Document:

Exhibit 10.2

OREGON STEEL MILLS, INC.
 2002 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

Amended March 23, 2006, Effective April 28, 2004

SECTION 1     PURPOSE.

The purposes of this Plan are to attract and retain the services of the Participants who make significant contributions to the Company; to further the growth and financial success of the Company by aligning the interests of the Participants with the interests of the Company’s stockholders; and to provide the Participants with an incentive for long-term value creation.  

SECTION 2     DEFINITIONS.

For purposes of the Plan, the following terms are defined as set forth below:  

“Board” means the Board of Directors of the Company.

“Capital Transaction” means a sale or exchange of all or substantially all of the assets of the Company, a merger or consolidation in which the Company is not the surviving corporation, a merger, reorganization or consolidation in which the Company is the surviving corporation and stockholders of the Company exchange their stock for securities or property, a liquidation of the Company, or a similar transaction as determined by the Committee.

“Change in Control” means:

	
  
 
  	
  
(i)
  	
  
Any time less than a majority of the directors of   the Company are individuals who were either elected by the Board or nominated   by the Board (or a committee of the Board) for election by the stockholders   of the Company;
  
	
   
  	
  
 
  	
  
 
  
	
  
 
  	
  
(ii)
  	
  
At any time a majority of the Board are individuals   who, in connection with a single transaction or a series of related   transactions that effects a change in the ownership of the Company, were   either not elected by the Board or nominated by the Board (or a committee of   the Board) for election by the stockholders of the Company;
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
(iii)
  	
  
Any person (other than (a) an employee benefit   plan of the Company, or (b) a corporation owned directly or indirectly,   by the stockholders of the Company in substantially the same proportions as   their ownership of stock of the Company) is or becomes the beneficial owner   (as defined in Rule 13d of the Exchange Act), directly or indirectly, of   securities of the Company representing twenty-five percent or more of the   combined voting power of the Company’s then outstanding securities; or
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
(iv)
  	
  
The stockholders of the Company approve (a) a   plan of complete liquidation of the Company, other than in connection with   the complete cessation of the business activities conducted with the   Company’s operating assets, or (b) an agreement is entered for the sale   or disposition by the Company of all or substantially all of the Company’s   assets except pursuant to an order of a bankruptcy court having jurisdiction   of the Company.  For purposes of   clause (b), the term “the sale or disposition by the Company of all or   substantially all of the 
  

	
  
 
  	
  
 
  	
  
Company’s assets” means a sale or other disposition   transaction or series of related transactions involving assets of the Company   or of any direct or indirect subsidiary of the Company (including the stock   of any direct or indirect subsidiary of the Company) in which the value of   the assets or stock being sold or otherwise disposed of (as measured by the   purchase price being paid therefore or by such other method as the Board   determines is appropriate in a case where there is no readily ascertainable   purchase price) constitutes more than two-thirds of the fair market value of   the Company (as hereinafter defined).    For purposes of the preceding sentence, the “fair market value of the   Company” means the aggregate market value of the Company’s outstanding Common   Stock (on a fully diluted basis) plus the aggregate market value of the   Company’s other outstanding equity securities, if any.  The aggregate
market value of the Common   Stock will be determined by multiplying the number of shares of the Common   Stock (on a fully diluted basis) outstanding on the date of the execution and   delivery of a definitive agreement with respect to the transaction or series   of related transactions (the “Transaction Date”) by the average closing   price of the Common Stock for the ten trading days immediately preceding the   Transaction Date.  The aggregate   market value of any other equity securities of the Company will be determined   in a manner similar to that prescribed in the immediately preceding sentence   for determining the aggregate market value of the Common Stock or by such   other method as the Board determines is appropriate; provided that, in the   event that on the Transaction Date there is no public market for such Common   Stock or other equity security, the fair market value of the equity   securities or Common Stock will be as reasonably determined by the
Board.
  

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.  

“Committee” means the Board or a committee that has been established to administer the Plan.  Any such committee must consist of two or more Board members who must be “Non-Employee Directors” as that term is defined in Rule 16b-3 promulgated under the Exchange Act.

“Common Stock” means the common stock of the Company, par value $.01 per share.  

“Company” means Oregon Steel Mills, Inc., a Delaware corporation.  

“Disability” with respect to a Participant means a physical or mental condition that prevents the Participant from performing his or her duties as a member of the Board, and which is expected to be permanent or for an indefinite duration exceeding one year.  

“Effective Date” means April 26, 2002.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.  

“Fair Market Value” means, on any given date, the closing price of a share of Common Stock as reported by the New York Stock Exchange composite tape on such day, or if the Common Stock is not traded on such day, then on the next preceding day that the Common Stock was traded, all as reported by such source as the Committee may select.

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“For Cause” means, with respect to service on the Board, (i) disloyalty, gross negligence, or breach of fiduciary duty to the Company, (ii) the commission of an act of embezzlement, fraud or deliberate disregard of the rules or policies of the Company, or (iii) the unauthorized disclosure or misappropriation of any trade secret or confidential information of the Company.

“Non-Employee Director” means a person who as of any applicable date is a member of the Board and is not an officer (other than Chairman) or employee of the Company or any subsidiary of the Company.  

“Optionee” means a Participant.  

“Participant” means a Non-Employee Director who is granted an Option under this Plan.  

“Plan” means the Oregon Steel Mills, Inc. 2002 Non-Employee Director Stock Option Plan, as amended from time to time.  

“Retirement” means termination of an individual’s directorship with at least ten years of service as a member of the Board or after age 70.

“Option” means a non-qualified option to purchase shares of Common Stock.  

“Termination of Directorship” means the date upon which any Participant ceases to be a member of the Board for any reason.  

In addition, certain other terms used herein have definitions given to them in the first place in which they are used.  

SECTION 3     ADMINISTRATION.

The Plan will be administered by the Committee.  The Committee will have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as the Committee deems advisable, to interpret the terms and provisions of the Plan and any Option issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan.  

The determination of the Committee on all matters relating to the Plan or any agreement relating thereto will be conclusive and final.  No member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Option.  

SECTION 4     STOCK SUBJECT TO PLAN.

Subject to adjustment as provided in Section 5, the total number of shares of Common Stock of the Company available for grant under the Plan while it is in effect will not exceed 150,000.  The shares deliverable upon exercise of an Option granted under this Plan may be made available from authorized but unissued shares of Common Stock or shares reacquired by the Company, including shares purchased in the open market or in private transactions.  The shares of Common Stock related to the unexercised or undistributed portion of any terminated, expired or forfeited Option will be made available in connection with future Option grants under the Plan.  No fractional shares will be issued.

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SECTION 5     ADJUSTMENT.

(a)  Adjustment.  If there is any change in the Common Stock by reason of any subdivision or consolidation of shares, including, a stock dividend, stock split, reverse stock split, recapitalization, continuation or reclassification, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company, the aggregate number of shares of Common Stock available under this Plan, the Grant Amounts specified in Section 7, and the number and the price of shares of Common Stock subject to outstanding Options will be appropriately adjusted automatically.  However, in no event, may a Participant acquire under the Plan more than one percent of the shares of the Common Stock outstanding at the Effective Date.

(b)  No Fractional Shares.  No right to purchase fractional shares will result from any adjustment in Options pursuant to this Section 5.  In case of any such adjustment, the Shares subject to the Option will be rounded down to the nearest whole share.

(c)  Notice.  Notice of any adjustment will be given by the Company to each Participant whose Options have been adjusted and such adjustment (whether or not such notice is given) will be effective and binding for all purposes of this Plan.

SECTION 6     ELIGIBILITY.

Only individuals who are Non-Employee Directors are eligible to be granted Options under the Plan.

SECTION 7     OPTION GRANTS.

(a)  Initial Grants.  On April 26, 2002, an Option to purchase 4,000 shares of Common Stock (the “Initial Grant Amount”), at an exercise price equal to the closing price on that date, is automatically granted to each person who on the Effective Date was a Non-Employee Director.  

(b)  Subsequent Grants.  With respect to each person who first becomes a Non-Employee Director after the Effective Date, an Option to purchase 2,000 shares of Common Stock (the “Subsequent Grant Amount”), at an exercise price equal to the date of such appointment, is automatically granted as of the date such person is elected or appointed as a Non-Employee Director.  Such subsequent grant will be in addition to any annual grants of Options as described in Section 7(c) below.  Upon Stockholder approval of the 2005 Long-Term Incentive Plan April 28, 2005, no further grant will occur without action by the Board to specifically authorize such grant.   

(c)  Annual Grants.  On the date of each annual meeting of the Company’s stockholders following the Effective Date, each person who is a Non-Employee Director immediately following such meeting (regardless of whether elected, re-elected or retained as a Non-Employee Director at such meeting) will automatically be granted an Option to purchase 1,500 shares of Common Stock (the “Annual Grant Amount”) at an exercise price equal to the closing price as of such meeting date.  (The Initial Grant Amount, the Subsequent Grant Amount and the Annual Grant Amount are referred to herein collectively as the “Grant Amounts”.)  Upon Stockholder approval of the 2005 Long-Term Incentive Plan April 28, 2005, no further grant will occur without action by the Board to specifically authorize such grant.   

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(d)  Available Shares.  In the event that the number of shares of Common Stock available for future grant under the Plan is insufficient to make all automatic grants required to be made on a given date, then all Non-Employee Directors entitled to a grant on such date will share ratably in the number of Options in accordance with the number of shares available for grant under the Plan.  

SECTION 8     OPTION TERMS.  

Options granted under the Plan will be evidenced by an option agreement and will be subject to the following terms and conditions:

(a)  Option Term.  The term of each Option will be 10 years from the date the Option is granted, subject to extension or earlier termination as provided herein.  

(b)  Vesting and Exercisability.  Except as otherwise provided in this Plan, Options will vest and become exercisable as follows:  

	
  
Percentage of Shares
   Underlying Option
   Which May be Exercised
  	
   
 	
  
Time Period or Event
  
	
  

  	
  
 
  	
  

  
	
  33 1/3%
  	
  
 
  	
  
One year from date of grant
  
	
  
66 2/3%
  	
  
 
  	
  
Two years from the date of grant
  
	
  
100%
  	
  
 
  	
  
Three years from the date of grant
  
	
  
100%
  	
  
 
  	
  
Upon a Change in Control
  
	
  100%
  	
  
 
  	
  
Upon Retirement
  

(c)  Option Price.  The option price per share of Common Stock covered by an Option will be the Fair Market Value on the Grant date.

(d)  Method of Exercise.  Except as otherwise provided in this Plan, Options may be exercised, in whole or in part, at any time during the option term by giving notice of exercise to the Company specifying the number of shares of Common Stock subject to the Option to be purchased.  Such notice must be accompanied by payment in full of the purchase price and payment of all federal, state, local or other withholding taxes payable by the Company incident to exercise of an Option.  An Optionee will have all rights as a stockholder of the Company holding Common Stock following notice of exercise, payment in full for such shares and the Company’s receipt of all other documents required by this Plan.  

(e)  Payment of Purchase Price.  Payment of the purchase price may, at the election of the Optionee, be made in any one or any combination of the following: 

	
  
 
  	
  
(1)cash, other immediately available funds or check;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
(2)consideration received by the Company under a   cashless exercise program with an outside broker implemented by the Company   in connection with the Plan; or
  
	
   
  	
  
 
  
	
  
 
  	
  
(3)surrender of other shares of Common Stock of the   Company which
  

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(i)          in   the case of shares acquired pursuant to the exercise of a Company stock   option, have been owned by Participant for more than six months on the date   of surrender, and
  
	
  
 
  	
  
 
  
	
  
 
  	
  
(ii)          are   credited at the then Fair Market Value per share.
  

(f)  Non-transferability of Options.  All Options will be exercisable during the Participant’s lifetime, only by the Participant or by the guardian or legal representative of the Participant.  No Option will be transferable by the Participant other than by will or by the laws of descent and distribution.

(g)  Termination of Directorship.  If a Termination of Directorship occurs, any unexercised Option, to the extent exercisable on the date of Termination of Directorship, may be exercised, in whole or in part, in accordance with the following time periods:

	
  If   Termination of
   Directorship is for:
  	
   
 	
  
Time   Period After Termination of
   Directorship that Option May be Exercised:
  
	
  

  	
   
 	
  

  
	
  
Death
  	
   
 	
  
180 days
  
	  
	 
	  

	
  
Disability
  	
   
 	
  
180 days
  
	  
	 
	  

	
  
Retirement
  	
   
 	
  
3 years or expiration   of the stated term of the
   Option, whichever period is shorter
  
	  
	 
	  

	
  For Cause
  	
   
 	
  
None, immediately   terminated
  
	  
	 
	  

	
  
Other
  	
   
 	
  
90 days or expiration   of the stated term of the
   Option, whichever period is shorter
  

(h)  Extension of Term.  Upon Termination of Directorship by reason of death or Disability, the term of any Option which by its terms would otherwise expire after the Participant’s Termination of Directorship but prior to the end of the period following the Participant’s Termination of Directorship described in Section 8(h), will be extended so as to permit any unexercised Option to be exercised at any time within the period described in Section 8(h); provided, however, that in no event may the term of any Option expire more than 10 years after the grant date of the Option.

(i)  Termination Upon Capital Transaction.  This Plan and each Option, whether vested or unvested, will terminate upon a Capital Transaction unless such Options are assumed by a successor corporation in a merger or consolidation immediately prior to such Capital Transaction.  If outstanding Options are not assumed by a successor corporation in a merger or consolidation, all Participants will have the right to exercise all vested Options during the 15 days prior to such Capital Transaction.  The Company will, subject to any nondisclosure provisions, attempt to provide Participants at least 15 days notice of the Option termination date.  The Committee may (but will not be obligated to) (a) accelerate the vesting of any Option, or (b) apply the foregoing provisions, including but not limited to termination of this Plan and the Options granted pursuant to the Plan, in the event there is a sale of 51% or more of the
stock of the Company in any two-year period or a transaction similar to a Capital Transaction.  

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SECTION 9     SECURITIES LAW AND LISTING MATTERS.  

(a)  Compliance with Laws.  If the Committee deems it necessary, the Company may require a written investment intent representation by the Participant and may require that a restrictive legend be affixed to certificates for shares of Common Stock issued pursuant to Options.  If the Committee determines that the exercise or vesting of, or delivery of benefits pursuant to, any Option would violate any applicable provisions of federal or state securities law or the listing requirements of any national securities exchange on which are listed any of the Company’s equity securities, then the Committee may postpone any such exercise, vesting, or delivery, as the case may be, but the Company will use its best efforts to cause such exercise, vesting or delivery to comply with all such provisions at the earliest practicable date.

(b)  Registration and Listing.  If the Committee determines, in its discretion, that it is necessary or desirable that the shares subject to any Option (a) be registered, listed or qualified on any securities exchange or the Nasdaq Stock Market or under any applicable law, or (b) be approved by any governmental regulatory body, or (c) be approved by the stockholders of the Company, as a condition of, or in connection with, the granting of such Option, or the issuance or purchase of shares upon exercise of the Option, the Option may not be exercised in whole or in part unless such registration, listing, qualification or approval has been obtained free of any condition not acceptable to the Committee.

SECTION 10     AMENDMENT OR TERMINATION OF THIS PLAN.

Unless previously terminated by the Board, this Plan will terminate on April 25, 2012 and no Options will be granted thereafter.  Such termination will not affect any Option previously granted.  The Board may from time to time in its discretion amend or modify this Plan without the approval of the stockholders of the Company, except as such approval as may be required under the Exchange Act, the Code or by the national securities exchange on which the Common Stock is traded.  Any amendment or termination will not materially and adversely affect any Option then outstanding under this Plan unless consented to by the affected Optionee.

SECTION 11     GENERAL PROVISIONS.

(a)  Governing Law.  The validity, construction, interpretation, administration and effect of this Plan and any rules, regulations and actions relating to this Plan will be governed by and construed exclusively in accordance with the laws of the State of Delaware.

(b)  Severability.  If all or any part of this Plan is declared by any court, governmental authority or arbitrator to be unlawful or invalid, such unlawfulness or invalidity will not serve to invalidate any portion of this Plan not declared to be unlawful or invalid.  Any Section or part of a Section so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

 (c)  Notices.  All notices and demands of any kind which the Committee, any Participant, or other person may be required or desires to give under the terms of this Plan will be in writing and must be personally delivered or sent by mail, postage prepaid, addressed to the Company at its principal place of business and to the Participant at the address shown in the stock option agreement or at any other address the Participant indicates by notice to the Company.  Delivery by mail will be deemed made at the expiration of the third day after the day of mailing, except for notice of the exercise of an Option and related documents which must be actually received by the Company.

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(d)  No Other Rights.  Nothing in the Plan, or any Option granted under the Plan, will confer any right to any person to continue as a director of the Company or interfere in any way with the rights of the stockholders of the Company or the Board to elect and remove directors.

	
   
  	

  Oregon Steel Mills, Inc.

	
   
  	
   
  	
   
  
	
   
  	
   
  	
  /s/ Jennifer R. Murray
  
	
   
  	
   
  	
  

  
	
   
  	
  By:
  	
  Jennifer R. Murray
  
	
   
  	
  Its:
  	
  Vice President Administration and Corporate   Secretary
  

8EXHIBIT 4.01

                           CERTIFICATE OF AMENDMENT TO
                          ARTICLES OF INCORPORATION OF
                             DEER VALLEY CORPORATION

                           CERTIFICATE OF DESIGNATION,
                             PREFERENCES AND RIGHTS
                                       OF
                      SERIES A CONVERTIBLE PREFERRED STOCK

     Deer  Valley  Corporation,  a  corporation organized and existing under the
laws  of  the  State  of  Florida (the "CORPORATION"), hereby certifies that the
Board of Directors of the Corporation (the "BOARD OF DIRECTORS" or the "BOARD"),
pursuant  to  authority  of  the  Board  of  Directors as required by applicable
corporate  law,  and  in  accordance  with  the  provisions  of  its Articles of
Incorporation  and  Bylaws,  has  and  hereby  authorizes  a  series  of  the
Corporation's  previously  authorized  Preferred Stock, par value $.01 per share
(the "PREFERRED STOCK"), and hereby states the designation and number of shares,
and  fixes the rights, preferences, privileges, powers and restrictions thereof,
as  follows:

           SERIES A CONVERTIBLE PREFERRED STOCK DESIGNATION AND AMOUNT

     750,000  shares  of  the  authorized  and  unissued  Preferred Stock of the
Corporation  are  hereby  designated "SERIES A CONVERTIBLE PREFERRED STOCK" with
the  following  rights,  preferences,  powers,  privileges,  restrictions,
qualifications  and  limitations.

     1.  Stated  Value.  The  stated  value  of  each  issued  share of Series A
         -------------
Convertible  Preferred  Stock shall be deemed to be $10.00 (the "STATED VALUE"),
as the same may be equitably adjusted whenever there may occur a stock dividend,
stock split, combination, reclassification or similar event affecting the Series
A  Convertible  Preferred  Stock.

     2.  Dividends.
         ---------

          a.  Dividends  on  Series  A  Convertible  Preferred  Stock.
              --------------------------------------------------------

          (i) From and including the Date of Issuance (as defined below) of each
     share  of  Series  A Convertible Preferred Stock to the earliest of [A] the
     payment  of  the  Individual  Series  A  Liquidation Preference Payment (as
     defined  in  Section  4(a)  below)  on  each  share of Series A Convertible
                  ------------
     Preferred  Stock  upon  the  liquidation,  dissolution or winding-up of the
     Corporation,  [B]  the  conversion  of  the  Series A Convertible Preferred
     Stock, or [C] the date two (2) years from the Date of Issuance of the share
     of  Series A Convertible Preferred Stock, the holders of shares of Series A
     Convertible  Preferred  Stock shall be entitled to receive, prior to and in
     preference  to  any  declaration  or  payment  of any dividend on any other
     shares  of capital stock of the Corporation, a dividend for each such share
     at  a  rate  per  annum equal to seven percent (7%) of the Stated Value (as
     such  term is defined in Section 1 above) thereof, payable semi-annually by
                              ---------
     one  of the following methods, as selected by the Corporation: [Y] in cash,
     to  the  extent  funds  are  legally  available therefor in accordance with
     applicable  corporate  law;  or  [Z]  in-kind,  with shares of Common Stock

                                     -1-
<PAGE>

     registered  on Form SB-2 (or an alternative available form if the reporting
     company  is  not  eligible  to  file  a  Form SB-2), at a ten percent (10%)
     discount to the "MARKET PRICE" (as defined in Section 9 below). The date on
                                                   ---------------
     which  the  Corporation  initially issues any share of Series A Convertible
     Preferred  Stock  shall be deemed its "DATE OF ISSUANCE," regardless of the
     number  of  times  transfer  of  such  share  is  made on the stock records
     maintained  by  or  for  the  Corporation  and  regardless of the number of
     certificates  which  may  be  issued  to  evidence  such  share.

          (ii)  From  and  including  the  date  two  (2) years from the Date of
     Issuance of a share of Series A Convertible Preferred Stock to the earliest
     of  [A]  the  payment  of  the  Individual  Series A Liquidation Preference
     Payment  (as  defined  in  Section  4(a)  below)  on each share of Series A
                                ------------
     Convertible Preferred Stock upon the liquidation, dissolution or winding-up
     of  the  Corporation;  or  [B]  the  conversion of the Series A Convertible
     Preferred  Stock, each holder of Series A Convertible Preferred Stock shall
     receive,  in  the case of a dividend on Common Stock or any class or series
     that  is convertible into Common Stock, that dividend per share of Series A
     Convertible  Preferred Stock as would equal the product of [Y] the dividend
     payable on each share of such class or series determined, if applicable, as
     if  all  such shares of such class or series had been converted into Common
     Stock  and all Series A Convertible Preferred Stock had been converted into
     Common  Stock,  and  [Z] the number of shares of Common Stock issuable upon
     conversion  of  a share of Series A Convertible Preferred Stock, calculated
     on  the  record  date for determination of holders entitled to receive such
     dividend.

          b.  Priority of Payment. In the event that full dividends are not paid
              -------------------
     under  Section  2(a)(i)  above  to the holders of all outstanding shares of
            ---------------
     Series  A Convertible Preferred Stock so entitled to such payment and funds
     available  for payment of dividends shall be insufficient to permit payment
     in  full  to  holders of all such stock of the full preferential amounts to
     which  they are then entitled, then the entire amount available for payment
     of  dividends  shall  be  distributed,  first, ratably among all holders of
     Series  A  Convertible  Preferred Stock in proportion to the full amount to
     which they would otherwise be respectively entitled and, second, only after
     the  holders of Series A Convertible Preferred Stock have received the full
     amount  of dividends to which they were entitled, ratably among all holders
     of  other Preferred Stock and Common Stock in proportion to the full amount
     to  which  they  would  otherwise  be  respectively  entitled.

     3.  Voting.
         ------

          a. Number of Votes. On any matter presented to the stockholders of the
             ---------------
     Corporation  for  their  action  or  consideration  at  any  meeting  of
     stockholders  of  the Corporation (or by written consent of stockholders in
     lieu  of  a  meeting),  each  holder  of  outstanding  shares  of  Series A
     Convertible  Preferred  Stock  shall be entitled, subject to the limitation
     set forth in Section 3(b) below, to cast the number of votes for the Series
                  -----------
     A  Convertible  Preferred  Stock  in an amount equal to the number of whole
     shares  of  Common  Stock  into  which  the  shares of Series A Convertible
     Preferred  Stock  held by such holder are convertible as of the record date
     for  determining  stockholders  entitled  to vote on such matter. Except as
     provided  by  law  or  by  the  provisions  of Sections 3(c) and (d) below,
                                                    --------------------

                                     -2-
<PAGE>

     holders  of  Series  A Convertible Preferred Stock shall vote together with
     the  holders  of  Common Stock, and with the holders of any other series of
     Preferred  Stock the terms of which so provide, together as a single class.

          b.  Limitation  on Number of Votes. Notwithstanding anything contained
              ------------------------------
     herein  to  the  contrary,  the voting rights of each holder of outstanding
     shares  of  Series  A  Convertible  Preferred  Stock  shall  be  limited in
     accordance  with  Section  6  hereof,  so  that  each  holder  of  Series A
     Convertible  Preferred  Stock shall be entitled to vote only that number of
     votes  equal  to  the number of whole shares of Common Stock into which the
     shares  of  Series  A Convertible Preferred Stock are convertible as of the
     record  date,  up to a maximum of 4.99% of the outstanding shares of Common
     Stock  of  the  Corporation.

          c.  Senior  Securities  or  Financial  Instruments. At any time when a
              ----------------------------------------------
     minimum  of  $3,500,000  of  the  Stated  Value  of  the shares of Series A
     Convertible  Preferred  Stock  are  outstanding,  except  where the vote or
     written  consent  of  the  holders  of  a  greater  number of shares of the
     Corporation  is  required  by  law,  by  the  Corporation's  Articles  of
     Incorporation,  as  amended  (the  "ARTICLES  OF INCORPORTION"), or by this
     Certificate of Designations, Preferences and Rights of Series A Convertible
     Preferred Stock (the "CERTIFICATE OF DESIGNATIONS"), and in addition to any
     other  vote  required  by  law,  the  Articles  of  Incorporation,  or this
     Certificate  of  Designations,  without  the written consent or affirmative
     vote  of  the holders of fifty percent (50%) of the then-outstanding shares
     of  Series  A  Convertible Preferred Stock given in writing or by vote at a
     meeting, consenting or voting (as the case may be) as a separate class from
     the  Common  Stock,  the  Corporation  shall  not,  either  directly  or by
     amendment,  merger, consolidation or otherwise, issue any Additional Shares
     of  Common  Stock  (as  defined in Section 5(d) below) unless the same rank
                                        -----------
     junior  to  the  Series  A  Convertible Preferred Stock with respect to the
     distribution of assets on the liquidation, dissolution or winding-up of the
     Corporation  and  with  respect  to the payment of dividends and redemption
     rights,  if  applicable.  Notwithstanding  the foregoing, this Section 3(c)
                                                                    -----------
     shall  not  apply  to  a Qualified Financing or the Reverse Merger (as such
     terms  are  defined  in  Section  9  below).
                              ----------

          d.  Other  Limitations on Corporate Action. At any time when a minimum
              --------------------------------------
     of  $3,500,000  of  the  Stated  Value  (as  defined  in the Certificate of
     Designation)  of  the  shares  of  Series A Preferred Stock is outstanding,
     except where the vote or written consent of the holders of a greater number
     of  shares  of  the  Corporation  is  required  by  law,  the  Articles  of
     Incorporation,  or  by this Certificate of Designations, and in addition to
     any  other  vote required by law, the Articles of Incorporation, or by this
     Certificate of Designation, without the written consent or affirmative vote
     of  the  holders  of  no-less  than  fifty percent (50%) of the outstanding
     Stated  Value  of  the  Series  A Convertible Preferred Stock consenting or
     voting  (as the case may be) as a separate class from the Common Stock, the
     Corporation  shall  not,  either  directly  or  by  amendment,  merger,
     consolidation  or  otherwise:

               (i)  liquidate,  dissolve, or wind-up the business and affairs of
          the  Corporation,  effect  any Deemed Liquidation Event, or consent to
          any  of  the  foregoing;

               (ii)  effectuate  any merger, reorganization, or recapitalization
          of  the Corporation, including such transactions with a Subsidiary (as

                                     -3-
<PAGE>

          defined  in  Section  9  below)  or  related entity, or enter into any
                       ----------
          agreement  to  do  any of the foregoing, other than in connection with
          the  Reverse  Merger;

               (iii)  until  the  Effective  Date of the Registration Statement,
          purchase  or  redeem  or  pay  or  declare  any  dividend  or make any
          distribution  on,  any  shares  of  stock  other  than  the  Series  A
          Convertible  Preferred Stock as expressly authorized herein, or permit
          any  Subsidiary  to  take  any  such action, except for (A) securities
          repurchased  from  former employees, officers, directors, consultants,
          or  other  persons  who  performed services for the Corporation or any
          subsidiary  in  connection  with  the  cessation of such employment or
          service;  or  (B)  securities  repurchased  upon  the  exercise of the
          Corporation's right of first refusal to purchase such securities, each
          as  approved  by  the  Board  of  Directors;

               (iv)  after  the  Effective  Date  of the Registration Statement,
          purchase  or  redeem  or  pay  or  declare  any  dividend  or make any
          distribution  on,  any  shares  of  stock  other  than  the  Series  A
          Convertible  Preferred Stock as expressly authorized herein, or permit
          any Subsidiary to take any such action, so long as an accrued dividend
          under  Section 2 is unpaid, except for (A) securities repurchased from
          former  employees,  officers, directors, consultants, or other persons
          who  performed  services  for  the  Corporation  or  any Subsidiary in
          connection  with  the  cessation of such employment or service; or (B)
          securities repurchased upon the exercise of the Corporation's right of
          first  refusal  to  purchase  such securities, each as approved by the
          Board  of  Directors;

               (v)  alter  or change the voting or other powers, preferences, or
          other  rights, privileges, or restrictions of the Series A Convertible
          Preferred  Stock  contained  herein  (by  merger,  consolidation,  or
          otherwise);

               (vi)  increase the authorized number of shares of Preferred Stock
          or  Series  A  Convertible  Preferred  Stock;  or

               (vii) make, or permit any Subsidiary to make, any loan or advance
          to any person, including, without limitation, any employee or director
          of  the Company, or incur any Indebtedness, except the Permitted Debt.

     4. Liquidation, Dissolution, or Winding-Up; Certain Mergers, Consolidations
        ------------------------------------------------------------------------
and  Asset  Sales.
-----------------

          a.  Payments  to Holders of Series A Convertible Preferred Stock. Upon
              ------------------------------------------------------------
     any  liquidation,  dissolution  or  winding-up  of the Corporation, whether
     voluntary or involuntary, the holders of the shares of Series A Convertible
     Preferred  Stock  shall  be  paid,  before any payment shall be paid to the
     holders  of  Common Stock, or any other stock ranking on liquidation junior
     to  the  Series  A  Convertible  Preferred  Stock  (including  the Series B
     Preferred  Stock and Series C Preferred Stock (as defined in the Securities
     Purchase and Share Exchange Agreement) )(the "JUNIOR STOCK"), an amount for
     each  share  of  Series  A  Convertible Preferred Stock held by such holder
     equal to the sum of (1) the Stated Value thereof and (2) an amount equal to

                                     -4-
<PAGE>

     dividends  accrued but unpaid thereon, computed to the date payment thereof
     is  made  available (such applicable amount payable with respect to a share
     of  Series A Convertible Preferred Stock sometimes being referred to as the
     "INDIVIDUAL  SERIES  A  PREFERRED  LIQUIDATION PREFERENCE PAYMENT" and with
     respect  to  all  shares  of  Series  A  Convertible Preferred Stock in the
     aggregate  sometimes  being  referred  to  as  the  "AGGREGATE  SERIES  A
     LIQUIDATION PREFERENCE PAYMENT"). If, upon such liquidation, dissolution or
     winding-up of the Corporation, whether voluntary or involuntary, the assets
     to  be  distributed  among  the  holders  of shares of Series A Convertible
     Preferred  Stock  shall be insufficient to permit payment to the holders of
     Series  A  Convertible  Preferred Stock of an aggregate amount equal to the
     Aggregate  Series  A Liquidation Preference Payment, then the entire assets
     of  the Corporation to be so distributed shall be distributed ratably among
     the  holders  of  Series  A  Convertible  Preferred  Stock  (based  on  the
     Individual  Series  A  Preferred Liquidation Preference Payments due to the
     respective  holders  of  Series  A  Convertible  Preferred  Stock).

          b.  Payments  to  Holders  of  Junior  Stock. After the payment of all
              ----------------------------------------
     preferential  amounts  required  to  be paid to the holders of the Series A
     Convertible  Preferred  Stock and any other class or series of stock of the
     Corporation ranking on liquidation senior to or on a parity with the Series
     A  Convertible  Preferred Stock, the holders of shares of Junior Stock then
     outstanding  shall  be  entitled  to  receive  the  remaining assets of the
     Corporation available for distribution to its stockholders as otherwise set
     forth  in  the  Articles  of  Incorporation.

          c.  Deemed  Liquidation  Events.
              ---------------------------

               (i)  The  following events shall be deemed to be a liquidation of
          the  Corporation for purposes of this Section 4 (a "DEEMED LIQUIDATION
                                                ---------
          EVENT"),  unless  the  holders of a majority of the shares of Series A
          Convertible Preferred Stock elect otherwise by written notice given to
          the  Corporation at least five (5) days prior to the effective date of
          any  such  event:

                    (A)  a  merger  or  consolidation  (other  than  the Reverse
               Merger)  in  which:

                         (I)  the  Corporation  is  a  constituent  party,  or

                         (II)  a  Subsidiary  is  a  constituent  party  and the
                    Corporation  issues  shares of its capital stock pursuant to
                    such  merger  or  consolidation,

          except  that  any  such  merger  or  consolidation  involving  the
          Corporation  or  a  Subsidiary in which the shares of capital stock of
          the  Corporation  outstanding  immediately  prior  to  such  merger or
          consolidation continue to represent, or are converted or exchanged for
          shares  of  capital  stock  that represent, immediately following such
          merger  or consolidation, at least a majority, by voting power, of the
          capital  stock of (1) the surviving or resulting corporation or (2) if
          the surviving or resulting corporation is a wholly-owned subsidiary of
          another  corporation  immediately  following  such  merger  or
          consolidation,  the  parent corporation of such surviving or resulting
          corporation  (provided  that, for the purpose of this Section 4(c)(i),
                                                                ---------------

                                     -5-
<PAGE>

          all  shares  of  Common  Stock  issuable  upon  exercise  of  options
          outstanding immediately prior to such merger or consolidation, or upon
          conversion  of convertible securities outstanding immediately prior to
          such  merger  or  consolidation  shall  be  deemed  to  be outstanding
          immediately  prior to such merger or consolidation and, if applicable,
          converted  or  exchanged  in  such merger or consolidation on the same
          terms  as  the actual outstanding shares of Common Stock are converted
          or  exchanged);  or

                    (B)  the  sale,  lease, transfer, or other disposition, in a
               single  transaction  or  series  of  related transactions, by the
               Corporation  or any Subsidiary of all or substantially all of the
               assets of the Corporation and its Subsidiaries, taken as a whole,
               except  where such sale, lease, transfer, or other disposition is
               to  a  wholly-owned  Subsidiary.

               (ii)  The  Corporation  shall  not  have  the power to effect any
          transaction  constituting  a  Deemed  Liquidation  Event  pursuant  to
          Section  4(c)(i)(A)(I) above unless the agreement or plan of merger or
          ---------------------
          consolidation  provides  that  the  consideration  payable  to  the
          stockholders  of  the Corporation shall be allocated among the holders
          of  capital  stock of the Corporation in accordance with Sections 4(a)
                                                                   -------------
          and  4(b)  above.
          -----------------

               (iii)  In  the  event  of  a Deemed Liquidation Event pursuant to
          Section  4(c)(i)(A)(II)  or  (B)  above,  if  the Corporation does not
          ----------------------
          effect  a  dissolution  of  the Corporation under the Florida Business
          Corporation  Act  within sixty (60) days after such Deemed Liquidation
          Event, then (A) the Corporation shall deliver a written notice to each
          holder  of Series A Convertible Preferred Stock no later than the 60th
          day  after the Deemed Liquidation Event advising such holders of their
          right  (and  the requirements to be met to secure such right) pursuant
          to  the terms of the following clause (B) to require the redemption of
                                         ---------
          such  shares  of  Series A Convertible Preferred Stock; and (B) if the
          holders  of  at  least  a  majority  of the then-outstanding shares of
          Series  A  Convertible  Preferred  Stock  so  request  in  a  written
          instrument  delivered  to  the Corporation not later than seventy-five
          (75)  days  after such Deemed Liquidation Event, the Corporation shall
          use  the  consideration  received  by  the Corporation for such Deemed
          Liquidation Event (net of any retained liabilities associated with the
          assets sold or technology licensed, as determined in good faith by the
          Board  of  Directors)(the  "NET  PROCEEDS")  to  redeem, to the extent
          legally  available  therefor,  on  the  90th  day  after  such  Deemed
          Liquidation Event (the "LIQUIDATION REDEMPTION DATE"), all outstanding
          shares  of  Series  A Convertible Preferred Stock at a price per share
          equal to the Series A Liquidation Amount. In the event of a redemption
          pursuant  to  the  preceding  sentence,  if  the  Net Proceeds are not
          sufficient  to  redeem  all outstanding shares of Series A Convertible
          Preferred  Stock,  or if the Proceeds are not sufficient to redeem all
          outstanding  shares of Series A Convertible Preferred Stock, or if the
          Corporation  does  not  have  sufficient  funds  lawfully available to
          effect  such  redemption,  the  Corporation  shall  redeem  a pro rata
          portion  of  each  holder's  shares  of Series A Convertible Preferred
          Stock  to  the  fullest  extent  of such Net Proceeds or such lawfully
          available  funds,  as  the  case may be, and, where such redemption is
          limited  by  the  amount  of lawfully available funds, the Corporation
          shall  redeem  the  remaining  shares to have been redeemed as soon as
          practicable  after  the  Corporation  has  funds  legally  available
          therefor. Prior to the distribution or redemption provided for in this
          Section  4(c)(iii),  the Corporation shall not expend or dissipate the
          -----------------
          consideration  received  for  such Deemed Liquidation Event, except to
          discharge  expenses  incurred  in  the  ordinary  course  of business.

                                     -6-
<PAGE>

               (iv)  The  amount  deemed  paid  or distributed to the holders of
          capital  stock of the Corporation upon any such merger, consolidation,
          sale,  transfer,  exclusive  license,  other disposition or redemption
          shall  be  the cash or the value of the property, rights or securities
          paid  or  distributed  to  such  holders  by  the  Corporation  or the
          acquiring  person,  firm  or other entity. The value of such property,
          rights or securities shall be determined in good faith by the Board of
          Directors.

     5.  Optional  Conversion.  The  holders  of  Series A Convertible Preferred
         --------------------
Shares  shall  have  the conversion rights as follows (the "CONVERSION RIGHTS").

          (a)  Right  to  Convert.  Each share of Series A Convertible Preferred
               ------------------
     Stock  shall  be  convertible,  at the option of the holder thereof, at any
     time  after  the  "CONVERSION  DATE"  (as  defined in Section 9 below), and
                                                           ---------
     without the payment of additional consideration by the holder thereof, into
     such  number  of  fully-paid and nonassessable shares of Common Stock as is
     determined  by  dividing  (1) the sum of (i) the Stated Value per share and
     (ii)  all  dividends accrued and unpaid on each such share to the date such
     share  is  converted,  whether  or  not  declared,  and all other dividends
     declared  and  unpaid  on  each  such  share  through  the  date  of actual
     conversion,  by  (2) the Series A Conversion Price in effect at the time of
     conversion.  The  "SERIES  A  CONVERSION PRICE" shall be seventy five cents
     ($.75).  The  Series  A  Conversion  Price, and the rate at which shares of
     Series A Convertible Preferred Stock may be converted into shares of Common
     Stock,  shall  be  subject  to  adjustment  as  provided  below.

          (b)  Fractional  Shares. No fractional shares of Common Stock shall be
               ------------------
     issued upon conversion of the Series A Convertible Preferred Stock. In lieu
     of  any  fractional shares to which the holder would otherwise be entitled,
     the  Corporation  shall  pay  cash equal to such fraction multiplied by the
     fair market value of a share of Common Stock as determined in good faith by
     the  Board of Directors, or round-up to the next whole number of shares, at
     the  Corporation's  option.  Whether  or  not  fractional  shares  would be
     issuable upon such conversion shall be determined on the basis of the total
     number  of  shares of Series A Convertible Preferred Stock the holder is at
     the time converting into Common Stock and the aggregate number of shares of
     Common  Stock  issuable  upon  such  conversion.

          (c)  Mechanics  of  Conversion.
               -------------------------

               (i)  For  a  holder  of  Series  A Convertible Preferred Stock to
          voluntarily  convert  shares  of  Series A Convertible Preferred Stock
          into  shares  of  Common  Stock,  that  holder  shall  surrender  the
          certificate  or  certificates  for such shares of Series A Convertible
          Preferred  Stock  (or,  if  the  registered  holder  alleges that such
          certificate  has  been  lost, stolen, or destroyed, a lost certificate
          affidavit  and  agreement  reasonably acceptable to the Corporation to
          indemnify  the  Corporation against any claim that may be made against
          the  Corporation on account of the alleged loss, theft, or destruction
          of  such  certificate),  at  the  office of the transfer agent for the
          Series  A  Convertible  Preferred Stock (or at the principal office of
          the  Corporation if the Corporation serves as its own transfer agent),
          together  with written notice that the holder elects to convert all or
          any  number  of the shares of the Series A Convertible Preferred Stock
          represented  by  such  certificate or certificates and, if applicable,
          any  event  on  which  such conversion is contingent. The notice shall
          state  the  holder's  name  or  the names of the nominees in which the

                                     -7-
<PAGE>

          holder  wishes  the  certificate  or certificates for shares of Common
          Stock  to  be  issued.  If  required  by the Corporation, certificates
          surrendered  for  conversion  shall  be  endorsed  or accompanied by a
          written instrument or instruments of transfer, in form satisfactory to
          the  Corporation,  duly executed by the registered holder or his, her,
          or  its  attorney duly authorized in writing. The close of business on
          the  date  of  receipt  by the transfer agent of such certificates (or
          lost  certificate  affidavit  and  agreement)  and  notice  (or by the
          Corporation if the Corporation serves as its own transfer agent) shall
          be  the  time of conversion (the "CONVERSION TIME"), and the shares of
          Common  Stock  issuable  upon  conversion of the shares represented by
          such  certificate  shall  be  deemed to be outstanding of record as of
          that  date.  The  Corporation  shall, as soon as practicable after the
          Conversion  Time,  issue  and  deliver at such office to the holder of
          Series  A  Convertible  Preferred  Stock,  or  to  his,  her,  or  its
          nominee(s),  a certificate or certificates for the number of shares of
          Common  Stock  to which the holder(s) shall be entitled, together with
          cash  in  lieu  of  any  fraction  of  a  share,  if  applicable.

               (ii)  The  Corporation  shall  at  all  times  while the Series A
          Convertible Preferred Stock is outstanding, reserve and keep available
          out of its authorized but unissued stock, for the purpose of effecting
          the  conversion  of  the  Series  A  Convertible Preferred Stock, such
          number  of  its  duly  authorized shares of Common Stock as shall from
          time to time be sufficient to effect the conversion of all outstanding
          Series  A Convertible Preferred Stock; and if, at any time, the number
          of  authorized  but  unissued  shares  of  Common  Stock  shall not be
          sufficient  to effect the conversion of all then-outstanding shares of
          the  Series  A Convertible Preferred Stock, the Corporation shall take
          such  corporate  action as may be necessary to increase its authorized
          but  unissued shares of Common Stock to such number of shares as shall
          be  sufficient  for  such  purposes,  including,  without  limitation,
          engaging  in best efforts to obtain the requisite stockholder approval
          of  any  necessary  amendment  to  the  Articles  of  Incorporation.

               (iii)  All  shares  of  Series A Convertible Preferred Stock that
          shall have been surrendered for conversion as herein provided shall no
          longer  be  deemed  to  be outstanding, and all rights with respect to
          such  shares,  including  the  rights,  if any, to receive notices, to
          vote,  and to receive payment of any dividends accrued or declared but
          unpaid  thereon,  shall  immediately  cease  and  terminate  at  the
          Conversion  Time,  except  only  the  right  of the holders thereof to
          receive  shares  of  Common  Stock in exchange therefor. Any shares of
          Series A Convertible Preferred Stock so converted shall be retired and
          cancelled  and shall not be reissued as shares of such series, and the
          Corporation (without the need for stockholder action) may from time to
          time  take  such  appropriate action as may be necessary to reduce the
          authorized  number  of  shares of Series A Convertible Preferred Stock
          accordingly.

               (iv)  Upon  any  such  conversion,  no adjustment to the Series A
          Conversion  Price shall be made for any accrued or declared but unpaid
          dividends  on the Series A Convertible Preferred Stock surrendered for
          conversion  or  on  the  Common  Stock  delivered  upon  conversion.

               (v) The Corporation shall pay any and all issue and other similar
          taxes  that  may  be payable in respect of any issuance or delivery of

                                     -8-
<PAGE>

          shares  of  Common  Stock  upon  conversion  of  shares  of  Series  A
          Convertible  Preferred  Stock  pursuant  to  this  Section  5.  The
          Corporation shall not, however, be required to pay any tax that may be
          payable  in  respect  of  any  transfer  involved  in the issuance and
          delivery  of shares of Common Stock in a name other than that in which
          the  shares  of Series A Convertible Preferred Stock so converted were
          registered,  and no such issuance or delivery shall be made unless and
          until  the  person  or entity requesting such issuance has paid to the
          Corporation  the  amount  of  any  such tax or has established, to the
          satisfaction  of  the  Corporation,  that  such  tax  has  been  paid.

          (d)  Adjustments  to  Series  A  Conversion Price for Diluting Issues.
               -----------------------------------------------------------------

               (i)  Special  Definitions.  For  purposes  of this Section 5, the
                    --------------------
          following  definitions  shall  apply:

                    (A)  "OPTION"  shall  mean  rights,  options, or warrants to
               subscribe  for,  purchase,  or  otherwise acquire Common Stock or
               Convertible  Securities.

                    (B)  "SERIES  A  ORIGINAL ISSUE DATE" shall mean the date on
               which the first share of Series A Convertible Preferred Stock was
               issued.

                    (C)  "CONVERTIBLE  SECURITIES"  shall  mean  any evidence of
               indebtedness,  shares  or other securities directly or indirectly
               convertible  into or exchangeable for Common Stock, but excluding
               Options.

                    (D)  "ADDITIONAL  SHARES  OF  COMMON  STOCK"  shall mean all
               shares  of Common Stock issued (or, pursuant to Section 5(d)(iii)
                                                               -----------------
               below, deemed to be issued) by the Corporation after the Series A
               Original  Issue  Date,  other  than  the  following  ("EXEMPTED
               SECURITIES"):

                         (I) shares of Common Stock issued or deemed issued as a
                    dividend  or  distribution on Series A Convertible Preferred
                    Stock,  Series  A  Warrants  (as defined in Section 9 below)
                                                                ---------
                    issued  as  penalty  warrants  to  holders  of  Series  A
                    Convertible  Preferred  Stock  pursuant  to Section 2 of the
                                                                ---------
                    Investor  Rights  Agreement, and Series A Warrants issued as
                    penalty  warrants  to  the  holder  of  the Series D Warrant
                    pursuant  to  Section  2  of  the Investor Rights Agreement;
                                  ----------

                         (II)  shares  of  Common  Stock  issued  or issuable by
                    reason  of  a  dividend,  stock  split,  split-up  or  other
                    distribution  on  shares  of Common Stock that is covered by
                    Section  5(e)  or  5(f)  below;
                    -----------------------

                         (III) shares of Common Stock issued or deemed issued to
                    employees  or  directors  of,  or  consultants  to,  the
                    Corporation or any of its Subsidiaries for services rendered
                    pursuant  to  a  plan, agreement, or arrangement approved by
                    the  Board  of  Directors  (including  up to 5,000 shares of
                    Common  Stock  per  month  issued  or  issuable  to  third
                    party(ies)  in  connection  with the provision of guarantees
                    for  certain  obligations  of  the  Company);

                                     -9-
<PAGE>

                    (IV)  shares  of  Common  Stock  or  Convertible  Securities
               actually issued upon the exercise of Options, or shares of Common
               Stock  actually  issued  upon  the  conversion  or  exchange  of
               Convertible  Securities  (including  the  Series  A  Convertible
               Preferred  Stock,  the  Series B Convertible Preferred Stock, the
               Series  C Convertible Preferred Stock, the Series A Warrants, the
               Series  B  Warrants, the Series C Warrants, the Series D Warrant,
               and  the  warrants  issued  to  Midtown  Partners  & Co., LLC (as
               placement  agent) in connection with the offering of the Series A
               Convertible Preferred Stock), in each case, provided the issuance
               is  pursuant to the terms of such Option or Convertible Security;

                    (V)  shares  of  Common  Stock  issued  or  deemed issued in
               connection with a bona fide joint venture or business acquisition
               of  or by the Corporation, whether by merger, consolidation, sale
               of assets, sale or exchange of stock, or otherwise; provided that
               any  such issuance is approved by the Board of Directors, and, at
               the  time  of  such  issuance, the aggregate of that issuance and
               similar issuances in the preceding twelve (12) month period shall
               not exceed ten percent (10%) of the then-outstanding Common Stock
               (assuming  full  conversion  and  exercise of all convertible and
               exercisable  securities);

                    (VI)  shares  of  Common  Stock,  Preferred  Stock  or other
               securities  issued  by  the  Corporation  in  connection with the
               Reverse  Merger  (the  "EXCHANGED  SECURITIES"),  in exchange for
               outstanding  shares  of  Common  Stock,  Preferred Stock or other
               securities  of  DeerValley  Acquisitions  Corp. (the "SURRENDERED
               SECURITIES");  and

                    (VII)  the  Company's  offering  of  up to 750,000 shares of
               Series  A  Convertible  Preferred  Stock,  Series  A Warrants and
               Series  B  Warrants,  and  up  to  76,201  shares  of  Series  B
               Convertible  Preferred  Stock  and Series C Convertible Preferred
               Stock,  in the aggregate, pursuant to the Securities Purchase and
               Share  Exchange  Agreement.

               (ii) No Adjustment of Series A Conversion Price. No adjustment in
                    ------------------------------------------
          the  Series  A  Conversion  Price  shall  be made as the result of the
          issuance  of  Additional  Shares  of  Common  Stock  if:  (a)  the
          consideration per share (determined pursuant to Section 5(d)(v) below)
                                                          --------------
          for  such  Additional  Shares  of  Common Stock issued or deemed to be
          issued  by  the Corporation is equal to or greater than the applicable
          Series  A Conversion Price in effect immediately prior to the issuance
          or  deemed  issuance of such Additional Shares of Common Stock; or (b)
          prior  to  such  issuance or deemed issuance, the Corporation receives
          written  notice  from  the  holders  of  at  least  a  majority of the
          then-outstanding  shares  of  Series  A  Convertible  Preferred  Stock
          agreeing  that  no  such adjustment shall be made as the result of the
          issuance or deemed issuance of such Additional Shares of Common Stock.

               (iii)  Deemed  Issue  of  Additional  Shares  of  Common  Stock.
                      ---------------------------------------------------------

                    (A)  If  the  Corporation,  at any time or from time to time
               after  the  Series A Original Issue Date, shall issue any Options
               or  Convertible  Securities  (excluding  Options  or  Convertible
               Securities  that, upon exercise, conversion, or exchange thereof,
               would  entitle  the holder thereof to receive Exempted Securities
               pursuant  to Sections 5(d)(i)(D)(I), (II), (III), (IV), (V), (VI)
                            ----------------------------------------------------
               or  (VII))  or  shall  fix a record date for the determination of
               ----------

                                      -10-
<PAGE>

               holders  of  any class of securities entitled to receive any such
               Options  or  Convertible  Securities,  then the maximum number of
               shares  of  Common Stock (as set forth in the instrument relating
               thereto,  assuming  the  satisfaction  of  any  conditions  to
               exercisability,  convertibility,  or  exchangeability but without
               regard  to  any  provision  contained  therein  for  a subsequent
               adjustment  of  such  number)  issuable upon the exercise of such
               Options  or,  in  the  case of Convertible Securities and Options
               therefor,  the  conversion  or  exchange  of  such  Convertible
               Securities,  shall  be  deemed  to be Additional Shares of Common
               Stock  issued  as  of  the  time of such issue or, in case such a
               record date shall have been fixed, as of the close of business on
               such  record  date.

                    (B)  If the terms of any Option or Convertible Security, the
               issuance  of  which  resulted  in  an  adjustment to the Series A
               Conversion Price pursuant to the terms of Section 5(d)(iv) below,
                                                         ---------------
               are  revised  (either  automatically  pursuant  to the provisions
               contained  therein  or as a result of an amendment to such terms)
               to  provide for either (1) any increase or decrease in the number
               of shares of Common Stock issuable upon the exercise, conversion,
               or exchange of any such Option or Convertible Security or (2) any
               increase  or  decrease  in  the  consideration  payable  to  the
               Corporation  upon  such  exercise, conversion, or exchange, then,
               effective  upon such increase or decrease becoming effective, the
               Series  A  Conversion  Price  computed upon the original issue of
               such  Option or Convertible Security (or upon the occurrence of a
               record  date  with  respect  thereto) shall be readjusted to such
               Series  A  Conversion  Price as would have been obtained had such
               revised  terms  been in effect upon the original date of issuance
               of  such  Option  or  Convertible  Security.  Notwithstanding the
               foregoing,  no  adjustment pursuant to this clause (B) shall have
               the  effect  of  increasing  the  Series A Conversion Price to an
               amount  that  exceeds  the  lower  of (i) the Series A Conversion
               Price  on  the  original  adjustment  date,  or (ii) the Series A
               Conversion  Price  that would have resulted from any issuances of
               Additional Shares of Common Stock between the original adjustment
               date  and  such  readjustment  date.

                    (C)  If  the  terms  of  any  Option or Convertible Security
               (excluding Options or Convertible Securities that, upon exercise,
               conversion, or exchange thereof, would entitle the holder thereof
               to  receive  Exempted  Securities  pursuant  to  Sections
                                                                --------
               5(d)(i)(D)(I),  (II), (III), (IV), (V), (VI) or (VII) above), the
               ----------------------------------------------------
               issuance of which did not result in an adjustment to the Series A
               Conversion  Price pursuant to the terms of Section 5(d)(iv) below
                                                          ----------------
               (either  because the consideration per share (determined pursuant
               to  Section  5(d)(v)  below)  of  the Additional Shares of Common
                   ---------------
               Stock  subject  thereto was equal to or greater than the Series A
               Conversion  Price  then  in  effect,  or  because  such Option or
               Convertible  Security  was  issued  before  the Series A Original
               Issue  Date),  are revised after the Series A Original Issue Date
               (either  automatically  pursuant  to  the  provisions  contained
               therein  or as a result of an amendment to such terms) to provide
               for  either  (1) any increase or decrease in the number of shares
               of  Common  Stock  issuable  upon  the  exercise,  conversion, or
               exchange  of  any  such Option or Convertible Security or (2) any
               increase  or  decrease  in  the  consideration  payable  to  the
               Corporation  upon  such  exercise,  conversion, or exchange, then
               such  Option  or  Convertible  Security,  as  so amended, and the
               Additional  Shares of Common Stock subject thereto (determined in
               the  manner  provided  in  Section  5(d)(iii)(A)  above) shall be
                                          --------------------
               deemed  to  have  been  issued  effective  upon  such increase or
               decrease  becoming  effective.

                                      -11-
<PAGE>

                    (D)  Upon  the  expiration or termination of any unexercised
               Option  or  unconverted  or unexchanged Convertible Security that
               resulted (either upon its original issuance or upon a revision of
               its  terms)  in  an  adjustment  to the Series A Conversion Price
               pursuant  to  the  terms  of Section 5(d)(iv) below, the Series A
                                            ---------------
               Conversion  Price shall be readjusted to such Series A Conversion
               Price  as would have been obtained had such Option or Convertible
               Security  never  been  issued.

               (iv)  Adjustment  of  Series  A Conversion Price Upon Issuance of
                     -----------------------------------------------------------
          Additional  Shares  of  Common  Stock. If the Corporation shall at any
          -------------------------------------
          time after the Series A Original Issue Date issue Additional Shares of
          Common Stock (including Additional Shares of Common Stock deemed to be
          issued  pursuant to Section 5(d)(iii) above), without consideration or
          for  a  consideration  per  share  less  than  the applicable Series A
          Conversion  Price  in effect immediately prior to such issue, then the
          Series  A  Conversion  Price  shall be reduced, concurrently with such
          issue,  to  a  price  equal to the consideration received per share in
          connection  with  the  issuance  of  such  Additional Shares of Common
          Stock.

               (v)  Determination of Consideration. For purposes of this Section
                    ------------------------------
          5(d),  the  consideration received by the Corporation for the issue of
          any  Additional  Shares  of Common Stock shall be computed as follows:

                    (A)  Cash  and  Property:  Such  consideration  shall:
                         -------------------

                         (I)  insofar as it consists of cash, be computed at the
                    aggregate  amount  of  cash  received  by  the  Corporation,
                    excluding  amounts  paid  or  payable  for accrued interest;

                         (II)  insofar  as  it  consists  of property other than
                    cash,  be  computed  at the fair market value thereof at the
                    time of such issue, as determined in good faith by the Board
                    of  Directors;  and

                         (III)  if  Additional Shares of Common Stock are issued
                    together  with other shares or securities or other assets of
                    the  Corporation  for consideration that covers both, be the
                    proportion  of  such  consideration so received, computed as
                    provided  in  clauses  (I)  and (II) above, as determined in
                                  ---------------------
                    good  faith  by  the  Board  of  Directors.

                    (B)  Options  and  Convertible Securities. The consideration
                         ------------------------------------
               per  share  received  by the Corporation for Additional Shares of
               Common  Stock  deemed  to  have  been  issued pursuant to Section
                                                                         -------
               5(d)(iii)  above, relating to Options and Convertible Securities,
               --------
               shall  be  determined  by  dividing

                         (I) the total amount, if any, received or receivable by
                    the  Corporation  as  consideration  for  the  issue of such
                    Options  or  Convertible  Securities,  plus  the  minimum
                    aggregate  amount  of additional consideration (as set forth
                    in  the  instruments relating thereto, without regard to any
                    provision  contained  therein for a subsequent adjustment of

                                      -12-
<PAGE>

                    such  consideration)  payable  to  the  Corporation upon the
                    exercise  of  such  Options or the conversion or exchange of
                    such  Convertible  Securities, or in the case of Options for
                    Convertible  Securities,  the  exercise  of such Options for
                    Convertible  Securities  and  the  conversion or exchange of
                    such  Convertible  Securities,  by

                         (II)  the  maximum number of shares of Common Stock (as
                    set  forth  in  the  instruments  relating  thereto, without
                    regard  to  any provision contained therein for a subsequent
                    adjustment  of  such  number)  issuable upon the exercise of
                    such  Options  or  the  conversion  or  exchange  of  such
                    Convertible  Securities.

               (vi)  Multiple  Closing  Dates. If the Corporation shall issue on
                     ------------------------
          more  than  one date Additional Shares of Common Stock that are a part
          of  one transaction or a series of related transactions and that would
          result  in  an adjustment to the Series A Conversion Price pursuant to
          the  terms  of  Section  5(d)(iv)  above,  then,  upon  the final such
                          ----------------
          issuance,  the  Series  A Conversion Price shall be readjusted to give
          effect  to  all  such issuances as if they occurred on the date of the
          first  such  issuance  (and  without  giving  additional effect to any
          adjustments  as  a  result  of  any  subsequent  issuances within such
          period).

          (e)  Adjustment  for Stock Splits and Combinations. If the Corporation
               ---------------------------------------------
     shall,  at  any time or from time to time after the Series A Original Issue
     Date,  effect  a  subdivision  of  the  outstanding  Common Stock without a
     comparable  subdivision  of  the  Series  A Convertible Preferred Stock, or
     combine  the  outstanding  shares  of  Series A Convertible Preferred Stock
     without  a  comparable  combination  of  the  Common  Stock,  the  Series A
     Conversion  Price  in  effect  immediately  before  that  subdivision  or
     combination shall be proportionately decreased so that the number of shares
     of  Common  Stock issuable on conversion of each share of such series shall
     be  increased  in  proportion  to  such increase in the aggregate number of
     shares of Common Stock outstanding or in proportion to such decrease in the
     aggregate  number  of  shares  of  Series  A  Convertible  Preferred  Stock
     outstanding,  as  applicable. If the Corporation shall, at any time or from
     time  to  time  after  the  Series  A  Original  Issue  Date,  combine  the
     outstanding  shares of Common Stock without a comparable combination of the
     Series  A  Convertible  Preferred  Stock  or  effect  a  subdivision of the
     outstanding  shares  of  Series  A  Convertible  Preferred  Stock without a
     comparable  subdivision  of the Common Stock, the Series A Conversion Price
     in  effect  immediately  before  the  combination  or  subdivision shall be
     proportionately  increased  so  that  the  number of shares of Common Stock
     issuable  on  conversion of each share of such series shall be decreased in
     proportion  to  such  decrease  in the aggregate number of shares of Common
     Stock outstanding or in proportion to such increase in the aggregate number
     of  shares  of  Series  A  Convertible  Preferred  Stock  outstanding,  as
     applicable.  Any adjustment under this subsection shall become effective at
     the  close  of  business on the date the subdivision or combination becomes
     effective.

          (f)  Adjustment  for  Certain  Dividends  and  Distributions.  If  the
               -------------------------------------------------------
     Corporation  shall,  at  any  time  or from time to time after the Series A
     Original  Issue  Date,  make  or  issue,  or  fix  a  record  date  for the
     determination of holders of Common Stock entitled to receive, a dividend or
     other  distribution  payable  on  the  Common Stock in additional shares of
     Common  Stock,  then, and in each such event, the Series A Conversion Price
     in  effect  immediately before such event shall be decreased as of the time
     of such issuance or, in the event such a record date shall have been fixed,
     as  of the close of business on such record date, by multiplying the Series
     A  Conversion  Price  then  in  effect  by  a  fraction:

                                      -13-
<PAGE>

               (1) the numerator of which shall be the total number of shares of
          Common  Stock  issued and outstanding immediately prior to the time of
          such  issuance  or  the  close  of  business  on such record date, and

               (2)  the denominator of which shall be the total number of shares
          of  Common  Stock issued and outstanding immediately prior to the time
          of such issuance or the close of business on such record date plus the
          number  of shares of Common Stock issuable in payment of such dividend
          or  distribution;

          provided,  however,  that  if  such  record date shall have been fixed
          and  such  dividend  is  not fully paid or if such distribution is not
          fully  made  on the date fixed therefor, the Series A Conversion Price
          shall  be  recomputed  accordingly as of the close of business on such
          record  date  and  thereafter  the  Series A Conversion Price shall be
          adjusted  pursuant to this subsection as of the time of actual payment
          of  such  dividends  or  distributions; and provided further, however,
          that  no  such  adjustment  shall  be  made if the holders of Series A
          Convertible  Preferred  Stock simultaneously receive (i) a dividend or
          other  distribution of shares of Common Stock in a number equal to the
          number  of  shares  of Common Stock as they would have received if all
          outstanding  shares  of  Series A Convertible Preferred Stock had been
          converted  into  Common  Stock  on  the  date of such event; or (ii) a
          dividend  or  other  distribution  of  shares  of Series A Convertible
          Preferred  Stock  that  are convertible, as of the date of such event,
          into  such  number of shares of Common Stock as is equal to the number
          of additional shares of Common Stock being issued with respect to each
          share  of  Common  Stock  in  such  dividend  or  distribution.

          (g)  Adjustments  for  Other  Dividends  and  Distributions.  If  the
               ------------------------------------------------------
     Corporation  shall,  at  any  time  or from time to time after the Series A
     Original  Issue  Date,  make  or  issue,  or  fix  a  record  date  for the
     determination  of  holders  of capital stock of the Corporation entitled to
     receive,  a  dividend  or  other  distribution payable in securities of the
     Corporation (other than a distribution of shares of Common Stock in respect
     of  outstanding  shares of Common Stock) or in other property, then, and in
     each  such event, the holders of Series A Convertible Preferred Stock shall
     receive,  simultaneously  with  the  distribution  to  the  holders of such
     capital stock, a dividend or other distribution of such securities or other
     property  in  an  amount  equal  to  the amount of such securities or other
     property  as they would have received if all outstanding shares of Series A
     Convertible  Preferred  Stock  had  been converted into Common Stock on the
     date  of  such  event.

          (h)  Adjustment  for  Merger  or  Reorganization,  etc. Subject to the
               -------------------------------------------------
     provisions  of Section 4(c) above, if there shall occur any reorganization,
                    -----------
     recapitalization,  reclassification,  consolidation or merger involving the
     Corporation  in  which  the  Common Stock (but not the Series A Convertible
     Preferred  Stock)  is  converted into or exchanged for securities, cash, or
     other  property (other than a transaction covered by Sections 5(e), (f), or
                                                          ----------------------
     (g)  above),  then,  following  any  such reorganization, recapitalization,
     ---
     reclassification,  consolidation,  or  merger,  each  share  of  Series  A
     Convertible  Preferred Stock shall thereafter be convertible in lieu of the
     Common  Stock  into  which  it was convertible prior to such event into the
     kind  and amount of securities, cash or other property that a holder of the
     number  of  shares  of  Common  Stock  of  the  Corporation  issuable  upon
     conversion of one share of Series A Convertible Preferred Stock immediately
     prior  to  such  reorganization,  recapitalization,  reclassification,

                                      -14-
<PAGE>

     consolidation,  or  merger  would have been entitled to receive pursuant to
     such  transaction; and, in such case, appropriate adjustment (as determined
     in  good  faith by the Board of Directors) shall be made in the application
     of  the  provisions  in  this  Section  5  with  respect  to the rights and
                                    ----------
     interests  thereafter  of the holders of the Series A Convertible Preferred
     Stock,  to  the  end  that  the  provisions  set  forth  in  this Section 5
                                                                       ---------
     (including  provisions  with respect to changes in and other adjustments of
     the Series A Conversion Price) shall thereafter be applicable, as nearly as
     reasonably  may  be,  in  relation  to  any  securities  or  other property
     thereafter  deliverable  upon  the  conversion  of the Series A Convertible
     Preferred  Stock.

          (i)  Certificate  as  to  Adjustments.  Upon  the  occurrence  of each
     adjustment  or  readjustment  of  the Series A Conversion Price pursuant to
     this  Section  5,  the  Corporation,  at its expense, shall, as promptly as
           ----------
     reasonably  practicable,  but  in  any  event  not later than ten (10) days
     thereafter,  compute such adjustment or readjustment in accordance with the
     terms  hereof  and furnish to each holder of Series A Convertible Preferred
     Stock  a  certificate  setting  forth  such  adjustment  or  readjustment
     (including  the  kind and amount of securities, cash or other property into
     which  the Series A Convertible Preferred Stock is convertible) and showing
     in  detail  the  facts upon which such adjustment or readjustment is based.
     The  Corporation  shall,  as  promptly  as reasonably practicable after the
     written request at any time of any holder of Series A Convertible Preferred
     Stock  (but  in any event not later than ten (10) days thereafter), furnish
     or cause to be furnished to such holder a certificate setting forth (i) the
     Series  A Conversion Price then in effect, and (ii) the number of shares of
     Common Stock and the type and amount, if any, of other securities, cash, or
     property  that  then  would  be  received  upon  the conversion of Series A
     Convertible  Preferred  Stock.

          (j)  Notice  of  Record  Date.  In  the  event:
               ------------------------

               (i)  the  Corporation  shall  take a record of the holders of its
          Common  Stock  (or other stock or securities at the time issuable upon
          conversion  of  the  Series  A  Convertible  Preferred  Stock) for the
          purpose of entitling or enabling them to receive any dividend or other
          distribution, or to receive any right to subscribe for or purchase any
          shares  of  stock  of any class or any other securities, or to receive
          any  other  right;  or

               (ii)  of  any  capital  reorganization  of  the  Corporation, any
          reclassification of the Common Stock, or any Deemed Liquidation Event;
          or

               (iii)  of  the voluntary or involuntary dissolution, liquidation,
          or  winding-up  of  the  Corporation,

          then,  and  in  each  such  case,  the  Corporation will send or cause
          to  be sent to the holders of the Series A Convertible Preferred Stock
          a  notice specifying, as the case may be, (i) the record date for such
          dividend, distribution, or right, and the amount and character of such
          dividend,  distribution, or right; or (ii) the effective date on which
          such  reorganization,  reclassification,  consolidation,  merger,
          transfer,  dissolution, liquidation, or winding-up is proposed to take
          place, and the time, if any is to be fixed, as of which the holders of
          record  of Common Stock (or such other stock or securities at the time
          issuable  upon  the  conversion  of the Series A Convertible Preferred
          Stock)  shall be entitled to exchange their shares of Common Stock (or
          such  other  stock  or  securities)  for  securities or other property
          deliverable upon such reorganization, reclassification, consolidation,
          merger,  transfer,  dissolution,  liquidation,  or winding-up, and the
          amount  per  share  and  character  of such exchange applicable to the
          Series A Convertible Preferred Stock and the Common Stock. Such notice
          shall  be  sent  at  least  ten  (10) days prior to the record date or
          effective  date  for  the  event  specified in such notice. Any notice
          required by the provisions hereof to be given to a holder of shares of
          Series  A  Convertible  Preferred  Stock  shall be deemed sent to such
          holder  if  deposited  in the United States mail, postage prepaid, and
          addressed  to such holder at his, her, or its address appearing on the
          books  of  the  Corporation.

     6.  Conversion Cap. In no event shall any holder be entitled to convert any
         --------------
Series  A Convertible Preferred Stock to the extent that, after such conversion,
the sum of the number of shares of Common Stock beneficially owned by any holder
and  its  affiliates  (other  than  shares  of  Common Stock which may be deemed
beneficially  owned  through  the  ownership  of  the unconverted portion of the
Series A Convertible Preferred Stock or any unexercised right held by any holder
subject  to  a  similar limitation), would result in beneficial ownership by any
holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock (after taking into account the shares to be issued to the holder upon such
conversion).  For  purposes  of  this  Section  6, beneficial ownership shall be
determined  in  accordance  with Section 13(d) of the Securities Exchange Act of
1934,  as  amended. Nothing herein shall preclude the holder from disposing of a
sufficient  number  of  other  shares  of Common Stock beneficially owned by the
holder  so  as  to  thereafter  permit  the continued conversion of the Series A
Convertible  Preferred  Stock.

     7.  Intentionally  omitted.

     8.  Waiver.  Any  of  the  rights, powers, or preferences of the holders of
         ------
Series  A  Convertible  Preferred  Stock  set  forth herein may be waived by the
affirmative  consent or vote of the holders of at least a majority of the shares
of  Series  A  Convertible  Preferred  Stock  then  outstanding.

     9.  Definitions.  As  used  herein,  the  following  terms  shall  have the
         -----------
following  meanings:

          a.  "AFFILIATE"  means,  with  respect to any individual, corporation,
     partnership,  association,  trust,  or  any  other  entity (in each case, a
     "PERSON"), any Person that, directly or indirectly, Controls, is Controlled
     by,  or  is  under  common  Control  with  such  Person, including, without
     limitation,  any  general  partner,  executive officer, or director of such
     Person or any holder of ten percent (10%) or more of the outstanding equity
     or  voting  power  of  such  Person.

          b.  "CLOSING  PRICE"  for  any  day means: (i) the last reported sales
     price  regular  way  of  the  Common  Stock  on  such  day on the principal
     securities exchange on which the Common Stock is then listed or admitted to
     trading  or  on  Nasdaq, as applicable; (ii) if no sale takes place on such
     day  on  any such securities exchange or system, the average of the closing
     bid  and  asked  prices,  regular  way, on such day for the Common Stock as
     officially  quoted  on  any such securities exchange or system; (iii) if on

                                      -15-
<PAGE>

     such  day  such  shares  of Common Stock are not then listed or admitted to
     trading on any securities exchange or system, the last reported sale price,
     regular  way,  on  such  day  for  the  Common  Stock  in  the  domestic
     over-the-counter  market as reported on the Over the Counter Bulletin Board
     (the  "OTCBB"); (iv) if no sale takes place on such day, the average of the
     high  and  low  bid  price  of the Common Stock on such day in the domestic
     over-the-counter  market  as reported on the OTCBB; (v) if on such day such
     shares  of  Common  Stock are not then listed or admitted to trading on any
     securities  exchange  or system, the last reported sale price, regular way,
     on such day for the Common Stock in the domestic over-the-counter market as
     reported  on  the  by  the  National Quotation Bureau, Incorporated, or any
     other  successor  organization, or (vi) if no sale takes place on such day,
     the  average  of the high and low bid price of the Common Stock on such day
     in  the  domestic  over-the-counter  market  as  reported  by  the National
     Quotation Bureau, Incorporated, or any other successor organization. If, at
     any  time,  such  shares  of  Common  Stock  are not listed on any domestic
     exchange  or  quoted  in the NASDAQ System or the domestic over-the-counter
     market  or  reported  in  the "pink sheets," the Closing Price shall be the
     fair  market  value thereof determined by an independent appraiser selected
     in  good  faith  by  the  Board  of  Directors.

          c. "CONTROL" means the possession, directly or indirectly, of power to
     direct  or  cause  the direction of management or policies (whether through
     ownership  of  voting  securities,  by  agreement  or  otherwise).

          d.  "CONVERSION  DATE" shall mean either (1) the Effective Date of the
     Registration  Statement,  or  (2)  the date that the holder of the Series A
     Convertible  Preferred Stock has satisfied the minimum one (1) year holding
     requirements  set  forth  in  SEC  Rule  144(d).

          e.  "EFFECTIVE DATE OF THE REGISTRATION STATEMENT" shall mean the date
     on  which  the  SEC  declares  effective  the  Corporation's  registration
     statement  filed  pursuant  to  Section 2 of the Investor Rights Agreement.

          f.  "INDEBTEDNESS"  means,  as applied to any Person, all obligations,
     contingent  and  otherwise,  that,  in  accordance  with  GAAP,  should  be
     classified  upon  such  Person's  balance sheet as liabilities, or to which
     reference  should be made by footnotes thereto, including, in any event and
     whether  so  classified:  (a)  all  debt  and similar monetary obligations,
     whether  direct  or  indirect; (b) all liabilities secured by any mortgage,
     pledge,  security  interest, lien, charge, or other encumbrance existing on
     property  owned  or  acquired  subject thereto, irrespective of whether the
     liability  secured  thereby  shall  have  been assumed; (c) all guarantees,
     endorsements, and other contingent obligations, whether direct or indirect,
     in  respect  of  indebtedness of others, including any obligation to supply
     funds to or in any manner to invest in, directly or indirectly, the debtor,
     to  purchase  indebtedness,  or to assure the owner of indebtedness against
     loss, through an agreement to purchase goods, supplies, or services for the
     purpose  of enabling the debtor to make payment of the indebtedness held by
     such  owner or otherwise; and (d) the obligation to reimburse the issuer in
     respect  of  any  letter  of  credit.

                                      -16-
<PAGE>

          g.  "INVESTOR  RIGHTS  AGREEMENT"  shall  mean  the  Investor  Rights
     Agreement  dated  January  18,  2006,  by and among the Corporation and the
     other  parties  thereto.

          h.  "MARKET  PRICE"  shall  mean  the  average of the five (5) Closing
     Prices of the Common Stock for the five (5) Trading Days preceding the date
     or  the  dates  that  the  dividend  is  due  or  a conversion is to occur.
     Notwithstanding  the  foregoing, if at the time a dividend is paid pursuant
     to  Section  2(a) above with registered Common Stock, and the Corporation's
         ------------
     Common Stock is not listed on any domestic exchange or quoted in the NASDAQ
     System  or  the  domestic  over-the-counter market or reported in the "pink
     sheets,"  the  Closing  Price  shall  be  the  fair  market  value  thereof
     determined  by an independent appraiser selected in good faith by the Board
     of  Directors.

          i. "PERSON" shall mean any individual, partnership, firm, corporation,
     association, trust, unincorporated organization or other entity, as well as
     any  syndicate  or  group that would be deemed to be a person under Section
     13(d)(3)  of  the  Securities  Exchange  Act  of  1934,  as  amended.

          j.  "PERMITTED  DEBT"  shall  mean  (i) trade payables incurred in the
     ordinary  course  of  business;  (ii)  one  or more debt facilities used to
     finance  the  purchase  of  raw  materials for products manufactured by the
     Company and inventory; (iii) factoring of accounts receivables; (iv) surety
     bonds  and  letters  of credit issued or obtained in the ordinary course of
     business;  (v)  the  refinancing  of  debt  existing as of the date of this
     Agreement,  upon  substantially similar terms; (vi) up to $3,000,000 of new
     Indebtedness;  and  (vii)  debt  incurred pursuant to that certain Interest
     Bearing  Non-Convertible  Installment  Promissory Note that forms a part of
     the  Securities  Purchase  and  Share  Exchange  Agreement.

          k.  "QUALIFIED  FINANCING"  means  an  equity offering obtained by the
     Corporation  after  the  date of this Certificate of Designation, provided,
     however,  that  (i)  the  gross  aggregate  proceeds raised and liquidation
     preferences  shall be no more than $3,000,000; (ii) the dividend rate shall
     not  exceed  ten  percent  (10%);  and  (iii) the holders of the securities
     issued  in  connection  with  the Qualified Financing shall not have voting
     rights  more  favorable  than  voting  rights  granted  to  the  Series  A
     Convertible  Preferred  Stock.  As  a  point  of  clarification, all equity
     financings  after  the  date  of  this Certificate of Designations shall be
     aggregated  for purposes of determining if the $3,000,000 cap has been met.

          l.  "REVERSE  MERGER" means the reverse triangular merger transaction,
     share  exchange  or other similar transaction with DeerValley Acquisitions,
     Corp.  to  be  contemplated  on  or  about  the date of this Certificate of
     Designations, and the acquisition of all or substantially all of the issued
     and  outstanding  capital  stock  of  Deer  Valley  Homebuilders,  Inc.

          m.  "SEC"  means the United States Securities and Exchange Commission.

          n.  "SEC  RULE  144"  means  Rule 144 promulgated by the SEC under the
     Securities  Act.

                                      -17-
<PAGE>

          o.  "SECURITIES ACT" means the Securities Act of 1933, as amended, and
     the  rules  and  regulations  promulgated  thereunder.

          p. "SERIES A WARRANTS" means the Series A Warrants for the purchase of
     Common  Stock  issued to purchasers of Series A Convertible Preferred Stock
     pursuant  to  the  Securities  Purchase  and  Share  Exchange  Agreement.

          q. "SERIES B WARRANTS" means the Series B Warrants for the purchase of
     Common  Stock  issued to purchasers of Series A Convertible Preferred Stock
     pursuant  to  the  Securities  Purchase  and  Share  Exchange  Agreement.

          r. "SERIES C WARRANTS" means the Series C Warrants for the purchase of
     Common  Stock  issued  to TotalCFO, LLC pursuant to the Securities Purchase
     and  Share  Exchange  Agreement.

          s.  "SERIES  D WARRANT" means the Series D Warrant for the purchase of
     Common Stock issued to Vicis Capital Master Fund pursuant to the Securities
     Purchase  and  Share  Exchange  Agreement.

          t.  "SECURITIES  PURCHASE  AND  SHARE  EXCHANGE  AGREEMENT"  means the
     Securities Purchase and Share Exchange Agreement dated January 18, 2006, by
     and  between  the  Company,  certain  shareholders  of  the Company a party
     thereto, DeerValley Acquisitions, Corp. ("DVA"), certain DVA shareholders a
     party  thereto,  Vicis  Capital  Master Fund, and each of the purchasers of
     Series  A  Convertible  Preferred  Stock  of  the  Company a party thereto.

          u.  "SUBSIDIARY" shall mean any corporation, association, partnership,
     limited liability company or other business entity of which more than fifty
     percent  (50%)  of  the  total  voting  power  is,  at  the  time, owned or
     controlled,  directly  or  indirectly, by the Corporation or one or more of
     the  other  Subsidiaries  of  the  Corporation  or  a  combination thereof.

          v.  "TRADING  DAY"  means  a  day  on  which  the securities exchange,
     association, or quotation system on which shares of Common Stock are listed
     for  trading  shall  be open for business or, if the shares of Common Stock
     shall  not be listed on such exchange, association, or quotation system for
     such  day, a day with respect to which trades in the United States domestic
     over-the-counter  market  shall  be  reported.

                            [signature page follows]

                                      -18-
<PAGE>

     IN  WITNESS WHEREOF, this Certificate of Designation has been executed by a
duly  authorized  officer  of  the  Corporation  on this 21st day of July, 2006.

                                  DEER  VALLEY  CORPORATION

                                  By: /s/ Charles G. Masters
                                     -----------------------------------------
                                     Charles  G.  Masters
                                     President  and  Chief  Executive  Officer

        [Signature Page to Series A Preferred Certificate of Designation]

                                      -19-
<PAGE>

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