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                                                                    EXHIBIT 10.4
                                                                    ------------

                              AMENDMENT NO. 2 TO
                              THE PMI GROUP, INC.
                             EQUITY INCENTIVE PLAN

     THE PMI GROUP, INC., having adopted The PMI Group, Inc. Equity Incentive
Plan (the "Plan") and having restated the Plan effective as of August 16, 1999,
and having amended the restated Plan on one subsequent occasion, hereby amends
the restated Plan effective as of February 18, 1999, by deleting the phrase
"Years of Benefit Accrual Service" from clause (b) of the first sentence of
Section 2.31 thereof and substituting the phrase "Years of Vesting Service"
therefor.

     IN WITNESS WHEREOF, The PMI Group, Inc., by its duly authorized officer,
has executed this Amendment No. 2 to the restated Plan on the date indicated
below.

                                           THE PMI GROUP, INC.

                                           By:  /s/ Charles Broom
                                                Vice President, Human Resources

Dated: December 12, 2000EXHIBIT 14 (a)(2)(4)(i)

                           CERTIFICATE OF DESIGNATION

                                       OF

                              SERIES A CONVERTIBLE
                                 PREFERRED STOCK

                                       OF

                          FRANKLIN CAPITAL CORPORATION

                            ------------------------
                         Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware
                            ------------------------

Franklin Capital Corporation, a Delaware corporation (the "Company"), certifies
that pursuant to the authority contained in its Certificate of Incorporation, as
amended (the "Certificate of Incorporation"), and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Company at a meeting duly called and
held on February 22, 2000 duly approved and adopted the following resolution,
which resolution remains in full force and effect on the date hereof:

RESOLVED, that pursuant to the authority vested in the Board of Directors by the
Certificate of Incorporation, the Board of Directors does hereby designate,
create, authorize and provide for the issue of a series of preferred stock
having a par value of $1.00 per share, with a liquidation preference of $100 per
share (the "Liquidation Preference"), which shall be designated as the Series A
Convertible Preferred Stock (the "Preferred Stock"), consisting of 500,000
shares having the following voting powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions:

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1. Ranking.

The Preferred Stock shall, with respect to distributions upon the liquidation,
winding-up and dissolution of the Company, rank (i) senior to all classes of
Common Stock of the Company and to each other class of capital stock or series
of preferred stock other than the Preferred Stock issued after the Initial
Closing Date by the Board of Directors, the terms of which do not expressly
provide that it ranks senior to or on a parity with the Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company (collectively referred to with the Common Stock of
the Company as "Junior Securities"); (ii) on a parity with any additional shares
of Preferred Stock issued by the Company after the Initial Closing Date and any
other class of capital stock or any additional series of preferred stock issued
by the Company established after the Initial Closing Date by the Board of
Directors, the terms of which expressly provide that such class or series will
rank on a parity with the Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company
(collectively referred to as "Parity Securities"); and (iii) junior to each
class of capital stock or series of preferred stock other than the Preferred
Stock issued by the Company after the Initial Closing Date by the Board of
Directors, the terms of which expressly provide that such class or series will
rank senior to the Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Securities"). Notwithstanding the
foregoing, a security shall not be deemed to be a "Senior Security" solely
because such security has a stated dividend or interest coupon.

2. Dividends.

     (a) So long as any shares of Preferred Stock shall be outstanding, the
holders of such Preferred Stock shall be entitled to receive out of any funds
legally available therefor, when, as and if declared by the Board of Directors
of the Company, preferential dividends in cash at a rate of 7% per annum on the
Liquidation Preference hereunder, payable quarterly on the first Business Day of
each calendar quarter on a pro rata basis with any Parity Securities. Such
dividends shall be cumulative and begin to accrue from the date of issuance of
such shares, whether or not declared and whether or not there shall be net
profits or net assets of the Company legally available for the payment of those
dividends.

     (b) So long as any shares of Preferred Stock shall be outstanding, no
dividend whatsoever (except a dividend payable in Common Stock) shall be paid or
declared, no distribution shall be made, on account of any Junior Securities of
the Company and no Junior Securities shall be purchased unless (i) all dividends
in respect of the Preferred Stock for all past and current dividend periods have
been paid and all amounts in respect of the redemption of the Preferred Stock
required to be paid herein have been paid in full and (ii) such Junior
Securities have an "asset coverage" (as such term is used under the Investment
Company Act of 1940, as amended (the "Investment Company Act")) of at least 200
percent after deducting the amount of such dividend, distribution or purchase
price, as the case may be.

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3. Conversion Rights.

     (a) Optional Conversion of Preferred Stock into Common Stock.

A holder of shares of Preferred Stock may, commencing on or after the date
hereof and prior to the tenth anniversary of the Initial Closing Date, convert
such shares into Common Stock at any time, unless previously redeemed, at the
option of the holder thereof. The Preferred Stock will cease to be convertible
after the tenth anniversary of the Initial Closing Date. For the purposes of
conversion, each share of Preferred Stock shall be valued at the Liquidation
Preference, which shall be divided by the greater of $20 or a rate equal to 15%
above the average closing price for the ten consecutive Trading Days prior to
the Initial Closing Date (the "Conversion Rate") to determine the number of
shares of Common Stock issuable upon conversion. Immediately following such
conversion, the rights of the holders of converted Preferred Stock shall cease
and the persons entitled to receive the Common Stock upon the conversion of
Preferred Stock shall be treated for all purposes as having become the owners of
such Common Stock.

     (b) Mechanics; Transfer Tax; Conversion Rate

     (i) To convert the Preferred Stock, a holder must (A) surrender the
certificate or certificates evidencing the shares of Preferred Stock to be
converted, duly endorsed in a form satisfactory to the Company, at the office of
the Company or Transfer Agent for the Preferred Stock, (B) notify the Company at
such office that holder elects to convert the Preferred Stock and the number of
shares holder wishes to convert, (C) state in writing the name or names in which
holder wishes the certificate or certificates for shares of Common Stock to be
issued, and (D) pay any transfer or similar tax if required by clause (iii)
below. In the event that holder fails to notify the Company of the number of
shares of Preferred stock which holder wishes to convert, holder shall be deemed
to have elected to convert all shares represented by the certificate or
certificates surrendered for conversion. The date on which holder satisfies all
those requirements is the "Conversion Date." As soon as practicable thereafter,
the Company shall deliver a certificate for the number of full shares of Common
Stock issuable upon the conversion, and a new certificate representing the
unconverted portion, if any, of the shares of Preferred Stock represented by the
certificate or certificates surrendered for conversion. The person in whose name
the Common Stock certificate is registered shall be treated as the stockholder
of record on and after the Conversion Date.

     (ii) The Company shall not issue any fractional shares of Common Stock upon
conversion of the Preferred Stock. Instead the Company shall pay a cash
adjustment based upon the closing price of the Common Stock on the principal
securities exchange on which the Common Stock is then listed on the Business Day
prior to the Conversion Date.

     (iii) If a holder converts shares of Preferred Stock, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on the issue of
shares of Common Stock

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upon the  conversion.  However,  the  holder  shall pay any such tax that is due
because the shares are issued in a name other than the holder's name.

     (iv) The Company has reserved and shall continue to reserve out of its
authorized but unissued Common Stock or its Common Stock held in treasury enough
shares of Common Stock to permit the conversion, in full, of the Preferred Stock
to Common Stock. All shares of Common Stock that may be issued upon conversion
of the Preferred Stock shall be fully paid and nonassessable. The Company shall
endeavor to comply with all securities laws regulating the offer and delivery of
shares of Common Stock upon conversion of the Preferred Stock and shall endeavor
to list such shares of Common Stock on each national securities exchange or
automated quotation system on which the Common Stock is listed.

     (v) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate shall be
reduced, and, conversely, in case the outstanding shares of Common Stock shall
be combined into a smaller number of shares of Common Stock, the Conversion Rate
shall be increased by the product of the Conversion Rate and a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such subdivision or combination, as the case may be, and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such subdivision or combination, as the case may
be. Such reduction or increase, as the case may be, shall become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.

     (vi) If the Company at any time while the Preferred Stock, or any portion
thereof, remains outstanding, shall change any of the securities as to which
conversion rights under this Certificate of Designation exist into the same or a
different number of securities of any other class or classes, the Preferred
Stock shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the conversion rights under this
Certificate of Designation immediately prior to such reclassification or other
change and the Conversion Rate of the Preferred Stock shall be appropriately
adjusted.

     (vii) Shares issuable on conversion of shares of Preferred Stock shall
include only shares of the class designated as Common Stock of the Company on
the Initial Closing Date or shares of any class or classes resulting from any
reclassification thereof and which have no preferences in respect of dividends
or amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company and which are not subject to redemption
by the Company; provided that, if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.

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     (viii) No adjustment  in the  Conversion  Rate shall reduce the  Conversion
Rate below the then par value of the Common Stock.

     (ix) Whenever the Conversion Rate is adjusted, the Company shall promptly
mail to holders of Preferred Stock, first class, postage prepaid, a notice of
the adjustment. The Company shall file with the Transfer Agent for the Preferred
Stock, if any, a certificate from the Company's chief financial officer briefly
stating the facts requiring the adjustment and the manner of computing it. In
the event of any dispute thereon, the opinion of the Company's independent
public accountants, if accepted by the Board of Directors of the Company, shall
be conclusive and binding on the holders of the Preferred Stock absent manifest
error.

     (x) The Company from time to time may reduce the Conversion Rate if it
considers such reductions to be advisable in order that any event treated for
federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the holders of Common Stock by any amount.

     (xi) If:

     (A) the Company  takes any action which would  require an adjustment in the
     Conversion Rate pursuant to paragraph 3(b)(v) or 3(b)(vi) above;

     (B) the Company consolidates or merges with, or transfers all or
     substantially all of its assets to, another corporation (other than a
     wholly owned subsidiary of the Company), and stockholders of the Company
     must approve the transaction; or

     (C) there is a dissolution or liquidation of the Company;

the Company shall mail to the holders of the Preferred Stock, first class,
postage prepaid, a notice stating the proposed record or effective date, as the
case may be. The Company shall mail the notice at least 10 days before such
date. However, failure to mail the notice or any defect in it shall not affect
the validity of any transaction referred to in clause (A), (B) or (C) of this
paragraph 3(b)(xi).

     (xii) In the case of any consolidation of the Company or the merger of the
Company with or into any other entity or the sale or transfer of all or
substantially all the assets of the Company pursuant to which the Common Stock
is converted into other securities, cash or assets, then, upon consummation of
such transaction, each share of Preferred Stock shall automatically become
convertible into the kind and amount of securities, cash or other assets
receivable upon the consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock into which such share of Preferred Stock might
have been converted immediately prior to such consolidation, merger, transfer or
sale (assuming such holder of Common Stock failed to exercise any rights of
election and received per share the kind and amount of consideration receivable
per share by a plurality of non electing shares). Appropriate

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adjustment (as determined by the Board of Directors of the Company) shall be
made in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of Preferred Stock, to the end
that the provisions set forth herein (including provisions with respect to
changes in and other adjustment of the Conversion Rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other securities or property thereafter deliverable upon the conversion of
Preferred Stock. If this paragraph 3(b)(xii) applies, paragraph 3(b)(v) and
3(b)(vi) do not apply.

     (xiii) In any case in which this paragraph 3 shall require that an
adjustment as a result of any event becomes effective from and after a record
date, the Company may elect to defer until after the occurrence of such event
the issuance to the holder of any shares of Preferred Stock converted after such
record date and before the occurrence of such event of the additional shares of
Common Stock issuable upon such conversion over and above the shares issuable on
the basis of the Conversion Rate in effect immediately prior to adjustment;
provided, however, that if such event shall not have occurred and authorization
of such event shall be rescinded by the Company, the Conversion Rate shall be
recomputed immediately upon such rescission to the price that would have been in
effect had such event not been authorized, provided that such rescission is
permitted by and effective under applicable laws.

4. Liquidation Preference.

     Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company or reduction or decrease in its capital stock resulting in a
distribution of assets to the holders of any class or series of the Company's
capital stock, each holder of shares of the Preferred Stock will be entitled to
payment out of the assets of the Company available for distribution of an amount
equal to the Liquidation Preference per share of Preferred Stock held by such
holder, plus accrued and unpaid dividends, if any, to the date fixed for
liquidation, dissolution, winding-up or reduction or decrease in capital stock,
before any distribution is made on any Junior Securities, including, without
limitation, Common Stock of the Company. After payment in full of the
Liquidation Preference and all accrued and unpaid dividends, if any, to which
holders of Preferred Stock are entitled, such holders will not be entitled to
any further participation in any distribution of assets of the Company. If, upon
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company, the amounts payable with respect to the Preferred Stock and all other
Parity Securities are not paid in full, the holders of the Preferred Stock and
the Parity Securities will share equally and ratably in any distribution of
assets of the Company in proportion to the full liquidation preference and
accumulated and unpaid dividends, if any, to which each is entitled. However,
neither the voluntary sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more Persons will be deemed to be a voluntary or involuntary
liquidation, dissolution or winding-up of the Company or reduction or decrease
in capital stock, unless such sale, conveyance, exchange or transfer shall be in
connection with a liquidation, dissolution or winding-up of the business of the
Company or reduction or decrease in capital stock.

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5. Redemptions.

     (a) The Preferred Stock shall not be redeemed by the Company prior to the
first anniversary of the Initial Closing Date.

     (b) The Preferred Stock may be redeemed by the Company at any time on or
after the one year anniversary of the Initial Closing Date, in whole or in part,
on a pro rata basis, if at any time on or after the Initial Closing Date the
average trading price of the Common Stock for at least twenty days during any
thirty consecutive Trading Days is equal to or in excess of 150% of the
Conversion Rate, provided, however, that the holders of the Preferred Stock
shall have the right, up until 5 p.m., New York time, on the third Business Day
preceding the Redemption Date to convert the Preferred Stock to Common Stock at
the Conversion Rate. If any holder fails to convert the Preferred Stock during
the period contemplated above, the Company may redeem the Preferred Stock in
cash at a price per share equal to the Liquidation Preference plus any accrued
and unpaid dividends thereon through to the date of such redemption plus any
dividends which were scheduled to accrue thereon up through the end of the
calendar year of such redemption.

     (c) The Preferred Stock may be redeemed by the Company at any time on or
after the three year anniversary of the Initial Closing Date (whether or not the
circumstances described in subparagraph (b) shall have occurred prior to such
time), at a redemption price in cash equal to the Liquidation Preference per
share of Preferred Stock plus any accrued and unpaid dividends thereon through
the date of such redemption.

     (d) At least 15 Business Days prior to the date fixed for any redemption of
the Preferred Stock (the "Redemption Date"), written notice (the "Redemption
Notice") shall be given by first-class mail, postage prepaid, to each holder of
record on the record date fixed for such redemption of the Preferred Stock at
such holder's address as the same appears on the stock register of the Company,
provided that failure to give such notice or any deficiency therein shall not
affect the validity of the procedure for the redemption of any shares of
Preferred Stock to be redeemed except as to the holder or holders to whom the
Company has failed to give said notice or except as to the holder or holders
whose notice was defective. The Redemption Notice shall state:

            (i) whether the redemption is pursuant to subparagraph (b) or (c)
                hereof;

           (ii) the redemption price;

          (iii) whether all or less than all the outstanding shares of the
                Preferred Stock are to be redeemed and the total number of
                shares of the Preferred Stock being redeemed;

          (iv)  the number of shares of Preferred Stock held, as of the
                appropriate record date, by the holder that the Company intends
                to redeem;

          (v)   the Redemption Date;

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     (vi) that the holder has the right to convert the Preferred Stock to Common
Stock until 5 p.m., New York time, on the third Business Day preceding the
Redemption Date by complying with the provisions of Section 3 hereof;

     (vii) that the holder is to surrender to the Company, at the place or
places where certificates for shares of Preferred Stock are to be surrendered
for redemption, in the manner and at the price designated, its certificate or
certificates representing the shares of Preferred Stock to be redeemed; and

     (viii) that dividends on the shares of the Preferred Stock to be redeemed
shall cease to accrue on the Redemption Date unless the Company defaults in the
payment of the redemption price.

     (e) Each holder of Preferred Stock shall surrender the certificate or
certificates representing such shares of Preferred Stock to the Company, duly
endorsed, in the manner and at the place designated in the Redemption Notice and
on the date of redemption. The full redemption price for such shares of
Preferred Stock shall be payable in cash to the Person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.

     (f) Unless the Company defaults in the payment in full of the applicable
redemption price, dividends on the Preferred Stock called for redemption shall
cease to accumulate on the Redemption Date, and the holders of such redeemed
shares shall cease to have any further rights with respect thereto from and
after the Redemption Date, other than the right to receive the redemption price,
without interest.

6. Voting Rights.

     (a) The holders of Preferred Stock shall be entitled to notice of all
stockholders meetings in accordance with the Company's bylaws and the Delaware
General Corporation Law (the "DGCL"), and except as otherwise required by
applicable law, the holders of the Preferred Stock shall be entitled to vote on
all matters submitted to the stockholders for a vote, voting together with the
holders of the Common Stock as a single class, with each share of Preferred
Stock entitled to one vote per share.

     (b) The holders of the Preferred Stock, voting separately as one class,
shall have the right to elect (i) two directors at all times during which the
Preferred Stock is outstanding and (ii) a majority of the directors, if at any
time dividends on the Preferred Stock shall be unpaid in an amount equal to two
full years' dividends on such securities, and to continue to be so represented
until all dividends in arrears shall have been paid or otherwise provided for
(subject, however to the prior rights, if any, of the holders of any class of
Senior Securities outstanding.) If any

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vacancies shall exist in the offices of directors elected by the holders of the
Preferred Stock, such vacancy shall be filled as follows:

     (i) Upon the written request of the holders of record of at least 25% of
the shares of Preferred Stock then outstanding addressed to the Secretary of the
Company, a proper officer of the Company shall call a special meeting of the
holders of Preferred Stock for the purpose of electing the directors which such
holders are entitled to elect. If such meeting shall not be called by the proper
officer of the Company within 30 days after personal service of said written
request upon the Secretary of the Company, or within 30 days after mailing the
same within the United States by certified mail, addressed to the Secretary of
the Company at its principal executive offices, then the holders of record of at
least 25% of the outstanding shares of the Preferred Stock may designate in
writing one of their number to call such meeting at the expense of the Company,
and such meeting may be called by the Person so designated upon the notice
required for the annual meetings of stockholders of the Company and shall be
held at the place for holding the annual meetings of stockholders or such other
place in the United States as shall be designated in such notice.
Notwithstanding the provisions of this subparagraph, no such special meeting
shall be called if any such request is received less than 60 days before the
date fixed for the next ensuing annual or special meeting of stockholders of the
Company. Any holder of shares of the Preferred Stock so designated shall have,
and the Company shall provide, access to the lists of holders of shares of the
Preferred Stock for purposes of calling a meeting pursuant to the provisions of
this subparagraph.

     (ii) At any meeting held for the purpose of electing directors at which the
holders of Preferred Stock shall have the right to elect directors, the presence
in person or by proxy of the holders of at least a majority of the holders of
the Preferred Stock present at such meeting, or represented by proxy, shall have
the right to elect directors.

     (iii) Any vacancy occurring in the office of a director elected by the
holders of the Preferred Stock may be filled by the remaining director elected
by such holders unless and until such vacancy shall be filled by such holders.

     (c) The Company shall not, without the affirmative vote or consent of the
holders of at least a majority of the shares of Preferred Stock then outstanding
voting as one class:

          (i) amend or otherwise alter this Certificate of Designation or the
     Certificate of Incorporation in any manner that under the DGCL or the
     Investment Company Act requires the prior vote as a separate class of the
     holders of Preferred Stock;

          (ii) take any action which detracts from the voting powers,
     preferences and relative, participating, optional and other special rights,
     and qualifications, limitations, and restrictions of the Preferred Stock;
     provided, however, that the Company shall be entitled, without the consent
     of any holders of Preferred Stock, to make additional issuances of
     Preferred Stock, Senior Securities, Parity Securities or Junior Securities;

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          (iii) waive compliance with any provision of this Certificate of
     Designation; or

          (iv) complete any plan of reorganization adversely affecting the
     Preferred Stock or take any of the actions enumerated in Section 13(a) of
     the Investment Company Act.

     (d) Without the consent of each holder affected, an amendment or waiver of
the Company's Certificate of Incorporation or of this Certificate of Designation
may not (with respect to any shares of Preferred Stock held by a non-consenting
holder):

          (i) alter the voting rights with respect to the Preferred Stock or
     reduce the number of shares of Preferred Stock whose holders must consent
     to an amendment, supplement or waiver;

          (ii) reduce the Liquidation Preference or alter the provisions with
     respect to the redemption of the Preferred Stock;

          (iii) alter in any manner the conversion rights of the holders of
     Preferred Stock set forth in paragraph 3 hereof;

          (iv) reduce the rate of or change the time for payment of dividends on
     any share of Preferred Stock;

          (v) waive the consequences of any failure to pay dividends on the
     Preferred Stock;

          (vi) make any share of Preferred Stock payable in any form other than
     as stated in this Certificate of Designation;

          (vii) make any change in the provisions of this Certificate of
     Designation relating to waivers of the rights of holders of Preferred Stock
     to receive the Liquidation Preference and dividends on the Preferred Stock;

          (viii) waive a redemption payment with respect to any share of
     Preferred Stock; or

          (ix) make any change in the foregoing amendment and waiver provisions.

     (e) The Company in its sole discretion may without the vote or consent of
any holders of the Preferred Stock amend or supplement this Certificate of
Designation:

          (i) to cure any ambiguity, defect or inconsistency in any manner that
     does not adversely affect the holders of Preferred Stock;

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          (ii) to provide for uncertificated Preferred Stock in addition to or
     in place of certificated Preferred Stock; or

          (iii) to make any change that would provide any additional rights or
     benefits to the holders of the Preferred Stock or that does not adversely
     affect the rights under this Certificate of Designation of any such holder.

7. Exclusion of Other Rights.

     Except as may otherwise be required by law, the shares of Preferred Stock
shall not have any voting powers, preferences and relative, participating,
optional or other special rights, other than those specifically set forth in
this resolution (as such resolution may be amended from time to time) and in the
Certificate of Incorporation. The shares of Preferred Stock shall have no
preemptive or subscription rights.

8. Headings of Subdivisions.

     The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.

9. Severability of Provisions.

     If any voting powers, preferences and relative, participating, optional and
other special rights of the Preferred Stock and qualifications, limitations and
restrictions thereof set forth in this resolution (as such resolution may be
amended from time to time) is invalid, unlawful or incapable of being enforced
by reason of any rule of law or public policy, all other voting powers,
preferences and relative, participating, optional and other special rights of
Preferred Stock and qualifications, limitations and restrictions thereof set
forth in this resolution (as so amended) which can be given effect without the
invalid, unlawful or unenforceable voting powers, preferences and relative,
participating, optional or other special rights of Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect and no voting powers, preferences and relative,
participating, optional or other special rights of Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.

10. Re-issuance of Preferred Stock.

     Shares of Preferred Stock that have been issued and reacquired in any
manner, including shares purchased or redeemed or exchanged or converted, shall
(upon compliance with any applicable provisions of the laws of Delaware) have
the status of authorized but unissued shares of preferred stock of the Company
undesignated as to series and may be designated or re-designated and issued or
reissued, as the case may be, as part of any series of preferred stock of

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the Company, provided that any issuance of such shares as Preferred Stock must
be in compliance with the terms hereof.

11. Mutilated or Missing Preferred Stock Certificates.

     If any of the Preferred Stock certificates shall be mutilated, lost, stolen
or destroyed, the Company shall issue, in exchange and in substitution for and
upon cancellation of the mutilated Preferred Stock certificate, or in lieu of
and substitution for the Preferred Stock certificate lost, stolen or destroyed,
a new Preferred Stock certificate of like tenor and representing an equivalent
amount of shares of Preferred Stock, but only upon receipt of evidence of such
loss, theft or destruction of such Preferred Stock certificate and indemnity, if
requested, satisfactory to the Company and the Transfer Agent (if other than the
Company).

12. Certain Definitions.

     As used in this Certificate of Designation, the following terms shall have
the following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:

     "Business Day" means any day except a Saturday, a Sunday, or any day on
which banking institutions in New York, New York are required or authorized by
law or other governmental action to be closed.

     "Initial Closing Date" means the date on which the first shares of
Preferred Stock are originally issued by the Company under this Certificate of
Designation pursuant to that certain Preferred Stock Purchase Agreement dated
February 22, 2000 between the Company and the signatories thereto.

     "Common Stock" means the Common Stock, par value $1.00 per share, of the
Company as presently constituted.

     "Conversion Date shall have the meaning set forth in Section 3(b)(i).

     "Conversion Rate" shall have the meaning set forth in Section 3(a).

     "Person" shall include without limitation an individual, a partnership, a
company, an association, a joint stock company, a limited liability company, a
trust, a joint venture, an unincorporated organization and a governmental
authority.

     "Trading Day" means any day on which the American Stock Exchange or other
applicable stock exchange or market is open for business.

     "Transfer Agent" shall be the Company unless and until a successor is
selected by the Company.

                                       12

<PAGE>

IN WITNESS WHEREOF,  the Company has caused this certificate to be duly executed
by Spencer L. Brown, Secretary of the Company, this 22nd day of February, 2000.

FRANKLIN CAPITAL CORPORATION

By: /s/
       ----------------------------
       Spencer L. Brown
       Secretary

                                       13

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