ex10-1.htm


    Exhibit
      10.1

    FIRST
      AMENDMENT TO EARNOUT AGREEMENT

    


    


    


    This
      First Amendment dated November 19,
      2007 (the “Amendment”), amends the Earnout Agreement dated as of January
      18, 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 ("DVHB"), and Deer Valley Corporation, a Florida
      corporation (“Deer Valley”), as successor to DeerValley Acquisitions
      Corp., a Florida corporation (the “Earnout Agreement”).

    


    RECITALS

    


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

    


    B.           The
      Purchase Agreement provided that a portion of the Purchase Price (as defined
      in
      the Purchase Agreement) was to be calculated and paid as an earnout based upon
      the net income before taxes of DVHB.

    


    C.           Pursuant
      to the Earnout Agreement, the Sellers earned for the fourth quarter of 2005
      and
      for the twelve month period ending December 31, 2006 an aggregate Annual Price
      Adjustment of $2,464,550, of which $1,232,275 was distributed to the Sellers
      in
      accordance with the terms of the Earnout Agreement, and $1,232,275 was recorded
      as a liability to the PATA and remains undistributed to the Sellers (the
“2006 Undistributed PATA Accrual”).

    


    D.           Pursuant
      to the Earnout Agreement, Sellers, DVHB, and Parent Company anticipate that
      the
      Annual Price Adjustment for the Earnout Year ending December 31, 2007 will
      equal
      approximately $1,535,450 (the “2007 Estimated PATA Accrual”), of which
      $767,725 will be available for distribution to the Sellers pursuant to the
      terms
      of the Earnout Agreement, and $767,725 will be recorded as an additional
      liability, increasing the PATA, and will remain undistributed to the
      Sellers.

    


    E.           Sellers,
      DVHB, and Deer Valley wish to amend the Earnout Agreement to, among other
      matters, (a) provide for early release of $2,767,725, comprised of the 2006
      Undistributed PATA Accrual and the 2007 Estimated PATA Accrual, in exchange
      for
      (b) the Sellers agreeing to accept, in lieu of cash, common stock of Deer Valley
      (“Common Stock”) for any remaining Annual Price Adjustments accrued after
      the Earnout Year ending December 31, 2007, subject to the price guarantee
      described in Section 1.5 below and restrictions provided for in Sections 1.3,
      1.4 and 1.6 below.

    


    F.           All
      capitalized terms not otherwise defined herein have the meaning ascribed to
      them
      in the Earnout Agreement.

    


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

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

    


    1.           Restated
      Article I.  Article I of the Earnout Agreement is hereby
      deleted in its entirety and replaced with the following:

    


    ARTICLE
      I.

    PRICE
      ADJUSTMENT

    


    1.1           Release
      of Deferred Earnout Payments.  No later than December 31, 2007,
      Deer Valley shall make a $2,767,725 cash payment to the Sellers, comprised
      of
      the 2007 Estimated PATA Accrual and the 2006 Undistributed PATA
      Accrual.

    


    1.2           Shares
      Deposits.  No later than December 10, 2007, Deer Valley shall
      issue to the Sellers, for deposit into escrow with Bush Ross, P.A. (the
“Escrow Agent”), 2,000,000 shares of Common Stock to be held and released
      pursuant to Sections 1.4 and 1.6 below (the “Escrowed
      Shares”).  Contemporaneous with entering into this Amendment, the
      parties shall enter into an Escrow Agreement with the Escrow
      Agent.  Prior to vesting pursuant to Section 1.3 below, the Escrowed
      Shares may be voted by a majority of the Board of
      Directors.  Once  Escrowed Shares vest, the Sellers may vote
      such Vested Shares.

    


    1.3           Annual
      Price Adjustment.  For each Earnout Year ending after December 31,
      2007, the Sellers shall be entitled to a price adjustment in an amount equal
      to:
      (a) the Net Income Before Taxes of DVHB for such Earnout Year minus
      $1,000,000; multiplied by  (b) fifty (50%)
      percent (the “Annual Price Adjustment”).  The Annual Price
      Adjustment shall be determined annually on or before the earlier of: (y)
      twenty days (20) after the completion of the audit of Deer Valley’s financial
      statements for such Earnout Year; or (z) ninety days following the end of
      such Earnout Year.  The Sellers shall vest in that number of Escrowed
      Shares equal to the Annual Price Adjustment, divided by $1 (the “Vested
      Shares”).  For example, if the Net Income Before Taxes for a
      particular Earnout Year after 2007 is $3,000,000, then the Annual Price
      Adjustment for such Earnout Year will be $1,000,000, and the number of Escrowed
      Shares that will vest for such Earnout Year will be 1,000,000 shares of Common
      Stock.  Prior to the Distribution Date (as defined below), all Vested
      Shares will continue to be subject to forfeiture provisions in Section 1.6
      below.

    


    1.4           Release
      and 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; or (b) the date that both (i)
      cumulative Annual Price Adjustments after 2007 equal $2,000,000 and (ii)
      the five (5) year term of each Employment Agreement has expired (the
“Distribution Date”), DVHB shall release to each Seller an amount equal
      to the Vested Shares 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.  Any Escrowed Shares which have not vested
      by the Distribution Date shall be returned to Deer Valley for
      cancellation.  In no event shall cumulative Annual Price Adjustments
      accrued after 2007 exceed $2,000,000.

    


    1.5           Price
      Guarantee. If the Trading Price (as defined below) on the Distribution Date
      is less than $1.00, then Deer Valley shall be obligated to pay to the Sellers
      an
      amount equal to $1.00 minus the Trading Price, multiplied by
      the number of Vested Shares (the “Price Guarantee
      Payment”).  The Price Guarantee Payment may be paid in cash or
      with shares of Common Stock, at Deer Valley’s option.  For example, if
      the Trading Price on the Distribution Date is $0.75, and there are 1,500,000
      Vested Shares, then the Price Guarantee Payment would equal $375,000, which
      may
      be satisfied by the Company by issuing 500,000 shares of Common Stock or making
      a cash payment.

     

    
      
        
        

      

      
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    1.6           Forfeiture.
      If, before the Distribution Date, (a) Deer Valley or DVHB terminates a
      Seller’s employment for Cause (as defined in each Employment Agreement),
      (b) a Seller terminates his employment with DVHB 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 Deer Valley or DVHB to such Seller,
      such Seller (a “Forfeiting Seller”) shall have forfeited his interest in
      the Escrowed Shares and related Price Guarantee Payment, if any (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 Deer Valley, and (z) the remaining
      fifty (50%) percent of the Forfeited PATA Interest (including the Price
      Guarantee Payment, if any) 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 not affect any cash distributions made prior to the date of the Forfeiture
      Event.

    


    2.           Additional
      Definition.  The following definition is added to Section
      4.1 of the Earnout Agreement:

     

    “Trading
      Price” for a particular date (the “Determination Date”) shall mean
      the price determined by the first of the following clauses that applies: (a)
      if
      shares of Common Stock are traded on a national securities exchange (an
“Exchange”), the weighted average of the closing sale price of a share of the
      Common Stock of the Company on the last five (5) trading days prior to the
      Determination Date reported on such Exchange as reported in The Wall Street
      Journal (weighted with respect to the trading volume with respect to each such
      day); (b) if shares of Common Stock are not traded on an Exchange but trade
      in
      the over-the-counter market and such shares are quoted on the National
      Association of Securities Dealers Automated Quotations System (“NASDAQ”),
      the weighted average of the closing sale price of a share of the Common Stock
      of
      the Company on the last five (5) trading days prior to the Determination Date
      reported on NASDAQ as reported in The Wall Street Journal (weighted with respect
      to the trading volume with respect to each such day); (c) if such shares are
      an
      issue for which last sale prices are not reported on NASDAQ, the average of
      the
      closing sale price, in each case on the last five (5) trading days (or if the
      relevant price or quotation did not exist on any of such days, the relevant
      price or quotation on the next preceding Business Day on which there was such
      a
      price or quotation) prior to the Determination Date as reported by the Over
      the
      Counter Bulletin Board (the “OTCBB”), or any other successor
      organization; (d) if no closing sales price is reported for the Common Stock
      by
      the OTCBB or any other successor organization for such day, the average of
      the
      closing sale price, in each case on the last five (5) trading days (or if the
      relevant price or quotation did not exist on any of such days, the relevant
      price or quotation on the next preceding business day on which there was such
      a
      price or quotation) prior to the Determination Date as reported
      by  the "pink sheets" by the Pink Sheets, LLC, or any successor
      organization, (e) if no closing sales price is reported for the Common Stock
      by
      the OTCBB or any other successor organization for such day, then the average
      of
      the high and low bid and asked price of any of the market makers for the Common
      Stock as  reported on the OTCBB or in the "pink sheets" by the Pink
      Sheets, LLC on the last five (5) trading days; or (e) in all other cases, the
      fair market value of a share of Common Stock
      as
      determined, in good faith, by a majority of the Board of Directors of the
      Company.

     

    
      
        
        

      

      
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    3.           Counterparts.
      This Amendment may be executed simultaneously in two or more counterparts,
      each
      of which shall be deemed an original, but all of which together shall constitute
      one and the same instrument.

    


    4.           Ratification.  The
      terms and conditions of the Earnout Agreement that have not been modified by
      this Amendment shall remain in full force and effect.

    


    IN
      WITNESS WHEREOF, the parties have
      hereunto caused this Amendment to be executed in multiple original counterparts
      as of the date set forth above.

     

    
      
        	 	
                Deer
                  Valley Corporation, a Florida corporation

              
	 	 
	 	
                By:
                  /s/ Charles G. Masters

              
	 	
                Charles
                  G. Masters, President & CEO

              
	 	 
	 	
                Deer
                  Valley Homebuilders, Inc., an Alabama corporation

              
	 	 
	 	
                By:
                  /s/ Charles G. Masters

              
	 	
                Charles
                  G. Masters, Chairman of the Board

              
	 	 
	 	 
	 	
                 “Sellers”

              
	 	 
	 	
                /s/
                  Joel Stephen Logan, II

              
	 	
                Joel
                  Stephen Logan, II

              
	 	 
	 	
                /s/
                  Charles L. Murphree, Jr.

              
	 	
                Charles
                  L. Murphree, Jr.

              
	 	 
	 	
                /s/
                  John Steven Lawler

              
	 	
                John
                  Steven Lawler

              
	 	 
	 	
                /s/
                  James David Shaw

              
	 	
                James
                  David Shaw

              
	 	 
	 	
                /s/
                  William Joseph Aycock, Jr.

              
	 	
                William
                  Joseph Aycock, Jr.

              
	 	 
	 	
                
                  /s/
                    Jerry Ray Cooper, Jr.

                

              
	 	
                Jerry
                  Ray Cooper, Jr.

              
	 	 
	 	
                /s/
                  Timothy Wayne Gann

              
	 	
                Timothy
                  Wayne Gann

              
	 	 
	 	
                /s/
                  Jimmy Ray Hawkins

              
	 	
                Jimmy
                  Ray Hawkins

              


      

    

    
 

    
      
        
        

      

      
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