<PAGE>

                                                                     Exhibit 4.3
                                                                  Execution Copy
________________________________________________________________________________

                               SALE AND SERVICING

                                    AGREEMENT

                                      among

                           FRANKLIN AUTO TRUST 2001-2
                                     Issuer,

                            FRANKLIN RECEIVABLES LLC
                                     Seller,

                          FRANKLIN CAPITAL CORPORATION
                                    Servicer,

                                       and

                            FRANKLIN RESOURCES, INC.,

                                 Representative

                          Dated as of December 1, 2001

________________________________________________________________________________

<PAGE>

                                Table of Contents
                                -----------------

<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>                                                                                           <C>
                                            ARTICLE I


                                           Definitions

SECTION 1.1       Definitions.............................................................       1
SECTION 1.2       Other Definitional Provisions...........................................      18

                                           ARTICLE II


                                    Conveyance of Receivables

SECTION 2.1       Conveyance of Receivables...............................................      19

                                           ARTICLE III


                                         The Receivables

SECTION 3.1       Representations and Warranties of Seller................................      19
SECTION 3.2       Repurchase upon Breach..................................................      23
SECTION 3.3       Custody of Receivables Files............................................      24
SECTION 3.4       Duties of Servicer as Custodian.........................................      25
SECTION 3.5       Instructions; Authority To Act..........................................      27
SECTION 3.6       Custodian's Indemnification.............................................      27
SECTION 3.7       Effective Period and Termination........................................      27

                                           ARTICLE IV


                           Administration and Servicing of Receivables

SECTION 4.1       Duties of Servicer......................................................      28
SECTION 4.2       Collection and Allocation of Receivable Payments........................      28
SECTION 4.3       Realization upon Receivables............................................      28
SECTION 4.4       Financed Vehicle Insurance..............................................      28
SECTION 4.5       Maintenance of Security Interests in Financed Vehicles..................      28
SECTION 4.6       Covenants of Servicer...................................................      30
SECTION 4.7       Purchase of Receivables upon Breach.....................................      30
SECTION 4.8       Servicing Fee...........................................................      31
SECTION 4.9       Servicer's Certificate..................................................      31
SECTION 4.10      Annual Statement as to Compliance; Notice of Default....................      30
SECTION 4.11      Annual Independent Certified Public Accountants' Report.................      32
</TABLE>

                                      -i-

<PAGE>

<TABLE>
<S>                                                                                                     <C>
SECTION 4.12      Access to Certain Documentation and Information Regarding Receivables.............     31
SECTION 4.13      Servicer Expenses.................................................................     31
SECTION 4.14      Appointment of Subservicer........................................................     31
SECTION 4.15      Obligations under Basic Documents.................................................     31

                                                 ARTICLE V


                          Distributions; Statements to Certificateholders and Noteholders

SECTION 5.1       Establishment of Trust Accounts...................................................     32
SECTION 5.2       Collections.......................................................................     36
SECTION 5.3       Application of Collections........................................................     37
SECTION 5.4       Deficiency Notice.................................................................     37
SECTION 5.5       Additional Deposits...............................................................     37
SECTION 5.6       Distributions................................................Error! Bookmark not defined.
SECTION 5.7       [RESERVED]........................................................................     38
SECTION 5.8       Statements to Certificateholders and Noteholders..................................     39
SECTION 5.9       Net Deposits......................................................................     40
SECTION 5.10      Optional Deposits by the Security Insurer.........................................     40

                                                 ARTICLE VI


                                                 The Seller

SECTION 6.1       Representations of the Seller.....................................................     40
SECTION 6.2       Corporate Existence...............................................................     42
SECTION 6.3       Liability of Seller; Indemnities..................................................     43
SECTION 6.4       Merger or Consolidation of, or Assumption of the Obligations of, Seller...........     43
SECTION 6.5       Limitation on Liability of Seller and Others......................................     44
SECTION 6.6       Seller May Own Certificates or Notes..............................................     44

                                                ARTICLE VII


                                                The Servicer

SECTION 7.1       Representations of Servicer.......................................................     45
SECTION 7.2       Indemnities of Servicer...........................................................     46
SECTION 7.3       Merger or Consolidation of, or Assumption of the Obligations of, Servicer.........     47
SECTION 7.4       Limitation on Liability of Servicer and Others....................................     49
SECTION 7.5       Servicer Not To Resign............................................................     48
</TABLE>

                                      -ii-

<PAGE>

<TABLE>
<S>                                                                                           <C>
                                                ARTICLE VIIA


                                    The Servicer and the Representative

SECTION 7.1A      Representations of Franklin Resources...................................     48
SECTION 7.2A      Limitation on Liability of Franklin Resources and Others................     50

                                                ARTICLE VIII


                                                  Default

SECTION 8.1       Servicer Default........................................................     50
SECTION 8.2       Appointment of Successor................................................     52
SECTION 8.3       [RESERVED]..............................................................     52
SECTION 8.4       Notification to Noteholders and Certificateholders......................     52
SECTION 8.5       Waiver of Past Defaults.................................................     52

                                                 ARTICLE IX


                                                Termination

SECTION 9.1       Optional Purchase of All Receivables....................................     53

                                                 ARTICLE X


                                   Administrative Duties of the Servicer

SECTION 10.1      Administrative Duties...................................................     54
SECTION 10.2      Records.................................................................     56
SECTION 10.3      Additional Information to be Furnished to the Issuer....................     56
SECTION 10.4      Replacement Note Policy.................................................     56

                                                 ARTICLE XI


                                          Miscellaneous Provisions

SECTION 11.1      Amendment...............................................................     57
SECTION 11.2      Protection of Title to Trust............................................     58
SECTION 11.3      Notices.................................................................     60
SECTION 11.4      Assignment..............................................................     61
SECTION 11.5      Limitations on Rights of Others.........................................     61
SECTION 11.6      Severability............................................................     61
SECTION 11.7      Separate Counterparts...................................................     61
SECTION 11.8      Headings................................................................     62
SECTION 11.9      Governing Law...........................................................     62
SECTION 11.10     Assignment to Trustee...................................................     62
SECTION 11.11     Nonpetition Covenants...................................................     62
</TABLE>

                                     -iii-

<PAGE>

<TABLE>
<S>                                                                                                     <C>
SECTION 11.12     Limitation of Liability of Owner Trustee, Trustee and Indenture
                  Collateral Agent..................................................................     62
SECTION 11.13     Independence of the Servicer......................................................     63
SECTION 11.14     No Joint Venture..................................................................     63
SECTION 11.15     Third-Party Beneficiaries.........................................................     63
SECTION 11.16     Disclaimer by Security Insurer....................................................     63
</TABLE>

                                      -iv-




<PAGE>

                                    SCHEDULES

Schedule A   -      Schedule of Receivables
Schedule B   -      Location of Receivables

                                    EXHIBITS

Exhibit A    -      Reserved
Exhibit B    -      Reserved
Exhibit C    -      Form of Monthly Noteholder and Certificateholder Statement
Exhibit D    -      Form of Servicer's Certificate
Exhibit E    -      Form of Note Policy

                                       -v-

<PAGE>


          SALE AND SERVICING AGREEMENT, dated as of December 1, 2001, among
FRANKLIN AUTO TRUST 2001-2, a Delaware business trust (the "Issuer"), FRANKLIN
RECEIVABLES LLC, a Delaware limited liability company (the "Seller"), FRANKLIN
CAPITAL CORPORATION, a Utah corporation (the "Servicer" or "Franklin Capital"),
and FRANKLIN RESOURCES, INC., a Delaware corporation ("Franklin Resources" or
the "Representative").

          WHEREAS the Issuer desires to purchase a portfolio of receivables
arising in connection with motor vehicle retail installment sale contracts
acquired by Franklin Capital through motor vehicle dealers;

          WHEREAS the Seller has purchased such receivables from Franklin
Capital and is willing to sell such receivables to the Issuer;

          WHEREAS the Servicer is willing to service all such receivables;

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

                                   ARTICLE I.

                                   Definitions
                                   -----------

     SECTION 1.1   Definitions. Whenever used in this Agreement, the following
                   -----------
words and phrases shall have the following meanings:

          "Actuarial Method" means the method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product of
(i) one-twelfth of the fixed rate of interest on such obligation and (ii) the
outstanding principal balance of such obligation.

          "Additional Servicing Fee" means, with respect to any Monthly Period,
the fee payable to the Servicer for services rendered during such Monthly
Period, which shall be equal to one-twelfth of the excess, if any, of (a) the
applicable Servicing Fee Rate multiplied by the Pool Balance applicable to Prime
Receivables, Non-Prime Receivables and Sub-Prime Receivables, as applicable as
of the first day of such Monthly Period over (b) 1.25% multiplied by the Pool
Balance as of the first day of such Monthly Period.

          "Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. A Person shall not be deemed to be an

<PAGE>


Affiliate of any person solely because such other Person has the contractual
right or obligation to manage such Person unless such other Person controls such
Person through equity ownership or otherwise.

          "Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable during the related
Monthly Period and (ii) any Receivable that was purchased or repurchased by any
Person pursuant to this Agreement during the related Monthly Period) as of the
date of determination.

          "Agreement" means this Sale and Servicing Agreement, as the same may
be amended and supplemented from time to time.

          "Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service, car club and warranty contracts, other
items customarily financed as part of retail automobile installment sale
contracts or promissory notes, and related costs.

          "Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges as stated in the related Contract or as
recalculated based upon the terms of such Contract.

          "Available Funds" means, with respect to any Determination Date, the
sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account during the related Monthly Period,
and proceeds of any repurchase by a Dealer pursuant to Dealer Agreement, (iii)
following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding Determination Date by the Trustee or
Controlling Party for distribution pursuant to Section 5.6 of the Indenture, and
(iv) any Insolvency Proceeds received pursuant to Section 9.1(b) of this
Agreement.

          "Base Servicing Fee" means, with respect to any Monthly Period, the
fee payable to the Servicer for services rendered during such Monthly Period,
which shall be equal to one-twelfth of the applicable Servicing Fee Rate
multiplied by the Pool Balance applicable to Prime Receivables, Non-Prime
Receivables and Sub-Prime Receivables, as applicable as of the first day of such
Monthly Period; provided that the Base Servicing Fee shall not be greater than
one-twelfth of 1.25% per annum multiplied by the Pool Balance as of the first
day of such Monthly Period.

          "Basic Documents" means the Certificate of Trust, the Trust Agreement,
this Agreement, the Indenture, the Spread Account Agreement, the Servicer
Deposit Support Agreement, the Purchase Agreement, the Insurance Agreement, the
Indemnification Agreement, the Depository Agreement and other documents and
certificates delivered in connection therewith.

                                      -2-

<PAGE>

          "Business Day" means a day other than a Saturday, a Sunday or other
day on which commercial banks located in the states of California or New York
are authorized or obligated to be closed.

          "Certificate" means a certificate evidencing the beneficial interest
of a Certificateholder in the Trust.

          "Certificate Distribution Account" has the meaning assigned to such
term in the Trust Agreement.

          "Certificateholder" means each person in whose name a Certificate is
registered.

          "Class" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes or the Class A-4 Notes, as the context requires.

          "Class A-1 Notes" has the meaning assigned to such term in the
Indenture.

          "Class A-2 Notes" has the meaning assigned to such term in the
Indenture.

          "Class A-3 Notes" has the meaning assigned to such term in the
Indenture.

          "Class A-4 Notes" has the meaning assigned to such term in the
Indenture.

          "Closing Date" means December 13, 2001.

          "Collected Funds" means, with respect to any Determination Date, the
amount of funds in or to be deposited in the Collection Account representing
collections (excluding amounts constituting the Supplemental Servicing Fee) on
the Receivables during the related Monthly Period, including all Net Liquidation
Proceeds collected during the related Monthly Period (but excluding any Purchase
Amounts).

          "Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.1 of this Agreement.

          "Computer Tape" means the computer tapes or other electronic media
furnished by or on behalf of the Seller to the Issuer and its assigns and the
Security Insurer describing certain characteristics of the Receivables as of the
Cutoff Date.

          "Contract" means a motor vehicle retail installment sale contract.

          "Controlling Party" means the Security Insurer, so long as no Insurer
Default shall have occurred and be continuing, and the Trustee, for so long as
an Insurer Default shall have occurred and be continuing.

                                      -3-

<PAGE>

          "Corporate Trust Office" means (i) with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee, which at the time of
execution of this Agreement is 1011 Centre Road, Suite 200, Wilmington, Delaware
10985, Attention: Corporate Trust Department and (ii) with respect to the
Trustee and the Indenture Collateral Agent, the principal corporate office of
the Trustee, which at the time of execution of this Agreement is One Wall
Street, New York, New York 10286, Attention: Corporate Trust - ABS, Franklin
Auto Trust 2001-2.

          "Cram Down Loss" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on such Receivable or otherwise modifying or
restructuring the scheduled payments to be made on such Receivable, an amount
equal to the excess of (i) the principal balance of such Receivable immediately
prior to such order over (ii) the principal balance of such Receivable as so
reduced. A "Cram Down Loss" shall be deemed to have occurred on the date of
issuance of such order.

          "Cutoff Date" means as to any Receivable, December 1, 2001.

          "Dealer" means a dealer who sold a Financed Vehicle and who originated
and assigned the respective Receivable to Franklin Capital under an existing
agreement between such dealer and Franklin Capital.

          "Dealer Agreement" means any agreement between a Dealer and Franklin
Capital relating to the acquisition of Receivables from a Dealer by Franklin
Capital.

          "Deficiency Claim Date" means, with respect to any Distribution Date,
the fourth Business Day immediately preceding such Distribution Date.

          "Deficiency Notice" shall have the meaning set forth in Section 5.4(a)
of this Agreement.

          "Delivery" when used with respect to Trust Account Property means:

      (a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute instruments and
are susceptible of physical delivery ("Physical Property"):

          (i)  transfer of possession thereof to the Trustee, endorsed to, or
          registered in the name of, the Trustee or its nominee or endorsed in
          blank;

      (b) with respect to a certificated security:

          (i)  delivery thereof in bearer form to the Indenture Collateral
          Agent; or

          (ii) delivery thereof in registered form to the Indenture Collateral
          Agent and

                                       -4-

<PAGE>

          (A)  the certificate is endorsed to the Indenture Collateral Agent or
          in blank by effective endorsement; or

          (B)  the certificate is registered in the name of the Indenture
          Collateral Agent, upon original issue or registration of transfer by
          the Issuer;

     (c)  with respect to an uncertificated security:

          (i)  the delivery of the uncertificated security to the Indenture
          Collateral Agent; or

          (ii) the Issuer has agreed that it will comply with instructions
          originated by the Indenture Collateral Agent without further consent
          by the registered owner;

     (d)  with respect to any security issued by the U.S. Treasury that is a
book-entry security held through the Federal Reserve System pursuant to Federal
book-entry regulations:

          (i) a Federal Reserve Bank by book entry credits the book-entry
          security to the securities account (as defined in 31 CFR Part 357) of
          a participant (as defined in 31 CFR Part 357) which is also a
          securities intermediary; and

          (ii) the participant indicates by book entry that the book-entry
          security has been credited to the Indenture Collateral Agent
          securities account; and

     (e)  with respect to a security entitlement:

          (i)  the Indenture Collateral Agent becomes the entitlement holder; or

          (ii) the securities intermediary has agreed that it will comply with
          entitlement orders originated by the Indenture Collateral Agent
          without further consent by the entitlement holder.

     (f)  For the purpose of clauses (b) and (c) hereof "delivery" means:

          (i)  with respect to a certificated security:

          (A)  the Indenture Collateral Agent acquires possession thereof;

          (B)  another person (other than a securities intermediary) either
          acquires possession thereof on behalf of the Indenture Collateral
          Agent or, having previously acquired possession thereof, acknowledges
          that it holds for the Indenture Collateral Agent; or

          (C)  a securities intermediary acting on behalf of the Indenture
          Collateral Agent acquires possession of thereof, only if the
          certificate is in

                                      -5-

<PAGE>


          registered form and has been specially endorsed to the Indenture
          Collateral Agent by an effective endorsement;

          (ii)   with respect to an uncertificated security:

          (A)    the issuer registers the Indenture Collateral Agent as the
          registered owner, upon original issue or registration of transfer; or

          (B)    another person (other than a securities intermediary) either
          becomes the registered owner thereof on behalf of the Indenture
          Collateral Agent or, having previously become the registered owner,
          acknowledges that it holds for the Indenture Collateral Agent;

     (g)  for purposes of this definition, except as otherwise indicated, the
following terms shall have the meaning assigned to each such term in the UCC:

          (i)    "certificated security"

          (ii)   "effective endorsement"

          (iii)  "entitlement holder"

          (iv)   "instrument"

          (v)    "securities account"

          (vi)   "securities entitlement"

          (vii)  "securities intermediary"

          (viii) "uncertificated security"

     (h)  in each case of Delivery contemplated herein, the Indenture Collateral
Agent shall make appropriate notations on its records, and shall cause the same
to be made on the records of its nominees, indicating that securities are held
in trust pursuant to and as provided in this Agreement.

          "Depository Agreement" means the Note Depository Agreement.

          "Determination Date" means, with respect to any Distribution Date, the
fifth Business Day immediately preceding such Distribution Date.

          "Distribution Amount" means, with respect to any Distribution Date,
the sum of (i) the Available Funds for the immediately preceding Determination
Date, (ii) the Note Policy

                                      -6-

<PAGE>


Claim Amount, if any, received by the Trustee with respect to such Distribution
Date and (iii) amounts deposited by the Security Insurer as an Insurer Optional
Deposit, if any.

          "Distribution Date" means, with respect to each Monthly Period, the
twentieth day of the following calendar month, or if such day is not a Business
Day, the immediately following Business Day, commencing in January 2002.

          "Draw Date" means, with respect to any Distribution Date, the second
Business Day immediately preceding such Distribution Date.

          "Eligible Deposit Account" means either (a) an account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.

          "Eligible Institution" means (a) the corporate trust department of the
Trustee or any other entity specified in this Agreement or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), which (i) has either (A) a long-term unsecured debt rating of AA-
or better by Standard & Poor's and Aaa or better by Moody's or (B) a certificate
of deposit rating of A-1+ or better by Standard & Poor's and P-1 or better by
Moody's or any other short-term or certificate of deposit rating acceptable to
the Rating Agencies and to the Security Insurer and (ii) whose deposits are
insured by the FDIC. If so qualified under clause (b) above, the Owner Trustee
or the Trustee may be considered an Eligible Institution.

          "Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:

          (a)  direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;

          (b)  demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution authorities
(including depository receipts issued by any such institution or trust company
as custodian with respect to any obligation referred to in clause (a) above or
portion of such obligation for the benefit of the holders of such depository
receipts); provided, however, that at the time of the investment or contractual
           --------  -------
commitment to invest therein (which shall be deemed to be made again each time
funds are reinvested following each Distribution Date), the commercial paper or
other short-term senior unsecured debt obligations (other than such obligations
the rating of which is based on the credit of a Person other than such
depository institution or trust company) of such

                                      -7-

<PAGE>


depository institution or trust company shall have a credit rating from Standard
& Poor's of A-1+ and from Moody's of P-1;

          (c)  commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from Standard & Poor's of
A-1+ and from Moody's of P-1;

          (d)  investments in money market funds (including funds for which the
Trustee or the Owner Trustee or any of their respective Affiliates is investment
manager or advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G
and from Moody's of Aaa and having been approved by the Security Insurer;

          (e)  bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;

          (f)  repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
referred to in clause (b) above;

          (g)  any demand deposit in a trust account maintained by The Bank of
New York; provided that such deposits shall consist of direct obligations of,
and obligations guaranteed as to timely payment by, The Bank of New York; and

          (h)  any other investment which would satisfy the Rating Agency
Condition and is consistent with the ratings of the Notes and which, so long as
no Insurer Default shall have occurred and be continuing, has been approved by
the Security Insurer.

          Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Trustee or any of their Affiliates.

          "FDIC" means the Federal Deposit Insurance Corporation.

          "Final Scheduled Distribution Date" means with respect to (i) the
Class A-1 Notes, the December 2002 Distribution Date, (ii) the Class A-2 Notes,
the August 2004 Distribution Date (iii) the Class A-3 Notes, the February 2006
Distribution Date, and (iv) the Class A-4 Notes, the July 2009 Distribution
Date.

          "Final Scheduled Maturity Date" means May 31, 2009.

          "Financed Vehicle" means a new or used automobile or light-truck,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.

                                      -8-

<PAGE>

                  "First Payment Default" means any Receivable for which the
first scheduled payment remains unpaid as of the date upon which the second
scheduled payment has become due.

                  "Indemnification Agreement" means the Indemnification
Agreement dated December 13, 2001 by and among the Security Insurer, the Seller,
the Representative and Salomon Smith Barney Inc.

                  "Indenture" means the Indenture, dated as of December 1, 2001,
among the Issuer, the Indenture Collateral Agent and the Trustee, as the same
may be amended and supplemented from time to time.

                  "Indenture Collateral Agent" means the Person acting as
Indenture Collateral Agent under the Indenture, its successors in interest and
any successor Indenture Collateral Agent under the Indenture.

                  "Insolvency Event" means, with respect to a specified Person,
(a) the filing of a petition against such Person or the entry of a decree or
order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case under
any applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such petition, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.

                  "Insolvency Proceeds" shall have the meaning set forth in
Section 9.1(b) of this Agreement.

                  "Insurance Agreement" means the Insurance and Reimbursement
Agreement, dated as of December 13, 2001, among the Security Insurer, the
Trustee, the Servicer, Franklin Resources and the Seller.

                  "Insurance Agreement Trigger Event " means an "Insurance
Agreement Trigger Event" as defined in the Insurance Agreement.

                  "Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4 of
this Agreement) benefiting the

                                       -9-

<PAGE>

holder of the Receivable providing loss or physical damage, credit life, credit
disability, theft, mechanical breakdown or similar coverage with respect to the
Financed Vehicle or the Obligor.

                  "Insurer's Agent" means The Bank of New York.

                  "Insurer Default" means the occurrence and continuance of any
of the following events:
                  (a) the Security  Insurer shall have failed to make a payment
required under the Note Policy in accordance with its terms;

                  (b) the Security Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or

                  (c) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent, liquidator, rehabilitator or receiver for the Security Insurer or for all
or any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent, liquidator, rehabilitator or receiver
of the Security Insurer (or the taking of possession of all or any material
portion of the property of the Security Insurer); provided, however, that the
Security Insurer's rights shall be immediately reinstated upon cure of such
Insurer Default.

                  "Insurer Optional Deposit" has the meaning specified in
Section 5.10 of this Agreement.

                  "Interest Period" means, with respect to any Distribution
Date, (i) with respect to the Class A-1 Notes, from and including the most
recent Distribution Date on which interest has been paid (or from and including
the Closing Date in the case of the first Distribution Date) to but excluding,
the following Distribution Date and (ii) with respect to each Class of Notes
other than the Class A-1 Notes, from and including the twentieth day of the
calendar month preceding each Distribution Date (or from and including the
Closing Date in the case of the first Distribution Date) to but excluding, the
twentieth day of the following calendar month

                  "Interest Rate" means, with respect to (i) the Class A-1
Notes, 2.10375% per annum and, (ii) the Class A-2 Notes, 2.79% per annum, (iii)
the Class A-3 Notes, 3.77% per annum and (iv) the Class A-4 Notes, 4.55% per
annum (in the case of the Class A-1 Notes, computed on the actual days elapsed
and a 360-day year, and in the case of all other Classes of Notes, computed on
the basis of a 360-day year consisting of twelve 30-day months).

                                      -10-

<PAGE>

                  "Investment Earnings" means, with respect to any Distribution
Date, the investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust Accounts (other than the Spread Account) and the
Certificate Distribution Account.

                  "Issuer" means Franklin Auto Trust 2001-2.

                  "Lien" means a security interest, lien, charge, pledge,
equity, or encumbrance of any kind, other than tax liens, mechanics' liens and
any liens that attach to the respective Receivable by operation of law as a
result of any act or omission by the related Obligor.

                  "Lien Certificate" means, with respect to a Financed Vehicle,
an original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which the
original certificate of title is required to be given to the Obligor, the term
"Lien Certificate" shall mean only a certificate or notification, if any, issued
to a secured party.

                  "Liquidated Receivable" means, with respect to any
Determination Date, a Receivable as to which, as of the last day of the related
Monthly Period, any of the following events has occurred (i.e., the earliest to
occur of the following events): (i) the Servicer has determined in good faith
that all amounts it expects to recover have been received, (ii) more than $25.00
of a scheduled payment is 120 or more days delinquent and the Financed Vehicle
has been in the Servicer's possession for a period of at least 45 days, (iii)
more than $25.00 of a scheduled payment is 120 or more days delinquent, the
Servicer has not repossessed the Financed Vehicle and the Obligor has not
declared bankruptcy or (iv) the Financed Vehicle has been sold and the proceeds
received. In any case, if more than $25.00 of principal and interest on a
Receivable as of the last day of the related Monthly Period is 180 or more days
delinquent, then such Receivable shall be a Liquidated Receivable and shall have
a Principal Balance of zero.

                  "Month-End Pool Balance" means, as of the end of any Monthly
Period (other than the initial Monthly Period), the Pool Balance for the
immediately preceding Monthly Period, or in the case of the initial Monthly
Period the Original Pool Balance, less an amount equal to the sum of the
following amounts with respect to the related Monthly Period, computed in
accordance with the Simple Interest Method: (i) that portion of all collections
on Receivables allocable to principal, including full and partial principal
prepayments, received during such Monthly Period, (ii) the principal balance of
each Receivable that was purchased or repurchased by Franklin Capital, the
Seller, the Servicer or any affiliate of any of them as of the last day of such
Monthly Period, (iii) at the option of the Security Insurer, the outstanding
principal balance of those Receivables that were required to be repurchased by
the Seller and Franklin Capital during such Monthly Period but were not so
repurchased, (iv) without duplication of amounts in clause (ii), the principal
balance of each Receivable that became a Liquidated Receivable during such
Monthly Period and (v) the aggregate amount of Cram Down Losses during such
Monthly Period.

                                      -11-

<PAGE>

                  "Monthly Period" means, with respect to each Distribution
Date, the calendar month preceding the month in which such Distribution Date
occurs.

                  "Moody's" means Moody's Investors Service, Inc., or its
successor.

                  "Net Liquidation Proceeds" means, with respect to Liquidated
Receivables, (i) proceeds from the disposition of the Financed Vehicles relating
to the Liquidated Receivables, less reasonable Servicer out-of-pocket costs,
including repossession and resale expenses not already deducted from such
proceeds, and any amounts required by law to be
remitted to the Obligor, (ii) any proceeds from an Insurance Policy or (iii)
other monies received from the Obligor or otherwise.

                  "Non-Prime Receivables" means those Receivables indicated on
Schedule A hereto as non-prime.

                  "Note Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.1(a)(ii) of this
Agreement.

                  "Note Policy" means the financial guarantee insurance policy
issued by the Security Insurer to the Trustee for the benefit of the Noteholders
with respect to the Notes, including any endorsements thereto, in the form of
Exhibit E to the Indenture.

                  "Note Policy Claim Amount" shall have the meaning set forth in
Section 5.4(a) of this Agreement.

                  "Note Pool Factor" means, with respect to each Class of Notes
and the close of business on any Distribution Date, a seven-digit decimal figure
equal to the outstanding principal amount of such Class of Notes as of such
Distribution Date after giving effect to principal distributions on such date
divided by the original outstanding principal amount of such Class of Notes.

                  "Noteholder" or "Holder" means the Person in whose name a Note
is registered on the Note Register.

                  "Noteholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Noteholders' Interest
Distributable Amount for the preceding Distribution Date, over the amount in
respect of interest that was actually deposited in the Note Distribution Account
on such preceding Distribution Date, plus interest on the amount of interest due
but not paid to Noteholders on the preceding Distribution Date, to the extent
permitted by law, at the respective Interest Rate borne by each Class of Notes
from the twentieth day of the calendar month preceding such Distribution Date to
but excluding the twentieth day of the following calendar month.

                                      -12-

<PAGE>

          "Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date.

          "Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date and any Class of Notes, interest accrued during
the related Interest Period at the Interest Rate borne by such Class of Notes on
the outstanding principal amount of the Notes of such Class immediately
preceding such Distribution Date, calculated (i) in the case of the Class A-1
Notes, on the basis of actual days elapsed and a 360-day year and (ii) in the
case of the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, on the
basis of a 360-day year consisting of twelve 30-day months.

          "Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes.

          "Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.

          "Officer's Certificate" means a certificate signed by the (a) chairman
of the board, the president, any executive vice president or any vice president
and (b) any executive vice president, vice president, treasurer, assistant
treasurer, controller, secretary or assistant secretary of the Representative,
the Seller or the Servicer, as appropriate.

          "Opinion of Counsel" means one or more written opinions of counsel who
may be an employee of or counsel to the Representatives, the Seller or the
Servicer, which counsel shall be reasonably acceptable to the addressees.

          "Original Pool Balance" means $300,000,000.79.

          "Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.

          "Owner Trustee" means Bankers Trust (Delaware), not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.

          "Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.

          "Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.

          "Pool Balance" means, as of the end of any Monthly Period, the
aggregate Principal Balance of the Receivables (exclusive of Liquidated
Receivables) at the end of such

                                      -13-

<PAGE>


Monthly Period, after giving effect to all payments received from Obligors and
any Purchase Amounts to be remitted by Franklin Capital, the Seller or Servicer,
as the case may be, on the Determination Date following such Monthly Period and
all losses, including Cram Down Losses, realized on Receivables liquidated
during such Monthly Period.

          "Prime Receivables" means those Receivables indicated on Schedule A
hereto as prime.

          "Principal Balance" means, with respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the terms of
the Receivable and (ii) any Cram Down Loss in respect of such Receivable.


          "Principal Distributable Amount" means, with respect to any
Distribution Date, the excess of (i) the aggregate outstanding principal balance
of the Notes as of the preceding Distribution Date (after giving effect to
distributions thereon) or in the case of the first Distribution Date, as of the
Closing Date, over (ii) the Month-End Pool Balance as of the end of the
preceding Monthly Period; provided, however, that, on the Final Scheduled
Distribution Date for any Class of Notes, the Principal Distributable Amount
will not be less than the outstanding principal balance of such Class of Notes.

          "Purchase Agreement" means the Purchase Agreement, dated as of
December 1, 2001, between the Seller and Franklin Capital pursuant to which the
Seller acquired the Receivables, as such Agreement may be amended from time to
time.

          "Purchase Amount" means, with respect to any Receivable required to be
repurchased or purchased pursuant to Section 3.2 or Section 4.7 of this
Agreement or as to which the Servicer has exercised the purchase option pursuant
to Section 9.1(a) of this Agreement, an amount equal to the sum of (i) 100% of
the Principal Balance thereof and (ii) all accrued and unpaid interest thereon
(including one month's interest thereon, in the month of payment, at the APR
less, so long as Franklin Capital is the Servicer, the Base Servicing Fee).

          "Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Monthly Period by the Servicer pursuant to Section
4.7 of this Agreement, repurchased by the Seller, or the Representative pursuant
to Section 3.2 of this Agreement or purchased by Franklin Capital pursuant to
the Purchase Agreement.

                                      -14-

<PAGE>

          "Rating Agency" means Moody's and Standard & Poor's. If no such
organization or successor maintains a rating on the Notes, "Rating Agency" shall
be a nationally recognized statistical rating organization or other comparable
Person designated by the Seller and acceptable to the Security Insurer (so long
as an Insurer Default shall not have occurred and be continuing), notice of
which designation shall be given in writing by the Servicer to the Trustee, the
Owner Trustee, the Security Insurer and the Servicer.

          "Rating Agency Condition" means, with respect to any action or
amendment that either (i) each Rating Agency confirms in writing that such
amendment will not result in a reduction or withdrawal of such rating or (ii)
none of the Rating Agencies, within 10 days after receipt of notice of such
action or amendment, shall have notified the Seller, the Servicer or the Owner
Trustee in writing that such action or amendment will result in a reduction or
withdrawal of the then current rating of any Class of the Notes.

          "Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable (immediately prior to it becoming a Liquidated Receivable) over the
Net Liquidation Proceeds to the extent allocable to principal.

          "Receivable" means any Contract listed on Schedule A (which Schedule
may be in the form of microfiche).

          "Receivable Files" means the documents specified in Section 3.3 of
this Agreement.

          "Record Date" means, with respect to each Distribution Date, the day
immediately preceding such Distribution Date, unless otherwise specified in this
Agreement.

          "Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.

          "Schedule of Receivables" has the meaning assigned thereto in Section
3.1(d) of this Agreement.

          "Security Insurer" means MBIA Insurance Corporation, a stock insurance
company incorporated under the laws of the State of New York, or any successor
thereto, as issuer of the Note Policy.

          "Security Insurer Defense Costs" means all costs and expenses of the
Security Insurer (including costs and expenses of the Owner Trustee that the
Security Insurer may have paid) in connection with any action, proceeding or
investigation that could materially adversely affect the Trust or the Owner
Trust Estate or the rights or obligations of the Security Insurer under any of
the Basic Documents or under the Policy, including, without limitation, any
judgment or settlement entered into affecting the Security Insurer or the
Security Insurer's interests, together with interest thereon at a rate equal to
the Base Rate (as defined in the Insurance Agreement) from time to time in
effect plus 1%; provided, however, that the Security Insurer Defense Costs shall
not constitute a claim against the Trust.

          "Seller" means Franklin Receivables LLC, a Delaware limited liability
company, and its successors in interest to the extent permitted hereunder.

                                      -15-

<PAGE>

          "Seller Indemnification Cap" has the meaning assigned thereto in
Section 6.3 of this Agreement.

          "Servicer" means Franklin Capital, as the servicer of the Receivables,
and each successor Servicer pursuant to Section 7.3 or 8.2 of this Agreement.

          "Servicer Default" means an event specified in Section 8.1 of this
Agreement.

          "Servicer Deposit Support Agreement" means the Servicer Deposit
Support Agreement, dated December 13, 2001, made by Franklin Resources in favor
of the Trustee under the Indenture.

          "Servicer's Certificate" means an Officer's Certificate of the
Servicer delivered pursuant to Section 4.9 of this Agreement, substantially in
the form of Exhibit D to this Agreement.

          "Servicing Fee" has the meaning specified in Section 4.8 of this
Agreement.

          "Servicing Fee Rate" means with respect to (i) Prime Receivables, 1.0%
per annum, (ii) Non-Prime Receivables, 1.50% per annum and (iii) Sub-Prime
Receivables, 2.0% per annum.

          "Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made (in some states
assuming 30 day months), divided by the actual number of days in a year (360
days in states which assume 30 day months) and the remainder of such payment is
allocable to principal.

          "Simple Interest Receivable" means any Receivable under which the
portions of a payment allocable to interest and principal are determined in
accordance with the Simple Interest Method.

          "Spread Account" means a segregated trust account which is also an
Eligible Deposit Account for the benefit of the Security Insurer established and
governed by the Spread Account Agreement.

          "Spread Account Agreement" means the Spread Account and Payment
Agreement, dated as of December 1, 2001, by and among the Seller, the Servicer,
the Representative, the Security Insurer and The Bank of New York.

                                      -16-

<PAGE>

          "Spread Account Deposit Amounts" means the amounts required to be
deposited into the Spread Account pursuant to the Spread Account Agreement.

          "Spread Account Deposit Event" has the meaning assigned to such term
in the Spread Account Agreement.

          "Standard & Poor's" means Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.

          "Sub-Prime Receivables" means those Receivables indicated on Schedule
A hereto as sub-prime.

          "Supplemental Servicing Fee" means charges collected (from whatever
source) on the Receivables during the related Monthly Period including late
fees, prepayment fees, administrative fees and expenses or similar charges
allowed by applicable law with respect to Receivables, plus reinvestment
proceeds on any payments received in respect of Receivables during the related
Monthly Period.

          "Trust" means the Issuer.


          "Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.

          "Trust Accounts" has the meaning assigned thereto in Section 5.1(b) of
this Agreement.

          "Trust Agreement" means the Amended and Restated Trust Agreement,
dated as of December 1, 2001, between the Seller and the Owner Trustee, as the
same may be amended and supplemented from time to time.

          "Trust Officer" means, (i) in the case of the Trustee, the chairman or
vice-chairman of the board of directors, the chairman or vice-chairman of the
executive committee of the board of directors, the president, any vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller and any assistant controller or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers having direct responsibility for the
administration of this Agreement and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject, and (ii) in the case of the Owner Trustee, any officer in the corporate
trust office of the Owner Trustee with direct responsibility for the
administration of this Agreement or any of the Basic Documents on behalf of the
Owner Trustee.

          "Trust Property" has the meaning assigned thereto in Section 2.1 of
this Agreement.

                                      -17-

<PAGE>

          "Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.

          "UCC" means the Uniform Commercial Code as in effect in the State of
New York on the date of this Agreement.

     SECTION 1.2    Other Definitional Provisions
                    -----------------------------

          (a)  Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture, or, if not defined therein,
in the Trust Agreement.

          (b)  All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.

          (c)  As used in this Agreement, in any instrument governed hereby and
in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.

          (d)  The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation."

          (e)  The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.

          (f)  Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.

                                   ARTICLE II

                                      -18-

<PAGE>

                            Conveyance of Receivables
                            -------------------------

     SECTION 2.1   Conveyance of Receivables. In consideration of the Issuer's
                   -------------------------
delivery to or upon the order of the Seller on the Closing Date of (x) the net
proceeds from the sale of the Notes, (y) the Certificates and (z) the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller does hereby sell, transfer, assign, set over
and otherwise convey to the Issuer, without recourse (subject to the obligations
set forth herein), all right, title and interest of the Seller in and to:

          (a)  the Receivables, all monies representing interest payments and
principal payments received thereunder on and after the Cutoff Date;

          (b)  an assignment of the security interests in the Financed Vehicles
granted by Obligors pursuant to the Receivables and any other interest of the
Seller in such Financed Vehicles;

          (c)  any proceeds with respect to the Receivables from claims on any
physical damage, credit life or disability insurance policies covering Financed
Vehicles or Obligors and any proceeds from the liquidation of the Receivables;

          (d)  any proceeds from any Receivable repurchased by a Dealer,
pursuant to a Dealer Agreement, as a result of a breach of representation or
warranty in the related Dealer Agreement;

          (e)  all funds on deposit from time to time in the Trust Accounts and
in all investments and proceeds thereof and all rights of the Issuer therein;

          (f)  all of the Seller's rights under any extended warranty service
contracts on the related Financed Vehicles;

          (g)  the related Receivable Files;

          (h)  all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreement,
including the delivery requirements, the representations and warranties and the
cure and repurchase obligations of Franklin Capital under the Purchase
Agreement; and

          (i)  the proceeds of any and all of the foregoing (the items specified
in clauses (a) through (i) are referred to herein as the "Trust Property").

          It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Trust and the beneficial interest in
and title to the Receivables and the other Trust Property shall not be part of
the Seller's estate in the event of the filing of a bankruptcy petition by or

                                      -19-

<PAGE>


against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby is
held not to be a sale, this Agreement shall constitute a grant of a security
interest in the property referred to in this Section 2.1 for the benefit of the
Noteholders, the Certificateholders and the Security Insurer.

                                   ARTICLE III

                                 The Receivables
                                 ---------------

     SECTION 3.1    Representations and Warranties of the Seller. The Seller
                    --------------------------------------------
makes the following representations and warranties as to the Receivables on
which the Issuer is deemed to have relied in acquiring the Receivables and upon
which the Security Insurer shall be deemed to rely in issuing the Note Policy.
Such representations and warranties speak as of the execution and delivery of
this Agreement and as of the Closing Date (unless another date or time period is
otherwise specified or indicated in the particular representation or warranty),
but shall survive the sale, transfer and assignment of the Receivables to the
Issuer and the pledge thereof to the Trustee pursuant to the Indenture. The
representations set forth in Sections 3.1(a), (b), (h) and (r) may not be
waived.

          (a)  Title. Immediately prior to the transfer and assignment herein
               -----
contemplated, the Seller had good and marketable title to each Receivable, free
and clear of all Liens and, immediately upon the transfer thereof, the Trust
shall have good and marketable title to each such Receivable, free and clear of
all Liens (or a valid first priority perfected security interest in such
Receivable); and the transfer of the Receivables to the Trust has been perfected
under the UCC. No Dealer or any other Person has any right to receive proceeds
of any Receivables.

          (b)  All Filings Made. All filings (including, without limitation, UCC
               ----------------
filings) necessary in any jurisdiction to give the Trust a first priority
perfected ownership interest in the Receivables, and to give the Trustee a first
priority perfected security interest therein, shall have been made. All
financing statements filed or to be filed against the Seller in favor of the
Trust in connection herewith describing the Receivables contain a statement to
the following effect "A purchase of or security interest in any collateral
described in this financing statement will violate the rights of the Trust."

          (c)  Characteristics of Receivables. Each Receivable (i) was
               ------------------------------
originated in the United States of America and is denominated in United States
dollars by a Dealer in connection with the retail sale of a Financed Vehicle in
the ordinary course of such Dealer's business, was fully and properly executed
by the parties thereto, was purchased by the Seller from Franklin Capital which
in turn shall have purchased such Receivable from such Dealer under an existing
dealer agreement with Franklin Capital, and shall have been validly assigned by
Franklin Capital to the Seller in accordance with its terms, (ii) shall have
created or shall create a valid, subsisting and enforceable first priority
perfected security interest in favor of Franklin Capital in the Financed
Vehicle, which security interest has been assigned by Franklin Capital to the
Seller,

                                      -20-

<PAGE>


which in turn shall be assignable by the Seller to the Trust, (iii)
shall contain customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against the
collateral of the benefits of the security, (iv) shall provide for level monthly
payments (provided that the payment in the first or last month in the life of
the Receivable may be different from the level payment) that fully amortize the
Amount Financed by maturity and (v) provides for calculation of interest in
accordance with the Simple Interest Method. Except as otherwise evidenced in the
Receivable File relating thereto, the terms of each Receivable have not been
amended and collections relating to such Receivable have not been waived.

               (d) Schedule of Receivables. The information set forth in
                   -----------------------
Schedule A to this Agreement (the "Schedule of Receivables") is true and correct
in all material respects as of the Cutoff Date, and no selection procedures
believed by the Seller to be adverse to the Noteholders or the Security Insurer
were utilized in selecting the Receivables. The Computer Tape regarding the
Receivables is true and correct in all material respects as of the Cutoff Date.

               (e) Compliance With Law. Each Receivable complied at the time it
                   -------------------
was originated or made and complies at the execution of this Agreement in all
material respects with all requirements of applicable Federal, state and local
laws and regulations thereunder, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Rees-Levering Act, the
Federal Reserve Board's Regulations B and Z, state adaptations of the National
Consumer Act and other consumer credit laws and equal credit opportunity and
disclosure laws.

               (f) Binding Obligation. Each Receivable represents the legal,
                   ------------------
valid and binding payment obligation in writing of the Obligor thereunder,
enforceable by the holder thereof in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization and similar laws now or hereafter in
effect related to or affecting creditors' rights generally and subject to
general principles of equity (whether applied in a proceeding at law or in
equity); and all parties to each Receivable had full legal capacity to execute
and deliver such Receivable and all other documents related thereto and to grant
the security interest purported to be granted thereby.

               (g) No Government Obligor. None of the Receivables are due from
                   ---------------------
the United States of America or any State or from any agency, department or
instrumentality of the United States of America or any State.

               (h) Valid and Continuing Security Interest; No other pledges.
                   --------------------------------------------------------
This Agreement creates a valid and continuing security interest in the
Receivables in favor of the Trust, which security interest is prior to all other
Liens, and is enforceable against such creditors of and purchasers from the
Seller to the Trust. Other than the security interest granted to the Trust
pursuant to this Agreement, the Seller has not pledged, assigned, sold or
granted a security interest in, or otherwise conveyed any of the Receivables.
The Seller has not authorized the filing of and is not aware of any financing
statements against the Seller that include a description

                                      -21-

<PAGE>

of collateral covering the Receivables other than any financing statement
related to the security interest granted to the Trust pursuant to this
Agreement.

               (i) Security Interest in Financed Vehicle. Immediately prior to
                   -------------------------------------
the sale, assignment and transfer thereof to the Trust, each Receivable is
secured by a validly perfected first priority security interest in the Financed
Vehicle in favor of Franklin Capital as secured party or all necessary and
appropriate actions have been commenced that would result in the valid
perfection of a first priority security interest in the Financed Vehicle in
favor of Franklin Capital as secured party. Immediately after the sale,
assignment and transfer thereof to the Trust pursuant to this Agreement,
although the Lien Certificate will indicate Franklin Capital as lienholder and
will not indicate the Trust or Owner Trustee as secured party, each Receivable
will be secured by an enforceable and perfected security interest in the
Financed Vehicle in favor of the Trust as secured party for the benefit of the
Noteholders and the Security Insurer, which security interest is prior to all
other Liens in such Financed Vehicle.

               (j) Receivables in Force. As of the Closing Date, no Receivable
                   --------------------
has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been
released from the Lien granted by the related Receivable in whole or in part
unless another vehicle has been substituted as collateral securing the
Receivable without any other modification to such Receivable.

               (k) No Waiver. No provision of a Receivable has been waived
                   ---------
except as reflected in the Receivable File relating to such Receivable.

               (l) No Defenses. As of the Closing Date, no right of rescission,
                   -----------
setoff, counterclaim or defense has been asserted or threatened with respect to
any Receivable.

               (m) No Liens. To the best of the Seller's knowledge, as of the
                   --------
Closing Date there are no Liens or claims, including Liens for work, labor,
materials or unpaid state or federal taxes relating to any Financed Vehicle
securing the related Receivable, that are or may be prior to or equal to the
Lien granted by such Receivable.

               (n) No Default. No Receivable has a payment that is more than 30
                   ----------
days delinquent as of the Cutoff Date and, except for any delinquency in payment
on any Receivable not more than 30 days delinquent, no default, breach,
violation or event (in any such case) permitting acceleration under the terms of
any Receivable has occurred; and except for any delinquency in payment on any
Receivable not more than 30 days delinquent, no continuing condition that with
notice or the lapse of time would constitute a default, breach, violation or
event (in any such case) permitting acceleration under the terms of any
Receivable shall have arisen as of the Cutoff Date; and the Seller has not
waived and shall not waive any of the foregoing. For purposes of this clause
(m), a Receivable is considered 30 days delinquent if 30 days have elapsed since
the date on which a scheduled payment had been due but not been made. As of the
Closing Date, no Receivable has had an uncured First Payment Default.

                                      -22-

<PAGE>

               (o) No Bankruptcies. No Obligor on any Receivable was the subject
                   ---------------
of a bankruptcy proceeding commenced following the execution of the related
Contract except an Obligor that has received a discharge or dismissal under the
United States Bankruptcy Code.

               (p) No Repossessions. As of the Cutoff Date, no Financed Vehicle
                   ----------------
securing any Receivable is in repossession status.

               (q) Adverse Selection. No selection procedures adverse to the
                   -----------------
Noteholders or the Security Insurer were utilized in selecting the Receivables
from those owned by Franklin Capital which met the selection criteria contained
in this Agreement.

               (r) Chattel Paper. Each Receivable constitutes "tangible chattel
                   -------------
paper" as defined in the UCC. The Receivables do not have any marks or notations
indicating that they have been pledged, assigned or otherwise conveyed to any
Person other than the Trust or the Trustee.

               (s) Insurance. Under the terms of each Receivable the Obligor is
                   ---------
required to maintain physical damage insurance or comprehensive and collision
insurance covering the Financed Vehicle.

               (t) Lawful Assignment. No Receivable was originated in, as of the
                   -----------------
Cutoff Date, or is subject to the laws of, any jurisdiction under which the
sale, transfer and assignment of such Receivable or this Agreement is unlawful,
void or voidable.


               (u) Reserved.
                   --------

               (v) One Original. There is only one original executed copy of
                   ------------
each Receivable; immediately prior to the constructive delivery thereof to the
Trustee pursuant to Section 3.3, such copy shall have been in the custody and
possession of the Seller or Franklin Capital.

               (w) Location of Receivable Files. The Receivable Files are kept
                   ----------------------------
at one or more of the locations listed in Schedule B and each item required to
be in a Receivable File is in such Receivable File.

               (x) Computer Records. As of the Closing Date, the accounting and
                   ----------------
computer records relating to the Receivables of the Seller have been marked to
show the absolute ownership by the Owner Trustee on behalf of the Trust of the
Receivables.

               (y) Taxes. To the knowledge of the Seller, there are no state or
                   -----
local taxing jurisdictions which have asserted that nonresident holders of notes
issued by a trust which holds assets similar to the assets to be held by the
Trust are subject to the jurisdiction's income or other taxes solely by reason
of the location in the jurisdiction of the Owner Trustee, the Seller, the
Servicer, the Representative, the obligors on or the assets securing the
Receivables held by the Trust, or the issuer of a financial guaranty insurance
policy.

                                      -23-

<PAGE>

               (z)  Maturity of Receivables. Each Receivable has a final
                    -----------------------
maturity date not later than November 2008; each Receivable has an original term
to maturity of not more than 84 months; the weighted average original term of
the Receivables is approximately 67.33 months; and the weighted average
remaining term of the Receivables is approximately 61.76 months as of the Cutoff
Date. No Receivable shall have a remaining term of less than six months as of
the Cutoff Date.

               (aa) Financing. As of the Cutoff Date, approximately 38.76% of
                    ---------
the aggregate Principal Balance of the Receivables, represent new vehicles; the
remainder of the Receivables represent used vehicles; 100% of the aggregate
Principal Balance of the Receivables represent Simple Interest Receivables.
Approximately 44.10% of the aggregate Principal Balance of the Receivables,
represent Prime Receivables, approximately 53.71% of the aggregate Principal
Balance of the Receivables, represent Non-Prime Receivables and approximately
2.19% of the aggregate Principal Balance of the Receivables, represent Sub-Prime
Receivables. The aggregate Principal Balance of the Receivables is
$300,000,000.79.

               (bb) APR. As of the Cutoff Date, the weighted average Annual
                    ---
Percentage Rate of the Receivables is approximately 12.61%. Each Receivable has
an APR equal to or greater than 6.49%.

               (cc) Number. As of the Cutoff Date, there are 18,251 Receivables.
                    ------

               (dd) Balance. Each Receivable has a remaining Principal Balance
                    -------
of not less than $1,020.53 and not more than $65,858.34, and as of the Cutoff
Date, the average Principal Balance of the Receivables is $16,437.46.

        SECTION 3.2 Repurchase upon Breach. (a) The Representative, the Seller,
                    ----------------------
the Servicer, the Security Insurer or the Issuer, as the case may be, shall
inform the other parties to this Agreement and the Trustee promptly, in writing,
upon the discovery of any breach of the Representative's or the Seller's
representations and warranties made pursuant to Section 3.1. As of the last day
of the second (or, if the Representative or the Seller so elects, the first)
month following the discovery by the Representative or the Seller or receipt by
the Representative or the Seller of notice from any of the Representative, the
Seller, the Servicer, the Security Insurer or the Issuer of such breach, unless
such breach is cured by such date, the Representative and the Seller shall
jointly and severally have an obligation to repurchase any Receivable in which
the interests of the Noteholders or the Security Insurer are materially and
adversely affected by any such breach as of such date. The "second month" shall
mean the month following the month in which discovery occurs or notice is given,
and the "first month" shall mean the month in which discovery occurs or notice
is given. In consideration of and simultaneously with the repurchase of the
Receivable, the Representative and/or the Seller shall remit, or cause Franklin
Capital to remit pursuant to the Purchase Agreement, to the Collection Account
the Purchase Amount in the manner specified in Section 5.5 and the Issuer shall
execute such assignments and other documents reasonably requested by such person
in order to effect such repurchase. The sole remedy of the Issuer, the Owner
Trustee, the Trustee, the Noteholders or the Certificateholders

                                      -24-

<PAGE>

with respect to a breach of representations and warranties pursuant to Section
3.1 and the agreement contained in this Section shall be the repurchase of
Receivables pursuant to this Section, subject to the conditions contained herein
or to enforce the obligations of Franklin Capital to the Seller to repurchase
such Receivables pursuant to the Purchase Agreement. Neither the Owner Trustee
nor the Trustee shall have a duty to conduct any affirmative investigation as to
the occurrence of any conditions requiring the repurchase of any Receivable
pursuant to this Section.

               (b) Pursuant to Section 2.1 of this Agreement, the Seller
conveyed to the Trust all of the Seller's right, title and interest in its
rights and benefits, but none of its obligations or burdens, under the Purchase
Agreement including the Seller's rights under the Purchase Agreement and the
delivery requirements, the representations and warranties and the cure or
repurchase obligations of Franklin Capital thereunder. The Seller hereby
represents and warrants to the Trust that such assignment is valid, enforceable
and effective to permit the Trust to enforce such obligations of Franklin
Capital under the Purchase Agreement.

        SECTION 3.3 Custody of Receivable Files. To assure uniform quality in
                    ---------------------------
servicing the Receivables and to reduce administrative costs, the Issuer hereby
revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Issuer and the Trustee as custodian of
the following documents or instruments which are hereby constructively delivered
to the Trustee, as of the Cutoff Date as pledgee of the Issuer with respect to
each Receivable:

               (a) the original Receivable;

               (b) a record of the information supplied by the Obligor in the
original credit application;

               (c) the original certificate of title or such documents that the
Servicer shall keep on file, in accordance with its customary procedures,
evidencing the security interest of Franklin Capital in the Financed Vehicle (it
being understood that (i) the original certificates of title generally are not
delivered to Franklin Capital for 120 days but that promptly upon delivery they
shall be delivered to the Servicer as custodian hereunder and (ii) in
California, Franklin Capital participates in the California electronic lien and
title system and does not receive physical documentation); and

               (d) any and all other documents that the Servicer shall keep on
file, in accordance with its customary procedures, relating to a Receivable, an
Obligor or a Financed Vehicle.

        SECTION 3.4 Duties of Servicer as Custodian. (a) Safekeeping. The
                    -------------------------------      -----------
Servicer shall hold the Receivable Files on behalf of the Issuer and the Trustee
and maintain such accurate and complete accounts, records and computer systems
pertaining to each Receivable File as shall enable the Issuer to comply with
this Agreement. In performing its duties as custodian the Servicer shall act
with reasonable care, using that degree of skill and attention that the Servicer

                                      -25-

<PAGE>

exercises with respect to the Receivable Files relating to all comparable
automotive receivables that the Servicer services for itself or others, except
that the Servicer shall not be obligated, and does not currently intend, to (i)
pay any premium of force-placed insurance concerning any Financed Vehicle or
(ii) monitor any Obligor's maintenance of such insurance. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Receivable Files held
by it under this Agreement and of the related accounts, records and computer
systems, in such a manner as shall enable the Issuer, the Security Insurer or
the Trustee to verify the accuracy of the Servicer's record keeping. The
Servicer shall promptly report to the Issuer, the Security Insurer and the
Trustee any failure on its part to hold the Receivable Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure.

               (b) Maintenance of Records. The Servicer shall maintain each
                   ----------------------
Receivable File at the offices specified in Schedule B to this Agreement or at
such other office as shall be specified to the Issuer, the Trustee and the
Security Insurer by written notice not later than 10 days after any change in
location provided that the Controlling Party does not object to such change. The
Servicer shall at all times maintain the original of the fully executed
Receivable and store such original Receivable in a fireproof facility.
Additionally, the Servicer shall maintain the Receivable Files in an organized
and orderly manner.

               (c) Access to Records. The Servicer will provide, on the Closing
                   -----------------
Date, an Officer's Certificate stating that the Receivable Files contain all
materials which are required to be kept therein by Section 3.3(a), (b), (c) and
(d). At any time following the Closing Date, the Security Insurer may conduct a
review of the Receivable Files, or a sample thereof as it may specify, at its
own expense but with the cooperation of the Servicer. Should the Security
Insurer find a material number of documents missing or any other irregularities,
then the Trustee shall perform a review, for the benefit of the Security Insurer
and at the expense of the Servicer, of all the Receivable Files.

               Upon reasonable prior notice, the Servicer shall make available
to the Issuer, the Trustee, the Security Insurer or any duly authorized
representatives, attorneys or auditors of any of the foregoing, a list of
locations of, and access to, the Receivable Files and records and computer
systems maintained by the Servicer at such times during normal business hours as
the Issuer, the Trustee or the Security Insurer shall instruct.

               (d) Release of Documents. Upon written instruction from the
                   --------------------
Trustee or the Security Insurer, at any time following a Servicer Default or
termination of the Servicer's appointment pursuant to Section 3.7 the Servicer
shall release any Receivable File to the Trustee, the Trustee's agent, or the
Trustee's designee, as the case may be, or the Security Insurer, as the case may
be, at such place or places as the Trustee or the Security Insurer, as the case
may be, may designate, as soon as practicable.

      SECTION 3.5 Instructions; Authority To Act. The Servicer shall be deemed
                  ------------------------------
to have received proper instructions with respect to the Receivable Files upon
its receipt of written instructions signed by a Trust Officer of the Trustee. A
copy of such instructions shall be

                                      -26-

<PAGE>

furnished by the Trustee to the Security Insurer. The Trustee shall not have any
duty or obligation to provide the Servicer with any such instructions with
respect to the Receivable Files.

        SECTION 3.6 Custodian's Indemnification. The Servicer as custodian shall
                    ---------------------------
indemnify and hold harmless the Trust, the Security Insurer, the Owner Trustee
and the Trustee and each of their officers, directors, employees and agents for
any and all liabilities, obligations, losses, compensatory damages, payments,
costs or expenses (including reasonable attorneys' fees and expenses) that may
be imposed on, incurred by or asserted against the Trust, the Security Insurer,
the Owner Trustee or the Trustee or any of their officers, directors, employees
and agents as the result of any improper act or omission in any way relating to
the maintenance and custody by the Servicer as custodian of the Receivable
Files; provided, however, that the Servicer shall not be liable to the Trust,
       --------  -------
the Owner Trustee, the Trustee or the Security Insurer, as the case may be, for
any portion of any such amount resulting from the willful misfeasance, bad faith
or negligence of the Owner Trustee, the Trustee or the Security Insurer, as the
case may be. This provision shall not be considered to limit the Servicer's or
any other party's rights, obligations, liabilities, claims or defenses which
arise as a matter of law or pursuant to any other provision of this Agreement.

        SECTION 3.7 Effective Period and Termination. The Servicer's appointment
                    --------------------------------
as custodian shall become effective as of the Cutoff Date and shall continue in
full force and effect until terminated pursuant to this Section 3.7. If Franklin
Capital shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of any Servicer shall have
been terminated under Section 8.1, the appointment of such Servicer as custodian
shall be terminated, in the same manner as the Servicer may be terminated under
Section 8.1. The Trustee or, with the consent of the Trustee, the Owner Trustee
may, in each case, with the consent of the Security Insurer, and the Security
Insurer may, terminate the Servicer's appointment as custodian (i) with cause or
(ii) upon the occurrence of an Insurance Agreement Trigger Event or a Spread
Account Deposit Event (excluding the event described in clause (v) of the
definition thereof), upon written notification to the Servicer and the Trustee
or Security Insurer, as the case may be. As soon as practicable after any
termination of such appointment, the Servicer shall deliver the Receivable Files
to the Trustee or the Trustee's agent at such place or places as the Trustee,
with the consent of the Security Insurer, or the Trustee shall, at the direction
of the Security Insurer, reasonably designate in writing. If the Servicer shall
be terminated as custodian hereunder for any reason but shall continue to serve
as Servicer, the Trustee shall, or shall cause its agent to, make the Receivable
Files available to the Servicer during normal business hours upon reasonable
notice so as to permit the Servicer to perform its obligations as Servicer
hereunder.

                                   ARTICLE IV

                   Administration and Servicing of Receivables
                   -------------------------------------------

        SECTION 4.1 Duties of Servicer. The Servicer, as agent for the Issuer
                    ------------------
and the Security Insurer (to the extent provided herein), shall manage, service,
administer and make

                                      -27-

<PAGE>

collections on the Receivables (other than Purchased Receivables) with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others, except that the Servicer shall not be obligated, and does
not currently intend, to (i) pay any premium of force-placed insurance
concerning any Financed Vehicle or (ii) monitor any Obligor's maintenance of
such insurance. The Servicer's duties shall include collection and posting of
all payments, responding to inquiries of Obligors on such Receivables,
investigating delinquencies, sending payment statements or coupon books to
Obligors, accounting for collections and furnishing monthly and annual
statements to the Owner Trustee, the Trustee and the Security Insurer with
respect to distributions. Subject to the provisions of Section 4.2(b), the
Servicer shall follow its customary standards, policies and procedures in
performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is authorized and empowered to execute and deliver, on
behalf of itself, the Issuer, the Owner Trustee, the Trustee, the Security
Insurer, the Certificateholders and the Noteholders or any of them, any and all
instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other comparable instruments, with respect to such
Receivables or to the Financed Vehicles securing such Receivables. If the
Servicer shall commence a legal proceeding to enforce a Receivable, the Issuer
(in the case of a Receivable other than a Purchased Receivable) shall thereupon
be deemed to have automatically assigned, solely for the purpose of collection,
such Receivable to the Servicer. If in any enforcement suit or legal proceeding
it shall be held that the Servicer may not enforce a Receivable on the ground
that it shall not be a real party in interest or a holder entitled to enforce
such Receivable the Owner Trustee shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Trust, the Trustee, the Certificateholders or the
Noteholders. The Owner Trustee and the Security Insurer shall upon the written
request of the Servicer furnish the Servicer with any powers of attorney and
other documents reasonably necessary or appropriate (as certified to the Owner
Trustee and/or the Security Insurer by the Servicer) to enable the Servicer to
carry out its servicing and administrative duties hereunder.

        SECTION 4.2 Collection and Allocation of Receivable Payments. (a) The
                    ------------------------------------------------
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others. The
Servicer shall allocate collections between principal and interest in accordance
with its customary servicing procedures.

               (b) The Servicer may, in accordance with its customary servicing
policies grant extensions, rebates or adjustments on a Receivable; provided,
                                                                   --------
however, that if the Servicer extends the date for final payment by the Obligor
-------
of any Receivable beyond the Final Scheduled Maturity Date, it shall promptly
repurchase such Receivable from the Trust in accordance with Section 4.7. The
Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing a Receivable. The
Servicer shall not voluntarily agree to any alteration of the interest rate on
any Receivable.

                                      -28-

<PAGE>

        SECTION 4.3 Realization upon Receivables. On behalf of the Issuer and
                    ----------------------------
the Security Insurer, the Servicer shall use its best efforts, consistent with
its customary servicing procedures, to repossess or otherwise convert the
ownership of the Financed Vehicle securing any Receivable as to which the
Servicer shall have determined eventual payment in full is unlikely. From time
to time, as appropriate for servicing or foreclosing upon any Receivable, the
Owner Trustee shall, upon written request of the Servicer, execute such
documents as shall be reasonably necessary to prosecute any such proceedings.
The Servicer shall follow such customary and usual practices and procedures as
it shall deem necessary or advisable in its servicing of automotive receivables,
which may include reasonable efforts to realize proceeds from Receivables
repurchased by a Dealer, pursuant to a Dealer Agreement, as a result of a breach
of representation or warranty in the related Dealer Agreement or a default by an
Obligor resulting in the repossession of the Financed Vehicle under such Dealer
Agreement. The foregoing shall be subject to the provision that, in any case in
which the Financed Vehicle shall have suffered damage, the Servicer shall not
expend funds in connection with the repair or the repossession of such Financed
Vehicle unless it shall determine in its reasonable discretion that such repair
and/or repossession will increase the Net Liquidation Proceeds by an amount
greater than the amount of such expenses.

        SECTION 4.4 Financed Vehicle Insurance. In the event of a loss or claim
                    --------------------------
under a physical damages insurance policy or comprehensive and collision
insurance policy, the Servicer shall, in accordance with its customary servicing
procedures take all necessary action to enforce all available rights and claims
under such insurance policy. Notwithstanding the foregoing, the Servicer shall
not be obligated to, and does not (a) monitor the placement or maintenance of
such insurance by Obligors or (b) pay any premium of force-placed insurance
concerning any Financed Vehicle.

        SECTION 4.5 Maintenance of Security  Interests in Financed  Vehicles.
                    --------------------------------------------------------
(a) The Servicer  shall,  in accordance  with its customary servicing
procedures, take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle in
favor of the Seller. The Servicer is hereby authorized to take such steps as are
necessary to re-perfect such security interest on behalf of the Issuer and the
Indenture Collateral Agent in the event of the relocation of a Financed Vehicle
or for any other reason.

               (b) Upon the occurrence of an Insurance Agreement Trigger Event,
and subject to the other provisions of this Agreement, the Security Insurer may
(so long as an Insurer Default shall not have occurred and be continuing)
instruct the Owner Trustee and the Servicer to take or cause to be taken, or, if
an Insurer Default shall have occurred, upon the occurrence of a Servicer
Default, the Owner Trustee and the Servicer shall take or cause to be taken such
action as may, in the opinion of counsel to the Security Insurer (or, if an
Insurer Default shall have occurred and be continuing, counsel to the Owner
Trustee), be necessary to perfect or reperfect the security interests in the
Financed Vehicles securing the Receivables in the name of the Trust by such
reasonable means as may, in the opinion of counsel to the Security Insurer or
the Owner Trustee (as applicable), be necessary or prudent. The Servicer hereby
agrees to pay all expenses related to such perfection or reperfection and to
take all action necessary therefor.

                                      -29-

<PAGE>

         SECTION 4.6 Covenants of Servicer. The Servicer shall not release the
                     ---------------------
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or payment in full less a deficiency which the Servicer
would not attempt to collect in accordance with its customary procedures or in
connection with repossession or except as may be required by an insurer in order
to receive proceeds from insurance covering such Financed Vehicle, nor shall the
Servicer impair the rights of the Issuer, the Trustee, the Indenture Collateral
Agent, the Security Insurer, the Certificateholders or the Noteholders in such
Receivables (it being understood that no action of the Servicer taken in
compliance with the terms of this Agreement shall be deemed to impair such
rights), nor shall the Servicer increase the number of scheduled payments due
under a Receivable.

        SECTION 4.7 Purchase of Receivables upon Breach. The Representative, the
                    -----------------------------------
Seller, the Servicer, the Security Insurer or the Issuer shall inform the other
parties and the Trustee promptly, in writing, upon the discovery of any breach
of the Servicer's covenants pursuant to Sections 4.2(b), 4.4, 4.5 or 4.6, or of
any breach of the Servicer's representations and warranties made pursuant to
Section 7.1(b). As of the last day of the second (or, if the Servicer so elects,
the first) month following the discovery by the Servicer or receipt by the
Servicer of notice from any of the Representative, the Seller, the Servicer, the
Security Insurer, the Issuer or the Trustee of such breach, unless such breach
is cured by such date, the Servicer shall be obligated to purchase any
Receivable in which the interests of the Noteholders, the Certificateholders or
the Security Insurer are materially and adversely affected by such breach as of
such date. The "second month" shall mean the month following the month in which
discovery occurs or notice is given, and the "first month" shall mean the month
in which discovery occurs or notice is given. In consideration of the purchase
of any such Receivable pursuant to the preceding sentence, the Servicer shall
remit the Purchase Amount in the manner specified in Section 5.5. The sole
remedy of the Issuer, the Trustee, the Noteholders or the Certificateholders
with respect to a breach pursuant to Sections 4.2(b), 4.4, 4.5 or 4.6, or to a
breach of representations and warranties pursuant to Section 7.1(b), shall be
limited to the purchase of Receivables in accordance with this Section 4.7. The
Trustee and the Owner Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the purchase of
any Receivable pursuant to this Section 4.7. A successor Servicer shall not have
repurchase obligations for breaches by the predecessor servicer.

               SECTION 4.8 Servicing Fee. The "Servicing Fee" for a Distribution
                           -------------
Date shall equal the sum of the Base Servicing Fee, the Supplemental Servicing
Fee, any Additional Servicing Fee, all Investment Earnings on the Collection
Account plus any reimbursement pursuant to Section 5.2(b). The Servicer shall be
entitled to retain from collections the Base Servicing Fee and the Investment
Earnings as provided herein. The Servicer shall also be entitled to retain the
Supplemental Servicing Fee to the extent that such amount is not required to be
deposited to the Spread Account pursuant to the Spread Account Agreement. The
Servicer, in its discretion at its election, may defer receipt of all or any
portion of the Servicing Fee for any Monthly Period to and until a later Monthly
Period for any reason (other than for the purpose of evading the priorities set
forth in Section 5.6(a)), including in order to avoid a shortfall in any

                                      -30-

<PAGE>

payments due on any Notes. Any such deferred amount shall be payable to (or may
be retained from subsequent collections by) the Servicer on demand.

         SECTION 4.9 Servicer's Certificate. (a) No later than 12:00 noon New
                     ----------------------
York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Trustee, the Security Insurer or its fiscal agent, the
Indenture Collateral Agent and each Rating Agency a Servicer's Certificate
containing, among other things, (i) all information necessary to enable the
Trustee to make any withdrawal and deposit required by Section 5.6(a) and
5.6(c), to give any notice required by Section 5.4 and to make the distributions
required by Section 5.6, (ii) all information necessary to enable the Trustee to
send the statements required by Section 5.8 to the Owner Trustee, the
Noteholders, the Certificateholders, each Rating Agency and the Security
Insurer, (iii) a listing of all Receivables purchased during the related Monthly
Period, identifying the Receivables so purchased, (iv) all information necessary
to enable the Trustee to reconcile all deposits to, and withdrawals from, the
Collection Account for the related Monthly Period and Distribution Date,
including the accounting required by Section 5.9, (v) the amount of Covered
Amounts (as defined in the Servicer Deposit Support Agreement) to be deposited
to the Collection Account for the related Distribution Date pursuant to the
Servicer Deposit Support Agreement, (vi) all information necessary to enable the
Owner Trustee to make the distribution required by the Trust Agreement, (vii) a
statement of the then current long-term rating and short-term rating of the
Representative maintained by each Rating Agency and (viii) a statement setting
forth the number of extensions or deferrals granted by the Servicer during the
prior calendar month and the aggregate principal balance as of the end of the
related Monthly Period of all Contracts on which an extension or deferral has
been granted by the Servicer during the prior calendar month pursuant to Section
4.2(b) herein. Receivables purchased by the Servicer, the Seller or the
Representative and each Receivable which became a Liquidated Receivable or which
was paid in full during the related Monthly Period shall be identified by
account number (as set forth in Schedule A hereto). A copy of such certificate
may be obtained by any Noteholder or Certificateholder by a request in writing
to the Trustee addressed to the Corporate Trust Office or from the Servicer.
Neither the Trustee nor the Owner Trustee shall be under any obligation to
confirm or reconcile the information provided pursuant to Section 4.9(a)(iv).

               (b) If the Servicer's Certificate contains a manifest error, the
Security Insurer's written notice to the Servicer, the Owner Trustee and the
Trustee containing the corrected information shall be deemed to amend such
Servicer's Certificate.

         SECTION 4.10 Annual Statement as to Compliance; Notice of Default. (a)
                      ----------------------------------------------------
The Servicer shall deliver to the Owner Trustee, the Trustee and the Security
Insurer, on or before January 31 of each year beginning January 31, 2003 an
Officer's Certificate, dated as of the preceding September 30, stating that (i)
a review of the activities of the Servicer during the preceding 12-month period
and of its performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof. The Trustee shall send a copy of such certificate and
the report referred to in Section 4.11 to the Rating Agencies. A copy of such

                                      -31-

<PAGE>

certificate and the report referred to in Section 4.11 may be obtained by any
Certificateholder by a request in writing to the Owner Trustee addressed to the
Corporate Trust Office or by any Noteholder by a request in writing to the
Trustee addressed to the Corporate Trust Office. Upon the telephone request of
the Owner Trustee, the Trustee will promptly furnish the Owner Trustee a list of
Noteholders as of the date specified by the Owner Trustee. Each Noteholder, by
its acceptance of a Note, shall be deemed to agree that the Trustee shall be
under no liability for providing the list of Noteholders to the Owner Trustee as
described in the immediately preceding sentence.

               (b) The Servicer shall deliver to the Owner Trustee, the Trustee,
the Security Insurer and the Rating Agencies, promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Default under Section
8.1(a) or (b).

         SECTION 4.11 Annual Independent Certified Public Accountants' Report.
                      -------------------------------------------------------
The Servicer shall cause a firm of independent certified public accountants,
which may also render other services to the Servicer or the Seller, to deliver
to the Seller, the Owner Trustee, the Trustee and the Security Insurer on or
before January 31 of each year beginning January 31, 2003 an agreed-upon
procedures report addressed to the Servicer, the Seller, the Owner Trustee, the
Trustee and the Security Insurer and each Rating Agency, expressing a summary of
findings, (based on certain procedures performed on the documents, records and
accounting records that such accountants considered appropriate under the
circumstances) relating to the servicing of the Receivables, or the
administration of the Receivables and of the Trust, as the case may be, during
the preceding year ended September 30, and that, on the basis of the accounting
and auditing procedures considered appropriate under the circumstances, such
firm is of the opinion that such servicing or administration was conducted in
compliance with the terms of this Agreement, except for (i) such exceptions as
such firm shall believe to be immaterial and (ii) such other exceptions as shall
be set forth in such report.

               Such report will also indicate that the firm is independent of
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.

         SECTION 4.12 Access to Certain Documentation and Information Regarding
                      ---------------------------------------------------------
Receivables. The Servicer shall provide to representatives of the Trustee, the
-----------
Owner Trustee and the Security Insurer reasonable access to the Receivable
Files. The Servicer shall provide to the Certificateholders and Noteholders
access to the Receivable Files in such cases where the Certificateholders or
Noteholders shall be required by applicable statutes or regulations to review
such documentation as demonstrated by evidence satisfactory to the Servicer in
its reasonable judgment. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect the obligation of
the Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors and the failure of the Servicer to provide access to
information as a result of such obligation shall not constitute a breach of this
Section.

                                      -32-

<PAGE>

         SECTION 4.13 Servicer Expenses. The Servicer shall be required to pay
                      -----------------
all expenses incurred by it in connection with its activities hereunder and
under any of the Basic Documents, including fees and disbursements of
independent accountants, taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to Certificateholders and Noteholders.

         SECTION 4.14 Appointment of Subservicer. The Servicer may at any time
                      --------------------------
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Servicer shall remain obligated
                    --------  -------
and be liable to the Issuer, the Owner Trustee, the Trustee, the Security
Insurer, the Certificateholders and the Noteholders for the servicing and
administering of the Receivables in accordance with the provisions hereof
without diminution of such obligation and liability by virtue of the appointment
of such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time and none of the Issuer, the
Owner Trustee, the Trustee, the Security Insurer, the Certificateholders or the
Noteholders shall have any responsibility therefor.

         SECTION 4.15 Obligations under Basic Documents. The Servicer shall
                      ---------------------------------
perform all of its obligations under the Basic Documents.


                                    ARTICLE V

                                 Distributions;
                                 --------------
                Statements to Certificateholders and Noteholders
                ------------------------------------------------

         SECTION 5.1  Establishment of Trust Accounts.
                      -------------------------------


                  (a)(i) The Trustee on behalf of the Noteholders, the Owner
         Trustee (on behalf of the Certificateholders) and the Security Insurer,
         shall establish and maintain in the name of the Indenture Collateral
         Agent an Eligible Deposit Account (the "Collection Account"), bearing a
         designation clearly indicating that the funds deposited therein are
         held on behalf of the Noteholders, the Owner Trustee on behalf of the
         Certificateholders, and the Security Insurer. Investment Earnings on
         funds in the Collection Account shall be paid to the Servicer.

                  (ii) The Trustee, on behalf of the Noteholders and the
         Security Insurer, shall establish and maintain in the name of the
         Indenture Collateral Agent an Eligible Deposit Account (the "Note
         Distribution Account"), bearing a designation clearly indicating that
         the funds deposited therein are held on behalf of the Noteholders and
         the Security Insurer. The Note Distribution Account shall initially be
         established with the Trustee.



                                      -33-

<PAGE>

                  (b)    Funds on deposit in the Collection Account, the Note
Distribution Account (collectively the "Trust Accounts") and the Certificate
Distribution Account shall be invested by the Indenture Collateral Agent with
respect to Trust Accounts and by the Owner Trustee with respect to the
Certificate Distribution Account (or any custodian with respect to funds on
deposit in any such account) in Eligible Investments selected in writing by the
Servicer (pursuant to standing instructions or otherwise); provided, however, it
is understood and agreed that neither the Indenture Collateral Agent nor the
Owner Trustee shall be liable for any loss arising from such investment in
Eligible Investments. All such Eligible Investments shall be held by or on
behalf of the Indenture Collateral Agent or the Owner Trustee, as applicable,
for the benefit of the Noteholders and/or the Certificateholders, as applicable,
and the Security Insurer. Other than as permitted by the Rating Agencies and the
Security Insurer, funds on deposit in the Collection Account, the Note
Distribution Account and the Certificate Distribution Account shall be invested
in Eligible Investments that will mature so that such funds will be available at
the close of business on the Business Day immediately preceding the Distribution
Date next succeeding the date of such investment. Funds deposited in a Trust
Account or the Certificate Distribution Account on the day immediately preceding
a Distribution Date upon the maturity of any Eligible Investments are not
required to be invested overnight.

                  (c)(i) The Indenture Collateral Agent shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (excluding all Investment Earnings on the
Collection Account) and all such funds, investments, proceeds and income shall
be part of the Owner Trust Estate. Except as otherwise provided herein, the
Trust Accounts shall be under the sole dominion and control of the Indenture
Collateral Agent for the benefit of the Noteholders and the Certificateholders,
as the case may be, and the Security Insurer. If, at any time, any of the Trust
Accounts or the Certificate Distribution Account ceases to be an Eligible
Deposit Account, the Indenture Collateral Agent (or the Servicer on its behalf)
or the Owner Trustee, as applicable, shall within 10 Business Days (or such
longer period as to which each Rating Agency and (unless an Insurer Default
shall have occurred and be continuing) the Security Insurer may consent)
establish a new Trust Account or a new Certificate Distribution Account, as
applicable, as an Eligible Deposit Account and shall transfer any cash and/or
any investments to such new Trust Account or a new Certificate Distribution
Account, as applicable. In connection with the foregoing, the Servicer agrees
that, in the event that any of the Trust Accounts are not accounts with the
Trustee, the Servicer shall notify a Trust Officer of the Trustee in writing
promptly upon any of such Trust Accounts ceasing to be an Eligible Deposit
Account.

                  (ii)   With respect to the Trust Account Property, the
         Indenture Collateral Agent, and with respect to the Certificate
         Distribution Account, the Issuer agrees, by its respective acceptance
         hereof, that:

                         A. any Trust Account Property or any property in the
                  Certificate Distribution Account that is held in deposit
                  accounts shall be held solely in Eligible Deposit Accounts
                  subject to the penultimate sentence of Section 5.1(c)(i); and,
                  except as otherwise provided herein, each such Eligible
                  Deposit Account shall be subject to the exclusive custody and
                  control of the Indenture Collateral


                                      -34-

<PAGE>

                  Agent with respect to the Trust Accounts and the Issuer with
                  respect to the Certificate Distribution Account, and the
                  Indenture Collateral Agent or the Issuer, as applicable, shall
                  have sole signature authority with respect thereto;

                         B. any Trust Account Property shall be Delivered to
                  the Indenture Collateral Agent in accordance with the
                  definition of "Delivery" and shall be held, pending maturity
                  or disposition, solely by the Indenture Collateral Agent or
                  such other Person acting solely for the Indenture Collateral
                  Agent as required for Delivery; and

                         C. in the event that the Indenture Collateral Agent, In
                  its capacity as securities intermediary, has or subsequently
                  obtains by agreement, operation of law or otherwise a security
                  interest in the Trust Accounts or any security entitlement
                  credited thereto, the Indenture Collateral Agent, in its
                  capacity as securities intermediary, hereby agrees that such
                  security interest shall be subordinate to the security
                  interest of the Indenture Collateral Agent. The financial
                  assets and other items deposited to the Trust Accounts will
                  not be subject to deduction, set-off, banker's lien, or any
                  other right in favor of any person (except that the Indenture
                  Collateral Agent, in its capacity as securities intermediary,
                  may set off the face amount of any checks which have been
                  credited to the Trust Accounts but are subsequently returned
                  unpaid because of uncollected or insufficient funds).

                  (d) The Servicer shall have the power, revocable by the
Controlling Party or by the Issuer with the consent of the Controlling Party, to
instruct the Indenture Collateral Agent to make withdrawals and payments from
the Trust Accounts for the purpose of permitting the Servicer or the Issuer to
carry out its respective duties hereunder or permitting the Trustee to carry out
its duties under the Indenture.

                  (e) The Servicer shall on or prior to each Distribution Date
transfer from the Collection Account to the Spread Account all amounts
constituting a part of the Supplemental Servicing Fee not retained by the
Servicer pursuant to Section 4.8.

         SECTION 5.2  Collections. (a) The Servicer shall remit within two
                      -----------
Business Days of receipt thereof to the Collection Account all payments by or on
behalf of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Net Liquidation Proceeds, both as collected during the
Monthly Period less any payments owed thereon to the Servicer. Notwithstanding
the foregoing, for so long as (i) Franklin Capital remains the Servicer, (ii) no
Servicer Default shall have occurred and be continuing, (iii) there exists no
Insurer Default, (iv) the Servicer's (or if the Servicer is Franklin Capital,
and the Representative has entered into an agreement, guaranty, surety or other
arrangement backing Franklin Capital's obligations acceptable to the Rating
Agencies and the Security Insurer, then the Representative's) short term
obligations are rated at least A-1 by Standard & Poor's and P-1 by Moody's and
(v) the Rating Agency Condition shall have been satisfied (and any conditions or
limitations imposed by the Rating Agencies in connection therewith are complied
with), the Servicer may remit such

                                      -35-

<PAGE>

collections with respect to the preceding calendar month to the Collection
Account on the second Business Day immediately preceding the related
Distribution Date. If, however, one of the conditions in clauses (i) through (v)
of the preceding sentence is not satisfied, then the Servicer shall remit such
collections with respect to the preceding calendar month to the Collection
Account within two Business Days of receipt thereof or, if the Servicer has
already held such collections for two Business Days, it shall remit such
collections to the Collection Account immediately. Pending deposit thereof into
the Collection Account, the Servicer may use or invest collections at its own
risk and for its own benefit and need not segregate collections from its own
funds. For purposes of this Article V the phrase "payments by or on behalf of
Obligors" shall mean payments made with respect to the Receivables by Persons
other than the Servicer or the Seller.

                  (b)    The Servicer will be entitled to be reimbursed from
amounts on deposit in the Collection Account with respect to a Monthly Period
for amounts previously deposited in the Collection Account but later determined
by the Servicer to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall be
paid to the Servicer on the related Distribution Date pursuant to Section
5.6(a)(i) upon certification by the Servicer of such amounts and the provision
of such information to the Trustee and the Security Insurer as may be necessary
in the opinion of the Security Insurer to verify the accuracy of such
certification. In the event that the Security Insurer has not received evidence
satisfactory to it of the Servicer's entitlement to reimbursement pursuant to
Section 5.2(b), the Security Insurer shall (unless an Insurer Default shall have
occurred and be continuing) give the Trustee notice to such effect, following
receipt of which the Trustee shall not make a distribution to the Servicer in
respect of such amount pursuant to Section 5.6(a)(i), or if the Servicer prior
thereto has been reimbursed pursuant to Section 5.6(a)(i) or Section 5.9, the
Trustee shall withhold such amounts from amounts otherwise distributable to the
Servicer on the next succeeding Distribution Date.

         SECTION 5.3     Application  of  Collections.  All  collections  for
                         ----------------------------
the Monthly Period shall be applied by the Servicer as follows:

                  With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor (other than Supplemental
Servicing Fees with respect to such Receivable, to the extent collected), shall
be applied to interest and principal in accordance with the Simple Interest
Method.

                  All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall, other than as provided in Section
5.9, be deposited in the Collection Account and paid to the Servicer in
accordance with Section 5.6(a).

         SECTION 5.4     Deficiency Notice. (a) In the event that the Servicer's
                         -----------------
Certificate with respect to any Determination Date shall state that the amount
of the Available Funds with respect to such Determination Date is less than the
sum of the amounts payable on the related Distribution Date pursuant to clauses
(iii) and (iv) of Section 5.6(a) remaining after application of clauses (i) and
(ii) of Section 5.6(a) (any such deficiency being a "Note Policy Claim


                                      -36-

<PAGE>

Amount"), then on the Deficiency Claim Date immediately preceding such
Distribution Date the Trustee, based solely on the information provided in the
Servicer's Certificate, shall deliver to the Indenture Collateral Agent, the
Security Insurer, the fiscal agent of the Security Insurer, the Owner Trustee,
the Insurer's Agent and the Servicer, by hand delivery, telex or facsimile
transmission, a written notice (a "Deficiency Notice") in accordance with the
terms of the Note Policy specifying the Note Policy Claim Amount for such
Distribution Date.

                  (b) Any Deficiency Notice shall be delivered by 10:00 a.m.,
New York City time, on the related Deficiency Claim Date. The amounts
distributed to the Trustee pursuant to a Deficiency Notice shall be deposited by
the Trustee into the Collection Account pursuant to Section 5.5.

         SECTION 5.5     Additional Deposits. The Servicer, the Seller, and the
Representative, as applicable, shall deposit or cause to be deposited in the
Collection Account on the second Business Day immediately prior to the
Distribution Date following the date on which such obligations are due the
aggregate Purchase Amount with respect to Purchased Receivables. On or before
each Draw Date, the Trustee shall remit to the Collection Account any amounts
delivered to the Trustee pursuant to a Deficiency Notice.

         SECTION 5.6     Distributions. (a) On each Distribution Date other than
the Distribution Date on which Insolvency Proceeds are to be distributed, the
Trustee shall (based solely on the information contained in the Servicer's
Certificate delivered with respect to the related Determination Date) distribute
the following amounts and in the following order of priority:

                  (i)   from the Distribution Amount, to the Servicer, the Base
         Servicing Fee for the related Monthly Period, any amounts constituting
         the Base Servicing Fee for previous Monthly Periods which have not been
         paid and any amounts specified in Section 5.2(b), to the extent the
         Servicer has not reimbursed itself in respect of such amounts pursuant
         to Section 5.9;

                  (ii)  from the Distribution Amount, to the Security Insurer,
         any accrued and unpaid premiums of the Security Insurer payable
         ursuant to the Insurance Agreement (to the extent such premiums have
         not been previously paid by the Servicer or Franklin Capital);

                  (iii) from the Distribution Amount, to the Note Distribution
         Account, the Noteholders' Interest Distributable Amount;

                  (iv)  from the Distribution Amount, to the Note Distribution
         Account, the Principal Distributable Amount;

                  (v)   from the Available Funds, to the Security Insurer, any
         interest due on outstanding Surety Draws (as defined below);


                                      -37-

<PAGE>

                  (vi)   from the Available Funds, to the Security Insurer, to
         the extent of available funds, the amount, if any, to reimburse the
         Security Insurer for amounts paid under the Note Policy (to the extent
         not reimbursed from other amounts available to the Security Insurer)
         (such amounts paid, the "Surety Draws"), any other Insurer Optional
         Deposits paid by the Insurer, any Security Insurer Defense Costs and
         all other amounts payable to the Security Insurer under the Insurance
         Agreement;

                  (vii)  from the Available Funds, to the Spread Account, Spread
         Account Deposit Amounts;

                  (viii) from the Available Funds, to the Trustee and Indenture
         Collateral Agent, to the extent of available funds, all outstanding
         fees, expenses and indemnification not previously paid to them by the
         Servicer;

                  (ix)   from the Available Funds, to the Servicer, the
         Additional Servicing Fee and for the related Monthly Period and any
         overdue Additional Servicing Fees; and

                  (x)    from the Available Funds, to the Certificate
         Distribution Account for distribution to the Certificateholders or
         their designees, any remaining funds.

provided, however, that, (A) following an acceleration of the Notes or, (B) if
--------  -------
an Insurer Default shall have occurred and be continuing, following the
occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iii),
5.1(v) or 5.1(vi) of the Indenture, or (C) following the receipt of Insolvency
Proceeds pursuant to Section 9.1(b), amounts deposited in the Note Distribution
Account shall be applied to the Noteholders to the extent necessary to pay
accrued and unpaid interest on the Notes and then, to the extent funds are
available therefor, principal on the Notes until the principal balance of the
Notes has been reduced to zero, in accordance with the provisions of Section 5.6
of the Indenture. Notwithstanding item (ix) above, for so long as the Servicer
and/or its affiliates are the owners of the Certificates, amounts to be remitted
pursuant to such item (ix) to the Certificate Distribution Account may instead
be distributed directly to the Certificateholders by the Servicer.

                  (b)    Reserved.

                  (c)    In the event that the Collection Account is maintained
with an institution other than the Indenture Collateral Agent, the Servicer
shall instruct and cause such institution to make all deposits and distributions
pursuant to Section 5.6(a) on the related Distribution Date.

         SECTION 5.7     [RESERVED].

         SECTION 5.8     Statements to Certificateholders and Noteholders. On or
                         ------------------------------------------------
prior to each Determination Date, the Servicer shall provide to the Trustee
(with a copy to the Security Insurer and the Rating Agencies) for the Trustee to
forward to each Noteholder of record, to each Paying Agent, if any, and to the
Owner Trustee for the Owner Trustee to forward to each Certificateholder of
record, a statement substantially in the form of Exhibit C, setting forth at

                                      -38-

<PAGE>


least the following information with respect to distributions on the related
Distribution Date as to the Notes and the Certificates to the extent applicable:

                  (i)    the amount of such distribution allocable to principal
         of each Class of Notes;

                  (ii)   the amount of such distribution allocable to interest
         on or with respect to each Class of Notes;

                  (iii)  the amount of such distribution payable pursuant to a
         claim on the Note Policy and any remaining outstanding balance
         available to be drawn under the Note Policy;

                  (iv)   the Month-End Pool Balance as of the close of business
         on the last day of the preceding Monthly Period;

                  (v) the aggregate outstanding principal amount of each Class
         of the Notes and the Note Pool Factor for each such Class, after giving
         effect to payments allocated to principal reported under (i) above;

                  (vi)   the amount of the Servicing Fee paid to the Servicer
         with respect to the related Monthly Period and/or due but unpaid with
         respect to such Monthly Period or prior Monthly Periods, as the case
         may be;

                  (vii)  the Noteholders' Interest Carryover Shortfall;

                  (viii) the amount of the aggregate Realized Losses, if any,
         for the related Monthly Period;

                  (ix)   the aggregate Purchase Amounts for Receivables, if any,
         that were repurchased in such period;

                  (x)    the amounts which were collected by the Servicer;

                  (xi)   the aggregate amount which was received by the Trust
         from the Servicer;

                  (xii)  any reimbursements to the Security Insurer;

                  (xiii) delinquency information relating to Receivables which
                  are 30, 60 or 90 days delinquent; and

                  (xiv)  the aggregate amount distributed to the
         Certificateholders.


                                      -39-

<PAGE>

Each amount set forth pursuant to paragraph (i), (ii), (iii), (vii), (x) and
(xi) above shall be expressed as a dollar amount per $1,000 of the initial
principal balance of the Notes (or Class thereof).

         SECTION 5.9     Net Deposits. As an administrative convenience, unless
                         ------------
the Servicer is required to remit collections within two Business Days of
receipt thereof, the Servicer will be permitted to make the deposit of
collections on the Receivables and Purchase Amounts for or with respect to each
Monthly Period net of distributions to be made to the Servicer with respect to
such Monthly Period. The Servicer, however, will account to the Owner Trustee,
the Trustee, the Indenture Collateral Agent, the Noteholders and the
Certificateholders as if all deposits, distributions and transfers were made
individually.

         SECTION 5.10    Optional Deposits by the Security Insurer. The Security
                         -----------------------------------------
Insurer shall at any time, and from time to time, with respect to a Distribution
Date, have the option (but shall not be required, except in accordance with the
terms of the Note Policy) to deliver or cause to be delivered amounts ("Insurer
Optional Deposits") to the Trustee for deposit into the Collection Account for
any of the following purposes: (i) to provide funds in respect of the payment of
fees or expenses of any provider of services to the Trust with respect to such
Distribution Date or (ii) to include such amount to the extent that without such
amount a draw would be required to be made on the Note Policy.


                                   ARTICLE VI

                                   The Seller
                                   ----------

         SECTION 6.1     Representations of the Seller. The Seller makes the
                         -----------------------------
ollowing representations on which the Security Insurer shall be deemed to have
relied in executing and delivering the Note Policy and on which the Issuer is
deemed to have relied in acquiring the Receivables. The representations speak as
of the execution and delivery of this Agreement and as of the Closing Date
(unless another date or time period is otherwise specified or indicated in the
particular representation or warranty), and shall survive the sale to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.

                  (a)  Organization and Good  Standing.  The Seller is duly
                       --------------------------------
organized and validly existing as a Delaware limited liability company with
power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted, and had
at all relevant times, and has, the power, authority and legal right to acquire
and own the Receivables.

                  (b)  Due Qualification. The Seller is duly qualified to do
                       -----------------
business as a limited liability company in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property, including the Receivables, or the conduct of its business
shall require such qualifications.


                                      -40-



<PAGE>

                  (c) Power and Authority of the Seller. The Seller has the
                      ---------------------------------
power and authority to execute and deliver this Agreement and to perform its
obligations under each of the Basic Documents to which the Seller is a party;
the Seller has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer and the Seller has duly
authorized such sale and assignment to the Issuer by all necessary action; and
the execution, delivery and performance of each of the Basic Documents to which
the Seller is a party has been duly authorized by the Seller by all necessary
action.

                  (d) Binding Obligation. This Agreement and each of the Basic
                      ------------------
Documents to which the Seller is a party constitute legal, valid and binding
obligations of the Seller, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and similar laws now or hereafter in effect relating to
creditors' rights generally and subject to general principles of equity (whether
applied in a proceeding at law or in equity).

                  (e) No Violation. The consummation of the transactions
                      ------------
contemplated by this Agreement and the fulfillment of the terms hereof and
thereof do not result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time or both) a default under,
the certificate of formation or limited liability company agreement of the
Seller, or any indenture, agreement or other instrument to which the Seller is a
party or by which it is bound; nor result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the best of its knowledge, any order, rule or regulation
applicable to the Seller of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.

                  (f) No Proceedings. There are no proceedings or investigations
                      --------------
pending against the Seller or, to its best knowledge, threatened against the
Seller, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Seller of its obligations under, or the
validity or enforceability of, the Basic Documents, the Notes or the
Certificates or (iv) that might adversely affect the federal income tax
attributes of the Issuer, the Notes or the Certificates.

                  (g) All Consents. All authorizations, consents, orders or
                      ------------
approvals of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Seller in connection with the execution and
delivery by the Seller of this Agreement or any of the Basic Documents to which
it is a party and the performance by the Seller of the transactions contemplated
by this Agreement, or any of the Basic Documents to which it is a party, have
been duly obtained, effected or given and are in full force and effect, except
where failure to obtain the same would

                                      -41-

<PAGE>

not have a material and adverse effect upon the rights of the Issuer, the
Noteholders or the Certificateholders.

          (h) Chief Executive Office. The chief executive office of the Seller
              ----------------------
is at 47 West 200 South, Salt Lake City, Utah 84101.

     SECTION 6.2 Corporate Existence. (a) During the term of this Agreement, the
                 -------------------
Seller will keep in full force and effect its existence, rights and franchises
as a limited liability company under the laws of the jurisdiction of its
formation and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Basic Documents and each
other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.

          (b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows:

          (i)   the Seller shall maintain records and books of account separate
     from those of its Affiliates;

          (ii)  except as otherwise provided in this Agreement, the Seller shall
     not commingle its assets and funds with those of its Affiliates;

          (iii) the Seller shall hold such appropriate meetings of its members
     as are necessary to authorize all the Seller's actions required by law to
     be authorized by the members, shall keep minutes of such meetings and of
     meetings of its stockholder(s) and observe all other customary formalities
     (and any successor Seller not a corporation shall observe similar
     procedures in accordance with its governing documents and applicable law);

          (iv)  the Seller shall at all times hold itself out to the public
     under the Seller's own name as a legal entity separate and distinct from
     its Affiliates; and

          (v)   all transactions and dealings between the Seller and its
     Affiliates will be conducted on an arm's-length basis.

     SECTION 6.3 Liability of Seller; Indemnities. The Seller shall be liable in
                 --------------------------------
accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement. Notwithstanding anything set
forth in this Section 6.3, the Seller shall only be required to indemnify the
parties listed below to the extent of any Available Funds remaining following
distributions made pursuant to clauses (i) through (ix) of Section 5.6(a) (the
"Seller Indemnification Cap"); provided, however, that if the aggregate amount
of indemnification for which the Seller would otherwise be required to indemnify
the parties listed below pursuant to this Section 6.3 exceeds the Seller
Indemnification Cap, the Servicer shall

                                      -42-

<PAGE>

indemnify the partifes listed below for the difference. In addition, the
indemnification provided herein shall not constitute a claim against the Seller.

          (a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trust, the Security Insurer, the Trustee and the
Indenture Collateral Agent from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions contemplated
in this Agreement and any of the Basic Documents (except any income taxes
arising out of fees paid to any of them and except any taxes to which the Owner
Trustee or the Trustee may otherwise be subject to), including any sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes (but, in the case of the Issuer, not including any taxes asserted with
respect to, federal or other income taxes arising out of distributions on the
Certificates and the Notes) and costs and expenses in defending against the
same.

          (b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trustee, the Indenture Collateral Agent, the Security
Insurer, and the Noteholders from and against any loss, liability or expense
incurred by reason of (i) the Seller's willful misfeasance, bad faith or
negligence in the performance of its duties under this Agreement or the other
Basic Documents, or by reason of reckless disregard of its obligations and
duties under this Agreement and (ii) the Seller's or the Issuer's violation of
Federal or state securities laws in connection with the offering and sale of the
Notes.

          (c) The Seller shall indemnify, defend and hold harmless the Owner
Trustee and its officers, directors, employees and agents from and against any
and all costs, expenses, losses, claims, damages and liabilities arising out of,
or incurred in connection with the acceptance or performance of the trusts and
duties set forth herein and in the Basic Documents except to the extent that
such cost, expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Owner Trustee.

          Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee, the Trustee or the Indenture Collateral Agent and
the termination of this Agreement, the Indenture or the Trust Agreement, as
applicable, and shall include reasonable fees and expenses of counsel and other
expenses of litigation. If the Seller shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Seller, without interest.

     SECTION 6.4 Merger or Consolidation of, or Assumption of the Obligations
                 ------------------------------------------------------------
of, the Seller. Any Person (a) into which the Seller may be merged or
--------------
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, shall be the successor to the Seller hereunder without the
execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that (i) unless an Insurer Default shall have
                --------  -------
occurred and be continuing, the Seller shall

                                      -43-

<PAGE>

have received the written consent of the Security Insurer prior to entering
into any such transaction, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 3.1 shall
have been breached and no Servicer Default, and no event which, after notice or
lapse of time, or both, would become a Servicer Default shall have happened and
be continuing, (iii) the Seller shall have delivered to the Owner Trustee, the
Trustee and the Security Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, (iv) the Rating Agency Condition shall have been
satisfied with respect to such transaction and (v) the Seller shall have
delivered to the Owner Trustee, the Trustee and the Security Insurer an Opinion
of Counsel stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Trustee, respectively, in the Receivables
and reciting the details of such filings or (B) no such action shall be
necessary to preserve and protect such interest. Notwithstanding anything herein
to the contrary, the execution of the foregoing agreement of assumption and
compliance with clauses (i), (ii), (iii), (iv) and (v) above shall be conditions
to the consummation of the transactions referred to in clauses (a), (b) or (c)
above.

     SECTION 6.5 Limitation on Liability of Seller and Others. The Seller and
                 --------------------------------------------
any member or officer or employee or agent of the Seller may rely in good faith
on the advice of counsel or on any document of any kind, prima facie properly
executed and submitted by any Person respecting any matters arising under any
Basic Document. The Seller shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.

     SECTION 6.6 Seller May Own Certificates or Notes. The Seller and any
                 ------------------------------------
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority, or distinction as among all
of the Notes or Certificates, provided, however, that any Notes or Certificates
                              --------  -------
owned by the Seller or any Affiliate thereof, during the time such Notes or
Certificates are owned by them, shall be without voting rights for any purpose
set forth in the Basic Documents and will not be entitled to the benefits of the
Note Policy. The Seller shall notify the Owner Trustee, the Trustee and the
Security Insurer promptly after it or any of its Affiliates become the owner of
a Certificate or a Note. The Seller hereby notifies the Owner Trustee that
immediately following the issuance of the Certificates it will own all the
Certificates.

                                      -44-

<PAGE>

                                   ARTICLE VII

                                  The Servicer
                                  ------------

     SECTION 7.1   Representations of Servicer. Franklin Capital, in its
                   ---------------------------
capacity as Servicer, makes the following representations on which the Security
Insurer shall be deemed to have relied in executing and delivering the Note
Policy and on which the Issuer is deemed to have relied in acquiring the
Receivables. The representations speak as of the execution and delivery of this
Agreement and as of the Closing Date, and shall survive the sale of the
Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the
Indenture.

          (a)  Organization and Good Standing. Franklin Capital is duly
               ------------------------------
organized and validly existing as a corporation in good standing under the laws
of the state of its incorporation, with the corporate power and authority to own
its properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant times,
and has, the power, authority and legal right to acquire, own, sell and service
the Receivables and to hold the Receivable Files as custodian.

          (b)  Due Qualification. Franklin Capital is duly qualified to do
               -----------------
business and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of its
business (including the servicing of the Receivables as required by this
Agreement) shall require such qualifications, and was duly qualified and had all
licenses in all relevant jurisdictions required for the origination of the
Receivables.

          (c)  Power and Authority of the Servicer. Franklin Capital has the
               -----------------------------------
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and the execution, delivery and performance
of this Agreement have been duly authorized by Franklin Capital by all necessary
corporate action. All authorizations, consents, orders or approvals of or
registrations or declarations with any court, regulatory body, administrative
agency or other government instrumentality required to be obtained, effected or
given by Franklin Capital in connection with the execution and delivery by the
Servicer of this Agreement or any of the Basic Documents to which it is a party
and the performance by the Servicer of the transactions contemplated by this
Agreement or any of the Basic Documents to which it is a party, have been duly
obtained, effected or given and are in full force and effect, except where
failure to obtain the same would not have a material adverse effect upon the
rights of the Issuer or the Noteholders.

          (d)  Binding Obligation. This Agreement constitutes a legal, valid and
               ------------------
binding obligation of Franklin Capital, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect relating
to creditors' rights generally, and subject to general principles of equity
(whether applied in a proceeding at law or in equity).

          (e)  No Violation. The consummation of the transactions contemplated
               ------------
by this Agreement and the fulfillment of the terms hereof do not result in any
breach of any of the terms

                                      -45-

<PAGE>

and provisions of, or constitute (with or without notice or lapse of time) a
default under the articles of incorporation or by-laws of Franklin Capital, or
any indenture, agreement or other instrument to which Franklin Capital is a
party or by which it shall be bound; or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents); or
violate any law or, to the best of Franklin Capital's knowledge, any order, rule
or regulation applicable to Franklin Capital of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Franklin Capital or its properties.

          (f)  No Proceedings. There are no proceedings or investigations
               --------------
pending against Franklin Capital, or, to its best knowledge, threatened against
Franklin Capital, before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over Franklin Capital or
its properties: (i) asserting the invalidity of this Agreement or any of the
Basic Documents or the Notes, (ii) seeking to prevent the issuance of the Notes
or the consummation of any of the transactions contemplated by this Agreement or
any of the Basic Documents, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by Franklin Capital of its
obligations under, or the validity or enforceability of this Agreement or any of
the Basic Documents or the Notes or (iv) relating to Franklin Capital and which
might adversely affect the federal income tax or ERISA attributes of the Issuer
or the Notes.

     SECTION 7.2   Indemnities of Servicer. (a) The Servicer shall be liable
                   -----------------------
in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement and the representations made by
the Servicer herein.

          (b)  The Servicer shall defend, indemnify and hold harmless the Owner
Trustee, the Trustee, the Trust, the Indenture Collateral Agent, the Security
Insurer, the Noteholders and the Seller from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from the use, ownership or operation by the Servicer or any Affiliate thereof of
a Financed Vehicle.

          (c)  The Servicer shall indemnify, defend and hold harmless the Owner
Trustee, the Trustee, the Seller, the Trust, the Indenture Collateral Agent, the
Security Insurer, their respective officers, directors, agents and employees and
the Noteholders from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such costs, expenses, losses,
claims, damages, or liabilities arose out of, or were imposed upon any such
Person through, the negligence, willful misfeasance or bad faith of the Servicer
in the performance of its duties under this Agreement or the other Basic
Documents or by reason of reckless disregard of its obligations and duties under
this Agreement.

          (d)  The Servicer shall indemnify, defend and hold harmless the Owner
Trustee, the Trustee and the Indenture Collateral Agent and their officers,
directors, employees and agents from and against all costs, expenses, losses,
claims, damages and liabilities arising out of or incurred in connection with
the acceptance or performance of the trusts and duties herein,

                                      -46-

<PAGE>


the Indenture and in the Trust Agreement, except to the extent that such costs,
expenses, losses, claims, damages or liabilities shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Owner Trustee, the Indenture Trustee or the Indenture Collateral Agent, as
applicable.

          For purposes of this Section, in the event of the termination of the
rights and obligations of Franklin Capital (or any successor thereto pursuant to
Section 7.3) as Servicer pursuant to Section 8.1, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer (other than the Trustee)
pursuant to Section 8.2.

          Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Trustee or the termination of this
Agreement, the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this Section and
the recipient thereafter collects any of such amounts from others, such Person
shall promptly repay such amounts to the Servicer, without interest.

     SECTION 7.3   Merger or Consolidation of, or Assumption of the
                   ------------------------------------------------
Obligations of, the Servicer. Any Person (a) into which the Servicer may be
----------------------------
merged or consolidated, (b) which may result from any merger or consolidation to
which the Servicer shall be a party, (c) which may succeed to the properties and
assets of the Servicer, substantially as a whole or (d) with respect to the
Servicer's obligations hereunder, which is a corporation 50% or more of the
voting stock of which is owned, directly or indirectly, by Franklin Resources,
which Person executed an agreement of assumption to perform every obligation of
the Servicer hereunder shall be the successor to the Servicer under this
Agreement without further act on the part of any of the parties to this
Agreement; provided, however, that (i) unless an Insurer Default shall have
           --------  -------
occurred and be continuing, the Servicer shall have received the written consent
of the Security Insurer prior to entering into any such transaction, (ii)
immediately after giving effect to such transaction, no Servicer Default and no
event which, after notice or lapse of time, or both, would become a Servicer
Default shall have happened and be continuing, (iii) the Servicer shall have
delivered to the Owner Trustee, the Trustee and the Security Insurer an
Officer's Certificate and an Opinion of Counsel (which shall not be addressed to
the Security Insurer as long as an Insurer Default exists) each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section and that all conditions precedent provided for in this
Agreement relating to such transaction have been complied with, (iv) the Rating
Agency Condition shall have been satisfied with respect to such transaction and
(v) the Servicer shall have delivered to the Owner Trustee, the Trustee and the
Security Insurer an Opinion of Counsel (which shall not be addressed to the
Security Insurer as long as an Insurer Default exists) stating that, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of the Owner Trustee and
the Trustee, respectively, in the Receivables and reciting the details of such
filings or (B) no such action shall be necessary to preserve and protect such
interest. Notwithstanding anything herein to the contrary, the execution of the
foregoing agreement of assumption and compliance with clauses (i), (ii), (iii),

<PAGE>

(iv) and (v) above shall be conditions to the consummation of the transactions
referred to in clauses (a), (b), (c) or (d) above.

     SECTION 7.4   Limitation on Liability of the Servicer and Others. Neither
                   --------------------------------------------------
the Servicer nor any of its directors, officers, employees or agents shall be
under any liability to the Issuer, the Noteholders or the Certificateholders,
except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
          --------  -------
or any such person against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence (except for errors in
judgment) in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement. The Servicer or any subservicer and
any of their respective directors, officers, employees or agents may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.

          Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its duties to service the Receivables in accordance with this
Agreement, and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer, may (but shall not be required to)
--------  -------
undertake any reasonable action that it may deem necessary or desirable to
protect the interests of the Certificateholders under the Trust Agreement and
the Noteholders under the Indenture.

     SECTION 7.5   Servicer Not To Resign. Subject to the provisions of
                   ----------------------
Section 7.3, the Servicer may not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement or the other Basic Documents
except upon determination that by reason of a change in legal requirements the
performance of its duties under this Agreement would cause it to be in violation
of such legal requirements in a manner which would result in a material adverse
effect on the Servicer and the Security Insurer does not elect to waive the
obligations of the Servicer to perform the duties which render it legally unable
to act or does not elect to delegate those duties to another Person. Notice of
any such determination permitting the resignation of the Servicer shall be
communicated to the Owner Trustee, the Trustee and the Security Insurer at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to and satisfactory to the Owner Trustee, the Trustee and the Security
Insurer concurrently with or promptly after such notice. No such resignation of
the Servicer shall become effective until a successor servicer shall have
assumed the responsibilities and obligations of Franklin Capital in accordance
with Section 8.2 of this Agreement.

                                      -48-

<PAGE>

                                  ARTICLE VIIA

                               The Representative
                               ------------------

     SECTION 7.1A   Representations of Franklin Resources. Franklin Resources
                    -------------------------------------
makes the following representations on which the Security Insurer shall be
deemed to have relied in executing and delivering the Note Policy and on which
the Issuer is deemed to have relied in acquiring the Receivables. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date, and shall survive the sale of the Receivables to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.

           (a) Organization and Good Standing. Franklin Resources is duly
               ------------------------------
organized and validly existing as a corporation in good standing under the laws
of the state of its incorporation, with the corporate power and authority to own
its properties and to conduct its business as such properties are currently
owned and such business is presently conducted.

           (b) Due Qualification. Franklin Resources is duly qualified to do
               -----------------
business and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of its
business shall require such qualifications.

          (c)  Power and Authority. Franklin Resources has the corporate power
               -------------------
and authority to execute and deliver this Agreement and to perform its
obligations hereunder, and the execution, delivery and performance of this
Agreement have been duly authorized by Franklin Resources by all necessary
corporate action. All authorizations, consents, orders or approvals of or
registrations or declarations with any court, regulatory body, administrative
agency or other government instrumentality required to be obtained, effected or
given by Franklin Resources in connection with the execution and delivery by
Franklin Resources of this Agreement or any of the Basic Documents to which it
is a party and the performance by Franklin Resources of the transactions
contemplated by this Agreement or any of the Basic Documents to which it is a
party, have been duly obtained, effected or given and are in full force and
effect, except where failure to obtain the same would not have a material
adverse effect upon the rights of the Issuer or the Noteholders.

          (d)  Binding Obligation. This Agreement constitutes a legal, valid and
               ------------------
binding obligation of Franklin Resources, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect relating
to creditors' rights generally, and subject to general principles of equity
(whether applied in a proceeding at law or in equity).

          (e)  No Violation. The consummation of the transactions contemplated
               ------------
by this Agreement and the fulfillment of the terms hereof do not result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under the articles of incorporation or
by-laws of Franklin Resources, or any indenture, agreement or other instrument
to which Franklin Resources is a party or by which it shall be bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such

                                      -49-

<PAGE>


indenture, agreement or other instrument (other than pursuant to the Basic
Documents); or violate any law or, to the best of Franklin Resources' knowledge,
any order, rule or regulation applicable to Franklin Resources of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over Franklin Resources or its
properties.

          (f)  No Proceedings. There are no proceedings or investigations
               --------------
pending against Franklin Resources or, to its best knowledge, threatened against
Franklin Resources, before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over Franklin Resources
or its properties: (i) asserting the invalidity of this Agreement or any of the
Basic Documents or the Notes, (ii) seeking to prevent the issuance of the Notes
or the consummation of any of the transactions contemplated by this Agreement or
any of the Basic Documents, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by Franklin Resources of its
obligations under, or the validity or enforceability of, this Agreement or any
of the Basic Documents or the Notes or (iv) relating to Franklin Resources and
which might adversely affect the federal income tax or ERISA attributes of the
Issuer or the Notes.

     SECTION 7.2A   Limitation on Liability of Franklin Resources and Others.
                    --------------------------------------------------------
Neither Franklin Resources nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this Agreement
or for errors in judgment; provided, however, that this provision shall not
                           --------  -------
protect Franklin Resources or any such person against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties under this Agreement. Franklin Resources or and any of its directors,
officers, employees or agents may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising under this Agreement.

                                   ARTICLE VIII

                                     Default
                                     -------

     SECTION 8.1    Servicer Default. If any one of the  following events (a
                    ----------------
"Servicer Default") shall occur and be continuing:

          (a)  Any failure by the Servicer to deliver to the Owner Trustee or
the Trustee for deposit in any of the Trust Accounts or the Certificate
Distribution Account any payment required to be so delivered under the terms of
the Notes, the Certificates or this Agreement that shall continue unremedied for
a period of 30 Business Days after written notice of such failure is received by
the Servicer from the Security Insurer, the Owner Trustee or the Trustee or
after discovery of such failure by an Officer of the Servicer; or

                                      -50-

<PAGE>

          (b)  Failure by the Servicer or the Seller (as the case may be) duly
to observe or to perform in any material respect any other covenants or
agreements of the Servicer or the Seller (as the case may be) set forth in the
Notes, the Certificates, this Agreement or any other Basic Document, which
failure shall (i) materially and adversely affect the rights of the
Certificateholders, the Security Insurer or the Noteholders and (ii) continue
unremedied for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given (A) to
the Servicer by the Security Insurer, the Owner Trustee or the Trustee or (B) to
the Servicer, the Owner Trustee and the Trustee by the Holders of Notes
evidencing not less than 25% of the outstanding principal amount of the Notes as
applicable (or for such longer period, not in excess of 120 days, as may be
reasonably necessary to remedy such default; provided that such default is
capable of remedy within 120 days and the Servicer delivers an Officers'
Certificate to the Security Insurer, the Owner Trustee and the Trustee to such
effect and to the effect that the Servicer has commenced or will promptly
commence, and will diligently pursue, all reasonable efforts to remedy such
default); or

          (c)  An Insolvency Event occurs with respect to the Servicer or any
successor; or

          (d)  So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Trigger Event described in Section 6.01 of
the Insurance Agreement shall have occurred;

then, and in each and every case, (i) so long as no Insurer Default shall have
occurred and be continuing, the Trustee may, with the consent of the Security
Insurer and at the direction of the Security Insurer, the Trustee shall, subject
to subsection (b) of this Section 8.1 or (ii) if an Insurer Default shall have
occurred and be continuing, any of the Trustee or the Holders of Notes
evidencing not less than a majority of the principal amount of the Notes then
outstanding or Holders of Certificates of Percentage Interests greater than 50%
in the case of any default that does not adversely affect the Trustee or the
Noteholders, in any case by notice given in writing to the Servicer (and to the
Trustee if given by the Security Insurer or, as applicable, the Noteholders or
the Certificateholders) may terminate all of the rights and obligations of the
Servicer under this Agreement. For purposes of Section 8.1(b), any determination
of an adverse effect on the interest of the Certificateholders or the
Noteholders pursuant to Section 8.1(b) shall be made without consideration of
the availability of funds under the Note Policy. On or after the receipt by the
Servicer of such written notice, all authority, power, obligations and
responsibilities of the Servicer under this Agreement, whether with respect to
the Notes, the Certificates or the Receivables or otherwise, automatically shall
pass to, be vested in and become obligations and responsibilities of the Trustee
in its capacity as successor Servicer provided that the Trustee is not unwilling
or unable to act; provided, however, that the Trustee shall have no liability
                  --------  -------
with respect to any obligation which was required to be performed by the prior
Servicer prior to the date that the Trustee becomes the Servicer or any claim of
a third party based on any alleged action or inaction of the prior Servicer. The
Trustee is authorized and empowered by this Agreement, as successor Servicer to
execute and deliver, on behalf of the prior Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice

                                      -51-

<PAGE>


of termination, whether to complete the transfer and endorsement of the
Receivables and the other Trust Property and related documents, to show the
Trustee as lienholder or secured party on the related Lien Certificates, or
otherwise. The prior Servicer agrees to cooperate with the successor Servicer in
effecting the termination of the responsibilities and rights of the prior
Servicer under this Agreement, including, without limitation, the transfer to
the successor Servicer for administration by it of all cash amounts that shall
at the time be held by the prior Servicer for deposit, or have been deposited by
the prior Servicer, in the Collection Account or thereafter received with
respect to the Receivables and the delivery to the successor Servicer of all
Receivable Files, records and a computer tape in readable form containing all
information necessary to enable the successor Servicer to service the
Receivables and the other Trust Property. The terminated Servicer shall grant
the Trustee, (in its capacity as Trustee and/or successor Servicer), the Owner
Trustee and the Security Insurer reasonable access to the terminated Servicer's
premises at the Servicer's reasonable expense.

     SECTION 8.2    Appointment of Successor. (a) Upon the Servicer's receipt of
                    ------------------------
notice of termination, pursuant to Section 8.1 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (x) the date 45 days
from the delivery to the Owner Trustee and the Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel. In the event of the Servicer's
termination hereunder, the Trustee shall, provided it is not unwilling or unable
to act, become the successor Servicer and assume the obligations of the Servicer
hereunder and, unless an Insurer Default shall have occurred and be continuing,
shall accept its appointment by a written assumption in form acceptable to the
Security Insurer. Notwithstanding the above, the Trustee, with the prior written
consent of the Security Insurer, or the Security Insurer shall, if the Trustee
shall be unwilling or legally unable so to act, appoint, or petition a court of
competent jurisdiction to appoint, any established institution having a net
worth of not less than $50,000,000 and whose regular business shall include the
servicing of automotive receivables as the successor to the Servicer under this
Agreement. Any successor Servicer shall be acceptable to the Security Insurer.

          (b)  Upon appointment, the successor Servicer (including the Trustee
acting as successor Servicer) shall be the successor in all respects to the
predecessor Servicer and shall be subject to all the responsibilities, duties
and liabilities arising thereafter relating thereto placed on the predecessor
Servicer, subject to the exceptions set forth in Section 8.2(a) hereof, and
shall be entitled to the Servicing Fee and all the rights granted to the
predecessor Servicer by the terms and provisions of this Agreement.

     SECTION 8.3    [RESERVED]

                                      -52-

<PAGE>

     SECTION 8.4 Notification to Noteholders and Certificateholders. Upon any
                 --------------------------------------------------
termination of, or appointment of a successor to, the Servicer pursuant to this
Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders and the Security Insurer, and the Trustee shall give prompt
written notice thereof to Noteholders and to the Rating Agencies.


     SECTION 8.5 Waiver of Past Defaults. So long as no Insurer Default shall
                 -----------------------
have occurred and be continuing, the Security Insurer (or, if an Insurer Default
shall have occurred and be continuing, the Holders of Notes evidencing not less
than a majority of the outstanding principal amount of the Notes, or Holders of
Certificates of Percentage Interests greater than 50% in the case of any default
which does not adversely affect the Trustee or the Noteholders (in each case, in
any default which does not adversely affect the Security Insurer) may, on behalf
of all Noteholders and Certificateholders, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from any of the Trust
Accounts in accordance with this Agreement. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto.

                                   ARTICLE IX

                                   Termination
                                   -----------

     SECTION 9.1 Optional Purchase of All Receivables. (a) On the last day of
                 ------------------------------------
any Monthly Period as of which the Pool Balance shall be less than or equal to
10% of the Original Pool Balance, the Servicer shall have the option to purchase
the Owner Trust Estate, other than the Trust Accounts and the Certificate
Distribution Account (with the consent of the Security Insurer if such purchase
would result in a claim on the Note Policy or would result in any amount owing
to the Security Insurer under the Insurance Agreement remaining unpaid);
provided, however, that the amount to be paid for such purchase (as set forth in
--------  -------
the following sentence) shall be sufficient to pay the full amount of principal,
premium and other amounts owing to the Security Insurer if any, and interest
then due and payable on the Notes. To exercise such option, the Servicer shall
deposit pursuant to Section 5.5 in the Collection Account an amount equal to the
aggregate Purchase Amount for the Receivables, plus any amounts then due and
owing to the Security Insurer plus the appraised value of any other property
held by the Trust, such value to be determined by an appraiser mutually agreed
upon by the Servicer, the Security Insurer (unless an Insurer Default shall have
occurred and be continuing), the Owner Trustee and the Trustee, and shall
succeed to all interests in and to the Trust.

          (b) Upon any sale of the assets of the Trust pursuant to the Trust
Agreement, the Servicer shall instruct the Trustee to deposit the proceeds from
such sale after all payments and reserves therefrom (including the expenses of
such sale) have been made (the "Insolvency Proceeds") in the Collection Account.
On the Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a

                                      -53-

<PAGE>

Distribution Date, on the Distribution Date immediately following such deposit),
the Servicer shall instruct the Trustee to make, and the Trustee shall make, the
following deposits and distributions (after the application on such Distribution
Date of the Distribution Amount pursuant to Section 5.6(a)) from the Insolvency
Proceeds and the Distribution Amount for such Distribution Date:

          (i)  to the Note Distribution Account, any portion of the Noteholders'
     Interest Distributable Amount not otherwise deposited into the Note
     Distribution Account on such Distribution Date; and

          (ii) to the Note Distribution Account, the outstanding principal
     amount of the Notes (after giving effect to the reduction in the
     outstanding principal amount of the Notes to result from the deposits made
     in the Note Distribution Account on such Distribution Date).

Any Insolvency Proceeds remaining after the deposits described above shall be
paid first to the Security Insurer to the extent of any amounts owing to the
Security Insurer under the Insurance Agreement and not paid, and second, to the
extent of any remaining funds, to the Certificateholders.

          (c)  Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee, the Trustee, the Indenture Collateral Agent, the
Security Insurer and the Rating Agencies as soon as practicable after the
Servicer has received notice thereof.

          (d)  Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of the Trustee pursuant to this
Agreement.

                                    ARTICLE X

                      Administrative Duties of the Servicer
                      -------------------------------------

     SECTION 10.1 Administrative Duties. (a) Duties with Respect to the
                  ---------------------      --------------------------
Indenture and Depository Agreements. The Servicer shall perform all its duties
-----------------------------------
and the duties of the Issuer under the Indenture and the other Basic Documents.
In addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture and the
other Basic Documents. The Servicer shall monitor the performance of the Issuer
and shall advise the Owner Trustee when action is necessary to comply with the
Issuer's duties under the Indenture and the other Basic Documents. The Servicer
shall prepare for execution by the Issuer or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer to prepare, file
or deliver pursuant to the Indenture and the other Basic Documents. In
furtherance of the foregoing, the Servicer shall take all necessary action that
is the duty of the

                                      -54-

<PAGE>

Issuer to take pursuant to the Indenture and the other Basic
Documents, including, without limitation, pursuant to Sections 2.7, 3.5, 3.6,
3.7, 3.9, 6.7, 7.2, 7.3, 11.1 and 11.15 of the Indenture.

                  (b)   Duties with Respect to the Issuer.
                        ---------------------------------

                  (i)   In addition to the duties of the Servicer set forth in
         this Agreement or any of the Basic Documents, the Servicer shall
         perform such calculations and shall prepare for execution by the Issuer
         or the Owner Trustee or shall cause the preparation by other
         appropriate Persons of all such documents, reports, filings,
         instruments, certificates and opinions as it shall be the duty of the
         Issuer or the Owner Trustee to prepare, file or deliver pursuant to
         this Agreement or any of the Basic Documents or state or Federal
         securities laws, and at the request of the Owner Trustee shall take all
         appropriate action that it is the duty of the Issuer to take pursuant
         to this Agreement or any of the Basic Documents, including, without
         limitation, pursuant to Sections 2.6 and 2.13 of the Trust Agreement.
         In accordance with the directions of the Issuer or the Owner Trustee,
         the Servicer shall administer, perform or supervise the performance of
         such other activities in connection with the Collateral (including the
         Basic Documents) as are not covered by any of the foregoing provisions
         and as are expressly requested by the Issuer or the Owner Trustee and
         are reasonably within the capability of the Servicer.

                  (ii)  Notwithstanding anything in this Agreement or any of the
         Basic Documents to the contrary, the Servicer shall be responsible for
         promptly notifying the Owner Trustee in the event that any withholding
         tax is imposed on the Issuer's payments (or allocations of income) to
         an Owner (as defined in the Trust Agreement) as contemplated in Section
         5.2(c) of the Trust Agreement. Any such notice shall be in writing and
         specify the amount of any withholding tax required to be withheld by
         the Owner Trustee pursuant to such provision.

                  (iii) Notwithstanding anything in this Agreement or the Basic
         Documents to the contrary, the Servicer shall be responsible for
         performance of the duties of the Issuer or the Owner Trustee set forth
         in Section 5.6(a), (b), (c) and (d) of the Trust Agreement with respect
         to, among other things, accounting and reports to Holders (as defined
         in the Trust Agreement); provided, however, that once prepared by the
                                  --------  -------
         Servicer and filed with the appropriate tax authorities, the Owner
         Trustee shall retain responsibility for the distribution of the
         Schedule K-1s necessary to enable each Certificateholder to prepare its
         federal and state income tax returns.

                  (iv)  The Servicer shall perform the duties of the Servicer
         specified in Section 10.2 of the Trust Agreement required to be
         performed in connection with the resignation or removal of the Owner
         Trustee, and any other duties expressly required to be performed by the
         Servicer under this Agreement or any of the Basic Documents.

                  (v)   In carrying out the foregoing duties or any of its other
         obligations under this Agreement, the Servicer may enter into
         transactions with or otherwise deal with any of its

                                      -55-

<PAGE>

     Affiliates; provided, however, that the terms of any such transactions or
                 --------  -------
     dealings shall be in accordance with any directions received from the
     Issuer and shall be, in the Servicer's opinion, no less favorable to the
     Issuer in any material respect.

          (c) Tax Matters.  The Servicer shall prepare and file, on behalf of
              -----------
the Seller, so long as it is a Certificateholder, all tax returns, tax
elections, financial statements and such annual or other reports of the Issuer
as are necessary for preparation of tax reports as provided in Article V of the
Trust Agreement, including without limitation Forms 1099. All tax returns will
be signed by Seller, so long as it is a Certificateholder.

          (d) Non-Ministerial Matters. With respect to matters that in the
              -----------------------
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article X unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee and the Trustee of the proposed action and the Owner Trustee and, with
respect to items (A), (B), (C) and (D) below, the Trustee shall not have
withheld consent or provided an alternative direction. For the purpose of the
preceding sentence, "non-ministerial matters" shall include:

              (A) the amendment of or any supplement to the Indenture;

              (B) the initiation of any claim or lawsuit by the Issuer and the
          compromise of any action, claim or lawsuit brought by or against the
          Issuer (other than in connection with the collection of the
          Receivables);

              (C) the amendment, change or modification of this Agreement or any
          of the Basic Documents;

              (D) the appointment of successor Note Registrars, successor Paying
          Agents and successor Trustees pursuant to the Indenture or the
          appointment of Successor Servicers or the consent to the assignment by
          the Note Registrar, Paying Agent or Trustee of its obligations under
          the Indenture; and

              (E) the removal of the Trustee.

          (e) Exceptions. Notwithstanding anything to the contrary in this
              ----------
Agreement, except as expressly provided herein or in the other Basic Documents,
the Servicer, in its capacity hereunder, shall not be obligated to, and shall
not, (1) make any payments to the Noteholders or Certificateholders under the
Basic Documents, (2) sell the Owner Trust Estate pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.

     SECTION 10.2 Records. The Servicer shall maintain appropriate books of
                  -------
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer at
any time during normal business hours.

                                      -56-

<PAGE>

     SECTION 10.3   Additional Information to be Furnished to the Issuer. The
                    ----------------------------------------------------
Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.

     SECTION 10.4   Replacement Note Policy. In the event of an Insurer Default
                    -----------------------
or the rating of the Security Insurer is downgraded by any Rating Agency such
that the rating of any Class of Notes is reduced, suspended or withdrawn, the
Servicer shall be permitted, provided that all amounts payable to the Security
Insurer pursuant to the Insurance Agreement have been paid in full, (i) replace
the Note Policy with a financial guaranty insurance policy issued by another
insurer provided that the ratings on the financial strength of such replacement
insurer are higher than those of the insurer sought to be replaced (after giving
effect to such reduction) or (ii) eliminate or provide another form of credit
enhancement; provided that in the case of clause (ii), the Rating Agencies
consent thereto and confirmation that the ratings of the Notes will be increased
from their then-current levels (after giving effect to such reduction) as a
result of such action shall have been obtained. It shall be a condition to
substitution of any such new financial guaranty insurance policy or other form
of credit enhancement that there be delivered to the Trustee (i) an Officer's
Certificate by the Servicer stating that the conditions to such substitution set
forth in this Section 10.4 (other than in clause (ii)) have been satisfied and
(ii) a legal opinion, acceptable in form to the Trustee, from counsel to the
provider of such financial guaranty insurance policy or other form of credit
enhancement with respect to the enforceability thereof and such other matters as
the Trustee may require. Upon receipt of written notice of any such substitution
from the Servicer and the taking of physical possession of the replacement
financial guaranty insurance policy or other form of credit enhancement, the
Trustee shall, within five Business Days following receipt of such notice and
such taking of physical possession, deliver the Note Policy marked "Cancelled"
to the Security Insurer, and the Security Insurer will have no further liability
under the Note Policy.

     SECTION 10.5   Relocation of Receivables. The Servicer agrees that it will
                    -------------------------
not move the Receivable Files from the locations listed in Schedule B, unless
the Servicer shall have delivered to the Owner Trustee, the Trustee and the
Security Insurer an Opinion of Counsel stating that, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Trustee,
respectively, in the Receivables and reciting the details of such filings or (B)
no such action shall be necessary to preserve and protect such interest.

                                   ARTICLE XI

                            Miscellaneous Provisions
                            ------------------------

     SECTION 11.1   Amendment. This Agreement may be amended from time to time
                    ---------
by the Representative, the Seller, the Servicer and the Owner Trustee, with the
consent of the Trustee (which consent may not be unreasonably withheld), with
the prior written consent of the Security Insurer (so long as no Insurer Default
has occurred and is continuing) but without the

                                      -57-

<PAGE>

consent of any of the Noteholders or the Certificateholders, to cure any
ambiguity, to correct or supplement any provisions in this Agreement, to comply
with any changes in the Code, or to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Insurance Agreement;
provided, however, that such action shall not, adversely affect in any material
--------  -------
respect the interests of any Noteholder or Certificateholder; provided further
that if an Insurer Default has occurred and is continuing and the Security
Insurer has not consented to such action, such action shall not materially
adversely affect the interests of the Security Insurer. An amendment shall be
deemed not to adversely affect the interests of any such holder if the Rating
Agency Condition shall have been satisfied.

          This Agreement may also be amended from time to time by the
Representative, the Seller, the Servicer and the Owner Trustee, with the consent
of the Security Insurer (so long as no Insurer Default has occurred and is
continuing), the consent of the Trustee, the consent of the Holders of Notes
evidencing not less than a majority of the outstanding principal amount of the
Notes and the consent of the Holders of Certificates evidencing not less than a
Percentage Interest greater than 50% for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
                    --------  -------
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the aforesaid percentage of the outstanding principal amount of the Notes
and the Percentage Interests, the Holders of which are required to consent to
any such amendment, without the consent of the Holders of all the outstanding
Notes and the Certificates, of each Class affected thereby; provided further,
that if an Insurer Default has occurred and is continuing and the Security
Insurer has not consented to such action, such action shall not materially
adversely affect the interest of the Security Insurer.

          Promptly after the execution of any such amendment or consent pursuant
to either of the preceding paragraphs, the Owner Trustee shall furnish written
notification of the substance of such amendment or consent to each
Certificateholder and the Rating Agencies (and the Security Insurer, if the
Security Insurer's consent was not obtained).

          It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Noteholders or Certificateholders provided for in this
Agreement) and of evidencing the authorization of any action by Noteholders or
Certificateholders shall be subject to such reasonable requirements as the
Trustee or the Owner Trustee, as applicable, may prescribe.

          Prior to the execution of any amendment to this Agreement, the Owner
Trustee, the Trustee and the Security Insurer shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred to
in Section 11.2(i)(1) has been delivered. The

                                      -58-

<PAGE>

Owner Trustee and the Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Issuer's, the Owner Trustee's or the Trustee's,
as applicable, own rights, duties or immunities under this Agreement or
otherwise.

     SECTION 11.2   Protection of Title to Trust. (a) The Seller shall authorize
                    ----------------------------
and file or cause to be filed such financing statements and cause to be executed
and filed such continuation statements, all in such manner and in such places as
may be required by law fully to preserve, maintain and protect the interest of
the Issuer and the interests of the Indenture Collateral Agent on behalf of the
Noteholders, the Certificateholders and the Security Insurer in the Receivables
and in the proceeds thereof. The Seller shall deliver (or cause to be delivered)
to the Security Insurer, the Owner Trustee and the Indenture Collateral Agent
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.

          (b)  Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of Section 9-506 of
the UCC or any successor provision, unless it shall have given the Security
Insurer, the Owner Trustee and the Trustee at least five days' prior written
notice thereof and shall have promptly filed appropriate amendments to all
previously filed financing statements or continuation statements. Promptly upon
such filing, the Seller or the Servicer, as the case may be, shall unless an
Insurer Default shall have occurred and be continuing, deliver to the Security
Insurer, the Owner Trustee and the Trustee an Opinion of Counsel in form and
substance reasonably satisfactory to the Security Insurer, or if an Insurer
Default shall have occurred and be continuing an Opinion of Counsel satisfactory
to the Trustee stating either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the Trustee in the Receivables, and
reciting the details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (B) no such action shall be necessary to
preserve and protect such interest.

          (c)  Each of the Seller and the Servicer shall have an obligation to
give the Security Insurer, the Owner Trustee and the Trustee at least 60 days'
prior written notice of any change of the Seller's or the Servicer's "location"
(determined as provided in Section 9-307 of the UCC or any successor provision)
or jurisdiction of organization if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment. The Servicer shall at all
times maintain each office from which it shall service Receivables, and its
principal place of business and "location" (determined as provided in Section
9-307 of the UCC or any successor provision), within the United States of
America.

          (d)  The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature

                                      -59-

<PAGE>

of each) and (ii) reconciliation between payments or recoveries on (or with
respect to) each Receivable and the amounts from time to time deposited in the
Collection Account in respect of such Receivable.

          (e)  The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any backup archives)
that refer to a Receivable shall indicate clearly the interest of the Issuer and
the Trustee on behalf of the Certificateholders, the Noteholders and the
Security Insurer in such Receivable and that such Receivable is owned by the
Issuer and has been pledged to the Trustee. Indication of the Issuer's and the
Trustee's interest in a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Receivable shall
have been paid in full or repurchased.

          (f)  If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Trustee on behalf of the Certificateholders,
the Noteholders and the Security Insurer.

          (g)  The Servicer shall permit the Trustee and the Security Insurer
and their respective agents at any time during normal business hours to inspect,
audit and make copies of and abstracts from the Servicer's records regarding any
Receivable or any other portion of the Trust Property. The preceding sentence
shall not create any duty or obligation on the part of the Trustee to perform
any such acts.

          (h)  Upon request, the Servicer shall furnish to the Security Insurer,
the Owner Trustee or the Trustee, within five Business Days, a list of all
Receivables (by contract number and name of Obligor) then held as part of the
Trust, together with a reconciliation of such list to the Schedule of
Receivables and to each of the Servicer's Certificates furnished before such
request indicating removal of Receivables from the Trust.

          (i)  The Servicer shall deliver to the Security Insurer, the Owner
Trustee and the Trustee:

          (1)  Upon the execution and delivery of this Agreement and, if
     required pursuant to Section 11.1, of each amendment, an Opinion of Counsel
     stating that, in the opinion of such Counsel, in form and substance
     reasonably satisfactory to the Controlling Party, either (A) all financing
     statements and continuation statements have been executed and filed that
     are necessary fully to preserve and protect the interest of the Trust and
     the Trustee in the Receivables, and reciting the details of such filings or
     referring to prior Opinions of Counsel in which such details are given or
     (B) no such action shall be necessary to preserve and protect such
     interest; and

                                      -60-

<PAGE>

          (2)  On or before October 30 of each calendar year, a certificate
     signed by the Secretary or Assistant Secretary of the Servicer and an
     authorized officer of the managing member of the Seller stating that, to
     such officer's knowledge, following consultation with counsel, the Servicer
     or the Seller, as applicable, has determined that it was not necessary or
     desirable to file any continuation UCC financing statement or other UCC
     financing statement during such fiscal year in order to maintain the
     perfection of the Trustee's security interest, for the benefit of the
     Noteholders and the Security Insurer, in the Trust Property or if the
     Servicer or the Seller has determined that any such filing was necessary or
     desirable, describing the reason for any such filing and attaching a copy
     thereof to such certificate.

          Each Opinion of Counsel referred to in clause (l) or (2) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.

          (j)  The Seller shall, to the extent required by applicable law, cause
the Certificates and the Notes to be registered with the Commission pursuant to
Section 12(b) or Section 12(g) of the Exchange Act within the time periods
specified in such sections.

          (k)  On or before December 31 of each year, the Servicer shall forward
to the Owner Trustee a list of the scheduled holidays in California for the
following calendar year.

     SECTION 11.3   Notices. All demands, notices and communications upon or to
                    -------
the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating Agencies
under this Agreement shall be in writing, personally delivered, delivered by
overnight courier or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller to 47 West 200 South, Suite 500, Salt Lake City, UT 84101, Attention:
Harold E. Miller, Jr., with a copy to Franklin Resources, One Franklin Parkway,
San Mateo, California 94403, Attention: Jennifer Bolt; (b) in the case of the
Servicer to 47 West 200 South, Suite 500, Salt Lake City, UT 84101, Attention:
Harold E. Miller, Jr., with a copy to Franklin Resources, One Franklin Parkway,
San Mateo, California 94403, Attention: Jennifer Bolt; (c) in the case of the
Representative, to One Franklin Parkway, San Mateo, California 94403, Attention:
Jennifer Bolt; (d) in the case of the Issuer or the Owner Trustee, at the
Corporate Trust Office of the Owner Trustee, with a copy to Bankers Trust
(Delaware), 1011 Centre Road, Suite 200, Wilmington, DE 19805-1266, Attention:
Structured Financial Services - Corporate Trustee; (e) in the case of the
Trustee or the Indenture Collateral Agent, at the Corporate Trust Office; (f) in
the case of the Security Insurer, to MBIA Insurance Corporation, 113 King
Street, Armonk, New York 10504, Attention: Insured Portfolio Management-SF; (g)
in the case of Moody's, to Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007; and (g) in the case of
Standard & Poor's, to Standard & Poor's Ratings Group, 55 Water Street, New
York, New York 10041, Attention: Asset Backed Surveillance Department. Any
notice required or permitted to be mailed to a Noteholder or Certificateholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register or Note Register, as applicable. Any
notice so mailed within

                                      -61-

<PAGE>

the time prescribed in this Agreement shall be conclusively presumed to have
been duly given, whether or not the Certificateholder or Noteholder shall
receive such notice.

     SECTION 11.4   Assignment. Notwithstanding anything to the contrary
                    ----------
contained herein, except as provided in Sections 6.4 and 7.3 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Owner Trustee, the Trustee and the Security Insurer
(or if an Insurer Default shall have occurred and be continuing the Holders of
Notes evidencing not less than 66% of the principal amount of the outstanding
Notes.)

     SECTION 11.5   Limitations on Rights of Others. The provisions of this
                    -------------------------------
Agreement are solely for the benefit of the Seller, the Servicer, the Issuer,
the Owner Trustee and for the benefit of the Certificateholders, the Trustee,
the Security Insurer and the Noteholders, as third-party beneficiaries. Nothing
in this Agreement, whether express or implied, shall be construed to give to any
other Person, other than express third-party beneficiaries, any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.

     SECTION 11.6   Severability. Any provision of this Agreement that is
                    ------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     SECTION 11.7   Separate Counterparts. This Agreement may be executed by the
                    ---------------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

     SECTION 11.8   Headings. The headings of the various Articles and Sections
                    --------
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

     SECTION 11.9   Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
                    -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

     SECTION 11.10  Assignment to Trustee. The Seller hereby acknowledges and
                    ---------------------
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trustee pursuant to the Indenture for the benefit of the
Issuer Secured Parties (as defined in the Indenture) of all right, title and
interest of the Issuer in, to and under the Receivables and/or the assignment of
any or all of the Issuer's rights and obligations hereunder to the Trustee.

                                      -62-

<PAGE>

     SECTION 11.11  Nonpetition Covenants. (a) Notwithstanding any prior
                    ---------------------
termination of this Agreement, the parties hereto shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.

          (b)  Notwithstanding any prior termination of this Agreement, the
parties hereto shall not, prior to the date that is one year and one day after
the termination of this Agreement with respect to the Seller, acquiesce to,
petition or otherwise invoke or cause the Seller to invoke the process of any
court or government authority for the purpose of commencing or sustaining a case
against the Seller under any federal or state bankruptcy, insolvency or similar
law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Seller or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Seller.

     SECTION 11.12  Limitation of Liability of Owner Trustee, Trustee and
                    -----------------------------------------------------
Indenture Collateral Agent. (a) Notwithstanding anything contained herein to the
--------------------------
contrary, this Agreement has been countersigned by Bankers Trust (Delaware) not
in its individual capacity but solely in its capacity as Owner Trustee of the
Issuer and in no event shall Bankers Trust (Delaware) in its individual capacity
or, except as expressly provided in the Trust Agreement, as Owner Trustee have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer. For all purposes of this Agreement, in
the performance of its duties or obligations hereunder or in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.

          (b)  Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by The Bank of New York, not in its individual
capacity but solely as Trustee and as Indenture Collateral Agent, and in no
event shall The Bank of New York have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.

     SECTION 11.13  Independence of the Servicer. For all purposes of this
                    ----------------------------
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Servicer shall have no
authority to act for or represent the Issuer or the Owner Trustee in any way and
shall not otherwise be deemed an agent of the Issuer or the Owner Trustee.

                                      -63-

<PAGE>

     SECTION 11.14  No Joint Venture. Nothing contained in this Agreement (i)
                    ----------------
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.

     SECTION 11.15  Third-Party Beneficiaries. This Agreement shall inure to the
                    -------------------------
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Security Insurer and its successors and
assigns shall be a third-party beneficiary to the provisions of this Agreement,
and shall be entitled to rely upon and directly to enforce such provisions of
this Agreement, except as expressly limited by the terms hereof, so long as no
Insurer Default consisting of a failure to pay under the Note Policy shall have
occurred and be continuing. Except as expressly stated otherwise herein or in
the Basic Documents, any right of the Security Insurer to direct, appoint,
consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Security Insurer in its sole and absolute discretion.

     SECTION 11.16  Disclaimer by Security Insurer. The Security Insurer may
                    ------------------------------
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Note Policy) upon delivery of a written notice to the
Owner Trustee and the Trustee.

     SECTION 11.17  Acknowledgment of Parties; Security Insurer Defense
                    ---------------------------------------------------
Costs. Each of the Issuer, Seller, Franklin Capital (in its individual capacity
-----
and as Servicer) and Franklin Resources (in its individual capacity and as
Representative) acknowledge Section 4.6 of the Trust Agreement, and agree that
the Trust shall reimburse the Security Insurer for all Security Insurer Defense
Costs pursuant to Section 5.6(a) hereof.

                                      -64-

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and year first above written.

                                     FRANKLIN AUTO TRUST 2001-2

                                     By BANKERS TRUST (DELAWARE),
                                     not in its individual capacity but solely
                                       as Owner Trustee on behalf of the Trust,


                                     By:  /s/ Susan Barstock
                                        ------------------------------
                                          Name:  Susan Barstock
                                          Title: Vice President

                                     FRANKLIN RECEIVABLES LLC,
                                     Seller

                                     By FRANKLIN CAPITAL CORPORATION,
                                     as managing member


                                     By:  /s/ Harold Miller
                                        ------------------------------
                                          Name:  Harold E. Miller, Jr.
                                          Title: President and CEO


                                     FRANKLIN CAPITAL CORPORATION,
                                     Servicer,


                                     By:  /s/ Harold Miller
                                        ------------------------------
                                          Name:  Harold E. Miller, Jr.
                                          Title: President and CEO

                                     FRANKLIN RESOURCES, INC.,
                                     Representative,


                                     By:  /s/ Leslie M. Kratter
                                        ------------------------------
                                          Name:  Leslie M. Kratter
                                          Title: Senior Vice President

                                      -65-

<PAGE>

Acknowledged and Accepted:

THE BANK OF NEW YORK, not
in its individual capacity
but solely as Trustee,


By:  /s/ Erwin Soriano
   -----------------------------
     Name:  Erwin Soriano
     Title: Assistant Treasurer

Acknowledged and Accepted:

BANKERS TRUST (DELAWARE),
not in its individual capacity
but solely as Owner Trustee,


By:  /s/ Susan Barstock
   -----------------------------
     Name:  Susan Barstock
     Title: Vice President

Acknowledged and Accepted:

THE BANK OF NEW YORK, not
in its individual capacity
but solely as Indenture Collateral
Agent


By:  /s/ Erwin Soriano
   -----------------------------
     Name:   Erwin Soriano
     Title:  Assistant Treasurer

                                      -66-

<PAGE>

                                                                      SCHEDULE A




                             Schedule of Receivables
                             -----------------------

<PAGE>


                                                                      SCHEDULE B




                             Location of Receivables
                             -----------------------



                          Franklin Capital Corporation
                          47 West 200 South, Suite 500
                           Salt Lake City, Utah 84101







                              Downtown Self Storage
                               255 West 200 South
                           Salt Lake City, Utah 84101

<PAGE>


                                                                       Exhibit A


                                   [Reserved]

<PAGE>


                                                                       Exhibit B

                                   [Reserved]

<PAGE>

                                                                       Exhibit C




                      FORM OF MONTHLY NOTEHOLDER STATEMENT

                           FRANKLIN AUTO TRUST 2001-2
                      Class A-1 2.10375% Asset Backed Notes
                       Class A-2 2.79% Asset Backed Notes
                       Class A-3 3.77% Asset Backed Notes
                       Class A-4 4.55% Asset Backed Notes

Distribution Date:

Monthly Period:

         Under the Sale and Servicing Agreement, dated as of December 1, 2001
(the "Sale and Servicing Agreement"), among Franklin Capital Corporation, as
servicer, Franklin Receivables LLC, as seller, Franklin Resources, Inc., as
representative and Franklin Auto Trust 2001-2, as issuer, the Servicer is
required to prepare certain information each month regarding current
distributions to Noteholders and the performance of the Trust during the
previous month. The information that is required to be prepared with respect to
the Distribution Date and Monthly Period listed above is set forth below.
Certain of the information is presented on the basis of an original principal
amount of $1,000 per Note, and certain other information is presented based upon
the aggregate amounts for the Trust as a whole. Capitalized terms used herein
and not otherwise defined herein have the meanings assigned to those terms in
the Sale and Servicing Agreement.

A.  Information Regarding the Current Monthly Distribution.

1.  Notes.

<TABLE>
      <S>                                                                                            <C>
      (a)    The aggregate amount of the
             distribution with respect to:
                      the Class A-1 Notes ...........................................................$________
                      the Class A-2 Notes ...........................................................$________
                      the Class A-3 Notes ...........................................................$________
                      the Class A-4 Notes ...........................................................$________

      (b)    The amount of the distribution set
             forth in paragraph A.1.(a) above in
             respect of interest on:
</TABLE>



<PAGE>

<TABLE>
      <S>                                                                                       <C>
                       the Class A-1 Notes .....................................................$________
                       the Class A-2 Notes .....................................................$________
                       the Class A-3 Notes .....................................................$________
                       the Class A-4 Notes .....................................................$________

      (c)     The amount of the distribution set
              forth in paragraph A.1.(a) above in
              respect of principal of:
                       the Class A-1 Notes .....................................................$________
                       the Class A-2 Notes .....................................................$________
                       the Class A-3 Notes .....................................................$________
                       the Class A-4 Notes .....................................................$________

      (d)     The amount of the distribution in
              A.1.(a) payable pursuant to a claim
              on the Note Policy with respect to:
                       the Class A-1 Notes ....................................................$_______
                       the Class A-2 Notes ....................................................$_______
                       the Class A-3 Notes .....................................................$________
                       the Class A-4 Notes .....................................................$________

      (e)     The remaining outstanding balance
              available to be drawn under the
              Note Policy .....................................................................$_______

      (f)     The amount of the distribution set
              forth in paragraph A.1.(a) above
              per $1,000 interest in:
                       the Class A-1 Notes .....................................................$________
                       the Class A-2 Notes .....................................................$________
                       the Class A-3 Notes .....................................................$________
                       the Class A-4 Notes .....................................................$________

      (g)     The amount of the distribution set
              forth in paragraph A.1.(b) above
              per $1,000 interest in:
                       the Class A-1 Notes .....................................................$________
                       the Class A-2 Notes .....................................................$________
                       the Class A-3 Notes .....................................................$________
                       the Class A-4 Notes .....................................................$________

      (h)     The amount of the distribution set
              forth in paragraph A.1.(c) above
              per $1,000 interest in:
                       the Class A-1 Notes .....................................................$________
</TABLE>



<PAGE>

<TABLE>
<S>                                                                                                     <C>
                         the Class A-2 Notes ...........................................................$________
                         the Class A-3 Notes ...........................................................$________
                         the Class A-4 Notes ...........................................................$________

        (i)     The amount of the distribution set
                forth in paragraph A.1.(d) above
                per $1,000 interest in:
                         the Class A-1 Notes ...........................................................$________
                         the Class A-2 Notes ...........................................................$________
                         the Class A-3 Notes ...........................................................$________
                         the Class A-4 Notes ...........................................................$________

B.      Information Regarding the Performance of the Trust.

 1.  Pool Balance and Note Principal Balance.

        (a)     The Pool Balance at the close of business on
                the last day of the Monthly Period ........................................................$_____

        (b)     The aggregate outstanding principal amount of each Class of
                Notes after giving effect to payments allocated to principal as
                set forth in Paragraph A.1(c) above with respect to:
                         the Class A-1 Notes ...........................................................$________
                         the Class A-2 Notes ...........................................................$________
                         the Class A-3 Notes ...........................................................$________
                         the Class A-4 Notes ...........................................................$________

        (c)     The Note Pool Factor for each Class of Notes after giving affect
                to the payments set forth in paragraph A.1(c) with respect to:
                         the Class A-1 Notes ............................................................________
                         the Class A-2 Notes ............................................................________
                         the Class A-3 Notes ...........................................................$________
                         the Class A-4 Notes ...........................................................$________

        (d)     The amount of aggregate Realized Losses for the second preceding Monthly Period ........$________

        (e)     The aggregate Purchase Amount for
                all Receivables that were repurchased
                in the Monthly Period ..................................................................$________


 2.     Servicing Fee.
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
                The aggregate amount of the Servicing
                Fee paid to the Servicer with respect
                to the preceding Monthly Period .........................................................$_______

 3.     Payment Shortfalls.

        (a)     The amount of the Noteholders' Interest Carryover Shortfall
                after giving effect to the payments set forth in paragraph
                A.1(b) above with respect to:
                         the Class A-1 Notes ...........................................................$________
                         the Class A-2 Notes ...........................................................$________
                         the Class A-3 Notes ...........................................................$________
                         the Class A-4 Notes ...........................................................$________

        (b)     The amount of the Noteholders' Interest Carryover Shortfall set
                forth in paragraph B.3.(a) above per $1,000 interest with
                respect to:
                         the Class A-1 Notes ...........................................................$________
                         the Class A-2 Notes ...........................................................$________
                         the Class A-3 Notes ...........................................................$________
                         the Class A-4 Notes ...........................................................$________

4.      (a)     The number of extensions granted by the Servicer during the
                preceding Monthly Period .............................................................______

        (b)     The number of deferrals granted by the Servicer during the
                preceding Monthly Period .............................................................______

        (c)     The aggregate principal balance (as of the end of the Monthly
                Period) of all Contracts on which an extension or deferral has
                been granted by the Servicer during the preceding Monthly Period .....................$______

5.      (a)     The aggregate amount of collections by
                the Servicer during the preceding
                Monthly Period .......................................................................$______

        (b)     The aggregate amount which was received by
                the Trust from the Servicer during the
                preceding Monthly Period .............................................................$______

        (c)     The aggregate amount of reimbursements to
                the Security Insurer during the preceding
</TABLE>

<PAGE>

<TABLE>
        <S>                                                                                      <C>
                Monthly Period ..................................................................$______

        (d)     The number of Receivables that are delinquent
                for over:
                        30 days .................................................................______
                        60 days .................................................................______
                        90 days .................................................................______
</TABLE>



<PAGE>

                                                                       Exhibit D

                         Form of Servicer's Certificate

<PAGE>

                                                                       Exhibit E

                               Form of Note Policy