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                                                                    Exhibit 10.2



                          PLEDGE AND SECURITY AGREEMENT


                  PLEDGE AND SECURITY AGREEMENT (this "Security Agreement"),
dated June 24, 1998 between KBC BANK N.V., Grand Cayman Branch ("Pledgee"), and
REGENCY AFFILIATES, INC., a Delaware corporation ("Pledgor").

                                    RECITALS

                  A. Pledgor is a limited partner in Security Land and
Development Company Limited Partnership, a Maryland limited partnership
("Partnership").

                  B. Pledgor and Pledgee have entered into a Loan Agreement of
even date herewith as it may be amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement"). All capitalized terms used
herein shall have the meanings ascribed to them in the Loan Agreement or the
Uniform Commercial Code as adopted in New York, as applicable.

                  C. Pledgee has agreed, subject to the terms and conditions of
the Loan Agreement, to make a Loan (the "Loan") in the amount of Nine Million
Three Hundred Eighty-Three Thousand Three Hundred Nineteen and 77/100 Dollars
($9,383,319.77).

                  D. As a condition precedent to Pledgee making the Loan, the
Pledgee requires that the Pledgor execute and deliver this Security Agreement to
Pledgee to secure the prompt and complete performance of all of the obligations
and payment of all of the Obligations.

                  Accordingly, Pledgor hereby agrees with Pledgee as follows:

                  1. Security Interest. In consideration of the Loan and any
loan, advance, or other extension of credit heretofore or hereafter made by
Pledgee under the Loan Agreement or otherwise to, or for the account or benefit
of the Pledgee, and as security for the Obligations (as hereinafter defined),
Pledgor hereby delivers, pledges and grants a continuing security interest to
Pledgee (the "Security Interest") in all right, title and interest of Pledgor,
whether now owned or hereafter acquired, in and to the limited partnership
interest of Pledgor in the Partnership (the "Pledged Interest"), including
without limitation: (i) all of Pledgor's interests in respect of the Pledged
Interest in the capital of the Partnership and Pledgor's interest in all profits
and distributions to which Pledgor shall at any time be entitled in respect of
such Pledged Interest; (ii) all other payments, if any, due or to become due to
Pledgor in respect of such Pledged Interest pursuant to the Partnership
Agreement whether as contractual obligations, damages, insurance proceeds or
otherwise, other than payments of management fees; (iii) all of Pledgor's
rights, powers and remedies, if any, under the Partnership Agreement as a
limited partner thereunder or arising from its ownership of the Pledged Interest
pursuant thereto; (iv) all of Pledgor's rights under the Partnership Agreement
as a limited partner to make determinations, to exercise any election
(including, but not limited to, election of remedies) or option or to give or
receive any notice, consent, amendment, waiver or approval, together with full
power and authority to demand, receive, enforce, execute, endorse or cash any
checks or other payments, or 

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other instruments or orders, to file any claims and to take any action that (in
the opinion of Pledgee) may be necessary or advisable in connection with any of
the foregoing; and (v) to the extent not otherwise included, all proceeds of any
or all of the foregoing (collectively, the "Collateral").

                  2. Obligations Secured. The Collateral secures payment and
performance (a) by Pledgor of all of the Obligations as defined in the Loan
Agreement and (b) by Pledgor of all current and future debts, liabilities,
agreements, covenants, and obligations of Pledgor to Pledgee in connection with
the Loan and the Note, under or pursuant to this Security Agreement or the Loan
Agreement (all of the foregoing referred to collectively herein as the
"Obligations").

                  3. Representations and Warranties of Pledgor. Pledgor
represents and warrants that: (a) Pledgor is the legal and beneficial owner of
the Collateral free of all pledges, security interests, charges, liens, or other
encumbrances, except under this Security Agreement; (b) Pledgor has the power
and authority to convey any or all of its rights and interests in the
Collateral; (c) the General Partner and each limited partner of the Partnership
has consented to the Security Interest being granted herein to Pledgee, and
Pledgor has the full power to convey the Collateral subject only to the terms
and conditions set forth in the Partnership Agreement; (d) there are no options,
warrants, calls, or other rights or commitments of any character giving any
person the right to purchase the Collateral from Pledgor; (e) no certificates,
Instruments or documents have been issued by the Partnership to evidence the
Collateral; (f) there are no restrictions on the voting rights associated with
the Collateral or upon the transfer of any of the Collateral, other than those
restrictions contained in this Security Agreement, the Loan Agreement and the
Partnership Agreement, which have not been waived by the party having the right
to enforce such restrictions; (g) the execution and delivery by Pledgor of, and
performance by Pledgor of its obligations under, this Security Agreement does
not and will not result in any violation of or conflict with the terms of
Pledgor's articles of organization or by-laws, the Partnership Agreement or any
agreement, indenture, instrument, license, judgment, decree, order, law,
statute, or, ordinance or other governmental rule or regulation applicable to or
binding upon Pledgor; (h) no security agreement, financing statement, assignment
or equivalent security or lien instrument or continuation statement covering all
or any part of the Collateral is on file or of record in any public office or at
the records of the Partnership, except financing statements with respect to the
Collateral filed by the Pledgee pursuant to this Security Agreement; (i) upon
the filing of all appropriate financing statements under the Uniform Commercial
Code, and the execution and delivery by Pledgor and the Partnership of a Control
Letter, all steps necessary to create and perfect the security interest created
by this Security Agreement as a valid and continuing first lien on and first
perfected security interest in the Collateral in favor of the Pledgee prior to
all other Liens will have been taken; and (j) the chief place of business and
the chief executive office of the Pledgor and the office where the Pledgor keeps
its records concerning the Collateral is located at 729 South Federal Highway,
Suite 307, Stuart, Florida 34994.

                  4. Covenants of Pledgor. So long as this Security Agreement is
in effect, Pledgor: (a) will defend the Collateral against the claims and
demands of all other parties; will keep the Collateral free from all security
interests or other encumbrances, except under this Security Agreement; will not
sell, transfer, assign, deliver or otherwise dispose of any Collateral 



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or any interest therein or right thereunder or grant to any person any option,
warrant, or other rights to acquire any of the Collateral or any interest
therein or right thereunder, without the prior written consent of Pledgee; and
will not cause, permit or consent to any amendment or modification to the
Partnership Agreement without the prior written consent of Pledgee; (b) in
connection herewith, will execute and deliver to Pledgee such financing
statements, assignments, and other documents and do such other things relating
to the Collateral and the Pledgee's Security Interest as Pledgee may reasonably
request (all costs of lien searches and filing financing statements, assignments
and other documents in all public offices reasonably requested by Pledgee shall
constitute part of the Obligations and be secured by all of the Collateral as
well as all other property serving as security for the Obligations); (c) will
notify Pledgee promptly in writing of any change in Pledgor's address; (d) will
not, except upon Pledgee's request or with Pledgee's prior written consent, seek
or take delivery of any additional Instrument or other written document
constituting or evidencing any Collateral, and if Pledgor receives any such
Instrument or document (whether or not at Pledgee's request or with its
consent), Pledgor will immediately notify Pledgee thereof and immediately
deliver such Instrument or document to Pledgee, duly endorsed as Pledgee
requests or accompanied by an appropriate instrument of transfer executed in
blank; (e) will pay or reimburse Pledgee for all taxes, assessments and other
charges of every nature which may be imposed, levied or assessed on Pledgee in
respect of the Collateral; (f) will defend the right, title and interest
hereunder of the Pledgor as a first priority security interest; (g) will advise
Pledgor (i) promptly of any lien, security interest, encumbrance or claim made
or asserted against the Collateral, (ii) of any distribution of cash or other
property by the Partnership, or (iii) the occurrence of any other event would
have an adverse effect on the value of the Collateral or the Security Interest
of the Pledgee; and (h) will not change its name unless it has given thirty days
prior written notice to Pledgee.

                  5. Voting Rights. During the term of this Security Agreement,
so long as no Event of Default shall have occurred, Pledgor shall have the right
to vote the Collateral, to the extent such right exists under the Partnership
Agreement, on all partnership questions for all purposes not inconsistent with
the terms of this Security Agreement and with the Pledgee's prior written
consent. Upon the occurrence of an Event of Default, Pledgee shall thereafter
have, at its discretion, subject to the Project Documents, the option to
exercise all voting powers and other partnership rights, to the extent such
powers and rights exist under the Partnership Agreement, pertaining to the
Collateral.


                  6. Consent of Partners of Pledgee.

                     (a) Contemporaneously herewith, and as an additional
condition precedent to Pledgee's obligation to make the Loan, Pledgor shall
execute and deliver and shall cause the general partner of the Partnership to
execute and deliver the notice of pledge in the form of Exhibit A attached
hereto.


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                     (b) At any time after an Event of Default has occurred and
is continuing, Pledgee is authorized to transfer the Collateral or any part
thereof into its own name or that of its nominee so that Pledgee or its nominee
may become admitted as a limited partner of Partnership.

                  7. Distributions and Other Income from Collateral.

                     (a) Pledgor hereby grants to Pledgee full irrevocable power
and authority to receive and hold cash and non-cash distributions (including
without limitation, Partnership Distributions) by the Partnership which may be
held free and clear of the liens created hereby, and to convert any such
non-cash distributions to cash, and, except as provided in the next succeeding
sentence, to apply any such cash distributions or proceeds of conversion in the
manner specified in the Loan Agreement. So long as no Event of Default has
occurred and is continuing, Pledgee shall remit to Pledgor an amount of each
distribution of Net Cash Flow (and defined below) received prior to October 31,
2003, equal to the lesser of the amount of such distribution and three (3%) of
the income of the Partnership for the taxable year to which such distribution
relates which was allocated to Pledgor under the Partnership Agreement. For the
purposes hereof, "Net Cash Flow" has the meaning given to such term by Section
9.01(e) of the Partnership Agreement, excluding, in any event, all proceeds from
a sale or financing of the Property.

                     (b) If Pledgor receives, or becomes entitled to receive,
any additional limited partnership interest in the Partnership or any other
property (whether by reclassification, readjustment, or other change in the
capital structure of such Pledgee, or in any other manner), such additional or
other property shall constitute Collateral, and Pledgor shall direct the
Partnership to record such additional limited partnership interest in the name
of Pledgee on its books and deliver all such other property directly to Pledgee
to be held as Collateral.

                     (c) If, notwithstanding the foregoing, Pledgor receives any
distribution or other property which should have been paid or delivered directly
to Pledgee, as provided in subsections (a) or (b), above, or which was paid to
Pledgor in violation of subsection (a), Pledgor shall receive such distribution
or property, as the case may be, in trust for the benefit of Pledgee, shall
segregate such distribution or property from the other property or funds of
Pledgor, and deliver it immediately to Pledgee in the form received (with any
necessary endorsement).

                  8. Increases, Profits, Payments or Distributions. Whether or
not an Event of Default has occurred any increase in or profits on the
Collateral (which, for the purposes hereof, shall not include distributions
referred to in Section 7(a)) shall be part of the Collateral.

                  9. Events of Default. It shall be an Event of Default
hereunder if any Event of Default under the Loan Agreement occurs.

                 10. Remedies.

                     (a) Whenever an Event of Default occurs and so long as it
continues, Pledgee shall have, and may exercise with respect to the Collateral,
in such order and manner as it determines, all rights and remedies of a secured
party under the Uniform Commercial Code and under any other applicable law, as
the same may from time to time be in effect, as well as those rights granted
herein, under the Loan Agreement, and in any other agreement now or hereafter in
effect between Pledgor and Pledgee. Without limiting the generality of the



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foregoing, whenever an Event of Default exists, Pledgee may sell or otherwise
dispose of all or any part of the Collateral upon prior notice to Pledgor, by
public or private sale, in one or more transactions, and in such order as
Pledgee determines. Proceeds realized from such sales and dispositions shall be
applied first to Pledgee's costs and expenses in connection therewith and then
to the Obligations in such order as Pledgee determines. Pledgor recognizes that
Pledgee may be unable to effect a public sale of all or a part of the Collateral
by reason of certain provisions contained in the Securities Act of 1933, as
amended (the "Securities Act") and the securities laws of various states, and
may be compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Collateral for their own account, for investment and without a view to the
distribution or resale thereof. Pledgor understands that private sales so made
may be at prices and other terms less favorable than if the Collateral were sold
at public sales, and agrees that Pledgee has no obligation to delay the sale of
the Collateral for the period of time necessary to permit Pledgee to register
the Collateral for sale under the Securities Act or such state laws. Pledgor
agrees that private sales under the foregoing circumstances shall be deemed to
have been made in a commercially reasonable manner.

                     (b) Without in any way requiring notice to be given in the
following time and manner, Pledgor agrees that any notice by Pledgee of a sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the Uniform Commercial Code or otherwise, shall constitute
reasonable notice to Pledgor if such notice is mailed by registered or certified
mail, return receipt requested, postage prepaid, or delivered personally against
receipt, or sent by a recognized overnight delivery service, at least five (5)
days prior to such action, to Pledgor's address set below his signature hereto
or to such other address as is specified in writing to Pledgee as the address to
which notices shall be given to Pledgor.

                     (c) All costs and expenses incurred by Pledgee in enforcing
this Security Agreement, in realizing upon or protecting any Collateral and in
enforcing and collecting any Obligations or any guaranty thereof (including,
without limitation, if Pledgee retains counsel for advice, suit, appeal,
insolvency or other proceedings under the federal Bankruptcy Code or otherwise,
or for any of the above purposes, the actual attorneys' and paralegals' fees
incurred by Pledgee), shall constitute part of the Obligations, and all such
costs and expenses are secured by the Collateral, as well as by all other
property serving as security for the Obligations.

                 11. Miscellaneous.

                     (a) Pledgor authorizes Pledgee, without notice or demand
and without affecting any obligations hereunder, from time to time: (i) to
renew, extend, increase, accelerate, or otherwise change the time of payment,
the terms of, or the interest on the Obligations or any part thereof; (ii) to
take from any party and hold collateral (other than the Collateral) for the
payment of the Obligations or any part thereof, and to exchange, enforce or
release such collateral or any part thereof; (iii) to accept and hold any
endorsement or guaranty of payment of the Obligations or any part thereof and to
release or substitute any such endorser or guarantor, or any party who has given
any security interest in any other collateral as security for the payment 



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of the Obligations or any part thereof, or any other party in any way obligated
to pay the Obligations or any part thereof; and (iv) to direct the order or
manner of the disposition of the Collateral and any and all other collateral and
the enforcement of any and all endorsements and guaranties relating to the
Obligations or any part thereof as Pledgee, in its sole discretion, may
determine.

                     (b) Pledgor hereby appoints Pledgee as Pledgor's
attorney-in-fact (without requiring Pledgee) to perform all acts which Pledgee
deems appropriate in accordance with this Security Agreement to perfect and
continue its interests hereunder in the Collateral and to protect, preserve and
realize upon the Collateral. Pledgor further appoints Pledgee as its
attorney-in-fact to execute such orders and receipts for payment of the
Collateral in accordance with this Security Agreement as Pledgee deems
appropriate in its sole discretion. These powers of attorney are coupled with an
interest and shall be irrevocable and are given to secure performance by Pledgor
of the Obligations. Pledgor ratifies and approves all acts of such attorney, and
Pledgee shall not be liable for any acts or omissions or any error of judgment
or mistake of fact or law other than resulting from Pledgee's gross negligence
or willful misconduct. Whenever Pledgee takes any action hereunder as Pledgor's
attorney when an Event of Default does not exist, then Pledgee shall give
Pledgor reasonable contemporaneous notice (which may be by telephone) of such
action. Subject to the terms of this Security Agreement, Pledgee may demand,
collect, and sue on the Collateral (in either its or Pledgor's name, at
Pledgee's sole option), and enforce, compromise, settle, or discharge the
Collateral, without discharging the Obligations or any part thereof and whether
or not any such action results in the imposition of any penalty. Pledgor
authorizes and directs each Pledgee to make any payments in respect of the
Collateral as Pledgee may direct and hereby releases each Pledgee from any
liability to Pledgor for making such payments.

                     (c) Upon Pledgor's failure to perform any of its duties
hereunder and under the Loan Agreement, Pledgee may, but shall not be obligated
to, perform any or all such duties, and the cost thereof shall be secured by the
Collateral, as well as by all other property serving as security for the
Obligations.

                     (d) Pledgee's failure to exercise any right, remedy or
option under this Security Agreement or any supplement or other agreement
between Pledgee and Pledgor or delay by Pledgee in exercising the same will not
operate as a waiver. No waiver by Pledgee shall affect its right to require
strict performance of this Security Agreement. Pledgee's rights and remedies
will be cumulative and not exclusive.

                     (e) Pledgee shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which Pledgee
accords its own property, it being understood that Pledgee shall not have
responsibility for (i) ascertaining or taking action with respect to any matters
relative to any Collateral, whether or not Pledgee has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Collateral. Pledgor shall have the sole
responsibility for taking any and all steps to preserve rights against any and
all parties to any Collateral, whether or not in Pledgee's possession. Pledgee
shall not be responsible for loss or damage resulting from Pledgee's failure 



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to enforce or collect any Collateral or to collect any moneys due or to become
due thereunder. Pledgor waives protest of any Instrument constituting Collateral
at any time held by Pledgee on which such Pledgor is in any way liable and
waives notice of any other action taken by Pledgee.

                     (f) If any provision of this Security Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Security Agreement.

                     (g) Upon any assignment by Pledgee of its rights and
obligations, or any part thereof, in accordance with the Loan Agreement, such
assignee shall become vested with Pledgee's rights and benefits hereunder to the
extent of such assignment.

                     (h) If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Pledgee is
required to surrender or return such payment or proceeds to any person for any
reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Security Agreement shall
continue in full force and effect as if such payment or proceeds had not been
received by Pledgee. This subsection shall remain effective notwithstanding any
contrary action which may be taken by Pledgee in reliance upon such payment or
proceeds. This subsection shall survive the termination or revocation of this
Security Agreement.

                     (i) This Security Agreement may not be modified, altered or
amended, except by an agreement in writing signed by Pledgor and Pledgee.

                     (j) Neither Pledgee nor any Pledgee Affiliate (as defined
below) shall be liable for any indirect, special, incidental or consequential
damages in connection with any breach of contract, tort or other wrong relating
to this Security Agreement or the Obligations or the establishment,
administration or collection thereof (including without limitation damages for
loss of profits, business interruption, and the like), whether such damages are
foreseeable or unforeseeable, even if Pledgee has been advised of the
possibility of such damages. Neither Pledgee nor any Pledgee Affiliate shall be
liable for any claims, demands, losses or damages, of any kind whatsoever, made,
claimed, incurred or suffered by Pledgor through the ordinary negligence of
Pledgee, or any Pledgee Affiliate. "Pledgee Affiliate" shall mean Pledgee's
directors, officers, employees, agents, attorneys and any other person or entity
affiliated with or representing Pledgee.

                     (k) This Security Agreement, the Loan Agreement and the
other Loan Documents represent the entire agreement and understanding of the
parties concerning the subject matter hereof, and supersedes all other prior
agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written.

                     (l) All terms, conditions, promises, covenants, provisions
and warranties set forth in this Security Agreement shall inure to the benefit
of and bind Pledgee's and Pledgor's respective representatives, successors and
assigns.


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                     (m) THIS SECURITY AGREEMENT SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK GOVERNING CONTRACTS
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE. PLEDGOR HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY
OF NEW YORK IN THE STATE OF NEW YORK. PLEDGOR WAIVES ANY OBJECTION OF FORUM NON
CONVENIENS AND VENUE. PLEDGOR FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON HIM, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE
MANNER SET FORTH IN SECTION 11(o) HEREOF FOR THE GIVING OF NOTICE.

                     (n) PLEDGEE AND PLEDGOR EACH HEREBY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY
WAY RELATING TO THIS SECURITY AGREEMENT OR ANY CONDUCT, ACTS OR OMISSIONS OF
PLEDGEE OR PLEDGOR OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH PLEDGEE OR PLEDGOR IN CONNECTION
WITH THIS SECURITY AGREEMENT OR THE COLLATERAL, IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

                     (o) Any notice required hereunder shall be in writing and
addressed to Pledgor and to Pledgee at their addresses set forth beneath their
respective signatures below. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or two (2) days after deposit in the United States mail, postage prepaid.

                     (p) This Security Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.

                     (q) This Security Agreement shall remain in full force and
effect until all of the Obligations have been indefeasibly paid and performed in
full and the Loan Agreement and all other agreements, documents and instruments
referred to therein or at any time executed and/or delivered in connection
therewith or related thereto, including, but not limited to, this Security
Agreement, have been terminated, at which time Pledgee shall release its
Security Interest in the Collateral.


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                  IN WITNESS WHEREOF, Pledgor has executed and delivered this 
Security Agreement on June ____, 1998.

                                          PLEDGOR
                                          REGENCY AFFILIATES, INC.


                                          By:
                                             ---------------------------------
                                             William R. Ponsoldt, Sr.
                                             President

                                             Address:  729 South Federal Highway
                                                       Suite 307
                                                       Stuart, Florida 34994


PLEDGEE

Accepted at ____________, ____________
this _____ day of June, 1998

KBC BANK N.V.,
Grand Cayman Branch


By:
   -----------------------------------
   Name:
   Title:



By:
   -----------------------------------
   Name:
   Title:


Address:  c/o 125 West 55th Street
          New York, New York 10019




                        [ PLEDGE AND SECURITY AGREEMENT ]


<PAGE>   10


                                                                       EXHIBIT A


Regency Affiliates, Inc.
729 South Federal Highway
Suite 307
Stuart, Florida 34994


KBC Bank N.V.
125 West 55th Street
New York, New York 10019


                        RE: PLEDGE OF LIMITED PARTNERSHIP

Ladies and Gentlemen:

                     You have advised us that, pursuant to a Pledge and Security
Agreement, dated June __, 1998 with KBC Bank N.V., Grand Cayman branch,
("Pledgee"), a copy of which is attached hereto (the "Security Agreement"),
Regency Affiliates, Inc. ("Limited Partner") has pledged to Pledgee and granted
to Pledgee a security interest in its limited partnership interest in Security
Land and Development Company Limited Partnership (the "Partnership") and in
certain other property described therein (collectively, the "Collateral").
Defined terms used herein shall have the meanings assigned thereto in the Loan
Agreement dated June __, 1998 between Limited Partner and Pledgee providing a
loan from KBC Bank to Limited Partner (the "Loan Agreement"). In connection
therewith, we hereby acknowledge and agree, for the benefit of Limited Partner
and Pledgee, as follows:


                     1. We hereby acknowledge notice that Limited Partner has
pledged to Pledgee and granted to Pledgee a security interest in the Collateral
(as defined in the Security Agreement). We agree to mark the books and records
of the Partnership accordingly to reflect such pledge and security interest.

                     2. Until Pledgee notifies us in writing to the contrary, we
agree to: (i) pay directly to Pledgee when due and payable (a) all distributions
payable to Pledgor, (b) all payments in respect of the redemption of all or any
part of the Collateral payable to Pledgor, (c) all payments in respect of the
Collateral payable to Pledgor upon the Partnership's liquidation, dissolution,
or winding-up, and (d) all other sums at any time due in respect of the
Collateral payable to Pledgor; and (ii) deliver directly to Pledgee any
certificate, instrument, or other tangible evidence of any Collateral,
including, without limitation, any additional securities or any warrant, right
or option to acquire, or any security convertible into, any interest of the
Partnership, to the extent at any time issued or issuable to Limited Partner.

<PAGE>   11

                     3. We shall not, without Pledgee's prior written consent,
register on the Partnership's books or otherwise give effect to any transfer of
the Collateral or any pledge thereof, security interest therein, or other
encumbrance thereon.

                     4. We will send to Pledgee a copy of each of the following
items that we send to the Limited Partner or the Trustee at the time we provide
the same to the Limited Partner or the Trustee: all tax information and tax
reports concerning the Partnership; financial information and financial reports
concerning the Partnership; information and reports concerning the value or
condition of the Collateral; notices required by the Project Documents; and any
other material notice, report, or other communication.

                     5. We agree that, if the General Partner of the Partnership
receives (a) written notice from Pledgee that the loan under the Loan Agreement
is outstanding and that an Event of Default has occurred and continues under the
Loan Agreement and that the General Forbearance Period (as defined in Section
14.02 of the Partnership Agreement), if any, has expired or been terminated and
(b) written instructions from Pledgee to transfer the Limited Partner's
partnership interest in the Partnership to Pledgee or RVI American Insurance
Company, a subsidiary or affiliate of either , or any designee, as specified in
such notice, then the General Partner shall cause such assignment on the books
of the Partnership and shall take such other action as is contemplated and
authorized by Section 14.02 of the Partnership Agreement to effectuate the
assignment of the Limited Partner's partnership interest and the substitution of
the assignee pursuant to such section.

                     6. We shall have no liability to Pledgee in the event that
any agreement, instrument or document executed by us as attorney-in-fact for a
limited partner of the Partnership at Pledgee's request in connection with the
enforcement of Pledgee's security interest shall be determined to have exceeded
the authority granted in the applicable power of attorney.

                     7. We hereby represent and warrant to Pledgee as follows:

                        (a) The Partnership is duly organized, validly existing 
and in good standing as a limited partnership under the laws of the State of
Maryland. The Partnership is qualified to do business and in good standing in
all jurisdictions in which the failure to be so qualified and in good standing
would have a material adverse effect on its business, properties, or financial
condition. The Partnership has all requisite power and authority to conduct its
business as now conducted and own its property.

                        (b) The Partnership has the full power, authority and
legal right to execute, deliver, and perform the Escrow Agreement dated the date
hereof by and among the Partnership, KBC Bank, R.V.I, and State Street Bank and
Trust Company, as escrow agent and trustee (the "Escrow Agreement"). The
Partnership has taken all required action to authorize the execution, delivery,
and performance of the Escrow Agreement. The Escrow Agreement has been duly
executed and delivered by the Partnership, and constitutes its legal, valid and
binding agreement and obligation enforceable against it in accordance with its
terms.

<PAGE>   12

                     8. We agree that none of the terms of this letter may be
modified in any respect without the prior written consent of Pledgee, and we
further agree that such terms shall continue in full force and effect until
Pledgee notifies us in writing that the pledge and security interest under the
Security Agreement has terminated.

                     9. Limited Partner hereby agrees that we may comply with
the terms of this letter without any obligation to inquire into the propriety or
validity of any action taken or omitted by Pledgee and without any liability to
Limited Partner whatsoever for any action or inaction hereunder on our part.

                     10. This letter shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York (without
giving effect to the conflicts of laws principles of such state). This letter
may be signed in one or more counterparts and by each party in separate
counterparts, each of which shall be an original and all of which together
constitute one agreement.


                               (Signatures Follow)




<PAGE>   13


                                           Very truly yours,

                                           1500 WOODLAWN LIMITED PARTNERSHIP

                                           By:  Woodlawn Investment Group, Inc.,
                                                Managing General Partner

                                           By:
                                                --------------------------------
                                                Name:
                                                Title:



                                           WOODLAWN INVESTMENT GROUP, INC.


                                           By:
                                                --------------------------------
                                                Name:
                                                Title:

Accepted and Agreed:

REGENCY AFFILIATES, INC.



By:
   ------------------------------------
   William R. Ponsoldt, Sr.
   President


KBC BANK N.V.,
Grand Cayman Branch


By:
   ------------------------------------
   Name:
   Title


By:
   ------------------------------------
   Name:
   Title: