dividends), additional shares of
    Common Stock to the extent that the shares to be acquired at the Second
    Closing and the Subsequent Closings, respectively, have not yet been
    purchased.  If US Realty acquires all of the shares represented by the
    Remaining Equity Commitment (and assuming no other change in the number of
    outstanding shares), US Realty will own approximately 43.2% of the
    outstanding Common Stock on a fully diluted basis.

             Use of Proceeds.  The net proceeds of the investment by US Realty
    will be used (i) to repay certain indebtedness of the Company under its
    revolving credit agreements, and (ii) to make additional investments in
    shopping centers.

             Management of the Company; Representation on the Board and Certain
    Board Committees.  Other than the addition to the Board of US Realty's
    nominees following receipt of shareholder approval, the Board and management
    of the Company are not expected to change as a result of the Transaction.

            Under the Stockholders Agreement, two persons identified by US
    Realty, ____________________ and _________________________, [DESCRIBE

                                       6

<PAGE>
 
    POSITIONS AND BACKGROUND], will become directors of the Company immediately
    after the approval of the Transaction by the shareholders of the Company.
    Thereafter, US Realty will have the right, until the earlier of (i) the
    first date on which US Realty's ownership of Common Stock drops below 20% of
    the outstanding shares of Common Stock on a fully diluted basis for a
    continuous period of 180 days (upon such occurrence, a "20% Termination
    Date") or (ii) the termination of the Standstill Period or any Standstill
    Extension Term (as defined below), to nominate for election by shareholders
    at each annual or special meeting that number of directors to the Board such
    that the total number of US Realty nominees (including any directors
    previously nominated by US Realty whose terms have not expired at such
    meeting) is equal to the greater of (i) two, and (ii) that number
    corresponding to the percentage of outstanding Common Stock owned by US
    Realty, but not more than 49% of the Board.  If the Standstill Period or any
    Standstill Extension Term has expired, but the 20% Termination Date shall
    not have occurred, US Realty may nominate for election to the Board that
    number of directors which is equal to the lesser of (i) two and (ii) the
    number corresponding to the percentage of outstanding Common Stock owned by
    US Realty.  After the expiration of the Standstill Period or any Standstill
    Extension Term, at the Company's request, US Realty will use its reasonable
    best efforts to cause such of its nominees to resign from the Board as will
    reduce the number of its nominees to the number described in the preceding
    sentence.  So long as the Standstill Period or any Standstill Extension Term
    is in effect, the Stockholders Agreement prohibits US Realty from seeking
    additional representation on the Board.  In addition, so long as US Realty
    has the right to nominate directors to the Board and at least one director
    nominated by US Realty is serving thereon, US Realty has the right, subject
    to certain limitations, to have one of the directors whom it nominated serve
    on each of the Board's key committees.

             Information Rights.  Following shareholder approval and until the
    20% Termination Date, the Company will have the obligation (i) to provide to
    US Realty certain financial statements and operating information, generally
    limited to information provided to the Company's senior management and the
    Board, and a copy of any filing made by the Company pursuant to any federal
    or state securities law, and (ii) to consult with the designated
    representative of US Realty, prior to approval by the Board or entering into
    any definitive agreement, in connection with proposals relating to certain
    extraordinary or material transactions, including the acquisition in a
    single transaction or series of related transactions of any assets or
    business having a value exceeding $10 million.  US Realty will be obligated
    to comply with the Company's insider trading policy.  The Company and US
    Realty also will afford each other a reasonable opportunity to review in
    advance any filing by it pursuant to any federal or state securities or
    other laws or any press release that mentions the other.

             Participation Rights.  So long as US Realty's ownership of Common
    Stock on a fully diluted basis does not drop below 15% for more than 180
    days, in the event that the Company issues or sells shares of capital stock,
    US Realty will be entitled (except in certain circumstances) to a
    participation right to purchase or subscribe for, either as part of such
    issuance or in a concurrent issuance, that portion of the total number of
    shares to be issued equal to US Realty's proportionate holdings of Common
    Stock prior to such issuance (but not to exceed 42.5% of the capital stock
    issued in the Company's first offering and 37.5% of the capital stock issued
    in subsequent offerings).

             Limitations on Corporate Actions.  Until the first to occur of (i)
    the expiration of the Standstill Period or any Standstill Extension Term and

                                       7

<PAGE>
 
    (ii) the 20% Termination Date, the Company will be subject to certain
    limitations on its operations, including restrictions relating to (a) the
    incurrence of total indebtedness in an amount exceeding 60% of the gross
    book value of the Company's total consolidated assets, (b) causing or
    permitting the sum of (i) securities of any other person, (ii) assets held
    other than directly by the Company, (iii) loans made by the Company to a
    subsidiary, or the reverse, and (iv) assets managed by persons other than
    employees of the Company, to, at any time, exceed 30%, at cost, of the
    consolidated assets owned by the Company, (c) investment in real estate
    other than shopping centers, (d) termination of the federal income tax
    status of the Company as a REIT, and (e) except as permitted or required by
    agreements existing as of June 11, 1996, owning any interest in any
    partnership unless the Company is the sole managing general partner of such
    partnership.  In addition, the Company will be subject to certain
    limitations on the value of assets that it owns indirectly through other
    entities and the manner in which it conducts business in the future.  US
    Realty requested these conditions because of its belief that REITs with
    direct and extensive control over the operation of all of their assets
    operate more effectively, and in order to permit US Realty to comply with
    certain requirements of the U.S. Internal Revenue Code of 1986, as amended
    (the "Code"), and other countries' tax  laws applicable to foreign
    investors.  The Company believes that these limitations are generally
    consistent with its operating strategies and does not believe that they will
    materially restrict its operations or have a material adverse effect on its
    financial condition or results of operations.

             Voting Rights.  During the Standstill Period and any Standstill
    Extension Term, US Realty will vote its shares of Common Stock at its option
    in accordance with the recommendation of the Company's Board or
    proportionally in accordance with the votes of the other holders of the
    Common Stock.  However, US Realty may vote all of the shares of Common Stock
    that it owns, in its sole and absolute discretion, with regard to the
    election of its nominees to the Board, and may vote shares of Common Stock
    owned by it representing up to 40% of the outstanding shares, in its sole
    and absolute discretion, with regard to (i) any amendment to the Charter or
    Bylaws that would reasonably be expected to materially adversely affect US
    Realty and (ii) any extraordinary transaction (as defined).  If any such
    extraordinary transaction requires the affirmative vote of the holders of
    two-thirds of the outstanding shares of Common Stock, US Realty may vote, in
    its sole discretion, shares owned by it representing up to 28% of the
    outstanding Common Stock.

             Standstill Provisions.  For a period of five years following
    shareholder approval (the "Standstill Period") and during any Standstill
    Extension Term (as defined below), US Realty and its affiliates may not (i)
    acquire beneficial ownership of more than 45% of the outstanding shares of
    Common Stock, on a fully-diluted basis, (ii) sell, pledge, transfer or
    otherwise dispose of any shares of Common Stock except in accordance with
    certain specified limitations (including a requirement that the Company, in
    its sole and absolute discretion, approve any transfer in a negotiated
    transaction that would result in the transferee beneficially owning more
    than 9.8% of the Company's capital stock), (iii) act in concert with any
    other person or group by becoming a member of any group within the meaning
    of Section 13(d) of the Securities and Exchange Act of 1934, as amended (the
    "Exchange Act") (other than such a group comprised exclusively of US Realty
    and one or more of its affiliates), (iv) solicit, encourage, or propose to
    effect or negotiate certain business combination transactions other than
    pursuant to the Stock Purchase Agreement, (v) solicit, encourage, initiate,
    or participate in any "solicitation" of "proxies" or become a "participant"
    in any "election contest" (as such terms are defined or used in Regulation
    14A under the Exchange Act, disregarding certain provisions thereof), (vi)

                                       8

<PAGE>
 
    seek Board representation or a change in the composition or size of the
    Board, except as permitted by the Stockholders Agreement, (vii) except in
    certain circumstances, sell or otherwise transfer or pledge any capital
    stock of Holdings or any affiliate of Holdings that owns Common Stock,
    (viii) request an amendment or waiver of the foregoing limitations or of the
    ownership limitations of the Charter, or (ix) assist or encourage any person
    or entity with respect to any of the foregoing (collectively, the
    "Standstill Provisions").

            After expiration of the Standstill Period, the Standstill Provisions
    will be extended automatically for successive one-year periods (each a
    "Standstill Extension Term"), unless US Realty provides written notice at
    least 270 days prior to the commencement of any Standstill Extension Term
    that such Standstill Extension Terms and all further Standstill Extension
    Terms are canceled.  The Standstill Period or a Standstill Extension Term,
    as the case may be, will be automatically terminated upon the occurrence of
    certain actions taken or not taken by the Company.

             Registration Rights.  Pursuant to the Registration Rights
    Agreement, the Company has granted certain registration rights to US Realty
    that will enable US Realty to resell in registered offerings certain shares
    of Common Stock and other securities of the Company acquired by it to the
    public under certain conditions.The shares issued to US Realty pursuant to
    the Stock Purchase Agreement will be registered under the Securities Act of
    1933, as amended (the "Securities Act").  However, because US Realty may be
    deemed to be an "underwriter" for purposes of the Securities Act, the shares
    of Common Stock and other securities of the Company owned by it may not be
    sold in the absence of registration under the Securities Act unless an
    exemption from registration is available.

             Conditions to Closing.  Each of the Company's and US Realty's
    obligations to effect the Second and Subsequent Closings are subject to
    various mutual and unilateral conditions, including, without limitation, the
    following:  (i) the Company shall continue to qualify as a REIT for federal
    income tax purposes; (ii) the shareholders shall have approved the
    Transaction (Proposal 1); (iii) the shareholders shall have approved the
    Amendment to the Charter to expressly authorize US Realty to own up to 45%
    of the Common Stock, on a fully diluted basis, to permit individuals (and
    entities treated as individuals) who are treated as owning shares of Company
    capital stock as a result of the ownership of shares by US Realty and its
    affiliates to own up to 9.8% of the Company's outstanding capital stock and
    to make certain other modifications to facilitate the Company's continued
    qualification as a domestically controlled REIT for federal income tax
    purposes (Proposal 2); (iv) the Company shall continue to qualify as a
    domestically controlled REIT for federal income tax purposes; (v) there
    shall have been no change or circumstance that has had or would reasonably
    be expected to have a material adverse effect on the financial condition,
    results of operations or business of the Company and its subsidiaries taken
    as a whole (a "Material Adverse Effect"); and (vi) various other customary
    conditions shall have been satisfied.

             No Solicitation of Competing Transactions.  Unless and until the
    Stock Purchase Agreement is terminated in accordance with its terms, the
    Company may not solicit proposals or indications of interest from, provide
    information to, or negotiate with any person, with respect to certain
    transactions alternative to the Transaction (each a "Competing
    Transaction"). However, the Board may take such actions as may be required

                                       9

<PAGE>
 
    by the Board's fiduciary obligations to the shareholders as determined in
    good faith by the Board on the written advice of outside counsel.

             Expenses; Break-Up Fee.  If the Transaction is submitted to a vote
    of the shareholders and the shareholders fail to approve the Transaction (or
    in the event that the Company has failed to convene a meeting of
    shareholders for such purpose on or before October 31, 1996), the Company
    will pay to US Realty $1 million to reimburse it for its expenses in
    connection with the transactions (including opportunity costs).  If the
    Transaction is not approved by the shareholders in connection with the
    emergence and consummation, under certain circumstances, of a proposal for a
    Competing Transaction, the Company will pay to US Realty a break-up fee of
    $5 million.


     POTENTIAL BENEFICIAL EFFECTS OF THE TRANSACTION

            The Company believes that the Transaction, if consummated,
    represents an attractive opportunity to improve long-term shareholder value
    by providing the Company with access to significant equity capital at an
    attractive cost and additionally provides strategic resources not otherwise
    readily available to it, thereby enhancing the Company's short-term and
    long-term growth prospects and better positioning it to capitalize on
    shopping center opportunities in the southeastern United States.  In
    particular, the Company believes that the Transaction may have a number of
    beneficial effects on the Company and its shareholders, including the
    following:

             Large, Timely Infusion of Capital at Reasonable Cost.  The
    Transaction is expected to enable the Company to accomplish its financing
    objectives for 1996 and a significant portion of 1997 in a single
    transaction on favorable terms compared with those that might have been
    available in the public markets.  Because the purchase price for the Common
    Stock to be acquired by US Realty is fixed, the Transaction protects the
    Company against the risks of a decline in the stock market as a whole and
    the market for REIT shares in particular.  In addition, the Company will not
    pay any underwriting discount or commission in connection with the sales to
    US Realty and expects that its out-of-pocket expenses in connection with
    such sales will be substantially less than the costs it would have incurred
    in selling a similar number of shares in one or more firm commitment
    underwritings.  Moreover, the Company is not exposed to the risk of a
    decline in the market price of its shares that is commonly observed in
    advance of such offerings.  Additionally, the Transaction will enable
    management to focus on acquisitions and intensively managing the Company's
    existing properties instead of being required to divert management time and
    attention to the process of raising capital.

             Indirect Affiliation with Security Capital Group.  Security Capital
    Group is highly-regarded as a sophisticated operator of and investor in
    REITs and owns a substantial minority interest in US Realty.  A subsidiary
    of Security Capital Group is the operating advisor to US Realty.
    ___________________ and ____________________, [DESCRIBE POSITIONS AND
    BACKGROUND], will become directors of the Company immediately after approval
    by the Company's shareholders of the Transaction.  The Company believes that
    it will benefit significantly from its association with Messrs.
    ____________________ and ___________________ and their access to the market
    knowledge, operating experience and research capabilities of Security
    Capital Group. Additionally, pursuant to the Stockholders Agreement, US
    Realty is obligated to make available to the Company certain strategic

                                       10

<PAGE>
 
    advice and related information and expertise acquired or developed in the
    ordinary course of its business, including information concerning property
    acquisition opportunities.

             Improved Future Access to Capital.  The Company believes that, as a
    result of the Transaction, it will have greater access to the capital
    markets and a lower cost of capital because the Transaction will (i)
    increase its equity market capitalization and total capitalization, (ii)
    establish an indirect affiliation with the highly-regarded Security Capital
    Group, which should enhance the Company's access and attractiveness to
    significant institutional investors; and (iii) through the participation
    rights granted to US Realty under the Stockholders Agreement, provide a
    highly-motivated potential buyer for substantial portions of future
    offerings by the Company of its equity securities or debt securities
    convertible into equity.  Moreover, because of its substantial investment
    in the Company, in addition to its obligations to provide advice under the
    Stockholders Agreement, US Realty will have significant incentives to make
    available its resources, experience and advice regarding access to capital
    markets and assisting the Company to achieve a lower cost of capital.  The
    Company believes that improved access to the capital markets should enhance
    its ability to grow and increase shareholder value.

             Potential Enhancement of Shareholder Value.  The Transaction will
    not result in any direct return to shareholders of cash or other
    consideration.  The Company, however, believes that the Transaction offers
    shareholders an opportunity to realize long-term value.  Further, the
    elimination of the Company's need to access the public equity markets in
    1996 would remove what the Company believes has been a limiting factor in
    the continuing appreciation of its stock price, that is, the assumption
    among institutional investors that the Company will be forced to offer
    additional Common Stock publicly in 1996.  The Company's strategic plan
    calls for the application of the significant capital to be raised in the
    Transaction to execute an attractive growth strategy for the purpose of
    increasing the Company's asset base and cash flow in a controlled but
    significant fashion over a relatively short period of time.  Management's
    goal is to increase funds from operations and cash available for
    distribution to shareholders through the strategic deployment of the capital
    and other resources to be made available to the Company through its
    affiliation with US Realty.

            It should be noted, however, that there is no assurance that the
    Company will realize any of the potential benefits of the Transaction
    described above.  See "APPROVAL OF THE TRANSACTION (Proposal 1) -- Potential
    Beneficial Effects of the Transaction."


     POTENTIAL ADVERSE EFFECTS OF THE TRANSACTION

            The Company believes that the Transaction, if consummated, could
    have certain adverse effects on the Company and its shareholders, including
    the following:

             Concentration of Ownership of Common Stock.  US Realty will be
    entitled to own up to 45% of the Company's capital stock on a fully diluted
    basis and will be the largest single shareholder of the Company.  US Realty
    will have the right to nominate a proportionate number of the directors of
    the Company's Board, rounded down to the nearest whole number, based upon
    its ownership of outstanding shares of Common Stock, but not to exceed 49%
    of the Board.  Although certain Standstill Provisions will preclude US
    Realty from increasing its percentage interest in the Company for a period
    of at least five years (subject to certain exceptions), and US Realty will

                                       11

<PAGE>
 
    be subject to certain limitations on its voting rights with respect to its
    shares of Common Stock during that time, US Realty nonetheless will have a
    substantial influence over the affairs  of the Company as a result of the
    Transaction.  This concentration of ownership in one shareholder could be
    disadvantageous to other shareholders' interests.

            US Realty could own as much as 43.2% of the Company's total common
    equity on a fully diluted basis.  If the Standstill Period or any Standstill
    Extension Term terminates and the Company's Class B Non-Voting Common Stock
    (the "Class B Stock") is not converted into shares of Common Stock (in which
    case US Realty's shares would constitute 52.7% of the outstanding Common
    Stock), US Realty could be in a position to control the election of the
    Board or the outcome of any corporate transaction or other matter submitted
    to the shareholders for approval (assuming no other changes in the number of
    outstanding shares of Common Stock).

            Anti-Takeover Effect of the Transaction.  US Realty's acquisition of
    up to 52.7% of the Common Stock (43.2% on a fully diluted basis) and the
    director nomination, voting and other rights granted to US Realty under the
    Stockholders Agreement, although subject to certain limitations during the
    Standstill Period by reason of the Standstill Provisions, may make it more
    difficult for other shareholders to challenge the Company's director
    nominees, elect their own nominees as directors, or remove incumbent
    directors and may render the Company a less attractive target for an
    unsolicited acquisition by an outsider.

             Potential Dilution.  While the Company generally has the ability to
    control the timing of the Second and Subsequent Closings and any additional
    investments by US Realty, if the proceeds from sales of securities to US
    Realty are not invested in a timely or accretive manner, there would be
    dilution of earnings per share and funds from operations per share to the
    existing shareholders of the Company.  The Company does not intend to change
    its careful acquisition criteria, and it may temporarily have excess cash on
    its balance sheet if sufficient acquisitions are not completed by June 1997
    (unless the Company and US Realty agree to extend this date).

             Limitations on Corporate Actions.  Pursuant to the Stockholders
    Agreement, the Company has agreed to certain limitations on its operations
    during the Standstill Period and any Standstill Extension Term, including
    restrictions relating to the incurrence of total indebtedness exceeding 60%
    of the gross book value of the Company's total consolidated assets,
    investments in properties other than shopping centers in a specified
    geographic area, the indirect ownership of assets, and certain other
    matters.  Although the Company believes that these limitations are
    consistent with its operating strategies and does not believe that they will
    materially restrict its operations or have a material adverse effect on its
    financial condition or results of operations, there can be no assurance that
    these limitations will not do so in the future.

             Effects on Future Foreign Investment in the Company.  The
    Transaction is not expected to have a material adverse effect on the
    existing holdings of shares of Common Stock by foreign investors.  However,
    as a result of certain proposed changes to the Charter that are designed to
    help protect the Company's status as a "domestically controlled REIT" for
    the primary benefit of US Realty and other existing foreign holders, the
    acquisition of additional shares of Common Stock in the future by foreign
    investors (whether or not they currently own an interest in the Company)
    would be subject to certain limitations and risks to which such investors
    would not normally be subject.  See "Proposal to Amend the Ownership

                                       12

<PAGE>
 
    Restrictions -- Reasons for and Possible Effects of the Amendment."  The
    restriction of new foreign investment in the Company (through market
    purchases or otherwise) could reduce the demand for the Common Stock,
    potentially decreasing the market value of the Common Stock, and could
    hinder the ability of the Company to raise capital in the future through
    sales to non-U.S. persons of equity or debt securities convertible into
    equity.


    CONFLICTS OF INTEREST; INTERESTS OF CERTAIN PERSONS

            The execution of the Stock Purchase Agreement has accelerated the
    exercisability of 131,400 options (with an exercise price of $19.25 per
    share) held by the Company's executive officers (of which 29,200 options
    were scheduled to vest in October 1996), and 7,000 options (with exercise
    prices ranging from $16.75 to $18.75 per share) held by the Company's
    directors (of which all 7,000 were scheduled to vest in December 1996).  The
    Stock Purchase Agreement will not have any other effect on any employment
    agreement, stock option or other compensatory arrangement for any executive
    officer or director of the Company.

            US Realty will have the right to certain Board representation
    following shareholder approval of the Transaction.  To the extent that any
    such director nominees are affiliated or associated with US Realty, such
    persons may thereby be deemed to have interests in the Transaction that are
    in addition to the interests of the shareholders generally.


    POTENTIAL EFFECTS OF SHAREHOLDER APPROVAL OR DISAPPROVAL OF THE
    TRANSACTION

             Effects of Shareholder Approval.  Approval of the Transaction by
    the shareholders will constitute approval of all of the various terms set
    forth in the Stock Purchase Agreement, the Stockholders Agreement and the
    Registration Rights Agreement and the transactions contemplated thereby.

            Such approval also may serve to extinguish potential claims, if any,
    regarding any conduct of members of the Board in connection with the
    Transaction, including potential claims alleging violations of the Board's
    duties to shareholders.  Under Florida law, fully informed shareholder
    approval of a transaction may, in certain circumstances, serve to extinguish
    certain related fiduciary duty claims against directors.


    OPINION OF FINANCIAL ADVISOR

            The Company engaged Prudential Securities as its financial advisor
    in connection with the Transaction.  On June 11, 1996, Prudential Securities
    delivered to the Board a written opinion to the effect that, as of such date
    and based upon and subject to certain matters stated therein, the
    consideration to be received by the Company pursuant to the Stock Purchase
    Agreement is fair to the Company from a financial point of view.  A copy of
    Prudential Securities' opinion, which sets forth the assumptions made,
    matters considered and limits on the review undertaken, is attached hereto
    as Appendix E.  SHAREHOLDERS SHOULD READ PRUDENTIAL SECURITIES' OPINION

                                       13

<PAGE>
 
    CAREFULLY IN ITS ENTIRETY.  The opinion of Prudential Securities does not
    constitute a recommendation as to how any shareholder should vote at the
    Special Meeting.


     RECOMMENDATION OF THE BOARD; FACTORS AND CONCLUSIONS OF
    THE BOARD INVOLVED IN ITS DETERMINATION

            The Board has unanimously approved the Transaction and has
    determined that the Transaction is in the best interests of the Company and
    its shareholders.  THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
                                                                              
    FOR APPROVAL OF THE TRANSACTION.
    ---                             

            The recommendation of the Board is based on its belief that the
    Transaction represents an attractive opportunity to improve long-term
    shareholder value by providing the Company with access to significant equity
    capital at an attractive cost and additionally provides strategic resources
    not otherwise readily available to it, thereby enhancing the Company's
    short-term and long-term growth  prospects and positioning it to better
    capitalize on shopping center opportunities in the southeastern United
    States.  See "Approval of the Transaction --Recommendation of the Board;
    Factors and Conclusions of the Board Involved in its Determination."


     AMENDING THE OWNERSHIP LIMITATIONS (PROPOSAL 2)

            The Board has approved and recommends the approval by the
    shareholders of an amendment to Article 5 of the Charter to expressly
    authorize US Realty to acquire up to 45% of the outstanding Common Stock, on
    a fully diluted basis, to permit individuals (and entities treated as
    individuals) who are treated as owning shares of Company capital stock as a
    result of the ownership of shares by US Realty and its affiliates to own up
    to 9.8% of the outstanding shares of capital stock and to make certain other
    modifications to facilitate the Company's continued qualification as a
    domestically controlled REIT for federal income tax purposes. APPROVAL OF
    THIS AMENDMENT IS A CONDITION TO CONSUMMATION OF THE TRANSACTION AND IS 
    CONDITIONED UPON APPROVAL OF THE TRANSACTION (PROPOSAL 1).  THE BOARD
    UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT.
                                                  ---                           

                                       14

<PAGE>
 
                              THE SPECIAL MEETING


   OUTSTANDING SHARES AND VOTING RIGHTS

            Record Date.  Only shareholders of record at the close of business
  on the Record Date are entitled to notice of and to vote at the Special
  Meeting or any adjournment thereof.

            Quorum.  The Company's Bylaws provide that a majority of the issued
  and outstanding shares of Common Stock, present in person or represented by
  proxy at the Special Meeting, shall constitute a quorum.  Abstentions, but not
  broker non-votes (i.e., votes not cast by a broker or other record holder in
                    ----                                                      
  "street" or nominee name solely because such record holder does not have
  discretionary authority to vote on the matter), will be treated as shares that
  are present, or represented, and entitled to vote for purposes of determining
  the presence of a quorum at the Special Meeting.

            Voting Rights.  The securities that can be voted at the Special
  Meeting consist of issued and outstanding shares of Common Stock, with each
  share entitling its owner to one vote on all matters.  There is no cumulative
  voting of shares.  At the close of business on the Record Date, the Company
  had outstanding [7,882,802] shares of Common Stock.  Shareholders' votes will
  be tabulated by the persons appointed by the Chairman of the Special Meeting
  to act as inspectors of election for the Special Meeting.

            No Appraisal Rights.  Shareholders are not entitled under Florida
  law to appraisal rights with respect to the Transaction.

            Reasons for Seeking Shareholder Approval.  Approval of the
  Transaction is not required by Florida law or the Charter or Bylaws.  Instead,
  the Company is seeking shareholder approval of the Transaction pursuant to the
  rules of the NYSE.  Paragraph 312.03 of the NYSE Listed Company Manual
  provides that shareholder approval is required prior to issuance of common
  stock in certain instances, including when the number of shares of common
  stock to be issued in a transaction (or series of transactions), other than a
  public offering for cash, would equal at least 20% of the number of shares of
  common stock outstanding before such issuance.  If the Company were to
  consummate the Transaction without shareholder approval, the NYSE would have
  the authority to delist the Common Stock from the NYSE.

            The proposed amendment to the Charter requires shareholder approval
  under Florida law and under the Charter.


   VOTE REQUIRED

            Vote Required to Approve the Transaction (Proposal 1).  Pursuant to
  the rules of the NYSE, the affirmative vote of a majority of the total votes
  cast by the shareholders, provided that the number of total votes cast
  represents over 50% of the shares of Common Stock issued and outstanding on
  the Record Date, is required to approve the Transaction (Proposal 1).
  Abstentions and broker non-votes will have no effect on the result of the vote
  to approve the Transaction, assuming that the number of votes cast represents
  over 50% of all outstanding shares of Common Stock.  Members of the Stein
  Group, who as of the Record Date collectively owned 9.0% of the outstanding
  shares of Common Stock, have executed letter agreements with US Realty,
  pursuant to which they have agreed to vote all of their shares in favor of the
  Transaction.  US Realty, which as of the Record Date held 1,053,500 shares of
  Common Stock, representing 13.4% of the total outstanding Common Stock, is

                                       15

<PAGE>
 
  expected to vote its shares in favor of this proposal.  Approval of the
  Transaction by the requisite vote of the shareholders of the Company is a
  condition to consummation of the Transaction (except for the initial purchase
  by US Realty of 934,000 shares on July 10, 1996).  Approval of the Transaction
  is conditioned upon approval of the proposed amendment to Article 5 of the
  Charter.

            Vote Required to Approve the Amendment to Article 5 of the Charter
  (Proposal 2).  The affirmative vote of a majority of the total votes cast by
  the shareholders is required to amend the Charter to expressly authorize US
  Realty to acquire up to 45% of the outstanding Common Stock, on a fully
  diluted basis, to permit individuals (and entities treated as individuals) who
  are treated as owning shares of Company capital stock as a result of the
  ownership of shares by US Realty and its affiliates to own up to 9.8% of the
  Company's outstanding capital stock and to make certain other modifications to
  facilitate the Company's continued qualification as a domestically controlled
  REIT for federal income tax purposes (Proposal 2).  Abstentions and broker
  non-votes will have no effect on the result of the vote to approve the
  proposed amendment to the Charter.  Members of the Stein Group, who as of the
  Record Date collectively owned 9.0% of the outstanding shares of Common Stock,
  have executed letter agreements with US Realty, pursuant to which they have
  agreed to vote all of their shares in favor of the proposed  amendment to the
  Charter.  US Realty, which as of the Record Date held 1,053,500 shares of
  Common Stock, representing 13.4% of the total outstanding Common Stock, is
  expected to vote its shares in favor of this proposal.  Approval of the
  proposed amendment to Article 5 of the Charter by the requisite vote of
  shareholders of the Company is a condition to consummation of the Transaction
  (except for the initial purchase by US Realty of 934,000 shares on July 10,
  1996).  Approval of the proposed amendment to Article 5 is conditioned upon
  approval of the Transaction.


   PROXIES

            The shares represented by each properly executed proxy not
  subsequently revoked will be voted at the Special Meeting in accordance with
  the instructions contained therein.  IF NO SPECIFICATION IS MADE, THE PROXY
  WILL BE VOTED (I) FOR PROPOSAL 1 TO APPROVE THE TRANSACTION AND (II) FOR
                    ---                                                ---
  PROPOSAL 2 TO APPROVE AND ADOPT THE AMENDMENT TO THE CHARTER TO EXPRESSLY
  AUTHORIZE US REALTY TO ACQUIRE UP TO 45% OF THE OUTSTANDING COMMON STOCK, ON A
  FULLY DILUTED BASIS, TO PERMIT INDIVIDUALS (AND ENTITIES TREATED AS
  INDIVIDUALS) WHO ARE TREATED AS OWNING SHARES OF COMPANY CAPITAL STOCK AS A
  RESULT OF THE OWNERSHIP OF SHARES BY US REALTY AND ITS AFFILIATES TO OWN UP TO
  9.8% OF THE COMPANY'S OUTSTANDING CAPITAL STOCK AND TO MAKE CERTAIN OTHER
  MODIFICATIONS TO FACILITATE THE COMPANY'S CONTINUED QUALIFICATION AS A
  DOMESTICALLY CONTROLLED REIT FOR FEDERAL INCOME TAX PURPOSES.

            A shareholder giving a proxy in the form accompanying this Proxy
  Statement has the power to revoke the proxy prior to its exercise by (i) prior
  to the Special Meeting filing a written notice of revocation bearing a later
  date with J. Christian Leavitt, Regency Realty Corporation, 121 West Forsyth
  Street, Suite 200, Jacksonville, Florida 32202, (ii) delivering to the Company
  a duly executed proxy bearing a later date, or (iii) attending the Special
  Meeting and voting in person.

            If necessary, the holders of the proxies may vote in favor of a
  proposal to adjourn the Special Meeting to permit further solicitation of
  proxies in order to obtain sufficient votes to approve any of the matters
  being considered at the Special Meeting.  If the Special Meeting is adjourned
  for any reason, at any subsequent reconvening of the Special Meeting all
  proxies may be voted in the same manner as such proxies would have been voted
  at the original convening of the Special Meeting (except for any proxies that
  have theretofore effectively been revoked or withdrawn).

            The cost of soliciting proxies will be borne by the Company.  In
  addition to the use of the mails, proxies may be solicited personally or by

                                       16

<PAGE>
 
  telephone or facsimile transmission by officers, directors, and employees of
  the Company, who will not be specifically compensated for such solicitation
  activities, [AND/OR BY _____________________________________, A THIRD-PARTY
  PROXY SOLICITOR WHOM THE COMPANY HAS HIRED FOR THIS PURPOSE AND WHO WILL
  RECEIVE A FEE OF $____________ (PLUS OUT-OF-POCKET EXPENSES) FOR ITS SERVICES
  FOR SOLICITING SUCH PROXIES.]  Arrangements also will be made with brokerage
  houses and other custodians, nominees and fiduciaries for forwarding
  solicitation materials to the beneficial owners of shares of Common Stock held
  of record by such persons, and the Company will reimburse such persons for
  their reasonable expenses incurred in that connection.

  SHAREHOLDERS ARE REQUESTED TO INDICATE THEIR VOTE, SIGN AND DATE THE ENCLOSED
  PROXY CARD AND RETURN IT PROMPTLY TO THE COMPANY IN THE POSTAGE-PAID ENVELOPE
  THAT HAS BEEN PROVIDED.

  THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
                                                          ---                
  TRANSACTION AND FOR THE PROPOSED AMENDMENT TO ARTICLE 5 OF THE COMPANY'S
                  ---                                                     
  CHARTER SET FORTH IN THIS PROXY STATEMENT.

                                       17

<PAGE>
 
                          APPROVAL OF THE TRANSACTION
                                  (PROPOSAL 1)


            The following discussion summarizes the material aspects of the
  Transaction, as set forth in the Stock Purchase Agreement and the various
  exhibits thereto, including the Stockholders Agreement and the Registration
  Rights Agreement.  This summary is not intended to be a complete description
  of the Stock Purchase Agreement or the exhibits thereto and is subject to, and
  qualified in its entirety by, reference to the Stock Purchase Agreement, the
  form of Stockholders Agreement and the form of Registration Rights Agreement,
  copies of which are attached hereto as appendices and incorporated herein by
  reference.


   INFORMATION ABOUT THE COMPANY

            The Company is a Florida-based, fully integrated, self-administered
  and self-managed real estate investment trust ("REIT") which owns, manages,
  and develops community and neighborhood shopping centers.  The Company's
  primary focus is grocery-anchored community and neighborhood shopping centers
  in the Southeastern United States.  As of June 1, 1996, the Company owns and
  operates 35 community and neighborhood shopping centers totalling
  approximately 4.0 million square feet and 4 suburban office complexes
  totalling approximately 298,000 square feet, located in Florida (74.8% of
  GLA), Alabama (12.3%), Georgia (8.5%) and Mississippi (4.4%).  The Company
  also manages and leases approximately 1.1 million square feet of properties
  for third parties and performs ancillary third party services (including
  tenant representation, site selection and construction management) on a
  selective basis.

            The Company is incorporated in Florida.  Its executive offices are
  located at 121 West Forsyth Street, Suite 200, Jacksonville, Florida 32202,
  and its telephone number is (904) 356-7000. The Company operates additional
  offices in Ft. Lauderdale, Tampa and Stuart, Florida and in Atlanta, Georgia.


   INFORMATION ABOUT US REALTY

            Security Capital U.S. Realty is a Luxembourg corporation that
  endeavors to become Europe's preeminent publicly-held real estate company with
  strategic ownership positions in leading "value-added" real estate operating
  companies in the United States (i.e. real estate operating companies in which
                                  ----                                         
  opportunities exist to enhance asset cash flow by combining a strategically
  focused asset portfolio with synergistic marketing and other strategies that
  meet the special needs of customers).  US Realty's shares are listed on the
  Amsterdam Stock Exchange and the Luxembourg Stock Exchange.  It does not
  intend to become publicly held within the United States.  US Realty believes
  its shares are owned by approximately 400 different investors, primarily
  financial institutions and similar investors who have substantial
  international investments.  Security Capital Group owns 39.8% of the
  outstanding shares of US Realty and no other shareholder is permitted to own
  more than 9.5% thereof.  There are no shareholder agreements or other
  agreements pursuant to which any shareholder has special voting rights or
  control rights with respect to US Realty.

            US Realty endeavors to acquire 25% to 45% of the common stock of a
  limited number of U.S. real estate operating companies with specific market
  niches and the potential to be leaders in their respective peer groups.  US
  Realty endeavors to maximize shareholder value in each of these companies by
  investing sufficient capital and, through representation on the board of

                                       18

<PAGE>
 
  directors and committees thereof, providing input to management with respect
  to development and implementation strategies for long-term growth in per share
  operating results.

            The Company will be the exclusive strategic investment of US Realty
  in the business of acquiring, developing and owning Shopping Center
  Properties, as defined, in that portion of the southern and eastern United
  States defined in the Stockholders Agreement as the "Geographic Region."
  "Shopping Center Properties" are defined in the Stockholders Agreement as any
  shopping center under 250,000 square feet of leasable area anchored by a
  grocery store, drugstore or general merchandise discount store (such as Wal-
  Mart, K-Mart, Target, TJ Maxx, Stein Mart or similar store), but excluding any
  enclosed regional or urban mall or other similar shopping facility, and
  "Geographic Region" means Florida, Alabama, Mississippi, Georgia, North
  Carolina, South Carolina, Tennessee, Kentucky, Virginia, West Virginia,
  Maryland and the District of Columbia and the southern regions of Indiana and
  Ohio (including Indianapolis and Columbus, respectively).  Neither US Realty
  nor any of its affiliates currently has a direct investment in any Shopping
  Center Property in the Geographic Region or owns any material interest in any
  company that owns assets that currently compete with the Company's investments
  or properties.

            US Realty has over $800 million of equity capital, of which a
  minimum of $132.2 million has been reserved for its investment in the Company.
  US Realty consummated an equity offering in October 1995 pursuant to which it
  received $509 million of subscriptions, all of which has been called and
  funded.  On July 2, 1996, US Realty completed an underwritten public offering
  of its shares in Europe and realized gross proceeds of $250 million.

            Security Capital Group, through its subsidiaries, is the principal
  shareholder of three REITs (described below) that focus on industrial and
  multifamily properties.  As of June 30, 1996, these REITs had combined total
  assets of $____ billion.  Two of these REITs are traded on the NYSE. Security
  Capital Group provides REIT management and other services to these REITs
  through its wholly-owned subsidiaries.

            Security Capital Industrial Trust ("SCI") (NYSE Symbol:  SCN) is the
  largest publicly held owner and operator of industrial properties in the
  United States.  As of June 30, 1996, SCI had industrial properties operating
  or under development in ____ metropolitan areas, totaling ____ million square
  feet.  SCI creates value for its shareholders through the "SCI National
  Operating System," a unique system that provides exceptional customer service,
  marketing and development to SCI customers at the local, regional and national
  levels.

            Security Capital Pacific Trust ("PTR") (NYSE Symbol:  PTR) is a
  preeminent real estate operating company focusing on the development,
  acquisition, operation and long-term ownership of multifamily properties in
  the growing markets of the western United States.  As of June 30, 1996, PTR's
  portfolio included ______ multifamily units in operation or under
  construction, approximately _____________ units in planning and land owned or
  under control for future development of an expected ___________ additional
  units.  PTR's research capability and development expertise are important in
  designing new properties to match the submarkets in which they are located.
  Service-oriented management and operating efficiencies have helped PTR achieve
  consistent growth in per share operating results.

            Security Capital Atlantic Incorporated is a private REIT that
  focuses on the development, acquisition, operation  and long-term ownership of
  income-producing multifamily properties in the southeastern United States.
  It expects to follow the operating and investment strategies that have been
  successfully implemented by PTR.

                                       19

<PAGE>
 
            US Realty, of which Security Capital Group is a 39.8% shareholder,
  is the principal shareholder in three REITs with specific market niches
  described below.  As of June 30, 1996, these REITs had combined total assets
  of $____ billion.  Two of these REITs are traded on the NYSE.

            CarrAmerica Realty Corporation ("CarrAmerica") (NYSE Symbol: CRE),
  based in Washington, D.C., focuses on identifying office properties in growing
  or protected markets.  Its strategy is to meet multiple-location office needs
  of corporate clients with cost-effective space through a national base of
  properties and development in growing suburban markets.  In November, 1995, US
  Realty agreed to invest $250 million in newly-issued CarrAmerica stock at
  $21.47 per share. Following CarrAmerica's shareholder approval the investment
  was consummated on April 30, 1996.

            Storage USA, Inc. ("Storage USA") (NYSE Symbol: SUS), based in
  Columbia, Maryland, with operations in 25 states, focuses on flexible, cost-
  efficient self-storage facilities for businesses and consumers.  Its strategy
  is to continue to acquire well-located properties in what is presently a
  fragmented sector, increase occupancies and rents with its national operating
  system, and create a national franchise for servicing customers.  In February,
  1996 US Realty agreed to invest $220 million in newly-issued Storage USA stock
  at $31.30 per share. $61 million was invested on March 19, 1996 and the
  balance is expected to be invested in the third quarter of 1996. Storage USA's
  shareholders approved the transaction on June 5, 1996.

            Pacific Retail Trust ("Pacific Retail"), based in Dallas, Texas, is
  a privately-held REIT formed with US Realty's assistance.  It focuses on
  shopping centers in the western United States in residential neighborhoods
  where opportunities for competing developments are limited ("infill
  locations").  Its strategy, which is similar to that which the Company will
  pursue (but in a different geographic area), is to acquire a large base of
  well-located grocery- or drugstore-anchored shopping centers that cater to the
  basic needs of consumers and achieve growth in operating revenue through
  intensive remarketing and remerchandising of the shopping centers, improving
  the mix and quality of the tenants.  In October, 1995, US Realty agreed to
  invest $200 million in Pacific Retail at $10 per share.


   BACKGROUND OF THE TRANSACTION

            The Company believes that commercial real estate in the United
  States will increasingly be held by publicly held REITs that are fully
  integrated operating companies.  During 1993 and 1994, a record volume of
  capital was invested in the initial public offerings of REITS.  It is the
  Company's view that, as the real estate securitization process continues, the
  success of a REIT will be largely dependent on its ability to access capital
  markets consistently on favorable terms and that this access will depend upon
  the REIT's "critical mass," or asset size, operational sophistication,
  experience and performance history.

            During the spring of 1995, representatives of SCIR and the Company
  held preliminary discussions concerning the possibility of an SCIR affiliate
  making an investment in the Company. Representatives of the Company had an
  introductory meeting with officers of SCIR in May 1995. However, the
  discussions never progressed beyond the preliminary stage.

            In March 1996, representatives of SCIR contacted Martin E. Stein,
  the Company's President, and expressed an interest in renewing discussions.
  The Company was aware of US Realty's reputation in the real estate industry
  and its investments in other REITs and was interested in further exploring a
  relationship as a means of accessing additional capital.

                                       20

<PAGE>
 
            Following SCIR's initial contact, William D. Sanders, Chairman of
  Security Capital Group, and Anthony R. Manno, Jr., Managing Director of SCIR,
  met with Mr. Stein at an industry conference on April 16, 1996, where they
  updated each other on the progress, strategy and philosophy of each company.
  The parties believed that, given the compatibility of their philosophies and
  visions and the potential mutual benefits from a financial relationship, the
  parties should explore a possible strategic investment by US Realty in the
  Company.  Over the course of the next several weeks, the Company and advisors
  to US Realty exchanged information and continued discussions. At the end of
  April 1996, Regency's senior management contacted Prudential Securities with
  respect to a possible US Realty proposal, as a result of which the Company
  retained Prudential Securities to serve as financial advisor in connection
  with evaluating any proposed transaction.

            On April 26, 1996, Paul E. Szurek, Managing Director of US Realty
  and its operating advisor, outlined a proposed structure modeled on US
  Realty's March 1996 agreement with Storage USA, Inc., a self-storage
  facilities REIT based in Columbia, Maryland.  Over the next several weeks, the
  parties discussed the terms of the proposed transaction, including price.
  Management briefed the Board of Directors concerning the status of the
  negotiations at a special meeting held on April 29 to approve the Company's
  quarterly dividend. On May 5, 1996, Mr. Stein visited representatives of SCIR
  in Santa Fe, New Mexico, where they reviewed philosophy, goals and certain
  operating strategies as well as the Company's and US Realty's respective
  positions on price.  On May 9, 1996, SCIR, with the concurrence of US Realty's
  management, proposed a price of $17.625 per share, which was higher than the
  $17.375 closing sale price of the Company's Common Stock on the NYSE on the
  same day and higher than the $17.25 average closing sale price during the
  preceding 30 days.  On May 10, 1996, Mr. Stein advised SCIR that the Company
  would be prepared to proceed to negotiate a transaction on that basis, subject
  to Board approval.

            On May 13, 1996, US Realty's management prepared a discussion
  outline of the principal terms of the proposed transaction, which was the
  subject of a telephone conference call between representatives of the Company
  and US Realty that day.  At a meeting on May 14, 1996, the Board authorized
  management to proceed with the negotiation of a transaction consistent with
  the discussion outline.  The initial transaction document drafts were
  distributed on May 16, based on the discussion outline and changes negotiated
  thereto, and detailed negotiations continued during the following two and one-
  half weeks between representatives of the Company and US Realty and their
  respective counsel concerning legal and business points in the draft
  documentation, with numerous revised drafts being circulated.  Officers of
  SCIR also made tours of certain of the Company's properties and performed due
  diligence during this period.

            Management kept members of the Board of Directors apprised of the
  status of the negotiations and documentation during this period and
  distributed for their review a report setting forth the financial analysis
  underlying the Prudential Securities opinion referred to below, a summary term
  sheet prepared by Prudential Securities and a complete draft of the Stock
  Purchase Agreement, Stockholders Agreement and Registration Rights Agreement.
  On May 31, US Realty's Board of Directors approved the price and the proposed
  transaction terms, and the approval was communicated to the Company.  On the
  morning of June 11, 1996, the Board of Directors held a special meeting to
  discuss the US Realty transaction.  Management discussed the potential
  advantages of, and alternatives to, the transaction, emphasizing the
  opportunity to raise a large amount of capital in a single transaction at
  reasonable cost, the certainty of amount but flexibility as to timing, the
  expected accretion to earnings and increase in shareholder value expected by
  management to result from the transaction, and the ability to obtain
  continuing access to US Realty's strategic advice and capital markets
  expertise.  Prudential Securities made a presentation to the Board of
  Prudential Securities' financial analysis underlying its opinion referred to
  below.  Among other things, the Board discussed with Prudential Securities the
  fact that although the per share price of $17.625 was higher than the 30-day
  average closing sale price when initially agreed upon, it was lower than the
  $19.00 closing price of the Common Stock on the NYSE on June 10.  It was noted
  that the US Realty price per share compared favorably with alternative means

                                       21

<PAGE>
 
  of raising the same capital because of the significant underwriting
  commissions and other transaction costs of a public offering and the lack of
  certainty that any comparable negotiated transactions of similar size would be
  available over the time period that US Realty would be funding its Total
  Equity Commitment.  Prudential Securities also delivered its written opinion
  to the Board at the meeting.  See "--Opinion of the Company's Financial
  Advisor."

            After a discussion concerning the advantages of and alternatives to
  the transaction and a summary by Company counsel of the status of the
  documentation, the Board voted unanimously in favor of the Stock Purchase
  Agreement and the transactions contemplated thereby, including the Amendment
  to the Charter, and authorized management to negotiate final changes and
  execute definitive agreements.  After final negotiations and redrafting, the
  Stock Purchase Agreement was executed late on June 11, 1996.

            On June 11, 1996, the day before the Transaction was publicly
  announced, the closing sale price for Common Stock as reported on the NYSE
  Composite Tape was $19.125.  For the 60 trading days prior to June 12, 1996,
  the average closing sale price for Common Stock was $17.72, and on July ___,
  1996, the closing sale price was $________.

   TERMS OF THE TRANSACTION

            Parties.  Holdings, a wholly-owned subsidiary of Security Capital
  U.S. Realty, will acquire the shares issued in connection with the
  Transaction.  Security Capital U.S. Realty has a contractual obligation to
  advance to Holdings the funds to purchase the shares as required pursuant to
  the Stock Purchase Agreement, and has guaranteed the performance by Holdings
  of its obligations under the Stock Purchase Agreement.

            US Realty Investment.  Pursuant to the Stock Purchase Agreement, the
  Company will sell an aggregate of up to 7,499,400 shares of Common Stock to US
  Realty at a price of $17.625 per share, for an aggregate purchase price of up
  to approximately $132 million (plus a purchase price adjustment equal to 85%
  of dividends accrued on the shares sold during the quarterly dividend period
  prior to issuance).  The purchase price per share was determined as a result
  of arm's length negotiations between the Company on the one hand and US Realty
  on the other hand and was based upon recent sales prices of the Common Stock
  at the time that representatives of the Company and US Realty agreed to
  negotiate the basic terms of the Transaction and agreed to proceed toward the
  negotiation and executive of definitive written agreements with respect
  thereto.  At the Initial Closing, the Company sold 934,400 shares to US Realty
  at $17.625 per share, for an aggregate purchase price of approximately $16.5
  million (plus the purchase price adjustment based on accrued dividends).  As
  of the Record Date, US Realty owned approximately 13.4% of the outstanding
  Common Stock (including 119,100 shares held by it at the time of execution of
  the Stock Purchase Agreement).

            If shareholder approval is obtained, at a time to be selected by the
  Company but not later than December 1, 1996, in the case of the Second
  Closing, and not later than June 1, 1997 in the case of the Subsequent
  Closings, the Company may sell 2,717,400 shares of Common Stock to US Realty
  at a price of $17.625 per share, for an aggregate purchase price of
  approximately $47.9 million (plus the purchase price adjustment based on
  accrued dividends), and up to 3,847,600 shares at a price of $17.625 per
  share, for an aggregate purchase price of up to approximately $67.8 million
  (plus the purchase price adjustment based on accrued dividends), respectively
  (the Second Closing and the Subsequent Closings constituting the "Remaining
  Equity Commitment").  US Realty will have the right, exercisable on a one-time
  basis in each of December 1996 and June 1997, to purchase from the Company, at
  a price of $17.625 per share (plus the purchase price adjustment based on
  accrued dividends), additional shares of Common Stock to the extent that the

                                       22

<PAGE>
 
  shares to be acquired at the Second Closing and the Subsequent Closings,
  respectively, have not yet been purchased.  If US Realty acquires all of the
  shares represented by the Remaining Equity Commitment (and assuming no other
  change in the number of outstanding shares), US Realty will own approximately
  43.2% of the outstanding Common Stock on a fully diluted basis.

            Use of Proceeds.  The net proceeds of the investment by US Realty
  will be used (i) to repay certain indebtedness of the Company under its
  revolving credit agreements, and (ii) to make additional investments in
  Shopping Center Properties in the Geographic Region.

            Stockholders Agreement.  At the Initial Closing, US Realty and the
  Company entered into the Stockholders Agreement, which grants certain rights
  to and imposes certain restrictions on US Realty with respect to the shares
  purchased by it pursuant to the Stock Purchase Agreement. Many of these rights
  terminate on the 20% Termination Date.  These rights and restrictions include
  the following:

              Strategic and Other Advice.  Following shareholder approval and
  until the 20% Termination Date, US Realty, at the Company's request, is
  obligated to use its reasonable efforts to make available to the Company the
  benefit of US Realty's market expertise, operating experience and research
  acquired or developed in the ordinary course of its business and to consult
  with and advise the Company from time to time, as reasonably requested by the
  Company, with respect to matters concerning: (i) business and operating
  strategy, (ii) financing and capital formation (including advice regarding
  capital markets and the structure, method and timing of capital-raising
  efforts), (iii) property acquisition strategy and acquisition opportunities
  with respect to the Shopping Center Properties in the Geographic Region of
  which US Realty becomes aware, (iv) investor relations, and (v) market or
  economic research in its possession that is not readily available from third
  parties.  US Realty will be entitled to customary fees and expense
  reimbursement for its services, but is not expected to require payment of such
  fees unless an unusual commitment of resources is requested by the Company.

              Management of the Company; Representation on the Board and
  Certain Board Committees.  Other than the addition to the Board of US Realty's
  nominees following receipt of shareholder approval, the Board and management
  of the Company will not change as a result of the Transaction.

            Under the Stockholders Agreement, two individuals identified by US
  Realty, _____________________ and __________________________,  [DESCRIBE
  POSITIONS AND BACKGROUND], will become directors of the Company immediately
  after the approval of the Transaction by the shareholders of the Company.  The
  Board of Directors has voted to expand the number of directors from eight to
  ten, subject to shareholder approval of the Transaction, and to elect Messrs.
  __________ and __________ to fill the vacancies.  Messrs. __________ and
  ___________ will be Class I and III directors, respectively.  Under Florida
  law directors elected by the Board to fill vacancies will be required to stand
  for re-election at the next annual meeting of the Company's shareholders, at
  which time their terms of office will be made the same as those of the other
  directors of the relevant class (i.e., expiring at the 1999 annual meeting in
  the case of Class III directors and at the 2000 annual meeting in the case of
  Class I directors).

            Additionally, US Realty will have the right, until the earlier of
  (i) the 20% Termination Date and (ii) the termination of the Standstill Period
  or any Standstill Extension Term, to nominate for election by shareholders at
  each annual or special meeting that number of directors to the Board such that
  the total number of US Realty nominees (including any directors nominated
  previously by US Realty whose terms have not expired) is equal to the greater

                                       23

<PAGE>
 
  of (i) two, and (ii) that number corresponding to the percentage of Common
  Stock owned by US Realty, but not more than 49% of the Board.  If the
  Standstill Period or any Standstill Extension Term has expired, but the 20%
  Termination Date has not occurred, US Realty may nominate for election to the
  Board pursuant to the terms of the Stockholders Agreement that number of
  directors which is equal to the lesser of (i) two and (ii) the number
  corresponding to the percentage of Common Stock owned by US Realty.  After the
  expiration of the Standstill Period or any Standstill Extension Term, at the
  Company's request, US Realty will use its reasonable efforts to cause such of
  its nominees to resign from the Board as will reduce the number of its
  nominees to the number described in the previous sentence.  At any time that
  US Realty has the right to nominate its proportionate share of nominees for
  election to the Board, the total number of members of the Board will not be
  less than eleven without US Realty's consent. Because the number of US Realty
  nominees calculated as described above is rounded down to the nearest whole
  number, US Realty will be entitled to five nominees (assuming it has invested
  its Total Equity Commitment) if the size of the Board is increased to 11, and
  to six nominees if the size of the Board is increased to 14 from its present
  size of eight.  So long as the Standstill Period or any Standstill Extension
  Term is in effect, the Stockholders Agreement prohibits US Realty from seeking
  additional representation on the Board.  In addition, so long as US Realty has
  the right to nominate directors to the Board and at least one director
  nominated by US Realty is serving thereon, US Realty has the right, subject to
  certain limitations, to have one of its nominees on each of the Board's audit
  committee, nominating committee, compensation committee, and executive
  committee, as well as any other key committees.  US Realty also has the right
  to name an individual to serve on the board of directors or comparable
  governing body of each subsidiary of the Company so long as US Realty has the
  right to nominate at least one director to the Board.

              Information Rights.  Following shareholder approval and until the
  20% Termination Date, the Company will have the obligation (i) to provide to
  US Realty certain financial statements and operating information, generally
  limited to information provided to the Company's senior management and the
  Board, and a copy of any filing made by the Company pursuant to any federal or
  state securities law, and (ii) to consult with the designated representative
  of US Realty, prior to approval by the Board or entering into any definitive
  agreement, in connection with proposals relating to (a) any acquisition or
  business combination having a value in excess of $10 million, (b) any sale or
  disposition of assets, whether by sale of stock or assets or by any business
  combination, having a value in excess of $20 million, (c) the incurrence or
  issuance of indebtedness, or the entering into a guaranty or any other
  financing arrangement, in excess of $20 million, (d) the annual operating
  budget of the Company, (e) material changes in executive management of the
  Company, (f) new material agreements with members of the executive management
  of the Company, and (g) except in certain circumstances, any issuance by the
  Company or any subsidiary of any capital stock or other equity interests.  In
  circumstances in which the Company is required under the Stockholders
  Agreement to consult with the designated representatives of US Realty,
  management of the Company will discuss with such representatives the proposal
  at issue prior to presenting it to the Board.  In its subsequent presentation
  to the Board, management of the Company expects to advise the Board of US
  Realty's views and recommendations, if any, on the proposal at issue.  The
  Board will have no obligation to accept or comply with the views of, or follow
  the recommendations of, US Realty.  The Company and US Realty also will afford
  each other a reasonable opportunity to review in advance any filing by it
  pursuant to any federal or state securities or other law or any press release
  that describes or mentions the other. US Realty will be obligated to comply
  with the Company's insider trading policy and to keep confidential all
  information obtained from the Company.

               Participation Rights.  So long as US Realty's ownership of
  Common Stock on  fully diluted basis does not drop below 15% for more than 180
  days (subject to certain conditions) (upon such occurrence, the "15%
  Termination Date"), in the event that the Company issues or sells shares of
  capital stock (including securities convertible into or exchangeable or
  redeemable for capital stock of the Company and including capital stock to be
  issued pursuant to the conversion, exchange or redemption of other

                                       24

<PAGE>
 
  securities), US Realty will be entitled to a participation right to purchase
  or subscribe for that proportion of the total number of shares to be issued,
  including shares to be issued to US Realty pursuant to the rights described in
  this paragraph, equal to US Realty's proportionate holdings of Common Stock
  outstanding prior to such issuance (but not to exceed 42.5% of the capital
  stock issued in the Company's first offering and 37.5% of the capital stock
  issued in subsequent offerings).  Notwithstanding the foregoing, US Realty
  shall have no right to participate in (i) the issuance or sale by the Company
  of any of its capital stock issued to the Company or any of its subsidiaries
  or pursuant to options, rights or warrants or other commitments or securities
  in effect or outstanding on the date of the Stock Purchase Agreement, or (ii)
  the issuance of capital stock pursuant to the conversion, exchange or
  redemption of any other capital stock with respect to the original issuance of
  which US Realty had and fully exercised participation rights.  US Realty will
  be entitled to participate in the issuance of capital stock by the Company
  pursuant to benefit, option, stock purchase or similar plans, including upon
  the exercise of options, rights, warrants or other securities, as if the price
  at which such capital stock is issued were the market price on the date of
  issuance.  All purchases pursuant to such participation rights will be at the
  same price and on the same terms and conditions as are applicable to other
  purchasers.

              Limitations on Corporate Actions.  Until the first to occur of
  (y) the expiration of the Standstill Period or any Standstill Extension Term
  and (z) the 20% Termination Date, the Company may not (a) incur total
  indebtedness in an amount in excess of 60% of the gross book value of the
  Company's total consolidated assets, (b) cause or permit the sum of (i)
  securities of any other person, (ii) assets held other than directly by the
  Company, (iii) loans made by the Company to a subsidiary, or the reverse, and
  (iv) assets managed by persons other than employees of the Company, to, at any
  time, exceed 30%, at cost, of the consolidated assets owned by the Company,
  (c) own real property other than Shopping Center Properties or land suitable
  for the development of Shopping Center Properties (which for purposes of this
  limitation include any such property having less than 350,000 square feet of
  leasable area in the Geographic Region) whose value exceeds 10% (15% before
  June 1997) of the aggregate value of the Company's real estate assets at cost,
  (d) terminate its eligibility for treatment as a REIT for federal income tax
  purposes, or (e) except as permitted or required by agreements existing as of
  June 11, 1996, own any interest in any partnership unless the Company is the
  sole managing general partner of such partnership (collectively, together with
  the covenants described in the following paragraph and certain covenants with
  respect to arrangements with affiliates, the "Corporate Action Covenants").
  The Company has certain specified rights to cure certain failures to comply
  with the Corporate Action Covenants.

            In addition, the Company has agreed to certain limitations,
  effective following shareholder approval of the Transaction and continuing
  until US Realty's ownership of Common Stock shall have been below 20% by value
  of the actually outstanding shares of Common Stock for a continuous period of
  180 days (subject to certain conditions), on  the amount of assets that it
  owns indirectly through other entities and the manner in which it conducts its
  business.  US Realty requested these conditions because of its belief that
  REITs with direct and extensive control over the operation of all of their
  assets operate more effectively and in order to permit US Realty to comply
  with certain requirements of the Code and other countries' tax laws applicable
  to foreign investors.  The Company, during the same period, has agreed not to
  take actions in the future that would result in more than 30% of its gross
  income, or more than 30% of the Company's assets by value (subject to certain
  adjustments), being attributable to properties that are indirectly owned and
  are not managed by employees of the Company.

            The Company believes that these limitations are generally consistent
  with its operating strategies and does not believe that they will materially
  restrict its operations or have a material adverse effect on its financial
  condition or results of operations, though there can be no assurance that they
  will not do so in the future.

                                       25

<PAGE>
 
            Voting Rights.  During the Standstill Period and any Standstill
  Extension Term, US Realty will vote its shares of Common Stock at its option
  in accordance with the recommendation of the Company's Board or proportionally
  in accordance with the votes of the other holders of the Common Stock.
  However, US Realty may vote all of the shares of Common Stock that it owns, in
  its sole and absolute discretion, with regard to the election of its nominees
  to the Board and may vote shares of Common Stock owned by it representing up
  to 40% of the outstanding shares, in it sole and absolute discretion, with
  regard to (i) any amendment to the Charter or Bylaws that would reasonably be
  expected to materially adversely affect US Realty and (ii) any extraordinary
  transaction (as defined). If any such extraordinary transaction requires the
  affirmative vote of the holders of two-thirds of the outstanding shares of
  Common Stock, US Realty may vote, in its sole discretion, shares owned by it
  representing up to 28% of the outstanding Common Stock.

            Standstill Provisions.  For a period of five years after the
  shareholder approval date and during any Standstill Extension Term, subject to
  earlier termination as described below, US Realty may not:  (i) acquire more
  than 45% of the outstanding shares of Common Stock, on a fully-diluted basis;
  (ii) sell, pledge, transfer or otherwise dispose of any shares of Company
  Stock except in certain circumstances (such as sales in certain limited
  amounts, privately negotiated sales, and sales under the Registration Rights
  Agreement, and transfers to a bona fide financial institution for the purpose
  of securing bona fide indebtedness, subject to certain obligations under the
  Stockholders Agreement), and in no event may any transfers be made in a
  negotiated transaction which would result in any transferee beneficially
  owning more than 9.8% of the Company's capital stock unless the Company
  approves the transfer, in its sole and absolute discretion; (iii) act in
  concert with any other person or group by becoming a member of any group
  acquiring, holding, voting, or disposing of voting securities pursuant to
  Section 13(d) of the Exchange Act (other than such a group comprised
  exclusively of US Realty and one or more of its affiliates); (iv) solicit or
  propose to effect or negotiate certain business combination transactions other
  than pursuant to the Stock Purchase Agreement; (v) solicit, initiate, or
  participate in any "solicitation" of "proxies" or become a "participant" in
  any "election contest" (as such terms are defined or used in Regulation 14A
  under the Exchange Act, disregarding certain provisions thereof); call, or
  participate in a call for, any special meeting of shareholders; request, or
  take any action to obtain any list of holders of any securities of the
  Company; or initiate, propose, participate in the making of, or solicit
  shareholders for the approval of any shareholder proposal; (vi) seek Board
  representation or a change in the composition or size of the Board, except as
  permitted by the Stockholders Agreement; (vii) except in certain
  circumstances, sell or otherwise transfer, or pledge or otherwise hypothecate,
  any capital stock of Holdings or any affiliate of Holdings that owns Common
  Stock; (viii) request an amendment or waiver of the foregoing limitations or
  of the ownership limitations in the amended Charter; or (ix) assist or
  encourage any person with respect to any of the foregoing.

            Exclusive Investment Vehicle for Shopping Center Properties and
  Shopping Center Companies.  Until the earlier of the 20% Termination Date and
  the date on which shareholders fail to approve the Transaction, US Realty and
  its controlled affiliates will not, directly or indirectly, own, purchase,
  develop, or otherwise acquire any Shopping Center Property in the Geographic
  Region.  If US Realty acquires any Shopping Center Properties as an incidental
  part of a portfolio investment, the Company will have the opportunity to
  acquire such properties as part of the portfolio acquisition or later if any
  such properties are proposed to be sold.  In addition, US Realty and its
  affiliates will not purchase equity securities of any Shopping Center Company
  (as defined in the Stockholders Agreement) other than the Company (except that
  US Realty may purchase less than 9% of other Shopping Center Companies so long
  as US Realty is not represented on the board of directors and does not
  participate in the management of such other company).

            Extension and Termination of Stockholders Agreement.  The Standstill
  Period will be extended automatically for successive one-year periods, unless
  US Realty provides written notice at least 270 days prior to the commencement
  of any Standstill Extension Term that such Standstill Ex

                                       26

<PAGE>
 
  tension Term and all further Standstill Extension Terms are canceled.
  However, the Standstill Period will be automatically terminated, during the
  Standstill Period or any Standstill Extension Term, if any of the following
  events occurs:  (i) the occurrence of a default under any debt agreement that
  would reasonably be expected to result in a Material Adverse Effect (as
  defined in the Stockholders Agreement) and which cannot be cured by the
  Company within the applicable cure period under such debt agreement; (ii) the
  acquisition by any other person or group of 9.8% or more of the voting power
  of the outstanding voting securities of the Company unless the shares
  representing in excess of such 9.8% ("Excess Shares") are deprived of voting
  rights pursuant to any applicable ownership limitations in the Charter, as
  amended, or any other enforceable agreement, or if the Excess Shares do not
  constitute more than 5.2% of the voting power of the outstanding voting
  securities, unless the transferee does not divest itself of the Excess Shares
  within the applicable cure period; (iii) any person or group having, or having
  the right to elect, a number of directors on the Board equal to or greater
  than the number of directors which US Realty is entitled to nominate; (iv) the
  authorization by the Company or the Board, with all US Realty nominees
  abstaining or voting against, of the solicitation of offers, proposals, or
  indications of interest with respect to certain mergers, sales of assets, or
  other similar extraordinary transactions (each a "Covered Transaction"); (v)
  the written submission by any person or group of a proposal with respect to a
  Covered Transaction (unless as soon as practicable after receipt of such
  proposal the Board determines that such proposal is not in the best interests
  of the Company and its shareholders, and the Board continues to reject such
  proposal as a result of such determination); (vi) in connection with an actual
  or proposed Covered Transaction, the removal of any rights plan, staggered
  board provisions, supermajority vote provisions, excess share provisions, or
  similar impediments to the consummation thereof, or, whether or not in
  connection with an actual or proposed Covered Transaction, any modification or
  waiver of the ownership restrictions contained in Article 5 of the Charter
  (except under certain circumstances); (vii) the failure of the Company to
  timely cure any breach of the Stock Purchase Agreement or the Stockholders
  Agreement which would reasonably be expected to materially adversely affect US
  Realty or have a Material Adverse Effect; (viii) the occurrence of any
  violation of any of the Corporate Action Covenants described above; or (ix)
  the occurrence of any event (including certain changes in management)
  entitling the holder of the Company's Class B Stock to convert its shares into
  Common Stock without regard to certain percentage limits otherwise applicable
  thereto.

            Registration Rights.  At the Initial Closing, the Company and US
  Realty entered into the Registration Rights Agreement, pursuant to which the
  Company is obligated to file a minimum of one registration statement under the
  Securities Act, plus an additional registration statement for each $50 million
  of shares of capital stock purchased by US Realty after the Initial Closing,
  for the resale by US Realty of all or a portion of the Company securities
  owned by it.  Because US Realty may be deemed to be an "underwriter" for
  purposes of the Securities Act, the shares of Common Stock and other
  securities of the Company owned by it may not be sold in the absence of
  registration under the Securities Act unless an exemption from registration is
  available.

            The Registration Rights Agreement provides, among other things,
  that, at any time after the Total Equity Commitment has been invested or the
  time for investment thereof has expired, US Realty will have the right to
  require the Company to file a registration statement (such filing, the "Shelf
  Registration") under the Securities Act for any or all shares acquired by US
  Realty pursuant to the Stock Purchase Agreement and the Stockholders
  Agreement, and any securities issued or issuable with respect to any such
  shares ("Registrable Securities").  The right to a Shelf Registration is
  limited, however, in that (i) it may be invoked in each instance only with
  respect to 1,000,000 or more shares, (ii) the Company is not required to
  effect more than three Shelf Registrations, and (iii) the Company will have
  the right from time to time to require US Realty not to sell under the Shelf
  Registration or to postpone or suspend the effectiveness thereof for up to
  approximately 90 days in certain circumstances, and US Realty will have the
  right to require the Company on not more than two occasions not to sell any
  common equity securities for up to 75 days in certain circumstances and
  subject to certain limitations.  US Realty also will have the right, with

                                       27

<PAGE>
 
  respect to most registrations of Common Stock by the Company for its own
  account, to require the Company to include Registrable Securities in such
  registration.  The Registration Rights Agreement provides that the Company and
  US Realty each will pay certain expenses relating to registrations.  The
  Registration Rights Agreement otherwise contains terms that are generally
  customary for registration rights agreements of its type.

            In addition, as long as US Realty owns at least 9.8% of the
  outstanding Common Stock on a fully-diluted basis and the Standstill Period
  (or any Standstill Extension) is in effect, in the event that the Company
  directly or indirectly sells or otherwise disposes of shares of Common Stock
  solely for cash to a third party in connection with certain extraordinary
  transactions such as a merger or the sale, issuance, or other disposition of
  capital stock of the Company representing, in the aggregate, at least 30% of
  the then outstanding capital stock of the Company, US Realty will have the
  right to include in such sale or distribution Registrable Securities owned by
  US Realty at such time on a pro rata basis (but not greater than 20%).

            Conditions to Closing.  Each of the Company's and US Realty's
  obligations to effect the Second Closing and each Subsequent Closing are
  subject to various mutual and unilateral conditions, including, without
  limitation, the following:  (i) the Company shall continue to qualify as a
  REIT for federal income tax purposes; (ii) the shareholders shall have
  approved the Transaction (Proposal 1); (iii) the shareholders shall have
  approved the Amendment to the Charter to expressly authorize US Realty to
  acquire up to 45% of the outstanding Common Stock, on a fully diluted basis,
  to permit individuals (and entities treated as individuals) who are treated as
  owning shares of Company capital stock as a result of the ownership of shares
  by US Realty and its affiliates to own up to 9.8% of the Company's outstanding
  capital stock and to make certain other modifications to facilitate the
  Company's continued qualification as a domestically controlled REIT for
  federal income tax purposes (Proposal 2); (iv) the Company shall continue to
  qualify as a domestically controlled REIT for federal income tax purposes; (v)
  there shall have been no change or circumstance that has had or would
  reasonably be expected to have a Material Adverse Effect; and (vi) various
  other customary conditions shall have been satisfied.

            No Solicitation of Competing Transactions.  Unless and until the
  Stock Purchase Agreement is terminated in accordance with its terms, the
  Company may not solicit proposals or indications of interest from, provide
  information to, or negotiate with any person, with respect to certain
  transactions alternative to the Transaction.  However, the Board may take such
  actions as may be required by the Board's fiduciary obligations to the
  shareholders as determined in good faith by the Board on the written advice of
  outside counsel.

            Expenses; Break-Up Fee.  If the Transaction is submitted to a vote
  of the shareholders and the shareholders fail to approve the Transaction (or
  in the event that the Company has failed to convene a meeting of shareholders
  for such purpose on or before October 31, 1996), the Company will pay to US
  Realty $1 million to reimburse it for its expenses in connection with the
  transactions. If the Transaction is not approved by the shareholders in
  connection with the emergence and consummation, under certain circumstances,
  of a proposal for a Competing Transaction, the Company will pay to US Realty a
  break-up fee of $5 million.  No expenses or break-up fee, as the case may be,
  will be owed if US Realty is in material default with respect to its
  obligations under the Stock Purchase Agreement.

            Amendment or Termination of the Stock Purchase Agreement.  Although
  the Board reserves the right to amend the provisions of the Stock Purchase
  Agreement without approval of the shareholders, either before or after
  approval by the shareholders of the Transaction and the transactions
  contemplated thereby, the Company intends to solicit further approval of the
  shareholders in the event that any such amendment would change the Transaction

                                       28

<PAGE>
 
  in a way that would be materially adverse to shareholders.  In addition, any
  amendment would require the consent of US Realty.  The Board also reserves the
  right to terminate the Stock Purchase Agreement without obtaining further
  approval of the shareholders.  The Board does not anticipate either the
  amendment of the terms of, or the termination of, the Stock Purchase
  Agreement.


    POTENTIAL BENEFICIAL EFFECTS OF THE TRANSACTION

            The Company believes that the Transaction, if consummated,
  represents an attractive opportunity to improve long-term shareholder value by
  providing the Company with access to significant equity capital at an
  attractive cost and additionally provides strategic resources not otherwise
  readily available to it, thereby enhancing the Company's short-term and long-
  term growth prospects and better positioning it to capitalize on shopping
  center opportunities in the southeastern United States.  In particular, the
  Company believes that the Transaction may have a number of beneficial effects
  on the Company and its shareholders, including the following:

            Large, Timely Infusion of Capital at Reasonable Cost.  The
  consummation of the Transaction is expected to enable the Company to
  accomplish its financing objectives for 1996 and a significant portion of 1997
  in a single transaction on favorable terms compared with those that might have
  been available in the public markets.  Because the purchase price for the
  Common Stock to be acquired by US Realty is fixed, the Transaction protects
  the Company against the risks of having to sell shares following a decline in
  the stock market as a whole and the market for REIT shares in particular.  In
  addition, the Company will not pay any underwriting discount or commission in
  connection with the sales to US Realty and expects that its out-of-pocket
  expenses in connection with such sales will be substantially less than the
  costs it would have incurred in selling a similar number of shares in one or
  more firm commitment underwritings.  Moreover, the Company is not exposed to
  the risk of a decline in the market price of its shares that is commonly
  observed in advance of such offerings.  Additionally, the Transaction will
  enable management to focus on acquisitions and intensively managing the
  Company's existing properties instead of being required to divert management
  time and attention to the process of raising capital.

            Indirect Affiliation with Security Capital Group.  Security Capital
  Group is highly-regarded as a sophisticated operator of and investor in REITs
  and owns a substantial minority interest in US Realty.  A subsidiary of
  Security Capital Group is the operating advisor to US Realty.
  ___________________ and ____________________, [DESCRIBE POSITIONS AND
  BACKGROUND], will become directors of the Company immediately after approval
  by the Company's shareholders of the Transaction.  The Company believes that
  it will benefit significantly from its association with Messrs.
  _________________ and ________________ and their access to the market
  knowledge, operating experience and research capabilities of Security Capital
  Group.  Additionally, pursuant to the Stockholders Agreement, US Realty is
  obligated to make available to the Company certain strategic advice and
  related information and expertise acquired or developed in the ordinary course
  of its business, including information concerning property acquisition
  opportunities.

            Improved Future Access to Capital.  The Company believes that, as a
  result of the Transaction, it will have greater access to the capital markets
  and a lower cost of capital, particularly debt, because the Transaction will
  (i) increase its total equity market capitalization from $207.8 million to
  $364.3 million and its total market capitalization from $345.9 million to
  $502.4 million on a pro forma basis as of June 30, 1996; (ii) establish an
  indirect affiliation with the highly-regarded Security Capital Group, which
  should enhance the Company's access and attractiveness to significant
  institutional investors; and (iii) through the participation rights granted to
  US Realty under the Stockholders Agreement, provide a highly-motivated
  potential buyer for substantial portions of future offerings by the Company of
  its equity securities or debt securities convertible into equity.  Moreover,

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<PAGE>
 
  because of its substantial investment in the Company, in addition to its
  obligations to provide advice under the Stockholders Agreement, US Realty will
  have significant incentives to make available its resources, experience and
  advice regarding access to the capital markets and assisting the Company to
  achieve a lower cost of capital.  The Company believes that improved access to
  the capital markets should enhance its ability to grow in ways that increase
  shareholder value.

            Potential Enhancement of Shareholder Value.  The Transaction will
  not result in any direct return to shareholders of cash or other
  consideration.  The Company, however, believes that the Transaction offers
  shareholders an opportunity to realize long-term value.  Further, the
  elimination of the Company's need to access the public equity markets in 1996
  would remove what the Company believes has been a limiting factor in the
  continuing appreciation of its stock price, that is, the assumption among
  institutional investors that the Company will be forced to offer additional
  common stock publicly in 1996.  The Company's strategic plan calls for the
  application of the significant capital to be raised in the Transaction to
  execute an attractive growth strategy for the purpose of increasing the
  Company's asset base and cash flow in a controlled but significant fashion
  over a relatively short period of time.  Management's goal is to increase
  funds from operations and cash available for distribution to shareholders
  through the strategic deployment of the capital and other resources to be made
  available to the Company through its affiliation with US Realty.

            It should be noted, however, that there is no assurance that the
  Company will realize all or any of the potential benefits described above,
  which are forward looking statements that are subject to numerous risks and
  uncertainty.  The Company's ability to enhance shareholder value will depend
  upon a number of circumstances, many of which are outside the control of
  management, including the availability of attractive acquisition and
  development opportunities; the Company's continuing ability to identify,
  perform due diligence with respect to, acquire and effectively manage a large
  number of shopping center properties; the state of the capital markets
  generally and prevailing interest rates; uncertainty concerning the Company's
  ability to refinance its indebtedness at favorable interest rates as it
  becomes due; and risks relating to the ownership of real estate generally,
  including the risks of bankruptcy, insolvency or the downturn in business of
  or failure to renew leases by the Company's anchor tenants, potential
  liability for unknown environmental matters, and the risk of uninsured losses.


   POTENTIAL ADVERSE EFFECTS OF THE TRANSACTION

            The Company believes that the Transaction, if consummated, will have
  certain potential adverse effects on the Company and its shareholders,
  including the following:

            Concentration of Ownership of Common Stock.  US Realty will be
  entitled to own up to 45% of the Company's capital stock on a fully diluted
  basis and will be the largest single shareholder of the Company.  US Realty
  will have the right to nominate a proportionate number of the directors of the
  Company's Board, rounded down to the nearest whole number, based upon its
  ownership of outstanding shares of Common Stock, but not to exceed 49% of the
  Board.  Although certain Standstill Provisions will preclude US Realty from
  increasing its percentage interest in the Company for a period of at least
  five years (subject to certain exceptions), and US Realty will be subject to
  certain limitations on its voting rights with respect to its shares of Common
  Stock, US Realty nonetheless will have a substantial influence over the
  affairs of the Company as a result of the Transaction.  This concentration of
  ownership in one shareholder could be disadvantageous to other shareholders'
  interests.

            The Standstill Period or any Standstill Extension Term will be
  terminated automatically in the event that a third party acquires beneficial
  ownership of more than 9.8% of the Company's outstanding Common Stock unless

                                       30

<PAGE>
 
  the Excess Shares are deprived of voting rights pursuant to any applicable
  ownership limitations in the Charter, as amended, or any other enforceable
  agreement. However, the Stockholders Agreement contains a grace period to
  enable the Company to attempt to cause a divestiture if the Excess Shares
  represent no more than 5.2% of the outstanding voting securities i.e., if the
  holder acquires beneficial ownership of no more than 15% of the outstanding
  voting securities.  This grace period is intended to allow the Company to
  attempt to cure an inadvertent acquisition of Excess Shares.  The Standstill
  Period or any Standstill Extension Term also will terminate on the occurrence
  of certain other events, including a material event of default under any
  indebtedness of the Company or any of its subsidiaries or the written
  submission by a third party of a proposal for, or expressing an interest in,
  an extraordinary transaction such as a business combination or change of
  control (unless rejected by the Board).  If the Standstill Period or any
  Standstill Extension Term terminates, US Realty could own as much as 52.7% of
  the outstanding Common Stock, representing approximately 45.0% of the
  Company's total common equity on a fully diluted basis, and would be in a
  position to control the election of the Board or the outcome of any corporate
  transaction or other matter submitted to the shareholders for approval
  (assuming no other changes in the number of outstanding shares of Common
  Stock), unless the holder of the Company's Class B Stock elected to convert
  its shares in full to Common Stock, which it would have the right to do under
  certain circumstances, in which case such holder would own approximately 16.9%
  of the outstanding Common Stock on a fully diluted basis and US Realty would
  own 43.2%.

            Anti-Takeover Effect of the Transaction.  The Company did not seek
  US Realty's investment as an "anti-takeover measure."  However, US Realty's
  acquisition of up to 52.7% of the Common Stock (43.2% on a fully diluted
  basis) and the director nomination, voting and other rights granted to US
  Realty under the Stockholders Agreement, although subject to certain
  limitations by reason of the Standstill Provisions, may make it more difficult
  for other shareholders to challenge the Company's director nominees, elect
  their own nominees as directors, or remove incumbent directors, even if a
  significant number of the shareholders believe that such action would be
  beneficial.  In addition, the Transaction and the transactions contemplated
  thereby may render the Company a less attractive target for an unsolicited
  acquisition by an outsider because the Standstill Period will terminate if a
  third party acquires beneficial ownership of more than 9.8% of the voting
  power of the Company's outstanding voting securities, thereby allowing US
  Realty to vote its Common Stock without restriction, which Common Stock may
  constitute a majority of the outstanding Common Stock.

            Potential Dilution.  While the Company generally has the ability to
  control the timing of the Second and Subsequent Closings and any additional
  investments by US Realty, if the proceeds from sales of securities to US
  Realty are not invested in a timely or accretive manner, there likely would be
  dilution of earnings per share and funds from operations per share to the
  existing shareholders of the Company.  The Company does not intend to change
  its careful acquisition criteria, and may temporarily have excess cash on its
  balance sheet if sufficient acquisitions are not completed by June 1997
  (unless the Company and US Realty agree to extend this date).

            Limitations on Corporate Actions.  Pursuant to the Stockholders
  Agreement, the Company has agreed to certain limitations on its operations
  during the Standstill Period and any Standstill Extension Term, including
  restrictions relating to the incurrence of total indebtedness exceeding 60% of
  the gross book value of the Company's total consolidated assets, investments
  in properties other than Shopping Center Properties in the Geographic Region,
  the indirect ownership of assets, and certain other matters.  Although the
  Company believes that these limitations are consistent with its operating
  strategies and does not believe they will materially restrict its operations
  or have a material adverse effect on its financial condition or results of
  operations, there can be no assurance that these limitations will not do so in
  the future.

                                       31

<PAGE>
 
            Effects on Future Foreign Investment in the Company.  The
  Transaction is not expected to have a material adverse effect on the existing
  holdings of shares of Common Stock by foreign investors.  However, as a result
  of certain proposed changes to the Charter that are designed to help protect
  the Company's status as a domestically controlled REIT for the primary benefit
  of US Realty and other existing foreign holders, the acquisition of additional
  shares of Common Stock in the future by foreign investors (whether or not they
  currently own an interest in the Company) would be subject to certain
  limitations and risks to which such investors would not normally be subject.
  See "Proposal to Amend the Ownership Restrictions -- Reasons for and Possible
  Effects of the Amendment."  The restriction of new foreign investment in the
  Company (through market purchases or otherwise) could reduce the demand for
  the Common Stock, potentially decreasing the market value of the Common Stock,
  and could hinder the ability of the Company to raise capital in the future
  through sales to non-U.S. persons of equity or debt securities convertible
  into equity.


   CONFLICTS OF INTEREST; INTERESTS OF CERTAIN PERSONS

            The execution of the Stock Purchase Agreement has accelerated the
  exercisability of options to purchase 155,500 shares of Common Stock
  outstanding under the Company's 1993 Long-Term Omnibus Plan (the "Plan").  As
  of the Record Date, there were outstanding options to purchase a total of
  187,000 shares of Common Stock.  Of the accelerated options, 131,400 (with an
  exercise price of $19.25 per share) are held by the Company's executive
  officers (of which 29,200 options were scheduled to vest in October 1996), and
  7,000 (with exercise prices ranging from $16.75 to $18.75 per share) options
  are held by the Company's directors (of which all 7,000 were scheduled to vest
  in December, 1996).

            Prior to the negotiation of the Stock Purchase Agreement, the
  compensation committee of the Board had approved the execution by the Company
  of severance compensation agreements with each of the Company's executive
  officers who presently do not have employment agreements providing for each
  officer to receive a lump sum payment computed as a certain multiple of his
  annual compensation (but in any event not to exceed one dollar less than the
  amount that would otherwise constitute an "excess parachute payment" under
  Section 280G of the Code) in the event that his employment was terminated
  without cause (as defined) or the officer terminated his employment with good
  reason (as defined) in either case following a change of control of the
  Company.  The agreements are intended to enable the Company to retain the
  services of its executive officers under circumstances in which the Company
  might potentially face a change of control (as defined), including any
  acquisition of control by US Realty following the termination of the
  Standstill Period or any Standstill Extension Term, and in which it might
  otherwise be difficult for the Company to retain key personnel.  While the
  consummation of the transactions contemplated by the Stock Purchase Agreement
  does not constitute a change of control under such agreements, a change of
  control as defined therein could occur if the Standstill Period is terminated
  and US Realty takes any action that otherwise falls within such definition.

            Except as set forth above, the Stock Purchase Agreement will not
  have any effect on any employment agreement, stock option or other
  compensatory arrangement for any executive officer or director of the Company.

            US Realty will have the right to certain Board representation
  following shareholder approval of the Transaction.  See "-- Terms of the
  Transaction -- Stockholders Agreement" above.  As discussed above,
  ____________________ and _________________, [DISCUSS POSITIONS AND
  BACKGROUND], will become directors of the Company immediately after the
  shareholder approval date.  As of the date hereof, US Realty has not informed
  the Company as to the identity of any additional director nominee to which it

                                       32

<PAGE>
 
  may be entitled in the future, and neither the Company nor the Board has any
  approval rights with respect thereto.  To the extent that any such director
  nominees are affiliated or associated with US Realty, such persons may thereby
  be deemed to have interests in the Transaction that are in addition to the
  interests of the shareholders generally.  If and when such director nominees
  become directors, they also will be entitled to receive normal compensation
  and  benefits customarily given by the Company to non-employee members of the
  Board.


   POTENTIAL EFFECTS OF SHAREHOLDER APPROVAL OR DISAPPROVAL OF THE TRANSACTION

            Effects of Shareholder Approval.  Approval of the Transaction by the
  shareholders will constitute approval of all of the various terms of the
  Transaction set forth in the Stock Purchase Agreement, the Stockholders
  Agreement and the Registration Rights Agreement and the transactions
  contemplated thereby.

            Such approval also may serve to extinguish potential claims, if any,
  regarding any conduct of members of the Board in connection with the
  Transaction, including potential claims, if any, alleging violations of the
  Board's duties to shareholders.  Under Florida law, the fully informed
  shareholder approval of a transaction may, in certain circumstances, serve to
  extinguish certain related fiduciary duty claims against directors.

            As described in "-- Terms of the Transaction --Conditions to
  Closing" above, approval of the Transaction is a condition to consummation of
  the Transaction, but there also are numerous other conditions that must be
  satisfied in order for the Transaction to be consummated.  There can be no
  assurance that all of these conditions will be satisfied, or that the
  Transaction will be consummated.


   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

            The following discussion summarizes the material federal income tax
  considerations resulting from the Transaction that may be relevant to the
  Company and the Company's current shareholders.  This discussion does not
  address the federal income tax considerations resulting from the Transaction
  that may be relevant to US Realty or its shareholders, and does not address
  the state, local, or foreign tax considerations resulting from the Transaction
  that may be relevant to the Company, US Realty, or their respective
  shareholders.  Foley & Lardner, counsel to the Company, has reviewed the
  following discussion and is of the opinion that the discussion fairly
  summarizes the federal income tax considerations that are material to a
  current shareholder of the Company as a result of the Transaction; however,
  the Company has not sought an opinion of counsel that the Company will qualify
  as a REIT following the Transaction, since such an opinion inevitably would be
  premised exclusively on representations by the Company as to future events.
  The discussion and the opinion of Foley & Lardner regarding the discussion are
  based on the current provisions of the Code, the applicable Treasury
  regulations promulgated thereunder, administrative rulings, court decisions,
  certain factual assumptions related to the ownership and operation of the
  Company, and certain representations made by the Company and US Realty.  No
  assurance can be given that the legal authorities on which this discussion is
  based will not change, perhaps retroactively, that the factual assumptions and
  representations underlying this discussion will continue to be accurate, or
  that there will not be a change in the future in the circumstances of the
  Company that would affect this discussion.

            No Recognition of Taxable Gain.  The Company believes that neither
  the Company nor any of the Company's current shareholders will recognize
  taxable gain as a result of the Transaction.

            Taxation of the Company as a REIT.  The Company made an election to
  be taxed as a REIT under sections 856 through 860 of the Code, effective for
  its short taxable year ended December 31, 1993.  The Company believes that,

                                       33

<PAGE>
 
  commencing with such taxable year, it has been organized and has operated in
  such a manner as to qualify for taxation as a REIT under the Code, and the
  Company intends to continue to operate in such a manner.  The Company does not
  expect the Transaction to affect the Company's ability to continue to qualify
  for taxation as a REIT.  No assurance, however, can be given that the Company
  has operated in a manner so as to qualify, or will operate in a manner so as
  to continue to qualify, as a REIT.   Qualification and taxation as a REIT
  depends upon the Company's ability to meet on a continuing basis, through
  actual annual operating results, distribution levels and diversity of share
  ownership, the various qualification tests imposed under the Code.

            Possible Impact of the Transaction on Subsequent Sales of Stock by
  Non-U.S. Shareholders.  Generally, a sale of stock in the Company by a "Non-
  U.S. Holder" will not be subject to United States taxation under the Foreign
  Investment in Real Property Tax Act of 1980 ("FIRPTA") unless such stock
  constitutes a United States Real Property Interest ("USRPI").  A Non-U.S.
  Holder is any person or entity other than (i) a citizen or resident of the
  United States, (ii) a corporation or partnership created or organized in the
  United States or under the laws of the United States or of any state thereof,
  or (iii) an estate or trust whose income is includible in gross income for
  United States federal income tax purposes regardless of its source.  Stock in
  the Company will not constitute a USRPI if the Company is a "domestically
  controlled REIT," defined generally as a REIT in which, at all times during a
  specified testing period, less than 50% in value of its stock was held
  directly or indirectly by Non-U.S. Holders.  US Realty, a Luxembourg
  corporation, may acquire up to 45% of the outstanding Common Stock of the
  Company, on a fully diluted basis, following approval of the Transaction.  In
  the event that, either at the time of the Transaction or at any time
  thereafter, US Realty and other shareholders of the Company who are Non-U.S.
  Holders own collectively 50% or more, in value, of the outstanding capital
  stock of the Company, the Company would cease to be a domestically controlled
  REIT.  Thus, no assurance can be given that the Company will continue to
  qualify as a domestically controlled REIT.

            If the Company does not qualify as a domestically controlled REIT, a
  Non-U.S. Holder's sale of stock in the Company generally still will not be
  subject to United States tax under FIRPTA, provided that (i) the stock is
  "regularly traded" (as defined by applicable Treasury regulations) on an
  established securities market, and (ii) the selling Non-U.S. Holder held 5% or
  less of the Company's outstanding stock at all times during a specified
  testing period.  The Company believes the Common Stock would be considered to
  be "regularly traded" for this purpose, and the Company has no actual
  knowledge of any Non-U.S. Holder (other than US Realty) that has previously
  held, or will hold immediately following the Transaction, in excess of 5% of
  the Company's stock.  Thus, the Company does not believe these considerations
  will directly affect any of its existing shareholders who are Non-U.S.
  Holders.

            If gain on the sale of stock in the Company were subject to taxation
  under FIRPTA, a Non-U.S. Holder would be subject to the same treatment as a
  United States shareholder with respect to such gain (subject to applicable
  alternative minimum tax, a special alternative minimum tax in the case of
  nonresident alien individuals, and the possible application of the 30% branch
  profits tax in the case of non-U.S. corporations), and the purchaser of the
  stock could be required to withhold 10% of the purchase price and remit such
  amount to the Internal Revenue Service.

            The Company has not sought an opinion of counsel as to whether it
  will qualify as a domestically controlled REIT following the Transaction
  because the Company is not aware that any Non-U.S. Holder (other than US
  Realty) will own more than 5% of its stock after the Transaction and,
  therefore, no current shareholder is expected to be adversely affected if the
  Company does not qualify as a domestically controlled REIT following the
  Transaction.

                                       34

<PAGE>
 
            Effect of Amendments to Charter on Additional Purchases by Non-U.S.
  Holders.  In order to assist the Company to continue to qualify as a
  domestically controlled REIT following the Transaction, the Charter will be
  amended to prevent any Non-U.S. Holder (other than US Realty and its
  affiliates) from acquiring additional shares of the Company's capital stock
  if, as a result of such acquisition, the Company would fail to qualify as a
  domestically controlled REIT (computed until the 15% Termination Date by
  assuming that US Realty owns 45% of the Company's outstanding Common Stock).
  If a Non-U.S. Holder other than US Realty were to acquire shares of stock in
  violation of this prohibition, the Non-U.S. Holder would forfeit any dividends
  with respect to such stock and any appreciation in the value of the stock
  following such acquisition.  The Company is unlikely to be able to advise any
  prospective non-U.S. investor that its purchase of capital stock of the
  Company would not violate this prohibition, thereby subjecting such
  prospective non-U.S. investor to potential adverse consequences.  Accordingly,
  an acquisition of shares of capital stock of the Company in the future may not
  be a suitable investment for non-United States investors (whether or not they
  currently own an interest in the Company).

  OPINION OF THE COMPANY'S FINANCIAL ADVISOR

       On June 11, 1996, Prudential Securities delivered its written opinion
  (the "Opinion") to the Board that, as of such date, the consideration to be
  received by the Company pursuant to the Transaction is fair to the Company
  from a financial point of view.  Prudential Securities made a presentation of
  the Opinion and the underlying financial analysis to the Board on June 11,
  1996 and, in addition, provided to each director, several days prior to the
  meeting, a detailed report setting forth the analysis underlying the Opinion.
  This analysis, as presented to the Board, is summarized herein. All of the
  members of the Board were present at the meeting (either in person or via
  teleconference) and had an opportunity to ask questions of Prudential
  Securities.  Prudential Securities discussed with the Board the information in
  the report, and the financial data and other factors considered by Prudential
  Securities, in conducting its analysis, all of which are summarized herein.

       In requesting the Opinion, the Board did not give any special
  instructions to Prudential Securities or impose any limitations upon the scope
  of the investigation that Prudential Securities deemed necessary to enable it
  to deliver the Opinion.  A copy of the Opinion, which sets forth the
  assumptions made, matters considered and limits on the review undertaken, is
  attached to this Proxy Statement as Appendix E and is incorporated herein by
  reference.  The summary of the Opinion set forth below is qualified in its
  entirety by reference to the full text of the Opinion.  Shareholders are urged
  to read the Opinion in its entirety.  The Opinion is directed only to the
  fairness of the consideration to be received by the Company from a financial
  point of view and does not constitute a recommendation to any shareholder as
  to how such shareholder should vote at the Special Meeting.

       In conducting its analysis and arriving at the Opinion, Prudential
  Securities reviewed such information and considered such financial data and
  other factors as Prudential Securities deemed relevant under the
  circumstances, including: (i) the Company's Annual Report on Form 10-K and the
  related financial information for the fiscal year ended December 31, 1995 and
  the Company's Quarterly Report on Form 10-Q and the related unaudited
  financial information for the quarterly period ended March 31, 1996; (ii)
  certain information, including financial forecasts, relating to the business,
  earnings, cash flow, assets and prospects of the Company (including the
  Company's acquisition program), furnished to Prudential Securities by the
  Company's management; (iii) the historical market prices and trading volume
  for the Common Stock and certain publicly traded companies which Prudential
  Securities deemed to be reasonably similar to the Company; (iv) the historical
  and projected results of operations of the Company and those of certain
  companies which Prudential Securities deemed to be reasonably similar to the
  Company; (v) the terms and conditions of certain recent transactions
  Prudential Securities deemed relevant; (vi) drafts, dated June 7, 1996, of the
  Stock Purchase Agreement, Stockholders Agreement and Registration Rights

                                       35

<PAGE>
 
  Agreement; and (vii) such other financial studies, analyses and investigations
  as Prudential Securities deemed relevant.  Prudential Securities discussed
  with senior management of the Company: (i) the prospects for their business,
  (ii) their estimate of such business' future financial performance, (iii) the
  potential financial impact of the Transaction on the Company, and (iv) such
  other matters as Prudential Securities deemed relevant. Prudential Securities
  has also visited selected properties owned by the Company.  The Opinion is
  necessarily based on economic, financial and market conditions as they existed
  and could be evaluated as of the date of the Opinion.

       In connection with its review and analysis and in arriving at the
  Opinion, Prudential Securities assumed and relied upon the accuracy and
  completeness of the financial and other information provided to Prudential
  Securities or which was publicly available, and did not undertake to verify
  independently any such information.  Prudential Securities neither made nor
  obtained any independent valuations or appraisals of any of the Company's
  assets.  With respect to certain financial projections of the Company provided
  to Prudential Securities by the Company, Prudential Securities assumed that
  the information was reasonably prepared and that the projections represented
  management's best currently available estimate as to the future financial
  performance of the Company.

       Prudential Securities expressed no opinion as to what the value of the
  Company's Common Stock will be when issued to US Realty or the prices at which
  the Common Stock will trade after the Transaction.  In addition, the Opinion
  does not evaluate the relative merits of the Transaction as compared to any
  other business plan or opportunity which might be presented to the Company or
  the effect of any other arrangement which the Company might pursue.

       With regard to the Transaction, Prudential Securities observed that the
  Transaction compares favorably to various funding alternatives (including
  public and private equity offerings) with respect to timing, amount, certainty
  of completion and cost.  Prudential Securities concluded that the Transaction
  would give the Company immediate access to significant capital at a price
  which was reasonable relative to the current market price for its Common
  Stock, would strengthen the Company's balance sheet and should increase the
  Company's asset base and funds from operations ("FFO") (assuming effective
  deployment of capital), which should improve the Company's access to capital
  in the future. Prudential Securities considered management's beliefs that the
  Company should benefit from its association with the US Realty and that a
  strategic partnership arrangement with US Realty (including the benefit of US
  Realty's market knowledge, real estate operating experience and research
  capabilities) will enhance the Company's ability to pursue its growth and
  operating strategies.

       In arriving at the Opinion, Prudential Securities performed a variety of
  financial analyses, including those summarized herein.  The summary set forth
  herein of the analyses presented to the Board at the June 11, 1996 meeting
  does not purport to be a complete description of the analyses performed.  The
  preparation of a fairness opinion is a complex process that involves various
  determinations as to the most appropriate and relevant methods of financial
  analyses and the application of these methods to the particular circumstances
  and, therefore, such an opinion is not necessarily susceptible to partial
  analysis or summary description.  Prudential Securities believes that its
  analysis must be considered as a whole and that selecting portions thereof or
  portions of the factors considered by it, without considering all the analyses
  and factors, could create an incomplete view of the evaluation process
  underlying the Opinion.  Prudential Securities made numerous assumptions with
  respect to industry performance, general business, economic, market and
  financial conditions and other matters, many of which are beyond the control
  of the Company.  Any estimates contained in Prudential Securities' analyses
  are not necessarily indicative of actual values or future results, which may
  be significantly more or less favorable than suggested by such analyses.
  Additionally, estimates of the values of businesses and securities do not
  purport to be appraisals or necessarily reflect the prices at which securities
  actually may be sold.  Accordingly, such analyses and estimates are inherently
  subject to substantial uncertainty.

                                       36

<PAGE>
 
       Subject to the foregoing, the following is a summary of the material
  financial analyses performed by Prudential Securities in arriving at the
  Opinion.

       Comparable Transactions Analysis.  Prudential Securities compared the
  purchase price per share of the Common Stock pursuant to the Transaction to
  selected historical trading prices of the Company's Common Stock.  Prudential
  Securities analyzed the percentage difference between the purchase price of
  $17.625 per share and the closing price of the Common Stock one day, one week,
  one month and two months prior to June 6, 1996.  The purchase price pursuant
  to the Transaction represented a (9.6%), (6.0%), 0.0% and 4.4%
  (discount)/premium to the Common Stock price one day, one week, one month and
  two months prior to June 6, 1996, respectively.  Prudential Securities
  compared these (discounts)/premiums with a group of six pending or completed
  strategic investments (generally, 15.0% to 50% ownership positions) which
  Prudential Securities considered to be reasonably comparable to the
  Transaction for the purpose of its analysis.  The transactions considered were
  strategic investments in: (i) Storage USA, Inc.; (ii) Carr Realty Corporation;
  (iii) Felcor Suite Hotels, Inc.; (iv) Crocker Realty Trust, Inc.; (v) Bay
  Apartment Communities, Inc.; and (vi) Regency Realty Corporation (previous
  transaction).  Such transactions were found to have the following ranges of
  percentage difference between the transaction purchase price and the
  historical trading price one day, one week, one month and two months prior to
  announcement of the transactions: (10.2%) to 4.2%; (9.4%) to 13.2%, (5.1%) to
  13.2% and (4.1%) to 9.6%, respectively.

       Comparable Company Analysis.  Prudential Securities compared selected
  financial ratios for the Company with a group of seven publicly traded
  companies engaged in the acquisition, operation and management of retail
  properties which Prudential Securities considered to be reasonably comparable
  to the Company for purposes of its analysis.  The companies considered were:
  (i) Developers Diversified Realty Corporation; (ii) Federal Realty Investment
  Trust; (iii) IRT Property Company; (iv) JDN Realty Corporation; (v) Kimco
  Realty Corporation; (vi) New Plan Realty Trust; and (vii) Weingarten Realty
  Investors (collectively, the "Comparable Companies").

       The Comparable Companies were found to have an equity market
  capitalization of between $228.5 million and $1.2 billion (with the Company at
  $191.8 million).  Such equity market values were estimated to be equal to 9.0x
  to 12.7x estimated calendar 1996 FFO (with the Company at 9.7x) and 8.6x to
  11.7x estimated calendar 1997 FFO (with the Company at 9.1x).  The FFO
  estimates utilized in this analysis were from First Call, an online data
  service available to subscribers which compiles estimates developed by equity
  research analysts.  The estimates published by First Call were not prepared in
  connection with the Transaction or at Prudential Securities' request.
  Prudential Securities calculated that the Comparable Companies had a range of
  debt as of March 31, 1996 as a percentage of total market capitalization of
  16.0% to 48.6% (with the Company at 39.5%).  Prudential Securities noted that
  the Company's equity market value and ratios of equity market value to
  estimated 1996 and 1997 FFO were in the low end of the ranges for the
  Comparable Companies and that the Company's ratio of debt to total market
  capitalization was in the high end of the range for the Comparable Companies.
  Prudential Securities also observed (i) a positive correlation between equity
  market valuations and total market capitalizations and (ii) a negative
  correlation between equity market valuations and the ratio of debt to total
  market capitalization.

       Pro Forma Funds From Operations Per Share Analysis.  Prudential
  Securities also analyzed the pro forma effect of the Transaction on the
  Company's FFO per share.  An analysis of the anticipated future results based
  on projections provided by the Company's management (assuming anticipated
  acquisition opportunities which can be pursued using the proceeds of the
  equity Transaction) indicated that the Transaction results in an increase in
  the Company's 1997 FFO per share on a fully-diluted basis.  Projected
  financial and other information concerning the Company and the impact of the
  Transaction upon the shareholders of the Company is not necessarily indicative

                                       37

<PAGE>
 
  of future results.  All projected financial information is subject to numerous
  contingencies beyond the control of the Company's management.

       The Company retained Prudential Securities to render a fairness opinion
  and to provide other financial advisory services in connection with the
  Transaction because it is an internationally recognized investment banking
  firm engaged in the valuation of businesses and their securities in connection
  with mergers, acquisitions and other purposes, and has substantial experience
  in transactions similar to the Transaction.  The engagement letter with
  Prudential Securities provides that the Company will pay Prudential Securities
  an advisory fee equal to $500,000 payable as follows: (i) $300,000 upon
  delivery of the Opinion and (ii) $200,000 upon the Company's receipt of
  shareholder approval in connection with the Transaction.  In addition, the
  engagement letter with Prudential Securities provides that the Company will
  reimburse Prudential Securities for its out-of-pocket expenses and will
  indemnify Prudential Securities and certain related persons against certain
  liabilities, including liabilities under securities laws, arising out of the
  Transaction or its engagement.

       In the ordinary course of business, Prudential Securities may actively
  trade the Company's Common Stock for its own account and for the accounts of
  customers, and accordingly, may at any time hold a long or short position in
  such securities.  Prudential Securities also provides equity research coverage
  of the Company.

    RECOMMENDATION OF THE BOARD; FACTORS AND CONCLUSIONS OF THE BOARD INVOLVED
  IN ITS DETERMINATION

            The Board has unanimously approved the Transaction and has
  determined that the Transaction is in the best interests of the Company and
  its shareholders.  THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
  "FOR" APPROVAL OF THE TRANSACTION.

            The Board believes that the Transaction is in the best interests of
  the Company and its shareholders because, if consummated, it represents an
  attractive opportunity to improve long-term shareholder value by providing the
  Company with access to significant equity capital at an attractive cost and
  additionally provides strategic resources not otherwise readily available to
  it, thereby enhancing the Company's short-term and long-term growth prospects
  and positioning it to better capitalize on shopping center opportunities in
  the southeastern United States.  See "-- Potential Beneficial Effects of the
  Transaction" above.

            
       While the Board believes that the Transaction is in the best
  interests of the Company and its shareholders, the consummation of the
  Transaction may have certain adverse effects that shareholders should
  consider.  These considerations include (i) the substantial amount of stock
  that will be concentrated in one shareholder of the Company, as well as
  certain rights being granted to US Realty in connection with the Transaction
  (including rights with respect to Board representation and information), which
  rights will allow US Realty to exercise substantial influence over the affairs
  of the Company even during the Standstill Period and might discourage other
  persons from offering to acquire a significant interest in the Company, (ii)
  the possibility that US Realty will gain control of the Company if the
  Standstill Period or any Standstill Extension Term terminates, (iii) the
  possible restriction of investment in the capital stock by foreign investors
  as a result of the proposed changes to the Charter designed to help protect
  the Company's status as a domestically controlled REIT for the primary benefit
  of US Realty and other existing foreign holders, and (iv) the possible
  dilution of earnings per share to shareholders as a result of the Transaction.
  See "-- Potential Adverse Effects of the Transaction" above.

            In reaching its determination that the Transaction is in the best
  interests of the Company and its shareholders, the Board considered the

                                       38

<PAGE>
 
  following material factors in addition to those discussed above under
  "Potential Beneficial Effects of the Transaction" and "Potential Adverse
  Effects of the Transaction."

              Substantial Shareholder.  The Board considered that, as a result
  of the Transaction, US Realty will be the largest single shareholder of the
  Company, owning as much as 43.2% of the outstanding Common Stock on a fully
  diluted basis, while the Charter will continue to prohibit certain persons
  from owning more than 7.0% by value of the Company's capital stock (subject to
  certain exceptions set forth in the Charter or approved by the Board) in order
  to facilitate the Company's continued qualification as a REIT.  The Board
  considered that US Realty also will have substantial information rights, the
  right to nominate Board members, and numerous other rights as set forth above
  in "-- Terms of the Transaction."  Although the Board believes that this
  concentration of ownership in one shareholder could potentially be
  disadvantageous to the other shareholders' interests, the Board also believes
  that certain provisions of the Stockholders Agreement should reduce, to some
  extent, the impact of such concentration of ownership by imposing various
  limitations on US Realty with regard to its ownership, transfer and voting of
  Common Stock, including (i) provisions that prohibit US Realty from acquiring
  greater than 45% of the Company's Common Stock on a fully diluted basis, (ii)
  provisions that prohibit US Realty from electing more than 49% of the
  directors of the Company during the Standstill Period or any Standstill
  Extension Term, and (iii) provisions that restrict US Realty from transferring
  shares of Common Stock except in accordance with applicable securities laws
  and the generally applicable ownership limitations in the Charter, as amended,
  and subject to the requirement that the Company approve, in its sole and
  absolute discretion, any transfer in a negotiated transaction that would
  result in the transferee beneficially owning more than 9.8% of the Company's
  capital stock. While the Board recognized the potentially negative aspects of
  the concentration of substantial ownership in a single shareholder, the Board
  believes that, on balance, the potentially negative aspects are outweighed by
  the potential benefits of obtaining in a timely way such a large amount of
  capital at a reasonable cost, the indirect affiliation with Security Capital
  Group and the other potential benefits of the Transaction.

              Impact on Other Investments.  The Board believes that the
  limitations on the Company's ability to engage in certain corporate actions
  without the consent of US Realty, the composition of the Board following the
  shareholder approval of the Transaction (and thereafter) and the likelihood
  that the size of US Realty's investment (notwithstanding related restrictions
  on US Realty, as discussed above), certain provisions of the Code limiting
  ownership of REITs and certain provisions of the Code and other countries' tax
  laws applicable to foreign investors, might discourage other persons
  (especially other foreign persons) from offering to acquire a significant
  interest in the Company (or all or a significant interest in the assets of the
  Company).  As a result, the Board considers this to be a negative factor.
  However, the Board believes that this factor is outweighed by the positive
  factors outlined above.

            The members of the Board evaluated the factors referred to above in
  light of their knowledge of the business and operations of the Company, their
  business judgment and the advice of Prudential Securities.  In view of the
  wide variety of factors considered in connection with the Board's evaluation
  of the Transaction, the Board did not find it practicable to, and did not,
  quantify or attempt to assign relative weights to the specific factors
  considered in reaching its determination.


   BENEFICIAL OWNERSHIP OF COMMON STOCK PRIOR TO AND AFTER THE TRANSACTION

            The following table sets forth information regarding the beneficial
  ownership of shares of Common Stock outstanding as of the Record Date and
  immediately following the Second Closing and the final Subsequent Closing of
  the Transaction (assuming that 6,565,000 shares are issued pursuant to the

                                       39

<PAGE>
 
  Second Closing and the Subsequent Closings), by (i) each person or group known
  to the Company who owns or who will own more than 5% of the outstanding shares
  of Common Stock immediately following the final Subsequent Closing, and (ii)
  each of the directors and the executive officers of the Company immediately
  following the final Subsequent Closing.  Unless otherwise indi cated in the
  footnotes, all of such interests are owned directly, and the indicated person
  has sole voting and investment power.  The number of shares represents the
  number of shares of Common Stock the person holds, including shares that may
  be issued upon the exercise of options that are exercisable within 60 days of
  the Record Date.  Information presented in the table and related notes has
  been obtained from the beneficial owner and/or from reports filed by the
  beneficial owner with the Securities and Exchange Commission pursuant to
  Section 13 of the Securities Act of 1934.

<TABLE>
<CAPTION>
                                                                       PERCENT OF COMMON STOCK
                                                         ------------------------------------------------------------
                                                                                                         FOLLOWING THE
                                 AMOUNT AND NATURE                                FOLLOWING THE         FINAL SUBSEQUENT
   BENEFICIAL OWNER            BENEFICIAL OWNERSHIP      AT RECORD DATE/(1)/      SECOND CLOSING/(1)/        CLOSING
   ----------------            --------------------      --------------          --------------         -----------------
<S>                                   <C>                <C>                 <C>                   <C>   

Security Capital U.S. Realty )      1,053,500                 13.4%                 35.6%/(3)/              45.4%/(3)/

Security Capital Holdings    )
 S.A./(2)/                   )
 
AXA Assurances I.A.R.D.      )
Mutuelle/(4)/                )

AXA Assurances Vie           )
Mutuelle/(4)/                )

Alpha Assurances             )      838,700/(6)/              10.6%                  7.9%                        *
I.A.R.D. Mutuelle/(5)/       )         
 
Alpha Assurances             )
Vie Mutuelle/(5)/            )

Uni Europe Assurance         )
Mutuelle/(7)/                )

AXA/(8)/                     )

The Equitable Companies      )
Incorporated/(9)/            )
 

Public Employees Retire-     )      440,000                    5.6%                  4.2%                        *
ment System of Ohio/(10)/    )
 
Joan W. Stein/(11)/          )                                  *

Martin E. Stein/(11)/        )

Richard Stein/(12)/          )      714,836/(13)/              9.0%                  6.7%                        *

Robert L. Stein/(14)/        )

John D. Baker II/(15)/       )
</TABLE>
 

       -----------------------------------
       Footnotes begin on page 41.
                                                             40



<PAGE>

<TABLE> 
<CAPTION>

                                                                       PERCENT OF COMMON STOCK
                                                         ------------------------------------------------------------
                                                                                                     FOLLOWING THE
                                 AMOUNT AND NATURE                            FOLLOWING THE         FINAL SUBSEQUENT
   BENEFICIAL OWNER            BENEFICIAL OWNERSHIP      AT RECORD DATE(1)   SECOND CLOSING(1)           CLOSING(1)
   ----------------            --------------------      --------------      --------------         -----------------
<S>                                   <C>                <C>                 <C>                   <C>   
Edward L. Baker                        9,673                    *                    *                       *

A.R. Carpenter                         7,344                    *                    *                       *

J. Dix Druce, Jr.                      7,845                    *                    *                       *

Albert Ernest, Jr.                     8,129                    *                    *                       *

Douglas S. Luke                        8,775                    *                    *                       *

[US REALTY DIRECTOR NOMINEE]            ___                    ___                  ___                     ___

[US REALTY DIRECTOR NOMINEE]            ___                    ___                  ___                     ___

Bruce M. Johnson                      51,949/(16)/              *                    *                       *

Robert C. Gillander, Jr.              49,115/(16)/              *                    *                       *

James D. Thompson                     42,283/(16)/              *                    *                       *

Richard E. Cook                       46,677/(16)/              *                    *                       *

A. Chester Skinner, III               36,119/(16)/              *                    *                       *

Norman A. Hofheimer, Jr.              29,060/(16)/              *                    *                       *

J. Christian Leavitt                  28,742/(16)               *                    *                       *

Robert L. Miller, Jr.                 29,621/(16)/              *                    *                       *

All directors and executive        1,070.168                  13.3%                 9.9%                     *
officers as a group (a total
of 14 persons) (16 persons
after the Second Closing)
- ---------------------------
</TABLE>


  *      Less than 1%
  /(1)/  The percentages shown on the above table do not take into account the
         shares of Common Stock issuable upon conversion of the Company's Class
         B Stock. The Company has outstanding a total of 2,500,000 shares of
         Class B Stock held by a single institutional investor which are
         convertible into Common Stock at the holder's option beginning December
         20, 1998, subject to certain numerical limitations, including a
         requirement that conversion not result in the holder being the
         beneficial owner of more than 4.9% of the Company's outstanding Common
         Stock. The Class B Stock will be immediately convertible into Common
         Stock in full upon the occurrence of certain extraordinary events or
         defaults, including certain changes in management. A total of 2,975,468
         shares of Common Stock are issuable upon conversion of the Class B
         Stock. Based on the number of shares of Common Stock outstanding on the
         Record Date (assuming no other changes and without giving effect to the
         Second Closing or any Subsequent Closing), the 2,975,468 shares of
         Common Stock issuable upon conversion of the Class B Stock would
         constitute approximately 27.4% of the Common Stock outstanding
         immediately following conversion.

                                       41

<PAGE>
  
  /(2)/  The business address of Security Capital U.S. Realty and Security
         Capital Holdings S.A. is 69, route d'Esch, L-1470 Luxembourg.
  /(3)/  Percent interest is calculated based on 3,770,900 shares owned
         following the Second Closing and 7,618,500 shares owned following the
         final Subsequent Closing.
  /(4)/  The business address of AXA Assurances I.A.R.D. Mutuelle and AXA
         Assurances Vie Mutuelle is La Grande Arche, Pardi Nord, 92044 Paris La
         Defense France.
  /(5)/  The business address of Alpha Assurances I.A.R.D. Mutuelle and Alpha
         Assurances Vie Mutuelle is 101-100 Terrasse Boieldieu, 92042 Paris La
         Defense France.
  /(6)/  AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Alpha
         Assurances I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, Uni Europe
         Assurance Mutuelle and AXA, as a group, disclaim any beneficial
         ownership of these shares which include 64,000 shares over which the
         reporting parties exercise shared voting power.
  /(7)/  The business address of Uni Europe Assurance Mutuelle is 24 Rue Drouot,
         75009 Paris France.
  /(8)/  The business address of AXA is 23 Avenue Matignon, 75008 Paris France.
  /(9)/  The business address of The Equitable Companies Incorporated is 787
         Seventh Avenue, New York, New York  10019.
  /(10)/ The business address of the Public Employees Retirement System of Ohio
         is 277 East Town Street, Columbus, Ohio 43215-4642.
  /(11)/ The business address of Joan W. Stein and Martin E. Stein, Jr. is 121
         West Forsyth Street, Suite 200, Jacksonville, Florida 32202.
  /(12)/ The business address of Richard W. Stein is 1650 Prudential Drive,
         Suite 304, Jacksonville, Florida 32207.
  /(13)/ Includes 160,263 shares held through The Regency Group, Inc. The named
         individual is deemed to have shared voting and instrument power over
         these shares by virtue of testamentary trusts and a voting trust of
         which the Steins and John D. Baker, II are trustees, which trusts own
         100% of the voting stock of The Regency Group, Inc. Also includes:
         307,147 shares and 108,235 shares owned through two family
         partnerships, The Regency Group II and Regency Square II, respectively.
         The general partners of The Regency Group II and Regency Square II are
         the Steins and a testamentary trust of which the Steins and Mr. Baker
         are trustees. Also includes: 9,029 shares owned by Joan W. Stein,
         individually; 75,291 shares owned by Martin E. Stein, Jr.,
         individually; 4,000 shares held by a trust of which Martin E. Stein,
         Jr. is the beneficiary; 1,305 shares held for the benefit of Martin E.
         Stein, Jr.'s minor children over which he has sole voting and
         dispositive power; 2,501 shares owned by Richard W. Stein,
         individually; 1,063 shares owned by Robert L. Stein, individually; and
         2,500 shares held for the benefit of Robert L. Stein's minor children,
         over which he has sole voting and dispositive power; and the following
         shares subject to presently exercisable options: Joan W. Stein, 1,000
         shares; Martin E. Stein, Jr., 40,000 shares; and Robert L. Stein, 1,000
         shares.
  /(14)/ The business address of Robert L. Stein is 1610 Independent Square,
         Jacksonville, Florida 32202.
  /(15)/ Mr. Baker's business address is 155 E. 21st Street, Jacksonville,
         Florida 32206.
  /(16)/ Includes the following shares covered by presently exercisable options:
         Mr. Johnson, 16,000 shares; Mr. Gillander, 16,000 shares; Mr. Thompson,
         14,000 shares; Mr. Cook, 16,000 shares; Mr. Skinner, 12,000 shares; Mr.
         Hofheimer, 12,000 shares; Mr. Leavitt, 10,000 shares; and Mr. Miller,
         10,000 shares.

                                       42

<PAGE>
 
   INFORMATION REGARDING DIRECTORS TO BE NOMINATED BY US REALTY

            Set forth below is certain information concerning
  ___________________ and ___________________, the individuals identified by US
  Realty who will become directors of the Company immediately after the receipt
  of shareholder approval of the Transaction:

            [Insert 5-year business history, other public company directorships
  and ages of US Realty nominees when they have been selected by US Realty and
  have agreed to serve.]

            As of the date hereof, US Realty has not informed the Company as to
  the identity of any additional director nominee that it may be entitled to
  nominate in the future, and neither the Company nor the Board has any approval
  rights with respect thereto.


   REQUIRED VOTE AND RELATED MATTERS

            The affirmative vote of a majority of the total votes cast, provided
  that the number of total votes cast represents over 50% of the shares of
  Common Stock issued and outstanding, is required to approve the Transaction.

            APPROVAL OF THE TRANSACTION BY THE REQUISITE VOTE OF THE
  SHAREHOLDERS OF THE COMPANY IS A CONDITION TO CONSUMMATION OF THE TRANSACTION
  (EXCEPT FOR THE INITIAL PURCHASE BY US REALTY OF 934,400 SHARES ON JULY 10,
  1996) AND A CONDITION TO APPROVAL OF PROPOSAL 2.

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 1.
                                                           ---            

                                       43

<PAGE>
 
                  PROPOSAL TO AMEND THE OWNERSHIP RESTRICTIONS
                                  (PROPOSAL 2)


            The Board has approved and recommends the approval by the
  shareholders of an amendment to Article 5 of the Charter to expressly
  authorize US Realty to acquire shares of Common Stock as contemplated by the
  Stock Purchase Agreement and to make certain other modifications to facilitate
  the Company's continued qualification as a domestically controlled REIT for
  federal income tax purposes.  The proposed amendments to Article 5 of the
  Charter also contain certain other minor amendments which the Company desires
  to make in order to better assist the Company in maintaining its status as a
  REIT under the Code following the acquisition by US Realty of the shares of
  Common Stock under the Stock Purchase Agreement (including revising the
  minimum 100-owner requirement in Section 5.2(f) to more closely conform to the
  language of the Code), none of which the Company deems to be material.  Set
  forth below is a summary of the proposed amendment.  The full text of the
  amendment to Article 5 is attached hereto as Appendix D.


   SUMMARY OF CURRENT ARTICLE 5

            For the Company to qualify as a REIT under the Code, no more than
  50% in value of its outstanding shares of capital stock may be owned, directly
  or constructively under the applicable attribution rules of the Code, by five
  or fewer "individuals" (as defined in the Code to include certain entities)
  during the last half of each taxable year (the "5/50 Rule").  In order to
  assist the Company in satisfying the 5/50 Rule, Article 5 of the Charter, as
  presently in effect, provides that subject to certain exceptions specified in
  the Charter and the application of certain attribution rules, certain holders
  (other than Existing Holders, as defined) may not own, or be deemed to own by
  virtue of the attribution provisions of the Code, more than 7.0% (the
  "Ownership Limit") by value of the Company's issued and outstanding shares of
  the capital stock.  If any shareholder purports to transfer shares of the
  Company's capital stock to a person and either (i) the transfer would result
  in the Company's failing to qualify as a REIT, or (ii) the transfer would
  cause the transferee to violate the applicable Ownership Limit, the purported
  transfer will be considered null and void, and the intended transferee will be
  deemed not to have acquired any rights in such shares.  In addition, if any
  person acquires shares of the Company's capital stock in excess of the
  applicable Ownership Limit, such person will be deemed to hold the shares of
  capital stock that exceed the Ownership Limit in trust for the Company.  Such
  person will not receive dividends or distributions with respect to the shares
  of capital stock that exceed the Ownership Limit and will not be entitled to
  vote such shares.  In addition, such person will be required to sell the
  excess shares (i) to the Company for the lesser of the amount paid for the
  shares or the average closing price for the ten trading days before the sale,
  or (ii) at the direction of the Company for the amount paid for the shares
  with any excess proceeds being paid to the Company.


    REASONS FOR AND POSSIBLE EFFECTS OF THE AMENDMENT

            At the request of US Realty, the Company proposes to amend Article 5
  of the Charter to expressly provide a special ownership limit of 45% of the
  outstanding shares of the Company's Common Stock, on a fully diluted basis
  ("Special Shareholder Limit"), for US Realty and its affiliates in order to
  specifically authorize US Realty to acquire shares of Common Stock as
  contemplated by the Stock Purchase Agreement.  The Special Shareholder Limit
  will be subject to reduction (in order to ensure satisfaction of the 5/50
  Rule) if an individual (or entity treated as an individual) which owns an
  interest in US Realty and its affiliates is treated as owning, after
  application of certain constructive ownership rules, more than 9.8% of the
  outstanding shares of the Company's capital stock.  The Special Shareholder

                                       44

<PAGE>
 
  Limit also would be subject to reduction in the future under certain
  circumstances if US Realty were to transfer all or a portion of such shares in
  a privately negotiated transaction.

            In order to assist the Company to qualify as a domestically
  controlled REIT following the Transaction, the Company proposes to amend
  Article 5 to prevent any Non-U.S. Holder (other than US Realty and its
  affiliates) from acquiring additional shares of the Company's capital stock
  if, as a result of such acquisition, the Company would fail to qualify as a
  domestically controlled REIT (computed until the 15% Termination Date by
  assuming that US Realty owns 45% of the Company's outstanding Common Stock).
  The Company is unlikely to be able to advise a prospective non-U.S. investor
  that its purchase of any shares of the Company's capital stock would not
  violate this prohibition, thereby subjecting such prospective non-U.S.
  investor to the adverse consequences described above (See "APPROVAL OF THE
  TRANSACTION (Proposal 1)--Certain Federal Income Tax Considerations").
  Accordingly, an acquisition of Common Stock in the future may not be a
  suitable investment for non-U.S. investors other than US Realty (whether or
  not such non-U.S. investor currently owns an interest in the Company).
  Article 5 in its current form does not contain any restrictions on
  acquisitions of the Company's capital stock by non-U.S. investors.


   REQUIRED VOTE AND RELATED MATTERS

            The affirmative vote of a majority of the total votes cast by the
  shareholders is required to approve the Amendment to the Charter.

            APPROVAL OF THIS PROPOSAL 2 IS A CONDITION TO THE APPROVAL AND
  CONSUMMATION OF THE TRANSACTION (EXCEPT FOR THE INITIAL PURCHASE BY US REALTY
  OF 934,400 SHARES ON JULY 10, 1996) AND IS A CONDITION TO APPROVAL OF PROPOSAL
  1.


  THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.
                                                       ---            



                                    SHAREHOLDER PROPOSALS


            Any qualified shareholder willing to make a proposal to be acted
  upon at the Annual Meeting of Shareholders in 1997 must submit such proposal
  to be considered by the Company for inclusion in the Company's proxy
  statement, to the Secretary of the Company at its principal office in
  Jacksonville, Florida, no later than December 14, 1996.

                                       45

<PAGE>
 
                                                                      APPENDIX A
 
                                                                [EXECUTION COPY]

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

                           STOCK PURCHASE AGREEMENT

                                 by and among

                           REGENCY REALTY CORPORATION

                         SECURITY CAPITAL HOLDINGS S.A.

                                      and

                          SECURITY CAPITAL U.S. REALTY

                                  dated as of

                                 June 11, 1996

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

<PAGE>
 
                               TABLE OF CONTENTS

                                                            Page
                                                            ----

                                   ARTICLE 1

                                  Definitions
                                  -----------

     Section 1.1      "Action"                               1
     Section 1.2      "ADA"                                  1  
     Section 1.3      "Advancing Party"                      2
     Section 1.4      "Affiliate"                            2
     Section 1.5      "Agreement"                            2
     Section 1.6      "Amended Company Charter"              2
     Section 1.7      "Army Corps of Engineers"              2
     Section 1.8      "Articles of Amendment"                2  
     Section 1.9      "Benefit Arrangements"                 2
     Section 1.10     "Blue Sky Laws"                        2
     Section 1.11     "Breaching Matters"                    2
     Section 1.12     "Breakup Fee"                          2
     Section 1.13     "Business Day"                         2
     Section 1.14     "Buyer"                                2
     Section 1.15     "Capital Expenditure Budget and
                         Schedule"                           2
     Section 1.16     "CERCLA"                               2
     Section 1.17     "Claim"                                2
     Section 1.18     "Class B Common Stock"                 2
     Section 1.19     "Closing"                              2
     Section 1.20     "Closing Date"                         3
     Section 1.21     "Code"                                 3
     Section 1.22     "Commitment"                           3  
     Section 1.23     "Company"                              3
     Section 1.24     "Company Charter"                      3
     Section 1.25     "Company Common Stock"                 3
     Section 1.26     "Company Environmental Reports"        3
     Section 1.27     "Company Leases"                       3
     Section 1.28     "Company Plans"                        3
     Section 1.29     "Company Preferred Stock"              3
     Section 1.30     "Company Properties"                   3
     Section 1.31     "Company Registration Statement"       3
     Section 1.32     "Company Reports"                      3
     Section 1.33     "Company Stock"                        3
     Section 1.34     "Competing Transaction"                3
     Section 1.35     "Controlled Group Liability"           4
     Section 1.36     "Cure Notice"                          4
     Section 1.37     "Debt Instruments"                     4
 

                                      -i-

<PAGE>
 
     Section 1.38     "Development Budget and Schedule"      4
     Section 1.39     "Development Properties"               4
     Section 1.40     "Employee Benefit Plans"               4
     Section 1.41     "Employees"                            4
     Section 1.42     "Employment Agreements"                4
     Section 1.43     "Environmental Claim"                  4
     Section 1.44     "Environmental Laws"                   4
     Section 1.45     "Environmental Permits"                4
     Section 1.46     "ERISA"                                4
     Section 1.47     "ERISA Affiliates"                     4
     Section 1.48     "Exchange Act"                         4
     Section 1.49     "Executive Summaries of the Company
                      Environmental Reports"                 5
     Section 1.50     "GAAP"                                 5
     Section 1.51     "Government Authority"                 5
     Section 1.52     "HSR Act"                              5
     Section 1.53     "Indemnified Party"                    5
     Section 1.54     "Initial Closing"                      5
     Section 1.55     "Initial Number of Shares"             5
     Section 1.56     "Initial Purchase Price"               5
     Section 1.57     "Insurance Policies"                   5
     Section 1.58     "IRS"                                  5
     Section 1.59     "Lease Summaries"                      5
     Section 1.60     "Liabilities"                          5
     Section 1.61     "Liens"                                6
     Section 1.62     "Loss and Expenses"                    6
     Section 1.63     "Material Adverse Effect"              6
     Section 1.64     "Material Company Leases"              6
     Section 1.65     "Materials of Environmental Concern"   6
     Section 1.66     "Next Dividend"                        6
     Section 1.67     "1997 and 1998 Preliminary Capital
                      Expenditure Budgets and Schedules"     6
     Section 1.68     "Other Filings"                        6
     Section 1.69     "Pension Plans"                        6
     Section 1.70     "Per Share Purchase Price"             6
     Section 1.71     "Per Share Additional Purchase Price"  6
     Section 1.72     "Permitted Liens"                      6
     Section 1.73     "person"                               7
     Section 1.74     "Prior Dividend"                       7
     Section 1.75     "Projects"                             7
     Section 1.76     "Property Restrictions"                7
     Section 1.77     "Proxy Statement"                      7
     Section 1.78     "Purchase Price"                       7
     Section 1.79     "Purchased Shares"                     7
     Section 1.80     "Registration Rights Agreement"        7
     Section 1.81     "Regulatory Filings"                   7
     Section 1.82     "REIT"                                 8
     Section 1.83     "Release"                              8
 

                                      -ii-

<PAGE>
 
     Section 1.84     "Remaining Equity Commitment"          8
     Section 1.85     "Rent Roll"                            8
     Section 1.86     "SEC"                                  8
     Section 1.87     "Second Closing"                       9
     Section 1.88     "Second Purchase"                      8
     Section 1.89     "Securities Act"                       8
     Section 1.90     "Securities Laws"                      8
     Section 1.91     "Stock Purchase"                       8
     Section 1.92     "Stockholders Agreement"               8
     Section 1.93     "Subsequent Purchase Price"            8
     Section 1.94     "Subsequent Purchases"                 8
     Section 1.95     "Subsidiaries"                         8
     Section 1.96     "Tax"                                  9
     Section 1.97     "Tax Return"                           9
     Section 1.98     "Tenancy Leases"                       9
     Section 1.99     "Total Equity Commitment"              9
     Section 1.100    "Voting Agreements"                    9
     Section 1.101    "Welfare Plans"                        9
 

                                   ARTICLE 2

                      Purchase and Sale of Shares; Closing
                      ------------------------------------

     Section 2.1    Purchase and Sale                       9
     Section 2.2    Consideration                          10
     Section 2.3    Initial Closing                        10
     Section 2.4    Subsequent Purchases and Sales         10
     Section 2.5    Additional Agreements and Closing
                    Deliveries                             11
     Section 2.6    Time and Place of Closings             11
     Section 2.7    Right to Assign                        11
     Section 2.8    Company's Right to Cure                11
     Section 2.9    Additional Purchase Price              12
 

                                   ARTICLE 3

                 Representations and Warranties of the Company
                 ---------------------------------------------

     Section 3.1    Organization and Qualification;
                    Subsidiaries                           12
     Section 3.2    Authority Relative to Agreements;
                    Board Approval                         13
     Section 3.3    Capital Stock                          14
     Section 3.4    No Conflicts; No Defaults; Required
 

                                     -iii-

<PAGE>
 
                     Filings and Consents                               14
     Section 3.5     SEC and Other Documents; Financial
                     Statements; Undisclosed Liabilities                15
     Section 3.6     Litigation; Compliance With Law                    16
     Section 3.7     Absence of Certain Changes or Events               16
     Section 3.8     Tax Matters; REIT and Partnership
                     Status                                             17
     Section 3.9     Compliance with Agreements; Material
                     Agreements                                         18
     Section 3.10    Financial Records; Company Charter
                     and By-laws; Corporate Records                     20
     Section 3.11    Properties                                         21
     Section 3.12    Environmental Matters                              27
     Section 3.13    Employees and Employee Benefit Plans               30
     Section 3.14    Labor Matters                                      32
     Section 3.15    Affiliate Transactions                             32
     Section 3.16    Insurance                                          32
     Section 3.17    Proxy Statement                                    32
     Section 3.18    Florida Takeover Law                               32
     Section 3.19    Vote Required                                      32
     Section 3.20    Brokers or Finders                                 33
     Section 3.21    Stockholders Agreement                             33
     Section 3.22    Knowledge Defined                                  33
 

                                   ARTICLE 4
                                   ---------

        Representations and Warranties of Buyer and the Advancing Party
        ---------------------------------------------------------------

     Section 4.1    Organization                                        33
     Section 4.2    Due Authorization                                   34
     Section 4.3    Conflicting Agreements and Other
                    Matters                                             34
     Section 4.4    Acquisition for Investment;
                    Sophistication; Source of
                    Funds                                               34
     Section 4.5    Proxy Statement                                     35
     Section 4.6    Brokers or Finders                                  35
     Section 4.7    REIT Qualification Matters                          35
     Section 4.8    Investment Company Matters                          35
     Section 4.9    Ownership of Tenants                                35
 
                                   ARTICLE 5

                         Covenants Relating to Closings
                         ------------------------------

     Section 5.1    Taking of Necessary Action                          36
 

                                      -iv-

<PAGE>
 
     Section 5.2    Registration Rights Agreement          37
     Section 5.3    Stockholders Agreement                 37
     Section 5.4    Public Announcements; Confidentiality  37
     Section 5.5    Conduct of the Business                38
     Section 5.6    No Solicitation of Transactions        39
     Section 5.7    Information and Access                 39
     Section 5.8    Notification of Certain Matters        40
     Section 5.9    Issuance Pursuant to Shelf
                    Registration                           40
 
                                   ARTICLE 6

                          Certain Additional Covenants
                          ----------------------------
     Section 6.1    Resale                                 40
     Section 6.2    Use of Funds                           40
     Section 6.3    REIT Status                            40
     Section 6.4    Guarantee                              40
     Section 6.5    Property Management Activities
                    and Reorganizational Matters           41
 
                                   ARTICLE 7

                             Conditions to Closings
                             ----------------------
 
     Section 7.1    Conditions of Purchase at Initial
                    Closings                               41
     Section 7.2    Conditions to Purchase at
                    Subsequent Closings                    42
     Section 7.3    Conditions of Purchase at All
                    Closings                               44
     Section 7.4    Conditions of Sale                     45
 
                                   ARTICLE 8

                           Survival; Indemnification
                           -------------------------
     Section 8.1    Survival                               46
     Section 8.2    Indemnification by Buyer or the
                    Company                                47
     Section 8.3    Third-Party Claims                     47
 

                                      -v-

<PAGE>
 
                                   ARTICLE 9

                                  Termination
                                  -----------
     Section 9.1    Termination                          48
     Section 9.2    Procedure and Effect of Termination  49
     Section 9.3    Expenses                             49
 
                                   ARTICLE 10

                                 Miscellaneous
                                 -------------
     Section 10.1     Counterparts                       50
     Section 10.2     Governing Law                      50
     Section 10.3     Entire Agreement                   50
     Section 10.4     Notices                            51
     Section 10.5     Successors and Assigns             51
     Section 10.6     Headings                           52
     Section 10.7     Amendments and Waivers             52
     Section 10.8     Interpretation; Absence of
                      Presumption                        52
     Section 10.9     Severability                       52
     Section 10.10    Further Assurances                 52
     Section 10.11    Specific Performance               52
     Section 10.12    Joint and Several Liability        53
     Section 10.13    Interpretation of Schedules        53

                                      -vi-

<PAGE>
 
                                   SCHEDULES

Schedule 1.70     Permitted Liens
Schedule 3.1(d)   Subsidiaries
Schedule 3.3(a)   Capital Stock Commitments
Schedule 3.3(b)   Other Equity Interests
Schedule 3.4(d)-A Consents for Initial Closing
Schedule 3.4(d)-B Consents for Second Closing
Schedule 3.4(d)-C Consents for Other Subsequent Closings
Schedule 3.5(a)   Company Registration Statements
                    and Company Reports
Schedule 3.6(a)   Pending Litigation
Schedule 3.7      Absence of Certain Changes or Events
Schedule 3.8(a)   Tax Matters
Schedule 3.9(c)   Indebtedness; Joint Venture
                    and Partnership Agreements
Schedule 3.9(d)   Development, Construction, Management
                    and Leasing Arrangements
Schedule 3.9(e)   Other Material Agreements
Schedule 3.9(f)   Conflict Policies and Agreements; Waivers
Schedule 3.9(g)   Change of Control Provisions
Schedule 3.10(b)  Corporate Records
Schedule 3.11(a)  Property Title Summary
Schedule 3.11(b)  Properties Violations/Engineering Reports
Schedule 3.11(d)  Company Properties in Flood Plain Areas
Schedule 3.11(e)  ADA Status
Schedule 3.11(f)  Material Company Lease Information
Schedule 3.11(g)  Letters of Intent or Similar Understandings
Schedule 3.11(h)  Rights of First Refusal
Schedule 3.11(i)  Non-Compliance and Capital
                    Expenditure Budget and Schedule
Schedule 3.11(j)  Developed, Undeveloped, or
                    Rehabilitated Land of Company Property
Schedule 3.11(l)  Tenancy Leases
Schedule 3.12(a)  Environmental Permits
Schedule 3.12(e)  Environmental Concerns
Schedule 3.12(f)  Environmental Reports
Schedule 3.13(a)  Employment Agreements
Schedule 3.13(b)  Employee Benefit Plans
Schedule 3.13(g)  Termination and Retirement Benefits
Schedule 3.14     Collective Bargaining; Labor Union Agreements
Schedule 3.15     Affiliate Transactions
Schedule 4.9      Tenants
Schedule 6.5(a)   Property Management Activities and Reorganizational Matters

                                     -vii-

<PAGE>
 
                                    EXHIBITS

Exhibit A         Voting Agreement
Exhibit B         Registration Rights Agreement
Exhibit C         Stockholders Agreement
Exhibit D         Employment Agreement
Exhibit E         Amended Company Charter

                                     -viii-

<PAGE>
 
          THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of June 11,
                                              ---------                        
1996, is made by and among Regency Realty Corporation, a Florida corporation
(the "Company"), Security Capital U.S. Realty, a Luxembourg corporation (the
      -------                                                               
"Advancing Party"), and Security Capital Holdings S.A., a Luxembourg corporation
- ----------------                                                                
and a wholly owned subsidiary of the Advancing Party ("Buyer").
                                                       -----   


                                   RECITALS:
                                   -------- 

          WHEREAS, Buyer wishes to purchase from the Company, and the Company
wishes to sell to Buyer, up to an aggregate of 7,499,400 shares (as such number
may be adjusted as set forth below) of the Company's common stock, par value
$0.01 per share (the "Company Common Stock") at a price of $17.625 per share;
                      --------------------                                   
and

          WHEREAS, Buyer and the Company are entering into this Agreement to
provide for such purchase and sale and to establish various rights and
obligations in connection therewith; and

          WHEREAS, in consideration for the rights to be granted to it in the
Stockholders Agreement (as defined below), the Advancing Party has agreed to
advance to Buyer all funds for any and all purchases of Company Common Stock
pursuant hereto and otherwise guarantee Buyer's obligations hereunder; and

          WHEREAS, the Company and Buyer believe that the combination in a
strategic partnership of the leadership, expertise and experience in the retail
shopping center industry of the Company and the unique market knowledge,
operating experience, research capabilities and access to capital of Buyer and
its affiliates will significantly enhance the Company's ability to pursue its
growth and operating strategies; and

          WHEREAS, by separate agreement (the "Voting Agreements"), certain
                                               -----------------           
shareholders of the Company have agreed to support and vote in favor of this
Agreement;

          NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:


                                   ARTICLE 1
                                   ---------

                                  Definitions
                                  -----------

          As used in this Agreement, the following terms shall have the
following respective meanings:

<PAGE>
 
          Section 1.1  "Action" shall mean any action, suit, arbitration,
                        ------                                           
inquiry, proceeding or investigation by or before any Government Authority.

          Section 1.2  "ADA" shall have the meaning set forth in Section
                        ---                                             
3.11(e).

          Section 1.3  "Advancing Party" shall have the meaning set forth in the
                        ---------------                                         
first paragraph hereof.

          Section 1.4  "Affiliate" shall have the meaning ascribed thereto in
                        ---------                                            
Rule 12b-2 promulgated under the Exchange Act, and as in effect on the date
hereof.

          Section 1.5  "Agreement" shall have the meaning set forth in the first
                        ---------                                               
paragraph hereof.

          Section 1.6  "Amended Company Charter" shall have the meaning set
                        -----------------------                            
forth in Section 7.2(c).

          Section 1.7  "Army Corps of Engineers" shall have the meaning set
                        -----------------------                            
forth in Section 3.11(d).

          Section 1.8  "Articles of Amendment" shall mean the Articles of
                        ---------------------                            
Amendment to Articles of Incorporation of the Company, filed on December 20,
1995 with respect to the Class B Common Stock.

          Section 1.9  "Benefit Arrangements" shall have the meaning set forth
                        --------------------                                  
in Section 3.13(h).

          Section 1.10  "Blue Sky Laws" shall have the meaning set forth in
                         -------------                                     
Section 3.4(e).

          Section 1.11  "Breaching Matters" shall have the meaning set forth in
                         -----------------                                     
Section 2.8(a).

          Section 1.12  "Breakup Fee" shall have the meaning set forth in
                         -----------                                     
Section 9.3(c).

          Section 1.13  "Business Day" shall mean any day other than a Saturday,
                         ------------                                           
a Sunday or a bank holiday in New York, N.Y.

          Section 1.14  "Buyer" shall have the meaning set forth in the first
                         -----                                               
paragraph hereof.

          Section 1.15  "Capital Expenditure Budget and Schedule" shall have the
                         ---------------------------------------                
meaning set forth in Section 3.11(i).

                                      -2-

<PAGE>
 
          Section 1.16  "CERCLA" shall have the meaning set forth in Section
                         ------                                             
3.12(e).

          Section 1.17  "Claim" shall have the meaning set forth in Section
                         -----                                             
3.12(g)(i).

          Section 1.18  "Class B Common Stock" shall have the meaning set forth
                         --------------------                                  
in Section 3.3(a).

          Section 1.19  "Closing" shall mean the consummation of any Stock
                         -------                                          
Purchase.

          Section 1.20  "Closing Date" shall mean, with respect to the
                         ------------                                 
consummation of any Stock Purchase, three Business Days after the date on which
the conditions set forth herein with respect thereto shall be satisfied or duly
waived, or if the Company and Buyer mutually agree on a different date, the date
upon which they have mutually agreed.

          Section 1.21  "Code" shall mean the Internal Revenue Code of 1986, as
                         ----                                                  
amended, and any successor thereto, including all of the rules and regulations
promulgated thereunder.

          Section 1.22  "Commitment" shall have the meaning set forth in Section
                         ----------                                             
3.7.

          Section 1.23  "Company" shall have the meaning set forth in the first
                         -------                                               
paragraph hereof.

          Section 1.24  "Company Charter" shall mean the Articles of Amendment
                         ---------------                                      
to the Charter of the Company, as in effect on the date hereof.

          Section 1.25  "Company Common Stock" shall have the meaning set forth
                         --------------------                                  
in the second paragraph hereof.

          Section 1.26  "Company Environmental Reports" shall have the meaning
                         -----------------------------                        
set forth in Section 3.12(f).

          Section 1.27  "Company Leases" shall have the meaning set forth in
                         --------------                                     
Section 3.11(f).

          Section 1.28  "Company Plans" shall have the meaning set forth in
                         -------------                                     
Section 3.13(b).

          Section 1.29  "Company Preferred Stock" shall have the meaning set
                         -----------------------                            
forth in Section 3.3(a).

                                      -3-

<PAGE>
 
          Section 1.30  "Company Properties" shall have the meaning set forth in
                         ------------------                                     
Section 3.11(a).

          Section 1.31  "Company Registration Statement" shall have the meaning
                         ------------------------------                        
set forth in Section 3.5(a).

          Section 1.32  "Company Reports" shall have the meaning set forth in
                         ---------------                                     
Section 3.5(a).

          Section 1.33  "Company Stock" shall mean, collectively, the Company
                         -------------                                       
Common Stock and any other shares of capital stock of the Company.

          Section 1.34  "Competing Transaction" shall mean (i) any acquisition
                         ---------------------                                
in any manner, directly or indirectly (including through any option, right to
acquire or other beneficial ownership), of more than 15% of the equity
securities, on a fully diluted basis, of the Company, or assets representing a
material portion of the assets of the Company, other than any of the
transactions contemplated by this Agreement, (ii) any merger, consolidation,
sale of assets, share exchange, recapitalization, other business combination,
liquidation, or other action out of the ordinary course of business of the
Company, other than any of the transactions contemplated by this Agreement, or
(iii) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.

          Section 1.35  "Controlled Group Liability" shall have the meaning set
                         --------------------------                            
forth in Section 3.13(h).

          Section 1.36  "Cure Notice" shall have the meaning set forth in
                         -----------                                     
Section 2.8(b).

          Section 1.37  "Debt Instruments" shall mean all notes, loan
                         ----------------                            
agreements, mortgages, deeds of trust or similar instruments which evidence or
secure any indebtedness owing by the Company or any of its Subsidiaries.

          Section 1.38  "Development Budget and Schedule" shall have the
                         -------------------------------                 
meaning set forth in Section 3.11(j).

          Section 1.39  "Development Properties" shall have the meaning set
                         ----------------------                            
forth in Section 3.11(j).

          Section 1.40  "Employee Benefit Plans" shall have the meaning set
                         ----------------------                            
forth in Section 3.13(h).

          Section 1.41  "Employees" shall have the meaning set forth in Section
                         ---------                                             
3.13(h).

                                      -4-

<PAGE>
 
          Section 1.42  "Employment Agreements" shall have the meaning set forth
                         ---------------------                                  
in Section 3.7.

          Section 1.43  "Environmental Claim" shall have the meaning set forth
                         -------------------                                  
in Section 3.12(g)(ii).

          Section 1.44  "Environmental Laws" shall have the meaning set forth in
                         ------------------                                     
Section 3.12(g)(iii).

          Section 1.45  "Environmental Permits" shall have the meaning set forth
                         ---------------------                                  
in Section 3.12(a).

          Section 1.46  "ERISA" shall mean the Employee Retirement Income
                         -----                                           
Security Act of 1974, as amended, and any successor thereto.

          Section 1.47  "ERISA Affiliates" shall mean, with respect to any
                         ----------------                                 
entity, trade or business, any other entity, trade or business that is a member
of a group described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or that
is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.

          Section 1.48  "Exchange Act" shall have the meaning set forth in
                         ------------                                     
Section 3.4(e).

          Section 1.49  "Executive Summaries of the Company Environmental
                         ------------------------------------------------
Reports" shall have the meaning set forth in Section 3.12(f).
- -------                                                      

          Section 1.50  "GAAP" shall have the meaning set forth in Section
                         ----                                             
3.5(b).

          Section 1.51  "Government Authority" shall mean any government or
                         --------------------                              
state (or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.

          Section 1.52  "HSR Act" shall have the meaning set forth in Section
                         -------                                             
3.4(e).

          Section 1.53  "Indemnified Party" shall mean Buyer or the Company, as
                         -----------------                                     
the context may require.

          Section 1.54  "Initial Closing" shall mean the first Closing.
                         ---------------                               

                                      -5-

<PAGE>
 
          Section 1.55  "Initial Number of Shares" shall mean 934,400 shares of
                         ------------------------                              
Company Common Stock.

          Section 1.56  "Initial Purchase Price" shall mean $16,468,800.
                         ----------------------                         

          Section 1.57  "Insurance Policies" shall have the meaning set forth in
                         ------------------                                     
Section 3.16.

          Section 1.58  "IRS" shall mean the Internal Revenue Service.
                         ---                                          

          Section 1.59  "Lease Summaries" shall have the meaning set forth in
                         ---------------                                     
Section 3.11(f).

          Section 1.60  "Liabilities" shall mean, as to any person, all debts,
                         -----------                                          
adverse claims, liabilities and obligations, direct, indirect, absolute or
contingent of such person, whether known or unknown, accrued, vested or
otherwise, whether in contract, tort, strict liability or otherwise and whether
or not actually reflected, or required by GAAP to be reflected, in such person's
or entity's balance sheets or other books and records, including (i) obligations
arising from non-compliance with any law, rule or regulation of any Government
Authority or imposed by any court or any arbitrator of any kind, (ii) all
indebtedness or liability of such person for borrowed money, or for the purchase
price of property or services (including trade obligations), (iii) all
obligations of such person as lessee under leases, capital or other, (iv)
liabilities of such person in respect of plans covered by Title IV of ERISA, or
otherwise arising in respect of plans for Employees or former Employees or their
respective families or beneficiaries, (v) reimbursement obligations of such
person in respect of letters of credit, (vi) all obligations of such person
arising under acceptance facilities, (vii) all liabilities of other persons or
entities, directly or indirectly, guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business) or discounted with
recourse by such person or with respect to which the person in question is
otherwise directly or indirectly liable, (viii) all obligations secured by any
Lien on property of such person, whether or not the obligations have been
assumed, and (ix) all other items which have been, or in accordance with GAAP
would be, included in determining total liabilities on the liability side of the
balance sheet.

          Section 1.61  "Liens" shall mean all liens, mortgages, deeds of trust,
                         -----                                                  
deeds to secure debt, security interests, pledges, claims, charges, easements
and other encumbrances of any nature whatsoever.

                                      -6-

<PAGE>
 
          Section 1.62  "Loss and Expenses" shall have the meaning set forth in
                         -----------------                                     
Section 8.2(a).

          Section 1.63  "Material Adverse Effect" shall mean a material adverse
                         -----------------------                               
effect on the financial condition, results of operations or business of the
Company and its Subsidiaries (to the extent of the Company's interests therein)
taken as a whole.

          Section 1.64  "Material Company Leases" shall have the meaning set
                         -----------------------                            
forth in Section 3.11(f).

          Section 1.65  "Materials of Environmental Concern" shall have the
                         ----------------------------------                
meaning set forth in Section 3.12(g)(iv).

          Section 1.66  "Next Dividend" shall mean, with respect to each
                         -------------                                  
Closing, the first dividend paid by the Company after such Closing.

          Section 1.67  "1997 and 1998 Preliminary Capital Expenditure Budgets
                         -----------------------------------------------------
and Schedules" shall have the meaning set forth in Section 3.11(i).
- -------------                                                      

          Section 1.68  "Other Filings" shall have the meaning set forth in
                         -------------                                     
Section 5.1(b).

          Section 1.69  "Pension Plans" shall have the meaning set forth in
                         -------------                                     
Section 3.13(h).

          Section 1.70  "Per Share Purchase Price" shall mean the price of
                         ------------------------                         
$17.625 per share for the Company Common Stock.

          Section 1.71  "Per Share Additional Purchase Price" shall mean, with
                         -----------------------------------                  
respect to each share of Company Common Stock purchased by Buyer at any Closing,
an amount equal to 85% of the product of (i) the per share amount of the Next
Dividend multiplied by (ii) a fraction, the numerator of which is the number of
days during the period commencing the day after the dividend payment date for
the last dividend paid by the Company prior to the date of such Closing (the
                                                                            
"Prior Dividend") and running through the day immediately prior to the date of
- ---------------                                                               
such Closing (inclusive), and the denominator of which is the number of days
during the period commencing the day after the dividend payment date for the
Prior Dividend and running through the dividend payment date for the Next
Dividend (inclusive).

          Section 1.72  "Permitted Liens" shall mean (i) Liens (other than Liens
                         ---------------                                        
imposed under ERISA or any Environmental Law or

                                      -7-

<PAGE>
 
in connection with any Environmental Claim) for taxes or other assessments or
charges of Governmental Authorities that are not yet delinquent or that are
being contested in good faith by appropriate proceedings, in each case, with
respect to which adequate reserves are being maintained by the Company or its
Subsidiaries to the extent required by GAAP, (ii) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other Liens (other than Liens
imposed under ERISA or any Environmental Law or in connection with any
Environmental Claim) imposed by law and created in the ordinary course of
business for amounts not yet overdue or which are being contested in good faith
by appropriate proceedings, in each case, with respect to which adequate
reserves or other appropriate provisions are being maintained by the Company or
its Subsidiaries to the extent required by GAAP and which, to the extent same do
not relate to work or materials provided for in the Capital Expenditure Budget
and Schedule, the 1997 and 1998 Preliminary Capital Expenditure Budgets and
Schedules or the Development Budget and Schedule, do not exceed $200,000 in the
aggregate (excluding from such calculation, any amounts disclosed in writing by
the Company to Buyer which (a) are fully covered by insurance held by the
Company under which the Company reasonably expects full recovery of such
amounts, or (b) for which an adequate escrow has been established and is, at the
relevant time, maintained), (iii) the Company Leases, (iv) easements, rights-of-
way, covenants and restrictions which are customary and typical for properties
similar to the Company Properties and which do not (x) interfere materially with
the ordinary conduct of any Company Property or the business of the Company and
its Subsidiaries as a whole or (y) detract materially from the value or
usefulness of the Company Properties to which they apply, (v) the Liens which
were granted by the Company or any of its Subsidiaries to lenders pursuant to
credit agreements in existence on the date hereof which are described in
Schedule 3.9(c), (vi) the other Liens, if any, described in Schedule 1.70, and
(vii) such imperfections of title and encumbrances, if any, as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

          Section 1.73  "person" shall mean any individual, corporation,
                         ------                                         
partnership, limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government Authority.

          Section 1.74  "Prior Dividend" shall have the meaning set forth in
                         --------------                                     
Section 1.65.

          Section 1.75  "Projects" shall have the meaning set forth in Section
                         --------                                             
3.11(j).

                                      -8-

<PAGE>
 
          Section 1.76  "Property Restrictions" shall have the meaning set forth
                         ---------------------                                  
in Section 3.11(a).

          Section 1.77  "Proxy Statement" shall have the meaning set forth in
                         ---------------                                     
Section 5.1(b).

          Section 1.78  "Purchase Price" shall mean the Per Share Purchase Price
                         --------------                                         
multiplied by the number of shares of Company Common Stock to be purchased and
sold at a particular Closing.

          Section 1.79  "Purchased Shares" shall have the meaning set forth in
                         ----------------                                     
Section 2.1.

          Section 1.80  "Registration Rights Agreement" shall have the meaning
                         -----------------------------                        
set forth in Section 2.5(a).

          Section 1.81  "Regulatory Filings" shall have the meaning set forth in
                         ------------------                                     
Section 3.4(e).

          Section 1.82  "REIT" shall have the meaning set forth in Section
                         ----                                             
3.8(b).

          Section 1.83  "Release" shall have the meaning set forth in Section
                         -------                                             
3.12(g)(v).

          Section 1.84  "Remaining Equity Commitment" shall mean, on any given
                         ---------------------------                          
date after the Initial Closing, the Total Equity Commitment minus the sum of the
Initial Purchase Price and, if any Subsequent Purchases shall have occurred,
minus the Subsequent Purchase Prices.  The Remaining Equity Commitment shall be
deemed to be zero on the earlier of (i) the date that the Remaining Equity
Commitment equals zero pursuant to the previous sentence, or (ii) the later of
(A) June 30, 1997 (unless otherwise extended by Buyer and the Company in their
sole discretion) or (B) if Buyer timely notifies the Company that it is,
pursuant to Section 2.4(b) or 2.4(c), exercising its right to make the Second
Purchase and/or part or all of any remaining Subsequent Purchase, then, the date
as soon thereafter as (x) all conditions to Buyer's obligations to effect such
purchase(s) shall have been satisfied or waived, and (y) such purchase(s) shall
have been effected.

          Section 1.85  "Rent Roll" shall have the meaning set forth in Section
                         ---------                                             
3.11(f).

          Section 1.86  "SEC" shall have the meaning set forth in Section
                         ---                                             
3.5(a).

                                      -9-

<PAGE>
 
          Section 1.87  "Second Closing" shall mean the Closing of the Second
                         --------------                                      
Purchase pursuant to Section 2.4(a) or (b) after the Initial Purchase.

          Section 1.88  "Second Purchase" shall have the meaning set forth in
                         ---------------                                     
Section 2.4(a).

          Section 1.89  "Securities Act" shall have the meaning set forth in
                         --------------                                     
Section 3.4(e).

          Section 1.90  "Securities Laws" shall have the meaning set forth in
                         ---------------                                     
Section 3.5(a).

          Section 1.91  "Stock Purchase" shall have the meaning set forth in
                         --------------                                     
Section 2.1.

          Section 1.92  "Stockholders Agreement" shall have the meaning set
                         ----------------------                            
forth in Section 2.5(a).

          Section 1.93  "Subsequent Purchase Price" shall mean the Per Share
                         -------------------------                          
Purchase Price multiplied by the number of Purchased Shares purchased by Buyer
in a Subsequent Purchase.

          Section 1.94  "Subsequent Purchases" shall have the meaning set forth
                         --------------------                                  
in Section 2.4(a).

          Section 1.95  "Subsidiaries" shall mean with respect to any person,
                         ------------                                        
any corporation, partnership, joint venture, business trust or other entity, of
which such person, directly or indirectly, owns or controls at least 50% of the
securities or other interests entitled to vote in the election of directors or
others performing similar functions with respect to such corporation or other
organization, or to otherwise control such corporation, partnership, joint
venture, business trust or other entity.  Without limiting the generality of the
foregoing, the Company's Subsidiaries include each of the entities set forth on
Schedule 3.1(d).

          Section 1.96  "Tax" means any federal, state, local, or foreign
                         ---                                             
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer,  registration, value added, alternative or add-
on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.  The term "Tax"
also includes any amounts payable pursuant to any tax sharing agreement to which
any

                                      -10-

<PAGE>
 
relevant entity is liable as a successor or pursuant to contract.

          Section 1.97  "Tax Return" means any return, declaration, report,
                         ----------                                        
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.

          Section 1.98  "Tenancy Leases" shall have the meaning set forth in
                         --------------                                     
Section 3.11(l).

          Section 1.99  "Total Equity Commitment" shall mean the amount of
                         -----------------------                          
$132,176,925.00 or, if the total number of Purchased Shares shall have been
reduced pursuant to Section 2.1 of this Agreement, the number of Purchased
Shares, as so reduced, multiplied by the Per Share Purchase Price.

          Section 1.100  "Voting Agreements" shall have the meaning set forth in
                          -----------------                                     
the fifth paragraph hereof, and shall be in the form set forth in Exhibit A.
                                                                  --------- 

          Section 1.101  "Welfare Plans" shall have the meaning set forth in
                          -------------                                     
Section 3.13(h).


                                   ARTICLE 2
                                   ---------

                      Purchase and Sale of Shares; Closing
                      ------------------------------------

          Section 2.1  Purchase and Sale.  Subject to the terms and conditions
                       -----------------                                      
hereof, from time to time after the date hereof, at each Closing, the Company
will sell, convey, assign, transfer, and deliver, and Buyer will purchase and
acquire from the Company, an aggregate of up to 7,499,400 shares of Company
Common Stock (the "Purchased Shares"); provided, however, that if at any Closing
                   ----------------    --------  -------                        
following such time as Buyer shall have purchased 6,845,000 Purchased Shares or
at which Buyer shall acquire in the aggregate (at such Closing together with all
prior Closings) in excess of 6,845,000 Purchased Shares the purchase by Buyer of
Purchased Shares in excess of 6,845,000 Purchased Shares would result in any
holder of Class B Common Stock having the right to convert shares of Class B
Common Stock into more than 9.8% of the Voting Securities (as defined in the
Stockholders Agreement), then, unless any such conversion right has been waived,
the number of Purchased Shares shall be reduced to 6,845,000 or such greater
number as would not result  in such conversion right (and the number of
Purchased Shares to be purchased at such Closing and any Subsequent Closing
shall be reduced accordingly). Each Closing at which Buyer

                                      -11-

<PAGE>
 
purchases any Purchased Shares is herein referred to as a "Stock Purchase."
                                                           --------------  

          Section 2.2  Consideration.  Subject to the terms and conditions
                       -------------                                      
hereof, at each Closing, Buyer shall deliver to the Company the relevant
Purchase Price with respect to the number of shares of Company Common Stock to
be purchased and sold at such Closing by wire transfer of immediately available
funds in U.S. dollars to the account or accounts specified by the Company.

          Section 2.3  Initial Closing.  Subject to the terms and conditions
                       ---------------                                      
hereof, at a mutually agreeable time promptly following the date on which the
applicable conditions set forth in Sections 7.1, 7.3 and 7.4 shall have been
satisfied or duly waived (but, in any event, no sooner than 20 days after the
date hereof), Buyer will purchase and acquire (and the Advancing Party shall
advance sufficient funds for such purchase) from the Company, and the Company
will sell, convey, assign, transfer and deliver to Buyer, the Initial Number of
Shares of Company Common Stock, and Buyer will pay to the Company the Initial
Purchase Price for such shares of Company Common Stock.

          Section 2.4  Subsequent Purchases and Sales.  (a)  Subject to the
                       ------------------------------                      
terms and conditions hereof, following the Initial Closing, the Company shall
have the right to require, subject to satisfaction or waiver of the applicable
conditions set forth in Sections 7.2 and 7.3, Buyer to purchase (and to require
the Advancing Party to advance sufficient funds for such purchase) from the
Company (i) at the Second Closing, 2,717,400 Purchased Shares (the "Second
                                                                    ------
Purchase"), and (ii) from time to time at one or more Subseqent Closings, up to
- --------                                                                       
an aggregate of 3,847,600 (as such number may be reduced pursuant to Section
2.1) Purchased Shares; provided that the Subsequent Purchase Price at each
Subseqent Closing shall be not less than $30 million (or a minimum of 1,702,128
Purchased Shares) (each, and individually and the Second Purchase referred to as
a "Subsequent Purchase" and, together, the "Subsequent Purchases").  Subject to
   -------------------                      --------------------               
the terms and conditions hereof, the Closing of any Subsequent Purchase shall
occur as soon as possible following the date on which the applicable conditions
set forth in Sections 7.2, 7.3 and 7.4 shall have been satisfied or duly waived.

          (b)  If the Second Purchase shall not have occurred on or before
December 1, 1996, then Buyer shall have the right,  subject to the satisfaction
or waiver of the applicable conditions set forth in Sections 7.2, 7.3 and 7.4,
to make the Second Purchase from the Company on or before December 31, 1996, or
as soon thereafter as all conditions to Buyer's obligation to effect the Second
Purchase hereunder shall have been satisfied or waived.

                                      -12-

<PAGE>
 
          (c)  If less than 3,847,600 (as such number may be reduced pursuant to
Section 2.1) Purchased Shares shall have been issued and sold at any and all
Subsequent Purchases other than at the Second Purchase on or before June 1,
1997, then Buyer shall have the right, subject to the satisfaction or waiver of
the applicable conditions set forth in Sections 7.2, 7.3 and 7.4, to make a
Subsequent Purchase from the Company on or before June 30, 1997, or as soon
thereafter as all conditions to Buyer's obligation to effect the Subsequent
Purchase hereunder shall have been satisfied or waived.

          (d)  If the condition set forth in Section 7.3(f) is not satisfied
(which determination shall be made by Buyer, in its sole discretion) or waived
at any time when a Closing would otherwise occur, the relevant Closing will be
effected as to the number of Purchased Shares, if any, as will not result in
such condition failing to be satisfied, and Buyer shall acquire any remaining
Purchased Shares as soon thereafter as such condition to Buyer's obligation to
effect the Subsequent Purchase shall have been, as determined in Buyer's sole
discretion, satisfied or waived.

          Section 2.5  Additional Agreements and Closing Deliveries.  (a)  At
                       --------------------------------------------          
the Initial Closing, and as a condition to the parties' obligations hereunder to
effect the transactions contemplated hereby at the Initial Closing, the Company
and Buyer shall enter into a registration rights agreement substantially in the
form attached as Exhibit B (the "Registration Rights Agreement"), and the
                 ---------       -----------------------------           
Company, Buyer and the Advancing Party shall enter into a shareholders agreement
substantially in the form attached as Exhibit C (the "Stockholders Agreement").
                                      ---------       ----------------------   

          (b)  In addition to the other things required to be done hereby, at
each Closing, the Company shall deliver, or cause to be delivered, to Buyer the
following:  (i) certificates representing the number of shares of Company Common
Stock to be issued and delivered at such Closing, free and clear of all Liens
(unless created by Buyer or any of its Affiliates), with all necessary share
transfer and other documentary stamps attached, (ii) a certificate, dated the
relevant Closing Date and validly executed on behalf of the Company, as
contemplated by Section 7.1(a), as to the Initial Closing only, by Section
7.2(a), as to each Subsequent Closing, and by Section 7.3(a) as  to all
Closings, (iii) evidence or copies of any consents, approvals, orders,
qualifications or waivers required pursuant to Section 7.1, as to the Initial
Closing only, pursuant to Section 7.2, as to each Subsequent Closing, and
pursuant to Section 7.3, as to all Closings, (iv) all certificates and other
instruments and documents required by this Agreement to

                                      -13-

<PAGE>
 
be delivered by the Company to Buyer at or prior to each Closing, and (v) such
other instruments reasonably requested by Buyer, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.

          (c)  In addition to the delivery of the Purchase Price and the other
things required to be done hereby, at each Closing, Buyer shall deliver, or
cause to be delivered, to the Company the following:  (i) a certificate, dated
the relevant Closing Date and validly executed by Buyer, as contemplated by
Section 7.4(a), (ii) if not previously delivered to the Company, all other
certificates, documents, instruments and writings required pursuant hereto to be
delivered by or on behalf of Buyer at or before each Closing, and (iii) such
other instruments reasonably requested by the Company, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.

          Section 2.6  Time and Place of Closings.  Each Closing shall take
                       --------------------------                          
place on the relevant Closing Date at such place and time as the Company and
Buyer shall mutually agree.

          Section 2.7  Right to Assign.  Buyer may assign its rights and
                       ---------------                                  
delegate its obligations created hereby to purchase Company Common Stock in
accordance with the provisions of Section 10.5.

          Section 2.8  Company's Right to Cure.  (a)  From the date hereof until
                       -----------------------                                  
the date that is four weeks from the date hereof, Buyer may conduct such
investigation as it deems appropriate to confirm the accuracy ofthe
representations and warranties of the Company contained herein.  No later than
the second Business Day after the last day of such four-week period, Buyer shall
deliver to the Company a written notice setting forth in reasonable detail any
matters as to which Buyer has knowledge (if any) and that render any of the
Company's representations and warranties contained herein untrue or incorrect in
such a way as would, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect (the "Breaching Matters").
                                          -----------------   

          (b)  If Buyer shall have set forth one or more Breaching Matters in
any notice delivered pursuant to Section 2.8(a), within 30 Business Days after
receipt of such notice  the Company shall attempt, to the extent commercially
reasonable and practicable, to cause the Breaching Matters identified by Buyer
in such notice to be true or correct so as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect and, if
so, shall deliver to Buyer written notice (the "Cure Notice") stating that all
                                                -----------                   
Breaching Matters identified by Buyer in Buyer's notice have been cured to the
extent required and describ-

                                      -14-

<PAGE>
 
ing the manner in which such Breaching Matters were so cured.  If the Company
fails to deliver the Cure Notice within 30 Business Days after its receipt of
Buyer's notice, Buyer shall have 10 Business Days to terminate this Agreement
without liability to any party.  If Buyer does not timely terminate this
Agreement pursuant to the preceding sentence, Buyer shall be deemed to have
waived the relevant Breaching Matters as conditions to any Closing or as a basis
for indemnification hereunder.  If Buyer obtains actual knowledge of any
Breaching Matter during the four-week period from the date hereof, but fails to
include such Breaching Matter in its notice pursuant to Section 2.8(a), Buyer
shall also be deemed to have waived such Breaching Matter.

          Section 2.9  Additional Purchase Price.  As additional consideration
                       -------------------------                              
from Buyer to the Company for the shares of Company Common Stock purchased at
each Closing, Buyer agrees that, simultaneously with its receipt of the Next
Dividend payable with respect to each such share of Company Common Stock
purchased at such Closing, Buyer shall pay to the Company the amount of the Per
Share Additional Purchase Price applicable to each such share of Company Common
Stock.


                                   ARTICLE 3
                                   ---------

                 Representations and Warranties of the Company
                 ---------------------------------------------

          The Company hereby represents and warrants to Buyer as follows:

          Section 3.1  Organization and Qualification; Subsidiaries.  (a)  The
                       --------------------------------------------           
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida.  The Company has all requisite
corporate power and authority to own, operate, lease and encumber its properties
and carry on its business as now conducted, and to enter into this Agreement,
the Registration Rights Agreement, and the Stockholders Agreement and to perform
its obligations hereunder and thereunder.

          (b)  Each of the Subsidiaries of the Company is a corporation,
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and has the corporate or partnership power and authority to own
its properties and to carry on its business as it is now being conducted.

          (c)  Each of the Company and its Subsidiaries is duly

                                      -15-

<PAGE>
 
qualified to do business and in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires such
qualification, except for any failures to be so qualified or to be in good
standing as would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.

          (d)  Schedule 3.1(d) sets forth the name of each Subsidiary of the
Company (whether owned, directly or indirectly, through one or more
intermediaries).  All of the outstanding shares of capital stock of, or other
equity interest in, each of the Subsidiaries owned by the Company are duly
authorized, validly issued, fully paid and nonassessable, and are owned,
directly or indirectly, by the Company free and clear of all Liens, except as
set forth in Schedule 3.1(d).  The following information for each Subsidiary is
set forth in Schedule 3.1(d), if applicable:  (i) its name and jurisdiction of
incorporation or organization, (ii) the type of and percentage interest held by
the Company in the Subsidiary and the names of and percentage interest held by
the other interest holders, if any, in the Subsidiary, and (iii) any loans from
the Company to, or priority payments due to the Company from, the Subsidiary,
and the rate of return thereon.  Except as contemplated hereby, there are no
existing options, warrants, calls, subscriptions, convertible securities or
other rights, agreements or commitments which obligate the Company or any of the
Subsidiaries to issue, transfer or sell any shares of capital stock or equity
interests in any of the Subsidiaries except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

          Section 3.2  Authority Relative to Agreements; Board Approval.  (a)
                       ------------------------------------------------       
The execution, delivery and performance of this Agreement, the Registration
Rights Agreement and the Stockholders Agreement have been duly and validly
authorized by all necessary corporate action on the part of the Company, subject
only to the approval of the issuance of Company Common Stock pursuant to this
Agreement and of the Amended Company Charter by the Company's shareholders.
This Agreement has been duly executed and delivered by the Company for itself
and constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights or general principles of equity.

          (b)  The Board of Directors of the Company has, as of the date hereof,
approved this Agreement, the Registration Rights Agreement, the Stockholders
Agreement and the transactions contemplated hereby and thereby, and determined
to recommend that the shareholders of the Company vote in favor of and approve
the

                                      -16-

<PAGE>
 
issuance of Company Common Stock pursuant to this Agreement.

          (c)  The shares of Company Common Stock to be acquired pursuant to
this Agreement have been duly authorized for issuance, and upon issuance will be
duly and validly issued, fully paid and nonassessable.

          (d)  The issue and sale of the shares of Company Common Stock
hereunder will not give any shareholder of the Company the right to demand
payment for its shares under Florida law or give rise to any preemptive or
similar rights.  Neither the entry into or announcement of this Agreement nor
the consummation of the transactions contemplated hereby will result in any
holder of Class B Common Stock having the right to convert any shares of Class B
Common Stock into shares of Company Common Stock pursuant to Section 4(a) of the
Articles of Amendment.

          (e)  The Board of Directors of the Company has adopted a resolution
authorizing the placement of the Investor Nominees (as defined in the
Stockholders Agreement) on the Board of Directors of the Company in accordance
with the terms of the Stockholders Agreement, and approving any necessary
expansion of the number of directors constituting the Board of Directors, all in
accordance with the requirements of the Company Charter.

          Section 3.3  Capital Stock.  (a)  The authorized capital stock of the
                       -------------                                           
Company as of the date hereof consists of 25,000,000 shares of Company Common
Stock, par value $0.01 per share, 10,000,000 shares of Special Common Stock, par
value $0.01 per share, and 10,000,000 shares of Preferred Stock, par value $0.01
per share.  As of May 31, 1996, there are 6,848,699 shares of Company Common
Stock issued and outstanding, 1,916 shares of Series A 8% Cumulative Preferred
Stock, par value $.01 per share ("Company Preferred Stock"), issued and
                                  -----------------------              
outstanding and 2,500,000 shares of Class B Non-voting Common Stock, par value
$0.01 per share ("Class B Common Stock"), issued and outstanding.  All such
                  --------------------                                     
issued and outstanding shares  of Company Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights.  The
Company has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities the holders of which have the right to vote) with the
shareholders of the Company on any matter.  As of the date hereof, except as set
forth in Schedule 3.3(a) to this Agreement, there are no existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate the Company to issue, transfer or sell
any shares of capital stock or other

                                      -17-

<PAGE>
 
equity interests of the Company.

          (b)  Except for interests in the Subsidiaries of the Companyand except
as set forth in Schedule 3.3(b), none of the Company or any of its Subsidiaries
owns directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, joint venture, business, trust or entity (other
than investments in short-term investment securities).

          Section 3.4  No Conflicts; No Defaults; Required Filings and Consents.
                       --------------------------------------------------------
Except as contemplated hereby, neither the execution and delivery by the Company
hereof nor the consummation by the Company of the transactions contemplated
hereby in accordance with the terms hereof, will:

          (a)  conflict with or result in a breach of any provisions of the
     Company Charter or by-laws of the Company;

          (b)  result in a breach or violation of, a default under, or the
     triggering of any payment or other obligations pursuant to, or, except as
     set forth in Schedule 3.9(g), accelerate vesting under, any of the Regency
     Realty Corporation 1993 Long Term Omnibus Plan or similar compensation plan
     or any grant or award made under any of the foregoing;

          (c)  violate or conflict with any statute, regulation, judgment,
     order, writ, decree or injunction applicable to the Company or its
     Subsidiaries, except as would not, individually or in the aggregate,
     reasonably be expected to result in a Material Adverse Effect;

          (d)  subject to the Company obtaining the third party consents set
     forth in Schedule 3.4(d)-A (with respect to the Initial Closing), Schedule
     3.4(d)-B (with respect to the Second Closing), and Schedule 3.4(d)-C (with
     respect to each other Subsequent Closing), violate or conflict with or
     result in a breach of any provision of, or constitute a default (or any
     event which, with notice or  lapse of time or both, would constitute a
     default) under, or result in the termination or in a right of termination
     or cancellation of, or accelerate the performance required by, or result in
     the creation of any Lien upon any of the properties of the Company or its
     Subsidiaries under, or result in being declared void, voidable or without
     further binding effect, any of the terms, conditions or provisions of any
     note, bond, mortgage, indenture, deed of trust or any license, franchise,
     permit, lease, contract, agreement or other instrument, commitment or
     obligation to which the Company or its Subsidiaries is a party, or by which
     the Company or its Subsidiaries or any of their properties is

                                      -18-

<PAGE>
 
     bound or affected, except for any of the foregoing matters which would not
     reasonably be expected to, individually or in the aggregate, result in a
     Material Adverse Effect; or

          (e)  require any consent, approval or authorization of, or
     declaration, filing or registration with, any Government Authority, other
     than any filings required under the Securities Act of 1933, as amended (the
     "Securities Act"), the Securities Exchange Act of 1934, as amended (the
      --------------                                                        
     "Exchange Act"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
     -------------                                                             
     as amended (the "HSR Act"), state securities laws ("Blue Sky Laws")
                      -------                            -------------  
     (collectively, the "Regulatory Filings"), and any filings required to be
                         ------------------                                  
     made with the Secretary of State of Florida or any national securities
     exchange on which the Company Common Stock is listed, except as would not,
     individually or in the aggregate, reasonably be expected to result in a
     Material Adverse Effect.

          Section 3.5  SEC and Other Documents; Financial Statements;
                       ----------------------------------------------
Undisclosed Liabilities.  (a)  The Company has delivered or made available to
- -----------------------                                                      
Buyer the registration statement of the Company filed with the Securities and
Exchange Commission ("SEC") in connection with the Company's initial public
                      ---                                                  
offering of Company Common Stock, and all exhibits, amendments and supplements
thereto (collectively, the "Company Registration Statement"), and each
                            ------------------------------            
registration statement, report, proxy statement or information statement and all
exhibits thereto prepared by it or relating to its properties since the
effective date of the Company Registration Statement, which are set forth in
Schedule 3.5(a), each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "Company Reports").  The Company
                                                ---------------                
Reports were filed with the SEC in a timely manner and constitute all forms,
reports and documents required to be filed by the Company under the Securities
Act, the Exchange Act and the rules and regulations promulgated thereunder (the
"Securities Laws").  As of their respective dates, the Company Reports (i)
 ---------------                                                          
complied as to  form in all material respects with the applicable requirements
of the Securities Laws and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.  There is no unresolved violation
asserted by any Government Authority with respect to any of the Company Reports.

          (b)  Each of the balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly presented the financial position of the

                                      -19-

<PAGE>
 
entity or entities to which it relates as of its date and each of the statements
of operations, shareholders' equity (deficit) and cash flows included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presented the results of operations, retained earnings or
cash flows, as the case may be, of the entity or entities to which it relates
for the periods set forth therein, in each case in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied during
                                           ----                              
the periods involved, except as may be noted therein and except, in the case of
the unaudited statements, normal recurring year-end adjustments which would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.  The projections set forth in the Regency Realty Corporation
1996 Consolidated Operating Reproject dated May 30, 1996 which has previously
been delivered by the Company to Buyer represent the Company's good faith
expectations and estimates with respect to the matters set forth therein.

          (c)  Except as and to the extent set forth in the Company Reports or
any Schedule hereto, to the Company's knowledge, none of the Company or any of
its Subsidiaries has any Liabilities (nor do there exist any circumstances) that
would, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.

          Section 3.6  Litigation; Compliance With Law.  (a)  There are no
                       -------------------------------                    
Actions pending or, to the Company's knowledge, threatened against the Company
or any of its Subsidiaries that would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, or which question
the validity hereof or any action taken or to be taken in connection herewith.
Except as disclosed in Schedule 3.6(a), there are no continuing orders,
injunctions or decrees of any Government Authority to which the Company or any
of its Subsidiaries is a party or by which any of its properties or assets are
bound.

          (b)  None of the Company or its Subsidiaries is in violation of any
statute, rule, regulation, order, writ, decree or injunction of any Government
Authority or any body having jurisdiction over them or any of their respective
properties which, if enforced, would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

          Section 3.7  Absence of Certain Changes or Events.  Except as
                       ------------------------------------            
disclosed in the Company Reports filed with the SEC prior to the date hereof or
in Schedule 3.7 and except for the entering into employment agreements in the
form attached as Exhibit D (the "Employment Agreements") with the employees
                 ---------       ---------------------                     
listed on Schedule 3.7,

                                      -20-

<PAGE>
 
since December 31, 1994, the Company and each of its Subsidiaries has conducted
its business only in the ordinary course and has acquired real estate and
entered into financing arrangements in connection therewith only in the ordinary
course of such business, and there has not been (a) any change, circumstance or
event that would reasonably be expected to result in a Material Adverse Effect,
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to the Company Common Stock, except in accordance with
Section 5.5, (c) any commitment, contractual obligation, borrowing, capital
expenditure or transaction (each, a "Commitment") entered into by the Company or
                                     ----------                                 
any of its Subsidiaries, other than Commitments which would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect,
or (d) any change in the Company's accounting principles, practices or methods
which would, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

          Section 3.8  Tax Matters; REIT and Partnership Status.  (a)  The
                       ----------------------------------------           
Company and each of its Subsidiaries has timely filed with the appropriate
taxing authority all Tax Returns required to be filed by it or has timely
requested extensions and any such request has been granted and has not expired.
Each such Tax Return is complete and accurate in all respects.  All Taxes shown
as owed by the Company or any of its Subsidiaries on any Tax Return have been
paid or accrued, except for Taxes being contested in good faith and for which
adequate reserves have been taken.  The Company and each of its Subsidiaries has
properly accrued all Taxes for such periods subsequent to the periods covered by
such Tax Returns as required by GAAP.  None of the Company or any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement now in effect extending the period for assessment or collection of
any Tax.  Except as set forth in Schedule 3.8(a), none of the Company or any of
its Subsidiaries is being audited or examined by any taxing authority with
respect to any Tax or is a party to any pending action or proceedings by any
taxing authority for  assessment or collection of any Tax, and no claim for
assessment or collection of any Tax has been asserted against it.  True and
complete copies of all federal, state and local income or franchise Tax Returns
filed by the Company and each of its Subsidiaries for 1993, 1994 and 1995 and
all communications relating thereto have been delivered to Buyer or made
available to representatives of Buyer prior to the date hereof.  No claim has
been made in writing or, to the Company's knowledge, otherwise by an authority
in a jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.  Except
as set forth in Schedule 3.8(a), there

                                      -21-

<PAGE>
 
is no dispute or claim concerning any Tax liability of the Company or any of its
Subsidiaries, (i) claimed or raised by any taxing authority in writing or (ii)
as to which the Company or any of its Subsidiaries has knowledge.  To the
Company's knowledge, as of the date hereof, (i) the Company is a "domestically-
controlled" REIT within the meaning of Code Section 897(h)(4)(B), and (ii) all
non-domestic beneficial owners (whether direct or indirect) of Company Common
Stock are set forth in Schedule 3.8(a).  To the Company's knowledge, except as
set forth in Schedule 3.8(a), no person or entity which would be treated as an
"individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by Section 856(h) of the Code) in excess of 9.8% of the value of the
outstanding equity interest in the Company.  Except as contemplated by this
Agreement or as set forth in Schedule 3.8(a), the Board of Directors has not
exempted any Person from the Ownership Limit, the Related Tenant Limit or the
Existing Holder Limit or otherwise waived any of the provisions of Article 5 of
the Company Charter (as all capitalized terms used in this sentence are defined
in the Company Charter).  The Exiting Holder Limit and the Ownership Limit (as
such terms are defined in the Company Charter) have not been modified pursuant
to Section 5.8 or 5.9 of the Company Charter or otherwise.  Each ownership
interest that the Company and each of its Subsidiaries has in an entity formed
as a partnership (or which files federal income tax returns as a partnership)
qualified, and since the date of its formation qualified, to be treated as a
partnership for federal income tax purposes or as a "qualified REIT subsidiary"
within the meaning of Section 856(i)(2) of the Code.

          (b)  The Company (i) intends in its federal income tax return for the
tax year ended December 31, 1995 and for the tax year that will end on December
31, 1996 to be taxed as a real estate investment trust within the meaning of
Section 856 of the Code ("REIT") and has complied (or will comply) with all
                          ----                                             
applicable provisions of the Code relating to a REIT, for 1995  and 1996, (ii)
has operated, and intends to continue to operate, in such a manner as to qualify
as a REIT for 1995 and 1996, (iii) has not taken or omitted to take any action
which would reasonably be expected to result in a challenge to its status as a
REIT, and, to the Company's knowledge, no such challenge is pending or
threatened, and (iv) to the Company's knowledge, and assuming the accuracy of
Buyer's representation in Section 4.7, will not be rendered unable to qualify as
a REIT for federal income tax purposes as a consequence of the transactions
contemplated hereby.

          (c)  Any amount or other entitlement that could be received (whether
in cash or property or the vesting of property)

                                      -22-

<PAGE>
 
as a result of any of the transactions contemplated hereby by any Employee,
officer, or director of the Company or any of their Affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or plan currently in effect would not
be characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).

          (d)  The disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any amount paid or payable by the
Company or any of its Subsidiaries under any contract, stock plan, program,
arrangement or understanding currently in effect.

          (e)  The Company was eligible to and did validly elect to be taxed as
a REIT for federal income tax purposes for calendar year 1993 and all subsequent
taxable periods.  Each Subsidiary of the Company organized as a partnership (and
any other Subsidiary that files Tax Returns as a partnership for federal income
tax purposes) was and continues to be classified as a partnership for federal
income tax purposes or as a "qualified REIT subsidiary" within the meaning of
Section 856(i)(2) of the Code.

          (f)  For purposes of this Section 3.8, no representation set forth in
Section 3.8 shall be deemed to be untrue or incorrect unless such untruths or
inaccuracies would, individually or in the aggregate, be reasonably expected to
result in a Material Adverse Effect.

          Section 3.9  Compliance with Agreements; Material Agreements.  (a)
                       -----------------------------------------------       
Neither the Company nor any of its Subsidiaries is in default under or in
violation of any provision of the Company Charter or the By-laws of the Company
(or equivalent documents), except for such defaults or violations which would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.

          (b)  The Company and each of its Subsidiaries have filed all material
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file with any
Government Authority and all other material reports and statements required to
be filed by them, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, and have paid
all fees or assessments due and payable in connection therewith, except for such
failures to file or pay which would not,

                                      -23-

<PAGE>
 
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.  There is no unresolved violation asserted by any regulatory
agency of which the Company has received written notice with respect to any
report or statement relating to an examination of the Company or any of its
Subsidiaries which, if resolved in a manner unfavorable to the Company or such
Subsidiary, would, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.

          (c)  The Company Reports or Schedule 3.9(c) set forth (i) a
description of all material indebtedness of the Company and each of its
Subsidiaries, whether unsecured, or secured or collateralized by mortgages,
deeds of trust or other security interests in the Company Properties or any
other assets of the Company and each of its Subsidiaries, or otherwise and (ii)
each Commitment entered into by the Company or any of its Subsidiaries
(including any guarantees of any third party's debt or any obligations in
respect of letters of credit issued for the Company's or any Subsidiary's
account) which may result in total payments or liability in excess of $200,000,
excluding Commitments made in the ordinary course of business with a maturity of
less than one year or that are terminable on 30 days or less notice, and
excluding Commitments the breach of which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.  True
and complete copies of the documents relating to the foregoing have been
delivered or made available to Buyer prior to the date hereof.  Neither the
Company nor any of its Subsidiaries is in default, and, to the Company's
knowledge, no event has occurred which, with the giving of notice or the lapse
of time or both, would constitute a default, under any of the documents
described in clause (i) or (ii) of this paragraph or in respect  of any payment
obligations thereunder except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.  All joint
venture and partnership agreements to which the Company or any of its
Subsidiaries is a party as of the date hereof are set forth in Schedule 3.9(c),
all of which are in full force and effect as against the Company or such
Subsidiary and, to the Company's knowledge, as against the other parties
thereto, and none of the Company or any of its Subsidiaries is in default, and,
to the Company's knowledge, no event has occurred which, with the giving of
notice or the lapse of time or both, would constitute a default, with respect to
any obligations thereunder, except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.  To
the Company's knowledge, the other parties to such agreements are not in breach
of any of their respective obligations thereunder, except as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.  To the Company's knowledge, there is no condition with respect
to the Company's Subsidiaries (including

                                      -24-

<PAGE>
 
with respect to the partnership agreements for the Company's Subsidiaries that
are partnerships) that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

          (d)  Except as disclosed in the Company Reports or any other Schedule
hereto, Schedule 3.9(d) sets forth a complete and accurate list of all material
agreements entered into by the Company or any of its Subsidiaries as of the date
hereof relating to the development or construction of, additions or expansions
to, or management or leasing services for retail shopping centers and suburban
office properties or other real properties which are currently in effect and
under which the Company or any of its Subsidiaries currently has, or expects to
incur, any material obligation.  True and complete copies of such agreements
have been delivered or made available to Buyer prior to the date hereof.

          (e)  Except as disclosed in the Company Reports and except for (i)
agreements made in the ordinary course of business with a maturity of less than
one year or that are terminable on 30 days or less notice, and (ii) agreements
the breach or non-fulfillment of which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect,
Schedule 3.9(e) sets forth a complete and accurate list of all material
agreements entered into by the Company as of the date hereof which are not
listed in any other Schedule hereto, including the material Debt Instruments.
Each agreement set forth in Schedule 3.9(e) is in full force and effect as
against the Company and, to the Company's knowledge,  as against the other
parties thereto, no payments, if any, thereunder are delinquent, the Company is
not in default thereunder, and no notice of default thereunder has been sent or
received by the Company or any of its Subsidiaries, except where the same would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.   To the Company's knowledge, no event has occurred
which, with notice or lapse of time or both, would constitute a default by the
Company under any agreement set forth in Schedule 3.9(e), except as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.  To the Company's knowledge, the other parties to such
agreements are not in breach of their respective obligations thereunder, except
as would not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect. True and complete copies of each such agreement
have been delivered or made available to Buyer prior to the date hereof.  The
representations and warranties of the Company and its Affiliates set forth in
the agreements listed under Items 6 and 7 of Schedule 3.9(e) have not been
breached.

                                      -25-

<PAGE>
 
          (f)  Schedule 3.9(f) sets forth a complete and accurate list of all
agreements and policies of the Company in effect on the date hereof relating to
transactions with affiliates and potential conflicts of interest.  Each
agreement or policy set forth in Schedule 3.9(f) is in full force and effect,
and the Company, each of its Subsidiaries, and, to the Company's knowledge, the
other parties thereto are in compliance with such agreements and policies, or
such compliance has been waived by the Company's Board of Directors as set forth
in Schedule 3.9(f).  True and complete copies of each such agreement or policy
have been delivered to Buyer.

          (g)  Except as set forth on Schedule 3.9(g), there are no change of
control or similar provisions in any employment, severance, stock option, stock
incentive, or similar agreement or arrangement which would be triggered by the
transactions contemplated by this Agreement.  Schedule 3.9(g) identifies the
obligations (including any payment or other obligation, forgiveness of debt,
other release from obligations, or acceleration of vesting) which are created,
accelerated or triggered by the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.

          Section 3.10  Financial Records; Company Charter and By-laws;
                        -----------------------------------------------
Corporate Records.  (a)  The books of account and other financial records of the
- -----------------                                                               
Company and each of its Subsidiaries are in all respects true and complete, have
been maintained in accordance with good business practices, and are accurately
reflected in all respects in the financial statements included in the Company
Reports, except, in each case, as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

          (b)  The Company has previously delivered or made available to Buyer
true and complete copies of the Company Charter and the By-laws of the Company,
as amended to date, and the charter, by-laws, organization documents,
partnership agreements and joint venture agreements of its Subsidiaries, and all
amendments thereto.  All such documents are listed in Schedule 3.10(b).

          (c)  The minute books and other records of corporate or partnership
proceedings of the Company and each of its Subsidiaries have been made available
to Buyer, contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
shareholders and directors and any committees of the Board of Directors of the
Company and their Subsidiaries which are corporations and all actions of the
partners of the Subsidiaries which are partnerships, except for documentation of
discussions relating to or in con-

                                      -26-

<PAGE>
 
nection with the transactions contemplated hereby or matters related hereto, and
except as would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.

          Section 3.11  Properties.  (a)  Schedule 3.11(a) sets forth a complete
                        ----------                                              
and accurate list and the address of all real property owned or leased by the
Company or any of its Subsidiaries or otherwise used by the Company or its
Subsidiaries in the conduct of their business or operations (collectively, and
together with the land at each address referenced in Schedule 3.11(a) and all
buildings, structures and other improvements and fixtures located on or under
such land and all easements, rights and other appurtenances to such land, the
                                                                             
"Company Properties"). The Company, or in the case of Company Properties owned
- -------------------                                                           
by Subsidiaries that are not wholly owned Subsidiaries of the Company, to the
Company's knowledge, such Subsidiaries, owns or own, as the case may be, good
and marketable fee simple title (or, if so indicated in Schedule 3.11(a),
leasehold title) to each of the Company Properties, in each case free and clear
of any Liens, title defects, contractual restrictions or covenants, laws,
ordinances or regulations affecting use or occupancy (including zoning
regulations and building codes) or reservations of interests in title
(collectively, "Property Restrictions"), except for (i) Permitted Liens and (ii)
                ---------------------                                           
Property Restrictions imposed or promulgated by law or by any Government
Authoritywhich are customary and typical for similar properties.  To the
Company's knowledge, none of the matters  described in clauses (i) and (ii) of
the immediately preceding sentence materially interferes with, impairs, or is
violated by, the existence of any building or other structure or improvement
which constitutes a part of, or the present use, occupancy or operation (or, if
applicable, development) of, the Company Properties taken as a whole, and such
matters do not, individually or in the aggregate, have a Material Adverse
Effect.  American Land Title Association policies of title insurance (or marked
title insurance commitments having the same force and effect as title insurance
policies) have been issued by national title insurance companies insuring the
fee simple or leasehold, as applicable, title of the Company or its
Subsidiaries, as applicable, to each of the Company Properties in amounts at
least equal to the original cost thereof, subject only to Permitted Liens, and,
to the Company's knowledge, such policies are valid and in full force and effect
and no claim has been made under any such policy.  The Company has delivered or
made available to Buyer true and complete copies of all such policies and of the
most recent surveys of the Company Properties, and true and complete copies of
all material exceptions referenced in such policies and the most recent title
reports for and surveys (to

                                      -27-

<PAGE>
 
the extent not previously delivered or made available to Buyer) of each of the
Company Properties available to the Company or any of its Subsidiaries will be
provided or made available by the Company for inspection by Buyer or its
representatives within five Business Days of Buyer's request therefor.

          (b)  Except as set forth in Schedule 3.11(b), and except for matters
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect or to materially and adversely affect the use or
occupancy (or, if applicable, development) of the Company Properties taken as a
whole, the Company has no knowledge (i) that any currently required certificate,
permit or license (including building permits and certificates of occupancy for
tenant spaces) from any Government Authority having jurisdiction over any
Company Property or any agreement, easement or other right which is necessary to
permit the lawful use, occupancy or operation of the existing buildings,
structures or other improvements which constitute a part of any of the Company
Properties or which are necessary to permit the lawful use and operation of
utility service to any Company Property or of any existing driveways, roads or
other means of egress and ingress to and from any of the Company Properties has
not been obtained or is not in full force and effect, or of any pending threat
of modification or cancellation of any of same, or (ii) of any violation by any
Company Property of any federal, state or municipal law, ordinance, order,
regulation or requirement, including any applicable zoning law or building code,
as a result of the use  or occupancy of such Company Property or otherwise.
Except as set forth in Schedule 3.11(b), the Company has no knowledge of
uninsured physical damage to any Company Property in excess of $200,000 in the
aggregate.  To the Company's knowledge, except for repairs identified in the
Capital Expenditure Budget and Schedule, each Company Property, (i) is in good
operating condition and repair and is structurally sound and free of defects,
with no material alterations or repairs being required thereto under applicable
law or insurance company requirements, and (ii) consists of sufficient land,
parking areas, driveways and other improvements and lawful means of access and
utility service and capacity to permit the use thereof in the manner and for the
purposes to which it is presently devoted (or, in the case of the Development
Property, for the development and operation thereon of the applicable Project),
except, in each such case, to the extent that failure to meet such standards
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or to materially and adversely affect the use or
occupancy of the Company Properties taken as a whole (or, in the case of the
Development Property, the development and operation thereon of the applicable
Project).  The Company has delivered or made available to Buyer true and
complete copies of all engineering reports, inspection reports, maintenance

                                      -28-

<PAGE>
 
plans and other documents relating to the condition of any Company Property
prepared for the Company or otherwise in the Company's or any Subsidiary's
possession.

          (c)  The Company has no knowledge (i) that any condemnation, eminent
domain or rezoning proceedings are pending or threatened with respect to any of
the Company Properties, (ii) that any road widening or change of grade of any
road adjacent to any Company Property is underway or has been proposed, (iii) of
any proposed change in the assessed valuation of any Company Property other than
customarily scheduled revaluations, (iv) of any special assessment made or
threatened against any Company Property, or (v) that any of the Company
Properties is subject to any so-called "impact fee" or to any agreement with any
Government Authority to pay for sewer extension, oversizing utilities, lighting
or like expenses or charges for work or services by such Government Authority,
except, in the case of each of the foregoing, to the extent that same would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or to materially and adversely affect the use or occupancy (or,
if applicable, development) of the Company Properties taken as a whole.

          (d)  To the Company's knowledge, each of the Company Properties is an
independent unit which does not rely on any facilities located on any property
not included in such Company Property to fulfill any municipal or governmental
requirement  or for the furnishing to such Company Property of any essential
building systems or utilities, other than facilities the benefit of which inures
to the Company Properties pursuant to one or more valid easements.  Each of the
Company Properties is served by public water and sanitary systems and all other
utilities, and, to the Company's knowledge, each of the Company Properties has
lawful access to public roads, in all cases sufficient for the current use and
occupancy of each Company Property (or, in the case of the Development Property,
for the development and operation thereon of the applicable Project).  To the
Company's knowledge, all parcels of land included in each Company Property that
purport to be contiguous are contiguous and are not separated by strips or
gores.  Except as set forth in Schedule 3.11(d), to the Company's knowledge, no
portion of any Company Property lies in any flood plain area (as defined, as of
the date hereof, by the U.S. Army Corps of Engineers (the "Army Corps of
                                                           -------------
Engineers") or otherwise) or includes any wetlands or vegetation or species
- ---------                                                                  
protected by any applicable laws.  Except as set forth on Schedule 3.11(d), none
of the Company Properties lies in any 100-year flood plain area, as established
by the Army Corps of Engineers.  Schedule 3.11(d) ac-

                                      -29-

<PAGE>
 
curately describes the Army Corps of Engineers' flood-plain designation for each
flood plain area in which any Company Property listed in such Schedule 3.11(d)
is located.  The improvements on each Company Property which lies in a flood
plain area comply with applicable building codes and other relevant laws and
regulations, and the Company or its Subsidiaries carry and presently maintain in
full force and effect flood insurance in connection with such Company Properties
as required by applicable law and as accurately described in Schedule 3.11(d).
To the Company's knowledge, no improvements constituting a part of any Company
Property encroach on real property not constituting a part of such Company
Property.  No representation set forth in this subsection (d) shall be deemed to
be untrue unless such untruths are, individually or in the aggregate, reasonably
expected to have a Material Adverse Effect or to materially and adversely affect
the use or occupancy (or, if applicable, development) of the Company Properties
taken as a whole.

          (e)  Schedule 3.11(e) contains a complete and accurate list of each
survey, study or report prepared by or for the Company or any Subsidiary in
connection with any Company Property's compliance or non-compliance with the
requirements of the Americans with Disabilities Act (the "ADA"), other than
                                                          ---              
routine correspondence or memoranda.  Except for matters addressed in the
Capital Expenditure Budget and Schedule, to the knowledge of the Company, no
Company Property fails to comply with the requirements of the ADA except for
such non-compliance  as the Company believes will not, individually or in the
aggregate, have a material adverse effect on the financial condition, results of
operations or business of the Company and its Subsidiaries (to the extent of the
Company's interest therein) taken as a whole.

          (f)  The Company has provided to Buyer an accurate rent roll for each
Company Property as of May 31, 1996 (the "Rent Roll"), which identifies and
                                          ---------                        
accurately describes each lease of space in each Company Property (collectively,
the "Company Leases").  The Company has delivered to Buyer a summary of each
     --------------                                                         
Company Lease (the "Lease Summaries") which accurately describes the material
                    ---------------                                          
terms thereof.  The Company has delivered or will make available to Buyer a true
and complete copy of each Company Lease, including all amendments and
modifications thereto.  With respect to each Company Lease for premises larger
than 10,000 square feet of rentable space (collectively, the "Material Company
                                                              ----------------
Leases"), except as set forth in Schedule 3.11(f) and except for matters which
- ------                                                                        
are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect, (i) each of the Material Company Leases is valid and
subsisting and in full force and effect as against the Company or the
Subsidiary, as applicable, and, to the Company's knowledge, as against the
tenant, and has not been amended, modified or supplemented, (ii) the tenant
under each

                                      -30-

<PAGE>
 
of the Material Company Leases is in actual possession of the premises leased
thereunder, (iii) no tenant under any Material Company Lease is more than 30
days in arrears in the payment of rent, (iv) none of the Company or any of its
Subsidiaries has received any written notice from any tenant under any Material
Company Lease of its intention to vacate, (v) none of the Company or any of its
Subsidiaries has collected payment of rent under any Material Company Lease
(other than security deposits) accruing for a period which is more than one
month in advance, (vi) no notice of default has been sent or received by the
landlord under any Material Company Lease which remains uncured as of the date
hereof, no default has occurred under any Material Company Lease and, to the
Company's knowledge, no event has occurred and is continuing which, with notice
or lapse of time or both, would constitute a default under any Material Company
Lease, (vii) no tenant under any of the Material Company Leases has any purchase
options or kick-out rights or is entitled to any concessions, allowances,
abatements, set-offs, rebates or refunds, (viii) none of the Material Company
Leases and none of the rents or other amounts payable thereunder has been
mortgaged, assigned, pledged or encumbered by any party thereto or otherwise,
except in connection with financing secured by the applicable Company Property
which is described in Schedule 3.9(c), (ix) (A) as of the date hereof, except as
set forth in Schedule 3.11(f), no brokerage or leasing commission or other
compensation is due or payable to any person with respect to or on account of
any of the Material Company Leases or any extensions or renewals thereof
incurred after the date hereof, and (B) any brokerage or leasing commission or
other compensation due or payable to any person with respect to or on account of
any of the Material Company Leases or any extensions or renewals thereof have
been incurred in the ordinary course of business of the Company consistent with
past practice and market terms, (x) except as set forth in the Lease Summaries,
no space of a material size in any Company Property is occupied by a tenant
rent-free, (xi) no tenant under any of the Material Company Leases has asserted
any claim which is likely to affect the collection of rent from such tenant,
(xii) no tenant under any of the Material Company Leases has any right to remove
material improvements or fixtures that have at any time been affixed to the
premises leased thereunder, (xiii) each tenant under the Material Company Leases
is required thereunder to maintain, at its cost and expenses, public liability
and property damage insurance with liability limits which reasonably relate to
the value of the contingent liabilities being insured thereby, and (xiv) the
landlord under each Material Company Lease has fulfilled all of its obligations
thereunder in respect of tenant improvements and capital expenditures.  Other
than the tenants identified in the Rent Roll and Lease Summaries and parties to
easement agreements

                                      -31-

<PAGE>
 
which constitute Permitted Liens, no third party has any right to occupy or use
any portion of any Company Property.  The Rent Roll or Lease Summaries include a
budget for all material tenant improvement and similar material work required to
be made by the lessor under each of the Material Company Leases.  None of the
matters disclosed in Schedule 3.11(f) has or could have, individually or in the
aggregate, a Material Adverse Effect.

          (g)  Schedule 3.11(g) sets forth a complete and accuratelist of all
material commitments, letters of intent or similar written understandings made
or entered into by the Company or any of its Subsidiaries as of the date hereof
(x) to lease any space larger than 10,000 rentable square feet at any of the
Company Properties, (y) to sell, mortgage, pledge or hypothecate any Company
Property or Properties, which, individually or in the aggregate, are material,
or to otherwise enter into a material transaction in respect of the ownership or
financing of any Company Property, or (z) to purchase or to acquire an option,
right of first refusal or similar right in respect of any real property, which,
individually or in the aggregate, are material, which, in any such case, has not
yet been reduced to a written lease or contract, and sets forth with respect to
each such commitment, letter of intent or other understanding the principal
terms thereof.  The Company has  previously delivered or made available to Buyer
a true and complete copy of each such commitment, letter of intent or other
understanding.  Schedule 3.11(g) also sets forth a complete and accurate list of
all agreements to purchase real property to which the Company or any Subsidiary
is a party.

          (h)  Except as set forth in Schedule 3.11(h), none of the Company or
any of its Subsidiaries has granted any outstanding options or has entered into
any outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of all or any part
of any Company Property, and no person has any right or option to acquire, or
right of first refusal with respect to, the Company's or any of its
Subsidiaries' interest in any Company Property or any part thereof.  Except as
set forth in Schedule 3.11(h) or 3.11(g), none of the Company or any of its
Subsidiaries has any outstanding options or rights of first refusal or has
entered into any outstanding contracts with others for the purchase of any real
property.

          (i)  Schedule 3.11(i) contains a complete and accurate description of
any non-compliance by any Company Property, to the Company's knowledge, with any
law, ordinance, code, health and safety regulation or insurance requirement
(except for the ADA, which is addressed in this respect in Section 3.11(e)
above), other than such non-compliance as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse

                                      -32-

<PAGE>
 
Effect.  Schedule 3.11(i) also sets forth the Company's or any Subsidiary's
capital expenditure budget and schedule for each Company Property, which
describes the capital expenditures which the Company or any Subsidiary has
budgeted for such Company Property for the period running through December 31,
1996 (the "Capital Expenditure Budget and Schedule"), and the Company's or any
           ---------------------------------------                            
Subsidiary's preliminary capital expenditure budget and schedule for each
Company Property, which describes the capital expenditures which the Company or
any Subsidiary has budgeted for such Company Property for the period commencing
January 1, 1997 and running through December 31, 1998 (the "1997 and 1998
                                                            -------------
Preliminary Capital Expenditure Budgets and Schedules").  Each of the Capital
- -----------------------------------------------------                        
Expenditure Budget and the 1997 and 1998 Preliminary Capital Expenditure Budgets
and Schedules also describes other capital expenditures as are necessary, to the
Company's knowledge, in order to bring such Company Property into compliance
with applicable laws, ordinances, codes, health and safety regulations and
insurance requirements (including in respect of fire sprinklers, compliance with
the ADA (except to the extent that (x) a tenant under any Company Lease is
contractually responsible and liable for such ADA compliance under its Company
Lease or (y) with respect to shopping center properties, any work required  to
cause such compliance is not material and the related expenditures are, in the
aggregate with all other such expenditures, less than $200,000) and asbestos
containing material) or which the Company otherwise plans or expects to make in
order to cure or remedy any construction, electrical, mechanical or other
defects, to renovate, rehabilitate or modernize such Company Property, or
otherwise, excluding, however, any tenant improvements required to be made under
any Company Lease.  To the Company's knowledge, the costs and time schedules for
1996 set forth in the Capital Expenditure Budget and Schedule are reasonable
estimates and projections.  To the Company's knowledge, the costs and time
schedules for 1997 and 1998 set forth in the 1997 and 1998 Preliminary Capital
Expenditure Budgets and Schedules are reasonable estimates and projections based
upon information available to the Company at the time that the 1997 and 1998
Preliminary Capital Expenditure Budgets and Schedules were prepared, and,
nothing has come to the attention of the Company since such time which would
indicate that the 1997 and 1998 Preliminary Capital Expenditure Budgets and
Schedules are inaccurate or misleading in any material respect.  Except as set
forth in Schedule 3.11(i), there are no outstanding or, to the Company's
knowledge, threatened requirements by any insurance company which has issued an
insurance policy covering any Company Property, or by any board of fire
underwriters or other body exercising similar functions, requiring any repairs
or alterations to be made to any Company Property that would, individually or in
the

                                      -33-

<PAGE>
 
aggregate, reasonably be expected to result in a Material Adverse Effect.

          (j)  Schedule 3.11(j) contains a list of each Company Property which
consists of or includes undeveloped land or which is in the process of being
developed or rehabilitated (collectively, the "Development Properties") and a
                                               ----------------------        
brief description of the development or rehabilitation intended by the Company
or any Subsidiary to be carried out or completed thereon (collectively, the
                                                                           
"Projects"), including any budget and development or rehabilitation schedule
- ---------                                                                   
therefor prepared by or for the Company or any Subsidiary (collectively, the
                                                                            
"Development Budget and Schedule").  Except as disclosed in Schedule 3.11(j),
- --------------------------------                                             
each Development Property is zoned for the lawful development thereon of the
applicable Project, and the Company or its Subsidiaries have obtained all
permits, licenses, consents and authorizations required for the lawful
development or rehabilitation thereon of such Project, except only for such
failure to meet the foregoing standards as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.  Except as
set forth in Schedule 3.11(j), to the Company's knowledge, there are no material
impediments to or constraints on the development or rehabilitation of any
Project in all material respects within the time  frame and for the cost set
forth in the Development Budget and Schedule applicable thereto.  In the case of
each Project the development of which has commenced, to the Company's knowledge,
the costs and expenses incurred in connection with such Project and the progress
thereof are, except as set forth in Schedule 3.11(j), consistent and in
compliance in all material respects with all aspects of the Development Budget
and Schedule applicable thereto.  The Company has delivered to Buyer all
feasibility studies, soil tests, due diligence reports and other studies, tests
or reports performed by or for the Company, or otherwise in the possession of
the Company, which relate to the Development Properties or the Projects.

          (k)  The Company has disclosed to Buyer all adverse matters known to
the Company with respect to or in connection with the Company Properties
(including the Company Leases and the Tenancy Leases), which would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (l)  The ground leases underlying the leased Company Properties
referenced in Schedule 3.11(a) (collectively, the "Tenancy Leases") are
                                                   --------------      
accurately described in Schedule 3.11(l).  Each of the Tenancy Leases is valid,
binding and in full force and effect as against the Subsidiary and, to the
Company's knowledge, as against the other party thereto.  Except as indicated in
Schedule 3.11(l), none of the Tenancy Leases is subject to any

                                      -34-

<PAGE>
 
mortgage, pledge, Lien, sublease, assignment, license or other agreement
granting to any third party any interest therein, collateral or otherwise, or
any right to the use or occupancy of any premises leased thereunder.  True and
complete copies of the Tenancy Leases (including all amendments, modifications
and supplements thereto) have been delivered to Buyer prior to the date hereof.
To the Company's knowledge, except as set forth in Schedule 3.11(l), there is no
pending or threatened proceeding which is reasonably likely to interfere with
the  quiet enjoyment of the tenant under any of the Tenancy Leases.  Except as
set forth in Schedule 3.11(l), as of the last day of the month preceding the
date hereof and as of the last day of the month preceding the date of the
Initial Closing, no payments under any Tenancy Lease are delinquent and no
notice of default thereunder has been sent or received by the Company or any of
its Subsidiaries, and, as of the date of each Subsequent Closing, there will be
no material deterioration with respect to such matters from the Company's
perspective.   There does not exist under any of the Tenancy Leases any default,
and, to the Company's knowledge, no event has occurred which, with notice or
lapse of time or both, would constitute such a default, except as would not,
individually or in  the aggregate, be reasonably expected to result in a
Material Adverse Effect.

          (m)  The Company and each of its Subsidiaries have good and sufficient
title to all the personal and non-real properties and assets reflected in their
books and records as being owned by them (including those reflected in the
balance sheets of the Company and its Subsidiaries as of March 31, 1996, except
as since sold or otherwise disposed of in the ordinary course of business), free
and clear of all Liens, except for Permitted Liens which are not, individually
or in the aggregate, reasonably expected to have a Material Adverse Effect.

          Section 3.12  Environmental Matters.  (a)  To the Company's knowledge,
                        ---------------------                                   
each of the Company and its Subsidiaries has obtained, and now maintains as
currently valid and effective, all permits, certificates of financial
responsibility and other governmental authorizations required under the
Environmental Laws (the "Environmental Permits") in connection with the
                         ---------------------                         
operation of its businesses and properties, all of which are listed in Schedule
3.12(a).  To the Company's knowledge, except as disclosed in the Executive
Summaries of the Company Environmental Reports, each of the Company and its
Subsidiaries, and each Company Property is and has been in compliance with all
terms and conditions of the Environmental Permits and all Environmental Laws,
except only to an extent which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.  The

                                      -35-

<PAGE>
 
Company has no knowledge of any circumstances or conditions that may prevent or
interfere with such compliance in the future.

          (b)  Each of the Company and its Subsidiaries has provided to Buyer
all formal communications, oral or written (whether from a Government Authority,
citizens' group, employee or other person), which the Company has received
regarding (x) alleged or suspected noncompliance of any of the Company
Properties with any Environmental Laws or Environmental Permits or (y) alleged
or suspected Liability of the Company or its Subsidiaries under any
Environmental Law, which noncompliance or Liability would, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (c)  There are no liens or encumbrances on any of the Company
Properties which arose pursuant to or in connection with any Environmental Law
or Environmental Claim and, to the Company's knowledge, no government actions
have been taken or threatened to be taken or are in process which are reasonably
likely to subject any Company Property to such liens or other encumbrances.

          (d)  No Environmental Claim with respect to the operations or the
businesses of the Company or its Subsidiaries, or with respect to the Company
Properties, has been asserted or, to the Company's knowledge, threatened, and,
to the Company's knowledge, no circumstances, past or present actions,
conditions, events or incidents which exist with respect to the Company or its
Subsidiaries or the Company Properties that would reasonably be expected to
result in any Environmental Claim being asserted, in any such case, against (i)
the Company or its Subsidiaries, or (ii) to the Company's knowledge, any person
whose liability for any Environmental Claims the Company or its Subsidiaries has
or may have retained or assumed either contractually or by operation of law.

          (e)  Except as disclosed in Schedule 3.12(e) (none of which matters
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect), or set forth in the Executive Summaries of the Company
Environmental Reports, (i) none of the Company or its Subsidiaries has been
notified or anticipates being notified of potential responsibility in connection
with any site that has been placed on, or proposed to be placed on, the National
Priorities List or its state or foreign equivalents pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
                                                                       ------   
42 U.S.C. (S) 9601 et seq., or analogous state or foreign laws, (ii) to the
Company's knowledge, no Materials of Environmental Concern are present on, in or
under any Company Property in a manner or condition that is reasonably likely to
give rise to an Environmental Claim which would reasonably be expected to result
in a Material Adverse Effect, (iii) to the

                                      -36-

<PAGE>
 
Company's knowledge, none of the Company or its Subsidiaries has Released or
arranged for the Release of any Materials of Environmental Concern at any
location to an extent or in a manner which would reasonably be expected to
result in a Material Adverse Effect, (iv) to the Company's knowledge, no
underground storage tanks, surface impoundments, disposal areas, pits, ponds,
lagoons, open trenches or disused industrial equipment is present at any Company
Property in a manner or condition that is reasonably likely to give rise to an
Environmental Claim which would reasonably be expected to result in a Material
Adverse Effect, (v) to the Company's knowledge, no transformers, capacitors or
other equipment containing fluid with more than 50 parts per million
polychlorinated biphenyls are present at any Company Property in a manner or
condition that is reasonably likely to give rise to an Environmental Claim which
would reasonably be expected to result in a Material Adverse Effect, except for
any such transformers, capacitors or other equipment owned by any utility
company, and (vi) to the Company's knowledge, no asbestos or asbestos-containing
material is present at any Company Property other than floor tiles that do not
contain any friable  asbestos and no Employee, agent, contractor or
subcontractor of the Company or its Subsidiaries or any other person is now or
has in the past been exposed to friable asbestos or asbestos-containing material
at any Company Property, except, in the case of each of the matters set forth in
this subpart (vi), for such matters as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

          (f)  Schedule 3.12(f) contains a list of each environmental report
prepared for the Company or its Subsidiaries or otherwise in the possession of
any of them with respect to the environmental condition of any Company Property
(collectively, the "Company Environmental Reports").  The Company has previously
                    -----------------------------                               
delivered or made available to Buyer true and complete copies of (i) the
executive summary or conclusion included in each Company Environmental Report
(collectively, the "Executive Summaries of the Company Environmental Reports")
                    --------------------------------------------------------  
and (ii) each Company Environmental Report which constitutes a "Phase II" (or
higher) environmental report or which is otherwise more detailed or in-depth
than a typical "Phase I" environmental report.  The Executive Summaries of the
Company Environmental Reports disclose all materially adverse matters known to
the Company in respect of the environmental condition (including violations of
Environmental Laws, Environmental Claims and the presence or Release of any
Materials of Environmental Concern) of the Company Properties (it being
understood, however, that reference in the Executive Summaries of the Company
Environmental Reports to other environmental reports, in-

                                      -37-

<PAGE>
 
vestigations, assessments or other documents shall not constitute disclosure of
the contents thereof except to the extent such contents are fully discussed in
the Executive Summaries of the Company Environmental Reports).  To the Company's
knowledge, none of the matters disclosed by the Executive Summaries of the
Company Environmental Reports would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.  The Company has no
knowledge of any facts or circumstances relating to the environmental condition
of any property owned, leased or otherwise held by the Company that is not a
Company Property that are reasonably likely to result in a Material Adverse
Effect.

          (g)  For purposes hereof, the terms listed below shall have the
following meanings:

                 (i) "Claim" shall mean all actions, causes of action, suits,
                      -----                                                  
          debts, dues, accounts, reckonings, bonds, bills, covenants, contracts,
          controversies, promises, trespasses, damages, judgments, executions,
          claims, liabilities and demands whatsoever, in law or equity.

                 (ii) "Environmental Claim" shall mean any Claim investigation
                       -------------------                                    
          or notice (written or oral) by any person alleging potential liability
          (including potential liability for investigatory costs, cleanup costs,
          governmental response costs, natural resources damages, property
          damages, personal injuries or fatalities, or penalties) arising out
          of, based on or resulting from (A) the presence, generation,
          transportation, treatment, use, storage, disposal or Release of
          Materials of Environmental Concern or the threatened Release of
          Materials of Environmental Concern at any location, or (B) activities
          or conditions forming the basis of any violation, or alleged violation
          of, or liability or alleged liability under, any Environmental Law.

                 (iii)  "Environmental Laws" shall mean federal, state, local,
                         ------------------                                   
          provincial, municipal and foreign laws, ordinances, principles of
          common law, rules, by-laws, orders, governmental policies, statutes,
          regulations, agreements, treaties, customary law, and international
          principles relating to the pollution or protection of the environment
          or of flora or fauna or their habitat or of human health and safety,
          or to the cleanup or restoration of the environment, including, but
          not limited to, any laws or regulations relating to (A) generation,
          treatment, storage, disposal or transportation of Materials of
          Environmental Concern, emissions or discharges or protection of the
          environment from the same,

                                      -38-

<PAGE>
 
          (B) exposure of persons to, or Release or threat of Release of,
          Materials of Environmental Concern, and (C) noise.

                 (iv) "Materials of Environmental Concern" shall mean all
                       ----------------------------------                
          chemicals, pollutants, contaminants, wastes, toxic substances,
          petroleum or any fraction thereof, petroleum products and hazardous
          substances (as defined in Section 101(14) of CERCLA, 42 U.S.C. (S)
          6601(14)), or solid or hazardous wastes as now defined and regulated
          under any Environmental Laws.

               (v) "Release" shall mean any release, spill, emission, leaking,
                    -------                                                   
          pumping, injection, deposit, disposal, discharge, dispersal, leaching
          or migration

          Section 3.13  Employees and Employee Benefit Plans.  (a)  Schedule
                        ------------------------------------                
3.13(a) sets forth a complete and accurate list of all employment agreements
with employees of the Company or any of its Subsidiaries.  Except for the
employees who are parties to such employment agreements, all of the employees of
the  Company and each of its Subsidiaries are employed on an at-will basis
(except for restrictions or limitations on the at-will basis of such employees
imposed by general principles of law or equity).

          (b)  The Company Reports or Schedule 3.13(b) sets forth a complete and
accurate list of all Employee Benefit Plans and all material Benefit
Arrangements which affect Employees of the Company or any of its Subsidiaries
(the "Company Plans").  With respect to each Company Plan, the Company has
      -------------                                                       
delivered or made available to Buyer true and complete copies of:  (i) the plans
and related trust documents and amendments thereto, (ii) the most recent summary
plan descriptions, if any, and the most recent annual report, if any, and (iii)
the most recent actuarial valuation (to the extent applicable).

          (c)  With respect to each Company Plan, (i) the Company and each of
its Subsidiaries is in compliance in all material respects with the terms of
each Company Plan and with the requirements prescribed by all applicable
statutes, orders or governmental rules or regulations, (ii) the Company and each
of its Subsidiaries has contributed to each Pension Plan included in the Company
Plans not less than the amounts accrued for such plan for all plan periods for
which payment is due, and (iii) none of the Company or any of its Subsidiaries
has any funding commitment or other liabilities except as reserved for in the
financial statements in or incorporated by reference into the Company Reports,
and, in the case of clause (i) through (iii), except for

                                      -39-

<PAGE>
 
such matters as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

          (d)  None of the Company or any of its Subsidiaries has made any
commitment to establish any new Employee Benefit Plan, to modify any Employee
Benefit Plan, or to increase benefits or compensation of Employees of the
Company or any of its Subsidiaries (except for normal increases in compensation
consistent with past practices), and to the Company's knowledge, no intention to
do so has been communicated to Employees of the Company or any of its
Subsidiaries.

          (e)  There are no pending or, to the Company's knowledge, anticipated
claims against or otherwise involving any of the Company Plans or any
fiduciaries thereof with respect to their duties to the Plans and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of Company Plan activities) has been brought against or with
respect to any such Company Plans.

          (f)  Neither the Company or any entity under "common control" with the
Company within the meaning of Section 4001 of ERISA has contributed to, or been
required to contribute to, any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA).

          (g)  Except as set forth on Schedule 3.13(g), the Company and its
Subsidiaries do not maintain or contribute to any plan or arrangement which
provides or has any liability to provide life insurance, medical or other
employee welfare benefits to any Employee or former Employee upon his retirement
or termination of employment and, to the Company's knowledge, the Company and
its Subsidiaries have never represented, promised or contracted (whether in oral
or written form) to any Employee or former Employee that such benefits would be
provided.

          (h)  For purposes hereof, "Employee Benefit Plans" means each and all
                                     ----------------------                    
"employee benefit plans" as defined in Section 3(3) of ERISA maintained or
contributed to by a party hereto or in which a party hereto participates or
participated and which provides benefits to Employees, including (i) any such
plan that are "employee welfare benefit plans" as defined in Section 3(1) of
ERISA, including retiree medical and life insurance plans ("Welfare Plans"), and
                                                            -------------       
(ii) any such plans that constitute "employee pension benefit plans" as defined
in Section 3(2) of ERISA ("Pension Plans").  "Benefit Arrangements" means life
                           -------------      --------------------            
and health insurance, hospitalization, savings, bonus, deferred compensation,
incentive compensation, holiday, vacation, severance pay, sick pay, sick leave,
disability, tuition refund, service award, company car,

                                      -40-

<PAGE>
 
scholarship, relocation, patent award, fringe benefit, individual employment,
consultancy or severance contracts and other polices or practices of a party
hereto providing employee or executive compensation or benefits to Employees,
other than Employee Benefit Plans.  "Employees" mean all current employees,
                                     ---------                             
former employees and retired employees of a party hereto or any of its
Subsidiaries, including employees on disability, layoff or leave status.
                                                                         
"Controlled Group Liability" means any and all liabilities under (i) Title IV of
- ---------------------------                                                     
ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv)
the continuation coverage requirements of Section 601 et seq. of ERISA and
Section 4980B of the Code, and (v) corresponding or similar provisions of
foreign laws or regulations, other than such liabilities that arise solely out
of, or relate solely to, the Plans.

          (i)  To the Company's knowledge, with respect to each plan that is
subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code:
(i) there does not exist any accumulated funding deficiency within the meaning
of Section 412 of the Code or Section 302 of ERISA, whether or not waived,  (ii)
the fair market value of the assets of such plan equals or exceeds the actuarial
present value of all accrued benefits under plan (whether or not vested), on a
termination basis, (iii) no reportable event within the meaning of Section
4043(c) of ERISA has occurred, and the consummation of the transactions
contemplated by this agreement will not result in the occurrence of any such
reportable event, and (iv) all premiums to the Pension Benefit Guaranty
Corporation have been timely paid in full.

          (j)  There does not now exist, nor do any circumstances exist that
could result in, any Controlled Group Liability that would be a liability of the
Company following the Closing.  Without limiting the generality of the
foregoing, neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.

          (k)  Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting
(except as set forth in Schedule 3.9(g)) or delivery of, or increase the amount
or value of, any payment or benefit to any employee of the Company.

          Section 3.14  Labor Matters.  Except as set forth in Schedule 3.14,
                        -------------                                        
none of the Company or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or

                                      -41-

<PAGE>
 
labor union organization.  Except for the matters set forth in Schedule 3.14
(none of which matters would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect), there is no unfair labor practice
or labor arbitration proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries.  To the knowledge of
the Company, there are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or threatened involving
employees of the Company or any of its Subsidiaries.

          Section 3.15  Affiliate Transactions.  Schedule 3.15 sets forth a
                        ----------------------                             
complete and accurate list of all transactions, series of related transactions
or currently proposed transactions or series of related transactions entered
into by the Company or any of its Subsidiaries since January 1, 1996 which are
of the type required to be disclosed by the Company pursuant to Item 404 of
Regulation S-K of the Securities Laws.  A true and complete copy of all
agreements or contracts relating to any such transaction has been delivered or
made available to Buyer prior to the date hereof.

          Section 3.16  Insurance.  The Company maintains insurance policies,
                        ---------                                            
including liability policies, covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company and
each of its Subsidiaries (collectively, the "Insurance Policies"), which are of
                                             ------------------                
a type and in amounts customarily carried by persons conducting businesses
similar to those of the Company.  There is no material claim by the Company or
any of its Subsidiaries pending under any of the material Insurance Policies as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies.

          Section 3.17  Proxy Statement.  The Proxy Statement and all of the
                        ---------------                                     
information included or incorporated by reference therein (other than any
information supplied or to be supplied by Buyer for inclusion or incorporation
by reference therein) will not, as of the date such Proxy Statement is first
mailed to the shareholders of the Company and as of the time of the meeting of
the shareholders of the Company in connection with the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.  The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.

          Section 3.18  Florida Takeover Law.  The terms of Sections 607.0901
                        --------------------                                 
and 607.0902 of the Florida 1989 Business

                                      -42-

<PAGE>
 
Corporation Act will not apply to Buyer, any Stock Purchase or any other
transaction contemplated hereby.

          Section 3.19  Vote Required.  The affirmative vote of the holders of a
                        -------------                                           
majority of the outstanding shares of Company Common Stock and Company Preferred
Stock voting together as a single class and entitled to vote hereon and duly
present in person or by proxy at a meeting duly called to vote hereon (and with
each share of Company Common Stock entitled to one vote per share and each share
of Company Preferred Stock being entitled to 50 votes per share) is the only
vote of the holders of any class or series of Company Stock necessary to approve
this Agreement, the Registration Rights Agreement, the Stockholders Agreement
and the transactions contemplated hereby and thereby, except that adoption of
the Amended Company Charter requires only that the vote of the outstanding
shares of the combined class of Company Common Stock and Company Preferred Stock
entitled to vote thereon (and with each share of Company Common Stock entitled
to one vote per share and each share of Company Preferred Stock being entitled
to 50 votes per share)  which vote for such adoption is greater than the number
of such outstanding shares who vote against such adoption.

          Section 3.20  Brokers or Finders.  No agent, broker, investment banker
                        ------------------                                      
or other firm or person, including any of the foregoing that is an Affiliate of
the Company, is or will be entitled to any broker's or finder's fee or any other
commission or similar fee from the Company in connection with this Agreement or
any of the transactions contemplated hereby for which Buyer or any of its
Affiliates will be responsible.

          Section 3.21  Stockholders Agreement.  If the Stockholders Agreement
                        ----------------------                                
were in effect as of the date hereof, the Company would be in compliance with
each of the covenants set forth in Section 6.1 thereof (subject to the
consummation of the reorganization described in Schedule 6.5(a)).

          Section 3.22  Knowledge Defined.  As used herein, the phrase "to the
                        -----------------                                     
Company's knowledge" (or words of similar import) means the actual knowledge of
any of Martin E. Stein, Jr., Bruce M. Johnson, Richard E. Cook, Robert C.
Gillander, Jr., James D. Thompson, J. Christian Leavitt or Robert L. Miller, Jr.
and includes any facts, matters or circumstances set forth in any written notice
from any Government Authority or any other material written notice received by
the Company or any of its Subsidiaries, and also including any matter of which
Buyer informs the Company in writing.

                                      -43-

<PAGE>
 
                                   ARTICLE 4
                                   ---------

        Representations and Warranties of Buyer and the Advancing Party
        ---------------------------------------------------------------

          Buyer and the Advancing Party hereby jointly and severally represent
and warrant to the Company as follows:

          Section 4.1  Organization.  (a)  Buyer is a corporation duly
                       ------------                                   
incorporated, validly existing and in good standing under the laws of
Luxembourg.  Buyer has all requisite corporate power and authority to own,
operate, lease and encumber its properties and to carry on its business as now
conducted, and to enter into this Agreement, the Registration Rights Agreement
and the Stockholders Agreement and to perform its obligations hereunder and
thereunder.

          (b)  The Advancing Party is a corporation duly incorporated, validly
existing and in good standing under the laws of Luxembourg.  The Advancing Party
has all requisite corporate power and authority to own, operate, lease and
encumber its properties and to carry on its business as now conducted,  and to
enter into this Agreement, the Registration Rights Agreement and the
Stockholders Agreement and to perform its obligations hereunder and thereunder.

          Section 4.2  Due Authorization.  The execution, delivery and
                       -----------------                              
performance of this Agreement, the Registration Rights Agreement, and the
Stockholders Agreement have been duly and validly authorized by all necessary
corporate action on the part of Buyer and the Advancing Party.  This Agreement
has been duly executed and delivered by each of Buyer and the Advancing Party
for itself and constitutes the valid and legally binding obligations of Buyer
and the Advancing Party, enforceable against Buyer or the Advancing Party, as
the case may be, in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity.

          Section 4.3  Conflicting Agreements and Other Matters.  Neither the
                       ----------------------------------------              
execution and delivery of this Agreement nor the performance by Buyer or the
Advancing Party, as the case may be, of its obligations hereunder will conflict
with, result in a breach of the terms, conditions or provisions of, constitute a
default under, result in the creation of any mortgage, security interest,
encumbrance, lien or charge of any kind upon any of the properties or assets of
Buyer or the Advancing Party, as the case may be, pursuant to, or require any
consent, approval or other action by or any notice to or filing with any
Government Authority pursuant to, the organizational documents or agreements of
Buyer or the Advancing Party, as the case may be, or any agreement, instrument,
order, judgment, decree, statute, law, rule or regulation by which

                                      -44-

<PAGE>
 
Buyer or the Advancing Party, as the case may be, is bound, except for filings
after any Closing under Section 13(d) or Section 16 of the Exchange Act.

          Section 4.4  Acquisition for Investment; Sophistication; Source of
                       -----------------------------------------------------
Funds.  (a)  Buyer is acquiring the Company Common Stock being purchased by it
- -----                                                                         
for its own account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof, and Buyer has no present
intention or plan to effect any distribution of shares of Company Common Stock,
                                                                               
provided that the disposition of Company Common Stock owned by Buyer shall at
- --------                                                                     
all times be and remain within its control, subject to the provisions of this
Agreement and the Registration Rights Agreement.  Buyer is able to bear the
economic risk of the acquisition of Company Common Stock pursuant hereto and can
afford to sustain a total loss on such investment, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the proposed investment, and therefore  has the capacity
to protect its own interests in connection with the acquisition of Company
Common Stock pursuant hereto.

          (b)  At the Initial Closing and at each subsequent Closing, the
Advancing Party shall have available and shall advance to Buyer all of the funds
necessary to satisfy Buyer's obligations hereunder and to pay any related fees
and expenses in connection with the foregoing.  The Advancing Party has, and at
each Closing will have either cash, written, enforceable subscriptions from its
investors or line of credit commitments sufficient, in any such case, to advance
the necessary funds to Buyer as will enable Buyer to purchase the requisite
Purchased Shares at each Closing, in accordance with this Agreement.  The
Advancing Party has provided to the Company a true and correct copy of the form
of the subscription agreement executed by the Advancing Party's investors.

          (c)  The Advancing Party has previously delivered to the Company (i)
an audited balance sheet for the Advancing Party as of December 31, 1995, and
(ii) an unaudited balance sheet for the Advancing Party as of April 30, 1996,
each balance sheet which was certified by an officer of the Advancing Party and
which fairly presented the financial position of the Advancing Party as of its
date in accordance with GAAP.  Each such balance sheet discloses either on its
face or by footnote, all material liabilities of the Advancing Party required to
be disclosed under GAAP.

          Section 4.5  Proxy Statement.  None of the information supplied or to
                       ---------------                                         
be supplied by Buyer for inclusion or incorporation by reference in the Proxy
Statement will, as of the date the Proxy

                                      -45-

<PAGE>
 
Statement is first mailed to the shareholders of the Company and as of the time
of the meeting of the shareholders of the Company in connection with the
transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.

          Section 4.6  Brokers or Finders.  No agent, broker, investment banker
                       ------------------                                      
or other firm or person, including any of the foregoing that is an Affiliate of
Buyer or the Advancing Party, is or will be entitled to any broker's or finder's
fee or any other commission or similar fee from Buyer or the Advancing Party in
connection with this Agreement or any of the transactions contemplated hereby
for which the Company or any of its Affiliates will be responsible.

          Section 4.7  REIT Qualification Matters.  To Buyer's knowledge, no
                       --------------------------                           
person which would be treated as an "individual" for purposes of Section
542(a)(2) of the Code (as modified by Section 856(h) of the Code) owns or would
be considered to own (taking into account the ownership attribution rules under
Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of
9.8% of the value of the outstanding equity interest in Buyer or the Advancing
Party.

          Section 4.8  Investment Company Matters.  Neither the Advancing Party
                       --------------------------                              
nor Buyer is, and after giving effect to the purchase of Company Common Stock
contemplated hereby neither will be, an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended.

          Section 4.9  Ownership of Tenants.  Buyer does not own, directly or
                       --------------------                                  
indirectly, an interest in a Tenant listed on Schedule 4.9, which interest is
equal to or greater than (i) 10% of the combined voting power of all classes of
stock of such Tenant, (ii) 10% of the total number of shares in all classes of
stock of such Tenant, or (iii) if such Tenant is not a corporation, 10% of the
assets or net profits of such Tenant.  For purposes of this Section, the rules
prescribed by Section 318(a) of the Code, for determining the ownership of
stock, as modified by Section 856(d)(5) of the Code, shall apply in determining
direct and indirect ownership of stock, assets, or net profits.  Capitalized
terms used but not defined in this Section 4.9 shall have the meaning assigned
to them in the Company Charter.  The Company shall advise Buyer within a
reasonable period of time before the Closing of any material changes to Schedule
4.9.

                                      -46-

<PAGE>
 
                                   ARTICLE 5
                                   ---------

                         Covenants Relating to Closings
                         ------------------------------

          Section 5.1  Taking of Necessary Action.  (a)  Each party hereto
                       --------------------------                         
agrees to use its commercially reasonable best efforts promptly to take or cause
to be taken all action and promptly to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
the Registration Rights Agreement and the Stockholders Agreement, subject to the
terms and conditions hereof and thereof, including all actions and things
necessary to cause all conditions precedent set forth in Article 7 to be
satisfied.

          (b)  As promptly as practicable after the date hereof, the Company
shall prepare and file with the SEC a preliminary proxy statement (the "Proxy
                                                                        -----
Statement") by which the Company's shareholders will be asked to approve the
- ---------                                                                   
Amended Company Charter and the issuance of shares of Company Common Stock
contemplated hereby.  The Proxy Statement as initially filed with the SEC, as it
may be amended and refiled with the SEC and as it may be mailed to the Company's
shareholders, shall be in form and substance reasonably satisfactory to Buyer.
The Company shall use its reasonable efforts to respond to any comments of the
SEC, and to cause the Proxy Statement to be mailed to the Company's shareholders
at the earliest practicable time.  As promptly as practicable after the date
hereof, the Company shall prepare and file any other filings required of the
Company or its Subsidiaries under the Exchange Act, the Securities Act or any
other federal, state or local laws relating to this Agreement and the
transactions contemplated hereby, including under the HSR Act and state takeover
laws (the "Other Filings"), and Buyer shall prepare and file any filings
           -------------                                                
required of Buyer by the HSR Act.  The Company and Buyer will notify each other
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the Proxy Statement or any Other Filing or for additional
information and will supply each other with copies of all correspondence between
each of them or any of their respective representatives, on the one hand, and
the SEC, or its staff or any other government officials, on the other hand, with
respect to the Proxy Statement or any Other Filing.  The Proxy Statement and any
Other Filing shall comply in all material respects with all applicable
requirements of law.  Buyer shall provide the Company all information about
Buyer required to be included or incorporated by reference in the Proxy
Statement or any Other Filing and shall otherwise cooperate with

                                      -47-

<PAGE>
 
the Company in taking the actions described in this paragraph.  Whenever any
event occurs which is required to be set forth in an amendment or supplement to
the Proxy Statement or any Other Filing, the Company or Buyer, as the case may
be, shall promptly inform the other party of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, and/or
mailing to shareholders of the Company, such amendment or supplement.  Subject
to the provisions of Section 5.6, the Proxy Statement shall include the
recommendation of the Board of Directors of the Company that the shareholders of
the Company vote in favor of and approve the Amended Company Charter and the
issuance of Company Common Stock pursuant to this Agreement.

          (c)  The Company shall call a meeting of its shareholders to be held
as promptly as practicable for the purpose  of voting upon the transactions
(including the issuance of Company Common Stock and the amendments to the
Company Charter) contemplated hereby; provided that should a quorum not be
obtained at such meeting of the shareholders, or if fewer shares of Company
Common Stock than the number required therefor are voted in favor of approval
and adoption of the transactions (including the issuance of Company Common Stock
and the amendments to the Company Charter) contemplated hereby, the meeting of
the shareholders shall be postponed or adjourned in order to permit additional
time for soliciting and obtaining additional proxies or votes.  In no event
shall the record date for determining shareholders entitled to notice of and to
vote at such shareholders' meeting to be held in accordance with the terms
hereof be earlier than the date following the date of the Initial Closing.

          (d)  The Company shall use its commercially reasonable best efforts to
obtain the consents set forth in each of Schedules 3.4(d)-A, 3.4(d)-B and
3.4(d)-C.

          (e)  From and after the date hereof, (i) no grant or award of options
or other similar equity-related or incentive compensation shall be made pursuant
to or by amendment to the agreements listed on Schedule 3.9(g), and (ii) any
employment, stock option or other agreement entered into and which contains a
change-of-control or similar provision shall contain only a change-of-control
provision in the form included in the form of employment agreement attached
hereto as Exhibit D.
          --------- 

          Section 5.2  Registration Rights Agreement.  At the Initial Closing,
                       -----------------------------                          
the Company, Buyer and the Advancing Party shall enter into the Registration
Rights Agreement.

          Section 5.3  Stockholders Agreement.  At the Initial Closing, the
                       ----------------------                              
Company, the Advancing Party and Buyer shall enter

                                      -48-

<PAGE>
 
into the Stockholders Agreement.

          Section 5.4  Public Announcements; Confidentiality.  (a)  Subject to
                       -------------------------------------                  
each party's disclosure obligations imposed by law and any stock exchange or
similar rules and the confidentiality provisions contained in Section 5.4(b),
the Company and Buyer (or Buyer's U.S. representatives) will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement, the Registration Rights
Agreement the Stockholders Agreement and any of the transactions contemplated
hereby or thereby.

          (b)  Buyer agrees that all information provided to Buyer or any of its
representatives pursuant to this Agreement  shall be kept confidential, and
Buyer shall not (x) disclose such information to any persons other than the
directors, officers, employees, financial advisors, legal advisors, accountants,
consultants and affiliates of Buyer who reasonably need to have access to the
confidential information and who are advised of the confidential nature of such
information or (y) use such information in a manner which would be detrimental
to the Company; provided, however, the foregoing obligation of Buyer shall not
                --------  -------                                             
(i) relate to any information that (1) is or becomes generally available other
than as a result of unauthorized disclosure by Buyer or by persons to whom Buyer
has made such information available, (2) is or becomes available to Buyer on a
non-confidential basis from a third party that is not, to Buyer's knowledge,
bound by any other confidentiality agreement with the Company, or (ii) prohibit
disclosure of any information if required by law, rule, regulation, court order
or other legal or governmental process.

          Section 5.5  Conduct of the Business.  Except for transactions
                       -----------------------                          
contemplated hereby, during the period from the date hereof (and with respect to
transactions or conduct relating to the number of shares of Company Stock
outstanding, from May 31, 1996) to the sooner to occur of (A) the date on which
the Remaining Equity Commitment shall be zero, and (B) if approval for the
issuance of the Company Common Stock required to effect a Subsequent Purchase
shall, in accordance with the terms hereof, have been sought from the
shareholders of the Company but the requisite approval of the Company's
shareholders shall not have been obtained, the date of the shareholder meeting
at which such shareholder approval shall not have been obtained, the Company,
except as otherwise consented to or approved by Buyer in writing or as permitted
or required hereby (x) has conducted or will conduct the business of the Company
and its Subsidiaries and has engaged or will engage in transactions only in the
ordinary course, and (y)

                                      -49-

<PAGE>
 
will not:

               (i) change any provision of the Amended Company Charter or the
     By-laws of the Company in a manner that would be adverse to Buyer;

               (ii) except for (A) issuances of shares of Company Common Stock
     in consideration for the acquisition of assets by the Company in bona fide
     arm's length transactions and subject to the limitations set forth in the
     Company Charter (and which issuances in any event shall not exceed 10% of
     the shares of Company Common Stock outstanding, on a pro forma basis,
     assuming the consummation of each of the Subsequent Closings contemplated
     by this Agreement), (B) grants of options or the issuance of shares of
     Company Common Stock pursuant to  the agreements listed and up to the
     amounts set forth in Schedule 3.3(a), change the number of shares of the
     authorized or issued capital stock of the Company or issue or grant any
     option, warrant, call, commitment, subscription, right to purchase or
     agreement of any character relating to the authorized or issued capital
     stock of the Company, or any securities convertible into shares of such
     stock (including Company Preferred Stock or Class B Common Stock), or
     split, combine or reclassify any shares of the capital stock of the Company
     or declare, set aside or pay any extraordinary dividend (except as may be
     required to comply with the requirements of Section 6.3), other
     distribution (whether in cash, stock or property or any combination
     thereof) in respect of the capital stock of the Company, or redeem or
     otherwise acquire any shares of such capital stock (provided, however, that
                                                         --------  -------      
     in connection with any transaction described in clauses (A) and (B), Buyer
     shall be entitled, to the extent so provided in Section 4.2 of the
     Stockholders Agreement, to a participation right on the terms set forth in
     Section 4.2 of the Stockholders Agreement as if all of the Purchased Shares
     were issued and owned by Buyer at the time of such transaction, with any
     additional shares of capital stock (as such term is used in Section 4.2 of
     the Stockholders Agreement) which Buyer shall have the right to purchase by
     virtue of such participation right to be issued and purchased only at the
     time of the Subsequent Closing, and subject to the satisfaction or waiver
     of the conditions applicable to the purchase of Purchased Shares thereat);

               (iii)  take any action or permit any of its Subsidiaries to take
     any action which would violate any

                                      -50-

<PAGE>
 
     of the Corporate Action Covenants under (and as defined in) the
     Stockholders Agreement if the Stockholders Agreement were then in effect;

               (iv) purchase or enter into a binding agreement to purchase any
     real property without Investor's prior written consent, including the
     purchase of any of the properties which are the subject of the purchase
     agreements, letters of intent or other arrangements described in Schedule
     3.11(g) or the other Schedules hereto; or

               (v) enter into any employment agreement, or permit any of its
     Subsidiaries to enter into any employment agreement with any officer or
     other employee except for entry into the Employment Agreements pursuant to
     Section 3.7 of this Agreement.


          Section 5.6  No Solicitation of Transactions.  Unless and until this
                       -------------------------------                        
Agreement is terminated in accordance with its terms, none of the Company or its
Subsidiaries shall, directly or indirectly, through any officer, director, agent
or otherwise, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or maintain or continue discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
knowingly permit any of the officers, directors or employees of such party or
any of its subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by such party or any of such party's
subsidiaries to take any such action, and the Company shall notify Buyer orally
(within one Business Day) and in writing (as promptly as practicable) of all of
the relevant details relating to all inquiries and proposals which it or any of
its Subsidiaries or any such officer, director, employee, investment banker,
financial advisor, attorney, accountant or other representative may receive
relating to any of such matters and if such inquiry or proposal is in writing,
the Company shall deliver to Buyer a copy of such inquiry or proposal; provided,
                                                                       -------- 
however, that nothing contained in this Section shall prohibit the Board of
- -------                                                                    
Directors of the Company from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender

                                      -51-

<PAGE>
 
or exchange offer or prohibit the Board from taking such other actions as may be
required to comply with the fiduciary obligations of the Board of Directors of
the Company, as determined in good faith by the Board of Directors of the
Company based on the written advice of outside counsel.

          Section 5.7  Information and Access.  From the date hereof until the
                       ----------------------                                 
date on which the Remaining Equity Commitment shall be zero, (i) the Company and
its Subsidiaries shall afford to Buyer and Buyer's accountants, counsel and
other representatives full and reasonable access during normal business hours
(and at such other times as the parties may mutually agree) to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Buyer (1) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of the Securities
Laws, and (2) all other information concerning their businesses, personnel and
the Company Properties as Buyer may reasonably request, and (ii) without
limiting the generality of the foregoing, Buyer shall have the right to conduct
or cause to be conducted an environmental, physical,  structural, electrical,
mechanical and other inspection and review of any Company Properties or request
that the Company update, at Buyer's expense, any existing reports, reviews or
inspections thereof, in which case the Company shall promptly so update its
reports, reviews and inspections and cause them to be certified to Buyer by the
firm or person who prepared such report or conducted such review or inspection.
Buyer and its accountants, counsel and other representatives shall, in the
exercise of the rights described in this Section, not unduly interfere with the
operation of the businesses of the Company or its Subsidiaries.

          Section 5.8  Notification of Certain Matters.  Each of Buyer and the
                       -------------------------------                        
Company shall use its good faith efforts to notify the other party in writing of
its discovery of any matter that would render any of such party's or the other
party's representations and warranties contained herein untrue or incorrect in
any material respect, but the failure of either party to so notify the other
party shall not be deemed a breach of this Agreement.

          Section 5.9  Issuance Pursuant to Shelf Registration.  The Company
                       ---------------------------------------              
shall cause the Purchased Shares to be issued pursuant to and registered under
the Company's shelf registration statement which is in effect as of the date
hereof (or another shelf registration statement in effect as of the date of the
relevant Closing) and, in connection with each such issuance and registration,
will prepare and cause to be filed a prospectus supplement to such shelf
registration statement.

                                      -52-

<PAGE>
 
                                   ARTICLE 6

                          Certain Additional Covenants
                          ----------------------------

          Section 6.1  Resale.  Buyer acknowledges and agrees that even though
                       ------                                                 
the Company Common Stock that Buyer will acquire in any Stock Purchase will be,
as of the relevant Closing thereof, registered under the Securities Act, it may,
to the extent Buyer is an affiliate of the Company for purposes of the
Securities Act, only be sold or otherwise disposed of in one or more
transactions registered under the Securities Act and, where applicable, relevant
state securities laws or as to which an exemption from the registration
requirements of the Securities Act and, where applicable, such state securities
laws is available, and Buyer agrees that the certificates representing such
Common Stock may bear a legend as to its possible affiliate status to that
effect.

          Section 6.2  Use of Funds.  The Company shall use the funds received
                       ------------                                           
from Stock Purchases for the repayment of debt of the Company and/or the
acquisition or development of assets by the Company.

          Section 6.3  REIT Status.  From and after the date hereof and so long
                       -----------                                             
as Buyer owns 10% or more of the outstanding Company Common Stock, the Company
will elect to be taxed as a REIT in its federal income tax returns, will comply
with all applicable laws, rules and regulations ofthe Code relating to a REIT,
and will not take any action or fail to take any action which would reasonably
be expected to, alone or in conjunction with any other factors, result in the
loss of its status as a REIT for federal income tax purposes.

          Section 6.4  Guarantee.  The Advancing Party hereby unconditionally
                       ---------                                             
and irrevocably guarantees and agrees to be responsible for the payment and
performance of all of Buyer's obligations hereunder.

          Section 6.5  Property Management Activities and Reorganizational
                       ---------------------------------------------------
Matters.  (a)  The Company will cause at or prior to the Second Closing, (i) the
- -------                                                                         
transfer of employees as set forth in Schedule 6.5(a), and (ii) the
restructuring and consolidation of certain Subsidiaries, the terms and
conditions of which are set forth in Schedule 6.5(a), and in form and substance
reasonably satisfactory to the Company and Buyer.

                                      -53-

<PAGE>
 
          (b)  The Company shall request all consents listed in Schedule 3.4(d)-
B which are required in connection with the matters contemplated in this Section
6.5(b) within one Business Day after the date hereof, and shall use its best
efforts to obtain such consents prior to the Initial Closing.

          (c)  The Company will use all reasonable efforts to phase out and
terminate the administrative services arrangement described in Paragraph D of
Schedule 3.9(f) within one year of the date hereof or as soon as possible
thereafter, and, prior to such termination, will not expand or increase, or
permit to be expanded or increased, the scope, type or quantity of services
provided or the amount of office space leased pursuant thereto or otherwise with
the parties thereto.

 
                               ARTICLE 7

                             Conditions to Closings
                             ----------------------

          Section 7.1  Conditions of Purchase at Initial Closing.  The
                       -----------------------------------------      
obligation of Buyer to purchase and pay for the Purchased Shares at the Initial
Closing is subject to satisfaction or waiver of each of the following conditions
precedent:

          (a)  Representations and Warranties; Covenants.  The representations
               -----------------------------------------                      
and warranties of the Company contained herein shall have been true and correct
in all respects on and as of the date hereof, and shall be true and correct in
all respects on and as of the date of such Initial Closing, with the same effect
as though such representations and warranties had been made on and as of the
date of such Initial Closing (except for representations and warranties that
speak as of a specific date or time other than the date of the Initial Closing
(which need only be true and correct in all respects as of such date or time)),
other than, in all such cases, such failures to be true and/or correct as would
not in the aggregate reasonably be expected to have a Material Adverse Effect;
                                                                              
provided, however, that if any of the representations and warranties is already
- --------  -------                                                              
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of this Section 7.1(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to Material Adverse Effect set forth immediately prior to this
proviso).  The covenants and agreements of the Company to be performed on or
before the date of the Initial Closing in accordance with this Agreement shall
have been duly performed in all respects, other than (except for the Company's
obligation to deliver the relevant shares of Company Common Stock at the Ini-

                                      -54-

<PAGE>
 
tial Closing, and for the covenants set forth in Sections 5.1(e), 5.2 and 5.3,
as to which the proviso set forth in this other-than clause shall not apply) for
such failures to have been performed as would not in the aggregate reasonably be
expected to have a Material Adverse Effect (provided, however, that if any such
                                            --------  -------                  
covenant or agreement is already qualified in any respect by materiality or as
to Material Adverse Effect for purposes of determining whether this condition
has been satisfied, such materiality or Material Adverse Effect qualification
will be in all respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but subject to
the overall exception as to Material Adverse Effect set forth immediately prior
to this proviso)).  The Company shall have delivered to Buyer at the Initial
Closing a certificate of an appropriate officer in form and substance reasonably
satisfactory to Buyer dated the date of the Initial Closing to such effect.

          For purposes of the foregoing condition, any Breaching Matters waived
by Buyer or cured by the Company in accordance with the provisions of Section
2.8(b) shall not be taken into account.

          In making any determination as to Material Adverse Effect under this
Section 7.1(a) or under Section 7.2(a) or 7.3(a), the matters set forth in each
such Section shall be aggregated and considered together.

          (b)  No Material Adverse Change.  Since March 31, 1996 there shall not
               --------------------------                                       
have been any change, circumstance or event which has had or would reasonably be
expected to have a Material Adverse Effect.

          (c)  HSR Act.  Any waiting period applicable to the consummation of
               -------                                                       
the transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated, or the Company and
Buyer shall have mutually concluded that no filing under the HSR Act is required
with respect to the transactions contemplated hereby.

          (d)  Consents.  The Company shall have obtained the consents set forth
               --------                                                         
in Schedule 3.4(d)-A.

                                      -55-

<PAGE>
 
          (e)  Ownership Limit Waiver.  Buyer's ownership of up to the Initial
               ----------------------                                         
Number of Shares plus the 119,000 shares of Company Common Stock owned by Buyer
or its Affiliates as of the date hereof shall have been irrevocably exempted
from the ownership limit provisions of Article 5 of the Company Charter and the
Board of Directors of the Company shall have taken such other action provided
for under Article 5 of the Company Charter as Buyer shall have requested to
irrevocably waive the application of said Article 5 to Buyer's acquisition and
holding of up to the Initial Number of Shares and to establish an "Ownership
Limit" as defined in said Article 5 in respect of Buyer which permits Buyer's
ownership of the Initial Number of Shares plus the 119,000 shares of Company
Common Stock owned by Buyer or its Affiliates as of the date hereof.  For
purposes of this paragraph (e), references to Buyer, shall also be deemed to be
references to any Person who would be an Investor within the meaning of the
Stockholders Agreement.

          (f)  Related Tenant Limit Waiver.  The Board of Directors of the
               ---------------------------                                
Company shall have granted a waiver of the Related Tenant Limit (as such term in
defined in the Company  Charter) to Buyer (or other exemption with the same
effect) in form and substance reasonably satisfactory to Buyer.

          Section 7.2  Conditions to Purchase at Subsequent Closings.  The
                       ---------------------------------------------      
obligations of Buyer to purchase and pay for the Purchased Shares at any
Subsequent Closing are subject to satisfaction or waiver of each of the
following conditions precedent:

          (a)  Representations and Warranties; Covenants.  The representations
               -----------------------------------------                      
and warranties of the Company contained herein shall have been true and correct
in all respects on and as of the date hereof, and shall be true and correct in
all respects on and as of the date of the Subsequent Closing, with the same
effect as though such representations and warranties had been made on and as of
the date of the Subsequent Closing (except for representations and warranties
that speak as of a specific date or time other than the date of the Subsequent
Closing (which need only be true and correct in all respects as of such date or
time)), other than, in all such cases, such failures to be true and/or correct
as would not in the aggregate reasonably be expected to have a Material Adverse
Effect; provided, however, that if any of the representations and warranties is
        --------  -------                                                      
already qualified in any respect by materiality or as to Material Adverse Effect
for purposes of this Section 7.2(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to Material Adverse Effect set forth immediately prior to this pro-

                                      -56-

<PAGE>
 
viso).  The covenants and agreements of the Company to be performed on or before
the date of the Subsequent Closing in accordance with this Agreement shall have
been duly performed in all respects, other than (except for the Company's
obligation to deliver the relevant shares of Company Common Stock at the
Subsequent Closing, and, with respect to the Second Closing, for the covenants
set forth in Section 6.5(a), as to which the proviso set forth in this other-
than clause shall not apply) for such failures to have been performed as would
not in the aggregate reasonably be expected to have a Material Adverse Effect
                                                                             
(provided, however, that if any such covenant or agreement is already qualified
- ---------  -------                                                             
in any respect by materiality or as to Material Adverse Effect for purposes of
determining whether this condition has been satisfied, such materiality or
Material Adverse Effect qualification will be in all respects ignored and such
covenant or agreement shall have been performed in all respects without regard
to such qualification (but subject to the overall exception as to Material
Adverse Effect set forth immediately prior to this proviso)).  The Company shall
have delivered to Buyer at the Subsequent Closing a certificate of  an
appropriate officer in form and substance reasonably satisfactory to Buyer dated
the date of the Subsequent Closing to such effect.

          (b)  Shareholder Approval.  The issuance of Company Common Stock
               --------------------                                       
pursuant to this Agreement shall have been approved by the requisite vote of the
Company's shareholders.

          (c)  Amended Company Charter; Modification of Ownership Limit.  With
               --------------------------------------------------------       
respect to the Second Closing, the amendment to the Company Charter in the form
attached as Exhibit E (the "Amended Company Charter") shall have been approved
            ---------       -----------------------                           
by the requisite vote of holders of Company Common Stock, all as required by and
in accordance with the Company Charter, and duly filed with the Secretary of
State of Florida and shall be in full force and effect, and a resolution related
to the Amended Company Charter, which shall have been approved by Buyer, shall
have been adopted by the Board of Directors of the Company.

          (d)  Consents.  The Company shall have obtained the consents set forth
               --------                                                         
in Schedule 3.4(d)-B with respect to the Second Closing and in Schedule 3.4(d)-C
with respect to each other Subsequent Closing.

          (e)  Certain Conditions Still True.  The conditions precedent set
               -----------------------------                               
forth in Sections 7.1(b), (c), (d) and (f) shall continue to be satisfied or
waived in all respects on and as of

                                      -57-

<PAGE>
 
the date of the Subsequent Closing.

          Section 7.3  Conditions of Purchase at All Closings.  The obligations
                       --------------------------------------                  
of Buyer to purchase and pay for the Purchased Shares at each Closing (including
the Initial Closing and any Subsequent Closing, except where otherwise
indicated) are subject to satisfaction or waiver of each of the following
conditions precedent:

          (a)  Representations and Warranties; Covenants.  The representations
               -----------------------------------------                      
and warranties of the Company contained in Sections 3.1(a), 3.1(b), 3.1(c),
3.1(d), 3.2, the second and third sentences of 3.3(a), 3.4, 3.5, 3.8(b), 3.8(e),
3.18, 3.19, and 3.20 shall have been true and correct in all respects on and as
of the date hereof, and shall be true and correct in all respects on and as of
the relevant Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time other
than such Closing Date (which need only be true and correct in all respects as
of such date or time)), other than, in all such cases, such failures to be true
and/or correct as would not in the aggregate reasonably be expected to have a
Material Adverse  Effect; provided, however, that if any of the representations
                          --------  -------                                    
and warranties is already qualified in any respect by materiality or as to
Material Adverse Effect for purposes of this Section 7.3(a) such materiality or
Material Adverse Effect qualification will be in all respects ignored (but
subject to the overall standard as to Material Adverse Effect set forth
immediately prior to this proviso).  The covenants and agreements of the Company
to be performed on or before the relevant Closing Date in accordance with this
Agreement shall have been duly performed in all respects, other than (except for
the Company's obligation to deliver the relevant shares of Company Common Stock
at the relevant Closing, as to which the proviso set forth in this other-than
clause shall not apply) for such failures to have been performed as would not in
the aggregate reasonably be expected to have a Material Adverse Effect
                                                                      
(provided, however, that if any such covenant or agreement is already qualified
 --------  -------                                                             
in any respect by materiality or as to Material Adverse Effect for purposes of
determining whether this condition has been satisfied, such materiality or
Material Adverse Effect or qualification will be in all respects ignored and
such covenant or agreement shall have been performed in all respects without
regard to such qualification (but subject to the overall exception as to
Material Adverse Effect set forth immediately prior to this proviso)).  As to
each Closing other than the Initial Closing, no condition to the obligations of
Buyer to purchase and pay for the Purchased Shares at the Initial Closing, and

                                      -58-

<PAGE>
 
that was not duly waived by Buyer, shall have failed to be satisfied as of the
Initial Closing.  The Company shall have delivered to Buyer at the relevant
Closing a certificate of an appropriate officer in form and substance reasonably
satisfactory to Buyer dated the relevant Closing Date to such effect.

          For purposes of the foregoing condition, any Breaching Matters waived
in accordance with the provisions of Section 2.8(b) shall not be taken into
account.

          (b)  No Injunction.  There shall not be in effect any order, decree or
               -------------                                                    
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby and there shall
be no pending Actions which would reasonably be expected to have a material
adverse effect on the ability of the Company to consummate the transactions
contemplated hereby or to issue the Purchased Shares.

          (c)  Proceedings.  All corporate and other proceedings to be taken by
               -----------                                                     
the Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Buyer  and Buyer shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.

          (d)  REIT Status.  The Company shall have elected to be taxed as a
               -----------                                                  
REIT in its most recent federal income tax return, and shall be in compliance
with all applicable laws, rules and regulations, including the Code, necessary
to permit it to be taxed as a REIT.  The Company shall not have taken any action
or have failed to take any action which would reasonably be expected to, alone
or in conjunction with any other factors, result in the loss of its status as a
REIT for federal income tax purposes.

          (e)  Opinion of Counsel.  Buyer shall have received an opinion from
               ------------------                                            
Foley & Lardner in form and substance reasonably satisfactory to Buyer.

          (f)  Domestically-Controlled REIT.  The Company is, and after giving
               ----------------------------                                   
effect to the relevant Closing will be, a "domestically-controlled" REIT within
the meaning of Code Section 897(h)(4)(B).

          Section 7.4  Conditions of Sale.  The obligation of
                       ------------------                    

                                      -59-

<PAGE>
 
the Company to issue and sell any Purchased Shares at any Closing (including the
Initial Closing and each Subsequent Closing, except where otherwise indicated
below) is subject to satisfaction or waiver of each of the following conditions
precedent:

          (a)  Representations and Warranties; Covenants.  The representations
               -----------------------------------------                      
and warranties of Buyer and the Advancing Party contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the relevant Closing Date with the same
effect as though such representations and warranties had been made on and as of
the relevant Closing Date (except for representations and warranties that speak
as of a specific date or time other than such Closing Date (which need only be
true and correct in all respects as of such date or time)), other than, in all
such cases, such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a Material Adverse Effect on the
Company or Buyer's ability to consummate the transactions contemplated hereby;
                                                                              
provided, however, that if any of the representations and warranties is already
- --------  -------                                                              
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of this Section 7.4(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to Material Adverse Effect set forth  immediately prior to this
proviso).  The covenants and agreements of Buyer to be performed on or before
the relevant Closing Date in accordance with this Agreement shall have been duly
performed in all respects, other than (except for Buyer's obligation to pay the
relevant Purchase Price at the relevant Closing, and, as to the Initial Closing,
except for Buyer's covenants set forth in Sections 5.2 and 5.3, as to which the
proviso set forth in this other-than clause shall not apply) for such failures
to have been performed as would not in the aggregate reasonably be expected to
have a Material Adverse Effect on the Company or Buyer's ability to consummate
the transactions contemplated hereby (provided, however, that if any such
                                      --------  -------                  
covenant or agreement is already qualified in any respect by materiality or as
to Material Adverse Effect for purposes of determining whether this condition
has been satisfied, such materiality or Material Adverse Effect qualification
will be in all respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but subject to
the overall exception as to Material Adverse Effect set forth immediately prior
to this proviso)).  Buyer shall have delivered to the Company at the relevant
Closing a certificate of an appropriate officer in form and substance reasonably
satisfactory to the Company dated the relevant Closing Date to such effect.

                                      -60-

<PAGE>
 
          (b)  HSR Act.  Any waiting period applicable to the consummation of
               -------                                                       
the transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated, or the Company and
Buyer shall have mutually concluded that no filing under the HSR Act is required
with respect to the transactions contemplated hereby.

          (c)  Shareholder Approval.  Except in the case of the Initial Closing,
               --------------------                                             
the issuance of the Company Common Stock pursuant to this Agreement shall have
been approved by the requisite vote of the Company's shareholders.

          (d)  No Injunction.  There shall not be in effect any order, decree or
               -------------                                                    
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby and there shall
be no pending Actions which would reasonably be expected to have a material
adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or to acquire the Purchased Shares.

          (e)  Consents.  The Company shall have obtained the consents set forth
               --------                                                         
in Schedule 3.4(d)-A in the case of the Initial Closing, in Schedule 3.4(d)-B in
the case of the Second Closing, and in Schedule 3.4(d)-C in the case of each
other Subsequent Closing.

          (f)  Proceedings.  All corporate and other proceedings to be taken by
               -----------                                                     
Buyer in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Company and the Company shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.

          (g)  Opinion of Counsel.  The Company shall have received an opinion
               ------------------                                             
from counsel to Buyer reasonably acceptable to the Company in form and substance
reasonably satisfactory to the Company.

                                      -61-

<PAGE>
 
 ARTICLE 8
 ---------

                           Survival; Indemnification
                           -------------------------

          Section 8.1  Survival.  All representations, warranties and (except as
                       --------                                                 
provided by the last sentence of this Section 8.1) covenants and agreements of
the parties contained herein, including indemnity or indemnification agreements
contained herein, or in any Schedule or Exhibit hereto, or any certificate,
document or other instrument delivered in connection herewith shall survive the
Initial Closing and any Subsequent Closing until the first anniversary of the
latest of the Initial Closing and any Subsequent Closing.  No Action or
proceeding may be brought with respect to any of the representations and
warranties, or any of the covenants or agreements which survive until such first
anniversary, unless written notice thereof, setting forth in reasonable detail
the claimed misrepresentation or breach of warranty or breach of covenant or
agreement, shall have been delivered to the party alleged to have breached such
representation or warranty or such covenant or agreement prior to such first
anniversary; provided, however, that, if Buyer shall have complied with this
             --------  -------                                              
Section 8.1, the damages for breach by the Company of any of the representations
and warranties, or any of the covenants or agreements which survive until such
first anniversary, shall be measured with respect to all of Buyer's purchases of
Company Common Stock hereunder and not with respect only to Buyer's purchases
hereunder made prior to such first anniversary, but such measurement shall not
in any event include any shares of Company  Stock that Buyer may have purchased
other than from the Company.  Those covenants or agreements that contemplate or
may involve actions to be taken or obligations in effect after the Initial
Closing shall survive in accordance with their terms.

          Section 8.2  Indemnification by Buyer or the Company.  (a)  Subject to
                       ---------------------------------------                  
Section 8.1, from and after any Closing Date, Buyer shall indemnify and hold
harmless the Company, its successors and assigns, from and against any and all
damages, claims, losses, expenses, costs, obligations, and liabilities,
including liabilities for all reasonable attorneys' fees and expenses (including
attorney and expert fees and expenses incurred to enforce the terms of this
Agreement) (collectively, "Loss and Expenses") suffered, directly or indirectly,
                           -----------------                                    
by the Company by reason of, or arising out of, (i) any breach as of the date
made or deemed made or required to be true of any representation or warranty
made by Buyer in or pursuant to this Agreement, or (ii) any failure by Buyer or
the Advancing Party to perform or fulfill any of its covenants or agreements set
forth herein.  Notwithstanding any other provision of this

                                      -62-

<PAGE>
 
Agreement to the contrary, in no event shall Loss and Expenses include a party's
incidental or consequential damages.

          (b)  Subject to Section 8.1, from and after any Closing Date, the
Company shall indemnify and hold harmless Buyer, its successors and assigns,
from and against any and all Loss and Expenses, suffered, directly or
indirectly, by Buyer by reason of, or arising out of, (i) any breach as of the
date made or deemed made or required to be true of any representation or
warranty made by the Company in or pursuant to this Agreement and any statements
made in any certificate delivered pursuant to this Agreement, or (ii) any
failure by the Company to perform or fulfill any of its covenants or agreements
set forth herein.  Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Loss and Expenses include a party's incidental or
consequential damages.

          (c)  Notwithstanding the foregoing, (i) neither Buyer nor the Company
shall be responsible for any Loss and Expenses as provided by paragraphs (a) and
(b), respectively, of this Section 8.2, until the cumulative aggregate amount of
such Loss and Expenses suffered by Buyeror the Company, as the case may be,
exceeds $250,000, in which case Buyer or the Company, as the case may be, shall
then be liable for all such Loss and Expenses, and (ii) the cumulative aggregate
indemnity obligation of each of Buyer and the Company under this Section 8.2
shall in no event exceed the actual aggregate amount paid by Buyer for the
shares of Company Common Stock purchased by it from the Company pursuant to this
Agreement.  Except with respect to third-party claims being defended in good
faith or claims for  indemnification with respect to which there exists a good
faith dispute, the indemnifying party shall satisfy its obligations hereunder
within 30 days of receipt of a notice of claim under this Article 8.

          Section 8.3  Third-Party Claims.  If a claim by a third party is made
                       ------------------                                      
against an Indemnified Party and if such Indemnified Party intends to seek
indemnity with respect thereto under this Article, such Indemnified Party shall
promptly notify the indemnifying party in writing of such claims setting forth
such claims in reasonable detail; provided, however, the foregoing
                                  --------  -------               
notwithstanding, the failure of any Indemnified Party to give any notice
required to be given hereunder shall not affect such Indemnified Party's right
to indemnification hereunder except to the extent the indemnifying party from
whom such indemnity is sought shall have been prejudiced in its ability to
defend the claim or action for which such indemnification is

                                      -63-

<PAGE>
 
sought by reason of such failure.  The indemnifying party shall have 20 days
after receipt of such notice to undertake, through counsel of its own choosing
and at its own expense, the settlement or defense thereof, and the Indemnified
Party shall cooperate with it in connection therewith; provided, however, that
                                                       --------  -------      
the Indemnified Party may participate in such settlement or defense through
counsel chosen by such Indemnified Party, provided that the fees and expenses of
                                          --------                              
such counsel shall be borne by such Indemnified Party.  The Indemnified Party
shall not pay or settle any claim which the indemnifying party is contesting.
Notwithstanding the foregoing, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
                          --------                                            
to indemnity therefor by the indemnifying party.  If the indemnifying party does
not notify the Indemnified Party within 20 days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the right to
contest, settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement.


                                   ARTICLE 9
                                   ---------

                                  Termination
                                  -----------

          Section 9.1  Termination.  (a) This Agreement may be terminated at any
                       -----------                                              
time prior to the Initial Closing by:

          (i)  the mutual consent of the Company and Buyer;

          (ii)  Buyer (if it is not in breach of any of its material obligations
hereunder) in the event of a breach or failure by the Company that is material
in the context of the transactions contemplated hereby of any representation,
warranty, covenant or agreement by the Company contained herein which has not
been, or cannot be, cured within 30 Business Days after written notice of such
breach is given to the Company;

          (iii)  the Company (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by Buyer that is
material in the context of the transactions contemplated hereby of any
representation, warranty, covenant or agreement by Buyer contained herein which
has not been, or cannot be, cured within 30 Business Days after written notice
of such breach is given to Buyer; or

          (iv)  either the Company or Buyer, if the Initial Closing shall not
have occurred on or prior to October 31, 1996,

                                      -64-

<PAGE>
 
unless the failure of such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe any material covenant
or agreement set forth herein required to be performed or observed by such party
on or before the date of the Initial Closing.

          (b) This Agreement may be terminated at any time by:

          (i)  Buyer, in the event that the shareholders of the Company vote
upon and fail to approve either (1) the issuance of Company Common Stock
contemplated hereby, or (2) the Amended Company Charter (it being understood
that the Initial Closing shall have occurred prior to the date of the meeting of
holders of shares of Company Stock to so approve); or

          (ii)  Buyer, (1) if the Board of Directors of the Company shall have
withdrawn, modified or failed to make or refrained from making its
recommendation that the shareholders of the Company approve the issuance of
Company Common Stock pursuant to this Agreement as provided for in Section
3.2(b) and Section 5.1(b), or (2) if the Board of Directors of the Company at
any time refuses to reaffirm, at Buyer's request, such recommendation and its
determination to make such recommendation to the shareholders of the Company,
except, in each case, as permitted by Section 5.6, or (3) if no meeting at which
the shareholders of the Company are asked to vote upon the transactions
contemplated by this Agreement shall have duly occurred on or prior to the six-
month anniversary of the date of the Stockholders Agreement.

          Section 9.2  Procedure and Effect of Termination.  In the event of
                       -----------------------------------                  
termination of this Agreement by either or both of  the Company and Buyer
pursuant to Section 9.1, written notice thereof shall forthwith be given by the
terminating party to the other party hereto, and this Agreement shall thereupon
terminate and become void and have no effect, and the transactions contemplated
hereby shall be abandoned without further action by the parties hereto, except
that the provisions of Sections 5.4 (Public Announcements; Confidentiality), 9.3
(Expenses), 10.2 (Governing Law), and 10.4 (Notices), and, in the event of any
termination following any Closing hereunder, the provisions of Article 8
(Survival; Indemnification), and any related definitional, interpretive or other
provisions necessary for the logical interpretation of such provisions, shall
survive the termination of this Agreement; provided, however, that such
                                           --------  -------           
termination shall not relieve any party hereto of any liability for any breach
of this Agreement.

                                      -65-

<PAGE>
 
          Section 9.3  Expenses.  (a)  Except as set forth in this Agreement,
                       --------                                              
whether or not any Stock Purchase is consummated, all legal and other costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and expenses
(which in the case of the Company, shall include shareholder solicitation
costs), except that Buyer and the Company shall share equally the filing fees
for the filing under the HSR Act which is to be made in connection with the
transactions contemplated hereby.

          (b)  In the event that the Company's shareholders shall have failed
for any reason (other than as a result of Buyer's breach of any of its material
obligations hereunder) to approve this Agreement and the transactions
contemplated hereby by the requisite vote at the Company's shareholders' meeting
held in accordance with the terms hereof, or the Company shall have failed to
duly convene such shareholders' meeting on or prior to October 31, 1996 provided
that Buyer is not in material default under this Agreement, that Buyer has not
breached any of its representations and warranties in any material respect, and
that Buyer has satisfied in all material respects its covenants relating to the
Second Closing and contemplated by the terms hereof to be performed at or prior
to the time of the Company's shareholders' meeting, the Company shall
immediately make payment to Buyer (by wire transfer) of the amount of $1.0
million, as reimbursement and compensation for Buyer's costs and expenses
(including opportunity costs) incurred in connection with this Agreement and the
transactions contemplated hereby.

          (c)  In the event that (i) this Agreement and the transactions
contemplated hereby shall have been submitted to a vote of the Company's
shareholders (or in the event the Company  shall fail to submit such matters to
a vote of its shareholders in violation of its obligations hereunder), (ii) a
Competing Transaction shall have been proposed prior to such submission to a
vote of the Company's shareholders (or such time as such submission would have
occurred had the Company not so failed to so submit such matters), and (iii) the
shareholders shall not, for any reason (other than as a result of Buyer's breach
of any of its material obligations hereunder), have approved this Agreement and
the transactions contemplated hereby by the requisite vote, then, provided that
Buyer is not in material default under this Agreement, that Buyer has not
breached any of its representations and warranties in any material respect, and
that Buyer has satisfied in all material respects its covenants relating to the
Initial Closing and contemplated by the terms hereof to be performed at or prior
to the time of the Company's shareholders' meeting, the Company shall
immediately make pay-

                                      -66-

<PAGE>
 
ment to Buyer (by wire transfer) of a fee in the amount of $5.0 million (the
                                                                            
"Breakup Fee"); provided, however, that if the Competing Transaction was not
- ------------    --------  -------                                           
solicited, initiated or encouraged directly or indirectly by the Company or any
of its Subsidiaries through any officer, director, agent or otherwise, the
Company shall not be required to pay the Breakup Fee unless a Competing
Transaction has been consummated or agreed to within six months after the
occurrence of the events described in clauses (i), (ii) and (iii) above.  Upon
payment to the Buyer of the Breakup Fee, the Company shall have no further
liability to Buyer arising out of any Competing Transaction.


                                   ARTICLE 10
                                   ----------

                                 Miscellaneous
                                 -------------

          Section 10.1  Counterparts.  This Agreement may be executed in one or
                        ------------                                           
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each party hereto and delivered to the other party.  Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is confirmed.

          Section 10.2  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
                        -------------                                          
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.

          Section 10.3  Entire Agreement.  This Agreement (including agreements
                        ----------------                                       
incorporated herein) and the Schedules and  Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein.  This Agreement is
not intended to confer upon any person not a party hereto (and their successors
and assigns) any rights or remedies hereunder.

          Section 10.4  Notices.  All notices and other communications hereunder
                        -------                                                 
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission

                                      -67-

<PAGE>
 
service to the appropriate address or number as set forth below.  Notices to the
Company shall be addressed to:

          Regency Realty Corporation
          121 W. Forsyth Street, Suite 200
          Jacksonville, Florida  32202
          Attention:  Martin E. Stein, Jr.
          Telecopy Number:  (904) 634-3428

          with a copy to:

          Foley & Lardner
          Greenleaf Building
          200 Laura Street
          Jacksonville, Florida  32202
          Attention:  Charles E. Commander III, Esq.
          Telecopy Number:  (904) 359-8700

or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer.  Notices to Buyer shall be
addressed to:

          Security Capital Holdings S.A.
          69, route d'Esch
          L-2953 Luxembourg
          Attention:  Paul E. Szurek
          Telecopy Number:  (352) 4590-3331

          with a copy to:

          Wachtell, Lipton, Rosen & Katz
          51 West 52nd Street
          New York, New York  10019
          Attention:  Adam O. Emmerich, Esq.
          Telecopy Number:  (212) 403-2000

          Section 10.5  Successors and Assigns.  This Agreement shall be binding
                        ----------------------                                  
upon and inure to the benefit of the parties hereto and their respective
successors.  Except as specifically provided hereby, Buyer shall not be
permitted to assign any of its rights hereunder to any third party, other than
to one or more Affiliates of Buyer or the Advancing Party of which Buyer and the
Advancing Party collectively, directly or indirectly, Beneficially Own (as that
term is defined in the Stockholders Agreement) 98% or more of the voting power
and the economic interests, provided that such Affiliates agree to be bound
hereby and by the Stockholders Agreement, and provided that Buyer and the
Advancing Party shall remain liable hereunder, and provided that any bona fide
financial institution to which any

                                      -68-

<PAGE>
 
Buyer, the Advancing Party or any permitted transferee has Transferred (as that
term is used in the Stockholders Agreement) (including upon foreclosure of a
pledge) shares of Company Stock for the purpose of securing bona fide
indebtedness of any Buyer and which has agreed to be bound by this Agreement and
the Stockholders Agreement shall also be entitled to enforce the rights of Buyer
and the Advancing Party hereunder.

          Section 10.6  Headings.  The Section, Article and other headings
                        --------                                          
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement.  All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.

          Section 10.7  Amendments and Waivers.  This Agreement may not be
                        ----------------------                            
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought.  Either party hereto may, only by an instrument in writing, waive
compliance by the other party hereto with any term or provision hereof on the
part of such other party hereto to be performed or complied with.  The waiver by
any party hereto of a breach of any term or provision hereof shall not be
construed as a waiver of any subsequent breach.

          Section 10.8  Interpretation; Absence of Presumption.  (a)  For the
                        --------------------------------------               
purposes hereof, (i) words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other gender
as the context requires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole (including all of the Schedules and Exhibits hereto)
and not to any particular provision of this Agreement, and Article, Section,
paragraph, Exhibit and Schedule references are to the Articles, Sections,
paragraphs, Exhibits and Schedules to this Agreement unless  otherwise
specified, (iii) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall not
be exclusive, and (v) provisions shall apply, when appropriate, to successive
events and transactions.

          (b)  This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to

                                      -69-

<PAGE>
 
be drafted.

          Section 10.9  Severability.  Any provision hereof which is invalid or
                        ------------                                           
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.

          Section 10.10  Further Assurances.  The Company and Buyer agree that,
                         ------------------                                    
from time to time, whether before, at or after any Closing Date, each of them
will execute and deliver such further instruments of conveyance and transfer and
take such other action as may be necessary to carry out the purposes and intents
hereof.

          Section 10.11  Specific Performance.  Buyer and the Company each
                         --------------------                             
acknowledge that, in view of the uniqueness of the parties hereto, the parties
hereto would not have an adequate remedy at law for money damages in the event
that this Agreement were not performed in accordance with its terms, and
therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.

          Section 10.12  Joint and Several Liability.  The obligations and
                         ---------------------------                      
liabilities of Buyer and the Advancing Party under or in connection with this
Agreement are joint and several.

          Section 10.13  Interpretation of Schedules.  Any matter set forth on
                         ---------------------------                          
any Schedule shall be deemed to be referred to on all other Schedules to which
such matter logically relates and where such reference would be appropriate and
can reasonably be inferred from the matters disclosed on the first Schedule as
if set forth on such other Schedules.

                                      -70-

<PAGE>
 
          IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto as of the day first above written.

                              REGENCY REALTY CORPORATION



                              By:
                                 Name:  Martin E. Stein, Jr.
                                 Title:   President



                              SECURITY CAPITAL HOLDINGS S.A.



                              By:
                                 Name:  Paul E. Szurek
                                 Title:   Managing Director



                              SECURITY CAPITAL U.S. REALTY



                              By:
                                 Name:  Paul E. Szurek
                                 Title:   Managing Director
                              ________

                                      -71-

<PAGE>
 
                                                                      APPENDIX B
                                                                                

                                                                                



                             STOCKHOLDERS AGREEMENT

                                  by and among

                           REGENCY REALTY CORPORATION

                         SECURITY CAPITAL HOLDINGS S.A.

                          SECURITY CAPITAL U.S. REALTY

                                      and

                            THE REGENCY GROUP, INC.


                                  dated as of

                               _________ __, 1996



                                        

<PAGE>
 
                               TABLE OF CONTENTS


                                                            Page
                                                            ----


                                   ARTICLE 1
                                   ---------

                                  Definitions
                                  -----------

Section 1.1    "Affiliate"..................................  1
Section 1.2    "Affiliate Arrangements".....................  2
Section 1.3    "Agreement"..................................  2
Section 1.4    "Beneficially Own"...........................  2
Section 1.5    "Board"......................................  2
Section 1.6    "Buyer"......................................  2
Section 1.7    "Code".......................................  2
Section 1.8    "Company"....................................  2
Section 1.9    "Company Common Stock".......................  2
Section 1.10   "Conflict of Interest Policies"..............  2
Section 1.11   "Corporate Action Covenants".................  2
Section 1.12   "Covered Transaction"........................  2
Section 1.13   "Director"...................................  2
Section 1.14   "Early Termination Event"....................  2
Section 1.15   "Excess Shares"..............................  2
Section 1.16   "Exercise Notice"............................  2
Section 1.17   "Extraordinary Transaction"..................  2
Section 1.18   "15% Termination Date".......................  3
Section 1.19   "fully diluted"..............................  3
Section 1.20   "Geographic Region"..........................  3
Section 1.21   "Government Authority".......................  3
Section 1.22   "Group"......................................  3
Section 1.23   "Investor"...................................  4
Section 1.24   "Investor Nominees"..........................  4
Section 1.25   "Investor Restricted Person".................  4
Section 1.26   "Key Committees".............................  4  
Section 1.27   "1933 Act"...................................  4
Section 1.28   "1934 Act"...................................  4
Section 1.29   "Participation Notice".......................  4
Section 1.30   "person".....................................  4
Section 1.31   "SCGI".......................................  4
Section 1.32   "SCGI Restricted Person".....................  4
Section 1.33   "Securities Filings".........................  4
Section 1.34   "Shareholder Approval".......................  4
 

                                      -i-

<PAGE>
 
Section 1.35   "Shareholder Approval Date"........................  4
Section 1.36   "Shopping Center Company"..........................  5
Section 1.37   "Shopping Center Property".........................  5
Section 1.38   "Standstill Extension Term"........................  5
Section 1.39   "Standstill Period"................................  5
Section 1.40   "Stock Purchase Agreement".........................  5
Section 1.41   "13D Group"........................................  5
Section 1.42   "Transfer".........................................  5
Section 1.43   "TRG"..............................................  5  
Section 1.44   "TRG Restricted Person" ...........................  5  
Section 1.45   "20% Termination Date".............................  5
Section 1.46   "USREALTY".........................................  6  
Section 1.47   "Voting Securities"................................  6
 


                                   ARTICLE 2
                                   ---------

                               Board of Directors
                               ------------------

Section 2.1    Investor Nominees.................................  6
Section 2.2    Committee Representation; Subsidiary Boards.......  7
Section 2.3    Vacancies.........................................  8
 

                                   ARTICLE 3
                                   ---------

                               Information Rights
                               ------------------

Section 3.1   Strategic Advice; Operating
              Statements; Public Company Status.................  8
Section 3.2   Advice of Actions.................................  9


                                   ARTICLE 4
                                   ---------

                        Voting and Participation Rights
                        -------------------------------

Section 4.1   Voting Rights...................................  10
Section 4.2   Participation Rights............................  11


                                   ARTICLE 5
                                   ---------

                             Standstill Provisions
                             ---------------------

Section 5.1     Standstill Periods............................  14
Section 5.2     Restrictions During Standstill
                Period and Standstill Extension
 

                                      -ii-

<PAGE>
 
                Term..................................  16
Section 5.3     Investments in Shopping Center
                Properties and Purchases of
                Interests in Shopping Center
                Companies.............................  17
Section 5.4     Notice to Company.....................  19
Section 5.5     Compliance with Insider Trading Policy  20
Section 5.6     Compliance with Section 5.2 of the
                Company Charter.......................  20
Section 5.7     Investment Company Matters............  20
Section 5.8     Waiver of Restrictions and Limits.....  20
Section 5.9     REIT Qualification....................  21
 
                                   ARTICLE 6
                                   ---------

                     Limitations on Corporate Actions, Etc.
                     --------------------------------------
 
Section 6.1    Limitations on Corporate Actions.......  21
Section 6.2    Provision of Information...............  23
Section 6.3    Compliance with Conflicts of Interest
               Policy.................................  23
Section 6.4    Maintenance of Affiliate and
               Joint Venture Arrangements.............  24
Section 6.5    Sales of Assets........................  24
Section 6.6    Investments in Shopping Center
               Properties and Purchases of
               Interests in Shopping Center
               Companies..............................  24
 
                                   ARTICLE 7
                                   ---------

                                 Miscellaneous
                                 -------------
 
Section 7.1     Counterparts..........................  26
Section 7.2     Governing Law.........................  26
Section 7.3     Entire Agreement......................  26
Section 7.4     Expenses..............................  26
Section 7.5     Notices...............................  26
Section 7.6     Successors and Assigns................  27
Section 7.7     Headings..............................  27
Section 7.8     Amendments and Waivers................  27
Section 7.9     Interpretation; Absence of Presumption  28
Section 7.10    Severability..........................  28
 

                                     -iii-

<PAGE>
 
Section 7.11    Further Assurances....................  28
Section 7.12    Specific Performance..................  28
Section 7.13    Investor Breach.......................  28
Section 7.14    Confidentiality.......................  28  
Section 7.15    Public Releases and Announcements.....  29

                                      -iv-

<PAGE>
 
          THIS STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of ________
                                            ---------                        
__, 1996, is made by and among Regency Realty Corporation, a Florida corporation
(the "Company"), Security Capital U.S. Realty, a Luxembourg corporation
      -------                                                          
("USREALTY"), Security Capital Holdings S.A., a Luxembourg corporation and a
- ----------                                                                  
wholly owned subsidiary of USREALTY ("Buyer"), and The Regency Group, Inc., a
                                      -----                                  
Florida corporation ("TRG").  Capitalized terms not otherwise defined herein
                      ---                                                   
have the meaning ascribed to them in the Stock Purchase Agreement (as
hereinafter defined).


                                   RECITALS:


          WHEREAS, the Company, USREALTY and Buyer have entered into a Stock
Purchase Agreement, dated as of June 11, 1996 (the "Stock Purchase Agreement"),
                                                    ------------------------   
pursuant to which the Company is selling, conveying, assigning and transferring,
and Buyer is purchasing, certain shares of the common stock, par value $.01 per
share, of the Company (the "Company Common Stock") on the date hereof, and
                            --------------------                          
pursuant to which the Company has agreed to sell, and Buyer has agreed to
purchase, certain additional shares of Company Common Stock, upon the terms and
subject to the conditions set forth therein; and

          WHEREAS, it is a condition to the transactions contemplated by the
Stock Purchase Agreement and the parties believe it to be in their best
interests that they enter into this Agreement and provide for certain rights and
restrictions with respect to the investment by Investor (as hereinafter defined)
in the Company and the corporate governance of the Company; and

          WHEREAS, the Company and Buyer believe that the combination in a
strategic partnership of the leadership, expertise and experience in the retail
shopping center industry of the Company and the unique market knowledge,
operating experience, research capabilities and access to capital of Buyer and
its Affiliates will significantly enhance the Company's ability to pursue its
growth and operating strategies;

          NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:


                                   ARTICLE 1

                                  Definitions
                                  -----------

                               As used in this Agreement, the following terms
shall have the following respective meanings:

<PAGE>
 
          Section 1.1  "Affiliate" shall have the meaning ascribed thereto in
                        ---------                                            
Rule 12b-2 promulgated under the 1934 Act, and as in effect on the date hereof.

          Section 1.2  "Affiliate Arrangements" shall mean the agreements and
                        ----------------------                               
arrangements described in Schedule 3.9(f) of the Stock Purchase Agreement or
which are disclosed in public filings of the Company.
 
          Section 1.3  "Agreement" shall have the meaning set forth in the first
                       -----------
paragraph hereof.

          Section 1.4  "Beneficially Own" shall mean, with respect to any
                        ----------------                                 
security, having direct or indirect (including through any Subsidiary or
Affiliate) "beneficial ownership" of such security, as determined pursuant to
Rule 13d-3 under the 1934 Act, including pursuant to any agreement, arrangement
or understanding, whether or not in writing.

          Section 1.5  "Board" shall mean the board of directors of the Company.
                       -------

          Section 1.6  "Buyer" shall have the meaning set forth in the first
                       -------
paragraph hereof.

          Section 1.7  "Code" shall mean the Internal Revenue Code of 1986, as
                        ----                                                  
amended, and any successor thereto, including all of the rules and regulations
promulgated thereunder.

          Section 1.8  "Company" shall have the meaning set forth in the first
                       ---------
paragraph hereof.

          Section 1.9  "Company Common Stock" shall have the meaning set forth
                       ----------------------
in the second paragraph hereof.

          Section 1.10  "Conflict of Interest Policies" shall have the meaning
                        ------------------------------
set forth in Section 6.3.

          Section 1.11  "Corporate Action Covenants" shall have the meaning set
                        ----------------------------
forth in Section 6.1.

          Section 1.12  "Covered Transaction" shall have the meaning set forth
                        ---------------------
in Section 5.1(a)(iv).

          Section 1.13  "Director" shall mean a member of the Board.
                        ----------

          Section 1.14  "Early Termination Event" shall have the meaning set
                        -------------------------
forth in Section 5.1(a).

                                      -2-

<PAGE>
 
          Section 1.15  "Excess Shares" shall have the meaning set forth in
                        ---------------
Section 5.1(a)(ii).

          Section 1.16  "Exercise Notice" shall have the meaning set forth in
                        -----------------
Section 4.2(b).

          Section 1.17  "Extraordinary Transaction" shall mean (a) any merger,
                         -------------------------                            
consolidation, sale of a material portion of the Company's assets,
recapitalization, other business combination, liquidation, or other similar
action out of the ordinary course of business of the Company, or (b) any
issuance of securities to any person or Group requiring shareholder approval in
accordance with the guidelines of the New York Stock Exchange as to such
matters, as in effect as of the date of the Stock Purchase Agreement.

          Section 1.18  "15% Termination Date" shall mean the first date, if
                         --------------------                               
any, following the date on which the Remaining Equity Commitment shall have been
reduced to zero on which Investor's ownership of Company Common Stock, on a
fully diluted basis, shall have been below 15% of the outstanding shares of
Company Common Stock for a continuous period of 180 days; provided, that, if
                                                          --------          
Investor's ownership of Company Common Stock shall, following the date on which
the Remaining Equity Commitment shall have been reduced to zero, have fallen
below 15% by number of the outstanding shares of Company Stock, on a fully
diluted basis, as a result of the redemption of limited partnership or other
interests in partnerships or other entities for shares of Company Common Stock,
then the 15% Termination Date shall mean the first date, if any, following the
date on which Investor's ownership of Company Common Stock shall have been below
15% by number of the outstanding shares of Company Stock, on a fully diluted
basis, for a continuous period of 450 days; provided, however, that if
                                            --------  -------         
Investor's ownership of Company Common Stock shall, following the date on which
the Remaining Equity Commitment shall have been reduced to zero, have fallen
below 15% of the outstanding shares of Company Common Stock as a result of a
Transfer by Investor of Company Common Stock or a failure of Investor to
exercise its rights under Section 4.2 during the 60 days immediately prior to
the expiration of such 180-day period, if any such rights are exercisable during
such period, to the extent necessary to (and provided that it shall be possible
by such exercise to) raise its ownership of the outstanding Company Common Stock
above such 15%  threshold, then the 15% Termination Date shall occur immediately
upon such Transfer or failure to exercise its rights under Section 4.2, as the
case may be.

          Section 1.19  "fully diluted" shall mean, with respect
                         -------------                          

                                      -3-

<PAGE>
 
to the Company Stock, the total number of outstanding shares of Company Stock
(for such purposes, treating as Company Stock all shares of Company Preferred
Stock and Class B Common Stock and all options or warrants to purchase and
securities convertible into (or exchangeable or redeemable for) Company Common
Stock, in each case outstanding as of the date of the Stock Purchase Agreement
and that remain outstanding as of the relevant measurement date, assuming
conversion of all such shares of Company Preferred Stock and Class B Common
Stock and assuming exercise, conversion, exchange or redemption of such other
securities).

          Section 1.20  "Geographic Region" shall mean the states of Florida,
                         -----------------                                   
Alabama, Mississippi, Georgia, North Carolina, South Carolina, Tennessee,
Kentucky, Virginia, West Virginia, Maryland and the District of Columbia, and
the southern regions of the states of Indiana and Ohio (including the cities of
Indianapolis and Columbus, respectively).

          Section 1.21  "Government Authority" shall mean any government or
                         --------------------                              
state (or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.

          Section 1.22  "Group" shall mean a "group" as such term is used in
                        -------
Section 13(d)(3) of the 1934 Act.

          Section 1.23  "Investor" shall mean, collectively, as the context may
                         --------                                              
require, USREALTY and Buyer, and shall also include any Affiliate of USREALTY or
Buyer of which USREALTY and/or Buyer collectively, directly or indirectly,
Beneficially Own 98% or more of the voting power and economic interests, or, for
purposes only of (i) Section 5.8 with regard to ownership of shares of Company
Common Stock by such Person and (ii) the provisions of the Registration Rights
Agreement, any bona fide financial institution to which any Investor has
Transferred (including upon foreclosure of a pledge) shares of Company Stock for
the purpose of securing bona fide indebtedness of any Investor and which has
agreed to be bound by this Agreement.

          Section 1.24  "Investor Nominees" shall have the meaning set forth in
                        -------------------
Section 2.1(a).

          Section 1.25  "Investor Restricted Person" shall have the meaning set
                        ----------------------------
forth in Section 5.3(a).

          Section 1.26  "Key Committees" shall have the meaning set forth in
                        ----------------
Section 2.2(a). 

                                      -4-

<PAGE>
 
          Section 1.27  "1933 Act" shall mean the Securities Act of 1933, as
                         --------
amended.

          Section 1.28  "1934 Act" shall mean the Securities Exchange Act of
                         --------
1934, as amended.

          Section 1.29  "Participation Notice" shall have the meaning set forth
                         --------------------
in Section 4.2(b).

          Section 1.30  "person" shall mean any individual, corporation,
                         ------                                         
partnership, limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government Authority.

          Section 1.31  "SCGI" shall have the meaning set forth in Section
                         ----
5.3(a).

          Section 1.32  "SCGI Restricted Person" shall have the meaning set
                         ----------------------
forth in Section 5.3(a).

          Section 1.33  "Securities Filings" shall have the meaning set forth in
                         ------------------
Section 3.1(b)(iii).

          Section 1.34  "Shareholder Approval" shall have the meaning set forth
                         --------------------
in Section 5.3(d).

          Section 1.35  "Shareholder Approval Date" shall mean the date on which
                         -------------------------                              
a duly called and held meeting of shareholders of the Company is held at which
meeting (i) a quorum is present and (ii) the transactions (including the
issuance of the Company Common Stock and the amendments to the Company Charter)
contemplated by the Stock Purchase Agreement are approved by the affirmative
vote of the holders of the requisite number of shares of Company Stock.

          Section 1.36  "Shopping Center Company" shall have the meaning set
                         -----------------------
forth in Section 5.3(b).

          Section 1.37  "Shopping Center Property" shall have the meaning set
                         ------------------------
forth in Section 5.3(a).

          Section 1.38  "Standstill Extension Term" shall have the meaning set
                         -------------------------
forth in Section 5.1(b).

          Section 1.39  "Standstill Period" shall have the meaning set forth in
                         ----------------- 
Section 5.1(a).

          Section 1.40  "Stock Purchase Agreement" shall have the meaning set
                         ------------------------
forth in the second paragraph hereof.

                                      -5-

<PAGE>
 
          Section 1.41  "13D Group" shall mean any group of persons acquiring,
                         ---------                                            
holding, voting or disposing of Voting Securities which would be required under
Section 13(d) of the 1934 Act and the rules and regulations thereunder (as in
effect, and based on legal interpretations thereof existing, on the date hereof)
to file a statement on Schedule 13D with the Securities and Exchange Commission
as a "person" within the meaning of Section 13(d)(3) of the 1934 Act if such
group beneficially owned Voting Securities representing more than 5% of any
class of Voting Securities then outstanding.

          Section 1.42  "Transfer" shall have the meaning set forth in Section
                         --------
5.2(a)(ii).

          Section 1.43  "TRG" shall have the meaning set forth in the first
                         ---
paragraph hereof.

          Section 1.44  "TRG Restricted Person" shall have the meaning set forth
                         --------------------- 
in Section 6.6.

          Section 1.45  "20% Termination Date" shall mean the first date, if
                         --------------------                               
any, following the date on which the Remaining Equity Commitment shall have been
reduced to zero on which Investor's ownership of Company Common Stock, on a
fully diluted basis, shall have been below 20% of the outstanding shares of
Company Common Stock for a continuous period of 180 days; provided, that, if
                                                          --------          
Investor's ownership of Company Common Stock shall, following the date on which
the Remaining Equity Commitment shall have been reduced to zero, have fallen
below 20% by number of the outstanding shares of Company Stock, on a fully
diluted basis, as a result of the redemption of limited partnership or other
interests in partnerships or other entities for shares of Company Common Stock,
then the 20% Termination Date shall mean the first date, if any, following the
date on which Investor's ownership of Company Common Stock shall have been below
20% by number of the outstanding shares of Company Stock, on a fully diluted
basis, for a continuous period of 450 days; provided, however, that if
                                            --------  -------         
Investor's ownership of Company Common Stock shall, following the date on which
the Remaining Equity Commitment shall have been reduced to zero, have fallen
below 20% of the outstanding shares of Company Common Stock as a result of a
Transfer by Investor of Company Common Stock or a failure of Investor to
exercise its rights under  Section 4.2 during the 60 days immediately prior to
the expiration of such 180-day period, if any such rights are exercisable during
such period, to the extent necessary to (and provided that it shall be possible
by such exercise to) raise its ownership of the outstanding Company Common Stock
above such 20% threshold, then the 20% Termination Date shall occur immediately
upon such Transfer

                                      -6-

<PAGE>
 
or failure to exercise its rights under Section 4.2, as the case may be.

          Section 1.46  "USREALTY" shall have the meaning set forth in the first
                         --------
paragraph hereof.

          Section 1.47  "Voting Securities" shall mean at any time shares of any
                         -----------------                                      
class of capital stock of the Company which are then entitled to vote generally
in the election of Directors.


                                   ARTICLE 2

                               Board of Directors
                               ------------------

          Section 2.1  Investor Nominees.  (a)  From and after the Shareholder
                       -----------------                                      
Approval Date, if any, and until the next annual or special meeting of
shareholders of the Company at, or the next taking of action by written consent
of shareholders of the Company with respect to, which any Directors are to be
elected, the Investor shall have the right (but not the obligation) to have on
the Board two Directors (such Directors, the "Investor Nominees"), and the
                                              -----------------           
Company shall cause such Investor Nominees to become members of the Board.  If
necessary to effectuate the placement of such Investor Nominees on the Board,
the Company shall, at its sole option, (i) expand the size of the Board or (ii)
solicit the resignations of the appropriate number of Directors, in either case,
to the extent necessary to permit the Investor Nominees to serve.  Thereafter
and until the earlier of the 20% Termination Date, if any, and the expiration of
the Standstill Period or any Standstill Extension Term (other, in either case,
as a result of an Early Termination Event), at each annual or special meeting of
shareholders of the Company at, or the taking of action by written consent of
shareholders of the Company with respect to, which any Directors are to be
elected, Investor shall have the right (but not the obligation) pursuant to this
Agreement (i) to nominate for election to the Board that number of Directors
which, when added to the number of Directors (such Directors also, "Investor
                                                                    --------
Nominees") who are then Investor Nominees and who will continue to serve as
- --------                                                                   
Directors without regard to the outcome of the election at such meeting or by
such consent, represent the greater of (x) two and (y) the same proportion of
the total  number of Directors as is represented by the number of shares of
Company Common Stock which Investor then owns relative to the outstanding
Company Common Stock (but in no event more than 49% of the Board), and (ii) to
be entitled to the benefits of the agreements of the Company contained in
Subsection 2.1(c) with respect to the Investor Nominees

                                      -7-

<PAGE>
 
described in clause (i) of this sentence.  Following the expiration of the
Standstill Period or any Standstill Extension Term (other, in either case, as a
result of an Early Termination Event), if such expiration of the Standstill
Period or any Standstill Extension Term shall be prior to the 20% Termination
Date, and until the 20% Termination Date, at each annual or special meeting of
shareholders of the Company at, or the taking of action by written consent of
shareholders of the Company with respect to, which any Directors are to be
elected, Investor shall have the right (but not the obligation) pursuant to this
Agreement (i) to nominate for election to the Board that number of Directors
which, when added to the number of Directors who are then Investor Nominees and
who will continue to serve as Directors without regard to the outcome of the
election at such meeting or by such consent, represent the lesser of (x) two and
(y) the same proportion of the total number of Directors as is represented by
the number of shares of Company Common Stock which Investor then owns relative
to the outstanding Company Common Stock (such Directors also, "Investor
                                                               --------
Nominees") and (ii) to be entitled to the benefits of the agreements of the
Company contained in Subsection 2.1(c) with respect to the Investor Nominees
described in clause (i) of this sentence.  In computing the number of Investor
Nominees, any fraction is to be rounded down to the nearest whole number.  At
the time of the expiration of the Standstill Period or any Standstill Extension
Term, if the Company shall so request, Investor shall use its reasonable efforts
to cause one or more then-serving Investor Nominees to resign from the Board
such that there shall be no more Investor Nominees on the Board than the lesser
of (x) two and (y) the same proportion of the total number of Directors as is
represented by the number of shares of Company Common Stock which Investor then
owns relative to the outstanding Company Common Stock.

          (b)  Investor will not name any person as an Investor Nominee if (i)
such person is not reasonably experienced in business, financial or real estate
matters, (ii) such person has been convicted of, or has pled nolo contendere to,
a felony, (iii) the election of such person would violate any law, or (iv) any
event required to be disclosed pursuant to Item  401(f) of Regulation S-K of the
1934 Act has occurred with respect to such person.  Investor shall use its
reasonable efforts to afford the independent directors of the Company a
reasonable opportunity to meet any individual that Investor is considering
naming as an Investor Nominee.

          (c)  The Company will support the nomination of, and the Company's
nominating committee (or any other committee exercising a similar function)
shall recommend to the Board, the

                                      -8-

<PAGE>
 
election of each Investor Nominee to the Board, and the Company will exercise
all authority under applicable law to cause each Investor Nominee to be elected
to the Board.  Without limiting the generality of the foregoing, with respect to
each meeting of shareholders of the Company at which Directors are to be
elected, the Company shall use its reasonable efforts to solicit from the
shareholders of the Company eligible to vote in the election of Directors
proxies in favor of any Investor Nominees.

          (d)  From and after the Shareholder Approval Date, if any, untilthe
earlier of the 20% Termination Date, if any, and the expiration of the
Standstill Period or any Standstill Extension Term (other, in either case, as a
result of an Early Termination Event), the total number of members of the Board
shall not be less than eleven without the prior written consent of Investor, in
its sole discretion.

          Section 2.2  Committee Representation; Subsidiary Boards.  (a)  During
                       -------------------------------------------              
such time as Investor is entitled pursuant to Section 2.1(a) to have at least
one Investor Nominee on the Board, unless Investor chooses not to exercise its
rights under this Section 2.2(a), at least one Director who is an Investor
Nominee shall serve on each of the audit committee, the nominating committee,
the compensation committee, the executive committee, any special committee(s) of
the Board, and any other committees which shall be charged with exercising
substantial authority on behalf of the Board (the foregoing, the "Key
                                                                  ---
Committees").  Notwithstanding the foregoing, if none of the Directors who are
Investor Nominees would be considered "independent" of the Company or
"disinterested" (i) for purposes of any applicable rule of the New York Stock
Exchange or any other securities exchange or other self-regulating organization
(such as the National Association of Securities Dealers) requiring that members
of the audit committee of the Board be independent of the Company, (ii) for
purposes of any law or regulation that requires, in order to obtain or maintain
favorable tax, securities, corporate law or other material legal benefits with
respect to any plan or arrangement for employee compensation or benefits, that
the members of the committee of the Board charged with responsibility for such
plan or arrangement be  "independent" of the Company or "disinterested", or
(iii) for purposes of any special committee formed in connection with any
transaction or potential transaction involving the Company and any of Investor,
its Affiliates or any Group of which Investor is a member or such other
transaction or potential transaction which would involve an actual or potential
conflict of interest on the part of the Directors who are Investor Nominees,
then a Director who is an Investor Nominee shall not be required to be

                                      -9-

<PAGE>
 
appointed to any such committee; provided, however, that the committees of the
                                 --------  -------                            
Board shall be organized such that, to the extent practicable, the only items to
be considered by a Key Committee on which no Director who is an Investor Nominee
may serve will be those items which prevent the Director who is an Investor
Nominee from serving on such Key Committee.  Any members of any Key Committee
who are Investor Nominees shall, in the event of any vacancy in such membership,
be replaced by a Director who is an Investor Nominee elected by a majority of
the Directors who are Investor Nominees.

          (b)  During such time as Investor is entitled pursuant to Section
2.1(a) to have at least one Investor Nominee on the Board, unless Investor
chooses not to exercise its rights under this Section 2.2(b), one individual
designated by Investor shall serve as a member of the board of directors or
comparable governing body of each Subsidiary of the Company, if any, that is a
corporation or other person with a board of directors or board of trustees.

          Section 2.3  Vacancies.  In the event that any Investor Nominee shall
                       ---------                                               
cease to serve as a Director for any reason other than the fact that Investor no
longer has a right to nominate a Director, as provided in Section 2.1(a), the
vacancy resulting thereby shall be filled by an Investor Nominee designated by
Investor; provided, however, that any Investor Nominee so designated shall
          --------  -------                                               
satisfy the qualification requirements set forth in Section 2.1(b).


                                   ARTICLE 3

                               Information Rights
                               ------------------

          Section 3.1  Strategic Advice; Operating Statements; Public Company
                       ------------------------------------------------------
Status.  (a)  From and after the Shareholder Approval Date, if any, until the
- ------                                                                       
20% Termination Date, Buyer will from time to time, as reasonably requested by
the Company, use reasonable efforts to make reasonably available to the Company
the benefit of Buyer's market expertise, operating experience and research
capabilities and will from time to time, as  reasonably requested by the
Company, consult with and advise the Company on matters concerning:

                 (i) business and operating strategy;

                 (ii) financing and capital formation (including advice
          regarding capital markets and structure, method and timing of capital-
          rasing

                                      -10-

<PAGE>
 
          efforts);

                 (iii)  property acquisition strategy and acquisition
          opportunities with respect to Shopping Center Properties in the
          Geographic Region of which Buyer becomes aware; and

                 (iv)    investor relations;

provided, however, that nothing herein shall require Buyer to provide the
- --------  -------                                                        
Company with any information that may be subject to any obligation of
confidentiality on Buyer's part.  Upon the reasonable request of the Company,
Buyer further will provide to the Company any relevant market or economic
research in its possession which is not readily available from third parties and
which is not subject to any obligation of confidentiality on Buyer's part.
Buyer will be entitled to receive customary fees and expense reimbursement for
its undertaking of any actions contemplated by this Section 3.1(a), which fees
and expenses will be agreed upon by Buyer and the Company in each instance.

          (b) From and after the Shareholder Approval Date, if any, until the
20% Termination Date, if any, the Company will:

                 (i) deliver to Investor, as soon as practicable after the end
          of each month or other reporting period, any operating and financial
          statements and management reports (x) of the Company, and (y) of each
          Subsidiary not consolidated with the Company, which are regularly
          provided to the senior management of the Company, each as, at and for
          the end of such month or other reporting period, and such other
          statements or reports as are reasonably requested by Investor, all in
          such form as are prepared by the Company for internal use by
          management (including, as applicable, by e-mail);

                 (ii) deliver to Investor copies of all other information
          distributed by the Company to the Board;

                 (iii)  deliver to Investor, as promptly as practicable
          following filing, a copy of each report, schedule or other document
          filed by the Company pursuant to the requirements of any federal or
          state securities laws (collectively, the "Securities Filings"); and
                                                    ------------------       

                 (iv) continue to comply in all material

                                      -11-

<PAGE>
 
          respects with the reporting requirements of Section 13 or 15(d) of the
          1934 Act.

                    (c)  The Company and Investor will afford one another a
          reasonable opportunity to review any Securities Filing, any other
          filing with a Government Authority and any press release or similar
          public announcement which refers to, describes or mentions such other
          party or any Affiliate of such other party prior to the time that such
          filing is filed with or sent to the applicable Government Authority or
          such announcement is disseminated.

          Section 3.2  Advice of Actions.  From and after the Shareholder
                       -----------------                                 
Approval Date, if any, until the 20% Termination Date, if any, without first
having consulted with the representative of Investor designated by Investor
pursuant to this Section 3.2, the Company will not seek approval by the Board of
any proposal, or enter into any definitive agreement, relating to:

          (a)  the acquisition in a single transaction or group of related
     transactions, whether by merger, consolidation, purchase of stock or assets
     or other business combination, of any business or assets having a value in
     excess of $10,000,000;

          (b)  the sale or disposal in a single transaction or group of related
     transactions of any assets, whether by merger, consolidation, sale of stock
     or assets or other business combination having a value in excess of
     $20,000,000;

          (c)  the incurrence or issuance of indebtedness in a single
     transaction or group of related transactions, the entering into a guaranty,
     or the engagement in any other financing arrangement in excess of
     $20,000,000;

          (d)  the annual operating budget for the Company;

          (e)  a material change in the executive management of the Company;

          (f)  any new material agreements or arrangements with any members of
     the executive management of the Company; or

          (g)  the issuance by the Company of capital stock of the Company or of
     options, rights or warrants or other commitments to purchase or securities
     convertible into (or exchangeable or redeemable for) shares of capital
     stock of

                                      -12-

<PAGE>
 
     the Company, or the issuance by a Subsidiary of any equity interests, other
     than, (i) to the Company or a wholly owned Subsidiary thereof, and (ii) to
     directors or employees of the Company or a Subsidiary in connection with
     any employee benefit plan approved by the shareholders of the Company.

Notwithstanding the foregoing, the Company shall have no obligation to accept or
comply with any advice offered by Investor or its designated representative in
any consultation referred to in this Section 3.2.  The designated representative
of Investor, for purposes of this Section 3.2, initially shall be Paul E.
Szurek.  Investor shall provide the company with ten days prior written notice
of any replacement of the designated representative.


                                   ARTICLE 4
                                   ---------

                        Voting and Participation Rights
                        -------------------------------

          Section 4.1  Voting Rights.  Subject to the provisions of this Section
                       -------------                                            
4.1, Investor may vote the shares of Company Stock which it owns in its sole and
absolute discretion.  During the Standstill Period, if any, and any Standstill
Extension Term, Investor will vote all shares of Company Common Stock which it
owns in one of the following two manners, at its option: (a) in accordance with
the recommendation of the Board or (b) proportionally, in accordance with the
votes of the other holders of Company Common Stock; provided, however, that
                                                    --------  -------      
Investor may vote all of the shares of Company Common Stock that it owns, in its
sole and absolute discretion, with regard to (x) the election of the Investor
Nominee(s) to the Board, (y) any amendment to the Company Charter or the By-laws
of the Company which would reasonably be expected to materially adversely affect
Investor, and (z) any Extraordinary Transaction submitted to a vote of the
shareholders of the Company.  With regard to (i) any amendment to the Company
Charter or the By-laws of the Company which would reasonably be expected to
materially adversely affect Investor, and (ii) any Extraordinary Transaction
submitted to a vote of the stockholders of the Company, Investor will vote all
shares of Company Common Stock owned by it that represent ownership of in excess
of 40% of the  outstanding shares of Company Common Stock, in one of the
following two manners, at its option: (x) in accordance with the recommendation
of the Board, or (y) proportionally in accordance with the votes of the other
holders of Company Common Stock.  With regard to any Extraordinary Transaction
submitted to a vote of the stockholders of the Company which requires the
affirmative vote of holders of two-thirds of the shares of Company Common Stock,

                                      -13-

<PAGE>
 
Investor will vote all shares of Company Common Stock owned by it that represent
ownership of in excess of 28% of the outstanding shares of Company Common Stock,
in one of the following two manners, at its option: (x) in accordance with the
recommendation of the Board, or (y) proportionally in accordance with the votes
of the other holders of Company Common Stock.

          Section 4.2  Participation Rights.  (a)  Right to Participate.  From
                       --------------------        --------------------       
and after the date hereof until the 15% Termination Date, if any, Investor shall
be entitled to a participation right to purchase or subscribe for up to that
number of additional shares of capital stock (including as "capital stock" for
purposes of this Section 4.2, any security, option, warrant, call, commitment,
subscription, right to purchase or other agreement of any character that is
convertible into or exchangeable or redeemable for shares of capital stock of
the Company or any Subsidiary (and all references in this Section 4.2 to capital
stock shall, as appropriate, be deemed to be references to any such securities),
and also including additional shares of capital stock to be issued pursuant to
the conversion, exchange or redemption of any security, option, warrant, call,
commitment, subscription, right to purchase or other agreement of any character
that is convertible into or exchangeable or redeemable for shares of capital
stock, as if the price at which such additional shares of capital stock is
issued pursuant to any such conversion, exchange or redemption were the market
price on the date of such issuance) to be issued or sold by the Company which
represents the same proportion of the total number of shares of capital stock to
be issued or sold by the Company (including the shares of capital stock to be
issued to Investor upon exercise of its participation rights hereunder; it being
understood and agreed that the Company will accordingly be required to either
increase the number of shares of capital stock to be issued or sold so that
Investor may purchase additional shares to maintain its proportionate interest,
or to reduce the number of shares of capital stock to be issued or sold to
Persons other than Investor) as is represented by the number of shares of
Company Common Stock owned by Investor prior to such sale or issuance (and
including for this purpose any shares of Company Common Stock to be acquired
pursuant to the Stock Purchase Agreement, but not yet issued) relative to the
number of shares of Company Common  Stock outstanding prior to such sale or
issuance (and including for this purpose any shares of Company Common Stock to
be acquired pursuant to the Stock Purchase Agreement, but not yet issued) (but
in no event, (i) more than 42.5% of the total number of shares of capital stock
to be issued or sold by the Company at the first offering of shares of capital
stock by the Company following the date on which the Remaining Equity Com-

                                      -14-

<PAGE>
 
mitment (as such term is defined in the Stock Purchase Agreement) shall be zero,
or, (ii) more than 37.5% of the total number of shares of capital stock to be
issued or sold by the Company at all subsequent offerings); provided, however,
                                                            --------  ------- 
that the provisions of this Section 4.2 shall not apply to (i) the issuance or
sale by the Company of any of its capital stock issued to the Company or any of
its Subsidiaries or pursuant to options, rights or warrants or other commitments
or securities in effect or outstanding on the date of the Stock Purchase
Agreement, or (ii) the issuance of capital stock pursuant to the conversion,
exchange or redemption of any other capital stock, and with respect to the
original issuance of which other capital stock Investor had and fully exercised
participation rights pursuant to this Section 4.2, but shall, without
limitation, apply to the issuance by the Company of any of its capital stock
pursuant to benefit, option, stock purchase, or other similar plans or
arrangements, including pursuant to or upon the exercise of options, rights,
warrants, or other securities or agreements (including those issued pursuant to
the Company's benefit plans), as if the price at which such capital stock is
issued were the market price on the date of such issuance.

          (b)  Notice.  In the event the Company proposes to issue or sell any
               ------                                                         
shares of capital stock in a transaction giving rise to the participation rights
provided for in this Section, the Company shall send a written notice (the
                                                                          
"Participation Notice") to Investor setting forth the number of shares of such
- ---------------------                                                         
capital stock of the Company that the Company proposes to sell or issue, the
price (before any commission or discount) at which such shares are proposed to
be issued (or, in the case of an underwritten or privately placed offering in
which the price is not known at the time the Participation Notice is given, the
method of determining such price and an estimate thereof), and all other
relevant information as to such proposed transaction as may be necessary for
Investor to determine whether or not to exercise the rights granted in this
Section.  At any time within 20 days after its receipt of the Participation
Notice, Investor may exercise its participation rights to purchase or subscribe
for shares of such shares of capital stock, as provided for in this Section, by
so informing the Company in writing (an "Exercise Notice").  Each Exercise
                                         ---------------                  
Notice shall state  the percentage of the proposed sale or issuance that the
Investor elects to purchase.  Each Exercise Notice shall be irrevocable, subject
to the conditions to the closing of the transaction giving rise to the
participation right provided for in this Section.

          (c)  Abandonment of Sale or Issuance.  The Company shall have the
               -------------------------------                             
right, in its sole discretion, at all times prior to consummation of any
proposed sale or issuance giving rise to

                                      -15-

<PAGE>
 
the participation right granted by this Section, to abandon, rescind, annul,
withdraw or otherwise terminate such sale or issuance, whereupon all
participation rights in respect of such proposed sale or issuance pursuant to
this Section shall become null and void, and the Company shall have no liability
or obligation to Investor or any Affiliate thereof who has acquired shares of
Company Stock pursuant to the Stock Purchase Agreement or from Investor with
respect thereto by virtue of such abandonment, rescission, annulment, withdrawal
or termination.

          (d)  Terms of Sale.  The purchase or subscription by Investor or an
               -------------                                                 
Affiliate thereof, as the case may be, pursuant to this Section shall be on the
same price and other terms and conditions, including the date of sale or
issuance, as are applicable to the purchasers or subscribers of the additional
shares of capital stock of the Company whose purchases or subscriptions give
rise to the participation rights, which price and other terms and conditions
shall be substantially as stated in the relevant Participation Notice (which
standard shall be satisfied if the price, in the case of a negotiated
transaction, is not greater than 110% of the estimated price set forth in the
relevant Participation Notice or, in the case of an underwritten or privately
placed offering, is not greater than the greater of (i) 110% of the estimated
price set forth in the relevant Participation Notice, and (ii) the most recent
closing price on or prior to the date of the pricing of the offering); provided,
                                                                       -------- 
however, that in the event the consideration to be received by the Company in
- -------                                                                      
connection with the issuance of shares of capital stock giving rise to
participation rights hereunder is other than cash or cash equivalents, the price
per share at which the participation rights may be exercised shall be the price
per share set forth in the Participation Notice or determined in the manner set
forth in the Participation Notice (which shall in either event be the price as
set forth in the agreement pursuant to which such shares are to be issued,
provided that the consideration to be received therefor is valued based upon the
fair market value thereof, as determined in good faith by the Company's
independent directors, after consultation with appropriate financial and legal
advisors, or the  price determined in accordance with paragraph (a) of this
Section 4.2); provided, further, however, that in the event the consideration to
              --------  -------  -------                                        
be received by the Company in connection with the issuance of shares of capital
stock giving rise to participation rights hereunder is other than cash or cash
equivalents, and the fair market value of the consideration to be received is
not determinable, the price per share at which the participation rights may be
exercised shall, (i) in the event that shares of capital stock with an
established trading market are being issued or sold, be the average ten-day
trailing market price of

                                      -16-

<PAGE>
 
such shares as of the date of receipt of the Participation Notice, and (ii) in
the event any other shares of capital stock are being issued or sold, be
determined by reference to the amount set forth above, adjusted as may be
appropriate to reflect the relationship between those shares of capital stock
with an established trading market and those shares of capital stock to be
issued in the relevant transaction; provided, however, that if the consideration
                                    --------  -------                           
otherwise covered by the second proviso of this Section 4.2(d) is received in
connection with a merger or consolidation by the Company, the price per share at
which the participation rights may be exercised shall be the market value per
share of Company Common Stock issued in respect of such merger or consolidation
as of the date of the merger or consolidation agreement; and provided, finally,
                                                             --------  ------- 
that in the event the purchases or subscriptions giving rise to the
participation rights are effected by an offering of securities registered under
the 1933 Act and in which offering it is not legally permissible for the
securities to be purchased by Investor to be included, such securities to be
purchased by Investor will be purchased in a concurrent private placement.

          (e)  Timing of Sale.  If, with respect to any Participation Notice,
               --------------                                                
Investor fails to deliver an Exercise Notice within the requisite time period,
the Company shall have 120 days after the expiration of the time in which the
Exercise Notice is required to be delivered in which to sell not more than 110%
of the number of shares of capital stock of the Company described in the
Participation Notice (plus, in the event such shares are to be sold in an
underwritten public offering, an additional number of shares of capital stock of
the Company, not in excess of 15% of 110% of the number of shares of capital
stock of the Company described in the Participation Notice, in respect of any
underwriters overallotment option) and not less than 90% of the number of shares
of capital stock of the Company described in the Participation Notice on terms
not more favorable to the purchaser than were set forth in the Participation
Notice.  If, at the end of 120 days following the expiration of the time in
which the Exercise Notice is required to  be delivered, the Company has not
completed the sale or issuance of capital stock of the Company in accordance
with the terms described in the Participation Notice (or at a price which is at
least 90% of the estimated price set forth in the Participation Notice), or in
the event of any contemplated sale or issuance within such 120-day period but
outside such price parameters, the Company shall again be obligated to comply
with the provisions of this Section with respect to, and provide the opportunity
to participate in, any proposed sale or issuance of shares of capital stock of
the Company; provided, however, that notwithstanding the foregoing, if the price
             --------  -------                                                  
at which such capi-

                                      -17-

<PAGE>
 
tal stock is to be sold in an underwritten offering (or a privately placed
offering in which the price is not less than 97% of the most recent closing
price at the time of the pricing of the offering) is not at least 90% of the
estimated price set forth in the Participation Notice, the Company may inform
Investor of such fact and Investor shall be entitled to elect, by written notice
delivered within two Business Days following such notice from the Company, to
participate in such offering in accordance with the provisions of this Section
4.2.


                                   ARTICLE 5

                             Standstill Provisions
                             ---------------------

          Section 5.1  Standstill Periods.  (a)  Subject to the provisions of
                       ------------------                                    
the following sentence, the "Standstill Period" shall be the period commencing
                             -----------------                                
on the Shareholder Approval Date, if any, and ending on the earlier of (x) the
fifth anniversary of the date thereof, and (y) the earliest of:

            (i) the occurrence of any event of default on the part of the
     Company or any Subsidiary under any debt agreements, instruments, or
     arrangements which event of default would reasonably be expected to result
     in a Material Adverse Effect and, in the case of a non-monetary event of
     default, which event of default cannot be, or is not, cured by the Company
     within the applicable cure period under such debt agreement, instrument or
     arrangement;

            (ii) the acquisition by any person or Group other than Investor or
     any Affiliate thereof or any person or Group acting in concert with or at
     the direction or request of the Investor or any Affiliate thereof of
     Beneficial Ownership of more than 9.8% of the voting power of the
     outstanding shares of Voting Securities (any such shares acquired in excess
     of such 9.8%, the "Excess  Shares"), unless (x) the Excess Shares are at or
                        --------------                                          
     immediately following their acquisition deprived of all voting rights
     pursuant to limitations on ownership of shares contained in the Company
     Charter, as in effect at the relevant time, or in any other legal, valid
     and enforceable agreement, plan or other right in effect as such time, or
     (y) provided the Excess Shares represent no more than 5.2% of the voting
     power of the outstanding Voting Securities, the Company, no later than the
     earlier of (aa) sixty days after the date of such acquisition, and (bb) the
     record date for the first meeting of shareholders after such record date,
     has caused such person or Group to cease, or such person or Group

                                      -18-

<PAGE>
 
     otherwise ceases, having Beneficial Ownership of the Excess Shares;

            (iii)  any person or Group having a number of Directors on the
     Board, or having the right or power to elect a number of Directors on the
     Board, equal to or greater than the number of Directors to which Investor
     is entitled;

            (iv) the authorization by the Company or the Board or any committee
     thereof (with all Investor Nominees abstaining or voting against) of the
     solicitation of offers or proposals or indications of interest with respect
     to any merger, consolidation, other business combination, liquidation, sale
     of the Company or all or substantially all of the assets of the Company or
     any other change of control of the Company or similar extraordinary
     transaction, but excluding any merger, consolidation or other business
     combination in which the Company is the surviving and acquiring corporation
     and in which the businesses or assets so acquired do not, or would not
     reasonably be expected to, have a value greater than 50% of the assets of
     the Company prior to such merger, consolidation or other business
     combination (any of the foregoing, a "Covered Transaction");
                                           -------------------   

            (v) the written submission by any person or Group other than
     Investor or any Affiliate thereof of a proposal to the Company (including
     to the Board or any agent, representative or Affiliate of the Company) with
     respect to, or otherwise expressing an interest in pursuing, a Covered
     Transaction; provided, however, that the Standstill Period shall not
                  --------  -------                                      
     terminate pursuant to this Section 5.1(a)(v) if, as soon as practicable
     after receipt of any such proposal, the Board determines that such proposal
     is not in the best interest of the Company and its shareholders and for so
     long as the Board continues to reject such proposal as a result of such
     determination;

            (vi) in connection with any actual or proposed Covered Transaction,
     the removal of any rights plan, provisions of the Company Charter relating
     to staggered terms of office for directors, provisions of the Company
     Charter or the By-laws of the Company relating to supermajority voting of
     the Company's shareholders, "excess share" provisions of the Company
     Charter or the By-laws of the Company, or any other similar arrangements,
     agreements, commitments or provisions in the Company Charter or the By-laws
     of the Company which would reasonably be expected to impede the
     consummation of such actual or proposed Covered Transaction by action of
     any Government Authority, the Board, the shareholders of

                                      -19-

<PAGE>
 
     the Company or otherwise, or, whether or not in connection with any actual
     or proposed Covered Transaction, any modification, amendment, waiver or
     repeal of the ownership restrictions in Article 5of the Company Charter
     (except as may be necessary to allow any acquisition of Company Stock that
     would not constitute an Early Termination Event under Section 5.1(a)(ii));

            (vii)  any breach by the Company of the Stock Purchase Agreement
     which is neither cured nor desisted from within 30 days of receipt of
     written notice of such breach and which would reasonably be expected to
     materially adversely affect Investor or cause a Material Adverse Effect;

            (viii)  any breach of this Agreement by the Company which is neither
     cured nor desisted from within 30 days of receipt of written notice of such
     breach and which would reasonably be expected to materially adversely
     affect Investor or cause a Material Adverse Effect;

            (ix) any violation of any Corporate Action Covenant; or

            (x) any exercise of a conversion right with respect to shares of
     Class B Common Stock effected at a time or in circumstances in which the
     Percentage Limit (as such term is defined in the Articles of Amendment to
     Articles of Incorporation of the Company, filed on December 20, 1995) is
     for any reason not applicable, ineffective or waived.

               Any event set forth in subsection (i), (ii), (iii), (iv), (v),
     (vi), (vii), (viii), (ix) or (x) of this Section 5.1(a) shall be an "Early
                                                                          -----
     Termination Event."
     -----------------  

          (b)  If the Standstill Period shall not have been terminated prior to
the fifth anniversary of the date hereof, the Standstill Period and any
Standstill Extension Term shall automatically be extended for successive one-
year periods (each  such period, a "Standstill Extension Term"), unless, in the
                                    -------------------------                  
case of each Standstill Extension Term, Investor provides to the Company written
notice at least 270 days prior to the commencement of such Standstill Extension
Term, that such Standstill Extension Term and all further Standstill Extension
Terms are cancelled.  Any Standstill Extension Term will be terminated upon the
earlier of (i) the first anniversary thereof, and (ii) the occurrence of an
Early Termination Event.

          Section 5.2  Restrictions During Standstill Period and Standstill
                       ----------------------------------------------------
Extension Term.  (a)  During the Standstill Period,
- --------------                                     

                                      -20-

<PAGE>
 
if any, and any Standstill Extension Term (and, with respect only to the
provisions of subsection (ii) hereof, also at any other time when Investor owns
more than 15% of the then outstanding shares of Company Common Stock, on a fully
diluted basis), Investor will not, will cause each of its controlled Affiliates
not to, and will use its reasonable best efforts to cause each of its other
Affiliates not to, directly or indirectly:

            (i) act in concert with any other person or Group by becoming a
     member of a 13D Group, other than any 13D Group comprised exclusively of
     Investor and one or more of its Affiliates;

            (ii) sell, transfer, pledge or otherwise dispose of (collectively,
                                                                              
     "Transfer") any shares of Company Common Stock except for:  (v) Transfers
     ---------                                                                
     made in compliance with the requirements of Rule 144 of the 1933 Act, (w)
     Transfers pursuant to negotiated transactions with third parties, provided,
                                                                       -------- 
     however, that no such Transfer which would result in the applicable
     -------                                                            
     transferee having beneficial ownership of more than 9.8% of the Company
     Stock shall occur unless (A) the Company, in its sole discretion, approves
     such Transfer, and (B) the transferee acknowledges that it is subject to
     the provisions of Article 5 of this Agreement to which Investor is subject,
     (x) Transfers pursuant to or in accordance with the Registration Rights
     Agreement or otherwise in a public offering, (y) Transfers to one or more
     Affiliates of Investor who agree to be bound by the terms and conditions of
     this Agreement and who satisfy the ownership criteria in the definition of
     "Investor", and (z) Transfers to a bona fide financial institution for the
     purpose of securing bona fide indebtedness of any Investor; provided, that
     no such Transfer shall result in the bona fide financial institution having
     beneficial ownership of more than 9.8% of the Company Stock unless such
     bona fide financial institution acknowledges that it is subject to the
     provisions of Article 5 of this Agreement to which Investor is subject;

            (iii)  purchase or otherwise acquire shares of Company Common Stock
     (or options, rights or warrants or other commitments to purchase and
     securities convertible into (or exchangeable or redeemable for) shares of
     Company Common Stock) as a result of which, after giving effect to such
     purchase or acquisition, Investor and its Affiliates will Beneficially Own
     more than 45% of the outstanding shares of Company Common Stock, on a fully
     diluted basis;

                                      -21-

<PAGE>
 
            (iv) solicit, encourage or propose to effect or negotiate any
     Covered Transaction other than pursuant to the Stock Purchase Agreement;

            (v) solicit, initiate, encourage or participate in any
     "solicitation" of "proxies" or become a "participant" in any "election
     contest" (as such terms are defined or used in Regulation 14A under the
     1934 Act, disregarding clause (iv) of Rule 14a-1(l)(2) and including an
     exempt solicitation pursuant to Rule 14a-2(b)(1)); call, or in any way
     encourage or participate in a call for, any special meeting of shareholders
     of the Company (or take any action with respect to acting by written
     consent of the shareholders of the Company); request, or take any action to
     obtain or retain any list of holders of any securities of the Company; or
     initiate or propose any shareholder proposal or participate in or encourage
     the making of, or solicit shareholders of the Company for the approval of,
     one or more shareholder proposals; provided, however, that Investor shall
                                        --------  -------                     
     not be prohibited from communicating with a securityholder who is engaged
     in any "solicitation" of "proxies" or who is a "participant" in any
     "election contest";

            (vi) seek representation on the Board or a change in the composition
     or size of the Board other than as permitted by Article 2;

            (vii)  Transfer any capital stock of Buyer or any capital stock of
     any Affiliate of Buyer that owns Company Common Stock, or cause Buyer or
     any such Affiliate thereof to Transfer any options, warrants, convertible
     securities or other similar rights to acquire any capital stock of Buyer or
     any such Affiliate thereof; provided, however, that no such Transfer shall
                                 --------  -------                             
     be prohibited if after giving effect thereto the Beneficial Owner of such
     shares of Company Common Stock satisfies the ownership criteria in the
     definition of "Investor"; and provided, further, that no Transfers to a
                                   --------  -------                        
     bona fide financial institution for the purpose of securing bona fide
     indebtedness of any Investor shall be prohibited hereby;

            (viii)  request the Company or any of its directors, officers,
     employees or agents to amend or waive any provisions of this Section 5.2 or
     Section 5.2 of the Company Charter or seek to challenge the legality or
     effect thereof; or

            (ix) assist, advise, encourage or act in concert with

                                      -22-

<PAGE>
 
     any person with respect to, or seek to do, any of the foregoing.

                   (b)  At such time as the restrictions on the activities of
     Investor contained in Section 5.2(a), 5.2(b) or 5.4 take effect, such
     restrictions shall supercede any restrictions on the activities of Investor
     contained in the Confidentiality Agreement, dated May 10, 1995, by and
     between Investor and the Company whereupon all such restrictions set forth
     in said Confidentiality Agreement shall cease to apply.

          Section 5.3  Investments in Shopping Center Properties and Purchases
                       -------------------------------------------------------
of Interests in Shopping Center Companies.  (a)  Subject to the provisions of
- -----------------------------------------                                    
the following sentence, and excluding transactions which are the subject of
paragraph (b) of this Section, from and after the date hereof until the earlier
of (i) the date, if any, on which shareholders of the Company vote upon and fail
to approve the transactions contemplated by the Stock Purchase Agreement, (ii)
the six-month anniversary of the date hereof if a meeting at which the
shareholders of the Company are asked to vote upon the transactions contemplated
by the Stock Purchase Agreement shall not have occurred on or prior to such six-
month anniversary date, and (iii) the 20% Termination Date, if any, Investor and
any other person of which Investor is the direct or indirect general partner or
as to which Investor has the direct or indirect right or power to elect a
majority of the board of directors or other governing body or otherwise controls
(but subject, in the case of any person other than Investor, to the fiduciary
duties of such person or its general partner, board of directors or other
governing body) (any such person, an "Investor Restricted Person") shall not,
                                      --------------------------             
and Investor shall use its reasonable best efforts to cause Security Capital
Group Incorporated ("SCGI") and any person of which SCGI is the direct or
                     ----                                                
indirect general partner or as to which SCGI has the direct or indirect right or
power to elect a majority of the board of directors or other governing bodyor
otherwise controls (but subject, in the case of any person other than Investor,
to the fiduciary duties of such person or its general partner, board of
directors or other governing body) (SCGI and any such person, an "SCGI
                                                                  ----
Restricted Person") not to, directly or indirectly, own, purchase, develop or
- -----------------                                                            
otherwise acquire, directly or indirectly, any grocery-store, drugstore, or
general merchandise discount-store (such  as Wal-Mart, K-Mart, Target, TJ Maxx,
Steinmart or similar store) anchored shopping center under 250,000 square feet
of leasable area located in the Geographic Region (a "Shopping Center Property",
                                                      ------------------------  
and not including within the meaning of such defined term any enclosed regional
or urban mall or other similar shopping facility).

                                      -23-

<PAGE>
 
Notwithstanding the foregoing, Investor, any Investor Restricted Person or any
SCGI Restricted Person may own, purchase, or otherwise acquire, directly or
indirectly, any Shopping Center Properties if the investment in the Shopping
Center Properties is incidental to an investment made by Investor, such Investor
Restricted Person or such SCGI Restricted Person which investment is not
primarily related to Shopping Center Properties; it being understood and agreed
that any acquisition of real estate properties in which Shopping Center
Properties constitute 30% or less of the purchase price of all of the real
estate properties acquired shall be considered an investment in which the
Shopping Center Properties acquired are incidental to an investment which is not
primarily related to Shopping Center Properties; provided, however, that if
                                                 --------  -------         
Investor, any Investor Restricted Person or any SCGI Restricted Person
determines to make such a permitted investment, Investor, such Investor
Restricted Person or such SCGI Restricted Person shall afford the Company a
period of 20 day after receipt of written notice from Investor describing the
material terms of the proposed investment, in which to provide Investor, such
Investor Restricted Person or such SCGI Restricted Person, as applicable,
written notice that it elects to purchase the Shopping Center Properties
constituting a part of such investment (subject to customary due diligence and
other closing conditions); in the event Investor, such Investor Restricted
Person or such SCGI Restricted Person thereafter makes such investment and the
price and other terms are not less favorable to the Company than those set forth
in the notice of material terms delivered to the Company, the Company shall
promptly acquire the Shopping Center Properties included therein, at the price
allocated to such Shopping Center Properties in the purchase agreement entered
into by Investor, the Investor Restricted Person or the SCGI Restricted Person,
as the case may be, in respect of such acquisition and otherwise on terms
substantially similar to the terms of Investor's, the Investor Restricted
Person's or SCGI Restricted Person's acquisition of such properties; provided,
                                                                     -------- 
further, that if Investor, an Investor Restricted Person or an SCGI Restricted
- -------                                                                       
Person shall have made such a purchase, including the Shopping

Center Properties therein, and if Investor, an Investor Restricted or an SCGI
Restricted Person should thereafter, but prior to the 20% Termination Date,
determine to sell any Shopping Center Properties so purchased, Investor, such
Investor Restricted Person or such SCGI Restricted Person shall inform the
Company of such fact, and the Company shall have 20 days in which to  give
Investor, such Investor Restricted Person or such SCGI Restricted Person written
notice that it desires to purchase such Shopping Center Properties; such notice
shall set forth the terms on which the Company is prepared to effect such
purchase; Investor, such Investor Restricted Person or such SCGI Re-

                                      -24-

<PAGE>
 
stricted Person shall be free to accept such offer, or to otherwise dispose of
such Shopping Center Properties, but shall in no event dispose of such Shopping
Center Properties on terms materially less favorable to Investor, such Investor
Restricted Person or such SCGI Restricted Person without first again affording
the Company the opportunity to purchase such Shopping Center Properties.

          (b)  From and after the date hereof until the earlier of (i) the date,
if any, on which shareholders of the Company vote upon and fail to approve the
transactions contemplated by the Stock Purchase Agreement, (ii) the six-month
anniversary of the date hereof if a meeting at which the shareholders of the
Company are asked to vote upon the transactions contemplated by the Stock
Purchase Agreement shall not have occurred on or prior to such six-month
anniversary date, and (iii) the 20% Termination Date, if any, Investor and any
Investor Restricted Person shall not, and Investor shall use its reasonable best
efforts to cause all SCGI Restricted Persons not to, purchase or otherwise
acquire equity securities, or options, warrants, calls, purchase rights,
subscription rights, conversion rights, exchange rights or similar rights to
purchase or otherwise acquire equity securities, representing 9% or more of the
equity interest of any person, other than the Company, if (i) such person's
principal business activity is the acquisition, development or ownership for
rental purposes of Shopping Center Properties, (ii) more than 25% of such
person's assets are Shopping Center Properties (but not including as Shopping
Center Property assets for such purpose any indebtedness secured directly or
indirectly by Shopping Center Properties), or (iii) more than 25% of such
person's revenues are derived from the purchase, development or ownership of
Shopping Center Properties (any such person, a "Shopping Center Company");
                                                -----------------------   
provided, however, that Investor, any Investor Restricted Person or any SCGI
- --------  -------                                                           
Restricted Person shall be entitled to purchase or otherwise acquire less than
9% of the equity interest of a Shopping Center Company only if no Investor,
Investor Restricted Person or SCGI Restricted Person shall be represented on (or
have the right to nominate representatives to) the board of directors or similar
governing body or shall participate in the management, of such Shopping Center
Company.

          (c)  The provisions of this Section 5.3 shall not restrict Investor,
any Investor Restricted Person or any SCGI Restricted Person from, directly or
indirectly, (w) providing  debt financing for Shopping Center Properties or
investing in, owning or acquiring a mortgage REIT or other person substantially
all of whose business consists of making mortgage loans on Shopping Center
Properties and other real estate assets, (x)

                                      -25-

<PAGE>
 
in connection with the activities described in clause (w), acquiring or owning
any Shopping Center Properties through foreclosure on mortgages or similar
instruments or other realization on security, or (y) the ownership of any REIT
convertible debt which is passively held and unaccompanied by representation on
the board of directors or participation in management and which is held by a
person of which none of Investor, any Investor Restricted Person or any SCGI
Restricted Person directly or indirectly Beneficially Owns 20% or more of the
outstanding economic or voting interest.

          (d)  Notwithstanding any contrary provision herein, the provisions of
this Section 5.3 shall not go into effect unless and until the transactions
contemplated by the Stock Purchase Agreement shall have been approved by the
holders of the requisite number of shares of Company Stock at a duly called and
held meeting of shareholders of the Company at which meeting a quorum is present
(such approval, the "Shareholder Approval").
                     --------------------   

          Section 5.4  Notice to Company.  From and after the Shareholder
                       -----------------                                 
Approval Date, if any, until the expiration of the Standstill Period or any
Standstill Extension Period, if Investor wishes to sell pursuant to subsection
5.2(a)(ii)(v), (w) or (x) any shares of Company Common Stock, Investor shall
give the Company 15 days' prior written notice of such proposed sale, setting
forth the number of shares of Company Common Stock that Investor proposes to
sell, the expected timing of the proposed sale, and the expected selling price
of such sale, in order to enable the Company to make an offer to purchase such
shares.  During the period described in the preceding sentence, Investor shall
also notify the Company if Investor reaches a formal board-level decision to
sell shares of Company Common Stock representing more than 2% of the then
outstanding shares of Company Common Stock.

          Section 5.5  Compliance with Insider Trading Policy.  For as long as
                       --------------------------------------                 
Investor Beneficially Owns any shares of Company Common Stock, Investor will,
and will use its commercially reasonable efforts to cause its directors,
officers, employees, agents, and representatives to, comply with the written
policy of the Company reasonably designed to prevent violations of insider
trading and similar laws.  It is understood and agreed that no such policy
existed as of the date of the Stock Purchase Agreement, and that prior to the
adoption or amendment of any such policy to which Investor will be subject
(including  any such policy proposed to be adopted following the date of the
Stock Purchase Agreement and prior to the date hereof, and to which Investor
would become subject by virtue hereof), the Company will consult with Investor,
and will not adopt or amend any such policy, nor will Investor be subject to any
such

                                      -26-

<PAGE>
 
policy, without the written consent of Investor, which consent will not be
unreasonably withheld.

          Section 5.6  Compliance with Section 5.2 of the Company Charter.  For
                       --------------------------------------------------      
as long as Investor Beneficially Owns any shares of Company Common Stock (unless
the Standstill Period or any Standstill Extension Term is terminated by any of
the actions set forth in Section 5.1(a)(iv), (v) or (vi) (or unless any such
action occurs following the termination of the Standstill Period or any
Standstill Extension Term) or by any other willful action by the Company which
constitutes an Early Termination Event (or would constitute an Early Termination
Event during the Standstill Period or any Standstill Extension Term)), Investor
and each Investor Restricted Person will, and Investor will use its reasonable
best efforts to cause the SCGI Restricted Persons to, comply with Section 5.2 of
the Company Charter and will not seek to challenge the legality or effect
thereof.

          Section 5.7  Investment Company Matters.  From and after the
                       --------------------------                     
Shareholder Approval Date, if any, until the 20% Termination Date, if any,
Investor shall use its reasonable best efforts to not be or become an
"investment company" or an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.

          Section 5.8  Waiver of Restrictions and Limits.  Provided that
                       ---------------------------------                
Shareholder Approval is obtained, subject to the provisions of the third
sentence of this Section 5.8, the Company shall take all actions, including by
providing any necessary exemptions from or amendments to (A) any restrictions or
limits contained in Article 5 of the Company Charter or (B) any agreement or
instrument which governs ownership of shares of Company Stock by any person,
necessary to permit Investor to Beneficially Own up to and including the greater
of (i) 45% of the outstanding shares of Company Common Stock and (ii) the
percentage which represents the number of shares of Company Common Stock
purchased pursuant to the Stock Purchase Agreement relative to the outstanding
shares of Company Common Stock.  If any third party shall be given the right to
Beneficially Own more than 45% of the outstanding shares of Company Common
Stock, the Company shall take all actions (including by providing the foregoing
exemptions and amendments) to waive any and all restrictions or limits on
Investor provided that such waiver does not result in the disqualification of
the Company  as a REIT.  From and after the 15% Termination Date, if any, the
Company shall take all actions, including by providing any necessary exemptions
from or amendments to (A) any restrictions or limits contained in Article 5 of
the Company Charter or (B) any agree-

                                      -27-

<PAGE>
 
ment or instrument which governs ownership of shares of Company Stock by any
person, necessary to permit Investor to Beneficially Own up to and including 15%
of the outstanding shares of Company Common Stock, but shall not be required to
take any action to permit Investor to Beneficially Own more than 15% of the
outstanding shares of Company Common Stock.  From and after the first date on
which Investor does not own at least 9.8% of the outstanding shares of Company
Common Stock, if any, the Company shall take all actions, including by providing
any necessary exemptions from or amendments to (A) the ownership limits
contained in Article 5 of the Company Charter or (B) any agreement or instrument
which governs ownership of shares of Company Stock by any person, necessary to
permit Investor to Beneficially Own up to and including 9.8% of the outstanding
shares of Company Common Stock, but shall not be required to take any action to
permit Investor to Beneficially Own more than 9.8% of the outstanding shares of
Company Common Stock.  Notwithstanding the foregoing, Investor or the Company
may at any time acquire Beneficial Ownership of the securities of such other
party or its Affiliates to the extent permitted by applicable law and the
provisions of the organizational documents of such party or its Affiliates, as
applicable, and other agreements from time to time governing the ownership of
such securities.

          Section 5.9  REIT Qualification.  From and after the Shareholder
                       ------------------                                 
Approval Date until the 15% Termination Date, Investor shall annually inform the
Company whether Investor believes, and shall otherwise from time to time, as
reasonably requested by the Company, reasonably cooperate (including by
providing such information and documentation as may be reasonably requested by
the Company) with the Company to enable the Company to determine whether, any
person which would be treated as an "individual" for purposes of Section
542(a)(2) of the Code (as modified by Section 856(h) of the Code) owns or would
be considered to own (taking into account the ownership attribution rules under
Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of
9.8% of the value of the outstanding equity interest in Investor.


                               ARTICLE 6

                     Limitations on Corporate Actions, Etc.
                     --------------------------------------

          Section 6.1  Limitations on Corporate Actions.  (a)  The Company
                       --------------------------------                   
agrees that from and after the Shareholder Approval Date, until the earlier of
(i) the termination of the Standstill Period or any Standstill Extension Term or
(ii) the 20%

                                      -28-

<PAGE>
 
Termination Date, if any, it will not, and will not permit any of its
Subsidiaries to:

                 (A) incur total consolidated indebtedness for money borrowed
          (including for this purpose any indebtedness evidenced by notes,
          debentures, bonds or other similar instruments, or secured by any lien
          on any property or asset, all obligations issued or assumed as the
          deferred purchase price of property, conditional sale obligations,
          obligations under any title retention agreement (but excluding trade
          accounts payable and other accrued current liabilities arising in the
          ordinary course of business), obligations under letters of credit, or
          similar credit transactions, and obligations which are required to be
          accounted for as capital leases) in an amount in excess of 60% of the
          gross book value of the consolidated book assets of the Company
          (excluding any minority interests not convertible into interests in
          the Company) before depreciationand amortization, unless the violation
          of such ratio is cured within 30 days of its occurrence;

                 (B) cause or permit the sum of (w) stocks, securities,
          partnership interests or any similar investments or instruments of or
          in any other Person, (x) assets held other than directly by the
          Company, (y) loans made by the Company to a Subsidiary, or loans made
          by a Subsidiary to the Company, and (z) assets managed by Persons
          other than employees of the Company (excluding retention of a third
          party manager that is desisted prior to the fifth day immediately
          preceding the end of the calendar quarter in which it arises and
          provided that any asset managed by a third party shall be considered a
          passive asset to be included in the calculations pursuant to Section
          6.1(b)), to, at any time constitute more than 30%, at cost, of the
          consolidated assets owned by the Company;

                 (C) have at any time prior to June 1, 1997, more than 15%, and
          at all other times, more than 10%, at cost, of its consolidated assets
          in property types other than Shopping Center Properties or land
          suitable and intended for development of Shopping Center Properties;

                                      -29-

<PAGE>
 
          provided, however, that for purposes of this subsection (C) of Section
          --------  -------                                                     
          6.1(a), Shopping Center Properties shall include any grocery-, drug-
          or general merchandise discount-store anchored shopping center under
          350,000 square feet of leasable area located in the Geographic Region;

                 (D) in the case of the Company, (1) terminate its eligibility
          for treatment as a real estate investment trust, as defined in the
          Code, or (2) take any action or fail to take any action which would
          reasonably be expected to, alone or in conjunction with any other
          factors, result in the loss of such eligibility, unless in the case of
          a failure to take action, such action is taken within thirty days; or

                 (E) except as permitted or required by any agreements or
          commitments existing as of the date of the Stock Purchase Agreement
          and disclosed to Investor pursuant thereto, own any interest in any
          partnership unless the Company is the sole managing general partner of
          such partnership.
 
          (b)  from and after Shareholder Approval Date, until the first date,
if any, following the date on which the Remaining Equity Commitment shall have
been reduced to zero on which Investor's ownership of Company Common Stock shall
have been below 20% by value of the actually outstanding shares of Company
Common Stock for a continuous period of 180 days (or if Investor's ownership of
Company Common Stock shall, following the date on which the Remaining Equity
Commitment shall have been reduced to zero, have fallen below 20% by value of
the actually outstanding shares of Company Common Stock as a result of a
Transfer by Investor of Company Common Stock or a failure of Investor to
exercise its rights under Section 4.2 during the 60 days immediately prior to
the expiration of such 180-day period, if any such rights are exercisable during
such period, to the extent necessary to (and provided that it shall be possible
by such exercise to) raise its ownership of the actually outstanding Company
Common Stock above such 20% threshold, then until such Transfer or failure to
exercise its rights under Section 4.2, as the case may be), the Company

               (i) will not, without the prior written consent of Investor,
            either take any action that would cause, or fail to take any action
            which failure would cause, (A) the percentage of the Company's
            consolidated gross income that is considered "pas-

                                      -30-

<PAGE>
 
            sive income" (within the meaning of Section 1296(a)(1) of the Code,
            and computed using the assumptions and conventions set forth in
            Schedule 6.1(c) hereto, together with such modifications thereto as
            Investor shall advise the Company in writing are necessary as a
            result of the promulgation of regulations, rulings, or other formal
            or informal administrative guidance clarifying existing law or a
            change in existing law or interpretations thereof) to exceed 30%, or
            (B) the average percentage of the Company's assets (by value,
            computed as of the end of every calendar quarter) held during any
            taxable year which produce passive income or which are held for the
            production of passive income (as such terms are used in Section
            1296(a)(2) of the Code and computed using the assumptions and
            conventions set forth in Schedule 6.1(c) hereto, together with such
            modifications thereto as Investor shall advise the Company in
            writing are necessary as a result of the promulgation of
            regulations, rulings, or other formal or informal administrative
            guidance clarifying existing law or a change in existing law or
            interpretations thereof) to exceed 30%; and

            (ii) will otherwise consider in good faith suggestions made by
     Investor as to the structure of the operations of the Company and its
     Subsidiaries in order to permit Investor or any shareholder of Investor to
     avoid being classified as a "passive foreign investment company" under the
     Code.

The agreements of the Company set forth in subsections (a) and (b) of this
Section 6.1, and Sections 6.3, 6.4 and 6.6 shall be the "Corporate Action
                                                         ----------------
Covenants."
- ---------  

          Section 6.2  Provision of Information.  For as long as Investor
                       ------------------------                          
Beneficially Owns any shares of Company Stock, the Company will provide to
Investor all information and documentation requested by Investor, and will
cooperate with Investor as requested, as may be necessary for Investor to
perform the calculations to be made in connection with and to meet the
documentation requirements pursuant to Sections 1291 through 1297 of the Code,
as may be amended from time to time, and any successor provisions thereto, and
as may otherwise be reasonably necessary in connection with any other record
keeping or reporting laws, rules or regulations (including all such information,
documentation and cooperation as is necessary to enable Investor to (1) file any
Tax Returns it is required to file and  (2) to

                                      -31-

<PAGE>
 
determine and document its status, income, asset mix and other relevant items
with respect to the Passive Foreign Investment Company provisions of the Code).

          Section 6.3  Compliance with Conflicts of Interest Policy.  Promptly
                       --------------------------------------------           
following the date hereof, the Company shall, subject to the reasonable consent
and approval of Investor, adopt policies typical of publicly traded companies
relating to transactions with affiliates and potential conflicts of interest
(such policies, together with the Affiliate Arrangements, as modified or amended
from time to time with the consent of Investor, collectively, the "Conflict of
                                                                   -----------
Interest Policies").  From and after the date of adoption of such Conflict of
- -----------------                                                            
Interest Policies until the 20% Termination Date, (x) the Company will, and will
cause its Subsidiaries to, comply with and enforce such Conflict of Interest
Policies, and (y) Investor will comply with the Conflict of Interest Policies;
                                                                              
provided, however, that the provisions of this Agreement, the Stock Purchase
- --------  -------                                                           
Agreement and the Registration Rights Agreement and the transactions
contemplated hereby and thereby shall not be limited, amended or modified in any
way by, and shall govern in the event of a conflict with, the Conflict of
Interest Policies; provided further that no Conflict of Interest Policy shall in
                   ----------------                                             
any way discriminate or differentiate among any Affiliates of the Company.

          Section 6.4  Maintenance of Affiliate and Joint Venture Arrangements.
                       -------------------------------------------------------  
From and after the date hereof until the 20% Termination Date, if any, (x) the
Company will, and will cause its Subsidiaries to, comply with, enforce and keep
in effect each of the Affiliate Arrangements, and (y) the Company will not, and
will cause its Subsidiaries not to, (A) modify, amend or waive any provision
contained in any Affiliate Arrangement without the prior written consent of
Investor, in its sole discretion, or (B) materially expand or increase, or
permit to be materially expanded or increased, the scope, type or quantity of
activities performed, or transactions entered into, by Village Common Shopping
Center, a Florida limited partnership, Regency Ocean East Partnership, Ltd., a
Florida limited partnership, or RRC Operating Partnership of Georgia, L.P., a
Georgia limited partnership, or (C) enter into new joint venture, partnership or
similar arrangements with third parties, or (D) directly or indirectly, own,
purchase, develop,  or otherwise acquire or finance any Shopping Center Property
in conjunction with any Affiliate which is not a wholly owned Subsidiary of the
Company or otherwise in a joint venture with any such party, in each case,
without the prior written consent of Investor, in its sole discretion, provided
that in the case of the proposed joint venture arrangement with WLD Enterprises,
Ltd. regarding the Deerfield Beach shopping center, Investor shall not
unreasonably

                                      -32-

<PAGE>
 
withhold its consent.

          Section 6.5  Sales of Assets.  From and after the date hereof until
                       ---------------                                       
the 15% Termination Date, if any, the Company will, and will cause its
Subsidiaries to, use its reasonable efforts, consistent with prudent management
of the Company's properties and assets in the interest of the Company's
shareholders, to dispose of properties or assets through tax deferred exchanges
which exchanges will defer any capital gains distributions to shareholders of
the Company.  In the event it is expected that any capital gains distributions
are to be made, the Company will endeavor to provide Investor with such advance
notice thereof as may be practicable.

          Section 6.6  Investments in Shopping Center Properties and Purchases
                       -------------------------------------------------------
of Interests in Shopping Center Companies.  (a)  Subject to the provisions of
- -----------------------------------------                                    
the following sentence, and excluding transactions which are the subject of
paragraph (b) of this Section, from and after the date hereof until the earlier
of (i) the date, if any, on which shareholders of the Company vote upon and fail
to approve the transactions contemplated by the Stock Purchase Agreement, and
(ii) the 20% Termination Date, if any, TRG and any other person of which TRG is
the direct or indirect general partner or as to which TRG has the direct or
indirect right or power to elect a majority of the board of directors or other
governing body or otherwise controls (any such person, a "TRG Restricted
                                                          --------------
Person") shall not, directly or indirectly, own, purchase, develop or otherwise
acquire, directly or indirectly, any Shopping Center Property.  Notwithstanding
the foregoing, TRG or any TRG Restricted Person may own, purchase, or otherwise
acquire, directly or indirectly, any Shopping Center Properties if the
investment in the Shopping Center Properties is incidental to an investment made
by TRG orsuch TRG Restricted Person which investment is not primarily related to
Shopping Center Properties; it being understood and agreed that any acquisition
of real estate properties in which Shopping Center Properties constitute 30% or
less of the purchase price of all of the real estate properties acquired shall
be considered an investment in which the Shopping Center Properties acquired are
incidental to an investment which is not primarily related to Shopping Center
Properties; provided, however, that if TRG or any TRG Restricted Person
            --------  -------                                          
determines to make such a permitted investment, TRG or such TRG Restricted
Person shall afford the Company a period of 20 day after receipt of written
notice from TRG describing the material terms of the proposed investment, in
which to provide TRG or such TRG Restricted Person, as applicable, written
notice that it elects to purchase the Shopping  Center Properties constituting a
part of such investment (subject to customary due diligence and other

                                      -33-

<PAGE>
 
closing conditions); in the event TRG or such TRG Restricted Person thereafter
makes such investment and the price and other terms are not less favorable to
the Company than those set forth in the notice of material terms delivered to
the Company, the Company shall promptly acquire the Shopping Center Properties
included therein, at the price allocated to such Shopping Center Properties in
the purchase agreement entered into by TRG or the TRG Restricted Person, as the
case may be, in respect of such acquisition and otherwise on terms substantially
similar to the terms of TRG's or the TRG Restricted Person's acquisition of such
properties; provided, further, that if TRG or a TRG Restricted Person shall have
            --------  -------                                                   
made such a purchase, including the Shopping Center Properties therein, and if
TRG or a TRG Restricted Person should thereafter, but prior to the 20%
Termination Date, determine to sell any Shopping Center Properties so purchased,
TRG or such TRG Restricted Person shall inform the Company of such fact, and the
Company shall have 20 days in which to give TRG or such TRG Restricted
Personwritten notice that it desires to purchase such Shopping Center
Properties; such notice shall set forth the terms on which the Company is
prepared to effect such purchase; TRG or such TRG Restricted Person shall be
free to accept such offer, or to otherwise dispose of such Shopping Center
Properties, but shall in no event dispose of such Shopping Center Properties on
terms materially less favorable to TRG or such TRG Restricted Person without
first again affording the Company the opportunity to purchase such Shopping
Center Properties.

          (b) From and after the date hereof until the earlier of (i) the date,
if any, on which shareholders of the Company vote upon and fail to approve the
transactions contemplated by the Stock Purchase Agreement, and (ii) the 20%
Termination Date, if any, TRG and any TRG Restricted Person shall not purchase
or otherwise acquire equity securities, or options, warrants, calls, purchase
rights, subscription rights, conversion rights, exchange rights or similar
rights to purchase or otherwise acquire equity securities, representing 9% or
more of the equity interest of any person, other than the Company, if such
person is a Shopping Center Company; provided, however, that TRG or any TRG
                                     --------  -------                     
Restricted Person shall be entitled to purchase or otherwise acquire less than
9% of the equity interest of a Shopping Center Company only if no TRG or TRG
Restricted Person shall be represented on (or have the right to nominate
representatives to) the board of directors or similar governing body or shall
participate in the management, of such Shopping Center Company.
 
          (c)  The provisions of this Section 6.6 shall not restrict TRG or any
TRG Restricted Person from, directly or indirectly, (w) providing debt financing
for Shopping Center

                                      -34-

<PAGE>
 
Properties or investing in, owning or acquiring a mortgage REIT or other person
substantially all of whose business consists of making mortgage loans on
Shopping Center Properties and other real estate assets, (x) in connection with
the activities described in clause (w), acquiring or owning any Shopping Center
Properties through foreclosure on mortgages or similar instruments or other
realization on security, or (y) the ownership of any REIT convertible debt which
is passively held and unaccompanied by representation on the board of directors
or participation in management and which is held by a person of which none of
TRG or any TRG Restricted Person directly or indirectly Beneficially Owns 20% or
more of the outstanding economic or voting interest.

            (d)  Each of the Company and Investor shall be entitled to the
benefits of the provisions contained in this Section 6.6.


                                   ARTICLE 7

                                 Miscellaneous
                                 -------------

          Section 7.1  Counterparts.  This Agreement may be executed in one or
                       ------------                                           
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party.  Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is confirmed.

          Section 7.2  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
                       -------------                                          
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.

          Section 7.3  Entire Agreement.  This Agreement (including agreements
                       ----------------                                       
incorporated herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein.  This Agreement is
not intended to confer upon any person not a party hereto (and their successors
and assigns) any rights or remedies hereunder.

          Section 7.4  Expenses.  Except as set forth in the Stock Purchase
                       --------                                            
Agreement, all legal and other costs and expenses

                                      -35-

<PAGE>
 
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.  Without
limiting the foregoing, the Company shall pay all costs and expenses incurred in
connection with the solicitation of votes of shareholders of the Company to
approve the transactions contemplated by the Stock Purchase Agreement.

          Section 7.5  Notices.  All notices and other communications hereunder
                       -------                                                 
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below.  Notices to the
Company shall be addressed to:

               Regency Realty Corporation
               121 West Forsyth Street, Suite 200
               Jacksonville, Florida  32202
               Attention:  Martin E. Stein, Jr.
               Telecopy Number:  (904) 634-3428

          with a copy to:

               Foley & Lardner
               Greenleaf Building
               200 Laura Street
               Jacksonville, Florida  32202
               Attention:  Charles E. Commander III, Esq.
               Telecopy Number:  (904) 359-8700

or at such other address and to the attention of such other person as the
Company may designate by written notice to Investor.  Notices to Investor shall
be addressed to:

               Security Capital Holdings S.A.
               69, route d'Esch
               L-2953 Luxembourg
               Attention:  Paul E. Szurek
               Telecopy Number:  (352) 4590-3331

          with a copy to:

               Wachtell, Lipton, Rosen & Katz
               51 West 52nd Street
               New York, New York  10019
               Attention:  Adam O. Emmerich, Esq.
               Telecopy Number:  (212) 403-2000

          Section 7.6  Successors and Assigns.  This Agreement
                       ----------------------                 

                                      -36-

<PAGE>
 
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors.  Neither party shall be permitted to assign any of its
rights hereunder to any third party, except that any Investor shall be permitted
to assign its rights hereunder to any other person who would satisfy the
criteria in the definition of "Investor" which agrees to be bound by this
Agreement.

          Section 7.7  Headings.  The Section, Article and other headings
                       --------                                          
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement.  All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.

          Section 7.8  Amendments and Waivers.  This Agreement may not be
                       ----------------------                            
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought.  Any party hereto may, only by an instrument in writing, waive
compliance by another party hereto with any term or provision hereof on the part
of such other party hereto to be performed or complied with.  The waiver by any
party hereto of a breach of any term or provision hereof shall not be construed
as a waiver of any subsequent breach.

          Section 7.9  Interpretation; Absence of Presumption.  (a)  For the
                       --------------------------------------               
purposes hereof, (i) words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other gender
as the context requires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole (including all of the Schedules and Exhibits hereto)
and not to any particular provision of this Agreement, and Article, Section,
paragraph, Schedule and Exhibit references are to the Articles, Sections,
paragraphs, Schedules and Exhibits to this Agreement unless otherwise specified,
(iii) the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall not
be  exclusive, and (v) provisions shall apply, when appropriate, to successive
events and transactions.

          (b)  This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.

                                      -37-

<PAGE>
 
          Section 7.10  Severability.  Any provision hereof which is invalid or
                        ------------                                           
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.

          Section 7.11  Further Assurances.  The Company and Investor agree
                        ------------------                                 
that, from time to time, each of them will, and will cause their respective
Affiliates to, execute and deliver such further instruments and take such other
action as may be necessary to carry out the purposes and intents hereof.

          Section 7.12  Specific Performance.  The Company and Investor each
                        --------------------                                
acknowledge that, in view of the uniqueness of arrangements contemplated by this
Agreement, the parties hereto would not have an adequate remedy at law for money
damages in the event that this Agreement were not performed in accordance with
its terms, and therefore agree that the parties hereto shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which the parties hereto may be entitled at law or in equity.

          Section 7.13  Investor Breach.  In the event Investor shall have
                        ---------------                                   
breached (i) its obligation to effect a purchase of Company Common Stock
pursuant to the Stock Purchase Agreement which breach is neither cured nor
desisted from within 30 days of receipt of written notice of such breach, or
(ii) any of its obligations under this Agreement which breach is neither cured
nor desisted from within 30 days of receipt of written notice of such breach and
which would reasonably be expected to materially adversely affect the Company,
the Company shall no longer be required to perform any of its obligations
hereunder.

          Section 7.14  Confidentiality.  Investor agrees that all information
                        ---------------                                       
provided to Investor or any of its representatives pursuant to this Agreement
shall be kept confidential, and Investor shall not (x) disclose such information
to any persons other than the directors, officers, employees, financial
advisors, legal advisors, accountants, consultants and affiliates of Investor
who reasonably need to have access to the confidential information and who are
advised of the confidential nature of such information or (y) use such
information  in a manner which would be detrimental to the Company; provided,
                                                                    -------- 
however, the foregoing obligation of Investor shall not (a) relate to any
- -------                                                                  
information that (i) is or becomes generally available other than as a result of
unauthorized disclosure by Investor or by persons to whom Investor has made such
information available, (ii) is or becomes available to Investor on a non-
confidential basis from a third party that is not, to Investor's knowledge,
bound by any other confidentiality agreement with the Company,

                                      -38-

<PAGE>
 
or (b) prohibit disclosure of any information if required by law, rule,
regulation, court order or other legal or governmental process.

          Section 7.15  Public Releases and Announcements.  The Company agrees
                        ---------------------------------                     
that until the 20% Termination Date, it shall endeavor to provide to Investor
advance copies of, or, in the case of oral announcements, advance notice of, any
public release or announcement concerning the Company to be issued, released or
made by the Company or any of its Affiliates, in each case, if possible, at
least one Business Day prior to such release or announcement.

                                      -39-

<PAGE>
 
          IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto as of the day first above written.

                              REGENCY REALTY CORPORATION



                              By:
                                 ----------------------------------
                                 Name:  Martin E. Stein, Jr.
                                 Title:   President



                              SECURITY CAPITAL HOLDINGS S.A.



                              By:
                                 ---------------------------------
                                 Name:  Paul E. Szurek
                                 Title:   Managing Director



                              SECURITY CAPITAL U.S. REALTY



                              By:
                                 ---------------------------------
                                 Name:  Paul E. Szurek
                                 Title:   Managing Director



                              THE REGENCY GROUP, INC.



                              By:
                                 ---------------------------------
                                 Name:  Martin E. Stein, Jr.
                                 Title:

                                      -40-

<PAGE>
 
                                                                      Appendix C



            _______________________________________________________



                         REGISTRATION RIGHTS AGREEMENT

                                  by and among

                           REGENCY REALTY CORPORATION

                         SECURITY CAPITAL HOLDINGS S.A.

                                      and

                          SECURITY CAPITAL U.S. REALTY

                                  dated as of

                                _______ __, 1996



            _______________________________________________________

<PAGE>
 
                               TABLE OF CONTENTS


                                                           Page
                                                           ----

<TABLE>
<CAPTION>
 
 
<S>         <C>                                             <C>
Section 1.  Definitions                                      1
            -----------
 
            (a)      "Agreement"                             1
            (b)      "Buyer"                                 1
            (c)      "Commencement Date"                     1
            (d)      "Company"                               1
            (e)      "Company Registration Expenses"         1
            (f)      "Commission"                            2
            (g)      "Exchange Act"                          2
            (h)      "Exercise Notice"                       2
            (i)      "Extraordinary Transaction"             2
            (j)      "Extraordinary Transaction Shares"      2
            (k)      "Holdings"                              2
            (l)      "NASD"                                  2
            (m)      "Registrable Securities"                2
            (n)      "Registration Expenses"                 2
            (o)      "Registration Suspension Period"        3
            (p)      "Securities Act"                        3
            (q)      "Shelf Registration"                    3
            (r)      "Stockholders Agreement"                3
            (s)      "Stock Purchase Agreement"              3
            (t)      "Suspension Notice"                     3
            (u)      "Tag-Along Notice"                      3
            (v)      "Tag-Along Shares"                      3
            (w)      "Third Party"                           3
            (x)      "Underwritten/Placed Offering"          3
            (y)      "USREALTY"                              3
 
Section 2.  Shelf Registration                               3
            ------------------
 
            (a)      Obligation to File and Maintain         3
            (b)      Black-Out Periods of Buyer              4
            (c)      Black-Out Periods of the Company        4
            (d)      Number of Shelf Registrations           5
            (e)      Size of Shelf Registration              6
            (f)      Notice                                  6
            (g)      Expenses                                6
            (h)      Selection of Underwriters               6
 
Section 3.  Incidental Registrations                         6
            ------------------------
 
 
</TABLE>


                                      -i-

<PAGE>
 

<TABLE>

<S>                  <C>                                    <C>
            (a)      Notification and Inclusion              6
            (b)      Cut-back Provisions                     7
            (c)      Expenses                                7
            (d)      Duration of Effectiveness               7
 
Section 4.  Registration Procedures                          7
            -----------------------
 
Section 5.  Requested Underwritten Offerings                10
            --------------------------------
 
Section 6.  Preparation; Reasonable Investigation           10
            -------------------------------------
 
Section 7.  Tag-Along Rights                                11
            ----------------
 
            (a)      Rights and Notice                      11
            (b)      Number of Shares to be Included        11
            (c)      Abandonment of Sale                    11
            (d)      Terms of Sale                          12
            (e)      Timing of Sale                         12
 
Section 8.  Indemnification                                 12
            ---------------
 
            (a)      Indemnification by the Company         12
            (b)      Indemnification by Buyer               13
            (c)      Notices of Claims, etc.                13
            (d)      Other Indemnification                  14
            (e)      Indemnification Payments               14
            (f)      Contribution                           14
 
Section 9.  Covenants Relating to Rule 144                  14
            ------------------------------
 
Section 10. Miscellaneous                                   15
            -------------
 
            (a)      Counterparts                           15
            (b)      Governing Law                          15
            (c)      Entire Agreement                       15
            (d)      Notices                                15
            (e)      Successors and Assigns                 16
            (f)      Headings                               16
            (g)      Amendments and Waivers                 16
            (h)      Interpretation; Absence of
                     Presumption                            16
            (i)      Severability                           17

</TABLE>
 

                                      -ii-

<PAGE>
 
          REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of ________
                                              ---------                        
__, 1996, by and among Regency Realty Corporation, a Florida corporation (the
                                                                             
"Company"), Security Capital U.S. Realty, a Luxembourg corporation ("USREALTY"),
- --------                                                             --------   
and Security Capital Holdings S.A., a Luxembourg corporation ("Holdings") and a
                                                               --------        
wholly owned subsidiary of USREALTY.  Capitalized terms not otherwise defined
herein have the meaning ascribed to them in the Stock Purchase Agreement (as
hereinafter defined).

          WHEREAS, the Company, Holdings and USREALTY have entered into a Stock
Purchase Agreement, dated as of June 11, 1996 (the "Stock Purchase Agreement"),
                                                    ------------------------   
that provides for the purchase by Holdings and sale by the Company to Holdings
of shares of Company Common Stock; and

          WHEREAS, in order to induce Buyer to enter into the Stock Purchase
Agreement, the Company has agreed to provide the registration rights set forth
herein;

          NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:

          Section 1.  Definitions.  As used herein, the following terms
                      -----------                                      
shall have the following meanings:

          (a)  "Agreement" shall have the meaning set forth in the
                ---------                                         
first paragraph hereof.

          (b)  "Buyer" shall mean, collectively, as the context may require,
                -----                                                       
USREALTY and Holdings, and shall also include any Affiliate of USREALTY or
Holdings of which USREALTY and/or Holdings collectively, directly or indirectly,
Beneficially Own 98% or more of the voting power and of the economic interests,
or any bona fide financial institution to which any Buyer has Transferred
(including upon foreclosure of a pledge) shares of Company Stock for the purpose
of securing bona fide indebtedness of any Buyer.  (Capitalized terms used in
this definition and not defined herein shall have the meanings ascribed to them
in the Stockholders Agreement.)

          (c)  "Commencement Date" shall mean the first anniversary of the date
                -----------------                                              
of this Agreement, except that, in the case of any Buyer which is a bona fide
financial institution  to which any other Buyer has Transferred (including upon
foreclosure of a pledge) shares of Company Stock for the purpose of securing
bona fide indebtedness, the Commencement Date shall be the date of this
Agreement.

          (d)  "Company" shall have the meaning set forth in the first
                -------                                               
paragraph hereof.

<PAGE>
 
          (e)  "Company Registration Expenses" shall mean the fees and
                -----------------------------                         
disbursements of counsel and independent public accountants for the Company
incurred in connection with the Company's performance of or compliance with this
Agreement, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, and any
premiums and other costs of policies of insurance obtained by the Company
against liabilities arising out of the sale of any securities.

          (f)  "Commission" shall mean the Securities and Exchange
                ----------                                        
Commission, and any successor thereto.

          (g)  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
                ------------                                                    
amended, and any successor thereto, and the rules and regulations thereunder.

          (h)  "Exercise Notice" shall have the meaning set forth in
                ---------------                                     
Section 7(a).

          (i)  "Extraordinary Transaction" shall mean (i) any merger,
                -------------------------                            
consolidation, sale or acquisition of assets, recapitalization, other business
combination, liquidation, or other action out of the ordinary course of business
of the Company, or (ii) any sale, issuance or other disposition of capital stock
of the Company representing, in the aggregate, at least 30% of the then
outstanding capital stock of the Company.

          (j)  "Extraordinary Transaction Shares" shall have the
                --------------------------------                
meaning set forth in Section 7(a).

          (k)  "Holdings" shall have the meaning set forth in the first
                --------                                               
paragraph hereof.

          (l)  "NASD" shall mean the National Association of Securities
                ----                                                   
Dealers, Inc.

          (m)  "Registrable Securities" shall mean (i) any and all shares of
                ----------------------                                      
Company Stock acquired by Buyer pursuant to the Stock Purchase Agreement, (ii)
any and all securities acquired by Buyer pursuant to Section 4.2 of the
Stockholders Agreement, and (iii) any securities issued or issuable with
respect to any Company Stock or other securities referred to in clause (i) or
(ii) by way of conversion, exchange, stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise.  As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (A) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration state-

                                      -2-

<PAGE>
 
ment, or (B) such securities shall have been sold in accordance with Rule 144
(or any successor provision) under the Securities Act.

          (n)  "Registration Expenses" shall mean all registration, filing and
                ---------------------                                         
stock exchange or NASD fees, all fees and expenses of complying with securities
or blue sky laws, all printing expenses, messenger and delivery expenses, any
fees and disbursements of any separate counsel retained by Buyer, any fees and
disbursements of underwriters customarily paid by sellers of securities who are
not the issuers of such securities and all underwriting discounts and
commissions and transfer taxes, if any, and any premiums and other costs of
policies of insurance obtained by Buyer against liabilities arising out of the
public offering of securities.

          (o)  "Registration Suspension Period" shall have the meaning
                ------------------------------                        
set forth in Section 2(b).

          (p)  "Securities Act" shall mean the Securities Act of 1933, as
                --------------                                           
amended, and any successor thereto, and the rules and regulations thereunder.

          (q)  "Shelf Registration" shall have the meaning set forth in
                ------------------                                     
Section 2(a).

          (r)  "Stockholders Agreement" shall have the meaning set
                ----------------------                            
forth in Section 2(c).

          (s)  "Stock Purchase Agreement" shall have the meaning set
                ------------------------                            
forth in the second paragraph hereof.

          (t)  "Suspension Notice" shall have the meaning set forth in
                -----------------                                     
Section 2(b).

          (u)  "Tag-Along Notice" shall have the meaning set forth in
                ----------------                                     
Section 7(a).

          (v)  "Tag-Along Shares" shall have the meaning set forth in
                ----------------                                     
Section 7(a).

          (w)  "Third Party" shall have the meaning set forth in
                -----------                                     
Section 7(a).

          (x)  "Underwritten/Placed Offering" shall mean a sale of securities of
                ----------------------------                                    
the Company to an underwriter or underwriters for reoffering to the public or on
behalf of a person other than the Company through an agent for sale to the
public.

          (y)  "USREALTY" shall have the meaning set forth in the first
                --------                                               
paragraph hereof.

                                      -3-

<PAGE>
 
          Section 2.  Shelf Registration.  (a)  Obligation to File and Maintain.
                      ------------------        ------------------------------- 
At any time following the Commencement Date, promptly upon the written request
of Buyer, the Company will use its reasonable best efforts to file with the
Commission a registration statement under the Securities Act for the offering on
a continuous or delayed basis in the future of all of the Registrable Securities
(the "Shelf Registration").  The Shelf Registration shall be on an appropriate
      ------------------                                                      
form and the Shelf Registration and any form of prospectus included therein or
prospectus supplement relating thereto shall reflect such plan of distribution
or method of sale as Buyer may from time to time notify the Company, including
the sale of some or all of the Registrable Securities in a public offering or,
if requested by Buyer, subject to receipt by the Company of such information
(including information relating to purchasers) as the Company reasonably may
require, (i) in a transaction constituting an offering outside the United States
which is exempt from the registration requirements of the Securities Act in
which the seller undertakes to effect registration after the completion of such
offering in order to permit such shares to be freely tradeable in the United
States, (ii) in a transaction constituting a private placement under Section
4(2) of the Securities Act in connection with which the seller undertakes to
effect a registration after the conclusion of such placement to permit such
shares to be freely tradeable by the purchasers thereof, or (iii) in a
transaction under Rule 144A of the Securities Act in connection with which the
seller undertakes to effect a registration after the conclusion of such
transaction to permit such shares to be freely tradeable by the purchasers
thereof.  The Company shall use its reasonable best efforts to keep the Shelf
Registration continuously effective for the period beginning on the date on
which the Shelf Registration is declared effective and ending on the first date
that there are no Registrable Securities.  During the period during which the
Shelf Registration is effective, the Company shall supplement or make amendments
to the Shelf Registration, if required by the Securities Act or if reasonably
requested by  Buyer or an underwriter of Registrable Securities, including to
reflect any specific plan of distribution or method of sale, and shall use its
reasonable best efforts to have such supplements and amendments declared
effective, if required, as soon as practicable after filing.

          (b)  Black-Out Periods of Buyer.  Notwithstanding anything herein to
               --------------------------                                     
the contrary, (i) the Company shall have the right from time to time to require
Buyer not to sell under the Shelf Registration or to suspend the effectiveness
thereof during the period starting with the date 30 days prior to the Company's
good faith estimate, as certified in writing by an executive officer of the
Company to Buyer, of the proposed date of filing of a registration statement or
a preliminary prospectus supplement relating to an existing shelf registration
statement, in either case,

                                      -4-

<PAGE>
 
pertaining to an underwritten public offering of equity securities of the
Company for the account of the Company, and ending on the date 90 days following
the effective date of such registration statement or the date of filing of such
prospectus supplement, and (ii) the Company shall be entitled to require Buyer
not to sell under the Shelf Registration or to suspend the effectiveness thereof
(but not for a period exceeding 90 days) if the Company determines, in its good
faith judgment, that such offering or continued effectiveness would interfere
with any material financing, acquisition, disposition, corporate reorganization
or other material transaction involving the Company or any of its subsidiaries
or public disclosure thereof would be required prior to the time such disclosure
might otherwise be required, or when the Company is in possession of material
information that it deems advisable not to disclose in a registration statement.

          Once any registration statement filed pursuant to this Section 2 or in
which Registrable Securities are included pursuant to Section 3 has been
declared effective, any period during which the Company fails to keep such
registration statement effective and usable for resale of Registrable Securities
for the period required by Section 4(b) shall be referred to as a "Registration
                                                                   ------------
Suspension Period".  A Registration Suspension Period shall commence on and
- -----------------                                                          
include the date that the Company gives written notice to Buyer of its
determination that such registration statement is no longer effective or usable
for resale of Registrable Securities (the "Suspension Notice") to and including
                                           -----------------                   
the date when the Company notifies Buyer that the use of the prospectus included
in such registration statement may be resumed for the disposition of Registrable
Securities.

          (c)  Black-Out Periods of the Company.  Subject to the conditions of
               --------------------------------                               
this Section 2(c), Buyer shall have the right, exercisable on not more than two
occasions, to require the Company not to sell, and to use its good faith efforts
to cause any other holder of common equity securities or securities convertible
into common equity securities of the Company not to sell, any common equity
securities of the Company or any securities convertible into common equity
securities of the Company under any registration statement or prospectus
supplement relating to an existing shelf registration statement (other than
sales of shares of Common Stock upon the redemption of limited partnership units
of any Subsidiary of the Company and sales of equity securities issued or
granted pursuant to any employee benefit or similar plan or any dividend
reinvestment plan), or to suspend the effectiveness thereof, during the period
starting with the date 15 days prior to Buyer's good faith estimate, as
certified in writing by an executive officer of Buyer to the Company, of the
proposed date of filing of a preliminary prospectus supplement relating to a
Shelf Registration filed pursuant to Section 2(a), pertaining to an underwritten
pub-

                                      -5-

<PAGE>
 
lic offering of Registrable Securities, and ending on the date 60 days following
the date of filing of the final prospectus supplement, but in no event on a date
later than 75 days following the date of filing of the preliminary prospectus
supplement.  The Company's obligations under this Section 2(c) are subject to
the continuing satisfaction of the following conditions: (a) the Registrable
Securities to be offered by Buyer in such underwritten public offering shall
represent (i) in the case of Buyer's first exercise of its rights under this
Section 2(c), the greater of (A) at least 20% of the then outstanding shares of
Company Common Stock and (B) at least that number of shares of Registrable
Securities having a market value, based on the most recent closing price, of $50
million, in each case determined at the time Buyer exercises its rights under
this Section 2(c); and (ii) in the case of Buyer's second exercise of its rights
under this Section 2(c), the greater of (A) at least 40% of the total number of
shares of Registrable Securities then Beneficially Owned by Buyer and its
Affiliates and (B) at least that number of shares of Registrable Securities
having a market value, based on the most recent closing price, of $60 million,
in each case determined at the time Buyer exercises its rights under this
Section 2(c); (b) no black-out period pursuant to Section 2(b)(i) shall be in
effect at the time of Buyer's exercise of its rights under this Section 2(c);
(c) the Company shall not have suspended sales of Registrable Securities
pursuant to Section 2(b)(ii); (d) the Company shall not have delivered to Buyer
a written notice to the effect that the Board of Directors has determined in
good faith that compliance with this  Section 2(c) would reasonably be expected
to have a Material Adverse Effect on the Company; and (e) Buyer shall not be in
default of any of its material obligations under the Stock Purchase Agreement,
the Stockholders Agreement, dated as of the date hereof, by and among the
Company, Holdings and USREALTY (the "Stockholders Agreement"), or this
                                     ----------------------           
Agreement.  In no event may the Company include in any preliminary prospectus
supplement under which Buyer is offering Registrable Securities covered by this
Section 2(c) any equity securities of the Company or any securities convertible
into equity securities of the Company.

          (d)  Number of Shelf Registrations.  The Company shall be obligated to
               -----------------------------                                    
effect, under this Section 2, a minimum of one Shelf Registration, plus an
additional Shelf Registration for each $50,000,000 of shares of Company Stock
purchased by Buyer from the Company subsequent to the Initial Closing.  A Shelf
Registration shall not be deemed to have been effected, nor shall it be
sufficient to reduce the number of Shelf Registrations available to Buyer under
this Section 2, unless such registration becomes effective pursuant to the
Securities Act and is kept continuously effective for a period of at least two
years (other than any periods during such period of effectiveness which are
Registration Suspension Periods, and provided that no such Registration
Suspension

                                      -6-

<PAGE>
 
Periods shall count towards such two-year period); provided, however, that no
                                                   --------  -------         
Shelf Registration shall be deemed to have been effected, nor shall it reduce
the number of Shelf Registrations available under this Section 2, if such
registration cannot be used by Buyer for more than 60 days as a result of any
stop order, injunction or other order of the Commission or other Government
Authority for any reason other than an act or omission of Buyer.

          (e)  Size of Shelf Registration.  The Company shall not be required to
               --------------------------                                       
effect a Shelf Registration of fewer than 1,000,000 shares or other units of
Registrable Securities (as adjusted for any stock splits, reverse stock splits
or similar events which occur after the date hereof), except that if there are
less than 1,000,000 (as adjusted for any stock splits, reverse stock splits or
similar events which occur after the date hereof) shares of Registrable
Securities outstanding, then the Company shall be required to effect a Shelf
Registration of all of the remaining shares or other units of Registrable
Securities outstanding.

          (f)  Notice.  The Company shall give Buyer prompt notice in the event
               ------                                                          
that the Company has suspended sales of Registrable Securities under Section
2(b).

          (g)  Expenses.  All Registration Expenses incurred in connection with
               --------                                                        
any Shelf Registration which may be requested under this Section 2 shall be
borne by Buyer, and all Company Registration Expenses incurred in connection
with any such Shelf Registration shall be borne by the Company; provided that
Buyer shall reimburse the Company for the first $25,000 of fees and
disbursements of counsel and independent public accountants for the Company
included in Company Registration Expenses and relating to each such Shelf
Registration.

          (h)  Selection of Underwriters.  Any and all underwriters or other
               -------------------------                                    
agents involved in any sale of Registrable Securities pursuant to a registration
statement contemplated by this Section 2 shall include such underwriter(s) or
other agent(s) as selected by Buyer and approved of by the Company, which
approval shall not be unreasonably withheld; provided that Security Capital
Markets Group Incorporated or any other Affiliate of Buyer shall in all events
be approved by the Company.

          Section 3.   Incidental Registrations.  (a)  Notification and
                       ------------------------        ----------------
Inclusion.  If the Company proposes to register for its own account any common
- ---------                                                                     
equity securities of the Company or any securities convertible into common
equity securities of the Company under the Securities Act (other than a
registration relating solely to the sale of securities to participants in a
dividend reinvestment plan, a registration on Form S-4 relating to a business
combination or similar transaction permitted to be registered on such Form S-4,

                                      -7-

<PAGE>
 
a registration on Form S-8 relating solely to the sale of securities to
participants in a stock or employee benefit plan, a registration permitted under
Rule 462 under the Securities Act registering additional securities of the same
class as were included in an earlier registration statement for the same
offering, and declared effective), the Company shall, at each such time after
the Commencement Date, promptly give written notice of such registration to
Buyer.  Upon the written request of Buyer given within 10 days after receipt of
such notice by Buyer, the Company shall seek to include in such proposed
registration such Registrable Securities as Buyer shall request be so included
and shall use its reasonable best efforts to cause a registration statement
covering all of the Registrable Securities that Buyer has requested to be
registered to become effective under the Securities Act.  The Company shall be
under no obligation to complete any offering of securities it proposes to make
under this Section 3 and shall incur no liability to Buyer for its failure to do
so.  If, at any time after giving written notice of its intention to register
any securities and prior to the effective  date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to Buyer and,
thereupon, (i) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses incurred in connection therewith) and (ii) in the case of
a determination to delay registering, the Company shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities.

          (b)  Cut-back Provisions.  If a registration pursuant to this Section
               -------------------                                             
3 involves an Underwritten/Placed Offering of the securities so being
registered, whether or not solely for sale for the account of the Company, which
securities are to be distributed by or through one or more underwriters of
recognized standing under underwriting terms customary for such transaction, and
the underwriter or the managing underwriter, as the case may be, of such
Underwritten/Placed Offering shall inform the Company of its belief that the
amount of securities requested to be included in such registration or offering
exceeds the amount which can be sold in (or during the time of) such offering
without delaying or jeopardizing the success of the offering (including the
price per share of the securities to be sold), then the Company will include in
such registration (i) first, all the securities of the Company which the Company
proposes to sell for its own account or the account of others (other than Buyer)
requesting inclusion in such registration pursuant to rights to registration on
request, and (b) second, to the extent of the amount which the Company is so
advised can be

                                      -8-

<PAGE>
 
sold in (or during the time of) such offering, Registrable Securities and other
securities requested to be included in such registration, pro rata among Buyer
and others exercising incidental registration rights, on the basis of the shares
of Company Stock requested to be included by all such persons.

          (c)  Expenses.  The Company shall bear and pay all Company
               --------                                             
Registration Expenses incurred in connection with any registration of
Registrable Securities pursuant to this Section 3 for Buyer, and all
Registration Expenses incurred in connection with any registration of any other
securities referred to in the first sentence of Section 3(a), and Buyer shall
bear and pay all Registration Expenses incurred in connection with any
registration of Registrable Securities pursuant to this Section 3 for Buyer.

          (d)  Duration of Effectiveness.  At the request of Buyer, the Company
               -------------------------                                       
shall, subject to Section 2(b), use its reasonable best efforts to keep any
registration statement for which Registrable Securities are included under this
Section 3 effective and usable for up to 90 days (subject to extension for the
length of any Registration Suspension Period), unless the distribution of
securities registered thereunder has been earlier completed; provided, however,
                                                             --------  ------- 
that in no event will the Company be required to prepare or file audited
financial statements with respect to any fiscal year by a date prior to the date
on which the Company would be so required to prepare and file such audited
financial statements if such registration statement were no longer effective and
usable.

          Section 4.  Registration Procedures.  In connection with the filing of
                      -----------------------                                   
any registration statement as provided in Section 2 or 3, the Company shall use
its reasonable best efforts to, as expeditiously as reasonably practicable:

            (a) prepare and file with the Commission the requisite registration
     statement (including a prospectus therein) to effect such registration and
     use its reasonable best efforts to cause such registration statement to
     become effective, provided that before filing such registration statement
     or any amendments or supplements thereto, the Company will furnish to the
     counsel selected by Buyer copies of all such documents proposed to be
     filed, which documents will be subject to the review of such counsel before
     any such filing is made, and the Company will comply with any reasonable
     request made by such counsel to make changes in any information contained
     in such documents relating to Buyer;

                                      -9-

<PAGE>
 
            (b) prepare and file with the Commission such amendments and
     supplements to such registration statement and the prospectus used in
     connection therewith as may be necessary to maintain the effectiveness of
     such registration and to comply with the provisions of the Securities Act
     with respect to the disposition of all securities covered by such
     registration statement until, in the case of Section 2, the termination of
     the period during which the Shelf Registration is required to be kept
     effective, or, in the case of Section 3, the earlier of such time as all of
     such securities have  been disposed of and the date which is 90 days after
     the date of initial effectiveness of such registration statement;

            (c) furnish to Buyer such number of conformed copies of such
     registration statement and of each such amendment and supplement thereto
     (in each case including all exhibits), such number of copies of the
     prospectus contained in such registration statements (including each
     complete prospectus and any summary prospectus) and any other prospectus
     filed under Rule 424 under the Securities Act, in conformity with the
     requirements of the Securities Act, and such other documents, including
     documents incorporated by reference, as Buyer may reasonably request;

            (d) register or qualify all Registrable Securities under such other
     securities or blue sky laws of such jurisdictions as Buyer shall reasonably
     request, to keep such registration or qualification in effect for so long
     as such registration statement remains in effect, and take any other action
     which may be reasonably necessary or advisable to enable Buyer to
     consummate the disposition in such jurisdictions of the securities owned by
     Buyer, except that the Company shall not for any such purpose be required
     to qualify generally to do business as a foreign corporation in any
     jurisdiction wherein it would not but for the requirements of this
     paragraph be obligated to be so qualified, or to consent to general service
     of process in any such jurisdiction, or to subject the Company to any
     material tax in any such jurisdiction where it is not then so subject;

            (e) cause all Registrable Securities covered by such registration
     statement to be registered

                                      -10-

<PAGE>
 
     with or approved by such other Government Authority as may be reasonably
     necessary to enable Buyer to consummate the disposition of such Registrable
     Securities;

            (f) furnish to Buyer a signed counterpart, addressed to Buyer (and
     the underwriters, if any), of

                 (i) an opinion of counsel for the Company, dated the effective
          date of such registration statement (and, if such registration
          includes an underwritten public offering, dated the date of the
          closing under the underwriting agreement), reasonably satisfactory in
          form and substance to Buyer, and

                 (ii) to the extent permitted by then applicable rules of
          professional conduct, a "comfort" letter, dated the effective date of
          such registration statement (and, if such registration includes an
          underwritten public offering, dated the date of the closing under the
          underwriting agreement), signed by the independent public accountants
          who have certified the Company's financial statements included in such
          registration statement,

     covering substantially the same matters with respect to such registration
     statement (and the prospectus included therein) and, in the case of the
     accountants' letter, with respect to events subsequent to the date of such
     financial statements, all as are customarily covered in opinions of
     issuer's counsel and in accountants' letters delivered to the underwriters
     in underwritten public offerings of securities;

            (g) immediately notify Buyer at any time when the Company becomes
     aware that a prospectus relating thereto is required to be delivered under
     the Securities Act, of the happening of any event as a result of which the
     prospectus included in such registration statement, as then in effect,
     includes an untrue statement of a material fact or omits to state any
     material fact required to be stated therein or necessary to make the
     statements therein not misleading in the light of the circumstances under
     which they were made, and at the request of Buyer promptly prepare and
     furnish to Buyer a rea-

                                      -11-

<PAGE>
 
     sonable number of copies of a supplement to or an amendment of such
     prospectus as may be necessary so that, as thereafter delivered to the
     purchasers of such securities, such prospectus shall not include an untrue
     statement of a material fact or omit to state a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading in the light of the circumstances under which they were made;

            (h) comply or continue to comply in all material respects with the
     Securities Act and the Exchange Act and with all applicable rules and
     regulations of the Commission, and make available to its security holders,
     as soon as reasonably practicable, an earnings statement covering the
     period of at least 12 months, but not more than 18 months, beginning with
     the first full calendar month after the effective date of such registration
     statement, which earnings statement shall satisfy the provisions of Section
     11(a) of the Securities Act, and not file any amendment or supplement to
     such registration statement or prospectus to which Buyer shall have
     reasonably objected on the grounds that such amendment or supplement does
     not comply in all material respects with the requirements of the Securities
     Act, having been furnished with a copy thereof at least five Business Days
     prior to the filing thereof;

            (i) provide a transfer agent and registrar for all Registrable
     Securities covered by such registration statement not later than the
     effective date of such registration statement; and

            (j) list all Company Stock covered by such registration statement on
     any securities exchange on which any of the Company Stock is then listed.

Buyer shall furnish in writing to the Company such information regarding Buyer
(and any of its affiliates), the Registrable Securities to be sold, the intended
method of distribution of such Registrable Securities, and such other
information requested by the Company as is necessary for inclusion in the
registration statement relating to such offering pursuant to the Securities Act
and the rules of the Commission thereunder.  Such writing shall expressly state
that it is being furnished to the Company for use in the preparation of a
registration statement, preliminary prospectus, supplementary prospectus, final
prospectus or amendment or supplement thereto, as the

                                      -12-

<PAGE>
 
case may be.

          Buyer agrees by acquisition of the Registrable Securities that upon
receipt of any notice from the Company of the happening of any event of the kind
described in paragraph (g) of this Section 4, Buyer will forthwith discontinue
its disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until Buyer's receipt of the copies of
the supplemented  or amended prospectus contemplated by paragraph (g) of this
Section 4.

          Section 5.  Requested Underwritten Offerings.  If requested by the
                      --------------------------------                      
underwriters for any underwritten offerings by Buyer, under a registration
requested pursuant to Section 2(a), the Company will enter into a customary
underwriting agreement with such underwriters for such offering, to contain such
representations and warranties by the Company and such other terms as are
customarily contained in agreements of this type, including indemnities to the
effect and to the extent provided in Section 6.  Buyer shall be a party to such
underwriting agreement and may, at its option, require that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of Buyer.
Buyer shall not be required to make any representations or warranties to or
agreement with the Company or the underwriters other than representations,
warranties or agreements regarding Buyer and Buyer's intended method of
distribution and any other representation or warranty required by law.

          Section 6.  Preparation; Reasonable Investigation.  In connection with
                      -------------------------------------                     
the preparation and filing of the registration statement under the Securities
Act, the Company will give Buyer, its underwriters, if any, and their respective
counsel, the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers, its counsel and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of Buyer's and such underwriters' respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act.

          Section 7.  Tag-Along Rights.  From and after the date hereof until
                      ----------------                                       
the earlier of (i) the date on which Buyer shall own shares of Company Common
Stock representing less

                                      -13-

<PAGE>
 
than 9.8% of the then outstanding shares of Company Common Stock on a fully
diluted basis, or (ii) the date on which Buyer shall no longer be subject to the
standstill restrictions set forth in Section 5.2(a) of the Stockholders
Agreement (unless Buyer is not subject to such restrictions as a result of an
Early Termination Event (as that term is defined in the Stockholders
Agreement)), Buyer shall be entitled to the rights set forth in this Section 7.

          (a)  Rights and Notice.  The Company shall not directly or indirectly
               -----------------                                               
sell or otherwise dispose of shares of Company Stock to any person (a "Third
                                                                       -----
Party") in connection with an Extraordinary Transaction in which the
- -----                                                               
consideration for some or all of the shares of Company Stock is cash or cash
equivalents (as determined under GAAP), unless the terms and conditions of such
sale or other disposition shall include an offer to Buyer to include, at the
option of Buyer, in such sale or other disposition the Registrable Securities
owned by Buyer at the time of such sale or other disposition determined in
accordance with Section 7(b) (the "Tag-Along Shares").  The Company shall send a
                                   ----------------                             
written notice (the "Tag-Along Notice") to Buyer setting forth the number of
                     ----------------                                       
shares of Company Stock proposed to be sold or otherwise disposed of in the
Extraordinary Transaction (the "Extraordinary Transaction Shares"), and the
                                --------------------------------           
price at which such shares are proposed to be sold (or the method by which such
price is proposed to be determined).  At any time within 15 days after its
receipt of the Tag-Along Notice, Buyer may exercise its option to sell the Tag-
Along Shares by furnishing written notice of such exercise (the "Exercise
                                                                 --------
Notice") to the Company.

          (b)  Number of Shares to be Included.  If the proposed sale or other
               -------------------------------                                
disposition by the Company in connection with an Extraordinary Transaction is
consummated, Buyer shall have the right to sell to the Third Party as part of
such proposed sale or other disposition such number of Registrable Securities
owned by Buyer equal to the product of (i) the ratio (which in no event shall
exceed 20% for purposes of this Section 7) of the total number of Registrable
Securities owned by Buyer at the time that Buyer receives the Tag-Along Notice
to the total number of outstanding shares of Company Stock, on a fully diluted
basis, at the time that Buyer receives the Tag-Along Notice, and (ii) the number
of Extraordinary Transaction Shares; provided, however, that if the number of
                                     --------  -------                       
Tag-Along Shares is greater than the number of Registrable Securities owned by
Buyer at the time that Buyer receives the Tag-Along Notice, then Buyer shall
have the right to sell to the Third Party as part of the proposed sale or other
disposition to the Third Party by the Company in connection with an
Extraordinary Transaction the total number of Regis-

                                      -14-

<PAGE>
 
trable Securities owned by Buyer at the time that Buyer receives the Tag-Along
Notice.  All calculations pursuant to this paragraph shall exclude and ignore
any unissued shares of Company Stock issuable pursuant to stock options,
warrants and other rights to acquire shares of Company Stock and pursuant to
convertible or exchangeable securities.

          (c)  Abandonment of Sale.  Each of the Company and the Third Party
               -------------------                                          
shall have the right, in its sole discretion,  at all times prior to
consummation of the proposed sale or other disposition giving rise to the tag-
along right granted by this Section 7 to abandon, rescind, annul, withdraw or
otherwise terminate such sale or other disposition, whereupon all tag-along
rights in respect of such sale or other disposition pursuant to this Section 7
shall become null and void, and neither the Company nor the Third Party shall
have any liability or obligation to Buyer with respect thereto by virtue of such
abandonment, rescission, annulment, withdrawal or termination.

          (d)  Terms of Sale.  The purchase from Buyer pursuant to this Section
               -------------                                                   
7 shall be on the same terms and conditions, including the per share price and
the date of sale or other disposition, as are applicable to the Company, and
which shall be consistent with the relevant Tag-Along Notice.

          (e)  Timing of Sale.  If, with respect to any Tag-Along Notice, Buyer
               --------------                                                  
fails to deliver an Exercise Notice within the requisite time period, the
Company shall have 120 days after the expiration of the time in which the
Exercise Notice is required to be delivered in which to sell or otherwise
dispose of not more than the number of shares of Company Stock described in the
Tag-Along Notice on terms not more favorable to the Company than were set forth
in the Tag-Along Notice.  If, at the end of 120 days following the receipt of
the Tag-Along Notice, the Company has not completed the sale or other
disposition of Company Stock in accordance with the terms described in the Tag-
Along Notice, the Company shall again be obligated to comply with the provisions
of this Section 7 with respect to, and provide Buyer with the opportunity to
participate in, any proposed sale or other disposition of shares of Company
Stock in connection with an Extraordinary Transaction.

          Section 8.  Indemnification.  (a)  Indemnification by the Company.  In
                      ---------------        ------------------------------     
the event of any registration of any Registrable Securities of the Company under
the Securities Act, the Company will, and hereby does, indemnify and hold
harmless Buyer, each other person who participates as an underwriter in the
offering or sale of such securities and each other person who controls any such
underwriter within the meaning of the

                                      -15-

<PAGE>
 
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which Buyer or any such underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement under which such Registrable Securities were registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Company will
reimburse Buyer and each such underwriter and controlling person for any
reasonable legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceedings; provided, however, that the Company shall not be liable in any such
             --------  -------                                                  
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by Buyer or any
other person who participates as an underwriter in the offering or sale of such
securities, in either case, specifically stating that it is for use in the
preparation thereof, and provided, further, that the Company shall not be liable
                         --------  -------                                      
to any person who participates as an underwriter in the offering or sale of
Registrable Securities or any other person, if any, who controls such
underwriter within the meaning of the Securities Act in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such person's failure to send or give
a copy of the final prospectus or supplement to the persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus or
supplement.  Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Buyer or any such underwriter or
controlling person and shall survive the transfer of such securities by Buyer.

          (b)  Indemnification by Buyer.  The Company may re-
               ------------------------                      

                                      -16-

<PAGE>
 
quire, as a condition to including any Registrable Securities in any
registration statement pursuant to Section 2 or Section 3, that the Company
shall have received an undertaking satisfactory to it from Buyer to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 8) the Company, each director of the Company, each
officer of the Company and each other  person, if any, who controls the Company
within the meaning of the Securities Act, and each other person who participates
as an underwriter in the offering or sale of such securities and each other
person who controls any such underwriter within the meaning of the Securities
Act, with respect to any untrue statement or alleged untrue statement of a
material fact in or omission or alleged omission to state a material fact from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by Buyer specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement.  Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, or controlling person and
shall survive the transfer of such securities by Buyer.

          (c)  Notices of Claims, etc.  Promptly after receipt by an indemnified
               -----------------------                                          
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 8, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
             --------  -------                                              
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 8, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice.  In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying

                                      -17-

<PAGE>
 
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation.

          (d)  Other Indemnification.  Indemnification similar to that specified
               ---------------------                                            
in the preceding paragraphs of this  Section 8 (with appropriate modifications)
shall be given by the Company and Buyer with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of Governmental Authority other than the Securities Act.

          (e)  Indemnification Payments.  The indemnification required by this
               ------------------------                                       
Section 8 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.

          (f)  Contribution.  If, for any reason, the foregoing indemnity is
               ------------                                                 
unavailable, or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of the expense, loss, damage or liability, (i) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other
(determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission relates to information supplied
by the indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission), or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in the proportion as
is appropriate to reflect not only the relative fault of the indemnifying party
and the indemnified party, but also the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other, as
well as any other relevant equitable considerations.  No indemnified party
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any indemnifying
party who was not guilty of such fraudulent misrepresentation.

          Section 9.  Covenants Relating to Rule 144.  The Company will file in
                      ------------------------------                           
a timely manner (taking into account any extensions granted by the Commission),
information, documents and reports in compliance with the Exchange Act and will,
at

                                      -18-

<PAGE>
 
its expense, forthwith upon the request of Buyer, deliver to Buyer a
certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's
Commission file number, (d) the number of shares of  Company Common Stock and
the number of shares of Company Preferred Stock outstanding as shown by the most
recent report or statement published by the Company, and (e) whether the Company
has filed the reports required to be filed under the Exchange Act for a period
of at least 90 days prior to the date of such certificate and in addition has
filed the most recent annual report required to be filed thereunder.  If at any
time the Company is not required to file reports in compliance with either
Section 13 or Section 15(d) of the Exchange Act, the Company will, at its
expense, forthwith upon the written request of Buyer, make available adequate
current public information with respect to the Company within the meaning of
paragraph (c)(2) of Rule 144 of the General Rules and Regulations promulgated
under the Securities Act.

          Section 10.  Miscellaneous.  (a)  Counterparts.  This Agreement may be
                       -------------        ------------                        
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other party.
Copies of executed counterparts transmitted by telecopy, telefax or other
electronic transmission service shall be considered original executed
counterparts for purposes of this Section 10, provided receipt of copies of such
counterparts is confirmed.

          (b)  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
               -------------                                                    
IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF.

          (c)  Entire Agreement.  This Agreement (including agreements
               ----------------                                       
incorporated herein) contains the entire agreement between the parties with
respect to the subject matter hereof and there are no agreements or
understandings between the parties other than those set forth or referred to
herein.  This Agreement is not intended to confer upon any person not a party
hereto (and their successors and assigns) any rights or remedies hereunder.

          (d)  Notices.  All notices and other communications hereunder shall be
               -------                                                          
sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is

                                      -19-

<PAGE>
 
confirmed, telecopy, telefax or other electronic transmission service to the
appropriate address or number as set forth below.  Notices to the Company shall
be addressed to:

               Regency Realty Corporation
               121 W. Forsyth Street, Suite 200
               Jacksonville, Florida  32202
               Attention:  Martin E. Stein, Jr.
               Telecopy Number:  (904) 634-3428

            with a copy to:

               Foley & Lardner
               Greenleaf Building
               200 Laura Street
               Jacksonville, Florida  32202
               Attention:  Charles E. Commander III, Esq.
               Telecopy Number:  (904) 359-8700

or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer.  Notices to Buyer shall be
addressed to:

               Security Capital Holdings S.A.
               69, route d'Esch
               L-2953 Luxembourg
               Attention: Paul E. Szurek
               Telecopy Number: (352) 4590-3331

            with a copy to:

               Wachtell, Lipton, Rosen & Katz
               51 West 52nd Street
               New York, New York  10019
               Attention:  Adam O. Emmerich, Esq.
               Telecopy Number:  (212) 403-2000

          (e)  Successors and Assigns.  This Agreement shall be binding upon and
               ----------------------                                           
inure to the benefit of the parties hereto and their respective successors.
Neither party shall be permitted to assign any of its rights hereunder to any
third party, except that if (i) Buyer transfers or pledges any or all
Registrable Securities to a bona fide financial institution as security for any
bona fide indebtedness of any Buyer and such financial institution agrees to be
bound by the Stockholders Agreement, the pledgee of the Registrable Securities
shall be considered an intended beneficiary hereof and may exercise all rights
of Buyer hereunder, and (ii) any person included within the definition of the
term Buyer shall be permitted to assign its rights hereunder to any other person

                                      -20-

<PAGE>
 
included within such definition.

          (f)  Headings.  The Section and other headings contained in this
               --------                                                   
Agreement are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.  All references to Sections or
other headings contained herein mean Sections or other headings of this
Agreement unless otherwise stated.

          (g)  Amendments and Waivers.  This Agreement may not be modified or
               ----------------------                                        
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought.
Either party hereto may, only by an instrument in writing, waive compliance by
the other party hereto with any term or provision hereof on the part of such
other party hereto to be performed or complied with.  The waiver by any party
hereto of a breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.

          (h)  Interpretation; Absence of Presumption.  For the purposes hereof,
               --------------------------------------                           
(i) words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other gender as the context
requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and Section,
paragraph or other references are to the Sections, paragraphs, or other
references to this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive, and (v)
provisions shall apply, when appropriate, to successive events and transactions.

          This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.

          (i)  Severability.  Any provision hereof which is invalid or
               ------------                                           
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.

                                      -21-

<PAGE>
 
          IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto as of the day first above written.

                              REGENCY REALTY CORPORATION



                              By:
                                 ----------------------------------
                                 Name:  Martin E. Stein, Jr.
                                 Title:   President


                              SECURITY CAPITAL U.S. REALTY



                              By:
                                 ----------------------------------
                                 Name:  Paul E. Szurek
                                 Title:   Managing Director


                              SECURITY CAPITAL HOLDINGS S.A.



                              By:
                                 ----------------------------------
                                 Name:  Paul E. Szurek
                                 Title:   Managing Director
                             

                                      -22-

<PAGE>
 
                                                                     APPENDIX D 
                    PROPOSED AMENDMENT TO COMPANY CHARTER
                     -------------------------------------

                                        
          The Amended and Restated Articles of Incorporation of the Company are
hereby amended by deleting Article 5 thereof in its entirety, and inserting in
lieu thereof the following:


                                   "ARTICLE 5

                                REIT PROVISIONS

     Section 5.1.  Definitions.  For the purposes of this Article 5, the
                   -----------                                          
following terms shall have the following meanings:

          (a)  "Acquire" shall mean the acquisition of Beneficial Ownership of
     shares of Capital Stock by any means including, without limitation,
     acquisition pursuant to the exercise of any option, warrant, pledge or
     other security interest or similar right to acquire shares, but shall not
     include the acquisition of any such rights, unless, as a result, the
     acquirer would be considered a Beneficial Owner as defined below.  The term
     "Acquisition" shall have the correlative meaning.

          (b) "Actual Owner" shall mean, with respect to any Capital Stock, that
     Person who is required to include in its gross income any dividends paid
     with respect to such Capital Stock.

          (c) "Beneficial Ownership" shall mean ownership of Capital Stock by a
     Person who would be treated as an owner of such shares of Capital Stock,
     either directly or indirectly, under Section 542(a)(2) of the Code, taking
     into account for this purpose (i) constructive ownership determined under
     Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code
     (except where expressly provided otherwise); and (ii) any future amendment
     to the Code which has the effect of modifying the ownership rules under
     Section 542(a)(2) of the Code.  The terms "Beneficial Owner," "Beneficially
     Owns" and "Beneficially Owned" shall have the correlative meanings.

          (d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
     In the event of any future amendments to the Code involving the renumbering
     of Code sections, the Board of Directors may, in its sole discretion,
     determine that any reference to a Code section herein shall mean the
     successor Code section pursuant to such amendment.

          (e) "Constructive Ownership" shall mean ownership of Capital Stock by
     a Person who would be treated as an owner of such Capital Stock, either
     directly or constructively, through

<PAGE>
 
     the application of Section 318 of the Code, as modified by Section
     856(d)(5) of the Code.  The terms "Constructive Owner', "Constructively
     Owns" and "Constructively Owned" shall have the correlative meanings.

          (f) "Existing Holder" shall mean any of The Regency Group, Inc., MEP,
     Ltd., and The Regency Group II, Ltd. (and any Person who is a Beneficial
     Owner of Capital Stock as a result of attribution of the Beneficial
     Ownership from any of the Persons previously identified) who at the opening
     of business on the date after the Initial Public Offering was the
     Beneficial Owner of Capital Stock in excess of the Ownership Limit; and any
     Person who Acquires Beneficial Ownership from another Existing Holder,
     except by Acquisition on the open market, so long as, but only so long as,
     such Person Beneficially Owns Capital Stock in excess of the Ownership
     Limit.

          (g) "Existing Holder Limit" for an Existing Holder shall mean,
     initially, the percentage by value of the outstanding Capital Stock
     Beneficially Owned by such Existing Holder at the opening of business on
     the date after the Initial Public Offering, and after any adjustment
     pursuant to Section 5.8 hereof, shall mean such percentage of the
     outstanding Capital Stock as so adjusted; provided, however, that the
     Existing Holder Limit shall not be a percentage which is less than the
     Ownership Limit or in excess of 9.8%.  Beginning with the date after the
     Initial Public Offering, the Secretary of the Corporation shall maintain
     and, upon request, make available to each Existing Holder, a schedule which
     sets forth the then current Existing Holder Limits for each Existing
     Holder.

          (h) "Initial Public Offering" means the closing of the sale of shares
     of Common Stock pursuant to the Corporation's first effective registration
     statement for such Common Stock filed under the Securities Act of 1933, as
     amended.

          (i) "Non-U.S. Person" shall mean any Person who is not (i) a citizen
     or resident of the United States, (ii) a partnership created or organized
     in the United States or under the laws of the United States or any state
     therein (including the District of Columbia), (iii) a corporation created
     or organized in the United States or under the laws of the United States or
     any state therein (including the District of Columbia), or (iv) any estate
     or trust  (other than a foreign estate or foreign trust, within the meaning
     of Section 7701(a)(31) of the Code).

          (j) "Ownership Limit" shall initially mean 7% by value of the
     outstanding Capital Stock of the Corporation, and after

                                      -2-

<PAGE>
 
     any adjustment as set forth in Section 5.9, shall mean such greater
     percentage (but not greater than 9.8%) by value of the outstanding Capital
     Stock as so adjusted.

          (k) "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
     retained by the Company which participates in a public offering of the
     Capital Stock for a period of 90 days following the purchase by such
     underwriter of the Capital Stock, provided that ownership of Capital Stock
     by such underwriter would not result in the Corporation being "closely
     held" within the meaning of Section 856(h) of the Code and would not
     otherwise result in the Corporation failing to quality as a REIT.

          (l) "REIT" shall mean a real estate investment trust under Section 856
     of the Code.

          (m) "Redemption Price" shall mean the lower of (i) the price paid by
     the transferee from whom shares are being redeemed and (ii) the average of
     the last reported sales price, regular way, on the New York Stock Exchange
     of the relevant class of Capital Stock on the ten trading days immediately
     preceding the date fixed for redemption by the Board of Directors, or if
     the relevant class of Capital Stock is not then traded on the New York
     Stock Exchange, the average of the last reported sales prices, regular way,
     of such class of Capital Stock (or, if sales prices, regular way, are not
     reported, the average of the closing bid and asked prices) on the ten
     trading days immediately preceding the relevant date as reported on any
     exchange or quotation system over which the Capital Stock may be traded, or
     if such class of Capital Stock is not then traded over any exchange or
     quotation system, then  the price determined in good faith by the Board of
     Directors of the Corporation as the fair market value of such class of
     Capital Stock on the relevant date.

          (n) "Related Tenant Owner" shall mean any Constructive Owner who also
     owns, directly or indirectly, an interest in a Tenant, which interest is
     equal to or greater than (i) 10% of the combined voting power of all
     classes of stock of such Tenant, (ii) 10% of the total number of shares of
     all classes

                                      -3-

<PAGE>
 
     of stock of such Tenant, or (iii) if such Tenant is not a corporation, 10%
     of the assets or net profits of such Tenant.

          (o) "Related Tenant Limit" shall mean 9.8% by value of the outstanding
     Capital Stock of the Corporation.

          (p) "Restriction Termination Date" shall mean the first day after the
     date of the Initial Public Offering on which the Corporation determines
     pursuant to Section 5.13 that it is no longer in the best interest of the
     Corporation to attempt to, or continue to, qualify as a REIT.

          (q) "Special Shareholder" shall mean any of (i) Security Capital U.S.
     Realty, Security Capital Holdings S.A. and any Affiliate (as such term is
     defined in the Stockholders Agreement) of Security Capital U.S. Realty or
     Security Capital Holdings S.A., (ii) any Investor (as such term is defined
     in Section 5.2 of the Stockholders Agreement), (iii) any bona fide
     financial institution to whom Capital Stock is Transferred in connection
     with any bona fide indebtedness of any Investor or any Person previously
     identified, (iv) any Person who is considered a Beneficial Owner of Capital
     Stock as a result of the attribution of Beneficial Ownership from any of
     the Persons previously identified and (v) any one or more Persons who
     Acquire Beneficial Ownership from a Special Shareholder, except by
     Acquisition on the open market.

          (r) "Special Shareholder Limit" for a Special Shareholder shall mean,
     initially, 45% of the outstanding shares of Common Stock of the
     Corporation, on a fully diluted basis, and after any adjustment pursuant to
     Section 5.8 shall mean the percentage of the outstanding Capital Stock as
     so adjusted; provided, however, that if any Person and its Affiliates
                  --------  -------                                       
     (taken as a whole), other than the Special Shareholder, shall directly or
     indirectly own in the aggregate more than 45% of the outstanding shares of
     Common Stock of the Corporation, on a fully diluted basis, the definition
     of "Special Shareholder Limit" shall be revised in accordance with Section
     5.8 of the Stockholders Agreement. Notwithstanding the foregoing provisions
     of this definition, if, as the result of any Special Shareholder's
     ownership (taking into account for this purpose constructive ownership
     under Section 544 of the Code, as modified by Section 856(h)(1)(B) of the
     Code) of shares of Capital Stock, any Person who is an individual within
     the meaning of Section 542(a)(2) of the Code (taking into account the
     ownership attribution rules under Section 544 of the Code, as modified by
     Section 856(h) of the Code) and who is the Beneficial Owner of any interest
     in a Special Shareholder would be considered to Beneficially Own more than
     9.8% of the outstanding shares of Capital Stock, then unless such

                                      -4-

<PAGE>
 
     individual reduces his or her interest in the Special Shareholder so that
     such Person no longer Beneficially Owns more than 9.8% of the outstanding
     shares of Capital Stock, the Special Shareholder Limit shall be reduced to
     such percentage as would result in such Person not being considered to
     Beneficially Own more than 9.8% of the outstanding Shares of Capital Stock.
     Notwithstanding anything contained herein to the contrary, in no event
     shall the Special Shareholder Limit be reduced below the Ownership Limit.
     At the request of the Special Shareholders, the Secretary of the
     Corporation shall maintain and, upon request, make available to each
     Special Shareholder a schedule which sets forth the then current Special
     Shareholder Limits for each Special Shareholder.

          (s) "Stock Purchase Agreement" shall mean that Stock Purchase
     Agreement dated as of June 11, 1996, by and among the Corporation, Security
     Capital Holdings S.A., and Security Capital U.S. Realty, as the same may be
     amended from time to time.

          (t) "Stockholders Agreement" shall mean that Stockholders Agreement
     dated as of July 10, 1996, by and among the Corporation, Security Capital
     Holdings S.A., and Security Capital U.S. Realty, as the same may be amended
     from time to time.

          (u) "Tenant" shall mean any tenant of (i) the Corporation, (ii) a
     subsidiary of the Corporation which is deemed to be a "qualified REIT
     subsidiary" under Section 856(i)(2) of the Code, or (iii) a partnership in
     which the Corporation or one or more of its qualified REIT subsidiaries is
     a partner.

          (v) "Transfer" shall mean any sale, transfer, gift, assignment,
     devise, or other disposition of Capital Stock or the right to vote or
     receive dividends on Capital Stock (including (i) the granting of any
     option or entering into  any agreement for the sale, transfer or other
     disposition of Capital Stock or the right to vote or receive dividends on
     the Capital Stock or (ii) the sale, transfer, assignment or other
     disposition or grant of any securities or rights convertible or
     exchangeable for Capital Stock), whether voluntarily or involuntarily,
     whether of record or Beneficially, and whether by operation of law or
     otherwise; provided, however, that any bona fide pledge of Capital Stock
     shall not be deemed a Transfer until such time as the pledgee effects an
     actual change in ownership of the pledged shares of Capital Stock.

     Section 5.2.  Restrictions on Transfer.  Except as provided in Section 5.11
                   ------------------------                                     
and Section 5.16, during the period commencing at the Initial Public Offering:

                                      -5-

<PAGE>
 
          (a) No Person (other than an Existing Holder or a Special Shareholder)
     shall Beneficially Own Capital Stock in excess of the Ownership Limit, no
     Existing Holder shall Beneficially Own Capital Stock in excess of the
     Existing Holder Limit for such Existing Holder and no Special Shareholder
     shall Beneficially Own Capital Stock in excess of the Special Shareholder
     Limit.

          (b) No Person shall Constructively Own Capital Stock in excess of the
     Related Tenant Limit for more than thirty (30) days following the date such
     Person becomes a Related Tenant Owner.

          (c) Any Transfer that, if effective, would result in any Person (other
     than an Existing Holder or a Special Shareholder) Beneficially Owning
     Capital Stock in excess of the Ownership Limit shall be void ab initio as
                                                                  ---------   
     to the Transfer of such Capital Stock which would be otherwise Beneficially
     Owned by such Person in excess of the Ownership Limit, and the intended
     transferee shall Acquire no rights in such Capital Stock.

          (d) Any Transfer that, if effective, would result in any Existing
     Holder Beneficially Owning Capital Stock in excess of the applicable
     Existing Holder Limit shall be void ab initio as to the Transfer of such
                                         ---------                           
     Capital Stock which would be otherwise Beneficially Owned by such Existing
     Holder in excess of the applicable Existing Holder Limit, and such Existing
     Holder shall Acquire no rights in such Capital Stock.

          (e) Any Transfer that, if effective, would result in any Special
     Shareholder Beneficially Owning Capital Stock in excess of the applicable
     Special Shareholder Limit  shall be void ab initio as to the Transfer of
                                              -- ------                      
     such Capital Stock which would be otherwise Beneficially Owned by such
     Special Shareholder in excess of the applicable Special Shareholder Limit,
     and such Special Shareholder shall Acquire no rights in such Capital Stock.

          (f) Any Transfer that, if effective, would result in any Related
     Tenant Owner Constructively Owning Capital Stock in excess of the Related
     Tenant Limit shall be void ab initio as to the Transfer of such Capital
                                ---------                                   
     Stock which would be otherwise Constructively Owned by such Related Tenant
     Owner in excess of the Related Tenant Limit, and the intended transferee
     shall Acquire no rights in such Capital Stock.

          (g) Any Transfer that, if effective, would result in the Capital Stock
     being beneficially owned by less than 100 Persons (within the meaning of
     Section 856(a)(5) of the Code)

                                      -6-

<PAGE>
 
     shall be void ab initio as to the Transfer of such Capital Stock which
                   ---------                                               
     would be otherwise beneficially owned by the transferee, and the intended
     transferee shall Acquire no rights in such Capital Stock.

          (h) Any Transfer that, if effective, would result in the Corporation
     being "closely held" within the meaning of Section 856(h) of the Code shall
     be void ab initio as to the portion of any Transfer of the Capital Stock
             ---------                                                       
     which would cause the Corporation to be "closely held" within the meaning
     of Section 856(h) of the Code, and the intended transferee shall Acquire no
     rights in such Capital Stock.

          (i) Any other Transfer that, if effective, would result in the
     disqualification of the Corporation as a REIT by virtue of actual,
     Beneficial or Constructive Ownership of Capital Stock shall be void ab
                                                                         --
     initio as to such portion of the Transfer resulting in the
     ------                                                    
     disqualification, and the intended transferee shall Acquire no rights in
     such Capital Stock.

     Section 5.3.  Remedies for Breach.
                   ------------------- 

          (a) If the Board of Directors or a committee thereof shall at any time
determine in good faith that a Transfer has taken place that falls within the
scope of Section 5.2 or that a Person intends to Acquire Beneficial Ownership of
any shares of the Corporation that would result in a violation of Section 5.2
(whether or not such violation is intended), the Board of Directors or a
committee thereof shall take such action as it  or they deem 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, subject, however, in all cases
to the provisions of Section 5.16.

          (b) Without limitation to Sections 5.2 and 5.3(a), any purported
transferee of shares Acquired in violation of Section 5.2 and any Person
retaining shares in violation of Section 5.2(b) shall be deemed to have acted as
agent on behalf of the Corporation in holding those shares Acquired or retained
in violation of Section 5.2 and shall be deemed to hold such shares in trust on
behalf of and for the benefit of the Corporation.  Such shares shall be deemed a
separate class of stock until such time as the shares are sold or redeemed as
provided in Section 5.3(c).  The holder shall have no right to receive dividends
or other distributions with respect to such shares, and shall have no right to
vote such shares.  Such holder shall have no claim, cause of action or any other
recourse whatsoever against any transferor of shares Acquired in violation of
Section 5.2.  The holder's sole right with respect to such shares shall be to
receive, at the

                                      -7-

<PAGE>
 
Corporation's sole and absolute discretion, either (i) consideration for such
shares upon the resale of the shares as directed by the Corporation pursuant to
Section 5.3(c) or (ii) the Redemption Price pursuant to Section 5.3(c).  Any
distribution by the Corporation in respect of such shares Acquired or retained
in violation of Section 5.2 shall be repaid to the Corporation upon demand.

          (c) The Board of Directors shall, within six months after receiving
notice of a Transfer or Acquisition that violates Section 5.2 or a retention of
shares in violation of Section 5.2(b), either (in its sole and absolute
discretion, subject to the requirements of Florida law applicable to redemption)
(i) direct the holder of such shares to sell all shares held in trust for the
Corporation pursuant to Section 5.3(b) for cash in such manner as the Board of
Directors directs or (ii) redeem such shares for the Redemption Price in cash on
such date within such six month period as the Board of Directors may determine.
If the Board of Directors directs the holder to sell the shares, the holder
shall receive such proceeds as the trustee for the Corporation and pay the
Corporation out of the proceeds of such sale (i) all expenses incurred by the
Corporation in connection with such sale, plus (ii) any remaining amount of such
proceeds that exceeds the amount paid by the holder for the shares, and the
holder shall be entitled to retain only the amount of such proceeds in excess of
the amount required to be paid to the Corporation.

     Section 5.4.  Notice of Restricted Transfer.  Any Person who Acquires,
                   -----------------------------                           
attempts or intends to Acquire, or retains shares in violation of Section 5.2
shall immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer, attempted or
intended Transfer, or retention, on the Corporation's status as a REIT.

     Section 5.5.  Owners Required to Provide Information.  From the date of the
                   --------------------------------------                       
Initial Public Offering and prior to the Restriction Termination Date:

          (a) Every shareholder of record of more than 5% by value (or such
     lower percentage as required by the Code or the regulations promulgated
     thereunder) of the outstanding Capital Stock of the Corporation shall,
     within 30 days after December 31 of each year, give written notice to the
     Corporation stating the name and address of such record shareholder, the
     number and class of shares of Capital Stock Beneficially Owned by it, and a
     description of how such shares are held; provided that a shareholder of
     record who holds outstanding Capital Stock of the Corporation as nominee
     for another Person, which

                                      -8-

<PAGE>
 
     Person is required to include in its gross income the dividends received on
     such Capital Stock (an "Actual Owner"), shall give written notice to the
     Corporation stating the name and address of such Actual Owner and the
     number and class of shares of such Actual Owner with respect to which the
     shareholder of record is nominee.  Each such shareholder of record shall
     provide to the Corporation such additional information as the Corporation
     may request in order to determine the effect, if any, of such Beneficial
     Ownership on the Corporation's status as a REIT.

          (b) Every Actual Owner of more than 5% by value (or such lower
     percentage as required by the Code or Regulations promulgated thereunder)
     of the outstanding Capital Stock of the Corporation who is not a
     shareholder of record of the Corporation, shall within 30 days after
     December 31 of each year, give written notice to the Corporation stating
     the name and address of such Actual Owner, the number and class of shares
     Beneficially Owned, and a description of how such shares are held.

          (c) Each Person who is a Beneficial Owner of Capital Stock and each
     Person (including the shareholder of record) who is holding Capital Stock
     for a Beneficial Owner shall provide to the Corporation such information as
     the Corporation may request, in good faith, in order to determine the
     Corporation's status as a REIT.

          (d) Nothing in this Section 5.5 or any request pursuant hereto shall
     be deemed to waive any limitation in Section 5.2.

     Section 5.6.  Remedies Not Limited.  Except as provided in Section 5.15,
                   --------------------                                      
nothing contained in this Article 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 shareholders in preserving the
Corporation's status as a REIT.

     Section 5.7.  Ambiguity.  In the case of an ambiguity in the application of
                   ---------                                                    
any of the provisions of this Article 5, including without limitation any
definition contained in Section 5.1 and any determination of Beneficial
Ownership, the Board of Directors in its sole discretion shall have the power to
determine the application of the provisions of this Article 5 with respect to
any situation based on the facts known to it.

     Section 5.8.  Modification of Existing Holder Limits and Special
                   --------------------------------------------------
Shareholder Limits.  Subject to the provisions of Section 5.10, the Existing
- ------------------                                                          
Holder Limits may or shall, as provided below, be modified as follows:

                                      -9-

<PAGE>
 
          (a) Any Existing Holder or Special Shareholder may Transfer Capital
     Stock to another Person, and, so long as such Transfer is not on the open
     market, any such Transfer will decrease the Existing Holder Limit or
     Special Shareholder Limit, as applicable, for such transferor (but not
     below the Ownership Limit) and increase the Existing Holder Limit or
     Special Shareholder Limit, as applicable, for such transferee by the
     percentage of the outstanding Capital Stock so transferred. The transferor
     Existing Holder or Special Shareholder, as applicable, shall give the Board
     of Directors of the Corporation prompt written notice of any such transfer.
     Any Transfer by an Existing Holder or Special Shareholder on the open
     market shall neither reduce its Existing Holder Limit or Special
     Shareholder Limit, as applicable, nor increase the Ownership Limit,
     Existing Holder Limit or Special Shareholder Limit of the transferee.

          (b) Any grant of Capital Stock or a stock option pursuant to any
     benefit plan for directors or employees shall increase the Existing Holder
     Limit or Special  Shareholder Limit for the affected Existing Holder or
     Special Shareholder, as the case may be, to the maximum extent possible
     under Section 5.10 to permit the Beneficial Ownership of the Capital Stock
     granted or issuable under such employee benefit plan.

          (c) The Board of Directors may reduce the Existing Holder Limit of any
     Existing Holder, with the written consent of such Existing Holder, after
     any Transfer permitted in this Article 5 by such Existing Holder on the
     open market.

          (d) Any Capital Stock issued to an Existing Holder or Special
     Shareholder pursuant to a dividend reinvestment plan adopted by the
     Corporation shall increase the Existing Holder Limit or Special Shareholder
     Limit, as the case may be, for the Existing Holder or Special Shareholder
     to the maximum extent possible under Section 5.10 to permit the Beneficial
     Ownership of such Capital Stock.

          (e) Any Capital Stock issued to an Existing Holder or Special
     Shareholder in exchange for the contribution or sale to the Corporation of
     real property, including Capital Stock issued pursuant to an "earn-out"
     provision in connection with any such sale, shall increase the Existing
     Holder Limit or Special Shareholder Limit, as the case may be, for the
     Existing Holder or Special Shareholder to the maximum extent possible under
     Section 5.10 to permit the Beneficial Ownership of such Capital Stock.

          (f) The Special Shareholder Limit shall be increased, from time to
     time, whenever there is an increase in Special

                                      -10-

<PAGE>
 
     Shareholders' percentage ownership (taking into account for this purpose
     constructive ownership under Section 544 of the Code, as modified by
     Section 856(h)(1)(B) of the Code) of the Capital Stock (or any other
     capital stock) of the Corporation due to any event other than the purchase
     of Capital Stock (or any other capital stock) of the Corporation by a
     Special Shareholder, by an amount equal to such percentage increase
     multiplied by the Special Shareholder Limit.

          (g) The Board of Directors may reduce the Special Shareholder Limit
     for any Special Shareholder and the Existing Holder Limit for any Existing
     Holder, as applicable, after the lapse (without exercise) of an option
     described in Clause (b) of this Section 5.8 by the percentage of Capital
     Stock that the option, if exercised, would have represented, but in either
     case no Existing  Holder Limit or Special Shareholder Limit shall be
     reduced to a percentage which is less than the Ownership Limit.

     Section 5.9.  Modification of Ownership Limit.  Subject to the limitations
                   -------------------------------                             
provided in Section 5.10, the Board of Directors may from time to time increase
or decrease the Ownership Limit; provided, however, that any decrease may only
be made prospectively as to subsequent holders (other than a decrease as a
result of a retroactive change in existing law that would require a decrease to
retain REIT status, in which case such decrease shall be effective immediately).

     Section 5.10.  Limitations on Modifications.  Notwithstanding any other
                    ----------------------------                            
provision of this Article 5:

          (a) Neither the Ownership Limit, the Special Shareholder Limit nor any
     Existing Holder Limit may be increased if, after giving effect to such
     increase, five Persons who are considered individuals pursuant to Section
     542(a)(2) of the Code (taking into account all of the then Existing Holders
     and Special Shareholders) could Beneficially Own, in the aggregate, more
     than 49.5% by value of the outstanding Capital Stock.

          (b) Prior to the modification of any Existing Holder Limit or
     Ownership Limit pursuant to Section 5.8 or 5.9, the Board of Directors of
     the Corporation may require such opinions of counsel, affidavits,
     undertakings or agreements as it may deem necessary or advisable in order
     to determine or insure the Corporation's status as a REIT.

          (c) No Existing Holder Limit or Special Shareholder Limit may be a
     percentage which is less than the Ownership Limit.

                                      -11-

<PAGE>
 
          (d) The Ownership Limit may not be increased to a percentage which is
     greater than 9.8%.

     Section 5.11.  Exceptions.  The Board of Directors may, upon receipt of
                    ----------                                              
either a certified copy of a ruling of the Internal Revenue Service, an opinion
of counsel satisfactory to the Board of Directors or such other evidence as the
Board of Directors deems appropriate, but shall in no case be required to,
exempt a Person (the "Exempted Holder") from the Ownership Limit, the Special
Shareholder Limit, the Existing Holder Limit or the Related Tenant Limit, as the
case may be, if the ruling or opinion concludes or the other evidence shows (A)
that no Person who is an individual as defined in Section 542(a)(2) of the Code
will, as the result of the ownership of the shares by the Exempted Holder, be
considered to have Beneficial Ownership  of an amount of Capital Stock that will
violate the Ownership Limit, the Special Shareholder Limit or the applicable
Existing Holder Limit, as the case may be, or (B) in the case of an exception of
a Person from the Related Tenant Limit that the exemption from the Related
Tenant Limit would not cause the Corporation to fail to qualify as a REIT.  The
Board of Directors may condition its granting of a waiver on the Exempted
Holder's agreeing to such terms and conditions as the Board of Directors
determines to be appropriate in the circumstances.

     Section 5.12.  Legend.  All certificates representing shares of Capital
                    ------                                                  
Stock of the Corporation shall bear a legend referencing the restrictions on
ownership and transfer as set forth in these Articles.  The form and content of
such legend shall be determined by the Board of Directors.

     Section 5.13.  Termination of REIT Status.  The Board of Directors may
                    --------------------------                             
revoke the Corporation's election of REIT status as provided in Section
856(g)(2) of the Code if, in its discretion, the qualification of the
Corporation as a REIT is no longer in the best interests of the Corporation.
Notwithstanding any such revocation or other termination of REIT status, the
provisions of this Article 5 shall remain in effect unless amended pursuant to
the provisions of Article 10.

     Section 5.14.  Certain Transfers to Non-U.S. Persons Void.  Any Transfer of
                    ------------------------------------------                  
shares of Capital Stock of the Corporation to any Person (other than a Special
Shareholder) that results in the fair market value of the shares of Capital
Stock of the Corporation owned directly and indirectly by Non-U.S. Persons to
comprise 50% or more of the fair market value of the issued and outstanding
shares of Capital Stock of the Corporation (determined, until the 15%
Termination Date (as defined in the Stockholders Agreement), if any, by assuming
that the Special Shareholders are Non-U.S. Persons, and own a percentage of the
outstanding shares of Common

                                      -12-

<PAGE>
 
Stock of the Corporation equal to 45%, on a fully diluted basis), shall be 
void ab initio to the fullest extent permitted under applicable law and the
intended transferee shall be deemed never to have had an interest therein. If
the foregoing provision is determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the shares held or purported
to be held by the transferee shall, automatically and without the necessity of
any action by the Board of Directors or otherwise, (i) be prohibited from being
voted at any time such securities result in the fair market value of the shares
of Capital Stock of the Corporation owned directly and indirectly by Non-U.S.
Persons to comprise 50% or more of the fair market value of the issued and
outstanding shares of Capital Stock of the Corporation (determined, until the
15% Termination Date, if any, assuming that the Special Shareholders are Non-
U.S. Persons, and own a percentage of the outstanding shares of Common Stock of
the Corporation equal to 45%, on a fully diluted basis), (ii) not be entitled to
dividends with respect thereto, (iii) be considered held in trust by the
transferee for the benefit of the Corporation and shall be subject to the
provisions of Section 5.3(c) as if such shares of Capital Stock were the subject
of a Transfer that violates Section 5.2, and (iv) not be considered outstanding
for the purpose of determining a quorum at any meeting of shareholders.

     Section 5.15.  Severability.  If any provision of this Article or any
                    ------------                                          
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and the application of such provisions shall be
affected only to the extent necessary to comply with the determination of such
court.

     Section 5.16.  New York Stock Exchange Transactions.  Nothing in this
                    ------------------------------------                  
Article 5 shall preclude the settlement of any transaction entered into through
the facilities of the New York Stock Exchange."

________________________________________________________________________________

                                      -13-

<PAGE>
 
                                                                      Appendix E


                                                                   June 11, 1996
PRIVATE AND CONFIDENTIAL
- ------------------------

Board of Directors
Regency Realty Corporation
121 West Forsyth Street
Suite 200
Jacksonville, FL  32202

Gentlemen:

We understand that Regency Realty Corporation, a Florida corporation (the
"Company"), Security Capital U.S. Realty, a Luxembourg corporation (the
"Investor"), and a wholly-owned subsidiary of the Investor (the "Investment
Sub"), propose to enter into a Stock Purchase Agreement (the "Stock Purchase
Agreement") pursuant to which, among other things, the Investment Sub would
invest in the Company $132.177 million (the "Investment") by purchasing from the
Company, by June 30, 1997, 7,499,400 newly issued shares of the Company's Common
Stock, par value $0.01, at a price of $17.625 per share, net to the Company in
cash (the "Consideration").

You have asked us whether, in our opinion, the proposed Consideration to be
received by the Company pursuant to the Investment is fair to the Company from a
financial point of view.

In conducting our analysis and arriving at the opinion set forth below, we have
reviewed such materials, and considered such financial and other factors as we
deemed relevant under the circumstances, including:

1.   the Company's Annual Report on Form 10-K and the related financial
     information for the fiscal year ended December 31, 1995 and the Company's
     Quarterly Report on Form 10-Q and the related unaudited financial
     information for the quarterly period ended March 31, 1996;

2.   certain information, including financial forecasts, relating to the
     business, earnings, cash flow, assets and prospects of the Company
     (including the Company's acquisition program), furnished to us by the
     management of the Company;

3.   the historical market prices and trading volume for the Company's Common
     Stock and certain publicly traded companies which we deemed to be
     reasonably similar to the Company;

4.   the historical and projected results of operations of the Company and those
     of certain companies which we deemed to be reasonably similar to the
     Company;

5.   the financial terms of certain recent transactions we deemed relevant;

<PAGE>
 
6.   drafts, dated June 7, 1996, of the Stock Purchase Agreement, Stockholders
     Agreement and Registration Agreement; and

7.   such other financial studies, analyses and investigations we deemed
     appropriate.

We have had discussions with senior management of the Company regarding:  (i)
the prospects for their business, (ii) their estimate of such business' future
financial performance, (iii) the financial impact of the Investment on the
Company, and (iv) such other matters as we deemed relevant.  We have also
visited selected Company properties.

In connection with our review and analysis and in arriving at our opinion, we
have relied on the accuracy and completeness of publicly available information
and all of the information supplied or otherwise made available to us by the
Company, and we have not independently verified such information or undertaken
an appraisal of the assets of the Company.  With respect to the financial
forecasts furnished by the Company, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's management as to the expected future financial
performance of the Company.  Further, our opinion is based on economic,
financial and market conditions as they exist and can be evaluated as of the
date hereof.

As you know, we have been retained by the Company to render this opinion and
other financial advisory services in connection with the Investment and will
receive a fee for such services, a portion of which fee is contingent upon the
stockholders of the Company approving the Investment.  We may actively trade the
Company's Common Stock for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.  We also provide equity research coverage of the Company.

This letter and the opinion expressed herein may not be reproduced, summarized,
excerpted from or otherwise publicly referred to or disclosed in any manner,
without our prior written consent; provided, the Company may set forth in full
this letter in any proxy statement relating to the Investment and, provided this
opinion is set forth in full, may quote from or refer to this letter in any such
proxy statement.

The opinion expressed herein is provided for the use of the Board of Directors
of the Company in their evaluation of the Investment, and our opinion is not
intended to be, and does not, constitute a recommendation to any stockholder of
the Company as to how such stockholder should vote at the stockholders' meeting
held in connection with the Investment.

On the basis of, and subject to, the foregoing, we are of the opinion that, as
of the date hereof, the Consideration to be received by the Company pursuant to
the Investment is fair to the Company from a financial point of view.

                                    Very truly yours,


                                    Prudential Securities Incorporated

<PAGE>
 
                                                                      APPENDIX F

                                PRELIMINARY COPY

                           REGENCY REALTY CORPORATION
                PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
                      FOR SPECIAL MEETING OF SHAREHOLDERS
                               SEPTEMBER 10, 1996

     The undersigned, having received the Notice of Special Meeting of
Shareholders and Proxy Statement appoints Joan W. Stein and Martin E. Stein,
Jr., and each or either of them, as proxies, with full power of substitution and
resubstitution, to represent the undersigned and to vote all shares of common
stock of Regency Realty Corporation which the undersigned is entitled to vote at
a Special Meeting of Shareholders of the Company to be held on Tuesday,
September 10, 1996, and any and all adjournments thereof, in the manner
specified.

     THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
                   WILL BE VOTED "FOR" EACH OF THE PROPOSALS.
          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Proposal 1:  Approval of the Transaction contemplated by the Stock Purchase
             Agreement

             [ ]  FOR      [ ]  AGAINST      [ ]  ABSTAIN

Proposal 2:  Approval and adoption of the Amendment to the Company's Charter to
             expressly authorize US Realty to acquire the shares contemplated by
             the Stock Purchase Agreement and facilitate the Company's continued
             qualification as a domestically controlled REIT

             [ ]  FOR      [ ]  AGAINST      [ ]  ABSTAIN


           (Continued and to be SIGNED and dated on the reverse side)

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

                                    SHOULD ANY OTHER MATTERS REQUIRING A VOTE OF
                                    THE SHAREHOLDERS ARISE, THE ABOVE NAMED
                                    PROXIES ARE AUTHORIZED TO VOTE THE SAME IN
                                    ACCORDANCE WITH THEIR BEST JUDGMENT IN THE
                                    INTEREST OF THE COMPANY.  The Board of
                                    Directors is not aware of any matter which
                                    is to be presented for action at the meeting
                                    other than the matters set forth herein.

                                    DATED: _______________________________, 1996

                                    ______________________________________(SEAL)

                                    ______________________________________(SEAL)

                                    (Please sign exactly as name or names appear
                                    hereon.  Executors, administrators, trustees
                                    or other representatives should so indicate
                                    when signing.)