Document:

EXHIBIT 4.1
                                                                     -----------

                            ON TECHNOLOGY CORPORATION

                  1995 DIRECTORS STOCK OPTION PLAN, AS AMENDED

                                  May 18, 1995

         ON Technology Corporation, hereinafter called the "Company," hereby
adopts a stock option plan for eligible Directors of the Company pursuant to the
following terms and provisions:

         1.   Purpose of the Plan. The purpose of this plan, hereinafter called
the "Plan," is to provide additional incentive to those Directors of the Company
who are not employees of the Company or any of its subsidiaries or affiliates
and who have not received options to purchase shares of the Company's common
stock, $.01 par value (the "Common Stock"), under any other option plan of the
Company, by encouraging them to acquire a new or an additional share ownership
in the Company, thus increasing their proprietary interest in the Company's
business and providing them with an increased personal interest in the Company's
continued success and progress. These objectives will be promoted through the
grant of options to acquire shares of Common Stock of the Company pursuant to
the terms of this Plan. Only those Directors who meet the qualifications stated
above are eligible for and shall receive options under this Plan. Any Director
who would otherwise be eligible to receive options under this Plan may decline
the grant of such options by giving written notice to the Company, in which
event no options will be granted to such declining Director.

         2.   Compliance with Rule 16b-3. It is the Company's intention that
this Plan and the options granted hereunder comply with Rule 16b-3 (Reg.
ss.240.16b-3) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and that Plan participants remain disinterested persons for
purposes of administering other employee benefit plans of the Company and having
such other plans be exempt from Section 16(b) of the Exchange Act. Thus, if any
Plan provision is later found not to be in compliance with Rule 16b-3 or if any
Plan provision would disqualify Plan participants from remaining disinterested
persons, that provision shall be deemed null and void, and in all events the
Plan shall be construed in favor of its meeting the Requirements of Rule 16b-3.

         3.   Effective Date of the Plan. This Plan shall become effective upon
adoption by the Board of Directors on May 18, 1995, subject to (i) approval by
holders of a majority of the outstanding shares of voting capital stock of the
Company and (ii) the effectiveness of the Registration Statement on Form S-1 to
be filed with the Securities and Exchange Commission in connection with the
initial public offering of the Company's Common Stock. In the event that the
conditions set forth in clauses (i) and (ii) of this paragraph 2 have not
occurred within twelve (12) months after the date this Plan is adopted by the
Board of Directors, this Plan and the options granted hereunder shall be null
and void.
<PAGE>

         4. Shares Subject to the Plan. The shares to be issued upon the
exercise of the options granted under this Plan shall be shares of the Common
Stock of the Company. Either treasury or authorized and unissued shares of
Common Stock, or both, as the Board of Directors shall from time to time
determine, may be so issued. No shares of Common Stock which are subject of any
lapsed, expired or terminated options may be made available for reoffering under
this Plan. If an option granted under this Plan is exercised pursuant to the
terms and conditions of subsection 5(b), any shares of Common Stock which are
the subject thereof shall not thereafter be available for reoffering under this
Plan.

         Subject to the provisions of the next succeeding paragraph of this
Section 3, the aggregate number of shares of Common Stock for which options may
be granted under this Plan shall be one hundred thousand (100,000) shares of
Common Stock, which number of shares reflects the 1-for-6 reverse stock split to
be effected by the Company on or about May 18, 1995, the same date that this
Plan shall become effective.

         In the event that subsequent to the date of adoption of this Plan by
the Board of Directors the Common Stock should, as a result of a stock split,
stock dividend, combination or exchange of shares, exchange for other
securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or other such change, be increased or decreased
or changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation, then (i) there
shall automatically be substituted for each share subject to an unexercised
option (in whole or in part) granted under this Plan, each share available for
additional grants of options under this Plan and each share made available for
grant to each eligible Director pursuant to Section 4 hereof, the number and
kind of shares of stock or other securities into which each outstanding share of
Common Stock shall be changed or for which each such share shall be exchanged,
(ii) the option price per share or unit of securities shall be increased or
decreased proportionately so that the aggregate purchase price for the
securities subject to the option shall remain the same as immediately prior to
such event, and (iii) the Board shall make such other adjustments as may be
appropriate and equitable to prevent enlargement or dilution of option rights.
Any such adjustment may provide for the elimination of fractional shares.

         5.   Grant of Options. Subject to the terms of this Plan, options shall
be granted to each eligible Director for the purchase of Ten Thousand (10,000)
shares of Common Stock by each such Director at an option price per share equal
to the fair market value of a share of Common Stock of the Company on the date
said options are granted. The date of grant of each such option shall be the
later of (i) the date that an eligible Director is elected and qualified as a
director of the Company or (ii) the effectiveness of the Registration Statement
on Form S-1 to be filed with the Securities and Exchange Commission in
connection with the initial public offering of the Company's Common Stock. Each
such option granted shall be exercisable for a period of ten (10) years from the
date of grant. Options granted under this Plan will be exercisable in twelve
(12) equal quarterly installments with the first quarterly installment
exercisable on the date of grant and the eleven (11) quarterly installments
thereafter exercisable on the last day of each fiscal quarter of the Company
commencing with the first full fiscal quarter after the date of grant. On or
after the third anniversary of the date of grant of an option under this Plan,
such option will be exercisable in full.
<PAGE>

         Notwithstanding any provision set forth herein to the contrary, if the
Class I Director(s) of the Company elected in May 1995 are not reelected at the
next annual meeting of stockholders following December 31, 1995, options granted
pursuant to the Plan to such initial Class I Director(s) shall be exercisable
for one-third of the total number of shares of Common Stock subject to the
option; and further provided that if the Class II Director(s) of the Company
elected in May 1995 are not reelected at the next annual meeting of stockholders
following December 31, 1996, options granted pursuant to the Plan to such
initial Class II Director(s) shall be exercisable for two-thirds of the total
number of shares of Common Stock subject to the option.

         6.   Option Provisions.

         (a)  Limitation on Exercise and Transfer of Options. Only the Director
to whom the option is granted may exercise the same except where a guardian or
other legal representative has been duly appointed for such Director and except
as otherwise provided in the case of such Director's death. No option granted
hereunder shall be transferable otherwise than by the Last Will and Testament of
the Director to whom it is granted or, if the Director dies intestate, by the
applicable laws of descent and distribution or pursuant to a qualified domestic
relations order (as defined in the Internal Revenue Code of 1986, as amended) or
Title I of the Employee Retirement Income Security Act, or the rules thereunder.
No option granted hereunder may be pledged or hypothecated, nor shall any such
option be subject to execution, attachment or similar process.

         (b)  Exercise of Option. Each option granted hereunder may be exercised
in whole or in part (to the maximum extent then exercisable) from time to time
during the option period, but this right of exercise shall be limited to whole
shares. Options shall be exercised by the optionee giving written notice to the
Secretary of the Company at its principal business office, by certified mail,
return receipt requested, of intention to exercise the same and the number of
shares with respect to which the Option is being exercised (the "Notice of
Exercise of Option") accompanied by full payment of the purchase price in cash
or, with the consent of the Board, in whole or in part in Common Stock having a
fair market value on the date the option is exercised equal to that portion of
the purchase price for which payment in cash is not made. Such Notice of
Exercise of Option shall be deemed delivered upon deposit into the mails.

         (c)  Termination of Directorship. Subject to the provisions of the
second paragraph of Section 4 herein, if the optionee ceases to be a Director of
the Company, his or her option shall terminate three (3) months after the
effective date of termination of his or her directorship and neither he nor she
nor any other person shall have any right after such date to exercise all or any
part of such option. If the termination of the directorship is due to death,
then the option may be exercised within twelve (12) months after the optionee's
death by the optionee's estate or by the person designated in the optionee's
Last Will and Testament or to whom transferred by the applicable laws of descent
and distribution (the "Personal Representative"). Notwithstanding the foregoing,
in no event shall any option be exercisable after the expiration of the option
period and not to any greater extent than the optionee would have been entitled
to exercise the option at the time of death.
<PAGE>

         (d)  Acceleration of Exercise of Options in Certain Events.
Notwithstanding anything in the foregoing to the contrary, in the event of a
"change in control" the eligible Director shall have the immediate right and
option (notwithstanding the provisions to paragraph 4 hereof) to exercise the
option with respect to all Common Stock covered by the option, which exercise,
if made, shall be irrevocable. The term "change in control" shall include, but
not be limited to: (i) the first purchase of shares pursuant to a tender offer
or exchange (other than a tender offer or exchange by the Company) for all or
part of the Company's common shares of any class or any securities convertible
into such common shares; (ii) the receipt by the Company of a Schedule 13D or
other advice indicating that a person is the "beneficial owner" (as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty
percent (20%) or more of the Company's shares of capital stock calculated as
provided in paragraph (d) of said Rule 13d-3; (iii) the date of approval by
shareholders of the Company of an agreement providing for any consolidation or
merger of the Company in which the Company will not be the continuing or
surviving corporation or pursuant to which shares of capital stock, of any class
or any securities convertible into such capital stock, of the Company would be
converted into cash, securities, or other property, other than a merger of the
Company in which the holders of shares of all classes of the Company's capital
stock immediately prior to the merger would have the same proportion of
ownership of common stock of the surviving corporation immediately after the
merger; (iv) the date of the approval by shareholders of the Company of any
sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company; or
(v) the adoption of any plan or proposal for the liquidation (but not a partial
liquidation) or dissolution of the Company.

         (e)  Holding Period. Shares of Common Stock obtained upon the exercise
of any option granted under the Plan may not be sold by persons subject to
Section 16 of the Exchange Act until six months after the date the option was
granted.

         (f)  Option Agreements. As a condition to the grant of an option under
this Plan, each recipient of an option shall execute an option agreement in such
form not inconsistent with the Plan as may be specified by the Board of
Directors.

         7.   Investment Representation; Approvals and Listing. The options to
be granted hereunder shall be further conditioned upon receipt of the following
investment representation from the optionee:

              "I further agree that any Common Stock of ON Technology
              Corporation which I may acquire by virtue of this option shall be
              acquired for investment purposes only and not with a view to
              distribution or resale; provided, however, that this restriction
              shall become inoperative in the event the said Common Stock
              subject to this option shall be registered under the Securities
              Act of 1933, as amended, or in the event there is presented to ON
              Technology Corporation an opinion of counsel satisfactory to ON
              Technology Corporation to the effect that the offer or sale of the
              Common Stock subject to this option may be lawfully made without
              registration of the said Common Stock under the Securities Act of
              1933, as amended."
<PAGE>

The Company shall not be required to issue any certificate or certificates for
Common Stock upon the exercise of an option granted under this Plan prior to (i)
the obtaining of any approval from any governmental agency which the Company
shall, in its sole discretion, determine to be necessary or advisable, (ii) the
admission of such Common Stock to listing on any national securities exchange on
which the Common Stock may be listed, (iii) the completion of any registration
or other qualification of the Common Stock under any state or federal law or
ruling or regulations of any governmental body which the Company shall, in its
sole discretion, determine to be necessary or advisable or the determination of
the Company, in its sole discretion, that any registration or other
qualification of the Common Stock is not necessary or advisable and (iv) the
obtaining of an investment representation from the optionee in the form stated
above or in such other form as the Company, in its sole discretion, shall
determine to be adequate.

         8.   General Provisions. For all purposes of this Plan the fair market
value of a Common Share shall be determined as follows: so long as the Common
Stock of the Company are listed upon an established stock exchange or exchanges
such fair market value shall be determined to be the highest closing price of
such Common Stock on such stock exchange or exchanges on the day the option is
granted (or the date the Common Stock are tendered as payment, in the case of
determining fair market value for that purpose) or if no sale of such Common
Stock shall have been made on any stock exchange on that day, then on the
closest preceding day on which there was a sale of such Common Stock; and during
any period of time as such Common Stock are not listed upon an established stock
exchange the fair market value per share shall be the mean between dealer "Bid"
and "Ask" prices of such Common Stock in the over-the-counter market on the day
the option is granted (or the day the Common Stock are tendered as payment, in
the case of determining fair market value for that purpose), as reported by the
National Association of Securities Dealers, Inc.

         The liability of the Company under this Plan and any distribution of
Common Stock made hereunder is limited to the obligations set forth herein with
respect to such distribution and no term or provision of this Plan shall be
construed to impose any liability on the Company in favor of any person with
respect to any loss, cost or expense which the person may incur in connection
with or arising out of any transaction in connection with this Plan, including,
but not limited to, any liability to any Federal, state, or local tax authority
and/or any securities regulatory authority.

         Nothing in this Plan or in any option agreement shall confer upon any
optionee any right to continue as a Director of the Company, or to be entitled
to any remuneration or benefits not set forth in this Plan or such option.

         Nothing contained in this Plan or in any option agreement shall be
construed as entitling any optionee to any rights of a shareholder as a result
of the grant of an option until such time as Common Stock are actually issued to
such optionee pursuant to the exercise of an option.
<PAGE>

         This Plan may be assumed by the successors and assigns of the Company.

         This Plan shall not be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.

         The cash proceeds received by the Company from the issuance of Common
Stock pursuant to this Plan will be used for general corporate purposes or in
such other manner as the Board of Directors deems appropriate.

         The expense of administering this Plan shall be borne by the Company.

         The captions and section numbers appearing in this Plan are inserted
only as a matter of convenience. They do not define, limit, construe or describe
the scope or intent of the provisions of this Plan.

         9.   Termination of the Plan. This Plan shall terminate ten (10) years
from the date of the effectiveness of the Registration Statement on Form S-1 to
be filed with the Securities and Exchange Commission in connection with the
initial public offering of the Company's Common Stock and thereafter no options
shall be granted hereunder. All options outstanding at the time of termination
of this Plan shall continue in full force and effect in accordance with and
subject to their terms and the terms and conditions of this Plan.

         10.  Taxes. Appropriate provisions shall be made for all taxes required
to be withheld and/or paid in connection with the Options or the exercise
thereof, and the transfer of shares of Common Stock pursuant thereto, under the
applicable laws or other regulations of any governmental authority, whether
federal, state, or local and whether domestic or foreign.

         11.  Changes in Governing Rules and Regulations. All references herein
to the Internal Revenue Code of 1986, as amended, or sections thereof, or to
rules and regulations of the Department of Treasury or of the Securities and
Exchange Commission, shall mean and include the Code sections thereof and such
rules and regulations as are now in effect or as they may be subsequently
amended, modified, substituted or superseded.

                                            Adopted by the Board of Directors on

                                            May 18, 1995
<PAGE>

                 AMENDMENTS TO 1995 DIRECTORS STOCK OPTION PLAN

Amendments adopted by the Board of Directors on March 5, 1999 and approved by
the Shareholders on April 30, 1999.

1.   The reference to "one hundred thousand (100,000)" in paragraph 2 of Section
4 (which is captioned "Shares Subject to the Plan") be and hereby is deleted and
"two hundred thousand (200,000)" is substituted in lieu thereof.

2.   The second sentence of the first paragraph of Section 5 (which is captioned
"Grant of Options") is deleted in its entirety and the following be and hereby
is inserted in lieu thereof:

     "The date of grant of each such option shall be the date on which an
     eligible Director is elected (or re-elected) and qualified as a director of
     the Company and, provided the individual continues to serve as a Director
     of the Company on the annual anniversary of his or her election (or
     re-election) each annual anniversary thereafter during such eligible
     Director's three-year term."

3.   The fourth sentence of the first paragraph of Section 5 (which is captioned
"Grant of Options") is deleted in its entirety and the following be and hereby
is inserted in lieu thereof:

     "Options granted under this Plan will be exercisable in four (4) quarterly
     installments with the first quarterly installment exercisable on the date
     of grant and the three (3) quarterly installments thereafter exercisable on
     the last day of each fiscal quarter of the Company commencing with the
     first full fiscal quarter after the date of grant. Such option shall be
     exercisable in full on and after the first anniversary thereof."

4.   The phrase in the first sentence of Section 1 that reads "and who have not
received options to purchase shares of the Company's common stock, $.01 par
value per share (the "Common Stock")," is hereby deleted in its entirety.

5.   The phrase "Common Stock" in the second sentence of Section 1 is deleted
and "the common stock of the Company, $.01 par value (the "Common Stock")," is
inserted in lieu thereof.

Amendment adopted by the Board of Directors on April 28, 2000.

     The second sentence of the first paragraph of Section 5 (which is captioned
"Grant of Options") is deleted in its entirety and the following be and hereby
is inserted in lieu thereof:

     "The date of grant of each such option shall be the date on which an
     eligible Director is elected (or re-elected) and qualified as a director of
     the Company and, provided, the individual continues to serve as a Director
     of the Company on the date of the next annual meeting of the Board of
     Directors annual anniversary following his or her election (or re-election)
     the date of each annual meeting thereafter during such eligible Director's
     three-year term; provided that a Director who is elected at any time other

<PAGE>

     than the date of an annual meeting of the Board of Directors shall receive
     a pro-rata option grant for year one based upon the number of months
     remaining in the period prior to such annual meeting."

Amendment adopted by the Board of Directors on November 5, 2001.

         In Section 4, which is captioned "Shares Subject to the Plan", the
third sentence of the first paragraph which currently reads "No shares of Common
Stock which are subject of any lapsed, expired or terminated options may be made
available for reoffering under this Plan." is hereby deleted and the following
substituted in lieu thereof:

         "The shares of Common Stock which are the subject of any lapsed,
         expired or terminated options may be made available for reoffering
         under this Plan."EXHIBIT 4.1
                                                                     -----------

                  CERTIFICATE OF THE DESIGNATION, PREFERENCES,
                  RIGHTS AND LIMITATIONS OF PALWEB CORPORATION
          SERIES 2001 12% CUMULATIVE CONVERTIBLE SENIOR PREFERRED STOCK
                                       OF
                               PALWEB CORPORATION
(FILED PURSUANT TO SECTIONS 103 AND 151 OF THE DELAWARE GENERAL CORPORATION LAW)

            We, Paul A. Kruger, President, and Julie Barksdale, Secretary, of
PalWeb Corporation (the "Company"), a corporation organized and existing under
the Delaware General Corporation Law, in accordance with the provisions of
Section 151 thereof, do hereby certify:

            That pursuant to authority conferred upon the Board of Directors of
the Company by the Certificate of Incorporation of the Company, said Board of
Directors duly authorized and adopted, by unanimous written consent of the Board
of Directors dated January 4, 2002, the following resolutions providing for the
issuance of one series of the Company's preferred stock of the par value of
$0.0001 per share, to be designated "Series 2001 12% Cumulative Convertible
Senior Preferred Stock":

            "RESOLVED, that issues of series of preferred stock of the Company,
designated 'Series 2001 12% Cumulative Convertible Senior Preferred Stock'
(herein referred to as `Senior Preferred Stock'), par value $0.0001 per share
with a stated value of $10.00 per share and consisting of 700,000 shares is
hereby provided for and the powers, preferences and relative and other special
rights, and the qualifications, limitations and restrictions thereof, are hereby
fixed as follows:

            1.          Priority; Number of Shares.
                        --------------------------

            Shares of Senior Preferred Stock shall be prior to the Company's
Common Stock, $.10 par value per share ("Common Stock") and the Company's
existing outstanding convertible preferred stock, par value $0.0001 per share
("Junior Preferred Stock"), with respect to the payment of dividends and the
distribution of assets. The number of shares which shall constitute Senior
Preferred Stock shall be 700,000.

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

                        (a) The quarterly cash dividend rate of Senior Preferred
            Stock shall be $.30 on each outstanding share of such stock. Such
            preferential cash dividends shall be payable when and as declared by
            the Board of Directors, to the extent permitted by law, quarterly on
            the last day of March, June, September and December in each year
            (the "Dividend Payment Dates"), commencing March 31, 2002.

<PAGE>

                        (b) All cash dividends payable shall accrue commencing
            as of the date of original issuance, and be cumulative. Interest at
            the rate of 12% per annum shall accrue and be payable with respect
            to any amounts of unpaid cumulative cash dividends on Senior
            Preferred Stock.

                        (c) So long as any shares of the Senior Preferred Stock
            shall remain outstanding, no dividend whatsoever (other than a
            dividend payable in Common Stock) shall be declared or paid upon any
            class of stock or series thereof ranking junior to the Senior
            Preferred Stock in the payment of dividends, nor shall any shares of
            any class of stock or series thereof ranking junior to the Senior
            Preferred Stock in payment of dividends be redeemed or purchased by
            the Company or any subsidiary thereof, nor shall any monies be paid
            to or made available for a sinking fund for the redemption or
            purchase of any shares of any class of stock or series thereof
            ranking junior to the Senior Preferred Stock in payment of
            dividends, unless in each instance full cumulative cash dividends on
            all outstanding shares of the Senior Preferred Stock payable on all
            previous Dividend Payment Dates and the cash dividend on all
            outstanding shares of the Senior Preferred Stock for the then
            current quarterly dividend period shall have been paid or declared
            and sufficient funds set apart therefor.

                        (d) No dividend shall be declared or paid on any share
            or shares of any class of stock or series thereof ranking on a
            parity with the Senior Preferred Stock in respect of payment of
            dividends for any dividend period unless there shall have been paid
            on all shares then outstanding of the Senior Preferred Stock for the
            same dividend period and all prior periods.

            3.          Preference On Liquidation.
                        -------------------------

                        (a) In the event of any voluntary or involuntary
            liquidation, distribution of assets (other than the payment of
            dividends), dissolution or winding up of the Company, before any
            payment or distribution of the assets of the Company (whether
            capital or surplus) shall be made to or set apart for the holders of
            Common Stock or of any other class of stock of the Company ranking
            junior to the Senior Preferred Stock in distribution of assets upon
            liquidation, the holders of shares of the Senior Preferred Stock
            shall each be entitled to receive payment of the stated value per
            share held by them plus any accrued and unpaid dividends and
            interest thereon to the date of final distribution to such holders,
            but they shall be entitled to no further payment with respect to
            such shares.

                                       2
<PAGE>

                        (b) Nothing herein contained shall be deemed to give the
            Company the right of redemption of shares of the Senior Preferred
            Stock. Neither the merger nor consolidation of the Company into or
            with any other corporation, nor the merger or consolidation of any
            other corporation into or with the Company, nor a sale, transfer or
            lease of all or any part of the assets of the Company, shall be
            deemed to be a liquidation, dissolution or winding up of the Company
            within the meaning of this Paragraph 3.

                        (c) Written notice of any voluntary or involuntary
            liquidation, dissolution or winding up of the affairs of the
            Company, stating a payment date and the place where the
            distributable amounts shall be payable and containing a statement of
            or reference to the conversion, if any, right set forth in Paragraph
            5, shall be given, by not less than thirty (30) days prior to the
            payment date stated therein, to the holders of record of the Senior
            Preferred Stock.

                        (d) No payment on account of such liquidation,
            dissolution or winding up of the affairs of the Company shall be
            made to the holders of any class or series of stock ranking on a
            parity with the Senior Preferred Stock in respect to the
            distribution of assets, unless there shall likewise be paid at the
            same time to the holders of the Senior Preferred Stock like
            proportionate distributive amounts, ratably, in proportion to the
            full distributive amounts to which they and the holders of such
            parity stock are respectively entitled with respect to such
            preferential distributions.

            4.          Voting Rights.
                        -------------

            The holders of the Senior Preferred Stock shall not have any voting
rights, except as set forth below or as otherwise are required by law:

                        (a) If, and so often as, the Company shall fail to
            declare and pay dividends on the Senior Preferred Stock at the time
            outstanding at the rate specified for such shares for two
            consecutive Dividend Payment Dates, the holders of the Senior
            Preferred Stock will be entitled to vote as a separate voting group
            for election, as herein provided, of additional members of the Board
            of Directors of the Company (not less than 60% of the Board of
            Directors); provided, however, that the holders of the Senior
            Preferred Stock shall exercise such special voting rights only at
            the next annual meeting of shareholders or any special meeting of
            shareholders held in lieu thereof after the fourth such payment date
            at which directors are elected and at which the holders of not less
            than a majority of the shares of the Senior Preferred Stock, then
            outstanding, are present in person or by proxy; and provided further
            that the special class voting rights provided for in this
            subparagraph (a) shall remain vested in the holders of the Senior
            Preferred Stock until all accrued and unpaid dividends on the Senior
            Preferred Stock then outstanding shall have been declared and paid,
            whereupon the holders of the Senior Preferred Stock shall be
            divested of their special voting rights in respect of subsequent
            elections of directors. In no event shall any voting rights be
            created with respect to any class or series of preferred stock of
            the Company which would be senior to the voting rights of the Senior
            Preferred Stock.

                        (b) At any meeting at which the holders of the shares of
            the Senior Preferred Stock shall be entitled to elect directors, the
            holders of a majority of the outstanding shares of the Senior
            Preferred Stock, present in person or by proxy, shall be sufficient
            to constitute a quorum, and the vote of the holders of a plurality
            of such shares so present at any such meeting at which there shall
            be such a quorum shall be sufficient to elect

                                       3
<PAGE>

            additional members having a majority (not less than 60%) of the
            Board of Directors members of the Board of Directors which such
            holders are entitled to elect as herein provided. Nothing in this
            subparagraph (b) shall prevent any change otherwise permitted in the
            total number of or classifications of directors of the Company nor
            require the resignation of any director elected other than pursuant
            to this subparagraph (b). Notwithstanding any classification of the
            other directors of the Company, any directors elected by the holders
            of the Senior Preferred Stock shall be elected annually for terms
            expiring at the next succeeding annual meeting of shareholders,
            subject to the earlier termination pursuant to the provisions of
            subparagraph (c) below.

                        (c) Upon any divesting of the special class of voting
            rights of the holders of the Senior Preferred Stock in respect of
            elections of directors as provided in this Paragraph 4, the terms of
            office of all directors then in office elected by such holders shall
            terminate immediately. If the office of any director elected by such
            holders, voting as a class, becomes vacant by reason of death,
            resignation, removal from office or otherwise, the remaining
            director elected by such holders may elect a successor who shall
            holder office for the unexpired term in respect of which such
            vacancy occurred.

                        (d) No class or series of stock of the Company ranking
            senior to the Senior Preferred Stock in distribution of assets upon
            liquidation or in payment of dividends shall be authorized and
            issued by the Company without the prior approval of the holders of a
            majority of the shares of Senior Preferred Stock then outstanding.

            5.          Convertibility.
                        --------------

            Subject to subparagraph 5(m) below, shares of Senior Preferred Stock
shall be convertible into Common Stock on the following terms and conditions:

                        (a) Subject to and upon compliance with the provisions
            of this paragraph 5, the holder of any shares of Senior Preferred
            Stock shall have the right, at such holder's option, at any time or
            from time to time before the close of business on the date next
            preceding the date fixed for redemption or repurchase of such shares
            of Senior Preferred Stock (unless the Company shall default in
            payment due upon such redemption or repurchase), to convert any of
            such shares into such number of fully paid and nonassessable shares
            of Common Stock at the Conversion Price (as hereafter defined)
            therefor in effect at the time of conversion.

                        (b) Each share of Senior Preferred Stock shall be
            convertible into the number of shares of Common Stock that results
            from dividing the stated value per share of Senior Preferred Stock
            by the Conversion Price, as hereinafter defined. The Conversion
            Price as of the original date of issuance of the Senior Preferred
            Stock shall be $.0286 per share of Common Stock subject to
            adjustment from time to time as provided herein.

                                       4
<PAGE>

                        (c) The holder of any shares of Senior Preferred Stock
            may exercise the conversion right as to any part thereof by
            surrendering to the Company at the office of any transfer agent of
            the Company for Senior Preferred Stock or at the principal office of
            the Company, the certificate or certificates for the shares to be
            converted, accompanied by written notice stating that the holder
            elects to convert all or a specified portion of the shares
            represented thereby and stating the name or names (with addresses)
            in which the certificate or certificates for the shares of Common
            Stock are to be issued. Subject to the provisions of this paragraph
            5, every such notice of election to convert shall constitute a
            contract between the holder of such shares and the Company whereby
            such holder shall be deemed to subscribe for the number of shares of
            Common Stock which he will be entitled to receive upon such
            conversion and, in payment and satisfaction of such subscription, to
            surrender such shares of Senior Preferred Stock and to release the
            Company from all obligations thereon and whereby the Company shall
            be deemed to agree that the surrender of such shares and the
            extinguishment of obligations thereon shall constitute full payment
            for Common Stock so subscribed for and to be issued upon such
            conversion. Conversion shall be deemed to have been effected on the
            date when delivery of such notice and such shares is made, and such
            date is referred to herein as the "Conversion Date." As promptly as
            practicable thereafter the Company shall issue and deliver, to or
            upon the written order of such holder, a certificate or certificates
            for the number of full shares of Common Stock to which such holder
            is entitled and a check or cash with respect to any fractional
            interest in a share of Common Stock as provided in subparagraph
            5(j). The person in whose name the certificate or certificates for
            Common Stock are to be issued shall be deemed to have become a
            holder of record of such Common Stock on the applicable Conversion
            Date. Upon conversion of only a portion of the number of shares
            covered by a certificate representing shares of Senior Preferred
            Stock surrendered for conversion, the Company shall issue and
            deliver to or upon the written order of the holder of the
            certificate so surrendered for conversion, at the expense of the
            Company, a new certificate covering the number of shares of Senior
            Preferred Stock representing the unconverted portion of the
            certificate so surrendered.

                        (d) If the Company shall at any time or from time to
            time after the original issue date of Senior Preferred Stock effect
            a subdivision or combination of any outstanding Common Stock,
            including a dividend payable in Common Stock, the Conversion Price
            then in effect immediately before such subdivision or combination
            shall be proportionately adjusted by multiplying the then effective
            Conversion Price by a fraction, (i) the numerator of which shall be
            the number of shares of Common Stock issued and outstanding
            immediately prior to such subdivision or combination, and (ii) the
            denominator of which shall be the number of shares of Common Stock
            issued and outstanding immediately after such subdivision or
            combination. The number of shares of Common Stock outstanding at any
            time shall, for the purposes of this resolution, include the number
            of shares of Common Stock into which any convertible securities of
            the Company, including Senior Preferred Stock, may be converted, or
            for which any warrant, option or rights of the Company may be
            exercised or exchanged. Any adjustment under this resolution shall
            become effective at the close of business on the date the
            subdivision

                                       5
<PAGE>

            or combination becomes effective. Advance notice of events which
            would give rise to an adjustment in the Conversion Price shall be
            given to holders of Senior Preferred Stock, but failure to give such
            notice shall not affect the validity or effectiveness of such event.
            No adjustment of the Conversion Price shall be made for the issuance
            of shares of Common Stock to employees pursuant to the Company's or
            any subsidiary's stock ownership, stock option or other benefit
            plan. No adjustment of the Conversion Price will be required to be
            made in any case until cumulative adjustments amount to one percent
            or more of the Conversion Price. The Company reserves the right to
            make such changes in the Conversion Price in addition to those
            required in the foregoing provisions as the Company in its
            discretion shall determine to be advisable in order that certain
            stock-related distributions hereafter made by the Company to its
            shareholders shall not be taxable.

                        (e) In the event the Company at any time or from time to
            time after the original issue date of Senior Preferred Stock shall
            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 in (i) evidences of indebtedness of the
            Company, (ii) assets of the Company (other than cash dividends or
            distributions paid out of retained earnings), or (iii) securities of
            the Company other than Common Stock, then and in each such event
            provision shall be made so that the holders of Senior Preferred
            Stock shall receive upon conversion thereof, in addition to the
            number of shares of Common Stock receivable thereupon, the amount of
            such evidences, assets or securities that they would have received
            had they held, on such record date, the maximum number of shares of
            Common Stock into which their Senior Preferred Stock could then have
            been converted. The Company reserves the right to make such changes
            in the Conversion Price in addition to those required in the
            foregoing provisions as the Company in its discretion shall
            determine to be advisable in order that certain stock-related
            distributions hereafter made by the Company to its shareholders
            shall not be taxable.

                        (f) If Common Stock issuable upon the conversion of
            Senior Preferred Stock shall be changed into the same or a different
            number of shares of any class or classes of stock, whether by
            capital reorganization, reclassification or otherwise (other than a
            subdivision or combination of shares or stock dividend provided for
            above, or a reorganization, merger, consolidation or sale of assets
            provided for elsewhere in this Paragraph 6), then and in each such
            event the holders of Senior Preferred Stock shall have the right
            thereafter to convert each such share into the kind and amounts of
            shares of stock and other securities and property receivable upon
            such reorganization, reclassification or other change, by holders of
            the maximum number of shares of Common Stock into which such Senior
            Preferred Stock could have been converted immediately prior to such
            reorganization, reclassification or change, all subject to further
            adjustment as provided herein.

                        (g) If at any time or from time to time there shall be a
            capital reorganization of Common Stock (other than a subdivision,
            combination, reclassification or exchange of

                                       6
<PAGE>

            shares provided for in this Paragraph 6) or a merger or
            consolidation of the Company with or into another corporation, or
            the sale of all or substantially all the Company's properties and
            assets or capital stock to any other person, then, as a part of such
            reorganization, merger, consolidation or sale, provision shall be
            made so that each holder of Senior Preferred Stock shall thereafter
            be entitled to receive, upon conversion of Senior Preferred Stock,
            the number of shares of stock or other securities or property of the
            Company, or of the successor corporation resulting from such merger
            of consolidation or sale as though conversion of Senior Preferred
            Stock had occurred immediately prior to such event, provided such
            holder (x) is not the entity with which the Company consolidated or
            into which the Company merged or which merged into the Company or to
            which such sale or transfer was made, as the case may be, or an
            affiliate of such an entity and (y) failed to exercise its rights of
            election, if any, as to the kind or amount of securities, cash and
            other property receivable upon such consolidation, merger, sale or
            transfer. In any such case, appropriate adjustment shall be made in
            the application of the provisions of this Paragraph 6 with respect
            to the rights of the holders of Senior Preferred Stock after the
            reorganization, merger, consolidation or sale to the end that the
            provisions of this Paragraph 6 (including adjustment of the
            Conversion Price then in effect and the number of shares purchasable
            upon conversion of Senior Preferred Stock) shall be applicable after
            that event as nearly equivalent as may be practicable.

                        (h) Senior Preferred Stock shall not be subject to any
            sinking fund for the purchase or redemption of shares.

                        (i) In each case of an adjustment or readjustment of a
            Conversion Price for Common Stock issuable upon conversion of Senior
            Preferred Stock, the Company, at its expense, shall cause
            independent certified public accountants of recognized standing
            selected by the Company (who shall be the independent certified
            public accountants then reviewing or auditing the books of the
            Company) to compute such adjustment or readjustment in accordance
            herewith and prepare a certificate showing such adjustment or
            readjustment, and shall provide a copy of such certificate to each
            registered holder of that Senior Preferred Stock in the manner in
            which notices are to be given hereunder. The certificate shall set
            forth such adjustment or readjustment and show in detail the facts
            upon which such adjustment or readjustment is based.

                        (j) No fractional shares of Common Stock or scrip shall
            be issued upon conversion of shares of Senior Preferred Stock. If
            more than one share of Senior Preferred Stock shall be surrendered
            for conversion at any one time by the same holder, the number of
            full shares of Common Stock issuable upon conversion thereof shall
            be computed on the basis of the aggregate number of shares of Senior
            Preferred Stock so surrendered. Instead of any fractional share of
            Common Stock which would otherwise be issuable upon conversion of
            any shares of Senior Preferred Stock, the Company shall pay a cash
            adjustment in respect of such fractional interest in an amount equal
            to that fractional interest of the then Current Market Price. The
            "Current Market Price" at any date shall mean the price per share of
            Common Stock on such date determined by the

                                       7
<PAGE>

            Board of Directors as provided below. The Current Market Price shall
            be the average of the daily closing prices per share of Common Stock
            for thirty (30) consecutive business days ending no more than
            fifteen (15) business days before the day in question (as adjusted
            for any stock dividend, split, combination or reclassification that
            took effect during such thirty (30) business day period). The
            closing price for each day shall be the last reported sales price
            regular way or, in case no such reported sales take place on such
            day, the average of the last reported bid and asked prices regular
            way, in either case on the principal national securities exchange on
            which Common Stock is listed or admitted to trading, or if not
            listed or admitted to trading on any national securities exchange,
            the average of the highest bid and the lowest asked prices quoted on
            The Nasdaq Stock Market; provided, however, that if Common Stock is
            not traded in such manner that the quotations referred to above are
            available for the period required hereunder, Current Market Price
            per share of Common Stock shall be deemed to be the fair value as
            determined by the Board of Directors, irrespective of any accounting
            treatment.

                        (k) If the shares of Senior Preferred Stock shall be
            called for redemption, the right to convert such shares shall
            terminate and expire at the close of business on the last business
            day preceding the redemption date.

                        (l) The Company shall pay any tax in respect of the
            issue of stock certificates on conversion of shares of Senior
            Preferred Stock. The Company shall not, however, be required to pay
            any tax which may be payable in respect of any transfer involved in
            the issue and delivery of stock in a name other than that of the
            holder of the shares converted, and the Company shall not be
            required to issue or deliver any such stock certificate unless and
            until the person or persons requesting the issuance thereof shall
            have paid to the Company the amount of any such tax or shall have
            established to the satisfaction of the Company that such tax has
            been paid.

                        (m) The Company shall, as soon as reasonably
            practicable, propose to its shareholders approval of an amendment to
            the Company's certificate of incorporation increasing the number of
            authorized shares of Common Stock to an amount which is at least
            sufficient to have available the full number of shares of Common
            Stock that would be issuable upon an exercise in full of all of the
            outstanding shares of Senior Preferred Stock. Thereafter, the
            Company shall at all times reserve and keep available out of its
            authorized Common Stock the full number of shares of Common Stock
            deliverable upon the conversion of all outstanding shares of Senior
            Preferred Stock and shall take all such action as may be required
            from time to time in order that it may validly and legally issue
            fully paid and nonassessable shares of Common Stock upon conversion
            of Senior Preferred Stock. As a condition precedent to the taking of
            any action which would cause an adjustment to the Conversion Price
            for Senior Preferred Stock, the Company will take such corporate
            action as may, in the opinion of its counsel, be necessary to
            authorize such number of shares of Common Stock as shall be issuable
            pursuant to such adjusted Conversion Price.

                                       8
<PAGE>

                        (n) Shares of Senior Preferred Stock converted shall not
            be reissued as shares of Senior Preferred Stock, but shall assume
            the status of authorized but unissued shares of preferred stock of
            the Company.

                        (o) If any shares of Common Stock to be reserved for the
            purpose of conversion of shares of Senior Preferred Stock require
            registration with or approval of any governmental authority under
            any federal or state law before such shares may be validly issued or
            delivered upon conversion, then the Company will in good faith and
            as expeditiously as possible endeavor to secure such registration or
            approval, as the case may be. If, and so long as, any shares of
            Common Stock into which the shares of Senior Preferred Stock are
            then convertible are listed on any national securities exchange or
            The Nasdaq Stock Market, the Company will, if permitted by the rules
            of such exchange, list and keep listed on such exchange or The
            Nasdaq Stock Market, as the case may be, upon official notice of
            issuance, all shares of Common Stock issuable upon conversion.

                        (p) All shares of Common Stock which may be issued upon
            conversion of the shares of Senior Preferred Stock will upon
            issuance by the Company be duly and validly issued, fully paid and
            nonassessable and free from all taxes, liens and charges with
            respect to the issuance thereof and the Company shall take no action
            which will cause a contrary result.

            6.          Sinking Fund.
                        ------------

            No sinking fund will be established for the retirement or redemption
of shares of the Senior Preferred Stock.

            7.          Authorized Shares.
                        -----------------

            The number of authorized shares of Senior Preferred Stock may be
increased or decreased by further resolutions duly adopted by the Board of
Directors of the Company and the filing of a certificate pursuant to the
provisions of the Delaware General Corporation Law stating that such increase or
decrease has been so authorized.

            8.          General Provisions.
                        ------------------

                        (a) Any notice required by the provisions of this
            resolution to be given to holders of record of the Senior Preferred
            Stock shall be deemed given when personally delivered to such holder
            or five business days after the same has been deposited in the
            United States mail, certified or registered mail, return receipt
            requested, postage prepaid, and addressed to that holder of record
            at its address appearing on the books of the Company.

                        (b) The Company shall not amend the certificate of
            incorporation of the Company or participate in any reorganization,
            recapitalization, transfer of assets,

                                       9
<PAGE>

            consolidation, merger, dissolution, issue or sale of securities or
            any other voluntary action, for the purpose of avoiding or seeking
            to avoid the observance or performance of any of the terms to be
            observed or performed hereunder by the Company.

            IN WITNESS WHEREOF, said PalWeb Corporation has caused this
Certificate to be signed by Paul A. Kruger, as President, and its corporate seal
to be hereunto affixed and attested by Julie Barksdale, as Secretary, this 4th
day of January, 2002, and each of said persons by his signature hereto affirms
that this Certificate is his act and deed and the act and deed of said Company,
and that the facts stated therein are true.

                                             PALWEB CORPORATION

                                             By /s/ Paul A. Kruger
                                               ---------------------------------
                                               Paul A. Kruger, President

Attest:

/s/ Julie Barksdale
--------------------------------
Julie Barksdale, Secretary

                                       10

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