Document:

SECOND AMENDMENT
                                     TO THE
                            REGENCY AFFILIATES, INC.
                            2003 STOCK INCENTIVE PLAN

      The 2003 Stock Incentive Plan, as amended, ("Plan"), as adopted by the
      Board of Directors of Regency Affiliates, Inc. (the "Company") on March
      17, 2003 and amended as of October 1, 2003, is hereby amended by the Board
      of Directors of the Company, pursuant to Section 7(a) of the Plan, as
      follows:

      1. To increase the number of shares of Common Stock, par value $0.01 per
      share, of the Company available for grant under the Plan by 250,000, the
      first paragraph of Section 3 of the Plan is hereby amended by deleting the
      number "250,000" and substituting therefor the number "500,000."

      2. Except as modified herein, the Plan shall remain in full force and
      effect.

      IN WITNESS WHEREOF, the Company has caused this amendment to be executed
      by its duly authorized officer as of the 13th day of August, 2004.

            REGENCY AFFILIATES, INC.

            By: /s/ Laurence S. Levy
                --------------------
                Laurence S. Levy
                PresidentREGENCY AFFILIATES, INC.

                             STOCK OPTION AGREEMENT

      THIS STOCK OPTION AGREEMENT (this "Agreement") dated as of August 13, 2004
(the "Grant Date"), is between Regency Affiliates, Inc., a Delaware corporation
(the "Company"), and Laurence S. Levy (the "Participant"), relating to options
to purchase shares of Stock, which options are granted under the Regency
Affiliates, Inc. 2003 Stock Incentive Plan, as amended (the "Plan"). Capitalized
terms used, but not otherwise defined, in this Agreement shall have the meanings
ascribed to such terms in the Plan.

1. Grant of Stock Option, Option Price and Term.

      (a) The Company grants to the Participant a Non-Qualified Stock Option
(the "Stock Option") to purchase 50,000 shares of Stock of the Company ("Option
Shares") at a price of $2.01 per share ("Option Price"), subject to the
provisions of the Plan and the terms and conditions herein.

      (b) The term of this Stock Option shall be a period of 10 years from June
10, 2004 unless earlier terminated as provided herein and in the Plan (the
"Option Period"). During the Option Period, subject to the provisions contained
herein and in the Plan, the Stock Option shall be fully vested and exercisable
on the Grant Date.

      Notwithstanding the foregoing, in the event the Participant incurs a
termination of employment for any reason whatsoever as an employee of the
Company or an Affiliate, the provisions of Section 4 of the Plan relating to the
expiration of the Stock Option upon a termination of employment shall apply.

      (c) The Stock Option granted hereunder is designated as a non-qualified
stock option which is not transferable by the Participant except to a Family
Member, as provided in Section 4 of the Plan, or by will or the laws of descent
and distribution.

2. Exercise.

      The Stock Option shall be exercisable during the Participant's lifetime
only by the Participant (or his Representative), and after the Participant's
death only by a Representative. The Stock Option may only be exercised by the
delivery to the Company of a properly completed written notice, in form
satisfactory to the Committee, which notice shall specify the number of Option
Shares to be purchased and the aggregate Option Price for such shares, together
with payment in full of such aggregate Option Price. Payment shall only be made
as specified in the Plan. If any part of the payment of the Option Price is made
in shares of Stock, such shares shall be valued by using their Fair Market Value
as of the date of exercise of the Stock Option.

      The Stock Option may not be exercised unless there has been compliance
with all the preceding provisions of this Section 2, and, for all purposes of
this Agreement, the date of the exercise of the Stock Option shall be the date

<PAGE>

upon which there is compliance with all such requirements. The Committee may
deny any method of exercise permitted hereunder if such method would result in
liability under Federal or state securities law to the Participant or the
Company or result in an expense charge to the Company.

3. Payment of Withholding Taxes.

      If the Company is obligated to withhold an amount on account of any tax
imposed as a result of the exercise of the Stock Option, the Participant shall
be required to pay such amount to the Company, as provided in the Plan. The
Participant acknowledges and agrees that he is responsible for the tax
consequences associated with the grant of the Stock Option and its exercise.

4. Changes in Company's Capital Structure.

      The existence of this Stock Option will not affect in any way the right or
authority of the Company or its stockholders to make or authorize (a) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (b) any merger or consolidation of
the Company's capital structure or its business; (c) any merger or consolidation
of the Company; (d) any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Stock or the rights thereof; (e) the
dissolution or liquidation of the Company; (f) any sale or transfer of all or
any part of its assets or business; or (g) any other corporate act or
proceeding, whether of a similar character or otherwise.

      In the event of a Change in Control or other corporate restructuring
provided for in the Plan, the Participant shall have such rights, and the
Committee shall take such actions, as are provided for in the Plan.

5. Plan.

      The Stock Option is granted pursuant to the Plan, and the Stock Option and
this Agreement are in all respects governed by the Plan and subject to all of
the terms and provisions thereof, whether such terms and provisions are
incorporated in this Agreement by reference or are expressly cited.

6. Employment Rights.

      No provision of this Agreement or of the Stock Option granted hereunder
shall give the Participant any right to continue in the employ of the Company or
any Affiliates, create any inference as to the length of employment of the
Participant, affect the right of the Company or any Affiliates to terminate the
employment of the Participant, with or without Cause, or give the Participant
any right to participate in any employee welfare or benefit plan or other
program (other than the Plan) of the Company or any Affiliate.

                                       2
<PAGE>

7. Governing Law.

      This Agreement and the Stock Option granted hereunder shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Delaware (other than its laws respecting choice of law), except to the extent
Federal laws would be mandatorily applicable.

8. Waiver; Cumulative Rights.

      The failure or delay of either party to require performance by the other
party of any provision hereof shall not affect its right to require performance
of such provision unless and until such performance has been waived in writing.
Each and every right hereunder is cumulative and may be exercised in part or in
whole from time to time.

9. Notices.

      Any notice which either party hereto may be required or permitted to give
the other shall be in writing and may be delivered personally or by mail,
postage prepaid, addressed to the Secretary of the Company, at its then
corporate headquarters, and the Participant at his address as shown on the
Company's records, or to such other address as the Participant, by notice to the
Company, may designate in writing from time to time.

                  [Remainder of page intentionally left blank.
                            Signature page follows.]

                                       3
<PAGE>

            IN WITNESS WHEREOF, the Company has caused this Stock Option
Agreement to be duly executed by an officer thereunto duly authorized, and the
Participant has hereunto set his hand, all as of the day and year first above
written.

REGENCY AFFILIATES, INC.

       /s/ Neil N. Hasson                          /s/ Laurence S. Levy
-----------------------------                      -----------------------------
Name:  Neil N. Hasson                              Laurence S. Levy
Title: Vice President

                                       4REGENCY AFFILIATES, INC.

                             STOCK OPTION AGREEMENT

      THIS STOCK OPTION AGREEMENT (this "Agreement") dated as of August 13, 2004
(the "Grant Date"), is between Regency Affiliates, Inc., a Delaware corporation
(the "Company"), and Neil N. Hasson (the "Participant"), relating to options to
purchase shares of Stock, which options are granted under the Regency
Affiliates, Inc. 2003 Stock Incentive Plan, as amended (the "Plan"). Capitalized
terms used, but not otherwise defined, in this Agreement shall have the meanings
ascribed to such terms in the Plan.

1. Grant of Stock Option, Option Price and Term.

      (a) The Company grants to the Participant a Non-Qualified Stock Option
(the "Stock Option") to purchase 50,000 shares of Stock of the Company ("Option
Shares") at a price of $2.01 per share ("Option Price"), subject to the
provisions of the Plan and the terms and conditions herein.

      (b) The term of this Stock Option shall be a period of 10 years from June
10, 2004 unless earlier terminated as provided herein and in the Plan (the
"Option Period"). During the Option Period, subject to the provisions contained
herein and in the Plan, the Stock Option shall be fully vested and exercisable
on the Grant Date.

      Notwithstanding the foregoing, in the event the Participant incurs a
termination of employment for any reason whatsoever as an employee of the
Company or an Affiliate, the provisions of Section 4 of the Plan relating to the
expiration of the Stock Option upon a termination of employment shall apply.

      (c) The Stock Option granted hereunder is designated as a non-qualified
stock option which is not transferable by the Participant except to a Family
Member, as provided in Section 4 of the Plan, or by will or the laws of descent
and distribution.

2. Exercise.

      The Stock Option shall be exercisable during the Participant's lifetime
only by the Participant (or his Representative), and after the Participant's
death only by a Representative. The Stock Option may only be exercised by the
delivery to the Company of a properly completed written notice, in form
satisfactory to the Committee, which notice shall specify the number of Option
Shares to be purchased and the aggregate Option Price for such shares, together
with payment in full of such aggregate Option Price. Payment shall only be made
as specified in the Plan. If any part of the payment of the Option Price is made
in shares of Stock, such shares shall be valued by using their Fair Market Value
as of the date of exercise of the Stock Option.

      The Stock Option may not be exercised unless there has been compliance
with all the preceding provisions of this Section 2, and, for all purposes of
this Agreement, the date of the exercise of the Stock Option shall be the date

<PAGE>

upon which there is compliance with all such requirements. The Committee may
deny any method of exercise permitted hereunder if such method would result in
liability under Federal or state securities law to the Participant or the
Company or result in an expense charge to the Company.

3. Payment of Withholding Taxes.

      If the Company is obligated to withhold an amount on account of any tax
imposed as a result of the exercise of the Stock Option, the Participant shall
be required to pay such amount to the Company, as provided in the Plan. The
Participant acknowledges and agrees that he is responsible for the tax
consequences associated with the grant of the Stock Option and its exercise.

4. Changes in Company's Capital Structure.

      The existence of this Stock Option will not affect in any way the right or
authority of the Company or its stockholders to make or authorize (a) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (b) any merger or consolidation of
the Company's capital structure or its business; (c) any merger or consolidation
of the Company; (d) any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Stock or the rights thereof; (e) the
dissolution or liquidation of the Company; (f) any sale or transfer of all or
any part of its assets or business; or (g) any other corporate act or
proceeding, whether of a similar character or otherwise.

      In the event of a Change in Control or other corporate restructuring
provided for in the Plan, the Participant shall have such rights, and the
Committee shall take such actions, as are provided for in the Plan.

5. Plan.

      The Stock Option is granted pursuant to the Plan, and the Stock Option and
this Agreement are in all respects governed by the Plan and subject to all of
the terms and provisions thereof, whether such terms and provisions are
incorporated in this Agreement by reference or are expressly cited.

6. Employment Rights.

      No provision of this Agreement or of the Stock Option granted hereunder
shall give the Participant any right to continue in the employ of the Company or
any Affiliates, create any inference as to the length of employment of the
Participant, affect the right of the Company or any Affiliates to terminate the
employment of the Participant, with or without Cause, or give the Participant
any right to participate in any employee welfare or benefit plan or other
program (other than the Plan) of the Company or any Affiliate.

                                       2
<PAGE>

7. Governing Law.

      This Agreement and the Stock Option granted hereunder shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Delaware (other than its laws respecting choice of law), except to the extent
Federal laws would be mandatorily applicable.

8. Waiver; Cumulative Rights.

      The failure or delay of either party to require performance by the other
party of any provision hereof shall not affect its right to require performance
of such provision unless and until such performance has been waived in writing.
Each and every right hereunder is cumulative and may be exercised in part or in
whole from time to time.

9. Notices.

      Any notice which either party hereto may be required or permitted to give
the other shall be in writing and may be delivered personally or by mail,
postage prepaid, addressed to the Secretary of the Company, at its then
corporate headquarters, and the Participant at his address as shown on the
Company's records, or to such other address as the Participant, by notice to the
Company, may designate in writing from time to time.

                  [Remainder of page intentionally left blank.
                            Signature page follows.]

                                       3
<PAGE>

            IN WITNESS WHEREOF, the Company has caused this Stock Option
Agreement to be duly executed by an officer thereunto duly authorized, and the
Participant has hereunto set his hand, all as of the day and year first above
written.

REGENCY AFFILIATES, INC.

       /s/ Laurence S. Levy                        /s/ Neil N. Hasson
-----------------------------                      -----------------------------
Name:  Laurence S. Levy                            Neil N. Hasson
Title: President

                                       4

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