<PAGE>   1
                                                                  Exhibit 10.1


     June 24, 1998

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


     Ladies and Gentlemen:


          We are pleased to inform you that our Grand Cayman Branch will make
     available to you a term loan in the principal amount of US$9,383,319.77.

          The terms and conditions of this loan are as follows:

         1. DEFINITIONS. Unless otherwise defined in this letter, terms used as
     defined terms have the meanings given to them on Exhibit A hereto.

         2. THE LOAN. Subject to the terms and conditions hereof, on June 24,
     1998, we will lend to you, and you will borrow from us, a term loan in the
     principal amount of Nine Million Three Hundred Eighty-Three Thousand Three
     Hundred Nineteen and 77/100 Dollars (US$9,383,319.77) (the "Loan"). The
     Loan shall be evidenced by the Term Note in the form attached hereto as
     Exhibit B (the "Note"), which you shall execute and deliver to us prior to
     or simultaneously with your receipt of the proceeds of the Loan.

         3. DISBURSEMENT OF LOAN. We will disburse the proceeds of the Loan to
     you as set forth in your separate written instructions to us.

         4. INTEREST.

          (a) You shall pay interest on the outstanding principal balance of the
     Loan until fully paid at a rate per annum equal to 7.5% (the "Interest
     Rate"). Interest shall be computed on a daily basis for the actual number
     of days elapsed over a year of 360 days, and shall be compounded
     semiannually on each June 1 and December 1, commencing June 1, 1998.
     Accrued interest shall be due and payable in arrears on the Loan Due Date
     (as defined in Section 5(a)).

          (b) Except as provided in the next succeeding sentence, in the event
     the principal balance of the Loan and accrued interest thereon is not paid
     in full on the Loan Due Date, then all such principal balance and accrued
     interest shall bear interest from the Loan Due Date until fully paid at a
     rate per annum (the "Default Rate") equal to the Interest Rate plus two
     percentage points, which interest shall be payable on demand.
     Notwithstanding the foregoing to the contrary, during the period between
     the Scheduled Maturity Date (as defined in Section 5(a)) and the expiration
     or termination of the Escrow Forbearance Period, the unpaid principal
     balance of and all accrued but unpaid interest on the Loan shall bear
     interest at a fluctuating rate per annum equal to LIBOR for each Interest
     Period during such period plus two percent (2%), which


<PAGE>   2


     interest shall be due and payable at the end of the Escrow Forbearance
     Period or the earlier payment in full of the then unpaid principal balance
     of the Loan.

         5. PAYMENTS AND PREPAYMENTS.

          (a) You shall repay the outstanding principal balance of the Loan on
     the earlier of (i) November 30, 2003 (the "Scheduled Maturity Date"), in
     accordance with the terms of the Note or (ii) the acceleration of the Loan
     upon an Event of Default hereunder (the earlier of (i) and (ii) being
     referred to herein as the "Loan Due Date").

          (b) Subject to Section 7(a) of the Security Agreement, you shall
     prepay the outstanding principal balance of the Loan, plus accrued interest
     thereon, immediately upon receipt of any and all Partnership Distributions,
     in the amount of each such Partnership Distribution. Such prepayment shall
     be applied to accrued interest on and the principal balance of the Loan in
     such order as we determine in our discretion.

          (c) You may voluntarily prepay the Loan upon 30-day's prior written
     notice to us and upon payment of the entire unpaid principal balance of the
     Loan, plus accrued and unpaid interest thereon, plus the Make-Whole
     Premium, if any.

          (d) All payments and prepayments to be made by you of principal,
     interest and other amounts due hereunder shall be made without setoff,
     defense or counterclaim in lawful money of the United States of America and
     in immediately available funds and at our Grand Cayman Branch, c/o KBC Bank
     N.V., 125 West 55th Street, New York, New York 10019 or such other address
     as we shall advise you in writing.

         6. TAXES. All payments made by you hereunder or under the Note shall be
     made free and clear of, and without reduction for or on account of, any
     present or future income, stamp or other taxes, levies, imports, duties,
     charges, fees, deduction, or withholding, now or hereafter imposed, levied,
     collected, withheld or assessed by any country (or by any political
     subdivision, or taxing authority thereof or therein), excluding income and
     franchise taxes, if any, imposed on our overall net income from all
     operations by the United States of America or any political subdivision or
     taxing authority thereof or therein including Puerto Rico (such
     non-excluded taxes being called "Foreign Taxes"). If any Foreign Taxes are
     required to be withheld from any amounts payable to us hereunder or under
     the Note, then, the amounts so payable to us shall be increased to the
     extent necessary to yield to us (after payment of all Foreign Taxes)
     interest or any such other amounts payable hereunder or thereunder at the
     rates or the amounts specified herein and in the Note. Whenever any Foreign
     Tax is payable by you, as promptly as possible thereafter, you shall send
     us a certified copy of an original official receipt showing payment
     thereof. If you fail to pay any Foreign Taxes when due to the appropriate
     taxing authority or fail to remit to us the required receipts or other
     required documentary evidence, you shall indemnify us for any incremental
     Foreign Taxes, interest or penalties that may become payable by us as a
     result of such failure.

         7. REQUIREMENT OF LAW. In the event that any law, regulation, treaty or
     directive or any change therein or in the interpretation or application
     thereof or compliance by us with any 




                                      -2-
<PAGE>   3


     request or directive (whether or not having the force of law) from any
     central bank or other governmental authority, agency or instrumentality:
     (a) does or shall subject us to any tax of any kind whatsoever with respect
     to the Loan, or change the basis of taxation of payments to us of
     principal, interest or any other amount payable in respect of the Loan or
     Note (except for changes in the rate of tax on our overall net income); (b)
     does or shall impose, modify or hold applicable any reserve, special
     deposit, compulsory loan or similar requirement against assets held by, or
     deposits or other liabilities in or for the account of advances or loans
     by, other credit extended by, or any other acquisition of funds by, any of
     our offices involved in making or maintaining the Loan and which were not
     otherwise included in the determination of the rate of interest under this
     agreement; or (c) does or shall impose on us any other condition with
     respect to making or maintaining the Loan; and the result of any of the
     foregoing is to increase the cost to us of making or maintaining the Loan
     or to reduce any amount receivable in respect of the Loan, then, in any
     such case, you shall promptly pay us, upon our demand, any additional
     amounts necessary to compensate us for such additional cost or reduced
     amount receivable. We shall notify you of the event by reason of which we
     have become entitled as promptly as practicable after we learn of such
     event, which notice shall set forth a reasonable description of the facts
     and circumstances of such event and its effect on the Loan. Such notice as
     to any additional amounts payable pursuant to the foregoing sentence
     submitted by us to you shall be conclusive and binding on you absent
     manifest error.

         8. CAPITAL ADEQUACY COSTS. If the introduction of or any change in (a)
     the judicial, administrative, or other governmental interpretation of any
     law or regulation or (b) compliance by us or any corporation controlling us
     with any guideline or request from any central bank or other governmental
     authority, agency or instrumentality (whether or not having the force of
     law) has the effect of requiring an increase in the amount of capital
     required or expected to be maintained by us or any corporation controlling
     us, and we determine that such increase is based upon making or maintaining
     the Loan or upon our obligations hereunder, then, you shall pay us such
     additional amount as we shall certify to be the amount allocable to our
     transaction with you hereunder. We will notify you of any event occurring
     after the date of this letter that will entitle us to compensation pursuant
     to this Section as promptly as practicable after we obtain knowledge
     thereof and determine to request such compensation. Our determination for
     purposes of this Section of the effect of any increase in the amount of
     capital required to be maintained by us and of the amount allocable to our
     obligations to you hereunder shall be conclusive and binding on you,
     provided that such determination is made on a reasonable basis.

         9. [INTENTIONALLY OMITTED.]

         10. CONDITIONS PRECEDENT TO THE LOAN. Our obligation to make the Loan
     is subject to satisfaction of the following conditions precedent: (i) we
     shall have received the Note conforming to the requirements hereof,
     executed by your duly authorized officers; (ii) we shall have received
     certified copies of your Articles of Incorporation and By-Laws and of all
     corporate action by you to authorize the execution, delivery and
     performance of the Loan Documents, together with such other documents as we
     shall reasonably require; (iii) we shall have received certificates as to
     the incumbency and signatures of your officers authorized to sign the Loan
     Documents; (iv) we shall have received the Security Agreement, and the
     other Loan Documents executed by your duly authorized officer; (v) we shall
     have received, in form and substance 




                                      -3-
<PAGE>   4


     satisfactory to us, all releases, terminations and such other documents as
     we may request to evidence and effectuate the termination of your financing
     arrangements with SIPI under the SIPI Loan Agreement and the SIPI Security
     Agreement, the repayment of all your obligations to SIPI, and the
     termination and release by them of any interest in and to any of your
     assets and property, including, but not limited to, UCC termination
     statements; (vi) we have received evidence, in form and substance
     satisfactory to us, that we have a valid perfected, first priority security
     interest in and lien upon the Collateral; (vii) we have received, in form
     and substance satisfactory to us, all consents, waivers, acknowledgements
     and other agreements from third parties when we may deem necessary or
     desirable in order to permit, protect and perfect our security interest in
     the Collateral; (viii) we have received an appraisal of the Property by
     Marshall & Stevens, in form and substance acceptable to us; (ix) we have
     received an environmental survey by E. Langan Engineering and Environmental
     Services, Inc., in form and substance acceptable to us; (x) we have
     received an engineer's report of E. Langan Engineering and Environmental
     Services, Inc., in form and substance acceptable to us; (xi) the Residual
     Value Insurance shall have been issued and shall be in full force and
     effect and we shall have been named as a loss payee with respect thereto;
     (xii) all of your representations and warranties in this letter and the
     other Loan Documents are complete and correct as of the date of the Loan
     and after giving effect thereto as if made on and as of such date; (xiii)
     on the date of the Loan and after giving effect thereto, you shall have
     complied and then be in compliance in all respects with all of the terms,
     covenants, and conditions of this letter and the other Loan Documents that
     bind or apply to you; (xiv) no Event of Default, or event which would be an
     Event of Default after notice or passage of time or the happening of any
     other contingency, shall have occurred and be continuing as of the date of
     the Loan or after giving affect thereto; (xv) we shall have received the
     legal opinion of Graham & James LLP, covering such matters as we reasonably
     request, in form and substance satisfactory to us and our counsel; (xvi) no
     event of default, or any event which would be an event of default after
     notice or passage of time or the happening of any other contingency, shall
     have occurred and be continuing as of the date of the Loan under any
     Project Document; (xvii) the Seventh Amendment shall have been duly
     executed by each partner of the Partnership and shall be in full force and
     effect, and we shall have received a duly executed copy thereof; (xviii)
     the Escrow Agreement shall have been duly executed and delivered by each of
     the parties thereto in addition to us and shall be in full force and
     effect; we shall have received a duly executed copy thereof; and all
     documents constituting the "Escrowed Documents" thereunder shall have been
     delivered to and shall be held by the escrow agent thereunder; (xix) we
     shall have received correct and complete copies of the Partnership
     Agreement and the Project Documents as in effect on the date the Loan is
     made; and (xx) all other documents and legal matters in connection with the
     transactions contemplated by this agreement shall be reasonably
     satisfactory in form and substance to us and our counsel.


         11. REPRESENTATIONS AND WARRANTIES. You hereby represent and warrant to
     us as follows:

          11.1 ORGANIZATION, QUALIFICATION, POWER AND AUTHORITY. (a) You are
     duly organized, validly existing and in good standing as a corporation
     under the laws of the State of Delaware; (b) you are 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 your 




                                      -4-
<PAGE>   5


     business, properties, or financial condition; and (c) you have all
     requisite power and authority to conduct your business as now conducted and
     own your property.

          11.2 EXECUTION, DELIVERY AND PERFORMANCE OF LOAN DOCUMENTS. You have
     the full power, authority and legal right to execute, deliver, and perform
     the Loan Documents. You have taken all required corporate and other action,
     to authorize the borrowing evidenced hereby and to authorize the execution,
     delivery, and performance of the Loan Documents. Each Loan Document has
     been duly authorized by you by all required corporate action, has been duly
     executed and delivered by you, and constitutes your legal, valid and
     binding agreement and obligation enforceable against you in accordance with
     its terms without setoff, defense or counterclaim. The execution and
     delivery of the Loan Documents and the carrying out of their terms and
     provisions do not and will not: (i) require any action or consent of or any
     registration or filing with, any governmental authority, bureau or agency,
     or any party to any agreement or other undertaking, or under any order or
     decree applicable to you or, to the best of your knowledge, the
     Partnership; or (ii) conflict with, or constitute a default under, or
     result in the creation or imposition of any lien on your properties and
     assets or the property or assets of, to the best of your knowledge, the
     Partnership, by reason of the terms of (1) any contract, mortgage, lien,
     lease, agreement, indenture, instrument, or judgement to which you or, to
     the best of your knowledge, the Partnership are a party or which is or
     purports to be binding you, (2) any judgment, law, statute, rule or
     governmental regulation applicable to you or, to the best of your
     knowledge, the Partnership, or (3) your Articles of Incorporation and
     By-Laws or the Partnership Agreement.

          11.3 COMPLIANCE. At the date hereof, you are not in violation of or in
     default in any material respect with respect to any judgment, decree, order
     or any federal, state or local law, rule, regulation, statute, or ordinance
     applicable to your business or properties (including, without limitation,
     those relating to environmental protection and pollution control), or any
     contract, mortgage, lien, lease, indenture, instrument, agreement, or
     document to which you are a party or bound. Without limiting the foregoing,
     you have complied with all the requirements of the Residual Value Insurance
     applicable to you with which compliance was required on or prior to the
     date hereof and have not taken any action, or failed to take any action,
     which could cause the Residual Value Insurance or any coverage of such
     insurance to cease to be in full force and effect in all respects with
     regard to the insured, any additional insured or loss payee named therein.

          11.4 LITIGATION. There are no pending, or to your knowledge,
     threatened suits, actions, proceeding, or counterclaims by any Person, or
     investigation by any Public Authority, or any basis for any of the
     foregoing, which challenge the validity or enforceability of any of the
     Loan Documents, or which could materially and adversely affect your
     financial condition, business or operation.

          11.5 USE OF PROCEEDS. The loan proceeds will be used solely for the
     purpose of repaying all debts, obligations and other liabilities
     outstanding under or in respect of the SIPI Loan Agreement, paying the
     costs and expenses incurred in connection with the transactions under the
     Loan Documents, financing acquisitions of businesses, and other general
     corporate purposes.



                                      -5-
<PAGE>   6


          11.6 MARGIN SECURITIES. The proceeds of the Loan will not be used,
     directly or indirectly, for the purpose of purchasing or carrying any
     margin security, for the purpose of reducing or returning any indebtedness
     which was originally incurred to purchase or carry any margin security or
     for any other purpose which might cause the Loan to be considered a
     "purpose credit" within the meaning of, or otherwise to violate, Regulation
     G, T, U or X of the Board of Governors of the Federal Reserve System.

          11.7 FINANCIAL STATEMENT. Your audited financial statements for the
     fiscal year ended December 31, 1996, which you have delivered to us, have
     been prepared in accordance with generally accepted accounting principles
     and fairly present, your financial condition and results of operation as at
     such date and for the period then ended. No material adverse change has
     occurred in your financial condition, business, or operations since
     December 31, 1996.

          11.8 TAXES. At the date hereof, you have filed all tax and information
     returns and other reports that you required by law to have filed, and you
     have paid all taxes, assessments, fees, and other governmental charges, and
     all penalties and interest, if any, against you or your property or income,
     or franchise, that have become due and payable.

          11.9 PARTNERSHIP DOCUMENTS. You have delivered to us accurate and
     complete copies of the Partnership Agreement and the Project Documents.
     There are no modifications of or supplements to the Partnership Agreement
     or the Project Documents other than as contemplated hereby, and, except for
     the Partnership Agreement, there are no agreements or documents relating to
     the organization and management of the Partnership, or the partners of the
     Partnership and the rights and obligations thereof. You and, to the best of
     your knowledge, each of the other partners of the Partnership is in
     compliance with the terms of the Partnership Agreement.

         All of the foregoing representations and warranties shall survive the
     execution and delivery of this letter.

         12. COVENANTS. You covenant that, at all times during the term hereof
     and so long as the Obligations remain outstanding you will perform and
     comply with the following covenants:

          12.1 CORPORATE EXISTENCE AND GOOD STANDING. You shall preserve and
     maintain your corporate existence and good standing in all jurisdictions
     necessary to conduct your business and own or lease your property, and
     maintain all licenses, permits, franchises, and governmental authorizations
     necessary to conduct your business and own or lease your property.

                  12.2 COMPLIANCE WITH LAW AND AGREEMENTS. You shall comply with
      each order, ordinance, law, rule, decree, judgement, governmental
      regulation and statute applicable to you (including, without limitation,
      those relating to environmental protection and pollution control) and each
      contract, mortgage, lien, lease, indenture, order, instrument, agreement
      or document to which you are a party or bound.



                                      -6-
<PAGE>   7


          12.3 MAINTENANCE OF BOOKS AND RECORDS. You shall keep adequate books
     and records of accounts, in which complete entries will be made in
     accordance with generally accepted accounting principles consistently
     applied, reflecting all your or its financial transactions.

          12.4 TAXES AND OTHER OBLIGATIONS. You shall file when due all tax and
     information returns and other reports which you are required to file; pay
     or provide for the payment of, when due, all taxes, fees, assessments and
     other governmental charges against or upon your property, income or
     franchises; make all required withholding and other tax deposits; establish
     adequate reserves for the payment of all such items; provide to us, upon
     request, satisfactory evidence of your timely compliance with the
     foregoing; and pay when due all Indebtedness for Borrowed Money owed by you
     and perform and discharge in a timely manner all other obligations
     undertaken by you.

          12.5 FINANCIAL STATEMENTS. You shall furnish to us (i) no later than
     90 days after the end of each of your fiscal years, an audited consolidated
     balance sheet, statement of income, and statement of cash flow and uses of
     funds for you and your consolidated subsidiaries, if any, as at the end of
     such year and for the fiscal year then ended; and (ii) no later than 45
     days after the end of each of your fiscal quarters, other than the last
     fiscal quarter of a fiscal year, an unaudited consolidated balance sheet,
     statement of income and statement of cash flow for you and your
     consolidated subsidiaries, if any, as at the end of such quarter and for
     the period from the beginning of the fiscal year until the end of such
     quarter. All such financial statements shall be prepared in accordance with
     generally accepted accounting principles and shall present fairly the
     financial position and results of operations for you and your consolidated
     subsidiaries, if any, as at the dates thereof and for the period then
     ended. All annual financial statements shall be examined by and accompanied
     by the unqualified report of independent certified public accountants
     reasonably acceptable to us. All quarterly financial statements shall be
     certified to be correct by your chief financial or accounting officer,
     subject to year-end adjustments. You shall furnish to us copies of all
     financial statements, tax or information returns, operating reports, and
     other written communication received from the Partnership, promptly after
     your receipt.

          12.6 MERGERS, CONSOLIDATIONS OR SALES. You shall not enter into any
     transaction of merger or consolidation with, or transfer, sell, assign,
     lease or otherwise dispose of all or substantially all of your properties
     or assets to, any Person (except a merger in which you are the surviving
     entity and after giving effect to which you are in compliance with all of
     your other covenants in the Loan Documents and no Event of Default, or
     event or circumstance that with the passage of time or the giving of notice
     or both would constitute an Event of Default, exists), or wind up,
     liquidate or dissolve or agree to do any of the foregoing.

          12.7 NOTICES. You shall notify us in writing of the following matters
     at the following times:

               (a) Immediately after becoming aware thereof, any Event of
          Default, or event of default or default under any Project Document,
          and


                                      -7-
<PAGE>   8


               (b) Immediately after becoming aware thereof, any pending or
          threatened action, suit, proceeding, or counterclaim by any Person, or
          any pending or threatened investigation by a Public Authority, which
          may materially and adversely affect the Project Documents, the
          repayment of the Obligations, our rights under the Loan Documents or
          your or the Partnership's property, business, operations or condition
          (financial or otherwise).

         12.8 INDEBTEDNESS. You shall not have outstanding any Indebtedness for
     Borrowed Money in excess of $80,000,000 in aggregate principal amount at
     any time.

         12.9 NEGATIVE PLEDGE. You shall not create, incur, assume or suffer to
     exist any Lien in or upon the Collateral except in our favor.

         12.10 FINANCIAL COVENANTS. You shall maintain a ratio of total
     Indebtedness for Borrowed Money to total equity of no greater than
     1.25:1.00.

         12.11 DISPOSAL OF PARTNERSHIP INTEREST. You will not sell, transfer,
     assign or otherwise convey your interest in the Partnership or any portion
     thereof, or grant any options or rights to purchase such interest or any
     portion thereof except pursuant to the Loan Documents or under Article XIV
     of the Partnership Agreement, as amended by the Seventh Amendment.

         12.12 ACTION UNDER PARTNERSHIP AGREEMENT. You shall not cast any vote,
     make any election, give or withhold any consent or approval, waive any
     provision, or take any other action under the Partnership Agreement which
     you may be permitted or required to cast, take, give, take or withhold,
     waive or make pursuant to the terms of the Partnership Agreement without
     our prior written consent:

          (a) if such vote, election, consent, approval, waiver, or other action
     is with respect to (i) the dissolution or winding-up of the Partnership,
     (ii) any amendment, modification, or supplement to or waiver or consent
     under the Project Documents, (iii) any voluntary or involuntary petition
     for relief or similar filing or action under the United States Bankruptcy
     Code or any other statute, law or proceeding for the relief of debtors, or
     any assignment for the benefit of creditors, or any appointment of a
     custodian, receiver or trustee, (iv) any incurrence of Indebtedness for
     Borrowed Money, (v) the imposition of any Lien on the Property, (vi) any
     sale or other disposition of the Property or any interest therein or of all
     or substantially all of the assets and property of the Partnership, or any
     merger or combination of the Partnership with or into any other Person, or
     (vii) any amendment, modification, or supplement to the Partnership
     Agreement; or

          (b) without at least 10 days prior written notice to us in the case of
     any other vote, election, consent, approval, waiver, or other action.

         12.13 TRANSACTIONS WITH AFFILIATES. You will not enter into or permit
     to exist any transaction or series of transactions with any affiliate other
     than in the ordinary course of business and on an arm's length basis,
     except transactions disclosed in your Annual Report on Form 10-K for the
     year ended December 31, 1996, your Quarterly Report on Form 10-Q/A for 



                                      -8-
<PAGE>   9


     the quarter ended September 30, 1997, your Current Report on Form 8-K,
     dated June 13, 1997, and the Project Documents.

         12.14 YEAR 2000. You shall take all action necessary to assure that
     your computer based systems are able to process effectively data including
     dates on and after January 1, 2000. At our request, you shall provide us
     with assurance reasonably acceptable to us of your year 2000 capability.

         12.15 FURTHER ASSURANCES. You shall execute and deliver to us, upon
     request, such documents and agreements and do such other acts, as we may,
     from time to time, reasonably request to carry out the terms and conditions
     of this letter.

         13. DEFAULT AND REMEDIES.

          13.1 DEFAULTS. Each of the following constitutes an event of default
     ("Event of Default"):

          (a) you fail to pay any principal of or accrued interest on the Note
     when due or fail to pay when due any of the other Obligations;

          (b) any representation or warranty made by you herein, in the Loan
     Documents, in any written statement or certificate furnished or deemed
     furnished by you to us at any time, or in any agreement, instrument, or
     document now or hereafter in effect evidencing, securing, guaranteeing, or
     relating in any way to your Obligations to us shall have been untrue in any
     material respect when made;

          (c) you default in the observance or performance of, or breach, any
     covenant or agreement herein, in the Loan Documents, or in any other
     agreement, instrument, or documents now or hereafter in effect evidencing,
     securing, guaranteeing, or relating in any way to your Obligations to us,
     or an event of default otherwise occurs under any such other agreement,
     instrument, or document, and in the case of a breach of Section 12.2, 12.3,
     12.4, 12.5, 12.7 or 12.14, such breach continues for ten (10) days
     unremedied or uncured;

          (d) the holder of any other of your Indebtedness for Borrowed Money in
     an outstanding principal amount in excess of $100,000 declares that a
     default exists with respect to such Indebtedness for Borrowed Money or
     under any agreement relating thereto;

          (e) you or the Partnership commence, have commenced against you or it,
     or acquiesce in the commencement or any action or proceeding in bankruptcy
     or seeking reorganization, arrangement, readjustment of debts, or any other
     relief under the United States Bankruptcy Code, as amended, or under any
     other bankruptcy or insolvency law, state or federal, now or hereafter
     existing, whether or not an order for relief has been entered therein, and
     in the event of an action or proceeding commenced against you, such action
     or proceeding, is not withdrawn or dismissed within forty-five (45) days
     after it is commenced;




                                      -9-
<PAGE>   10


          (f) you or the Partnership apply for or acquiesce in the appointment
     of, or have appointed against you or it, a receiver, custodian, trustee,
     sequestrator, or similar officer for you or it or all or any part of your
     or its property;

          (g) you or the Partnership make an assignment for the benefit of
     creditors;

          (h) you or the Partnership file a certificate of dissolution under
     applicable state law, are liquidated, or take any action or have any action
     taken against you or it in furtherance of dissolution or liquidation;

          (i) one or more final judgements for the payment of money aggregating
     $100,000 or more are rendered against you which remains undischarged,
     unvacated, unbonded or unstayed for a period of thirty (30) days;

          (j) any Lien, other than in our favor or pursuant to the Project Loan
     Documents, is filed or recorded with respect to or otherwise imposed upon
     the Collateral or the Property;

          (k) you are or the Partnership is enjoined, restrained or in any way
     prevented by order of any Public Authority from conducting all or any
     material part of your or its business and such order continues for more
     than fifteen (15) days;

          (l) we do not have or cease to have a valid and perfected first
     priority security interest in the Collateral for any reason other than the
     failure to take any action within our control;

          (m) any of the Loan Documents for any reason, other than a payment in
     full of the Obligations, ceases to be in full force and effect or is
     declared to be null and void or you deny that you have any further
     liability under any Loan Document to which you are a party, or give notice
     to such effect;

          (n) any material damage to, or loss, theft or destruction of, the
     Collateral or the Property, whether or not insured, or any Condemnation,
     act of force majeure or other casualty occurs which causes, for more than
     sixty (60) consecutive days, the cessation or substantial curtailment of
     revenue producing activities at any of your facilities or those of the
     Partnership if any such event or circumstances could reasonably be expected
     to have a Material Adverse Effect unless, within such sixty (60) day
     period, you have either (i) commenced and pursued diligently all action
     available to you under the Lease Agreement or (ii) provided to us a plan
     (acceptable to us in our discretion), and in the case of a casualty, work
     has commenced and is being diligently pursued under such plan, in each case
     for the purpose of returning your property or the Property to a revenue
     production state similar to the state of your property or the Property
     prior to the occurrence of such casualty or other event;

          (o) the Partnership engages in any type of business activity other
     than the ownership, lease and operation of the Property in accordance with
     past practices; or

                                      -10-

<PAGE>   11

          (p) the General Partner or any limited partner of the Partnership
     defaults in the observance or performance of, or breaches, any covenant or
     agreement in Article XIV, Section 9.01(d) or Section 22.07 of the
     Partnership Agreement or any representation or warranty made by it therein
     shall have been untrue in any material respect when made; or

          (q) the Partnership defaults in the observance or performance of, or
     breaches, any covenant or agreement contained in any Project Document, or
     any default or event of default otherwise occurs thereunder.

          13.2 REMEDIES. (a) If an Event of Default occurs, then, in addition to
     any other rights and remedies that we may have under law or agreement
     (including, without limitation, our rights and remedies under the Escrow
     Agreement and the Partnership Agreement, which are subject to the terms and
     conditions thereof), but subject to subsection (b) of this Section, we may,
     without notice to or demand on you, declare the unpaid principal balance of
     the Loan, together with accrued but unpaid interest thereon and all other
     Obligations, to be and all such sums shall thereupon become immediately due
     and payable. You waive presentment or payment, demand, protest, notice of
     protest and demand or dishonor hereof, and all other notices to which you
     may be entitled.

          (b) If you fail to pay the principal balance of and accrued but unpaid
     interest on the Loan at the Scheduled Maturity Date, and no other Event of
     Default is then continuing and we have not theretofore declared the
     principal balance of the Loan due and payable pursuant to Section 13.2(a),
     then, during the General Forbearance Period (as hereinafter defined), we
     will forbear from enforcing our remedies arising from such failure of
     payment. For the purposes hereof, the "General Forbearance Period" shall
     mean the period commencing on the Scheduled Maturity Date and ending on the
     earliest to occur of: (x) April 30, 2005; (y) the closing of a Qualifying
     Financing (as defined below) or a Qualifying Sale (as defined below); or
     (z) the earlier termination of the General Forbearance Period in accordance
     with this subsection. We may terminate the General Forbearance Period at
     any time that either of the following events or circumstances shall exist
     or occur:

                    (i) any Event of Default (other than your failure to pay the
               Obligations on the Scheduled Maturity Date) shall occur and be
               continuing; or

                    (ii) after the repayment in full of the Partnership's
               obligations pursuant to the Project Loan Agreement, any of the
               following conditions are not satisfied:

                         (A) the Government is the tenant of the Property and is
                    paying rent for the use and occupancy of the Property; you
                    are receiving distributions of your share of such rent under
                    the Partnership Agreement (as "Net Cash Flow" or otherwise)
                    within thirty days after each rental payment is received;
                    each of such distributions is in an amount 



                                      -11-
<PAGE>   12


                    which on an annualized basis is not less than $6,000,000 per
                    annum; and such distributions are being remitted by the
                    Partnership directly to us without reduction for application
                    to the Obligations; and

                         (B) either (1) the Partnership is engaged in and is
                    diligently pursuing good faith negotiation for (a) a new
                    lease for the Property, or an extension of the Lease
                    Agreement, providing for a rent and on other terms that will
                    enable the Partnership to obtain financing in an amount such
                    that the proceeds thereof that are to be distributed to you
                    under the Partnership Agreement will be sufficient to repay
                    the Loan and all accrued interest thereon (such financing
                    being referred to hereinafter as a "Qualifying Financing")
                    and (b) Qualifying Financing; or (2) the Partnership is
                    engaged in and is diligently pursuing good faith
                    negotiations for the sale of the Property at a price and on
                    terms such that the amount of cash to be distributed to you
                    under the Partnership Agreement from the proceeds of such
                    sale will be sufficient to repay the Loan and all accrued
                    interest thereon (such sale being referred to as a
                    "Qualifying Sale").

     Upon the expiration or termination of the General Forbearance Period,
     unless the Loan and all accrued interest thereon have been fully and
     finally paid, we shall be entitled at such time and at any time thereafter
     to enforce all of our rights and remedies for payment of the Obligations,
     to the same extent as if we had not agreed to forbear from doing so during
     the General Forbearance Period; provided, however, that we shall not be
     entitled at such time to enforce our rights and remedies under the Escrow
     Agreement unless the Escrow Forbearance Period (as defined in
     Section13.2(c)) has also expired or been terminated.

         (c) If you fail to pay the principal balance of and accrued but unpaid
     interest on the Loan at the Loan Due Date, then, whether or not another
     Event of Default is then continuing, during the Escrow Forbearance Period
     (as hereinafter defined), we will forbear from enforcing our rights and
     remedies under the Escrow Agreement arising from such failure of payment.
     For the purposes hereof, the "Escrow Forbearance Period" shall mean the
     period commencing on the Loan Due Date and ending on the earlier to occur
     of: (x) April 30, 2005; or (y) the earlier termination of the Escrow
     Forbearance Period in accordance with this subsection. We may terminate the
     Escrow Forbearance Period at any time that either of the following events
     or circumstances shall exist or occur:

                    (i) there shall occur and be continuing an event described
               in Section 13.1, subsection (e), (f), (g), (h), or (p), with
               respect to the Partnership or the General Partner, which, in the
               case of an event described in 



                                      -12-
<PAGE>   13


               Section 13.1(p), continues uncured for more than 10 days after
               the General Partner's receipt of written notice from us of such
               occurrence; or

                    (ii) after the repayment in full of the Partnership's
               obligations pursuant to the Project Loan Agreement, any of the
               conditions set forth in subsections (b)(ii)(A) or (b)(ii)(B) of
               this Section are not satisfied.
    
     Upon the expiration or termination of the Escrow Forbearance Period, unless
     the Loan and all accrued interest thereon have been fully and finally paid,
     we shall be entitled at such time and at any time thereafter to enforce all
     or our rights and remedies under the Escrow Agreement, to the same extent
     as if we had not agreed to forbear from doing so during the Escrow
     Forbearance Period.

         (d) Our forbearance as provided hereunder shall not be construed as a
     waiver of any of our rights or remedies, nor shall it be the basis to deem
     us estopped from taking any action at a later date. All statutes of
     limitations applicable to actions that we may be entitled to bring to
     enforce our rights and remedies shall be tolled during the General
     Forbearance Period or the Escrow Forbearance Period, as the case may be,
     and each time period provided in each such statute of limitations shall be
     extended by a period of time equal to the duration of the General
     Forbearance Period or the Escrow Forbearance Period.

         (e) We acknowledge that the rights and remedies granted to us in
     Article XIV of the Partnership Agreement are subject to the terms,
     conditions, and limitations therein and that we are bound thereby to the
     same extent as if we were a party to the Partnership Agreement.

         14. OBLIGATIONS UNCONDITIONAL; CUMULATIVE REMEDIES; NO PRIOR RECOURSE.
     Your obligations under the Loan Documents, except as otherwise expressly
     set forth therein, are absolute and unconditional and shall not be
     released, discharged, or otherwise affected by any action or inaction on
     our part in enforcing our rights hereunder, by a bankruptcy, insolvency, or
     similar proceeding, or by any other matter which might vary your risk or
     operate to discharge you as a matter of law. Our rights and remedies under
     the Loan Documents are cumulative and not exclusive of other rights and
     remedies provided by law. We may proceed directly against you for payment
     and performance of your obligations without prior recourse to any
     collateral or to any other person liable therefor.

         15. COMPLETE AGREEMENT; MODIFICATIONS AND WAIVERS. This Agreement and
     the other Loan Documents are the complete agreement between you and us
     regarding the transactions described herein and supersede any and all oral
     or other written agreements relating to such transactions. In entering into
     the agreements embodied in the Loan Documents, you have not relied on any
     agreements, representations, warranties, or statements by us that are not
     expressly set forth in this letter. The Loan Documents may not be modified,
     supplemented, or amended, or any of their provisions waived, except by a
     writing signed by you and us; provided, however, that you and we shall not
     amend Section 13.2 (c) or Section 13.1, subsections (e), (f), (g), (h), or



                                      -13-
<PAGE>   14

     (p) (insofar as such subsections apply to the Partnership and the General
     Partner), without the prior written consent of the General Partner. No
     waiver by us of a breach or Event of Default by you shall be deemed a
     waiver of any other previous, concurrent, or subsequent breach or Event of
     Default.

         16. REINSTATEMENT. If after receipt of any payment pursuant to the Loan
     Documents, we are for any reason compelled to surrender such payment to any
     person or entity, because such payment is determined to be void or voidable
     as a preference, impermissible set off, or a diversion of trust funds, or
     for any other reason, then the Loan Documents and your obligations intended
     to be paid by such payment shall be reinstated, if necessary, and shall
     continue in full force notwithstanding any contrary action which we may
     have taken in reliance upon such payment. Any such contrary action so taken
     shall be without prejudice to our rights under the Loan Documents and shall
     be deemed to have been conditioned upon such payment having become final
     and irrevocable.

         17. COSTS AND EXPENSES. You will pay or reimburse to us on demand any
     and all charges, costs, and taxes incurred in preparing, negotiating,
     documenting, implementing, and enforcing the Loan Documents and collecting
     Obligations, including without limitation, fees and disbursements of legal
     counsel, and all amounts payable by us under the Escrow Agreement.

         18. GOVERNING LAW; BINDING EFFECT. Unless otherwise expressly stated
     therein, the Loan Documents shall be governed by, and construed and
     enforced in accordance with, the laws of the State of New York, without
     giving effect to any conflicts of laws or principles thereof. The terms and
     provisions of the Loan Documents shall inure to the benefit of and be
     binding upon each of us and our respective successors and assigns;
     provided, however, that you may not assign any of your interests therein or
     obligations thereunder without our prior written consent. We may assign or
     grant participations in all or any of our rights and obligations under this
     letter, the Note and the other Loan Documents to one or more Persons, so
     long as the assignee or participant is not at the time of the assignment or
     sale of the participation entitled to demand a payment under Sections 6,7,
     or 8 that you are not then entitled to demand.

         19. SEVERABILITY. If any clause or provision of the Loan Documents
     shall be held invalid or unenforceable, in whole or in part, in any
     jurisdiction, such invalidity or unenforceability shall attach only to such
     clause or provisions, or part thereof, and shall not in any manner affect
     any other clause or provision in any jurisdiction.

         20. ADMISSIBILITY OF BOOKS AND RECORDS. You agree that our books and
     records showing the transactions contemplated by the Loan Documents shall
     be admissible in any action or proceeding arising therefrom and shall
     constitute prima facie proof thereof.

         21. CONSENT TO JURISDICTION. You agree that, in addition to any other
     courts that may have jurisdiction under applicable law and rules, the
     Supreme Court of the State of New York, in the County of New York, and the
     United States District Court for the Southern District of New York shall
     have jurisdiction to hear and determine any claims or disputes pertaining
     directly or indirectly to the Loan Documents or to any matter arising
     therefrom. You expressly submit and consent, in advance, to such
     jurisdiction in any action or proceeding in such courts, agree that 



                                      -14-
<PAGE>   15


     venue will be proper in such courts for all such matters and waive personal
     service of the summons and complaint or other process or papers issued
     therein. You agree that service of such summons or complaint or other
     process or papers may be made by registered or certified mail (return
     receipt requested) addressed to you at the address set forth in Section 22.

         22. NOTICES. Any notice or other communication given hereunder shall be
     in writing, shall be delivered against receipt, or mailed by registered or
     certified mail, return receipt requested, postage prepaid, and addressed to
     the party to be notified as follows, or to such other address as such party
     may designate by like notice:


         If to us, to:     KBC Bank N.V.
                           Grand Cayman Branch
                           c/o 125 West 55th Street
                           New York, New York  10019
                           Attn: Edward Sproull
                           Telephone No.: (212) 541-0600
                           Telecopy No.: (212) 956-5580


         If to you, to:    Regency Affiliates, Inc.
                           729 South Federal Highway, Suite 307
                           Stuart, Florida 34994
                           Attn:  William R. Ponsoldt
                           Telephone No.: (561) 220-7662
                           Telecopy No.: (561) 220-2974

         23. SETOFF. Whenever an Event of Default exists, we, without notice to
     or demand on you, may elect in our sole discretion to setoff against the
     amount due and all moneys then or thereafter owed to you by us or an
     affiliate, including, without limitation, all of your deposit and other
     accounts and funds in our or such affiliate's possession or control. We
     shall be deemed to have exercised this right immediately at the time of our
     election even though any charge therefor is made or entered on our records
     subsequent to that time. All costs and expenses, including, without
     limitation, attorney's fees, paid or incurred by us in connection with any
     such setoff shall be paid by you on demand and shall bear interest at the
     rate then applicable to the Loan from the date paid or incurred.

         24. WAIVER OF JURY TRIAL, ETC. YOU HEREBY WAIVE TRIAL BY JURY, AND YOU
     HEREBY WAIVE RIGHT OF SETOFF AND THE RIGHT TO IMPOSE COUNTERCLAIMS (OTHER
     THAN COMPULSORY COUNTERCLAIMS), IN ANY LITIGATION IN ANY COURT WITH RESPECT
     TO, IN CONNECTION WITH, OR ARISING OUT OF THE LOAN DOCUMENTS, OR ANY OTHER
     CLAIM OR DISPUTE HOWSOEVER ARISING BETWEEN US. YOU CONFIRM THAT THE
     FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.

         25. SECURITY AND GUARANTEES. We may, without notice or demand and
     without affecting your Obligations, from time to time:



                                      -15-
<PAGE>   16


         (a) take from any Person and hold collateral for the payment of all or
     any part of your Obligations hereunder and exchange, enforce or release
     such collateral or any part thereof; and

                  (b) accept and hold any endorsement or guarantee of payment of
      all or any part of the Obligations and release or substitute any such
      endorser or guarantors, or any Person who has given any Lien in any
      collateral as security for the payment of all or any part of the
      Obligations, or any other Person in any way obligated to pay all or any
      part of the Obligations.

         Please countersign below to indicate your acceptance of the terms
     hereof.





                         [Signatures on Following Page]



                                      -16-
<PAGE>   17




      KBC BANK N.V.


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


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


      Agreed and Accepted:

      REGENCY AFFILIATES, INC.



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


















                                [LOAN AGREEMENT]




<PAGE>   18


                                                                     EXHIBIT A


                                   DEFINITIONS


     When used in the letter to which this is attached:

         "Accreted Interest" means in respect of each interest compounding
     period in connection with the Loan, the total amount of interest accrued,
     but unpaid, as of the end of such period for such period, on the Total
     Amount of the Loan.

         "Accreted Interest Balance" means as of any date of determination in
     respect of the Loan, the aggregate of all Accreted Interest in respect of
     all interest compounding periods ending on or before such date of
     determination less all payments, if any, made on account of such Accreted
     Interest.

         "Business Day" means any day other than a Saturday, Sunday or other day
     on which our New York Branch is authorized or required by law to close.

         "Collateral" means the Collateral, under and as defined in the Security
     Agreement, and any other property in which we are granted a lien, charge,
     or security interest as security for the Obligations.

         "Condemnation" means any taking of or damage to any property or any
     part thereof by reason of any public improvement or condemnation
     proceeding, or in any other similar manner.

         "Deed of Trust" means the Amended and Restated Deed of Trust, dated as
     of November 1, 1994, for the benefit of the Trustee.

         "Dollars" or "$" means United States Dollars.

         "Escrow Agreement" means the Escrow Agreement dated June 24, 1998 by
     and among the Partnership, us, R.V.I America Insurance Company, and State
     Street Bank and Trust Company, as escrow agent and as trustee.

         "General Partner" means 1500 Woodlawn Limited Partnership, a Delaware
     limited partnership, which is the General Partner of the Partnership.

         "Guarantee" by any Person means all obligations of such Person which in
     any manner directly or indirectly guaranty the payment or performance of
     any indebtedness, dividend or other obligation of any other Person (the
     "guaranteed obligations"), or assure or in effect assure the holder of the
     guaranteed obligations against loss in respect thereof, including, without
     limitation, any such obligations incurred through an agreement: (a) to
     purchase the guaranteed obligations or any property constituting security
     therefor or (b) to advance or supply funds for the purchase



                                      -1-
<PAGE>   19


     or payment of the guaranteed obligations or to maintain working capital or
     other balance sheet condition.

         "Government" means the United States of America, acting by and through
     the General Services Administration.

         "Indebtedness for Borrowed Money" of any Person means all of such
     Person's liabilities, obligations and indebtedness to any Person, of any
     kind or nature, now or hereafter owing, arising, due or payable, howsoever
     evidenced, created, incurred, acquired or owing, in respect of: (a) the
     Obligations, (b) all other liabilities, obligations, and indebtedness for
     borrowed money or evidenced by a note, debenture, or other instrument for
     the payment of money, (c) all obligations and liabilities of any Person
     secured by any Lien on your property even though you have not assume or
     become liable for the payment thereof, provided that all such obligations
     and liabilities which are limited in recourse to such property shall be
     included in Indebtedness only to the extent of the book value of such
     property that would be shown on your balance sheet prepared in accordance
     with generally accepted accounting principles, (d) all obligations or
     liabilities created or arising under any capitalized lease or conditional
     sale or other title retention agreement with respect to property used or
     acquired by you, even if the rights and remedies of the lessor, seller or
     lender thereunder are limited to repossession of such property, provided,
     however, that all such obligations and liabilities which are limited in
     recourse to such property shall be included in Indebtedness only to the
     extent of the book value of such property that would be shown on your
     balance sheet prepared in accordance with generally accepted accounting
     principles, and (e) all obligations and liabilities under any Guarantee of
     another Person's Indebtedness for Borrowed Money.

         "Interest Period" means each period commencing on the Scheduled
     Maturity Date or the last day of the next preceding Interest Period and
     ending on the numerically corresponding day which is one month thereafter;
     provided, however, that if an Interest Period would end on a day which is
     not a LIBOR Business Day, then such Interest Period shall be extended and
     shall end on the next succeeding LIBOR Business Day.

         "Lease Agreement" means the U.S. Government Lease for Real Property No.
     gs-03B-40131, between the Government and the Partnership.

         "LIBOR" means, for any Interest Period, the rate per annum (rounded
     upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate
     Page 3570 (or any successor page) as the London interbank offered rate for
     deposits in Dollars at approximately 11:00 a.m. (London time) two (2)
     Business Days prior to the first day of such Interest Period. If for any
     reason Telerate Page 3570 is not available, the term "LIBOR Rate" shall
     mean, for any Interest Period, the rate per annum (rounded upwards if
     necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO
     Page as the London interbank offered rate for deposits in Dollars at
     approximately 11:00 a.m. (London time) two (2) Business Days prior to the
     first day of such Interest Period for a term comparable to such Interest
     Period; provided, however, if more than one rate is specified on Reuters
     Screen LIBO Page, the applicable rate shall be the sum of the arithmetic
     mean of all such rates.




                                      -2-
<PAGE>   20



         "LIBOR Business Day" means a Business Day on which dealings in U.S.
      Dollar deposits are carried out in the London interbank market.

         "Lien" means: (a) any interest in property securing an obligation owed
     to, or a claim by, a Person other than the owner of the property, whether
     such interest is based on the common law, statute or contract, and
     including, without limitation, a security interest, charge, claim, or lien
     arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
     assignment, deposit arrangement, security agreement, conditional sale or
     trust receipt or a lease, consignment or bailment for security purposes; or
     (b) any condition, restriction, lease or other title exception or
     encumbrance affecting property.

         "Loan Documents" means this letter, the Note, the Pledge and Security
     Agreement, the Seventh Amendment, the Escrow Agreement, and all other
     documents, agreements and instruments heretofore, now or hereafter
     evidencing, securing, guaranteeing or otherwise relating to the Obligations
     arising from or with respect to the transaction contemplated hereby, and
     all amendments, additions, extensions and substitutions.

         "Make-Whole Premium" means the excess, if any, of (1) the sum of the
     respective Payment Values (as such term is defined below) of (x) each
     prospective Accreted Interest amount the would be added to the portion of
     the Total Amount of the Loan being prepaid on or after the date of
     prepayment if the prepayment were not made and (y) the portion of the Total
     Amount of the Loan to be prepaid (the amount of each such payment being
     herein referred to as a "Payment"), over (2) the portion of the Total
     Amount of the Loan being prepaid. The "Payment Value" of each Payment shall
     be determined by discounting such Payment at the Reinvestment Rate (as such
     term is defined below), for, in the case of Accreted Interest amounts, the
     period from the relevant prospective compounding date on which such payment
     would have compounded to the Scheduled Maturity Date and, in the case of
     the Total Amount of the Loan, the period from the prepayment date to the
     Scheduled Maturity Date. The "Reinvestment Rate" is the yield which shall
     be imputed from the yields of those actively traded U.S. Treasury
     securities, having a maturity equal to the Weighted Average Life to Final
     Maturity (as such term is defined below) of the Loan, provided that, if
     such Weighted Average Life to Final Maturity is not equal to the maturity
     of actively traded U.S. Treasury securities (calculated to the nearest
     one-twelfth (1/12) of a year), such yield shall be obtained by linear
     interpretation from the yields of actively traded U.S. Treasury securities
     having the greater maturity closest to and the lesser maturity closest to
     such Weighted Average Life to Final Maturity. The yields of such U.S.
     Treasury securities shall be determined by us as of 10 a.m. New York City
     time on the fifth (5th) Business Day prior to the prepayment date.
     "Weighted Average Life to Final Maturity" of the Loan as of the time of
     determination thereof means the number of years (rounded to the nearest
     one-twelfth (1/12)) obtained by dividing the then Remaining Dollar-Years
     (as such term is defined below) of the Loan by the then outstanding Total
     Amount of the Loan. "Remaining Dollar Years" means the sum of the amounts
     obtained by multiplying the amount of each then prospective Accreted
     Interest amount that would have compounded on the Total Amount of the Loan
     being prepaid, or the Total Amount of the Loan being prepaid, as the case
     may be, by the number of years (calculated to the nearest one-twelfth
     (1/12)) which will elapse between the prepayment date and the relevant
     prospective interest compounding date or Scheduled Maturity Date, as the
     case may be.



                                      -3-
<PAGE>   21


         "Material Adverse Effect" means (a) a material adverse effect upon your
     business, operations, properties, assets or condition (financial or
     otherwise) or that of the Partnership on an individual basis, (b) the
     impairment of your ability to perform your obligations under any Loan
     Document to which you are a party or our ability to enforce any Loan
     Document or collect any of the Obligations or (c) the impairment of the
     Partnership's ability to perform its obligations under any Project Document
     to which it is a party. In determining whether any individual event would
     result in such effect, a Material Adverse Effect shall be deemed to have
     occurred if the cumulative effect of such event and all other then existing
     events would result in a Material Adverse Effect.

         "Obligations" means any and all of your present and future loans,
     advances, debts, liabilities, obligations, covenants, duties and
     indebtedness owing by you to us, whether or not arising under this letter,
     whether or not evidenced by any note, or other instrument or document,
     whether arising from an extension of credit, opening of a letter of credit,
     loan, guaranty, indemnification or otherwise, whether direct or indirect
     (including, without limitation, those acquired by assignment from others
     and any participation by us in your debts owing to others), absolute or
     contingent, due or to become due, primary or secondary, as principal or
     guarantor, and including, without limitation, all loans, interest, charges,
     expenses, fees, attorneys' fees, filing fees and any other sums chargeable
     to you hereunder, under another Loan Document or under any other agreement
     or instrument with us.

         "Partnership" means Security Land and Development Company Limited
     Partnership, a Maryland limited partnership.

         "Partnership Agreement" means the Security Land and Development Company
     Limited Partnership Amended and Restated Limited Partnership Agreement and
     Amended and Restated Certificate of Limited Partnership, dated as of
     November 25, 1986, as amended by the First Amendment, dated as of November
     25, 1986, the Second Amendment, dated as of November 22, 1988, the Third
     Amendment, dated as of January 1, 1989, the Fourth Amendment, dated as of
     August 20, 1990, the Fifth Amendment, dated as of November 17, 1994, the
     Sixth Amendment, dated as of November 17, 1994, and the Seventh Amendment,
     among, you, the General Partner and the other limited partners from time to
     time.

         "Partnership Distributions" means all proceeds of all distributions
     received by you from the Partnership, whether in the nature of insurance or
     Condemnation proceeds, refinancing proceeds, proceeds from the disposition
     of any assets of the Partnership or from any other Partnership source
     whatsoever or of any kind, except as provided in Section 7(a) of the
     Security Agreement.

         "Person" means any individual, sole proprietorship, partnership, joint
     venture, trust, unincorporated organization, association, corporation,
     governmental body, agency or bureau, or any other entity.

         "Project Documents" shall mean the Lease, the Project Loan Agreement,
     the Trust Agreement, and the Deed of Trust.



                                      -4-
<PAGE>   22


         "Project Loan Agreement" means the Project Loan Agreement, dated as of
     November 1, 1994, between the Partnership and the Trustee.

         "Property" means the land described on Exhibit D hereto, and the
     buildings, improvements, and fixtures thereon, located at 1500 Woodlawn
     Drive, Baltimore, Maryland.

         "Public Authority" means any nation, government, governmental
     department, commission, board, bureau, agency, regulatory authority,
     instrumentality, judicial or administrative body, domestic or foreign,
     federal, national, state or local having or claiming jurisdiction over the
     matter or matters in question.

         "Residual Value Insurance" means a Residual Value Insurance Policy in
     form and substance acceptable to us issued by R.V.I. America Insurance
     Company, or other insurer acceptable to us, in the amount of Fourteen
     Million Dollars ($14,000,000), which names us as a loss payee.

         "Security Agreement" means the Pledge and Security Agreement, dated as
     of June 24, 1998, between you and us.

         "Seventh Amendment" means the Seventh Amendment to the Partnership
     Agreement, dated as of June 24, 1998, in the form of Exhibit C to this
     letter.

         "SIPI" means Southern Indiana Properties, Inc.

         "SIPI Agreement" means the Credit Agreement, dated June 21, 1996,
     between you and SIPI.

         "SIPI Security Agreement" means the Collateral Assignment, Pledge and
     Security Agreement, dated June 21, 1996, between you and SIPI.

         "Total Amount" means as of any date, the sum of the unpaid principal
     balance and the Accreted Interest Balance of the Note.

         "Trust Agreement" means the Trust Agreement, dated as of November 1,
     1994, between the Partnership and the Trustee.

         "Trustee" means State Street Bank and Trust Company, successor trustee
     to Shawmut Bank, N.A., not in its individual capacity, but solely as
     trustee under the Trust Agreement, or any substitute pursuant to the terms
     thereof.




                                      -5-
<PAGE>   23



                                                                     EXHIBIT B

                                    TERM NOTE




US$                                                        New York, New York
   -------                                                 Date: June___, 1998



         FOR VALUE RECEIVED, REGENCY AFFILIATES, INC., a Delaware corporation
(the "Borrower"), hereby unconditionally promises to pay to the order of KBC
BANK N.V., Grand Cayman Branch (the "Bank"), at 125 West 55th Street, New York,
New York 10019, or such other place as the holder hereof may hereafter designate
in writing, the principal sum of ____ Million ____ Hundred Thousand Dollars 
(US$________) in lawful money of the United States of America and in 
immediately available funds on November 30, 2003.

         The Borrower shall also pay interest to the Bank, in like money, on the
unpaid principal balance of this Note outstanding from time to time until such
principal is fully paid at the rate per annum equal to ___% (the "Interest
Rate"). Interest shall be computed on a daily basis for the actual number of
days elapsed over a year of 360 days, shall be compounded semiannually on each
June 1 and December 1, commencing June 1, 1998, and shall be due and payable in
arrears on the earlier of (a) November 30, 2003 or (b) the earlier acceleration
of the Loan upon an Event of Default. Any amount of principal or interest hereof
which is not paid when due, whether at stated maturity, by acceleration or
otherwise, shall bear interest from the date when due until said principal
amount is paid in full, at the applicable rate per annum set forth in the
Agreement. In no event shall the rate of interest and other charges exceed the
maximum rate permitted by laws governing this Note. If the interest and other
charges collected exceed the maximum amount permitted by such laws, such excess
shall be deemed received on the account of, and shall automatically be applied
to reduce the principal balance of this Note.

         The Borrower shall pay to the holder of this Note all reasonable
attorneys' fees and disbursements and all out-of-pocket costs and expenses
incurred by the holder in collecting upon or enforcing this Note.

         The Borrower waives presentment for payment, demand, protest, notice of
dishonor hereof, and all other notices to which it may be entitled.

         Unless otherwise defined herein, all defined terms used in this Note
shall be the meanings given to them in the letter dated the date hereof between
the Borrower and the Bank pursuant to which this Note has been delivered (the
"Agreement").



<PAGE>   24


         This Note is issued under and is subject to the terms of the Agreement,
which terms are hereby incorporated herein by reference. This Note is secured
pursuant to and the holder is entitled to the benefits of the Pledge and
Security Agreement, dated as of June 24, 1998, between and Borrower and the Bank
(the "Security Agreement").

         The Borrower may prepay the principal of this Note only upon prior
written notice to the Bank and subject to the terms and provisions of the
Agreement.

         If any Event of Default shall occur and be continuing, then the entire
outstanding principal balance of and all accrued but unpaid interest on this
Note may become or be declared immediately due and payable, as provided in the
Agreement.

         This Note may not be modified, changed, or terminated orally, but only
by an agreement in writing signed by the party to be bound by it. No act,
failure, or delay by the Bank shall constitute a waiver of any of its rights and
remedies. Any written waiver shall be applicable only in the specific instance
for which it is given.

         The holder of this Note at its option may extend the time for payment
of this Note, postpone the enforcement hereof, or grant any other indulgences,
without affecting or diminishing the holder's right to recourse against the
Borrower or any endorser, sureties, or guarantors, which right is expressly
reserved.

         The terms and provisions hereof shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the Bank and the
Borrower; provided, however, that the Borrower may not assign any of its
interests herein or obligations hereunder without the prior written consent of
the Bank.

         This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to the
conflicts of laws principles of such State.

         The Borrower agrees that, in addition to any other courts that may have
jurisdiction under applicable law and rules, the Supreme Court of the State of
New York, County of New York, and the United States District Court for the
Southern District of New York shall have jurisdiction to hear and determine any
claims or disputes pertaining directly or indirectly to this Promissory Note or
to any matter arising herefrom. The Borrower expressly submits and consents in
advance to such jurisdiction in any action or proceeding in such courts, agrees
that venue will be proper in such courts for all such matters and waives
personal service of the summons and complaint or other process or papers issued
therein. The Borrower agrees that service of such summons and complaint or other
process of paper may be made by registered or certified mail (return receipt
requested) addressed to the Borrower at the address set forth below.

         THE BORROWER AND THE BANK WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING IN ANY COURT ARISING ON, OUT OF, UNDER, BY VIRTUE OF, OR IN ANY WAY
RELATING TO THE NOTE, OR THE TRANSACTIONS OCCURRING IN CONNECTION HEREWITH. THE
BORROWER AND THE BANK CONFIRM THAT THE FOREGOING WAIVER IS INFORMED AND
VOLUNTARY.



<PAGE>   25

         IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by
its duly authorized officers on the date first above written.


                                               REGENCY AFFILIATES, INC.


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

<PAGE>   26


                                                                     EXHIBIT C


                     7th Amendment to Partnership Agreement