PREFERRED STOCK EXCHANGE AGREEMENT



This  Agreement  is entered  into as of this 28th day of October,  1997  between
Diamond Equities, Inc. ("DEI"), a Nevada Corporation, and Dingaan Holdings, S.A.
("Dingaan").

                                    RECITALS

WHEREAS,  Dingaan  holds 727 shares of Series A 6%  Preferred  Stock  ("Series A
Stock") of DEI and,

WHEREAS,  DEI  desires  to  exchange  a new series of  preferred  stock  without
dividends for the Series A Stock and,

WHEREAS, Dingaan has agreed to such an exchange,

NOW THEREFORE,  in consideration of the premises contained in the recitals,  the
parties agree as follows:

                                    AGREEMENT

SECTION 1. SERIES A STOCK.

1.1 The  Series  A Stock  presently  held by  Dingaan  have a  stated  value  of
$1,817,591.00 (one million eight hundred seventeen thousand, five hundred ninety
one dollars).

1.2  Cumulative  Dividends  are at 6% payable  annually,  and are  presently  in
arrears in the amount of  $194,023.00  (one hundred  ninety  three  thousand and
twenty three dollars).

1.3 The  Series A Stock is  convertible  at the  option of the  holder at a rate
equal to 75%  (seventy  five  percent)  of the  average  bid price of the common
shares for the ten (10) days prior to the conversion date.

1.4 The  Series A Stock is  redeemable  by DEI at the  cash  price  paid for the
shares plus the amount of any dividends accumulated and unpaid as of the date of
the redemption.
<PAGE>
SECTION 2. OWNERSHIP.

2.1 Dingaan  confirms that its  ownership of the Series A Stock is  unencumbered
and that it is able to pass  clear  title to the  shares  to DEI on the  Closing
Date.

SECTION  3.  AUTHORIZATION  AND  EXCHANGE  OF  SERIES A STOCK  FOR NEW  SERIES B
PREFERRED STOCK.

3.1 The Board of Directors of DEI has, by resolution  dated  September 24, 1997,
authorized  the issuance and exchange of a new Series B Preferred  Stock for its
existing Series A Stock.

3.2 Twenty  thousand  (20,000)  shares of the Series B Stock  shall be valued at
$1,817,591.00 (one million,  eight hundred seventeen thousand,  five hundred and
ninety one dollars),  plus the Series A stock dividends in arrears in the amount
of  $194,023.00,  for a total  value of  $2,011,  614.00  (two  million,  eleven
thousand, six hundred fourteen dollars).

3.3 The twenty  five  thousand  (25,000)  shares of the Series B Stock  shall be
convertible into 20,000,000 (twenty million) shares of common stock of DEI.

3.4 Other specific terms and conditions of the Series B Preferred Stock shall be
determined  between the parties and  represented  in a Series B Preferred  Stock
Certificate.

SECTION 4. CLOSING.

 4.1 The Closing of the Exchange of Shares hereunder shall be held at offices of
DEI on November 1 ,1997 or such other place or date as the parties may agree.

4.2 At the Closing,  DEI shall  deliver a definitive  certificate  registered in
Dingaan's name  representing  20,000 shares of Series B Preferred  Stock and the
value thereof being exchanged, signed by the President of DEI.

4.3  At  the  Closing,  Dingaan  shall  deliver  its  certificate,  representing
ownership  of 727 shares of the  Series A  Preferred  Stock,  duly  endorsed  or
accompanied by a duly executed stock power in blank with a signature  guaranteed
by a bank, trust company or a member firm of the NASD.

SECTION 5.  REPRESENTATIONS  AND  WARRANTIES OF DEI. DEI hereby  represents  and
warrants to Dingaan as set forth below.

                                  Page 2 of 7
<PAGE>

5.1  ORGANIZATION AND STANDING;  ARTICLES AND BYLAWS.  DEI is a corporation duly
incorporated  and validly  existing and in good  standing  under the laws of the
State of Nevada.  DEI has  requisite  corporate  power and  authority to own and
operate its  properties  and assets,  and to carry on its  business as presently
conducted and as proposed to be conducted.  DEI is duly qualified and authorized
to do  business,  and is in good  standing  as a  foreign  corporation,  in each
jurisdiction  where the nature of its  activities  and of its  properties  (both
owned and leased) makes such  qualification  necessary and where a failure to do
so qualify would have a material adverse effect on its business or properties.

5.2 CORPORATE  POWER.  DEI will have at the Closing Date all requisite legal and
corporate power and authority to execute and deliver this Agreement, to sell and
issue the Shares  hereunder,  to issue the Common Stock issuable upon conversion
of the Preferred Stock ("Underlying  Common Stock") and to carry out and perform
its obligations under the terms of this Agreement.

5.4 CAPITALIZATION. The authorized capital stock of DEI immediately prior to the
Closing  consists of (a)  [NUMBER]  shares of Common  Stock,  of which  [NUMBER]
shares  are or will be  issued  and  outstanding,  and (b)  [NUMBER]  shares  of
preferred  stock  ("Preferred  Stock"),  of which [NUMBER] shares are or will be
issued and outstanding  prior to the Closing.  The outstanding  shares have been
duly authorized and validly  issued,  and are fully paid and  nonassessable  and
were issued in compliance with all applicable federal and state securities laws.
DEI has reserved [NUMBER] shares of Common Stock for issuance upon conversion of
the  Preferred  Stock.  There are (i) no options,  warrants  or other  rights to
purchase any of DEI's  authorized and unissued  capital  stock,  or any security
directly or indirectly  convertible  into or exchangeable  for shares of capital
stock of DEI, (ii) so far as known to DEI, no voting trust or voting  agreements
among, or irrevocable proxies executed by, stockholders of the Company, (iii) so
far as known to DEI, no agreements among stockholders providing for the purchase
or  sale  of  DEI's  capital  stock,  and  (iv) no  obligations  (contingent  or
otherwise)  of DEI to purchase,  redeem or  otherwise  acquire any shares of its
capital  stock or any interest  therein or to pay any dividend or make any other
distribution in respect  thereof.  All such issued and  outstanding  options and
warrants have been duly and validly issued in compliance with applicable federal
and state securities laws.

5.5  AUTHORIZATION.  All corporate  action on the part of DEI, its directors and
shareholders   necessary  for  the   authorization,   execution,   delivery  and
performance of this Agreement by DEI, the  authorization,  issuance and delivery
of the Shares and the  Underlying  Common  Stock and the  performance  of all of
DEI's  obligations  hereunder  has been taken or will be taken prior to Closing.
This Agreement constitutes a valid and binding obligation of DEI, enforceable in
accordance with its terms,  subject to laws of general  application  relating to
bankruptcy,  insolvency  and the  relief of debtors  and rules of law  governing
specific  performance,  injunctive relief or other general principles of equity,
whether such  enforcement  is  considered  in a proceeding in equity or law. The
Shares, when issued in compliance with the provisions of this Agreement, and the
Underlying Common Stock, when issued, will be validly issued, will be fully paid
and nonassessable,  will be free of any duties or other governmental charges and
will be free of any liens,  encumbrances or restrictions,  other than any liens,
encumbrances  or  restrictions  created by or imposed upon the holders under the
documents relating to this transaction;  provided,  however, that the Shares and
the  Underlying  Common Stock may be subject to  

                                  Page 3 of 7
<PAGE>
restrictions on transfer under state and/or federal  securities laws.  Except as
contemplated  herein, the Shares and the Underlying Common Stock are not subject
to any preemptive rights or rights of first refusal.

5.6  LIABILITIES.  Except as set forth in DEI's financial  statements as of June
30, 1997], copies of which have been heretofore delivered to Dingaan, DEI has no
liabilities or  obligations,  absolute or  contingent,  except  liabilities  and
obligations  which have been incurred in the ordinary course of business none of
which, in the aggregate, exceeds $10,000.

5.7 COMPLIANCE WITH OTHER  INSTRUMENTS.  Company is not in violation of any term
of its Articles or Bylaws,  or in any material  respect of any term or provision
of  the  mortgages,   indebtedness,   indentures,   contracts,   agreements,  or
instruments  set  forth on  Exhibit D or any other  material  agreement,  or any
judgment or decree.  The best of its  knowledge,  DEI is not in violation of any
order,  statute, rule or regulation applicable to DEI where such violation would
materially and adversely  affect DEI; to DEI's actual  knowledge,  DEI is not in
violation of any order, statute or regulation  applicable to DEI. The execution,
delivery and  performance of and compliance with this Agreement and the issuance
of the Shares and the  Underlying  Common  Stock have not  resulted and will not
result in any material  violation of, or conflict with, or constitute a material
default under,  DEI's Articles or Bylaws or any of such material  agreements nor
result in the creation of, or mortgage, pledge, lien, encumbrance or charge upon
any of the material properties or assets of DEI.

5.8 LITIGATION,  ETC. There are no actions, suits, proceedings or investigations
pending  against DEI or its properties or in which DEI is the plaintiff,  before
any court or governmental  agency (nor, to DEI's knowledge,  is there any threat
thereof or any reasonable basis therefor).

5.9 REGISTRATION RIGHTS. DEI is not under any contractual obligation to register
with the Securities and Exchange  Commission ("SEC") under the Securities Act of
1933, as amended ("Securities Act") any of its presently outstanding  securities
or any of its securities which may hereafter be issued.

5.10  GOVERNMENTAL  CONSENT,  ETC. No consent,  approval or  authorization of or
designation,  declaration or filing with any governmental authority on the party
of DEI is required in connection  with the valid  execution and delivery of this
Agreement,  or the offer,  or  issuance of the Shares or the  underlying  Common
Stock or the consummation of any other transaction contemplated hereby.

5.11 EXEMPTION.  The offer,  issue and exchange of the Shares and the Underlying
Common  Stock  are and will be  exempt  from  the  registration  and  prospectus
delivery  requirements of the 1933 Act,  pursuant to the exemption 5 provided by
Section 4(1) and 4(2) of the Act.

                                  Page 4 of 7
<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES OF DINGAAN.  Dingaan hereby represents
and  warrants  to DEI with  respect to the  exchange of the  Preferred  Stock as
follows:

6.1  INVESTMENT.  Dingaan is  acquiring  the shares for  investment  for its own
account,  not as a nominee or agent,  and not with the view to, or for resale in
connection with, any distribution  thereof. It understands that the shares to be
issued have not been,  and will not be,  registered  under the Securities Act of
1933,  as  amended  ("Securities  Act") or the  securities  laws of any state by
reason  of  a  specific  exemption  from  the  registration  provisions  of  the
Securities  Act  and  the  securities  law of the  State  of  Nevada  and  other
applicable  jurisdictions,  the  availability of which depends upon, among other
things, the bona fide nature of the investment intent.

6.2 RULE 144. It acknowledges that the Shares must be held  indefinitely  unless
subsequently  registered  under the  Securities  Act or unless an exemption from
such  registration  is  available.  It is  aware of the  provisions  of Rule 144
promulgated  under the  Securities  Act which  permit  limited  resale of shares
purchased  in a  private  placement  subject  to  the  satisfaction  of  certain
conditions,  including, among other things, the existence of a public market for
the shares,  the  availability of certain current public  information  about the
company, the resale occurring not less than one year after a party has purchased
and paid  for the  security  to be  sold,  the sale  being  effected  through  a
"broker's transaction" or in transactions directly with a "market maker" and the
number  of shares  being  sold  during  any  three-month  period  not  exceeding
specified  limitations.  Dingaan  acknowledges  that, except as specifically set
forth in this  Agreement,  it is not  relying on DEI in any way to  satisfy  the
conditions precedent for limited resale of shares pursuant to Rule 144 under the
Securities Act.

6.3 NO PUBLIC MARKET. It understands that no public market now exists for any of
the Series B Preferred  Stock issued by DEI and that DEI has made no  assurances
that a public market will ever exist for such securities.

6.4 ACCESS TO DATA.  It has had an  opportunity  to discuss the business of DEI,
its management and financial  affairs with its management and the opportunity to
review the Company's  financial  statements,  books and records,  facilities and
business  plan. It has also had an  opportunity  to ask questions of officers of
the company, which questions were answered to its satisfaction.

6.5 POWER AND  AUTHORITY.  Dingaan will have at the Closing  Date all  requisite
legal and other power and authority to execute and deliver this Agreement and to
carry out and perform its obligations  under the terms of this  Agreement.  This
Agreement  constitutes  a valid  and  legally  binding  obligation  of  Dingaan,
enforceable  in  accordance  with its  terms,  and  subject  to laws of  general
application  relating to  bankruptcy,  insolvency  and the relief of debtors and
rules of law governing specific performance,  injunctive relief or other general
principals of equity,  whether such enforcement is considered in a proceeding in
equity or law.

                                  Page 5 of 7
<PAGE>
SECTION 7. MISCELLANEOUS PROVISIONS.

7.1 NOTICES. All notices,  requests,  demands, and other communications required
or permitted  hereunder  will be in writing and will be deemed to have been duly
given when  delivered  by hand or two days after being  mailed by  certified  or
registered mail, return receipt requested, with postage prepaid:

            If to DEI to:                             If to Dingaan to:

             David D. Westfere                       Dingaan Holdings, S.A.
           2010 E. University Drive,           Enro Canadian Center, First Floor
                 Suite # 3                             Marlborough Street
              Tempe, AZ 85281                           P.O. Box N-38-2
                                                        Nassau, Bahamas

7.2 TITLES AND  CAPTIONS.  All  section  titles or  captions  contained  in this
Agreement are for  convenience  only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.

7.3 ENTIRE AGREEMENT.  This Agreement contains the entire understanding  between
and among the parties and  supersedes  any prior  understandings  and agreements
among them respecting the subject matter of this Agreement.

7.4  AGREEMENT  BINDING.  This  Agreement  shall  be  binding  upon  the  heirs,
executors, administrators, successors and assigns of the parties hereto.

7.5 ATTORNEY FEES. In the event an arbitration, suit or action is brought by any
party  under  this  Agreement  to  enforce  any of its  terms,  or in any appeal
therefrom,  it is  agreed  that  the  prevailing  party  shall  be  entitled  to
reasonable  attorneys fees to be fixed by the  arbitrator,  trial court,  and/or
appellate court.

7.6  GOVERNING  LAW.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the State of Nevada.

7.7  PRESUMPTION.  This Agreement or any section  thereof shall not be construed
against any party due to the fact that said Agreement or any section thereof was
drafted by said party.

7.8 FURTHER ACTION.  The parties hereto shall execute and deliver all documents,
provide  all  information  and take or  forbear  from all such  action as may be
necessary or appropriate to achieve the purposes of the Agreement.

7.9 PARTIES IN INTEREST.  Nothing herein shall be construed to be to the benefit
of any third  party,  nor is it  intended  that any  provision  shall be for the
benefit of any third party.

                                  Page 6 of 7
<PAGE>
7.10 SAVINGS CLAUSE.  If any provision of this Agreement,  or the application of
such  provision  to any  person  or  circumstance,  shall be held  invalid,  the
remainder of this Agreement,  or the application of such provision to persons or
circumstances  other  than  those as to which it is held  invalid,  shall not be
affected thereby.

Indicating  their agreement to the above, the parties have signed this Agreement
below:

DIAMOND EQUITIES, INC., A NEVADA CORPORATION:          DINGAAN HOLDINGS, S.A.



By:/s/ David D. Westfere                           By: E.P. Toothe & Associates
   ------------------------                           --------------------------

         David D. Westfere, President                  (Print or type full name)


Date: 10-28-97                                         E.P. Toothe & Associates
     ------------------------                         --------------------------
                                                             (Signature)

                                                   Date: 21st October, 1997.
                                                        ------------------------

                                  Page 7 of 7