EXHIBIT 10.32

                                                                  EXECUTION COPY
================================================================================

                           MBIA INSURANCE CORPORATION,
                                    as Surety

                  FIRST INVESTORS AUTO RECEIVABLES CORPORATION,
                                  as Transferor

                    FIRST INVESTORS FINANCIAL SERVICES, INC.,
                                    as Seller

                    TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
                               as Collateral Agent

                                       and

                               NATIONSBANK, N.A.,
                            as Reserve Account Agent

                               INSURANCE AGREEMENT

             First Investors Auto Receivables Corporation Revolving
                    Automobile Receivables Financing Facility

                           Dated as of October 1, 1996

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                                TABLE OF CONTENTS

        (This Table of Contents is for convenience of reference only and shall
not be deemed to be a part of this Insurance Agreement.)

                                                                            PAGE
                                    ARTICLE I

                                   DEFINITIONS

Section 1.01.  General Definitions.............................................1
Section 1.02.  Generic Terms...................................................3

                                   ARTICLE II

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.01.  Representations and Warranties of the Transferor, 
                 the Seller, the Collateral Agent, and the Reserve 
                 Account Agent.................................................4
Section 2.02.  Affirmative Covenants of the Transferor, the Seller, 
                 the Collateral Agent, and the Reserve Account Agent...........8
Section 2.03.  Negative Covenants of the Transferor, the Collateral 
                 Agent and the Seller.........................................13

                                   ARTICLE III

                            THE SURETY BOND; SECURITY

Section 3.01.  Agreement To Issue Surety Bond.................................14
Section 3.02.  Conditions Precedent To Issuance of the Surety Bond............14
Section 3.03.  Premium........................................................16
Section 3.04.  Indemnification................................................16
Section 3.05.  Payment Procedure..............................................19
Section 3.06.  Subrogation....................................................19
Section 3.07.  Reimbursement and Additional Payment Obligation................19
Section 3.08.  Assignment by Transferor.......................................21

                                   ARTICLE IV

                               FURTHER AGREEMENTS

Section 4.01.  Effective Date; Term of Agreement..............................21
Section 4.02.  Waiver of Rights; Further Assurances and Corrective
                 Instruments..................................................21
Section 4.03.  Obligations Absolute...........................................22

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Section 4.04.  Assignments; Reinsurance; Third-Party Rights...................22

                                    ARTICLE V

                               DEFAULTS; REMEDIES

Section 5.01.  Defaults.......................................................23
Section 5.02.  Remedies; No Remedy Exclusive..................................24
Section 5.03.  Waivers........................................................25
Section 5.04.  No Insolvency Proceedings......................................25

                                   ARTICLE VI

                                  MISCELLANEOUS

Section 6.01.  Amendments, Changes and Modifications..........................25
Section 6.02.  Notices........................................................26
Section 6.03.  Severability...................................................27
Section 6.04.  Governing Law..................................................27
Section 6.05.  Consent to Jurisdiction and Venue, Etc.........................27
Section 6.06.  Consent of Surety..............................................28
Section 6.07.  Counterparts...................................................28
Section 6.08.  Recitals.......................................................28
Section 6.09.  Headings.......................................................28


TESTIMONIUM
SIGNATURES

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                               INSURANCE AGREEMENT

        THIS INSURANCE AGREEMENT is made as of October 1, 1996 by and among MBIA
INSURANCE CORPORATION (the "Surety"), FIRST INVESTORS AUTO RECEIVABLES
CORPORATION, in its capacity as transferor (the "Transferor"), FIRST INVESTORS
FINANCIAL SERVICES, INC., in its capacity as seller (the "Seller"), TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, in its capacity as Collateral Agent (the
"Collateral Agent"), and NATIONSBANK, N.A., in its capacity as Reserve Account
Agent (the "Reserve Account Agent").

                                    RECITALS:

        1. The Transferor, Enterprise Funding Corporation (the "Company"), the
Reserve Account Agent, the Collateral Agent, the Surety and the Seller have
entered into a Security Agreement (as defined herein) of even date herewith,
pursuant to which, among other things, the Transferor has granted a security
interest in the Collateral to the Collateral Agent for the benefit of the
Company and the Surety, to secure payments under the Note, the Security
Agreement, the Note Purchase Agreement and this Agreement.

        2. The Transferor and the Seller have requested that the Surety issue
its Surety Bond (as defined below) to guarantee payment of Insured Amounts (as
defined in the Surety Bond), upon such terms and conditions as were mutually
agreed upon by the parties and subject to the terms and conditions of the Surety
Bond.

        3. The parties hereto desire to specify the conditions precedent to the
issuance of the Surety Bond by the Surety, the indemnity and reimbursement to be
provided by the Transferor in respect of amounts paid by the Surety under the
Surety Bond, the security to be provided to the Surety by the Transferor as an
inducement for the Surety to deliver the Surety Bond and to provide for certain
other indemnities and for certain other matters.

        NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, the Surety, the Transferor, the Seller, the Collateral Agent,
and the Reserve Account Agent agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

        Section 1.01. GENERAL DEFINITIONS. The terms defined in this Article I
shall have the meanings provided herein for all purposes of this Agreement,
unless the context clearly requires otherwise, in both singular and plural form,
as appropriate. Capitalized terms used in this Agreement but not otherwise
defined herein will have the meanings ascribed to such terms in the Security
Agreement.

        "ADVERSE SELECTION PROCEDURE" means any method of selecting or
identifying a Receivable eligible to be included in the Collateral, other than
in accordance with the Transaction Documents,

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that materially and adversely affects the representative nature of the sample of
Receivables so selected.

        "AGREEMENT" means this Insurance Agreement dated as of October 1, 1996,
including any amendments or any supplements hereto as herein permitted.

        "CLOSING DATE" means October 22, 1996.

        "COMMITMENT" means the Commitment Letter dated as of October 17, 1996
between the Transferor, the Seller and the Surety.

        "DATE OF ISSUANCE" means the date on which the Surety Bond is issued.

        "EVENT OF DEFAULT" means any event of default set forth in Section 5.01
hereof.

        "FIFSG" means First Investors Financial Services Group, Inc.

        "FINANCIAL STATEMENTS" means the balance sheets and the statements of
income, retained earnings and cash flows and notes thereto of FIFSG prepared on
a consolidated basis and furnished on behalf of the Seller to the Surety
pursuant to Section 2.02(c) hereof.

        "INSURED AMOUNTS" shall have the meaning assigned thereto in the Surety
Bond.

        "LATE PAYMENT RATE" means the rate of interest as is publicly announced
by Citibank, N.A. at its principal office in New York, New York as its prime
rate (any change in such prime rate of interest to be effective on the date such
change is announced by Citibank, N.A.) plus 2%. The Late Payment Rate shall be
computed on the basis of a year of 365 days calculating the actual number of
days elapsed. In no event shall the Late Payment Rate exceed the maximum rate
permissible under law applicable to this Agreement limiting interest rates.

        "MBIA PREMIUM" means the amount set forth in paragraph 1.a. of the
Commitment.

        "MOODY'S" means Moody's Investors Service Inc., its successors and their
assigns, and, if such corporation shall for any reason no longer perform the
functions of a securities rating agency, "Moody's" shall be deemed to refer to
any other nationally recognized rating agency designated by the Transferor with
the approval of the Surety.

        "NOTE" means the promissory note issued by the Transferor to the Company
pursuant to the Note Purchase Agreement.

        "NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated as of
October 22, 1996 between the Company and the Transferor.

        "SECURITY AGREEMENT" means the Security Agreement dated as of October
22, 1996, among the Company, the Transferor, the Surety, the Seller, the Reserve
Account Agent and the Collateral Agent.


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        "SERVICING AGREEMENT" shall have the meaning assigned thereto in the
Security Agreement.

        "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, its successors and their assigns and, if such
corporation shall for any reason no longer perform the functions of a securities
rating agency, "Standard & Poor's" shall be deemed to refer to any other
nationally recognized rating agency designated by the Transferor with the
approval of the Surety.

        "STATE" means the State of New York.

        "SURETY" means MBIA Insurance Corporation.

        "SURETY BOND" means the Surety Bond issued with respect to the
Receivables.

        "SURETY DEFAULT" means the occurrence and continuance of any failure of
the Surety to make payments under the Surety Bond in accordance with its terms.

        "SURETY INSOLVENCY" means (i) the entry of a decree or order of a court
or agency having jurisdiction in respect of the Surety in an involuntary case
under any present or future Federal or state bankruptcy, insolvency or similar
law or appointing a conservator or receiver or liquidator or rehabilitator or
other similar official of the Surety or of any substantial part of its property,
or the entering of an order for the winding up or liquidation of the affairs of
the Surety and the continuance of any such decree or order undischarged or
unstayed and in force for a period of 90 consecutive days; (ii) the Surety shall
consent to the appointment of a conservator or receiver or liquidator or other
similar official in any insolvency, readjustment of debt, marshaling of assets
and liabilities, rehabilitation or similar proceedings of or relating to the
Surety or of or relating to all or substantially all of its property; or (iii)
the Surety shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of or otherwise voluntarily
commence a case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations.

        "TERM OF THE AGREEMENT" shall be determined as provided in Section 4.01.

        "TRANSACTION" means the transactions contemplated by the Transaction
Documents.

        "TRANSACTION DOCUMENTS" means this Agreement, the Interest Rate Cap, the
Note Purchase Agreement, the Servicing Agreement, the Security Agreement, the
Purchase Agreement, any Originator Agreement and the Note.

        Section 1.02. GENERIC TERMS. All words used herein shall be construed to
be of such gender or number as the circumstances require. This "Agreement" shall
mean this Agreement as a whole and as the same may, from time to time hereafter,
be amended, supplemented or modified. The words "herein," "hereby," "hereof,"
"hereto," "hereinabove" and "hereinbelow," and words of similar import, refer to
this Agreement as a whole and not to any particular paragraph, clause or other
subdivision hereof, unless otherwise specifically noted.


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                                   ARTICLE II

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

        Section 2.01. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR, THE
SELLER, THE COLLATERAL AGENT, AND THE RESERVE ACCOUNT AGENT. The Transferor, the
Seller, the Collateral Agent, and the Reserve Account Agent represent and
warrant to, and covenant with, the other parties hereto (in each case only as to
matters concerning itself) as follows:

               (a) REPRESENTATIONS AND WARRANTIES OF TRANSFEROR, SELLER AND THE
        COLLATERAL AGENT CONTAINED IN OTHER TRANSACTION DOCUMENTS. All of the
        representations and warranties made by the Transferor, the Seller and
        the Collateral Agent, as the case may be, as of the Closing Date in any
        of the Transaction Documents (except with respect to the Originator
        Agreements) are incorporated as if fully set forth herein for the
        benefit of the Surety and are true and correct as of the Closing Date.

               (b) DUE ORGANIZATION AND QUALIFICATION. Each of the Transferor
        and the Seller is a corporation, duly organized, validly existing and in
        good standing under the laws of its respective jurisdiction of
        incorporation. The Collateral Agent is a national banking institution
        duly organized, validly existing and in good standing under the laws of
        the United States. Each of the Transferor, the Seller and the Collateral
        Agent is duly qualified to do business, is in good standing and has
        obtained all necessary licenses, permits, charters, registrations and
        approvals (together, "approvals") required to be obtained by the
        Transferor, the Seller and the Collateral Agent in each jurisdiction in
        which the failure to obtain such approvals would render any portion of
        the Transaction Documents unenforceable by the Transferor, the Seller or
        the Collateral Agent or any other party to the Transaction Documents, as
        the case may be, and would have a material adverse effect on the Surety.

               (c) POWER AND AUTHORITY. Each of the Transferor, the Seller and
        the Collateral Agent has all necessary corporate or institutional power
        and authority to conduct its business as currently conducted and to
        execute, deliver and perform its obligations under the Transaction
        Documents and to consummate the Transaction.

               (d) DUE AUTHORIZATION. The execution, delivery and performance of
        the Transaction Documents by the Transferor, the Seller and the
        Collateral Agent have been duly authorized by all necessary corporate or
        institutional action, as the case may be, and do not require any
        additional approvals or consents, or other action by or any notice to or
        filing with any Person, including, without limitation, any governmental
        entity or the Transferor's or the Seller's stockholders, which have not
        previously been obtained or given by the Transferor, the Seller or the
        Collateral Agent.

               (e) NONCONTRAVENTION. Neither the execution and delivery of the
        Transaction Documents by the Seller, the Transferor, the Collateral
        Agent or the Reserve Account Agent, as the case may be, the consummation
        of the transactions contemplated thereby nor the satisfaction of the
        terms and conditions of the Transaction Documents:


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                      (i) conflicts with or results in any breach or violation
               of any provision of the certificate of incorporation, bylaws or
               other organizational document of the Seller, the Transferor or
               the Collateral Agent or any law, rule, regulation, order, writ,
               judgment, injunction, decree, determination or award currently in
               effect having applicability to the Seller, the Transferor or the
               Collateral Agent or any of their material properties, including
               regulations issued by an administrative agency or other
               governmental authority having supervisory powers over the Seller,
               the Transferor or the Collateral Agent;

                      (ii) constitutes a default by the Seller, the Transferor
               or the Collateral Agent under or a breach of any provision of any
               loan agreement, mortgage, indenture or other agreement or
               instrument which is material to the Seller, the Transferor or the
               Collateral Agent to which the Seller, the Transferor or the
               Collateral Agent is a party or by which any of its or their
               respective properties, which are individually or in the aggregate
               material to the Seller, the Transferor or the Collateral Agent,
               is or may be bound or affected; or

                      (iii) except as contemplated by the Transaction Documents,
               results in or requires the creation of any lien upon or in
               respect of any assets of the Seller, the Transferor, the
               Collateral Agent or the Reserve Account Agent.

               (f) PENDING LITIGATION OR OTHER PROCEEDING. There is no pending
        action or proceeding before any court, governmental or administrative
        agency or arbitrator against or affecting the Transferor, the Seller,
        the Collateral Agent or the Reserve Account Agent or any of its or their
        subsidiaries or any properties or rights of the Transferor, the Seller,
        the Collateral Agent or the Reserve Account Agent or any of its or their
        subsidiaries or, to the Transferor's, the Seller's, the Collateral
        Agent's or the Reserve Account Agent's knowledge, any investigation or
        any threatened action or proceeding before any of the foregoing, which,
        if decided adversely to the Transferor, the Seller, the Collateral Agent
        or the Reserve Account Agent, would materially and adversely affect the
        ability of the Transferor, the Seller, the Collateral Agent or the
        Reserve Account Agent to perform their respective obligations under the
        Transaction Documents or would have a material adverse effect on the
        Surety.

               (g) VALID AND BINDING OBLIGATIONS. The Transaction Documents to
        which the Transferor, the Seller and the Collateral Agent, respectively,
        is a party constitute, and when executed will constitute, the legal,
        valid and binding agreements of the Transferor, the Seller and the
        Collateral Agent, respectively, enforceable against the Transferor, the
        Seller, and the Collateral Agent in accordance with their respective
        terms, except as the enforceability thereof may be limited by
        bankruptcy, insolvency, reorganization, moratorium or other similar laws
        relating to or limiting creditors' rights generally or general equitable
        principles, as such relate to the Transferor, the Seller and the
        Collateral Agent. The Transferor, the Seller and the Collateral Agent
        hereby agree and covenant that each will not at any time in the future,
        deny that the Transaction Documents to which the Transferor, the Seller
        and the Collateral Agent, respectively, is a party constitute the 


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        valid, legal and binding agreements of the Transferor, the Seller and
        the Collateral Agent, respectively, subject to the aforesaid
        limitations.

               (h) FINANCIAL STATEMENTS. The Financial Statements of FIFSG,
        copies of which the Seller has caused to be furnished to the Surety on
        behalf of the Seller, (i) are, as of the dates and for the periods
        referred to therein, complete and correct in all material respects, (ii)
        present fairly the financial condition and results of operations of the
        companies reported therein as of the dates and for the periods indicated
        and (iii) have been prepared in accordance with generally accepted
        accounting principles consistently applied, except as noted therein and
        subject to year-end adjustments with respect to interim statements.
        Since the date of the most recent Financial Statements, there has been
        no material adverse change in such condition or operations. Except as
        disclosed in the Financial Statements, the Seller, is not subject to any
        contingent liabilities or commitments that, individually or in the
        aggregate, have a material possibility of causing a material adverse
        change in respect of the Seller.

               (i) COMPLIANCE WITH LAW, REGULATIONS, ETC. None of the
        Transferor, the Seller, the Collateral Agent or the Reserve Account
        Agent has notice or any reason to believe that any practice, procedure
        or policy employed by the Transferor, the Seller, the Collateral Agent
        or the Reserve Account Agent in the conduct of its business violates any
        law, regulation, judgment or agreement applicable to the Transferor, the
        Seller, the Collateral Agent or the Reserve Account Agent which, if
        enforced, would have a material adverse effect on the ability of the
        Seller, the Transferor, the Collateral Agent or the Reserve Account
        Agent, as the case may be, to perform its respective obligations under
        the Transaction Documents. None of the Transferor, the Seller, the
        Collateral Agent or the Reserve Account Agent is in breach of or in
        default under any applicable law or administrative regulation of the
        state of its respective incorporation or any department, division,
        agency or instrumentality thereof or of the United States or any
        applicable judgment or decree or any loan agreement, note, resolution,
        certificate, agreement or other instrument to which the Transferor is a
        party or is otherwise subject which, if enforced, would have a material
        adverse effect on the ability of the Collateral Agent, the Reserve
        Account Agent, the Transferor or the Seller, as the case may be, to
        perform its respective obligations under the Transaction Documents.

               (j) TAXES. Each of the Transferor and the Seller and its
        respective parent company or companies have filed prior to the date
        hereof all federal and state tax returns that are required to be filed
        and paid all taxes, including any assessments received by them that are
        not being contested in good faith, to the extent that such taxes have
        become due, except for any failures to file or pay that, individually or
        in the aggregate, would not result in a material adverse change with
        respect to the Transferor and the Seller.

               (k) DELIVERY OF INFORMATION. Each of the Transferor and the
        Seller represents and warrants that none of the Transaction Documents
        nor any other information furnished in writing to the Surety by the
        Transferor or the Seller, as the case may be, contain any statement of a
        material fact by the Transferor or the Seller as the case may be, which
        was untrue or misleading in any material respect when made. None of the
        Transferor or the 

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        Seller has any knowledge of circumstances that could reasonably be
        expected to cause a material adverse change with respect to the
        Transferor or the Seller. Since the furnishing of such information by
        the Transferor and the Seller, there has been no change nor any
        development or event involving a prospective change which would render
        any of the Transaction Documents or other information furnished to the
        Surety untrue or misleading in a material respect.

               (l) SOLVENCY. The Transferor and the Seller are solvent and will
        not be rendered insolvent by the Transaction and, after giving effect to
        the Transaction, neither of the Transferor or the Seller will be left
        with an unreasonably small amount of capital with which to engage in its
        business, nor does the Transferor or the Seller intend to incur, or
        believe that it has incurred, debts beyond its ability to pay as they
        mature. None of the Transferor or the Seller contemplates the
        commencement of insolvency, bankruptcy, liquidation or consolidation
        proceedings or the appointment of a receiver, liquidator, conservator,
        trustee or similar official in respect of the Transferor or the Seller
        or any of its respective assets.

               (m) PRINCIPAL PLACE OF BUSINESS. The principal place of the
        Collateral Agent is located in Texas and the principal place of business
        of the Transferor is located in Texas. The principal place of business
        of the Seller is located in Texas.

               (n) REQUIREMENTS FOR RECEIVABLES. The Seller and the Transferor
        represent and warrant with respect to each Receivable that: (a) the
        related Obligor has no right of recission or cancellation, claims or
        defenses, set-offs or counterclaims of any kind whatsoever as to or
        against each Receivable; (b) the obligation created by the contract
        evidencing each Receivable is a bonafide sale in the ordinary course of
        the Originator's business; (c) the contract evidencing such Receivable
        complies with all state and federal laws and regulations; (d) the
        contract evidencing each Receivable, including, but not limited to,
        description of the motor vehicle and/or services contained therein, is
        in all respects complete, accurate and represents the entire agreement
        between the Originator and the Obligor and complies with Federal
        Consumer Credit Protection Act and all other applicable state and
        federal laws and regulations.

        Section 2.02. AFFIRMATIVE COVENANTS OF THE TRANSFEROR, THE SELLER, THE
COLLATERAL AGENT, AND THE RESERVE ACCOUNT AGENT. The Transferor, the Seller, the
Collateral Agent, and the Reserve Account Agent hereby covenant and agree that
during the term of this Agreement:

               (a) COMPLIANCE WITH AGREEMENTS. The Transferor, the Seller, the
        Collateral Agent and the Reserve Account Agent shall comply in all
        material respects with the terms and conditions of the Transaction
        Documents to which each, respectively, is a party and, so long as no
        Surety Default or Surety Insolvency exists, unless the Surety shall
        otherwise consent, none of the Transferor, the Seller, the Collateral
        Agent or the Reserve Account Agent shall agree to any waiver, amendment
        to or modification of the terms of any of the Transaction Documents to
        which each, respectively, is a party, except with respect to the
        Originator Agreements and except under the circumstances and in
        accordance with the terms specifically set forth in the related
        Transaction Document.


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               (b) CORPORATE EXISTENCE. The Transferor, the Seller, the
        Collateral Agent, and the Reserve Account Agent shall maintain their
        respective existences and continue to be duly organized, duly qualified
        and duly authorized under the laws of its respective jurisdiction of
        incorporation or organization and shall conduct its business in
        accordance with the terms of its certificate of incorporation and
        bylaws, or other organization documents.

               (c) THE SELLER TO PROVIDE FINANCIAL STATEMENTS; ACCOUNTANTS'
        REPORTS; OTHER INFORMATION. The Seller shall keep or cause to be kept in
        reasonable detail books and records of account of the Seller's books and
        records relating to its obligations assumed under the Transaction
        Documents, in accordance with its operating rules and procedures. The
        Seller shall furnish or cause to be furnished to the Surety:

                      (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and
               in any event within 120 days after the close of each fiscal year
               of FIFSG the audited consolidated balance sheets of FIFSG as of
               the end of such fiscal year and the related audited consolidated
               statements of income, changes in shareholders' equity and cash
               flows for such fiscal year, all in reasonable detail and stating
               in comparative form the respective figures for the corresponding
               date and period in the preceding fiscal year, prepared in
               accordance with generally accepted accounting principles,
               consistently applied, and accompanied by the audit opinion of the
               FIFSG's independent accountants (which shall be a nationally
               recognized independent public accounting firm) and by the
               certificate specified in Section 2.02(e) hereof.

                      (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available,
               and in any event within 90 days after each of the first three
               fiscal quarters of each fiscal year of FIFSG, the unaudited
               consolidated balance sheets of FIFSG and its subsidiaries as of
               the end of such fiscal quarter and the related unaudited
               consolidated statements of income, changes in shareholders'
               equity and cash flows for such fiscal quarter, all in reasonable
               detail and stating in comparative form the respective figures for
               the corresponding date and period in the preceding fiscal year,
               prepared in accordance with generally accepted accounting
               principles, consistently applied, and accompanied by the
               certificate specified in Section 2.02(e) hereof.

                      (iii)  [Reserved.]

                      (iv) OTHER REPORTS AND INFORMATION. The Seller shall also
               furnish, or cause to be furnished, with reasonable promptness,
               such other financial data, financial reports relating to the
               Seller or FIFSG prepared by third parties and other data relating
               to the Seller or FIFSG which are commonly prepared and can be
               provided without undue effort, as the Surety may reasonably
               request.

               (d) THE TRANSFEROR SHAREHOLDER MEETINGS. The Transferor shall
        have annual shareholder meetings and at least annual board of director
        meetings and shall prepare


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        income and franchise tax returns as appropriate. Upon the request of the
        Surety, the Transferor shall deliver to the Surety copies of the minutes
        of such meetings and such tax returns promptly upon filing.

               (e) CERTIFICATE OF COMPLIANCE. The Seller shall cause the
        Transferor to deliver to the Surety concurrently with the delivery of
        the Financial Statements required pursuant to paragraph (c) above any
        statement required to be delivered under the Security Agreement.

               (f) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
        The Transferor, the Seller, the Collateral Agent and the Reserve Account
        Agent shall, upon the request of the Surety, permit the Surety, or its
        authorized agent, at reasonable times and upon reasonable notice:

                      (i) to inspect such books and records of the Transferor,
               the Seller and the Collateral Agent as the case may be, as they
               may relate to the Receivables, the obligations of the Transferor,
               the Seller and the Collateral Agent, as the case may be, under
               the Transaction Documents and the transactions consummated in
               connection herewith and to inspect the books and records of the
               Reserve Account Agent as they may relate to the Reserve Account;

                      (ii) to discuss the affairs, finances and accounts of the
               Transferor, the Seller and the Collateral Agent as such relate to
               the performance by it of its obligations under the Transaction
               Documents with an appropriate officer of the Transferor, the
               Seller and the Collateral Agent, as the case may be; and to
               discuss the affairs, finances and accounts of the Reserve Account
               Agent as such may relate to the Reserve Account with an
               appropriate officer of the Reserve Account Agent.

                      (iii) to discuss the affairs, finances and accounts of the
               Transferor, the Seller and the Collateral Agent as such relate to
               the performance by it of its obligations under the Transaction
               Documents with the Transferor's, the Seller's and the Collateral
               Agent's independent public accountants, as the case may be,
               provided that an appropriate officer of the Transferor, the
               Seller and the Collateral Agent, as the case may be, shall have
               the right to be present during such discussions.

               Such inspections and discussions shall be conducted upon the
        request of the Surety and during normal business hours and shall not
        unreasonably disrupt the business of the Transferor, the Seller, the
        Collateral Agent or the Reserve Account Agent. The books and records of
        the Transferor will be maintained at the address of the Transferor
        designated herein for receipt of notices, unless the Transferor shall
        otherwise advise the parties hereto in writing, the books and records of
        the Collateral Agent will be maintained at the address of the Collateral
        Agent designated herein for receipt of notices, unless the Collateral
        Agent shall otherwise advise the parties hereto in writing, the books
        and records of the Reserve Account Agent will be maintained at the
        address of the Reserve Account Agent designated herein for receipt of
        notices, unless the Reserve Account Agent shall


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        otherwise advise the parties hereto in writing and the books and records
        of the Seller will be maintained at the Seller's address designated
        herein for receipt of notices, unless the Seller shall otherwise advise
        the parties hereto in writing.

               The Surety shall keep confidential all financial statements and
        reports delivered to it, the Credit Guidelines and any matter of which
        it becomes aware through such inspections or discussions, except as may
        be otherwise required, by regulation, law or court order or requested by
        appropriate governmental authorities or as necessary to enforce any of
        the provisions of the Transaction Documents, provided that the foregoing
        shall not limit the right of the Surety to make such information
        available on a confidential basis, to its regulators, securities rating
        agencies, reinsurers, credit and liquidity providers, counsel and
        accountants. If the Surety is requested or required (by oral questions,
        interrogatories, requests for information or documents subpoena, civil
        investigative demand or similar process) to disclose any information of
        which it becomes aware through such inspections or discussions, the
        Surety will promptly notify the Seller of such request(s) so that the
        Seller may seek an appropriate protective order and/or waive the
        Surety's compliance with the provisions of this Insurance Agreement. If,
        in the absence of a protective order or the receipt of a waiver
        hereunder, the Surety is, nonetheless, in the opinion of its counsel,
        compelled to disclose such information to any tribunal or else stand
        liable for contempt or suffer other censure or significant penalty, the
        Surety may disclose such information to such tribunal that the Surety is
        compelled to disclose, provided that a copy of all information disclosed
        is provided to the Seller promptly upon such disclosure.

               (g) INFORM SURETY OF MATERIAL EVENTS. Each of the Transferor,
        the Seller and the Collateral Agent (each, as to matters relating to
        itself) shall promptly inform the Surety in writing of the following:

                      (i) any default or any fact or event (of which, in the
               case of the Collateral Agent, the Collateral Agent has actual
               knowledge) which results, or which with notice or the passage of
               time, or both, would result in an Event of Default, or Servicer
               Event of Default, Termination Event, Wind-Down Event or
               Amortization Event under any Transaction Document or would
               constitute a material breach of a representation, warranty or
               covenant by it under any Transaction Document;

                      (ii) the submission of any claim or the initiation of any
               legal process, litigation or administrative or judicial
               investigation against it in any federal, state or local court or
               before any governmental body or agency, or before any arbitration
               board, or any such proceedings threatened by any governmental
               agency, (of which, in the case of the Collateral Agent, the
               Collateral Agent has actual knowledge), which, if adversely
               determined, would have a material adverse effect upon its ability
               to perform its obligations under any Transaction Document;

                       (iii) except in the case of the Collateral Agent, the
               submission of any claim or the initiation of any legal process,
               litigation or administrative or judicial investigation in any
               federal, state or local court or before any arbitration board, or


                                       10
<PAGE>

               any such proceeding threatened by any governmental agency
               transferred, which, if adversely determined, would have a
               material adverse effect on the Receivables;

                      (iv) the commencement of any proceedings under any
               applicable bankruptcy, reorganization, liquidation, insolvency or
               other similar law now or hereafter in effect or of any proceeding
               in which a receiver, liquidator, trustee or other similar
               official shall have been, or may be, appointed or requested;

                      (v) the receipt of notice from any agency or governmental
               body having authority over the conduct of its business that it is
               to cease and desist, or to undertake any, practice, program,
               procedure or policy employed by it in the conduct of its
               business, and such cessation or undertaking will materially
               adversely affect its ability to perform its obligations under the
               Transaction Documents; and

                      (vi) any change in the location of the Seller's, the
               Transferor's or the Collateral Agent's principal offices or books
               and records.

               (h) FINANCING STATEMENTS AND FURTHER ASSURANCES. The Seller shall
        cause the Transferor to file all necessary financing statements or other
        instruments, and any amendments or continuation statements relating
        thereto, necessary to be kept and filed in such manner and in such
        places as may be required by law to preserve and protect fully the
        interest of the Surety in the Receivables. The parties hereto shall,
        upon the request of the Surety, from time to time, execute, acknowledge
        and deliver, or cause to be executed, acknowledged and delivered, within
        ten days of such request, such amendments hereto and such further
        instruments and take such further action as may be reasonably necessary
        to effectuate the intention, performance and provisions of the
        Transaction Documents. The parties hereto agree to fully cooperate with
        the Surety, Standard & Poor's and Moody's in connection with any review
        which may be undertaken by Standard & Poor's and/or Moody's after the
        date hereof and to provide all information reasonably requested by
        Standard & Poor's and/or Moody's.

               (i) NOTICE OF AMENDMENTS. The Seller will provide the Surety with
        written notice of any change or amendment to any Transaction Document
        (except with respect to the Originator Agreements) as currently in
        effect.

               (j) THIRD-PARTY RIGHTS. Each of the Transferor, the Seller, the
        Collateral Agent, and the Reserve Account Agent agrees that the Surety
        shall have all of the rights of a third-party beneficiary of, and
        pursuant to, its agreements under each Transaction Document (except with
        respect to the Originator Agreements) to which the Transferor, the
        Seller, the Collateral Agent, respectively, is a party, unless otherwise
        expressly provided in the related Transaction Document.

               (k) MAINTENANCE OF LOANS. On or before each April 15, beginning
        in 1997, the Seller shall cause the Transferor to furnish to the Surety
        an officer's certificate either stating that such action has been taken
        with respect to the recording, filing, rerecording and refiling of any
        financing statements and continuation statements as is necessary to


                                       11
<PAGE>

        maintain the interest of the Surety created by the Security Agreement
        with respect to the Receivables and reciting the details of such action
        or stating that no such action is necessary to maintain such interests.
        Such officer's certificate shall also describe the recording, filing,
        rerecording and refiling of any financing statements and continuation
        statements that will be required to maintain the interest of the Surety
        in the Receivables until the date such next officer's certificate is
        due. The Seller will use its best efforts to cause any necessary
        recordings or filings to be made with respect to the Receivables.

               (l) SELLER'S INDEMNITY. Notwithstanding anything in subsection
        3.07(a) hereof, the Seller shall pay to the Surety an amount equal to
        any amount paid by the Surety because of the Servicer's failure to
        deposit into the Collection Account any amount required to be so
        deposited by it pursuant to the Servicing Agreement, together with
        interest on any and all amounts remaining unreimbursed (to the extent
        permitted by law, if in respect to any unreimbursed amounts representing
        interest) from the date such amounts became due until paid in full
        (after as well as before judgment) at a rate of interest equal to the
        Late Payment Rate.

               (m) MAINTENANCE OF LICENSES. The Collateral Agent, the Seller and
        the Transferor, respectively, or any successors thereof, shall maintain
        all licenses, permits, charters and registrations which are material to
        the conduct of its business.

               (n) CLOSING DOCUMENTS. The Seller shall provide or cause to be
        provided to the Surety an executed original copy of each document
        executed in connection with the Transaction within 30 days after the
        date of closing.

               (o) NOTICES UNDER THE INTEREST RATE CAP AND THE NOTE PURCHASE
        AGREEMENT. The Transferor shall promptly forward to the Surety a copy of
        each notice or other communication received by the Transferor or sent by
        the Transferor with respect to the Interest Rate Cap and the Note
        Purchase Agreement.

               (p) COLLATERAL AGENT TO ACT UPON DIRECTION OF SURETY; DELIVERY OF
        NOTICES. The Collateral Agent agrees that so long as no Surety Default
        has occurred and is continuing (i) the Collateral Agent shall not take
        any action which the Collateral Agent is entitled to take pursuant to
        the Servicing Agreement without the prior written consent of the Surety,
        and (ii) following the Surety's written request or direction, it will
        take or refrain from taking any action which the Collateral Agent is
        entitled to take pursuant to the Servicing Agreement. The Collateral
        Agent shall promptly forward to the Surety a copy of each notice or
        other communication given or received by the Collateral Agent pursuant
        to the Servicing Agreement.

        Section 2.03. NEGATIVE COVENANTS OF THE TRANSFEROR, THE COLLATERAL AGENT
AND THE SELLER. The Transferor, the Collateral Agent and the Seller agree and
covenant with the Surety that at all times during the Term of the Agreement:


                                       12
<PAGE>

               (a) ADVERSE SELECTION PROCEDURE. The Transferor and the Seller
        will not use any Adverse Selection Procedure in selecting the
        Receivables that qualify under the Security Agreement for inclusion as
        Collateral.

               (b) IMPAIRMENT OF RIGHTS. The Transferor, the Collateral Agent
        and the Seller each agree and covenant with the Surety that at all times
        during the Term of the Agreement the Transferor, the Seller and the
        Collateral Agent shall not take any action, or decline to take any
        action if reasonably requested by the Surety at a time when no Surety
        Default or Surety Insolvency exists, if such action or failure to take
        action will interfere with the enforcement of any rights under any of
        the Transaction Documents. The Transferor, the Collateral Agent and the
        Seller shall give the Surety written notice of any such action or
        failure to act on the earlier of: (i) the date upon which any publicly
        available filing or release is made with respect to such action or
        failure to act or (ii) promptly prior to the date of consummation of
        such action or failure to act. The Transferor, the Collateral Agent, and
        the Seller shall furnish to the Surety all information requested by it
        that is reasonably necessary to determine compliance with this
        paragraph.

               (c) AMENDMENT TO CERTIFICATE OF INCORPORATION. The Transferor
        shall not amend its certificate of incorporation at a time when no
        Surety Default or Surety Insolvency exists without the Surety's prior
        written consent except in accordance with the terms thereof.

               (d) LOAN AGREEMENTS; CHARGE-OFF POLICY. Except as otherwise
        permitted in the Security Agreement, the Seller shall not, and shall not
        permit the Servicer to, alter or amend any Receivable or their
        respective charge-off policies in a manner that materially adversely
        affects the Surety unless the Surety shall have previously given its
        consent.

               (e) INTEREST RATE CAP. The Transferor will not enter into the
        Interest Rate Cap until the Interest Rate Cap has been approved in form
        and substance by the Surety. The Transferor shall not agree to any
        changes to the Interest Rate Cap unless the Surety shall have previously
        given its consent. The Transferor shall take or refrain from taking any
        action, and exercise or refrain from exercising any rights of the
        Transferor under the Interest Rate Cap, in the manner directed by the
        Surety.

                                   ARTICLE III

                            THE SURETY BOND; SECURITY

        Section 3.01. AGREEMENT TO ISSUE SURETY BOND. The Surety agrees, subject
to the conditions set forth in Section 3.02 hereof, to issue the Surety Bond.

        Section 3.02. CONDITIONS PRECEDENT TO ISSUANCE OF THE SURETY BOND. The
Transferor and the Seller shall have complied with the terms and satisfied the
conditions precedent set forth below:

               (i) Payment of the MBIA Premium in accordance with Section 3.03
        hereof;

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<PAGE>

               (ii) Payment of or satisfactory arrangements for payment by the
        Transferor of (a) rating agency fees of Standard & Poor's and Moody's;
        and (b) the fees and expenses incurred by the Surety in connection with
        the issuance of such Surety Bond, including reasonable fees and expenses
        of counsel to the Surety and accountants for the Surety, all in
        accordance with the terms of the Commitment. The fees for any other
        rating agency shall be paid by the party requesting such other agency's
        rating, unless such other agency is a substitute for Standard & Poor's
        or Moody's in the event that Standard & Poor's or Moody's is no longer
        rating securities, in which case the cost for such agency shall be paid
        by the Transferor;

               (iii) Receipt by the Surety of a fully executed copy of the
        Transaction Documents (except for the Originator Agreements);

               (iv) Receipt by the Surety of (A) the certificate of
        incorporation and bylaws of the Transferor and (B) certified copies of
        the resolutions of the board of directors of the Transferor authorizing
        the execution and delivery and performance of the Transaction Documents
        and the other matters contemplated thereby, and of all other documents
        evidencing any other action of the Transferor necessary to enter into
        the Transaction Documents, all in form and substance acceptable to the
        Surety and its counsel;

               (v) [Reserved.]

               (vi) Receipt by the Surety of the following opinions of counsel:

                      (A) The law firm of Buck, Keenan & Owens shall have issued
               its favorable opinion, in form and substance acceptable to the
               Surety and its counsel, regarding and the validity and
               enforceability of the Transaction Documents (except with respect
               to the Originator Agreements) against the Transferor and the
               Seller, the law firm of Skadden, Arps, Slate, Meagher & Flom
               shall have issued its favorable opinion, in form and substance
               acceptable to the Surety and its counsel, regarding and the
               validity and enforceability of the Security Agreement and the
               Insurance Agreement against the Reserve Account Agent, and the
               law firm of Andrews & Kurth, L.L.P. shall have issued its
               favorable opinion, in form and substance acceptable to the Surety
               and its counsel, regarding and the validity and enforceability of
               the Transaction Documents against the Collateral Agent.

                      (B) The law firm of Vinson & Elkins shall have issued its
               favorable opinions, in form and substance acceptable to the
               Surety and its counsel, regarding the sale of the Receivables
               from the Seller to the Transferor, consolidation of the Seller
               and the Transferor in the event of the Seller's bankruptcy.

                      (C) The law firm of Buck, Keenan & Owens shall have issued
               its favorable opinions, in form and substance acceptable to the
               Surety and its counsel, regarding the perfection of the
               Collateral Agent's interest in the Receivables and the Reserve
               Account Agent's interest in (i) the funds on deposit in, and (ii)
               investments with respect to, the Reserve Account.

                                       14
<PAGE>

                      (D) The Surety shall have received such other opinions of
               counsel, in form and substance acceptable to the Surety and its
               counsel, including tax opinions, addressing such other matters as
               the Surety may reasonably request.

               (vii) Receipt by the Surety of true and correct copies of all
        approvals, licenses and consents, if any, including, without limitation,
        any required approval of the shareholders of the parties hereto,
        necessary for the transactions contemplated by the Transaction
        Documents;

               (viii) Receipt of confirmation from Standard & Poor's and Moody's
        that the rating of the Facility without regard to the Surety Bond is at
        least BBB- and Baa3, respectively;

               (ix) The Surety shall have received a certificate of an
        authorized officer of the Transferor, the Collateral Agent, the Seller
        and the Reserve Account Agent certifying the name and true signatures of
        the officers of the Transferor, the Collateral Agent, the Seller and the
        Reserve Account Agent, executing the Transaction Documents;

               (x) [Reserved.]

               (xi) The representations and warranties of the parties hereto set
        forth or incorporated by reference in this Agreement shall be true and
        correct as of the Date of Issuance as if made on the Date of Issuance
        and the Surety shall have received a certificate of appropriate officers
        of each of the parties hereto to that effect.

               (xii) The Seller will cause FIFSG to furnish a certificate to the
        Surety to the effect that (i) the Financial Statements which have been
        furnished to the Surety are, as of the date thereof, complete and
        correct in all material respects; present fairly the financial condition
        of FIFSG on a consolidated basis as of the date thereof; and have been
        prepared in accordance with generally accepted accounting principles
        consistently applied (except as noted therein and subject to year-end
        adjustments for interim statements) and (ii) there has been no material
        adverse change in such conditions or operations;

               (xiii) Delivery of such other documents, customary closing
        certificates, instruments, approvals or opinions as are reasonably
        requested by the Surety;

               (xiv) No suit, action or other proceeding, investigation or
        injunction, or final judgment relating thereto, shall be pending or
        threatened before any court or governmental agency in which it is sought
        to restrain or prohibit or to obtain damages or other relief in
        connection with the Transaction Documents or the consummation of the
        Transaction;

               (xv) No statute, rule, regulation or order shall have been
        enacted, entered or deemed applicable by any government or governmental
        or administrative agency or court that would make the transactions
        contemplated by any of the Transaction Documents illegal or otherwise
        prevent the consummation thereof;

                                       15
<PAGE>

               (xvi) No default or any fact or event which results, or which
        with notice or the passage of time, or both, would result in a
        Termination Event, Amortization Event, Wind- Down Event or Event of
        Default shall have occurred;

               (xvii) Compliance with all other terms, conditions and
        requirements of the Commitment;

               (xiii) The Surety and its counsel shall have determined that all
        documents, certificates and opinions to be delivered in connection with
        the Receivables conform to the terms of the Transaction Documents; and

               (xix) The Surety shall have received such other documents,
        instruments, approvals or opinions requested by the Surety as may be
        reasonably necessary to effect the Transaction, including but not
        limited to, evidence satisfactory to the Surety that the conditions
        precedent, if any, in the Transaction Documents have been satisfied.

Issuance of such Surety Bond will be conclusive evidence of satisfaction or
waiver of any of the conditions set forth in this Section 3.02.

        Section 3.03. PREMIUM. The MBIA Premium shall be payable in accordance
with the Security Agreement so long as no Surety Default or Surety Insolvency
has occurred. The MBIA Premium shall be nonrefundable without regard to whether
the Surety makes any payment under the Surety Bond.

        Section 3.04. INDEMNIFICATION. (a) In addition to any and all rights of
indemnification or any other rights of the Surety pursuant hereto or under law
or equity, the Transferor, the Seller, the Reserve Account Agent (subject to
Section 3.04(g) hereof) and the Collateral Agent (subject to the provisions of
Section 3.04(g) hereof), and any successors thereto agree to pay, and to
protect, indemnify and save harmless, the Surety and its officers, directors,
shareholders, employees, agents, including each person, if any, who controls the
Surety within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as amended,
from and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents by reason of:

               (i) the misfeasance or malfeasance of, or gross negligence or
        theft committed by, any director, officer, employee or agent of the
        Transferor, the Seller, the Reserve Account Agent, the Servicer or the
        Collateral Agent;

               (ii) the violation by the Transferor or the Seller of any federal
        or state laws, rules or regulations relating to the maximum amount of
        interest permitted to be received on account of the loan of money or
        with respect to the Receivables;

                                       16
<PAGE>

               (iii) the breach by the Transferor, the Seller or the Collateral
        Agent of any of its material obligations under this Agreement or any of
        the Transaction Documents;

               (iv) the breach by the Reserve Account Agent or the Servicer
        under any of the Transaction Documents to which it is a party, and such
        breach is not cured within the applicable time period set forth in the
        related Transaction Document;

               (v) the breach by the Transferor, the Seller, the Reserve Account
        Agent, the Servicer or the Collateral Agent of any representation or
        warranty on the part of the Transferor, the Seller, the Reserve Account
        Agent, the Servicer or the Collateral Agent contained in the Transaction
        Documents or in any certificate furnished or delivered to the Surety
        thereunder, and such breach is not cured within the applicable time
        period set forth in the related Transaction Document; and

               (vi) any state or federal tax liability imposed upon the
        Transferor or in connection with the transactions contemplated by the
        Transaction Documents.

        (b) The Transferor and the Seller agree to pay, and to protect,
indemnify and save harmless, the Surety and its officers, directors,
shareholders, employees, agents, including each person, if any, who controls the
Surety within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as amended,
from and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents by reason of any losses, damages or expenses of whatsoever kind or
nature, including reasonable attorney's fees, which the Surety may at any time
incur by reason of or in consequence of any Obligor making any legally proven
claim relating to an Originator's acts regarding each contract evidencing the
related Receivable purchased by the Seller or Transferor.

        (c) The Transferor and the Seller agree to pay, and to protect,
indemnify and save harmless, the Surety and its officers, directors,
shareholders, employees, agents, including each person, if any, who controls the
Surety within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as amended,
from and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the occurrence of the events set forth in Section
4.1(a) through (g) of the Note Purchase Agreement.

        (d) Any party which proposes to assert the right to be indemnified under
this Section 3.04 will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim is to
be made against the Transferor, the Seller, the Reserve Account Agent or the
Collateral Agent under this Section 3.04, notify the

                                       17
<PAGE>

Transferor, the Collateral Agent, the Reserve Account Agent or the Seller of the
commencement of such action, suit or proceeding, enclosing a copy of all papers
served. In case any action, suit or proceeding shall be brought against any
indemnified party and it shall notify the Transferor, the Collateral Agent, the
Reserve Account Agent or the Seller of the commencement thereof, the Transferor,
the Seller, the Reserve Account Agent or the Collateral Agent shall be entitled
to participate in, and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the Transferor, the Seller, the Reserve Account Agent or the
Collateral Agent to such indemnified party of its election so to assume the
defense thereof, the Transferor, the Seller, the Reserve Account Agent or the
Collateral Agent shall not be liable to such indemnified party for any legal or
other expenses other than reasonable costs of investigation subsequently
incurred by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its counsel in any such action
the defense of which is assumed by the Transferor, the Seller, the Reserve
Account Agent or the Collateral Agent in accordance with the terms of this
subsection (d), but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless the employment of counsel by such
indemnified party has been authorized by the Transferor, the Seller, the Reserve
Account Agent or the Collateral Agent. The Transferor, the Seller, the Reserve
Account Agent and the Collateral Agent shall not be liable for any settlement of
any action or claim effected without its consent.

        (e) This indemnity provision shall survive the termination of this
Agreement and shall survive until the statute of limitations has run on any
causes of action which arise from one of these reasons and until all suits filed
as a result thereof have been finally concluded.

        (f) Notwithstanding any provision or obligation to the contrary set
forth in this Agreement or any instrument now or hereafter securing, affecting
or relating to any obligation of the Transferor, the Seller, the Reserve Account
Agent or the Collateral Agent under this Agreement, including, without
limitation, the Security Agreement, no individual representative of the
Transferor, the Collateral Agent, the Reserve Account Agent or the Seller
(including, without limitation, employees, officers, directors and shareholders
thereof) shall have any personal liability under this Agreement including,
without limitation, any liability for the performance or observance or
nonperformance or nonobservance of any covenant or obligation of the Transferor,
the Collateral Agent, the Reserve Account Agent and the Seller or for breach of
any representation or warranty contained in this Agreement.

        (g) Notwithstanding any other provision of this Section 3.04, (I) the
Collateral Agent shall be obligated under this Section 3.04 to pay, protect,
indemnify and save harmless any indemnified party hereunder from and against
Liabilities only with respect to any misfeasance or malfeasance of, or gross
negligence or theft committed by any director, officer, employee or agent of the
Collateral Agent, as specified in Section 3.04(a)(i), and any breach by the
Collateral Agent, as specified in Section 3.04(a)(iii) or (v); and (II) in
connection with its duties, representations, warranties, covenants and
obligations pursuant to the Security Agreement and this Agreement, the Reserve
Account Agent shall be obligated under this Section 3.04 to pay, protect,
indemnify, and save harmless any indemnified party hereunder from and against
Liabilities only with respect to any gross negligence by the Reserve Account
Agent or theft committed by any director, officer, 

                                       18
<PAGE>

employee or agent of the Reserve Account Agent, as specified in Section
3.04(a)(i) and any breach by the Reserve Account Agent, as specified in Section
3.04(a)(iv) or (v).

        Section 3.05. PAYMENT PROCEDURE. If the Surety makes any payment under
the Surety Bond, the Transferor, the Seller and the Collateral Agent shall
accept, except in the case of manifest error, a voucher or other evidence of
payment as prima facie evidence that such payment was properly made. In the
event of any payment by the Surety, the Transferor, the Seller and the
Collateral Agent agree to accept a voucher or other evidence of payment complete
on its face as prima facie evidence of the propriety thereof and the liability
therefor of the Surety except in the case of manifest error. All payments to be
made to the Surety under this Agreement shall be made to the Surety in lawful
currency of the United States of America in immediately available funds at the
notice address for the Surety as specified in Section 6.02 hereof on the date
when due. Payments to be made to the Surety under this Agreement shall bear
interest payable to the extent provided in this Agreement at the Late Payment
Rate from the date when due to the date paid.

        Section 3.06. SUBROGATION. Upon any payment by the Surety pursuant to
the Surety Bond, the Surety shall be fully subrogated to the rights of the
Insured Party (as defined in the Surety Bond) to the extent of such payment,
pursuant to the priority set forth in Section 5.1 of the Security Agreement.
Each of the Transferor, the Seller, the Collateral Agent, and the Reserve
Account Agent acknowledges such subrogation and, further, agrees to execute such
instruments prepared by the Surety and to take such reasonable actions as, in
the sole judgment of the Surety, are necessary to evidence such subrogation and
to perfect the rights of the Surety to receive any moneys paid or payable under
the Security Agreement.

        Section 3.07. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. (a) In
accordance with Section 5.1(a)(vi) of the Security Agreement, the Surety shall
be entitled to reimbursement for any payment made by the Surety under the Surety
Bond, which reimbursement shall be due and payable on the date that any amount
is to be paid pursuant to a Notice or a Remittance Date Notice (each as defined
in the Surety Bond), in an amount equal to the amount to be so paid and all
amounts previously paid that remain unreimbursed, together with interest on any
and all amounts remaining unreimbursed (to the extent permitted by law, if in
respect of any unreimbursed amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment), at a
rate of interest equal to the Late Payment Rate.

        (b) The Seller agrees to pay to the Surety as follows: anything in
subsection 3.07(a) hereof to the contrary notwithstanding, the Surety shall be
entitled to reimbursement from the Seller (i) for payments made under the Surety
Bond arising as a result of the Transferor's failure to repurchase any
Receivable required to be repurchased pursuant to Section 3.1 of the Security
Agreement, or Section 3.02 of the Servicing Agreement, or the Seller's failure
to repurchase any Receivable required to be repurchased pursuant to Section 6.2
of the Purchase Agreement and (ii) for payments made under the Surety Bond,
arising as a result of the Servicer's failure to deposit into the Collection
Account any other amount required to be so deposited pursuant to the Security
Agreement, together with interest on any and all amounts remaining unreimbursed
(to the extent permitted by law, if in respect to any unreimbursed amounts
representing interest) from

                                       19
<PAGE>

the date such amounts became due until paid in full (after as well as before
judgment), at a rate of interest equal to the Late Payment Rate.

        (c) The Seller agrees to pay to the Surety as follows: any and all
charges, fees, costs and expenses that the Surety may reasonably pay or incur,
including, but not limited to, reasonable attorneys' and accountants' fees and
expenses, in connection with (i) any accounts established to facilitate payments
under the Surety Bond to the extent the Surety has not been immediately
reimbursed on the date that any amount is paid by the Surety under the Surety
Bond, (ii) the enforcement, defense or preservation of any rights in respect of
any of the Transaction Documents, including defending, monitoring or
participating in any litigation or proceeding (including any insolvency or
bankruptcy proceeding in respect of any Transaction participant or any affiliate
thereof) relating to any of the Transaction Documents, any party to any of the
Transaction Documents, in its capacity as such a party, or the Transaction, or
(iii) any amendment, waiver or other action with respect to, or related to, any
Transaction Document, whether or not executed or completed, and the Surety
reserves the right to charge a reasonable fee as a condition to executing any
waiver or consent proposed in respect of any of the Transaction Documents.

        (d) The Reserve Account Agent agrees to pay the Surety as follows: any
and all charges, fees, costs and expenses that the Surety may reasonably pay or
incur, including, but not limited to, reasonable attorneys' fees and expenses,
in connection with the Reserve Account Agent's failure to perform in any respect
any of its obligations, covenants or agreements contained in the Security
Agreement and in this Agreement.

        (e) The Seller and the Reserve Account Agent, as the case may be, and in
each case as to matters concerning itself, agree to pay to the Surety as
follows: with respect to the Seller, interest on any and all amounts described
in subclauses (b), (c), (f) and (g) and with respect to the Reserve Account
Agent, interest on any and all amounts described in subclause (d) of this
Section 3.07 from the date payable or paid by such party until payment thereof
in full, payable to the Surety at the Late Payment Rate per annum.

        (f) The Collateral Agent, the Seller and the Transferor agree to pay to
the Surety as follows: any payments made by the Surety on behalf of, or advanced
to, the Collateral Agent the Seller or the Transferor, as the case may be,
consisting of any amounts payable by the Collateral Agent, the Seller or the
Transferor pursuant to the Transaction Documents.

        (g) Following termination of the Security Agreement pursuant to Section
6.1 thereof, the Seller agrees to reimburse the Surety for any Insured Payments
required to be made pursuant to the Surety Bond subsequent to the date of such
termination.

        Section 3.08. ASSIGNMENT BY TRANSFEROR. The Transferor hereby assigns to
the Surety all of its rights in and to any indemnification provided to the
Transferor by the Servicer under the Servicing Agreement, including, but not
limited to, the indemnification rights of the Transferor pursuant to Sections
3.07 and 7.02 of the Servicing Agreement.

                                   ARTICLE IV

                                       20
<PAGE>

                               FURTHER AGREEMENTS

        Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall
take effect on the Date of Issuance and shall remain in effect until such time
as the Surety is no longer subject to a claim under the Surety Bond and all
amounts payable by the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent hereunder or under any other Transaction Document have
been paid in full and any preference period applicable to any such payment has
expired and all other obligations of the Transferor, the Seller, the Collateral
Agent or the Reserve Account Agent hereunder or under any other Transaction
Document have been performed in full.

        Section 4.02. WAIVER OF RIGHTS; FURTHER ASSURANCES AND CORRECTIVE
INSTRUMENTS. (a) Excepting at such times as a Surety Insolvency or a Surety
Default shall exist or shall have occurred and be continuing, none of the
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent shall
grant any waiver of rights under any of the Transaction Documents (except with
respect to the Originator Agreements) to which any of them is a party without
the prior written consent of the Surety, and any amendment or supplement to the
Transaction Documents without the written consent of the Surety shall be null
and void and of no force or effect, unless otherwise expressly provided under
the terms of the related Transaction Document.

        (b) Each of the Transferor, the Collateral Agent, the Reserve Account
Agent and the Seller agrees that it will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as the Surety may
reasonably request and as may be reasonably required in the Surety's judgment to
effectuate the intention of or facilitate the performance of this Agreement.

        Section 4.03. OBLIGATIONS ABSOLUTE. The obligations of the Transferor,
the Collateral Agent, the Reserve Account Agent and the Seller hereunder shall
be absolute and unconditional, and shall not be subject to, and the Transferor,
the Seller, the Collateral Agent, and the Reserve Account Agent hereby waive any
of their rights of, abatement, diminution, postponement or deduction, or to any
defense other than payment, or to any right of setoff or recoupment arising out
of any breach under any of the Transaction Documents, by any party thereto or
any beneficiary thereof, or out of any obligation at any time owing to the
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent.
Nothing herein shall be construed as prohibiting the Transferor, the Seller, the
Collateral Agent or the Reserve Account Agent from pursuing any rights or
remedies they may have against any other person or entity in a separate legal
proceeding. The obligations of the Transferor, the Seller, the Collateral Agent
and the Reserve Account Agent are absolute and unconditional and will be paid or
performed strictly in accordance with this Agreement.

        Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. (a) This
Agreement shall be a continuing obligation of the Transferor, the Seller, the
Collateral Agent and the Reserve Account Agent and shall (i) be binding upon the
Transferor, the Seller, the Collateral Agent and the Reserve Account Agent and
their respective successors and assigns and (ii) inure to the benefit of and be
enforceable by the Surety and its successors, transferees and assigns. None of
the Transferor, the Seller, the Collateral Agent or the Reserve Account Agent
may assign this 

                                       21
<PAGE>

Agreement, or delegate any of its duties specifically set forth herein, without
the prior written consent of the Surety which consent shall not be unreasonably
withheld.

        (b) The Surety shall have the right to give participations in its rights
under this Agreement and to enter into contracts of reinsurance with respect to
the Surety Bond and each such participant or reinsurer shall be entitled to the
benefit of any representation, warranty, covenant and obligation of the
Transferor, the Seller, the Collateral Agent and the Reserve Account Agent
hereunder as if such participant or Surety was a party hereto; provided that no
such grant of participation shall operate to relieve the Surety of liability on
the Surety Bond.

        (c) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any person, other than the Surety, against the
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent, and
all the terms, covenants, conditions, promises and agreements contained herein
shall be for the sole and exclusive benefit of the parties hereto and their
successors.

                                    ARTICLE V

                               DEFAULTS; REMEDIES

        Section 5.01. DEFAULTS. The occurrence of any of the following events
shall constitute an Event of Default:

               (a) Any representation or warranty made by the Transferor, the
        Seller, the Collateral Agent or the Reserve Account Agent (i) hereunder
        which, if capable of being cured, is not cured within 15 days after
        notice thereof is given to the Transferor, the Seller, the Collateral
        Agent or the Reserve Account Agent or (ii) under the Transaction
        Documents, or in any certificate furnished hereunder or under the
        Transaction Documents, which is not cured within the applicable cure
        period set forth in the related Transaction Document shall prove to be
        untrue or incomplete in any material respect;

               (b) (i) The Transferor, the Seller, the Reserve Account Agent or
        the Collateral Agent shall fail to pay when due any amount payable by
        the Transferor, the Seller, the Reserve Account Agent or the Collateral
        Agent hereunder or (ii) a legislative body has enacted any law that
        declares or a court of competent jurisdiction shall find or rule that
        any of the Transaction Documents to which the related Person is a party
        are not valid and binding on the Transferor, the Seller, the Collateral
        Agent or the Reserve Account Agent;

               (c) The occurrence and continuance of a Servicer Event of Default
        under the Servicing Agreement (as defined therein) or a Termination
        Event, a Wind-Down Event or Amortization Event under the Security
        Agreement, which is not cured within the applicable cure period set
        forth in the related Transaction Document (except with respect to a
        Termination Event);

               (d) Any failure on the part of the Transferor, the Seller, the
        Collateral Agent or the Reserve Account Agent duly to observe or perform
        in any material respect any other of the covenants or agreements on the
        part of the Transferor, the Seller, the Collateral 

                                       22
<PAGE>

        Agent or the Reserve Account Agent contained in this Agreement which
        continues unremedied for 30 days, or in any other Transaction Document
        which is not cured within the applicable cure period set forth in the
        related Transaction Document after the date on which written notice of
        such failure, requiring the same to be remedied, shall have been given
        to the Transferor, the Seller, the Collateral Agent or the Reserve
        Account Agent, as the case may be, by the Surety or by the Reserve
        Account Agent or the Collateral Agent (with a copy to the Surety);

               (e) Any material party thereto shall breach any material
        representation or warranty or fail to observe any material covenant or
        agreement contained in any Transaction Document (except for the
        obligations described under paragraph (a) or (c) above), and such
        failure shall continue for a period of 30 days after written notice
        given to the Transferor and, if applicable, such other party; provided
        that, if such failure shall be of a nature that it cannot be cured
        within 30 days, such failure shall not constitute an Event of Default
        hereunder if within such 30-day period the Transferor or such other
        party shall have given notice to the Surety of corrective action it
        proposes to take, which corrective action is agreed in writing by the
        Surety to be satisfactory and the Transferor or such other party shall
        thereafter pursue such corrective action diligently until such default
        is cured;

               (f) A decree or order of a court or agency or supervisory
        authority having jurisdiction in the premises in an involuntary case
        under any present or future federal or state bankruptcy, insolvency or
        similar law or the appointment of a conservator or receiver or
        liquidator or other similar official in any insolvency, readjustment of
        debt, marshaling of assets and liabilities or similar proceedings, or
        for the winding-up or liquidation of its affairs, shall have been
        entered against the Transferor, the Seller, the Collateral Agent or the
        Reserve Account Agent and such decree or order shall have remained in
        force undischarged or unstayed for a period of 60 consecutive days;

               (g) The Transferor, the Seller, the Collateral Agent or the
        Reserve Account Agent shall consent to the appointment of a conservator
        or receiver or liquidator or other similar official in any insolvency,
        readjustment of debt, marshaling of assets and liabilities or similar
        proceedings of or relating to the Transferor, the Seller, the Collateral
        Agent or the Reserve Account Agent or of or relating to all or
        substantially all of the property of any of them; or

               (h) The Transferor, the Seller, the Collateral Agent or the
        Reserve Account Agent shall admit in writing its inability to pay its
        debts generally as they become due, file a petition to take advantage of
        or otherwise voluntarily commence a case or proceeding under any
        applicable bankruptcy, insolvency, reorganization or other similar
        statute, make an assignment for the benefit of its creditors or
        voluntarily suspend payment of its obligations.

        Section 5.02. REMEDIES; NO REMEDY EXCLUSIVE. (a) Upon the occurrence of
an Event of Default, the Surety may exercise any one or more of the rights and
remedies set forth below against the party in default:

                                       23
<PAGE>

               (i) declare all indebtedness of every type or description owed by
        such party to the Surety with respect to the transactions contemplated
        by the Transaction Documents to be immediately due and payable, and the
        same shall thereupon be immediately due and payable;

               (ii) exercise any rights and remedies under any of the
        Transaction Documents in accordance with the terms of such Transaction
        Document; or

               (iii) take whatever action at law or in equity as may appear
        necessary or desirable in its judgment to collect the amounts then due
        and thereafter to become due under any of the Transaction Documents or
        to enforce performance and observance of any obligation, agreement or
        covenant of the Transferor, the Seller, the Collateral Agent or the
        Reserve Account Agent, as the case may be, under any of the Transaction
        Documents.

        (b) Unless otherwise expressly provided, no remedy herein conferred upon
or reserved to the Surety is intended to be exclusive of any other available
remedy, but each remedy shall be cumulative and shall be in addition to other
remedies given under any of the Transaction Documents or existing at law or in
equity. No delay or omission to exercise any right or power accruing under any
of the Transaction Documents upon the happening of any event set forth in
Section 5.01 hereof shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle the Surety
to exercise any remedy reserved to the Surety in this Article, it shall not be
necessary to give any notice, other than such notice as may be required in this
Article.

        Section 5.03. WAIVERS. (a) No failure by the Surety to exercise, and no
delay by the Surety in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by the Surety of any right hereunder shall not preclude
the exercise of any other right, and the remedies provided herein to the Surety
are declared in every case to be cumulative and not exclusive of any remedies
provided by law or equity.

        (b) The Surety shall have the right, to be exercised in its complete
discretion, to waive any Event of Default hereunder, by a writing setting forth
the terms, conditions and extent of such waiver signed by the Surety and
delivered to the Transferor, the Seller, the Collateral Agent, and the Reserve
Account Agent. Unless such writing expressly provides to the contrary, any
waiver so granted shall extend only to the specific event or occurrence which
gave rise to the Event of Default so waived and not to any other similar event
or occurrence which occurs subsequent to the date of such waiver.

        Section 5.04. NO INSOLVENCY PROCEEDINGS. So long as this Agreement is in
effect, no party hereto will file any involuntary petition or otherwise
institute any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law against the Transferor; provided, however, the Surety may take whatever
action it deems necessary to realize on the Receivables to the extent of any
payments under the Surety Bond.

                                       24
<PAGE>

                                   ARTICLE VI

                                  MISCELLANEOUS

        Section 6.01. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may
be amended, changed, modified, altered or terminated only by written instrument
or written instruments signed by the parties hereto. The Seller agrees to cause
the Transferor to provide prior written notification to both Moody's and
Standard & Poor's of any amendment to this Agreement.

        Section 6.02. NOTICES. All demands, notices and other communications to
be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
or telexed or telecopied to the recipient as follows:

        To the Surety:              MBIA Insurance Corporation
                                    113 King Street
                                    Armonk, NY  10504
                                    Attention:  Insured Portfolio Management-SF
                                    Telecopy No.:  (914) 765-3810
                                    Confirmation:  (914) 765-3781

        To the Seller:              First Investors Financial Services
                                        Group, Inc.
                                    Suite 710
                                    675 Bering Drive
                                    Houston, TX  77057
                                    Attention:  Tommy A. Moore, Jr.
                                    Telecopy No.:  (713) 977-0657
                                    Confirmation:  (713) 977-2600

        To the Collateral Agent:    Texas Commerce Bank National Association
                                    Corporate Trust Department
                                    601 Travis Street
                                    8th Floor
                                    Houston, TX  77002
                                    Attention:  Global Trust Services/First 
                                                Investors Auto Receivables 
                                                Corporation
                                    Telecopy No.: (713) 216-4880
                                    Confirmation: (713) 216-4181

                                       25
<PAGE>

        To the Reserve
        Account Agent:              NationsBank, N.A.
                                    NationsBank Corporate Center
                                    10th Floor
                                    100 N. Tryon Street
                                    Charlotte, NC  28255
                                    Attention:  Michelle Heath
                                    Telecopy No.:  (704) 388-9169
                                    Confirmation:  (704) 386-7922

        To the Transferor:          First Investors Auto Receivables Corporation
                                    Suite 710
                                    675 Bering Drive
                                    Houston, TX  77057
                                    Attention:  Tommy A. Moore, Jr.
                                    Telecopy No.:  (713) 977-0657
                                    Confirmation:  (713) 977-2600

        A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon delivery, except when telexed
or telecopied, in which case, effective upon telex or telecopy against receipt
of answerback or written confirmation.

        An affidavit by any Person representing or acting on behalf of any party
hereto, as to such mailing, having the registry receipt attached, shall be
conclusive evidence of the mailing of such demand, notice or communication.

        Section 6.03. SEVERABILITY. In the event any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
the parties hereto agree that such holding shall not invalidate or render
unenforceable any other provision hereof. The parties hereto further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
the Surety hereunder is unavailable or unenforceable shall not affect in any way
the ability of the Surety to pursue any other remedy available to it.

        Section 6.04. GOVERNING LAW. This Agreement shall be construed, and the
obligations, rights and remedies of the parties hereunder shall be determined,
in accordance with the laws of the State of New York.

        Section 6.05. CONSENT TO JURISDICTION AND VENUE, ETC. The Transferor,
the Seller, the Collateral Agent and the Reserve Account Agent each irrevocably
(a) agrees that any suit, action or other legal proceeding arising out of or
relating to this Agreement, the Security Agreement or any of the other
Transaction Documents may be brought in a court of record in the State of New
York or in the Courts of the United States of America located in such state, (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which they may have to the laying of
venue of any such suit, action or proceeding in any of such courts and any claim
that any such suit, action or proceeding has been brought in an

                                       26
<PAGE>

inconvenient forum. The Transferor, the Seller and the Collateral Agent each
hereby irrevocably appoints CT Corporation System, Suite 1301, 116 John Street,
New York, New York 10038, as its agent to receive on behalf of the Transferor,
the Seller and the Collateral Agent, as the case may be, and their respective
properties service of copies of the summons and complaint and other process
which may be served in any such suit, action or proceeding (the "Process
Agent"). Such service may be made by mailing or delivering a copy of such
process to the Transferor, the Seller or the Collateral Agent, as the case may
be, in care of the Process Agent at the applicable address above, and the
Transferor, the Seller and the Collateral Agent each hereby irrevocably
authorizes and directs the Process Agent to accept such service on their behalf.
The Reserve Account Agent hereby irrevocably consents to the service of any and
all process in any such suit, action or proceeding described in clause (a) above
by the mailing of copies of such process to its New York office located at 767
Fifth Avenue, New York, NY 10153, with a copy to the Reserve Account Agent at
its address provided in Section 6.02 hereof. The Surety agrees to mail to the
Transferor, the Seller or the Collateral Agent as the case may be, at its
address provided in Section 6.02 hereof a copy of any summons, complaint or
other process mailed or delivered by it to the Process Agent. As an alternative
method of service, the Transferor, the Seller and the Collateral Agent each also
irrevocably consents to the service of any and all process in any such action or
proceeding described in clause (a) above by the mailing of copies of such
process to the Transferor, the Seller and the Collateral Agent, as the case may
be, at its address provided in Section 6.02 hereof. The Transferor, the Seller,
the Collateral Agent and the Reserve Account Agent each agrees that a final,
nonappealable judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by execution on the
judgment or in any other manner provided by law. All mailings under this Section
6.05 shall be by certified mail, return receipt requested.

        Nothing in this Section 6.05 shall affect the right of the Surety to
serve legal process in any other manner permitted by law or affect the right of
the Surety to bring any suit, action or proceeding against the Transferor, the
Seller, the Collateral Agent or the Reserve Account Agent or their respective
property in the courts of any other jurisdiction.

        Section 6.06. CONSENT OF SURETY. In the event that the Surety's consent
is required under the terms hereof or any term of any other Transaction
Document, it is understood and agreed that the determination whether to grant or
withhold such consent shall be made solely by the Surety in its absolute
discretion. The Surety hereby agrees that it will respond to any request for
consent in a timely manner, taking into consideration the business of the
Transferor, the Seller, the Collateral Agent and the Reserve Account Agent.

        Section 6.07. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

        Section 6.08. RECITALS. All of the recitals hereinabove set forth are
incorporated in this Agreement by reference.

        Section 6.09. HEADINGS. The headings of sections contained in this
Agreement are provided for convenience only. They form no part of this Agreement
and shall not affect its 

                                       27
<PAGE>

construction or interpretation. All references to sections or subsections of
this Agreement refer to the corresponding sections or subsections of this
Agreement.

                                       28
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all
as of the day and year first above mentioned.

                                            MBIA INSURANCE CORPORATION


                                            By


                                            FIRST INVESTORS AUTO RECEIVABLES
                                            CORPORATION, as Transferor

                                            By /s/ TOMMY A. MOORE JR.
                                                   Tommy A. Moore Jr.


                                            FIRST INVESTORS FINANCIAL SERVICES,
                                            INC., as Seller

                                            By /s/ TOMMY A. MOORE JR.
                                                   Tommy A. Moore Jr.


                                            TEXAS COMMERCE BANK NATIONAL
                                            ASSOCIATION, as Collateral Agent

                                            By


                                            NATIONSBANK, N.A., as Reserve 
                                            Account Agent

                                            By /s/ MICHELLE HEATH
                                                   Michelle Heath

                                       29