EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this ____ day
of April, 1999, by and between ATLANTIC GULF COMMUNITIES CORPORATION, a Delaware
corporation (the "Employer") and WILLIAM G. PEACHER (the "Employee").

                                   WITNESSETH:

         WHEREAS,  Employer owns one hundred  (100%)  percent of the  beneficial
interest in Aspen Springs Ranch, Inc., a Colorado  corporation (the "Development
Company");

         WHEREAS, Employer believes that the future services of Employee will be
a valuable asset to Employer and the Development  Company,  and Employer desires
to secure the benefits of the services of Employee; and

         WHEREAS, Employee is willing to be employed on a full-time basis on the
terms, conditions and covenants as hereinafter set forth.

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
covenants  and  agreements  herein  contained,   and  other  good  and  valuable
consideration,  receipt and  sufficiency  of which is hereby  acknowledged,  the
Employer and Employee agree as follows

                                    ARTICLE I
                               TERMS OF EMPLOYMENT

         Section 1.1     TERM. The Employer hereby employs  Employee  commencing
on or about the 15th day of May, 1999 (the "Commencement  Date"), and continuing
thereafter for a term of five (5) years or until terminated as set forth herein,
upon the terms and conditions contained herein.

                                   ARTICLE II
                         DUTIES OF EMPLOYEE AND EMPLOYER

         Section  2.1    DUTIES OF EMPLOYEE.  Employee shall be employed as Vice
President  of  Employer  and  President  and  Chief  Operating  Officer  of  the
Development  Company and shall perform such duties as may be reasonably assigned
by  Employer's  President or the Board of Directors  of Employer  ("Board"),  or
both. The Employee shall devote his entire exclusive  productive  time,  ability
and attention to the business of the Employer and the Development Company during
the term of this Agreement. The Employee shall not directly or indirectly render
any services of a business,  commercial  or  professional  nature,  to any other
person or organization, whether for compensation or otherwise, without the prior
written consent of the Employer.

         Section 2.2     DUTIES OF EMPLOYER.  Employer  shall  provide  Employee
with necessary and  reasonable  office space and all staffing  requirements  (as
mutually determined by the parties hereto

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<PAGE>

to be necessary) in connection with the performance of his duties hereunder, and
shall pay all compensation  due hereunder  promptly in accordance with the terms
hereof.  Employee  shall be entitled to up to four (4) weeks paid  vacation  per
year,  provided that the taking of such vacation does not unreasonably  conflict
with the activities of Employer. If this Agreement is terminated for any reason,
accumulated  vacation  time  shall  be  paid  to  Employee  in  accordance  with
Employer's company policy,  provided,  however,  such accumulated  vacation time
shall not exceed two (2) weeks.

                                   ARTICLE III
                             COMPENSATION & BENEFITS

         Section 3.1     COMPENSATION.   As  compensation  for  services  to  be
rendered  pursuant to this  Agreement,  the  Employee  shall be  compensated  as
follows:

                  3.1.1  SALARY.   Commencing  on  the  Commencement  Date,  the
Employee shall be paid a base compensation of Two Hundred Fifty Thousand Dollars
($250,000)  per year.  Such  compensation  shall be payable in  accordance  with
Employer's customary payment schedule.

                  3.1.2  ANNUAL BONUS.  On or before January 31, 2000,  Employee
shall receive a guaranteed  bonus of One Hundred  Seventy-Five  Thousand Dollars
($175,000) for the year 1999.  Commencing on January 1, 2000,  Employee's annual
bonus will be based on annual  business  performance  when  compared to mutually
agreed upon goals and objectives  for the  Development  Company.  Based upon the
actual  performance  of the  Development  Company when compared to the goals and
objectives,  the Employee may earn up to seventy (70%) percent of the Employee's
annual salary as described in Paragraph 3.1.1 above as reasonably  determined by
the Board.  The annual bonus for the year 2000 and subsequent years will be paid
in accordance with Employer's customary payment schedule.

                  3.1.3  PARTICIPATION AGREEMENT.   Contemporaneous   with   the
execution  of  this   Agreement,   Employer  and  Employee  will  enter  into  a
Participation  Agreement which shall be in the same form as EXHIBIT "A" attached
hereto. The Participation  Agreement will provide,  among other things, that the
Employee  shall be  entitled  to five (5%)  percent of "Net  Profits" as defined
therein and payable from "Positive Net Cash Flow" of the Development Company.

                  3.1.4  EXPENSES.  Employee shall be entitled to  reimbursement
or payment on his behalf of the following expenses:

                           3.1.4.1         All actual  out-of-pocket  relocation
                                    expenses,  including house hunting trips and
                                    temporary housing  expenses,  and all actual
                                    out-of-pocket    costs   of   moving    from
                                    Employee's   current  home  in   Greensboro,
                                    Georgia as reasonably incurred by Employee;

                           3.1.4.2         Upon selection of a rental home to be
                                    located in the Aspen,  Colorado  area (which
                                    rental home must be reasonably acceptable to
                                    Employer),  and until such time as  Employee
                                    has closed on the sale of

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<PAGE>

                                    his existing  home in  Greensboro,  Georgia,
                                    Employer  shall  pay all  housing  expenses,
                                    including,   but  not  limited   to,   rent,
                                    utilities and insurance.  Within ninety (90)
                                    days  of  the  Commencement  Date,  Employee
                                    agrees  to list  his  existing  home  with a
                                    broker at a price  reasonably  acceptable to
                                    Employee   and  will  use  good   faith  and
                                    diligent  efforts  to  market  and  sell the
                                    same. Upon the closing of the existing home,
                                    Employer will pay the difference between all
                                    housing expenses as described above and Four
                                    Thousand  Dollars  ($4,000).  The  lease for
                                    such rental property shall be in the name of
                                    the  Employer  and  the   occupancy  by  the
                                    Employee  shall  be  deemed a  condition  of
                                    employment.  The  obligation  to lease  such
                                    home   shall   terminate   upon  the  second
                                    anniversary  of  the  Commencement  Date  or
                                    sooner  if  Employee  purchases  a  home  or
                                    constructs  a home  during such two (2) year
                                    period.  Should this Agreement be terminated
                                    for any  reason,  Employee  agrees to vacate
                                    such home  within  thirty  (30) days of such
                                    termination;

                           3.1.4.3         The use of a  4-wheel  drive  vehicle
                                    provided by  Employer,  which may be used by
                                    Employee for his personal use as well.  Upon
                                    termination   of  this   Agreement  for  any
                                    reason, Employee will immediately return the
                                    vehicle to Employer;

                           3.1.4.4         The  payment  of all dues  associated
                                    with the membership in the Club as described
                                    below;

                           3.1.4.5         All employee  benefit plans currently
                                    provided  to  Employer's  senior  management
                                    employees;

                           3.1.4.6         Reimbursement   for  all   reasonable
                                    travel,  lodging,  food and related expenses
                                    incurred  in  connection   with   Employee's
                                    employment, including expenses in connection
                                    with   attendance   of  mutually   agreeable
                                    seminars  reimbursable  in  accordance  with
                                    Employer's standard policy;

                           3.1.4.7         Reimbursement    to    Employee    of
                                    customary  and  reasonable   closing  costs,
                                    commissions  and  other  customary   closing
                                    expenses  incurred by Employee  upon sale of
                                    Employee's house in Greensboro, Georgia; and

                           3.1.4.8         Reimbursement    to    Employee    of
                                    customary  and  reasonable   closing  costs,
                                    financing fees and other  customary  closing
                                    expenses   incurred  by  Employee  upon  the
                                    acquisition  of the lot and club  membership
                                    described in Paragraph 3.1.5 below.


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<PAGE>

                  Employer's  obligation to reimburse  Employee for expenses set
forth  in this  Section  3.1.4  shall  terminate  upon the  termination  of this
Agreement,  except for the reimbursement of such expenses incurred prior to such
termination.

                  3.1.5 PURCHASE OF LOT AND  MEMBERSHIP.  Employee will select a
lot from an undeveloped portion of the Development Company's property,  which is
available inventory and mutually acceptable to the parties hereto. Such lot will
be reserved for acquisition by Employee  together with a membership in the Aspen
Springs Club.  The purchase  price for such lot and  membership  shall be at the
original offering price and Employee agrees to execute a standard  agreement and
membership documents.  Employee shall earn a credit in the amount of One Hundred
Thousand  Dollars  ($100,000)  per year for each year of  employment  under this
Agreement  toward the purchase price of such lot and membership (the "Credits").
At the time that Employee  acquires such lot and  membership,  Employee will pay
the  difference  between the retail  value of such lot and  membership  and Five
Hundred Thousand Dollars  ($500,000).  Employee will also execute a non-recourse
and contingent  promissory  note to the Employer for the amount  remaining after
subtracting  any earned Credits from Five Hundred  Thousand  Dollars  ($500,000)
(the  "Note").  The Note shall  provide  for  interest  in the amount of imputed
interest  required by the Internal  Revenue Service and shall also provide for a
reduction  of the  indebtedness  evidenced  thereby  by the  earned  Credits  as
provided  herein.  The Note shall also provide for a maturity  date of the fifth
anniversary  of  the  Commencement  Date.  The  repayment  of  the  indebtedness
evidenced by the Note will be secured by a deed of trust. The deed of trust will
provide that the Employer will  subordinate  the lien thereof to a  construction
loan  for a home  to be  built  on the lot on  terms  reasonably  acceptable  to
Employer.  If this Agreement is terminated by Employer  without cause,  Employee
shall,  within  ninety  (90) days of such  termination,  repay  the  outstanding
balance due on the Note. If this  Agreement is terminated  for any other reason,
Employee  shall  have  thirty  (30) days  after  such  termination  to repay the
outstanding  balance due on the Note. If the closing of the Lot has not occurred
prior  to  such  termination,  Employer  shall  have no  duty  to  provide  such
financing.

                  3.1.6 CLUB  MEMBERSHIP  EXPENSE.  For so long as  Employee  is
employed by Employer, the membership in the Club shall be dues free.

                                   ARTICLE IV
                                 TERMINATION FEE

         Section  4.1    TERMINATION  BY EMPLOYER.  If the  Employer  terminates
employment of the Employee,  without cause,  prior to the expiration of the five
(5) year term of this  Agreement,  Employer shall be entitled to: (i) a lump sum
payment of Five Hundred Thousand Dollars ($500,000); (ii) the recognition of the
Credits  earned for the  purchase  of the lot and  membership  as  described  in
Section  3.1.5  above,  but in no event less than One Hundred  Thousand  Dollars
($100,000); and (iii) the first year's bonus if not previously paid.

         Section 4.2     TERMINATION BY EMPLOYEE. If the Employee terminates his
employment  prior to the expiration of the five (5) year term of this Agreement,
the Employee shall only be entitled to the compensation  earned through the date
of such termination and the recognition of the Credits

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<PAGE>


earned for the purchase of the lot and  membership,  provided  that the Employee
has, in fact, closed on the purchase of the lot and membership.  If the Employer
terminates  this  Agreement  and has not closed on the  purchase  of the lot and
membership,  Employee shall not be entitled to any Credits. In any event, should
Employee terminate this Agreement,  Employee shall not be entitled to any amount
that would otherwise be due under the Participation Agreement.

         Section 4.3     PARTICIPATION.   If  the   Employer   terminates   this
Agreement  without  cause,  Employee shall be entitled to all amounts that would
otherwise  accrue  to  the  benefit  of the  Employee  under  the  Participation
Agreement for the period of time from the Commencement Date until six (6) months
from the date of such  termination.  If Employer  terminates this Agreement with
cause,  Employee shall be entitled to all amounts that would otherwise accrue to
the benefit of the Employee under the Participation  Agreement for the period of
time from the  Commencement  Date of the Employment  Agreement until the date of
such termination. Employee recognizes, however, that payments due as a result of
the  Participation  Agreement are paid from Positive Net Cash Flow as defined in
the Participation Agreement.

                                    ARTICLE V
                                    COVENANTS

         Section 5.1     COVENANTS.  Employee hereby covenants and presents:

                  5.1.1  During the term of this  Agreement,  the Employee shall
not directly or indirectly, either as an employee, employer,  consultant, agent,
principal,  partner,  stockholder,  corporate officer, director, or in any other
individual or  representative  capacity,  engage or  participate in any business
that is in  competition  in any  manner  whatsoever  with  any  business  of the
Employer or any of Employer's subsidiaries or affiliated companies.

                  5.1.2  Upon the  termination  of his  employment,  whether  by
expiration of this Agreement or otherwise,  the Employee shall not,  directly or
indirectly,  within  the  State of  Colorado,  enter  into or  engage  in direct
competition  with any business  activity of the Employer or Development  Company
either as an individual on his own, or as a partner or joint  venture,  or as an
employee or agent for any person or as an officer,  director or shareholder,  or
otherwise,  for a period of two (2) years  following the date of  termination of
his employment hereunder.

                  5.1.3  During the term of his employment under this Agreement,
the Employee will have access to and become  familiar with various trade secrets
and confidential  information consisting of business contracts,  customer lists,
records,  and  specifications,  all of which are owned by the Employer and which
are regularly used in the operations of the  Employer's  business.  The Employee
shall  not  disclose  any  of  the  aforesaid  trade  secrets  and  confidential
information,  directly or indirectly, nor use them in any way, either during the
term of this  Agreement,  or at any time  thereafter,  except as required in the
course of his employment hereunder.  They shall remain the exclusive property of
the Employer and may not be disclosed under any  circumstances  to any person or
party without the prior written consent of the Employer.

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<PAGE>


                  5.1.4  Employee  acknowledges  that it has received  copies of
the following documents:

                           5.1.4.1         that  certain Loan  Agreement,  dated
                                    September  3, 1998,  between the Company and
                                    Lehman Brothers Holdings, Inc.;

                           5.1.4.2         that    certain     Senior    Secured
                                    Facilities Credit Agreement, dated September
                                    3,  1998,  between  the  Company  and Morgan
                                    Stanley Senior Funding, Inc.;

                           5.1.4.3         that  certain   Exchange   Agreement,
                                    dated  September 3, 1998, by and between the
                                    Company and Spring Valley Holding USA, Ltd.,
                                    together with the Addendum thereto; and

                           5.1.4.4         the approved pro-forma and budget for
                                    the  project  (the  documents  described  in
                                    5.1.4.1,  5.1.4.2,  5.1.4.3 and this 5.1.4.4
                                    being collectively referred to herein as the
                                    "Project Agreements").

                  Employee agrees to comply with all of the terms and conditions
of the Project  Agreements,  as well as all applicable laws, rules,  regulations
and permits  with  respect to the project,  the  development  of the project and
Employee's performance of its duties hereunder.

                  5.1.5  The Employee shall not,  either during the term of this
Agreement,  or the first 180 days following the  termination of this  Agreement,
solicit,  encourage  or induce any  employee of the Employer to leave his or her
employment with the Company.

         Section 5.2     REMEDY FOR COVENANT VIOLATION.  Each covenant set forth
in  subsections  5.1.1,  5.1.2,  5.1.3,  5.1.4 and 5.1.5 above is  separate  and
distinct  from  every  other  covenant  set  forth  herein.  In the event of the
invalidity of any covenant,  the remaining covenants shall be deemed independent
and  divisible.  Employee  recognizes  that a  breach  of  any of the  covenants
contained in subsections 5.1.1,  5.1.2, 5.1.3, 5.1.4 and 5.1.5 would irreparably
injure the Employer.  Accordingly, the Employer may, in addition to pursuing its
other remedies,  obtain an injunction from any court having  jurisdiction of the
matter restraining any further violation, and no bond or other security shall be
required in connection with such injunction.

                                   ARTICLE VI
                                   TERMINATION

         Section 6.1     TERMINATION   FOR   CAUSE.   Notwithstanding   anything
contained in this Agreement to the contrary,  Employer may at any time terminate
this Agreement without further  obligation to Employee upon the happening of any
of the following events:

                  6.1.1  If Employee is convicted of a felony or other  criminal
offense involving moral turpitude; or

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<PAGE>


                  6.1.2  Employee  is or shall be unable to  discharge  properly
his obligations hereunder through illness or through accident or any other cause
whatsoever  for up to periods  aggregating  ninety  (90) days in any  continuous
period of three hundred sixty-five (365) days; or

                  6.1.3  If  Employee  shall die or be  adjudicated  of  unsound
         mind; or

                  6.1.4  If Employee commits a material breach of this Agreement
         including  but not  limited to a breach of any  covenant  contained  in
         Section 4.01 hereof; or

                  6.1.5  If Employee  violates  any federal or state  securities
         laws; or

                  6.1.6  If Employee misappropriates Employer's funds; or

                  6.1.7  The  habitual  use of alcohol or drugs by Employee to a
         degree  that  such  use   substantially   interferes   with  Employee's
         performance of his duties or obligations under this Agreement; or

                  6.1.8  Employee's deliberate and premeditated acts against the
         Company's best interests; or

                  6.1.9  Employee's violation of any law or regulation governing
         Employee's conduct under this Agreement.

         Section 6.2     TERMINATION  WITHOUT  CAUSE.   Employer  may  terminate
Employee  at any  time,  without  cause,  in which  case the  Employee  shall be
entitled to the Termination Fee described in Section 4.1 above and the interests
in the Participation Agreement described in Section 4.3 above.

         Section 6.3     DUTIES UPON  TERMINATION.  Upon the termination of this
Agreement,  Employee  shall  immediately  deliver  to  Employer  all the  books,
records, documents,  customer or supplier lists and all other assets or property
of Employer in his  possession,  custody or under his  control,  without  making
copies of any such documents whether for his own use or for any other purpose.

         Section 6.4     TERMINATION  BY EMPLOYEE.  Employee may terminate  this
Agreement  upon ninety (90) days' written  notice to Employer.  Should  Employer
fail to make  any  payment  due  Employee  when it is due and  within  ten  (10)
business days after  written  demand by Employee,  Employee may  terminate  this
Agreement  in  writing  without  advance  notice,  and shall not be bound by the
Covenants set forth herein.

                                   ARTICLE VII
                                 REPRESENTATIONS

         Section 7.1     REPRESENTATIONS  OF EMPLOYEE.  That he has been advised
that he has the legal ability to enter into this Agreement,  and that compliance
with the terms  hereof will not cause  Employee to be in  violation of any other
contract, covenant, or rule of law. Employee also represents

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<PAGE>


that he has been advised that the  Employer  has hired an  investment  banker to
pursue strategic alternative transactions.

         Section  7.2    REPRESENTATIONS  OF EMPLOYER.  Employer  represents and
warrants that Employer has the legal ability to enter into this  Agreement,  and
compliance  with the terms hereof will not cause  Employer to be in violation of
any  other  contract,  covenant,  or rule of law,  and  further  represents  and
warrants  that  its  current  intention  is  to  continue   development  of  its
properties.

                                  ARTICLE VIII
                               GENERAL PROVISIONS

         Section 8.1     This  Agreement  supersedes  any  and  all  agreements,
either  oral or in  writing  between  the  parties  hereto  with  respect to the
employment of the Employee by the Employer, and it contains all of the covenants
and agreements between the parties with respect to such employment in any matter
whatsoever.

         Section 8.2     The  invalidity  or  unenforceability  of any  terms or
provisions,  or any clause or portion thereof, of this Agreement shall in no way
affect the validity or  enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

         Section 8.3     This Agreement may not be changed or modified except by
an instrument in writing and signed by the parties hereto.

         Section 8.4     Except as otherwise  herein  expressly  provided,  this
Agreement  shall inure to the benefit of and be binding upon the parties hereto,
their heirs, legal  representatives,  successors and assigns,  provided that the
obligations of Employee hereunder may not be delegated.

         Section 8.5     This  Agreement  shall be governed by and  construed in
accordance with the laws of the State of Colorado.

         Section 8.6     This  Agreement  may be  executed  by each party upon a
separate copy, and in such case, one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties to this
Agreement.  This Agreement shall become effective when one or more  counterparts
has been signed by each of the other parties to this Agreement.

         Section 8.7     All notices  hereunder shall be in writing and shall be
deemed to have been given at the time by hand  delivery,  or when  mailed in any
general  or branch  United  States  Post  Office  enclosed  in a  registered  or
certified  postpaid envelope  addressed to the address of the respective parties
stated  below,  or to such  changed  address as such  party may have  affixed by
notice as aforesaid:

         EMPLOYEE:                         William G. Peacher
                                           1010 Liberty Bluff Court
                                           Greensboro, Georgia  30642

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         EMPLOYER:                         Atlantic Gulf Communities Corporation
                                           2601 S. Bayshore Drive
                                           Miami, Florida  33133
                                           Attn:  President

         Provided,  however,  any notice of change of address shall be effective
only upon receipt.

         8.8 Each party hereby waives their respective rights to a jury trial.

         8.9 In the event of any litigation  under or respecting this Agreement,
the  prevailing  party  shall be  entitled  to  attorney's  fees and court costs
through  all  pretrial,  trial,  appellate,  administrative,  and  post-judgment
proceedings.

         IN WITNESS  WHEREOF,  the parties hereto have executed this  Employment
Agreement on the day and year first above written.

                                           EMPLOYER:
                                           ATLANTIC GULF COMMUNITIES
                                           CORPORATION, a Delaware corporation


                                           By:

                                           Its:



                                           EMPLOYEE:




                                           William G. Peacher

                                        9

<PAGE>


                                   EXHIBIT "A"

                             PARTICIPATION AGREEMENT


         THIS PARTICIPATION  AGREEMENT (the "Agreement"),  made and entered into
this ____ day of  __________,  1999, by and between  ATLANTIC  GULF  COMMUNITIES
CORPORATION,  a Delaware corporation (the "Owner"),  and WILLIAM G. PEACHER (the
"Participant"), is as follows:

                              W I T N E S S E T H:

         WHEREAS,  Owner  is the  owner of one  hundred  (100%)  percent  of the
beneficial  interest of Aspen Springs Ranch,  Inc., a Colorado  corporation (the
"Development Company"); and

         WHEREAS,  the Development Company owns certain land in Garfield County,
Colorado,  described  on  EXHIBIT  "A" (the  "Real  Property")  upon  which  the
Development  Company  presently  intends to develop a planned  unit  development
consisting  of   approximately   four  hundred  one  (401)   residential   lots,
seventy-five  (75)  cooperative  units,  two (2) eighteen  hole golf courses and
other related amenities (the "Project");

         WHEREAS,  in  developing  the  Project,  the  Development  Company will
acquire  numerous  items of  personal  property  and  equipment  (the  "Personal
Property") as well as various  permits,  approvals,  trademarks and water rights
(collectively,  the  "Entitlements")  (the Real Property,  Personal Property and
Entitlements are collectively, the "Property");

         WHEREAS,  in consideration  of Participant  entering into an Employment
Agreement  of even date  herewith  (the  "Employment  Agreement")  and for other
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged,  Owner has agreed to convey to Participant,  pursuant to the terms
recited  herein,  a right to  receive  a  portion  of the net  profits  from the
development  of the  Project  and the  marketing,  sales  and  operation  of the
Property arising after the  Commencement  Date, free and clear of any obligation
by Participant  arising after the Commencement  Date, except as set forth herein
and in the Employment Agreement.

         NOW,  THEREFORE,  for and in  consideration  of the  mutual  covenants,
promises and agreements herein contained,  the parties hereto do hereby agree as
follows:

                                   ARTICLE 1.
                                   DEFINITIONS

         1.1.     All capitalized terms referenced or used in this Agreement and
not specifically defined herein shall have the meaning set forth in alphabetical
listing on EXHIBIT "B", which is attached hereto and incorporated by reference.

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<PAGE>


                                   ARTICLE 2.
                            TERM, OPTION TO TERMINATE

         2.1.     The term of this Agreement shall commence on the  Commencement
Date and end upon (i) the  termination  and winding up of the sale of all of the
Property,  including  the  distribution  to  Participant  of all  amounts due to
Participant hereunder,  (ii) the execution of a mutual written agreement between
the parties  terminating  this Agreement,  or (iii) in certain  circumstances as
provided  in  the  Employment  Agreement,  the  termination  of  the  Employment
Agreement and the  distribution  to  Participant  of all sums due to Participant
hereunder (the "Term").

                                   ARTICLE 3.
                             PARTICIPATION INTEREST

         3.1.     PARTICIPATION  INTEREST.  Owner  hereby  grants and assigns to
Participant a five (5%) percent interest of the Net Profits,  if any,  generated
from the  development of the Project and the  marketing,  sales and operation of
the  Property,   as  defined   herein  (the   "Participation   Interest").   The
Participation  Interest shall be paid from Positive Net Cash Flow. To the extent
that a  Participation  Interest is earned but there is no Positive Net Cash Flow
available to pay the same,  the  Participation  Interest shall accrue until such
time that Positive Net Cash Flow is available. When available, twenty-five (25%)
percent of such Positive Net Cash Flow shall be paid to  Participant  until such
time that the accrued Participation  Interest is paid.  Thereafter,  Participant
shall  receive  the  Participation  Interest  through  the  payment of five (5%)
percent  of the  Positive  Net Cash  Flow.  In such case,  Owner  shall  receive
ninety-five  (95%) percent of such Positive Net Cash Flow and all sums in excess
of the amount necessary to pay the Participation Interest.

         3.2.     FINANCIAL  STATEMENTS.  Owner shall provide Participant with a
copy of all its Financial  Statements  concerning the Property within forty-five
(45)  days  after  the  close  of  each  Calendar  Quarter.  Participant  hereby
represents  and  warrants to Owner that  Participant  shall treat all  Financial
Statements  as  confidential  and shall not disclose any  information  contained
therein to any person, other than its employees, agents, attorneys,  consultants
or affiliated entities.

         3.3.     AUDIT.  Participant  shall  have the right,  at  Participant's
expense, to conduct an annual audit of the financial books,  records and data of
Owner   related  to  the  Project  and  the  Property  and  the  amount  of  the
Participation  Interest.  Such audit shall be conducted,  at Participant's  sole
cost and expense,  by  Participant  or by an  accounting  firm of  Participant's
choice at Owners'  offices  during  normal  business  hours  and,  to the extent
practicable,  shall  be  conducted  in  such  a  manner  as  will  minimize  the
interference which such audit may cause with the business operations of Owner.

         3.4.     EMPLOYMENT AGREEMENT. As provided in the Employment Agreement,
should the  Employment  Agreement be  terminated by  Participant,  all rights to
receive the  Participation  Interest  (accrued and in the future)  shall also be
immediately  terminated.  Should the  Employment  Agreement be terminated by the
Owner without cause, Participant shall be entitled to all Participation Interest
for a period  of time from the  Commencement  Date of the  Employment  Agreement
until six (6) months from the date of such  termination.  Should the  Employment
Agreement be  terminated by Owner with cause,  Participant  shall be entitled to
all Participation Interest for a period of time from

                                        2

<PAGE>


the  Commencement  Date of the  Employment  Agreement  through  the date of such
termination.

                                   ARTICLE 4.
                    PARTICIPANT'S OBLIGATIONS OR LIABILITIES

         4.1.     LIABILITIES AND OBLIGATIONS. Other than those set forth in the
Employment  Agreement,  Owner  acknowledges  that  Participant does not have any
liability or obligation  arising after the Commencement  Date in connection with
the  development  of the Project and the  marketing,  sales and operation of the
Property.  Subject to the  provisions of Section 3.4 herein,  the  Participation
Interest granted to Participant is a "carried interest" in the Positive Net Cash
Flow as described  herein and the payment of said interest to  Participant  does
not require any additional  payment of funds or performance of any obligation by
Participant  after the Commencement  Date. The parties further  acknowledge that
the  granting  of the  Participation  Interest  and  the  payment  of  funds  to
Participant does not impose or create any additional  liability or obligation of
Participant to Owner other than as set forth in the agreements  executed between
the parties.

         4.2.     CAPITAL   CONTRIBUTIONS   AND   LOANS.   Participant   has  no
responsibility  to loan,  guarantee or  contribute  any amount of money to Owner
after  the   Commencement   Date  in  connection   with  its  ownership  of  the
Participation Interest.

                                   ARTICLE 5.
                      OWNER'S COVENANTS AND REPRESENTATIONS

         5.1.     Owner  makes the  following  representations  to  Participant,
which  representations  shall,  unless  otherwise  stated  herein,  survive  the
execution and delivery of this Agreement:

                  5.1.1.  CORPORATE   STATUS.   Owner  is  a  corporation   duly
         organized, validly existing, and in good standing under the laws of the
         State of Delaware,  and the person or persons  executing this Agreement
         have the full power and authority to enter into this Agreement, execute
         all documents required hereunder and to bind the Owner to the terms and
         conditions recited herein.

                  5.1.2.  AUTHORIZATION.  The making,  execution,  delivery  and
         performance  of this  Agreement by Owner has been duly  authorized  and
         approved by all  requisite  action of the Board of  Directors of Owner,
         and  this  Agreement  has  been  duly  executed  and  delivered  by the
         undersigned  officer and constitutes a valid and binding  obligation of
         Owner, enforceable in accordance with its terms.

                  5.1.3.  VIOLATION OF REPRESENTATIONS.  From and after the date
         hereof and until the  termination  of this  Agreement,  Owner shall not
         take any action or omit to take any action  which would have the effect
         of  violating  any of the  representations  of Owner  contained in this
         Agreement.

                  5.1.4.  VIOLATION  OF  AGREEMENT.  Neither the  execution  and
         delivery  of this  Agreement  by Owner nor Owner's  performance  of its
         obligations hereunder will result in a violation or

                                        3

<PAGE>


         breach of any term or provision or  constitute a default or  accelerate
         the performance required under any other agreement or document to which
         Owner is a party or is  otherwise  bound,  and  will not  constitute  a
         violation  of any law,  ruling,  regulation  or order to which Owner is
         subject.

                                   ARTICLE 6.
                                 OWNER'S DEFAULT

         6.1.     Owner shall be deemed to be in default under this Agreement (a
"Default"),  if Owner fails in the  performance of or compliance with any of the
covenants,  agreements, terms or conditions contained in this Agreement and such
failure  shall  continue for a period of thirty (30) days after  written  notice
thereof  from  Participant  to Owner  specifying  in detail  the  nature of such
failure,  or, in the case such failure cannot with due diligence be cured within
such period of thirty (30) days, if Owner fails to proceed promptly and with all
due  diligence to cure the same and  thereafter  to prosecute the curing of such
failure with all due  diligence [it being  intended  that in  connection  with a
failure not  susceptible  of being cured with due  diligence  within thirty (30)
days that the time  within  which to cure the same  shall be  extended  for such
period as may be necessary to complete the same with all due  diligence,  but in
no event shall the time be extended for more than ninety (90) days].

                                   ARTICLE 7.
                                    REMEDIES

         7.1.     PARTICIPANT'S  REMEDIES.  Upon the  occurrence of a Default by
Owner  which is not  cured  within  the  time  permitted,  Participant  shall be
entitled to:

                  7.1.1.  Specific performance of Owner's obligations  hereunder
         and injunctive relief, as applicable, under the laws of Colorado;

                  7.1.2.  Demand  payment of all amounts due  Participant  under
         the terms of this Agreement and demand the payment of all costs, actual
         damages  (not  consequential  or  punitive),  expenses  and  reasonable
         attorneys' fees of Participant due to Owner's Default; and

                  7.1.3.  Remedy any Default of Owner,  and in  connection  with
         such remedy,  Participant may pay all expenses and employ counsel,  and
         all  sums  so  expended  or  obligations  incurred  by  Participant  in
         connection therewith shall be paid by Owner to Participant, upon demand
         by Participant, and on failure of such reimbursement,  Participant may,
         at  Participant's  option,  deduct all costs and  expenses  incurred in
         connection  with  remedying  a  Default  of Owner  from  the next  sums
         subsequently  becoming due to Owner from Participant under the terms of
         this Agreement.

         No remedy  granted to  Participant  is intended to be  exclusive of any
other remedy herein or by law provided,  but each shall be cumulative  and shall
be in  addition  to every  other  remedy  given  hereunder  to now or  hereafter
existing at law, in equity or by statute. No delay or omission of Participant to
exercise  any right or power  accruing  upon any Event of Default  shall  impair
Participant's  exercise  of any  right or power  or shall be  construed  to be a
waiver of any Event of

                                        4

<PAGE>


Default or acquiescence therein.

                                   ARTICLE 8.
                              OFFSET AT TERMINATION

         8.1.     Upon  termination,  all sums owed by either party to the other
shall be paid within thirty (30) days or later if such  termination  is a result
of the termination of the Employment Agreement.  Any sums due to the Participant
hereunder may be offset against  amounts that the Participant may owe Owner as a
result of the Employment Agreement, provided, however, Owner may not offset sums
due to Participant  hereunder  against the outstanding  principal balance of the
Note (as defined in the Employment Agreement) prior to its maturity.

                                   ARTICLE 9.
                   RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS

         9.1.     NO  PARTNERSHIP  OR JOINT VENTURE.  Nothing  contained  herein
shall be deemed or  construed  by the  parties  hereto or by any third  party as
creating the relationship of (i) a partnership,  or (ii) a joint venture between
the parties hereto;  it being  understood and agreed that neither any provisions
contained  herein nor any acts of the parties  hereto  shall be deemed to create
any relationship between the parties hereto other than the relationship of Owner
and Participant, as set forth herein.

         9.2.     FURTHER  ACTIONS.  Owner and Participant  agree to execute all
contracts,  agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof; provided,  however,
in no event  shall  Participant  be  entitled to place or cause to be placed any
liens on the Property without Owner's prior consent.

         9.3.     NOT RESPONSIBLE FOR OTHER'S  COMMITMENTS.  Neither party shall
be responsible or liable for any  indebtedness  or obligation of the other party
incurred  either before or after the execution of this  Agreement,  except as to
those joint responsibilities,  liabilities, indebtedness or obligations incurred
pursuant to the terms of this Agreement,  and each party agrees to indemnify and
hold the other party harmless from such obligations and indebtedness.

                                   ARTICLE 10.
                                  MISCELLANEOUS

         10.1.    NOTICES.  Any  notices  or other  communications  required  or
permitted  hereunder shall be sufficiently  given if in writing and addressed as
shown below,  or to such other address as the party  concerned may substitute by
written  notice to the  other,  and (i)  delivered  personally,  or (ii) sent by
certified  or  registered  mail,  return  receipt  requested,  postage  prepaid,
addressed as shown below,  or to such other  address as the party  concerned may
substitute by written notice to the other. All notices  personally  delivered or
sent by overnight courier shall be deemed received on the date of delivery.  All
notices  forwarded by certified or registered mail shall be deemed received on a
date five (5) days  (excluding  Saturdays,  Sundays and holidays  upon which the
United States Postal Service does not deliver mail)  immediately  following date
of deposit in the mail. Provided,

                                        5

<PAGE>


however,  the return  receipt  indicating  the date upon which all notices  were
received  shall be PRIMA FACIE  evidence  that such notices were received on the
date on the return receipt.

         If to Owner:                 Atlantic Gulf Communities Corporation
                                      2601 S. Bayshore Drive
                                      Miami, Florida  33133
                                      Attn:  President

                                      With copies to:
                                      ---------------
                                      Atlantic Gulf Communities Corporation
                                      2601 S. Bayshore Drive
                                      Miami, Florida  33133
                                      Attn:  General Counsel

         If to Participant:           William G. Peacher
                                      1010 Liberty Bluff Court
                                      Greensboro, Georgia  30642

                                      With copies to:
                                      ---------------
                                      Edward M. Hughes, Esquire
                                      Hughes Law Firm, P.C.
                                      P. O. Box 23526
                                      Hilton Head Island, SC  29925-3526

         The  addresses and  addressees  may be changed by giving notice of such
change in the manner  provided  herein for giving notice.  Unless and until such
written notice is received, the last address and addressee given shall be deemed
to continue in effect for all purposes. No notice to either Owner or Participant
shall be deemed  given or received  unless the entity  noted "With a copy to" is
simultaneously delivered notice in the same manner as any notice given to either
Owner or Participant.

         10.2.    ASSIGNMENT.  This  Agreement  and any  documents  executed  in
connection  therewith  shall not be assigned by Participant or Owner without the
prior written consent of the other party, and any assignment  without such prior
written consent shall be null and void.  Merger of  consolidation of Owner shall
not be deemed an  assignment,  provided that the merged or  consolidated  entity
assumes the obligations hereunder.

         10.3.    SURVIVAL.  All  covenants,  agreements,   representations  and
warranties  made herein  shall  survive the  execution  and delivery of (i) this
Agreement,  and (ii) all other  documents  and  instruments  to be executed  and
delivered in accordance herewith, and shall continue in full force and effect.

         10.4.    OUTSIDE BUSINESSES.  Nothing contained in this Agreement shall
be  construed  to restrict or prevent,  in any manner,  any party or any party's
affiliates,  parent  corporations or representatives or principals from engaging
in any other businesses or investments.

                                        6

<PAGE>


         10.5.    CONSTRUCTION AND  INTERPRETATION OF AGREEMENT.  This Agreement
shall be governed by and construed under the laws of the State of Colorado.  Any
action brought to enforce or interpret  this  Agreement  shall be brought in the
court of  appropriate  jurisdiction  in the  county  in which  the  Property  is
located. Should any provision of this Agreement require judicial interpretation,
it is agreed that the court interpreting or considering same shall not apply the
presumption  that the terms hereof shall be more  strictly  construed  against a
party by reason of the rule or  conclusion  that a document  should be construed
more  strictly  against the party who itself or through its agent  prepared  the
same;  it  being  agreed  that  all  parties  hereto  have  participated  in the
preparation  of this  Agreement  and that legal  counsel was  consulted  by each
responsible party before the execution of this Agreement.

         10.6.    SPECIFIC  PERFORMANCE.  Participant  and Owner  agree  that in
addition to all other remedies, each of their obligations contained herein shall
be subject to the remedy of specific performance by appropriate action commenced
by the aggrieved party in a court of proper jurisdiction.

         10.7.    AMENDMENT  AND WAIVER.  This  Agreement  may not be amended or
modified in any way except by an instrument  in writing  executed by all parties
hereto;  provided,  however,  either  Participant or Owner may, in writing,  (i)
extend the time for  performance of any of the  obligations  of the other,  (ii)
waive  any  inaccuracies  and  representations  by the other  contained  in this
Agreement,  (iii)  waive  compliance  by the  other  with  any of the  covenants
contained in this  Agreement,  and (iv) waive the  satisfaction of any condition
that is  precedent  to the  performance  by the party so  waiving  of any of its
obligations under this Agreement.

         10.8.    SEVERABILITY.  Except as  expressly  provided to the  contrary
herein,  each  section,  part,  term or  provision  of this  Agreement  shall be
considered severable, and if for any reason any section, part, term or provision
herein is  determined  to be invalid and  contrary  to or in  conflict  with any
existing  or  future  law or  regulation  by a  court  or  agency  having  valid
jurisdiction,  such determination  shall not impair the operation of or have any
other affect on other sections,  parts, terms or provisions of this Agreement as
may remain  otherwise  intelligible,  and the latter shall  continue to be given
full force and effect and bind the parties  hereto,  and said invalid  sections,
parts, terms or provisions shall not be deemed to be a part of this Agreement.

         10.9.    BINDING  CONTRACT.  This  Agreement  shall be binding upon and
inure to the  benefit of the  parties  hereto and their  respective  successors,
legal representatives and assigns, where permitted.

         10.10.   INTEGRATED  AGREEMENT.  This Agreement  constitutes the entire
agreement   between   the   parties   hereto   and  there  are  no   agreements,
understandings,  warranties  or  representations  between the parties other than
those set forth herein.

         10.11.   GOVERNING  DOCUMENT.  This Agreement shall govern in the event
of any  inconsistency  between this  Agreement and any of the Exhibits  attached
hereto.

         10.12.   JURY  TRIAL.  The  Participant  and Owner  hereby  waive their
respective rights to a jury trial.

                                        7

<PAGE>


         10.13.   ATTORNEY'S FEES. In the event it becomes  necessary for either
party to litigate or to initiate any claim or proceeding in order to enforce its
rights under the terms of this  Agreement,  then the  prevailing  party shall be
entitled to reimbursement  of its costs and reasonable  attorney's fees incurred
in any such claim, proceeding or litigation, including those caused by appellate
proceedings.

         IN WITNESS  WHEREOF,  the parties have executed  this  Agreement on the
date first written above.

                                     OWNER:
                                     ATLANTIC GULF COMMUNITIES
                                     CORPORATION, a Delaware corporation


                                     By:

                                     Its:



                                     PARTICIPANT:




                                     WILLIAM G. PEACHER


                                        8

<PAGE>


                                   EXHIBIT "A"

                                  REAL PROPERTY

         Legal descriptions of certain land owned by the Development  Company in
Garfield County, Colorado.

<PAGE>


                                   EXHIBIT "B"

                                   DEFINITIONS


         All capitalized terms referenced or used in the Participation Agreement
to which this Exhibit is attached and not  specifically  defined  therein  shall
have the meaning set forth below in this EXHIBIT  "B",  which is attached to and
made a part of the  Participation  Agreement  for  all  purposes.  The  section,
paragraph and exhibit  references  herein refer to the Sections,  Paragraphs and
Exhibits in and to the Participation Agreement.

         1.1.     CAPITAL RESERVE.  The term "Capital  Reserve" shall mean those
amounts  established  by  Owner  to be  allocated  to  an  account  for  capital
replacements,  renewals, nonroutine repairs, maintenance and improvements within
and to the Property.

         1.2.     COMMENCEMENT DATE. The term "Commencement  Date" is defined as
the date upon which Owner and Participant execute this Agreement.

         1.3.     DEFAULT OR EVENT OF DEFAULT.  The terms "Default" or "Event of
Default" shall have the meaning set forth in Article 6.

         1.4.     EXPENSES. The term "Expenses" shall mean all expenses incurred
by or paid on behalf of Development Company,  computed on a cash basis, incurred
during or after the first calendar month beginning on or after the  Commencement
Date in  connection  with  all  business  related  to or from  the  development,
construction,  marketing,  management, operation and sale of the Project and the
Property, and shall include, but shall not be limited to, the following items:

                  1.4.1.  General   and    administrative    salaries,    wages,
         commissions,  employee benefits and payroll expenses, including payroll
         taxes,  approved  profit  sharing  plans and  insurance  for  employees
         employed  in  the  development,   construction,  marketing  management,
         operation or sale of the Property;

                  1.4.2.  All architectural, design, consulting, engineering and
         legal fees;

                  1.4.3.  All costs of permitting, platting, and other licensing
         as may be  required  to  accomplish  the  proposed  development  of the
         Property;

                  1.4.4.  All predevelopment and development costs, construction
         costs,  including,  but not  limited  to,  any  invoices  submitted  by
         contractors, subcontractors, laborers and suppliers, including costs of
         payment and performance bonds;

                  1.4.5.  Marketing, advertising and promotional expenses;

                  1.4.6.  Replacement of  inventories  of maintenance  parts and
         supplies;

                                        1

<PAGE>


                  1.4.7.  Reasonable reserves for warranty work;

                  1.4.8.  Replacement of equipment;

                  1.4.9.  General and administrative  office supplies,  postage,
         printing, routine office,  departmental and administrative expenses and
         costs and  accounting  services  incurred in the  on-site  development,
         construction, management, operation and sale of the Property;

                  1.4.10. Reasonable  travel  expenses of on-site  employees and
         off-site consultants incurred in connection with Property business;

                  1.4.11. A  credit  to  a  reserve  for  appropriate  insurance
         coverage and taxes each  calendar  month in an amount or at a rate that
         is sufficient to pay such insurance premiums and taxes when they become
         due and payable;

                  1.4.12. Insurance  premiums and taxes,  to the extent not paid
         from the reserve established therefor;

                  1.4.13. The amount credited to the Capital Reserve, as defined
         herein;

                  1.4.14. All release of lien and financing  costs for any loans
         associated  with the Property and all principal  and interest  payments
         and fees due under any loan  concerning the Property or construction of
         the Improvements;

                  1.4.15. Any amounts  retained for purposes of maintaining  the
         Working Capital at the level provided for herein;

                  1.4.16. Auditing costs,  accounting  costs,  computer fees and
         legal  fees   incurred  in  respect  to  the   marketing,   management,
         development, operation and sale of the Property;

                  1.4.17. All  capital   costs   incurred   in  the   operation,
         development and sale of the Property,  including the  construction  and
         equipping  of any  Improvements;  provided,  however,  said costs shall
         first be charged against the balance in the Capital Reserve;

                  1.4.18. Costs incurred for  development,  connection or use of
         utilities,  including,  but not limited to, all  electric,  gas,  waste
         disposal  and water costs,  and any other  utility  charges  payable by
         Participant hereunder;

                  1.4.19. Ordinary maintenance and repairs to the Property.

                  1.4.20. Accounts  receivable  previously included within Gross
         Receipts,  to the extent they remain  unpaid ninety (90) days after the
         first billing;

                                        2

<PAGE>


                  1.4.21. Any charges  pursuant to any other lease,  contract or
         agreement  related  to  the  development,   construction,   management,
         marketing, operation or sale of the Property, or purchase agreement for
         replacement of furniture, fixtures and equipment;

                  1.4.22. Any Negative  Cash Flow deficit  carried  forward from
         previous Calendar Year;

                  1.4.23. Costs  incurred in the cleanup  and/or  restoration of
         the Property in compliance with any environmental,  hazardous substance
         or solid waste laws or regulations;

                  1.4.24. Costs incurred in the  collection of any  condemnation
         proceeds relating to the Property;

                  1.4.25. Costs  incurred in the  restoration of the Property in
         connection with an insurable loss;

                  1.4.26. Repayment of Owner's equity  investment in the project
         (and any other  investment  from  future  participants  invested in the
         Project and not distributed to Owner),  together with a fifteen percent
         (15%) per annum return on any such investment; and

                  1.4.27. Other expenses reasonably incurred in the development,
         construction,   management,   marketing,  operation  and  sale  of  the
         Property.

         Any of the  above  provisions  resulting  in a double  deduction  as an
Expense shall be allowed as a deduction  only once.  Expenses  shall not include
depreciation,  but shall include the Project's allocable share of federal income
taxes and all state income taxes.

         1.5.     FINANCIAL  STATEMENTS.  The term "Financial  Statements" shall
mean a balance  sheet as of the close of a calendar  year,  statements of income
and expense and  Positive Net Cash Flow for that portion of the year then ended,
applied on basis  consistent  with that of the preceding  period,  or containing
disclosure of the effect on the  financial  position or results of operations of
any change during the period,  and certified as accurate by an executive officer
of Owner.

         1.6.     GROSS RECEIPTS.  The term "Gross Receipts" shall mean receipts
recognized  during or after the first calendar  month  beginning on or after the
Commencement  Date from all business  conducted  by  Development  Company  upon,
related  to  or  from  the  development,  construction,  marketing,  management,
operation  and sale or other  disposition  of the Property or the Real  Property
during the Term hereof, and shall include, but shall not be limited to, proceeds
from  the sale of lots,  or any  other  portion  of the  Real  Property,  or any
proceeds  from  usage  rights or leases of the Real  Property,  or for  services
performed  on, at, or from the  Property,  and  proceeds  paid as a result of an
insurable  loss in  connection  with the Real  Property or the  Property.  Gross
Receipts  shall be reduced by any refunds,  rebates,  discounts and credits of a
similar nature given,  paid or returned by Owner and/or  Development  Company in
the course of obtaining such Gross Receipts.

                                        3

<PAGE>


         Notwithstanding  anything to the  contrary,  Gross  Receipts  shall not
include applicable gross receipts taxes,  transfer fees, or similar governmental
charges  collected  directly from any purchasers as a part of the sales price of
any Property sold.

         Any of the above provisions  resulting in a double exclusion from Gross
Receipts shall be allowed as an exclusion only once.

         1.7.     NEGATIVE  NET CASH  FLOW.  The term  "Negative  Net Cash Flow"
shall be defined as the amount,  if any, by which Expenses exceed Gross Receipts
for the particular period in question.

         1.8.     NET  PROFITS.  The term "Net  Profits"  shall mean net pre-tax
income  from  the  Project,  subject  to the  conditions  set  forth  below,  as
determined  at the  end of  each  calendar  year in  accordance  with  generally
accepted accounting  principles.  The conditions are as follows: (i) Owner shall
be entitled  to a fifteen  percent  (15%) per annum  return on any funds for the
Project  funded  by Owner  and/or  Development  Company  (and any  other  equity
investment in the Project from future participants which remains invested in the
Project shall be entitled to a fifteen percent (15%) per annum return), (ii) all
non-capitalized  expenditures  shall be treated as an expense  for  purposes  of
determining "Net Profits" at the time of such  calculation,  and (iii) Owner may
establish  reasonable reserves for the operation and development of the Project.
Attached to this Exhibit "B" as Schedule 1 is proforma profit and loss statement
which is an example of how Net Profits are to be computed.

         1.9.     POSITIVE  NET CASH  FLOW.  The term  "Positive  Net Cash Flow"
shall  mean  that  amount,  if any,  by which the sum of Gross  Receipts  exceed
Expenses for the particular period in question.

         1.10.    WORKING  CAPITAL.  The term "Working  Capital"  shall mean the
initial sum of working capital and such additional amount as reasonably required
for the operation of the Property, which sum shall be periodically designated by
Owner to meet the requirements of the operation of the Property.

                                        4