Earnout Agreement

EARNOUT AGREEMENT
-----------------


This Earnout Agreement ("Agreement") is entered into this day of
--------- ----- January, 2006, by and between Joel Stephen Logan, II, Charles L. Murphree, Jr., John Steven Lawler, James David Shaw, William Joseph Aycock, Jr., Jerry Ray Cooper, Jr., Timothy Wayne Gann, and Jimmy Ray Hawkins (individually, a "Seller"
------ and collectively, the "Sellers"), Deer Valley Homebuilders, Inc., an Alabama
------- corporation ("Deer Valley"), and DeerValley Acquisitions Corp., a Florida
------------ corporation (the "Buyer").
-----


RECITALS


A. Pursuant to the Common Stock Purchase Agreement dated November 1, 2005 (the "Purchase Agreement"), Sellers have, on this date, sold 100% of the
------------------- issued and outstanding capital stock of Deer Valley to the Buyer.


B. The Purchase Agreement provides that a portion of the Purchase Price (as defined in the Purchase Agreement) is to be calculated and paid as an earnout based upon the Net Income Before Taxes (hereinafter defined) of Deer Valley.


C. Sellers have agreed that determination and payment of the earnout contemplated by the Purchase Agreement is to be in accordance with the terms of this Agreement.


NOW, THEREFORE, in consideration of the premises and of the respective covenants and provisions herein contained, each Seller and Buyer agree as follows:


ARTICLE I.
PRICE ADJUSTMENT
----------------


1.1 Annual Price Adjustment. For each Earnout Year (as defined below),
----------------------- the Buyer shall accrue a liability in an amount equal to: (a) the Net Income
- Before Taxes of Deer Valley for such Earnout Year (as determined pursuant to Article II below) minus $1,000,000; multiplied by (b) fifty (50%) percent (the
------------- - "Annual Price Adjustment"). For example, if the Net Income Before Taxes for a ------------------------- particular Earnout Year is $3,000,000, then the Annual Price Adjustment for such Earnout Year will be $1,000,000. The Annual Price Adjustment shall be determined and deposited annually on or before the earlier of: (y) twenty days (20) after
- the completion of the audit of the Parent Company's financial statements for such Earnout Year; or (z) ninety days following the end of such Earnout Year.
- The annual period used to measure the Annual Price Adjustment shall be the Company's fiscal year (each, an "Earnout Year"). All payments made under this
------------ Agreement shall be treated as an adjustment to the Purchase Price. The aggregate of such accrued liabilities being referred to herein as the "Price
----- Adjustment Target Account or"PATA." As to the start date, calculation of the
---------------------------------- contributions related to the PATA shall include the Net Income Before Taxes of Deer Valley for the fourth quarter of 2005 (which shall include revenue generated by homes delivered by Deer Valley on or after October 2, 2005), however the $1,000,000 calculation for the fourth quarter of 2005 shall be $250,000. Such accrual for the fourth quarter of 2005 shall be available for a cash distribution in accordance with Section 1.3 below after the 2006 fiscal year.


1.2 Security for the PATA Account. The Buyer shall secure liabilities
------------------------------ accrued under Section 1.1 above by either: (a) depositing cash into a segregated
- account maintained with an escrow agent mutually agreed to by the Buyer and a


Majority of the Sellers (the "Escrow Agent"); (b) by delivering or depositing
------------ - marketable securities, which shall not be securities of the Buyer or the Parent Company, or bonds with the Escrow Agent; or (c) by posting a letter of credit
- provided by a federally insured bank for the benefit of the Sellers, which may or may not be the escrow agent. The form of the security referenced above being in Buyer's sole discretion. The Buyer and the Seller shall mutually agree upon an escrow agent within thirty (30) days of the date of this Agreement. The PATA Account does not decrease for losses sustained by Deer Valley in subsequent years, by devaluation of the securities deposited with the Escrow Agent, or by any other means, except as provided herein by the provisions allowing for Cash Distributions (as defined below), for payments on the Distribution Date (as defined below), Forfeiture (as defined below), or otherwise provided herein.


1.3 Early Cash Distributions. At any time after determination of the
-------------------------- Annual Price Adjustment for each Earnout Year, each Seller may request, in writing, a cash payment in an amount equal to: (a) the Cumulative Price
- Adjustments multiplied by fifty (50%) percent; multiplied by (b) the percentage
------------- - (%) set forth next to such Seller's name on Exhibit"A" attached hereto, as
---------- Exhibit"A" may be amended pursuant to Section 1.5 below; (c) minus any Cash - ---------- ----- Distributions previously made to such Seller under this Section 1.3 (each, a "Cash Distribution"). For example, if (a) the Cumulative Adjustments are
---------------- $1,000,000, (b) the percentage set forth next to a particular Seller's name on Exhibit A is 30%, and (c) such Seller has not previously received any Cash Distributions under this Section 1.3, then the Cash Distribution available for such Seller is $150,000. By way of additional example, if (a) the Cumulative Adjustments are $1,000,000, (b) the percentage set forth next to a particular Seller's name on Exhibit A is 30%, and (c) the total amount previously paid to such Seller under this Section 1.3 is $75,000, then the Cash Distribution available for such Seller is $75,000. Deer Valley shall make a Seller's Cash Distribution within forty-five (45) days after receipt of written notice from such Seller. Each Seller is entitled to receive only one cash distribution per fiscal year under this Section 1.3. The security required pursuant to Section 1.2 above shall be reduced by the aggregate Cash Distributions.


1.4 Payments on the Distribution Date. Within forty-five (45) days
------------------------------------- after the earlier of: (a) the determination of the Annual Price Adjustment for
- the 2013 fiscal year; (b) the date that both (i) the Cumulative Price
- - Adjustments (as defined in Section 4.1 below) equals $6,000,000 and (ii) the
-- five (5) year term of each Employment Agreement has expired; or (c) upon the
- Sale of the Business (as defined in Section 4.1 below) (the "Distribution
------------ Date"), Deer Valley shall pay to each Seller an amount equal to: (y) the
- Cumulative Price Adjustments multiplied by the percentage (%) set forth next to
------------- such Seller's name on Exhibit"A" attached hereto, as may be amended from time to
---------- time pursuant to Section 1.5 below; minus (z) any Cash Distributions made to
----- - such Seller under Section 1.3 above; provided, however, if payment is being made under this Section 2.4 due to the Sale of the Business, then the Cumulative Price Adjustments shall be deemed to be $6,000,000, minus any payments that may
----- have been forfeited under Section 1.5(y) below.
-


1.5 Forfeiture. If, before the Distribution Date, (a) the Parent
---------- - Company or Deer Valley terminates a Seller's employment for Cause (as defined in each Employment Agreement), (b) a Seller terminates his employment with Deer
- Valley prior to the five (5) year term of each Employment Agreement, or (c) a
- Seller breaches the terms of a Non-Competition Agreement (in each case, a "Forfeiture Event"), then, upon written notice by Parent Company or Deer Valley ----------------- to such Seller, such Seller (a "Forfeiting Seller") shall have forfeited his
----------------- interest in the Price Adjustment Target Account (the "Forfeited PATA Interest").
----------------------- Upon a Forfeiture Event, (y) fifty (50%) percent of the Forfeited PATA Interest
- shall be immediately released from the Price Adjustment Target Account to the


Buyer, and (z) the remaining fifty (50%) percent of the Forfeited PATA Interest
- shall be allocated to the remaining Seller's pro-rata according to Exhibit"A",
---------- as amended, and distributed accordingly on the Distribution Date. Upon a Forfeiture Event, Exhibit"A" shall be deemed amended to reflect that the
---------- Forfeiting Seller's interest has been allocated to the remaining Sellers, as follows: each remaining Seller's percentage interest shall equal (i) the number of shares stated next to such Seller's name on Exhibit "A," divided by (ii) the
---------- total number of shares held by all Sellers less the shares held by the Forfeiting Seller. Notwithstanding anything to the contrary, a Forfeiture Event shall ...