EXECUTION COPY




                              COINSURANCE AGREEMENT

                                 by and between

                  FIDELITY AND GUARANTY LIFE INSURANCE COMPANY

                                       and

                         KEYPORT LIFE INSURANCE COMPANY

                            Dated as of July 26, 1996


                                TABLE OF CONTENTS
                                                             Page

ARTICLE I    DEFINITIONS . . . . . . . . . . . . . . . . . .   1

ARTICLE II   REINSURANCE COVERAGE. . . . . . . . . . . . . .   7

ARTICLE III  GENERAL PROVISIONS. . . . . . . . . . . . . . .   8

ARTICLE IV   REINSURANCE PREMIUMS; CEDING COMMISSION . . . .  13

ARTICLE V    RESERVES. . . . . . . . . . . . . . . . . . . .  15

ARTICLE VI   EXPENSE ALLOWANCE . . . . . . . . . . . . . . .  15

ARTICLE VII  DEATH BENEFITS, ANNUITY PAYMENTS AND OTHER
             PAYMENTS. . . . . . . . . . . . . . . . . . . .  16

ARTICLE VIII ACCOUNTING AND SETTLEMENT . . . . . . . . . . .  19

ARTICLE IX   DURATION, RECAPTURE AND TERMINATION . . . . . .  22

ARTICLE X    INSOLVENCY. . . . . . . . . . . . . . . . . . .  25

ARTICLE XI   ARBITRATION . . . . . . . . . . . . . . . . . .  26

ARTICLE XII  SECURITY. . . . . . . . . . . . . . . . . . . .  28

ARTICLE XIII REPRESENTATIONS, WARRANTIES AND COVENANTS
             OF THE COMPANY. . . . . . . . . . . . . . . . .  33

ARTICLE XIV  REPRESENTATIONS, WARRANTIES AND COVENANTS
             OF THE REINSURER. . . . . . . . . . . . . . . .  36

ARTICLE XV   CONDITIONS TO CLOSING . . . . . . . . . . . . .  39

ARTICLE XVI  MISCELLANEOUS PROVISIONS. . . . . . . . . . . .  41

             SCHEDULES

SCHEDULE A - REINSURED SPDAs

SCHEDULE B - QUARTERLY PERIOD REINSURANCE REPORTS

SCHEDULE C - ANNUAL REINSURANCE REPORTS

SCHEDULE D - POLICYHOLDER SERVICES TO BE PROVIDED

SCHEDULE E - CONSERVATION AND COMMISSION PAYMENT SERVICES TO BE
             PROVIDED AND ASSOCIATED FEES

SCHEDULE F - LIST OF AGENCY AND DISTRIBUTION AGREEMENTS

SCHEDULE G - CONSENTS AND APPROVALS REQUIRED BY THE COMPANY

SCHEDULE H - CONSENTS AND APPROVALS REQUIRED BY THE REINSURER

SCHEDULE I - FORM OF OPINION OF SENIOR VICE PRESIDENT AND
             GENERAL COUNSEL FOR THE REINSURER

SCHEDULE J - JOINT ELECTION UNDER IRC REGULATION 1.848-2(g)(8)


                              COINSURANCE AGREEMENT

          THIS COINSURANCE AGREEMENT (this "Agreement"), dated as of July 26,
1996, is made and entered into by and between FIDELITY AND GUARANTY LIFE
INSURANCE COMPANY, a life insurance company organized under the laws of the
State of Maryland (the "Company"), and KEYPORT LIFE INSURANCE COMPANY, a life
insurance company organized under the laws of the State of Rhode Island (the
"Reinsurer").

          WHEREAS, the Company has agreed to cede to the Reinsurer, on a
coinsurance basis, the Reinsured SPDAs (as defined below), and the Reinsurer has
agreed to reinsure all liabilities and obligations of the Company arising under
the Reinsured SPDAs, subject to the exclusions set forth in Section 2.03 below.

          NOW, THEREFORE, in consideration of the mutual covenants and promises
and upon the terms and conditions set forth herein, the parties hereto agree as
follows:


                                    ARTICLE I

                                   DEFINITIONS

          As used in this Agreement, the following terms shall have the
following meanings (definitions are applicable to both the singular and the
plural forms of each term defined in this Article):

"Account Values" means the account value, as defined in the Reinsured SPDAs,
which is not reduced for surrender charges.

"Accounting Period" means a calendar quarter, except that the initial Accounting
Period shall be the period commencing with the Effective Date and ending with
the last day of the then current calendar quarter, and the final Accounting
Period shall be the period commencing with the first day of the calendar quarter
that includes the Termination Date and ending on the Termination Date.

"Act" shall have the meaning specified in Section 13.07(b).

"Annual Report" means the report required to be prepared in accordance with
Section 8.03 and providing the data as shown on Schedule C.

"Benefits" shall have the meaning specified in Section 7.01.

"Blended Rate" means the percentage rate equal to the sum of (i) two-thirds of
the one year Treasury Note rate as of the close of business on the Business Day
immediately preceding the Closing Date plus (ii) one-third of the three year
Treasury Note rate as of the close of business on the Business Day immediately
preceding the Closing Date.

"Business Day" means any day that is not a Saturday or a Sunday or a day on
which banks in the State of New York are authorized or required by law to close.

"Cash Equivalents" means, as of any particular date, money market funds,
marketable obligations issued or guaranteed by the United States Government,
certificates of deposit, bankers' acceptances and other similar liquid
investments, in each case, with a maturity date of not more than 90 days from
the date on which any such instrument is transferred pursuant to the terms of
this Agreement, the market value of which on the date of transfer will be
counted as equivalent to cash for purposes of satisfying the aggregate amount of
cash and Cash Equivalents required to be transferred under this Agreement.

"Ceding Commission" shall have the meaning specified in Section 4.02.

"Closing" means the closing of the transactions under this Agreement on the
Closing Date.

"Closing Date" means the date which is three Business Days following the receipt
of all required governmental and regulatory consents and approvals, including
the expiration of any applicable waiting periods, in connection with the
reinsurance of the Reinsured SPDAs, which date shall not be earlier than August
1, 1996 or later than October 31, 1996.

"Commissions and Expenses" means (i) all sales commissions, production bonuses
or other payments in cash or kind payable to duly licensed insurance agents or
other persons with respect to any Reinsured SPDAs, whether issued by the Company
prior to the Effective Date or issued by the Company, with the consent of the
Reinsurer, on or subsequent to the Effective Date, (ii) an administration
services fee of $2.00 per month per Reinsured SPDA in force at the beginning of
each month during the term of this Agreement for providing the policyholder
services listed on Schedule D with respect to the Reinsured SPDAs, (iii) the
fees listed on Schedule E for providing the conservation and commission payment
services included therein, and (iv) all direct expenses incurred in connection
with the Reinsured SPDAs, including, but not limited to (a) guaranty fund
assessments relating to premiums written on or subsequent to the Effective Date,
(b) premium or other taxes and (c) any charges and assessments imposed directly
on or with respect to the Reinsured SPDAs.

"Daily Interest Amount" shall have the meaning specified in Section 7.01(b).

"Effective Date" shall have the meaning specified in Section 2.01.

"Endorsements" means any endorsements to the SPDAs in force on the Effective
Date and issued pursuant to an offer from the Company which has been accepted by
an owner of a Reinsured SPDA providing for a new interest rate guarantee period
and the reimposition of surrender charges upon termination of the initial
six-year surrender charge period.

"Extracontractual Liabilities" means all liabilities for consequential,
exemplary, punitive or similar damages which relate to or arise in connection
with any alleged or actual act, error or omission by the Company, its directors,
officers, employees, agents or any of the Company's affiliates, whether
intentional or otherwise, or from any alleged or actual reckless conduct or bad
faith by the Company, its directors, officers, employees, agents or any of the
Company's affiliates, in connection with the handling of any claim under any of
the Reinsured SPDAs or in connection with the issuance, delivery, cancellation
or administration of any of the Reinsured SPDAs.

"First Commission Rate" means the percentage rate equal to the sum of (i) 2.6
percent plus (ii) the product of (a) 1.4 and (b) the difference between (1) the
Blended Rate and (2) 6.06 percent.

"Governmental Authority" means any foreign, federal, state, local or other
court, arbitrator, administrative agency, commission or division, insurance or
securities regulatory or self-regulatory body or securities or commodities
exchange.

"Initial Reinsurance Premium" shall have the meaning specified in Section 4.01.

"Investment Assets" means the assets that are transferred to the Reinsurer in
connection with the Initial Reinsurance Premium.

"NAIC" means the National Association of Insurance Commissioners.

"Qualified Financial Institution" shall have the meaning specified in Section
09.30.97.08 of the Code of Maryland Regulations.

"Quarterly Report" means the report required to be prepared in accordance with
Section 8.02 and providing the data as shown on Schedule B.

"Quarterly Settlement" means the net amount due and payable to either party with
respect to any Accounting Period.

"Recapture Event" shall have the meaning specified in Section 9.03.

"Reinsured SPDAs" means (i) the SPDAs, including any Endorsements thereto, and
(ii) any single premium deferred annuity contracts replacing SPDAs and any
endorsements to SPDAs issued by the Company on or subsequent to the Effective
Date with the consent of the Reinsurer. Reinsured SPDAs shall not include
Retained Asset Account Funds in existence on the Effective Date.

"Reserves" means the statutory reserves established by the Company with respect
to the liabilities arising under the Reinsured SPDAs, including, but not limited
to, excess interest reserves, claim reserves and other statutory liabilities
required to be reported by the Company on its NAIC Annual Statement Blank filed
with the State of Maryland.

"Retained Asset Account Funds" means death benefit funds on deposit with the
Company but not yet paid out or annuitized under a settlement option at the
request of the beneficiary or the estate, with regard to the Reinsured SPDAs.

"Second Commission Rate" means the percentage rate equal to the sum of (i) 1.8
percent plus (ii) the product of (a) 1.4 and (b) the difference between (1) the
Blended Rate and (2) 6.06 percent.

"Short Term Rate" means the sum of (i) the Blended Rate and (ii) 1.0 percent.

"SPDAs" means the single premium deferred annuity contracts in force on the
Effective Date and issued by the Company on the policy forms listed on Schedule
A attached hereto.

"Terminal Accounting and Settlement" shall have the meaning specified in Section
9.07.

"Termination Date" means the date on which any complete termination of this
Agreement, as provided in Article IX, is effective, either as a result of an
event described in Article IX, or as designated by the terminating party or
parties.

"Termination Report" means the report required to be prepared in accordance with
Section 9.08 and providing the calculations for the Terminal Accounting and
Settlement.

"Third Commission Rate" means the percentage rate equal to the sum of (i) 3.0
percent plus (ii) the product of (a) 1.4 and (b) the difference between (1) the
Blended Rate and (2) 6.06 percent.

"Trust" or "Trust Account" shall mean the Trust or Trust Account established
pursuant to Article XII.

                                   ARTICLE II

                              REINSURANCE COVERAGE

     2.01. Coverage. Upon the terms and subject to the conditions and other
provisions of this Agreement and any required governmental and regulatory
consents and approvals, effective as of 12:01 a.m., Eastern Time, on the Closing
Date or, if the Closing Date is not the first day of the month, then such date
to be the first day of the month in which the Closing Date occurs (the
"Effective Date"), the Company hereby cedes to the Reinsurer, and the Reinsurer
hereby assumes, on a coinsurance basis, all liabilities and obligations of the
Company arising under the Reinsured SPDAs, subject to the exclusions set forth
in Section 2.03. The liability of the Reinsurer with respect to the Reinsured
SPDAs shall begin on the Effective Date.

     2.02.     Conditions.  The reinsurance hereunder is subject to the same
limitations, terms and conditions as the Reinsured SPDAs, except as otherwise
provided in this Agreement.

     2.03.     Exclusions.  This Agreement does not apply to and specifically
excludes from coverage hereunder:

               (a)  any insurance policy or annuity contract issued by the
Company other than the Reinsured SPDAs; or

               (b)  any Extracontractual Liabilities.

     2.04.     Plan of Reinsurance.  This reinsurance shall be on a one hundred
percent (100%) coinsurance basis.

     2.05.     Retrocession.  The Reinsurer retains the right to retrocede all
or any portion of the risk on any Reinsured SPDA.

     2.06.     Other Reinsurance.  During the term of this Agreement, the
Company shall not, without the prior written consent of the Reinsurer, enter
into any reinsurance agreement of any type, other than this Agreement, with
respect to the Reinsured SPDAs.

                                   ARTICLE III

                               GENERAL PROVISIONS

     3.01. Administration and Expenses. The Company or its designated
administrator shall continue to perform or have performed all policyholder
services as more fully described on Schedule D and the conservation and
commission payment services with respect to the Reinsured SPDAs as more fully
described on Schedule E. The Reinsurer shall pay all administration and
accounting expenses and other expenses related to maintenance of the Reinsured
SPDAs, as part of Commissions and Expenses payable pursuant to the provisions of
Section 6.01 of this Agreement.

     3.02. Voluntary Contract Changes or Reserve Assumption Changes. The
Company, on its own initiative, shall not without the prior consent of the
Reinsurer change (i) the terms and conditions of any Reinsured SPDAs, or (ii)
the assumptions, including the statutory reserve accumulation rate assumption
and the interpretation of NAIC regulations and guidelines relating to the
calculation of statutory reserves, used by the Company to establish the Reserves
with respect to the Reinsured SPDAs. The Reinsurer shall share, according to the
percentage specified in Section 2.04 of this Agreement, in any contract changes
or Reserve changes required by any regulatory authority having jurisdiction over
the Company in the ordinary course of exercising its powers or otherwise
required by law. In the event of an increase in the Reserves directly caused by
changes in the Company's interpretation, on its own initiative, of NAIC
regulations and guidelines relating to the calculation of the Reserves, the
Company and the Reinsurer shall attempt in good faith to determine the cost of
holding the additional amount of Reserves required by such changes; provided,
however, that if the Company and the Reinsurer are unable to resolve any
disagreement with respect to such cost, then the matter shall be referred to
arbitration pursuant to the terms of Article XI, at the initiative of either
party.

     3.03.     Inspection.

     (a) Subject to reasonable advance notice to the Company, the Reinsurer or
its designated representative may inspect, at the offices of the Company or its
designated representative or wherever such records are located, any and all
books, documents or records of the Company reasonably relating to the Reinsured
SPDAs during normal business hours for such period as this Agreement is in
effect or for as long thereafter as the Company seeks performance by the
Reinsurer pursuant to the terms of this Agreement. While performing any such
inspection, the Reinsurer or its designated representative shall use its best
efforts to minimize any disruption to the Company's normal business operations.
Upon the Reinsurer's reasonable request, copies of such records shall be
furnished to the Reinsurer, at the expense of the Reinsurer. The information
obtained by the Reinsurer shall be treated as confidential material and
proprietary to the Company and shall be used by the Reinsurer only for purposes
relating to reinsurance of the Reinsured SPDAs under this Agreement. The
Reinsurer's rights under this Section shall survive termination of this
Agreement.

     (b) Subject to reasonable notice to the Reinsurer, the Company or its
designated representative may inspect, at the offices of the Reinsurer or its
designated representative or wherever such records are located, any and all
books, documents, or records of the Reinsurer reasonably relating to the
Reinsured SPDAs during normal business hours for such period as this Agreement
is in effect or for as long thereafter as Reinsurer seeks performance by the
Company pursuant to the terms of this Agreement. While performing any such
inspection, the Company or its designated representative shall use its best
efforts to minimize any disruption to the Reinsurer's normal business
operations. Upon the Company's reasonable request, copies of such records shall
be furnished to the Company, at the expense of the Company. The information
obtained by the Company shall be treated as confidential material and
proprietary to the Reinsurer and shall be used by the Company only for purposes
relating to reinsurance of the Reinsured SPDAs under this Agreement. The
Company's rights under this Section shall survive termination of this Agreement.

     3.04. Misunderstandings and Oversights. If any delay, omission, error or
failure to pay amounts due or to perform any other act required by this
Agreement is unintentional and caused by misunderstanding or oversight, the
Company and the Reinsurer will adjust the situation to what it would have been
had the misunderstanding or oversight not occurred and the reinsurance provided
hereunder shall not be invalidated. The party first discovering such
misunderstanding or oversight, or act resulting from the misunderstanding or
oversight, will notify the other party in writing promptly upon discovery
thereof, and the parties shall act to correct such misunderstanding or oversight
within twenty (20) Business Days of receipt of such notice. However, this
Section shall not be construed as a waiver by either party of its right to
enforce strictly the terms of this Agreement.

     3.05. Reinstatements. If a Reinsured SPDA that is or has been reduced,
terminated, or lapsed is reinstated while this Agreement is in force, the
reinsurance for such Reinsured SPDA shall be reinstated automatically to the
amount that would be in force if the Reinsured SPDA had not been reduced,
terminated, or lapsed. The Company will pay to the Reinsurer all amounts
received or charged by the Company in connection with the reinstatement.

     3.06. Setoff and Recoupment. Any debts or credits, matured or unmatured,
liquidated or unliquidated, regardless of when they arose or were incurred, in
favor of or against either the Company or the Reinsurer with respect to this
Agreement are deemed mutual debts or credits, as the case may be, and shall be
setoff from any amounts due to the Company or the Reinsurer hereunder, as the
case may be, and only the net balance shall be allowed or paid. This setoff
provision (to the extent permitted by law) shall not be modified or reconstrued
due to the insolvency, liquidation, rehabilitation, conservatorship, or
receivership of either party.

     3.07. Payments. All payments made pursuant to this Agreement (other than
the transfer of Investment Assets in connection with the Initial Reinsurance
Premium described in Section 4.01 of this Agreement) shall be in cash or Cash
Equivalents and shall be made in immediately available funds or assets
acceptable to the Company (at market value) as agreed by the parties. If a
transfer of assets is agreed upon, the party making the transfer shall deliver
the assets to the other party along with such deeds, bills of sale,
endorsements, assignments and other good and sufficient instruments of
conveyance and transfer reasonably acceptable to the parties as shall be
effective to vest in the party receiving the assets all of the right, title and
interest of the transferring party in and to the assets.

     3.08. Age, Sex and Other Adjustments. If the Company's liability under any
of the Reinsured SPDAs is changed because of a misstatement of age or sex or any
other material facts, the Reinsurer shall share, according to the percentage
specified in Section 2.04 of this Agreement, in any such change.

                                   ARTICLE IV

                     REINSURANCE PREMIUMS; CEDING COMMISSION

     4.01. Initial Reinsurance Premium. As consideration for the assumption by
the Reinsurer of the liabilities under this Agreement, on the Closing Date, the
Company shall transfer to the Reinsurer (i) Investment Assets with an aggregate
fair market value to the Company equal to one hundred percent (100%) of the
Reserves with respect to the Reinsured SPDAs as of the close of business on the
Business Day immediately preceding the Effective Date plus (ii) an amount equal
to the Short Term Rate per annum on such Investment Assets from the Effective
Date until the close of business on the Business Day immediately preceding the
Closing Date (the "Initial Reinsurance Premium"). The Company shall deliver to
the Reinsurer possession of the Investment Assets and such deeds, bills of sale,
endorsements, assignments and other good and sufficient instruments of
conveyance and transfer in form and substance reasonably acceptable to the
parties as shall be effective to vest in the Reinsurer all of the right, title
and interest of the Company in and to the Investment Assets. Payment of the
Initial Reinsurance Premium shall be a condition precedent of reinsurance
coverage hereunder.

     4.02.     Ceding Commission.  On the Closing Date, the Reinsurer shall pay
a ceding commission (the "Ceding Commission") to the Company in an amount equal
to the sum of:

     (i) the product of (a) the Reserves as of the close of business on the
     Business Day immediately preceding the Effective Date allocated to the
     SPDAs with sixth year anniversary dates on or prior to the date which is 45
     days prior to the Effective Date and (b) the First Commission Rate;

     (ii) the product of (a) the Reserves as of the close of business on the
     Business Day immediately preceding the Effective Date allocated to the
     SPDAs with sixth year anniversary dates subsequent to the date which is 45
     days prior to the Effective Date for which Endorsements have not been
     issued and (b) the Second Commission Rate;

     (iii) the product of (a) the Reserves as of the close of business on the
     Business Day immediately preceding the Effective Date allocated to the
     SPDAs for which Endorsements have been issued prior to the Effective Date
     and (b) the Third Commission Rate; and

     (iv) an amount equal to the Short Term Rate per annum on the sum of the
     amounts calculated pursuant to subsections (i), (ii) and (iii) above from
     the Effective Date until the close of business on the Business Day
     immediately preceding the Closing Date.

Such amount shall be paid in cash or Cash Equivalents by the Reinsurer and shall
be netted against the Initial Reinsurance Premium in accordance with Section
3.06.

                                    ARTICLE V

                                    RESERVES

     5.01. Reserves and Reserve Credits. The Reinsurer shall establish and
maintain adequate Reserves with respect to the Reinsured SPDAs as necessary to
enable the Company to take full reinsurance reserve credit contemplated by this
Agreement on its statutory balance sheet filed with the Insurance Department of
all states in which the Company files its annual statement.

                                   ARTICLE VI

                                EXPENSE ALLOWANCE

     6.01. Expense Allowance. The Reinsurer shall pay the Company, in accordance
with Section 8.01(a), an expense allowance equal to 100.14% of the Commissions
and Expenses incurred and paid by the Company during the term of this Agreement
with respect to the Reinsured SPDAs; provided, however, the Reinsurer expressly
agrees that the Company's right to receive reimbursement for guaranty fund
assessments as part of Commissions and Expenses shall survive the termination of
this Agreement.

                                   ARTICLE VII

               DEATH BENEFITS, ANNUITY PAYMENTS AND OTHER PAYMENTS

     7.01.     Death Benefits, Annuity Payments and Surrender or
Withdrawal Payments.

     (a) The Reinsurer shall reimburse the Company, in accordance with Sections
7.01(b) and 8.01(b), for an amount equal to 100.14% of the sum of all (i) death
benefits, (ii) surrender or withdrawal payments and (iii) periodic payments
under annuity settlement options elected by the owner, and paid by the Company,
with respect to Reinsured SPDAs that become due on or after the Effective Date
(such death benefits and other payments referred to in the foregoing clause (i),
(ii) and (iii) are referred to collectively as "Benefits"). The reimbursement
for Benefits shall be net of surrender charges pursuant to the terms of the
relevant Reinsured SPDAs.

     (b)  On the Closing Date, the Reinsurer shall reimburse the Company for an
amount equal to the sum of:

     (i) 100.14% of any Benefits paid by the Company in respect of Reinsured
     SPDAs from the Effective Date until the close of business on the Business
     Day immediately preceding the Closing Date; and

     (ii) an amount equal to the sum of the Daily Interest Amount for each day
     from and including the Effective Date until the close of business on the
     Business Day immediately preceding the Closing Date. For purposes of this
     Section, the Daily Interest Amount means the product of (a) the cumulative
     amount of Benefits paid as of the close of business on each day on or
     subsequent to the Effective Date and (b) the Short Term Rate per annum.

The amount calculated pursuant to this Section 7.01(b) shall be paid in cash or
Cash Equivalents by the Reinsurer and shall be netted against the Initial
Reinsurance Premium in accordance with Section 3.06.

     7.02. Liability and Payment. Unless the Reinsurer has made the election
provided in Section 7.03 to participate in the contest, compromise or litigation
of a claim, the Reinsurer will accept the decision of the Company on payment of
a claim on a Reinsured SPDA. The Reinsurer will pay claims (including expenses
incurred in connection with such claims) for Benefits (other than for the
payment of periodic annuity payments if elected by the owner or annuitant)
attributable to Reinsured SPDAs in a lump sum to the Company without regard to
the form of claim settlement payable by the Company.

     7.03. Contested Claims. The Company will provide notice to the Reinsurer of
its intention to contest, compromise, or litigate a claim (including
interpleader actions) with respect to a Reinsured SPDA. Within ten (10) Business
Days after receipt of such notice, the Reinsurer may elect to participate in
contesting a claim attributable to a Reinsured SPDA by submitting a notice of
such election to the Company. The Reinsurer shall be deemed to have elected to
not participate in such contest if it fails to make such election within ten
(10) Business Days. If the Reinsurer elects not to participate in such contest,
it may discharge its liability by payment to the Company of the lesser of the
full amount of the claim or the full amount of the Reinsured SPDA relating to
such claim. In no event shall the Reinsurer indemnify the Company for any
Extracontractual Liabilities arising with respect to any Reinsured SPDA, unless
such Extracontractual Liabilities result from an action caused, or specifically
consented to, by the Reinsurer; provided, however, that the Reinsurer's election
to participate in the contest, compromise or litigation of a claim with respect
to a Reinsured SPDA shall not automatically be deemed to be an action
specifically consented to by the Reinsurer for purposes of the immediately
preceding clause. The Company and the Reinsurer agree to cooperate in the
prosecution of any claim contest.

                                  ARTICLE VIII

                            ACCOUNTING AND SETTLEMENT

     8.01.     Amounts Due the Reinsurer or the Company.

     (a) The payments required to be made under Section 6.01 shall be paid in
cash or Cash Equivalents and shall be made monthly by wire transfer of funds to
an account designated by the Company by 11 a.m. on the second Business Day
following the end of each month with respect to the Commissions and Expenses
incurred as of the close of business on the last day of each month (or partial
month) during the term of this Agreement; provided, that the Company notifies
the Reinsurer by 2 p.m. on the first Business Day following the end of each
month of the amounts due from the Reinsurer with respect to such month.

     (b) The payments required to be made under Section 7.01 (other than the
payment on the Closing Date pursuant to Section 7.01(b)) shall be paid in cash
or Cash Equivalents and shall be made weekly by wire transfer of funds to an
account designated by the Company by 11 a.m. on each Thursday following the
Closing Date with respect to the Benefits paid as of the close of business on
the second Business Day next preceding such Thursday; provided, that the Company
notifies the Reinsurer by 2 p.m. on the Business Day prior to such Thursday of
the amounts due from the Reinsurer with respect to such week.

     (c) If amounts due to be paid by the Reinsurer to the Company pursuant to
Section 8.01(a) or 8.01(b) above cannot be determined at such dates on an exact
basis, such payments may be determined on an estimated basis, and any
adjustments subsequently required to reflect actual data shall be made on the
weekly or monthly payment date, as applicable, following the date that such
actual data is available.

     (d) Except as otherwise specifically provided herein, all other amounts due
to be paid to either the Reinsurer or the Company under this Agreement shall be
determined on a net basis, giving full effect to Section 3.06 hereof, as of the
last day of each Accounting Period. Any net amount due from the Company to the
Reinsurer shall be paid in cash or Cash Equivalents no later than the day on
which the Quarterly Report showing such net amount, as described in Section
8.02, is due. Any net amount due from the Reinsurer to the Company shall be paid
no later than ten (10) Business Days following the receipt of such Quarterly
Report from the Company. If amounts due to be paid cannot be determined at such
dates on an exact basis, such payments may be determined on an estimated basis,
and any adjustments subsequently required to reflect actual data shall be made
at the date upon which any amended report, based on actual data, is due to be
provided pursuant to Section 8.04.

     8.02. Quarterly Reports. Within ten (10) Business Days of the end of each
Accounting Period the Company shall supply the Reinsurer with a report that
shall provide the data required in Schedule B (the "Quarterly Report"), which
shall show the net amount due, if any, by the Company or the Reinsurer, as
appropriate.

     8.03. Annual Reports. Within twenty (20) Business Days after the end of
each calendar year the Company shall supply the Reinsurer with a report that
shall provide the data required in Schedule C (the "Annual Report").

     8.04. Best Efforts to Supply Actual Data. In preparing all reports required
in this Agreement, the Company and the Reinsurer shall make their best efforts
to supply the actual data. If the actual data cannot be supplied with the
appropriate report, the Company shall produce best estimates, and shall provide
amended reports based on actual data no more than twenty (20) Business Days
after such report was originally due.

     8.05. Tax Reserves. In connection with the Annual Report described in
Section 8.03, the Company shall supply the Reinsurer with information with
respect to tax reserves relating to the Reinsured SPDAs.

     8.06. Interest on Delayed Payments. Should any payment due to either the
Reinsurer or the Company be delayed, such delayed payment (including any amount
constituting a difference between an estimated and actual amount, as described
in Section 8.01, shall accrue interest for the period that payment is overdue at
an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of
1%) at which dollar deposits approximately equal in amount to the overdue
payments hereunder for a comparable interest period are offered by the principal
London office of Citibank, N.A. in immediately available funds in the London
Interbank Market at approximately 11 a.m., London time, two Business Days prior
to the commencement of such interest period; each change in such interest rate
shall be effective on the date such change is announced as effective.

                                   ARTICLE IX

                       DURATION, RECAPTURE AND TERMINATION

     9.01. Duration.  Except as otherwise provided herein, this Agreement
 shall be unlimited in duration.


     9.02. Reinsurer's Liability. The Reinsurer's liability with respect to any
Reinsured SPDA will terminate on the earliest of: (i) the date the Reinsured
SPDA is recaptured; (ii) the date the Company's liability on such Reinsured SPDA
is terminated; or (iii) the date this Agreement is terminated. In no event
should any interpretation of this Section 9.02 imply a unilateral right of the
Reinsurer to terminate this Agreement.

     9.03. Termination Due to Recapture. The Company shall have the right, on
five (5) Business Days' written notice to the Reinsurer (the "Recapture Election
Notice"), to terminate this Agreement and recapture the Reinsured SPDAs in full,
such recapture and termination to be effective as of the next Business Day
following the end of such notice period, in the event that (i) the Standard &
Poor's Corporation Claims-Paying Ability rating of the Reinsurer becomes less
than BBB- (or other equivalent rating used by Standard & Poor's Corporation) or
the Moody's Investors Service, Inc. Financial Strength rating of the Reinsurer
becomes less than Baa3 (or other equivalent rating used by Moody's Investors
Service, Inc.), or (ii) the Reinsurer files a Risk-Based Capital Report with the
Commissioner of Insurance of the State of Rhode Island (or the then current
state of domicile of the Reinsurer) which indicates that its Total Adjusted
Capital is less than 150 percent of its Company Action Level RBC (as such
capitalized terms are defined in the NAIC Life Risk-Based Capital Report
Including Overview and Instructions for Companies, dated as of December 31,
1994), or (iii) the Reinsurer fails to be duly licensed to conduct a life
insurance business or accredited to act as a reinsurer in the Company's state of
domicile or in any other state or jurisdiction where failure of the Reinsurer to
be so licensed or accredited would cause the Company to be ineligible for
reserve credit for the reinsurance ceded under this Agreement, unless the
Reinsurer provides security for its obligations under this Agreement pursuant to
the provisions of Article XII, or (iv) the Reinsurer is the subject of an
insolvency, liquidation, supervision, conservation, rehabilitation or other
similar proceeding (each a "Recapture Event"). The Reinsurer shall provide
written notice to the Company within one Business Day of the occurrence of any
Recapture Event.

     9.04. Automatic Termination. If, at the end of an Accounting Period, none
of the Reinsured SPDAs are in force, this Agreement shall automatically
terminate.

     9.05. Termination Due to Nonpayment. Either party may terminate this
Agreement if the other party fails to pay, when due, any amounts due under this
Agreement, provided that the non-delinquent party has given at least twenty (20)
Business Days prior written notice of its intent to terminate for that reason.
The delinquent party may avoid termination pursuant to this Section 9.05 by
paying all amounts that are delinquent and then due, including any interest
owing thereon pursuant to Section 8.06, on or before the Termination Date
specified in the written notice.

     9.06. Termination by Mutual Agreement. The parties may mutually agree to
terminate this Agreement at any time.

     9.07. Payments on Termination. In the event that this Agreement is
terminated pursuant to this Article IX, a net accounting and settlement as to
any balance due under this Agreement shall be undertaken by the parties to this
Agreement (the "Terminal Accounting and Settlement"). Any net payment required
under the Terminal Accounting and Settlement will become due as of the
Termination Date, and shall be paid in cash or Cash Equivalents by the Reinsurer
or the Company, as appropriate, no later than the day on which the Termination
Report described in Section 9.08 is due to be provided. Net payments required
under the Terminal Accounting and Settlement shall consist of:

          (i)   the Quarterly Settlement for the final Accounting Period,
     calculated as of the Termination Date, plus any interest due pursuant to
     Section 8.06; plus

          (ii)  the payment by the Reinsurer to the Company of an amount equal
     to the Reserves as of the day immediately prior to the Termination Date
     with respect to the Reinsured SPDAs; plus

          (iii) in the event of a termination of this Agreement by the Reinsurer
     under Section 9.05, the payment by the Company to the Reinsurer of an
     amount equal to the product of (a) a fraction, the numerator of which is
     the Reserves as of the Termination Date and the denominator of which is the
     Reserves as of the Effective Date and (b) the Ceding Commission.

     9.08. Termination Report. Within ten (10) Business Days after the
Termination Date, the Company shall supply the Reinsurer with a report that
shall show the Terminal Accounting and Settlement (the "Termination Report"). In
the event that, subsequent to the Terminal Accounting and Settlement, an
adjustment is made with respect to any amount taken into account pursuant to
Schedule B, a supplementary accounting shall take place in accordance with the
procedures set out in Sections 8.04 and 9.07. Any net amount owed to the
Reinsurer or the Company by reason of such supplemental accounting, plus any
interest due pursuant to Section 8.06, shall be paid within ten (10) Business
Days after the completion of such Termination Report or supplementary
accounting, as appropriate.

                                    ARTICLE X

                                   INSOLVENCY

     10.01. Payments by Reinsurer. In the event of insolvency, liquidation or
rehabilitation of the Company, the Reinsurer hereby agrees that, as to all
reinsurance made, ceded or otherwise becoming effective hereunder, the
reinsurance shall be payable to the Company, or to its conservator, receiver,
liquidator or statutory successor on the basis of the liability of the Company
under the Reinsured SPDAs, without diminution because of the insolvency of the
Company or because the conservator, receiver, liquidator or statutory successor
of the Company has failed to pay all or a portion of any claim.

     10.02. Claims. It is agreed that the conservator, receiver, liquidator or
statutory successor of the Company shall give written notice to the Reinsurer of
the pendency or submission of a claim under any Reinsured SPDAs within a
reasonable time after such claim is filed in the insolvency, liquidation or
rehabilitation proceeding. During the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated any defense available to the Company or
its conservator, receiver, liquidator or statutory successor. The expense thus
incurred by the Reinsurer pursuant to this Section 10.02 shall be chargeable,
subject to the approval of the court, against the Company as a part of the
expense of insolvency, liquidation or rehabilitation to the extent of a
proportionate share of the benefit which accrues to the Company solely as a
result of the defense undertaken by the Reinsurer.

     10.03. No Waiver of Defenses. Nothing in this Article X shall preclude the
Reinsurer from asserting any excuse or defense to payment of this reinsurance
other than the excuses or defenses of the insolvency of the Company and the
failure of the Company's conservator, receiver, liquidator or statutory
successor to pay all or a portion of any claim.

                                   ARTICLE XI

                                   ARBITRATION

     11.01. Appointment of Arbitrators. In the event of any disputes or
differences arising hereafter between the contracting parties with reference to
any transaction under or relating in any way to this Agreement as to which
agreement between the parties hereto cannot be reached, the same shall be
decided by arbitration. Three arbitrators will decide any dispute or difference.
The arbitrators must be disinterested officers or retired officers of life
insurance or life reinsurance companies other than the two parties to this
Agreement or their affiliates. Each of the contracting parties agrees to appoint
one of the arbitrators with the third, the "Umpire," to be chosen by the two
appointed arbitrators. In the event that either party should fail to choose an
arbitrator within twenty (20) Business Days following a written request by the
other party to do so, the requesting party may choose the second arbitrator
before entering upon arbitration. In the event that the two arbitrators shall
not be able to agree on the choice of the Umpire within twenty (20) Business
Days following their appointment, each arbitrator shall nominate five candidates
within five Business Days thereafter. Each arbitrator shall decline four of the
candidates nominated by the other arbitrator. The Umpire shall be chosen from
the two remaining candidates by drawing lots. Should the chosen Umpire decline
to serve, the candidate whose lot was not drawn shall be appointed. This process
shall continue until a candidate has agreed to serve.

     11.02. Proceedings. The parties will cooperate in good faith in the
voluntary, prompt and informal exchange of non- privileged information relevant
to the arbitration. The parties will make every effort to conclude the
information exchange process within 30 days after notice that the Umpire has
been selected. Within 14 days after the Umpire is selected, the parties will
provide to each other copies of all documents in their possession or control on
which they will or may rely in support of their position. On the request of
either party, the arbitrators will conduct a conference for the purpose of
determining additional information to be exchanged. If the arbitrators determine
that the requesting party has a reasonable need for the information and that the
request is not overly burdensome to the opposing party, the arbitrators may
order the exchange of the additional information.

     11.03. Decision. Within 60 days following the appointment of the Umpire,
each party must present its case to the arbitrators. The arbitrators shall
consider customary and standard practices in the life reinsurance business.
Within sixty (60) days after the arbitration hearing, a decision shall be
reached by a majority vote of the arbitrators. There shall be no appeal from
their written decision, which shall be final and binding upon the parties.
Judgment may be entered on the decision of the arbitrators by any court having
jurisdiction.

     11.04. Expenses of Arbitration. Each party shall bear the expense of its
own arbitrator (whether selected by that party, or by the other party pursuant
to the procedures set out in Section 11.01) and related outside attorneys' fees,
and shall jointly and equally bear with the other party the expenses of the
third arbitrator.

     11.05. Applicable Law. Any arbitration instituted pursuant to this Article
shall be held in the City of Baltimore, State of Maryland, and the laws of the
State of Maryland and, to the extent applicable, the Federal Arbitration Act
shall govern the interpretation and application of this Agreement.

     11.06 Survival of Article. This Article shall survive termination of this
Agreement.

     11.07. Enforcement. The parties intend this Article to be enforceable in
accordance with the Federal Arbitration Act (9 U.S.C. Section 1 et seq., as
amended). In the event that either party refuses to submit to arbitration as
required by this Article, the other party may request that a United States
District Court compel arbitration in accordance with the Federal Arbitration
Act. Both parties consent to the jurisdiction of such a court to enforce this
Article and to confirm and enforce the performance of an award of the
arbitrators.

                                   ARTICLE XII

                                    SECURITY

     12.01. Security. If required in order to give the Company full reinsurance
reserve credit, the Reinsurer shall comply with any necessary financial security
requirements imposed by insurance laws and regulations of the State of Maryland
and of any other state or jurisdiction with respect to which the Company is
ineligible for reserve credit for the reinsurance ceded under this Agreement.

     12.02. Establishment of Trust. If credit for reinsurance, as required under
this Article XII, is not otherwise available to the Company with respect to the
reinsurance hereunder, the Reinsurer shall enter into a trust agreement (the
"Trust Agreement") and establish a trust account for the benefit of the Company
with respect to the Reserves on or before the date of filing of the first
financial statement of the Company for which such credit for reinsurance is
required, with a bank or other financial institution acceptable to the Company,
which shall be a Qualified Financial Institution.

     12.03. Purpose of Trust. The Reinsurer agrees to deposit, on or before the
date set forth in Section 12.02, and maintain in said Trust Account assets to be
held in trust by the Trustee for the benefit of the Company as security for the
payment of the Reinsurer's obligations to the Company under this Agreement. Such
assets shall initially be in an amount that is equal to or exceeds the Reserves,
with respect to the Reinsured SPDAs, shown on the Company's statutory financial
statements as of the date set forth in Section 12.02, and shall be increased or
decreased, as appropriate, for each Accounting Period in accordance with the
terms of this Agreement and the terms of the
 Trust Agreement.

     12.04. Trust Assets. The Reinsurer agrees that the assets so deposited, and
assets held in the trust account thereafter, shall consist only of cash (United
States legal tender), certificates of deposit (issued by a United States bank
and payable in United States legal tender), and investments of the types
permitted by Section 09.30.97.08 of the Code of Maryland Regulations.

     12.05. Title of Assets. The Reinsurer, prior to depositing assets with the
Trustee, shall execute all assignments and endorsements in blank, and transfer
legal title to the Trustee of all shares, obligations or any other assets
requiring assignments, in order that the Company, or the Trustee upon direction
of the Company, may whenever necessary negotiate any such assets without consent
or signature from the Reinsurer or any other entity.

     12.06. Settlements. All settlements of account under the Trust Agreement
between the Company and the Reinsurer shall be made in cash or Cash Equivalents.

     12.07. Withdrawals by the Company. The Reinsurer and the Company agree that
the assets in the Trust Account may be withdrawn by the Company at any time,
notwithstanding any other provisions in this Agreement, provided such assets are
applied and utilized by the Company or any successor of the Company by operation
of law, including, without limitation, any liquidator, rehabilitator, receiver
or conservator of the Company, without diminution because of the insolvency of
the Company or the Reinsurer, only for the following purposes:

          (i) to reimburse the Company for the Reinsurer's share of surrenders,
     withdrawals, death benefits or other amounts specified in Section 7.01 of
     this Agreement that have been paid by the Company pursuant to the
     provisions of the Reinsured SPDAs;

          (ii) to fund an account with the Company in an amount at least equal
     to the deduction, for reinsurance ceded, from the Company's liabilities
     under Reinsured SPDAs ceded under this Agreement. Such account shall
     include, but not be limited to, amounts for policy reserves, claims and
     losses incurred (including losses incurred but not reported), and unearned
     premium reserves; and

          (iii)     to pay any other amounts the Company claims are due under
      this Agreement.

     12.08 Withdrawals by the Reinsurer. The Reinsurer shall have the right to
seek the Company's approval to withdraw all or any part of the assets from the
Trust Account and transfer such assets to the Reinsurer, provided that:

          (i) the Reinsurer shall, at the time of withdrawal, replace the
     withdrawn assets with other assets of a type permitted hereunder having a
     market value equal to the market value of the assets withdrawn, so as to
     maintain the Trust Account in the required amount; or

          (ii) after such withdrawal and transfer, the market value of the Trust
     Account is no less than 102% of the required amount.

In the event that the Reinsurer seeks the Company's approval hereunder, the
Company shall not unreasonably or arbitrarily withhold its approval.

     12.09. Return of Assets. In the event that the Company withdraws assets
from the Trust Account for the purposes set forth in Section 12.07(i) or (ii) in
excess of actual amounts required to meet the Reinsurer's obligations to the
Company, or in excess of amounts determined to be due under Section 12.07(iii),
the Company shall return such excess to the Reinsurer, plus interest at the
prime (or base) rate of interest as set forth in Section 8.06 of this Agreement.
In the event of a dispute arising under this Article XII, the arbitration panel
established pursuant to Article XI of this Agreement shall have the right to
award interest at a rate that it determines to be equitable, and may award
attorney's fees, arbitration costs and other expenses.

     12.10. Letters of Credit. At the option of the Reinsurer, letters of credit
meeting the requirements of Section 09.30.97.08 of the Code of Maryland
Regulations may be substituted in whole or in part for the Trust Account in
order to provide the credit for reinsurance required hereunder. The letter of
credit will be procured from a Qualified Financial Institution, and may be drawn
down at any time by the Company, only for the purposes set forth in Section
12.07(i), (ii) or (iii) of this Agreement, without diminution because of the
insolvency of the Company or the Reinsurer. If the letter of credit is drawn
down, the provisions of Section 12.09 shall apply to the amount so drawn.

     12.11. Expenses. All expenses of establishing and maintaining the Trust
Account or letter of credit shall be paid by the Reinsurer.

                                  ARTICLE XIII

            REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

     13.01. Organization, Standing and Authority of the Company. The Company is
a life insurance company duly organized, validly existing and in good standing
under the laws of the State of Maryland and has all requisite corporate power
and authority to carry on the operations of its business as they are now being
conducted. The Company has all requisite corporate power and authority to own
and transfer ownership of the Investment Assets that are to be transferred in
connection with the Initial Reinsurance Premium.

     13.02. Authorization. The Company has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery by the Company of this Agreement, and the performance
by the Company of its obligations under this Agreement, have been duly
authorized by all necessary corporate action. This Agreement, when duly executed
and delivered by the Company, subject to the due execution and delivery by the
Reinsurer, will be a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.

     13.03. Assets. With respect to each of the Investment Assets, no consent or
other approval is required to be obtained by the Company to permit the Company
to convey, transfer and sell the Investment Assets to the Reinsurer pursuant to
this Agreement.

     13.04. No Conflict or Violation. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby in
accordance with the respective terms and conditions hereof will not (a) violate
any provision of the Articles of Incorporation or Bylaws of the Company, or (b)
violate any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, or any
agreement with, or condition imposed by, any governmental or regulatory body,
foreign or domestic, binding upon the Company.

     13.05. Intermediaries and Financial Advisors. Except for Oppenheimer & Co.,
Inc., no reinsurance intermediary or broker or other advisor has acted directly
or indirectly as such for, or is entitled to any compensation from, the Company
in connection with this Agreement.

     13.06. Investigations. The Company will notify the Reinsurer immediately,
in writing, of any and all investigations of the Company or its directors,
principal officers or shareholders conducted by any Federal, state or local
governmental or regulatory agency other than routine state insurance department
examinations.

     13.07.    Approvals of Governmental Authorities.

     (a) Except as set forth on Schedule G hereto, no consent, waiver, license,
approval, order or authorization of, or registration, filing or declaration
with, or notices to, any person, entity or Governmental Authority is required to
be obtained, made or given by or with respect to the Company in connection with
(i) the execution and delivery of this Agreement by the Company, or (ii) the
consummation by the Company of the transactions contemplated hereby.

     (b) Except as provided below, the Company shall take, and shall cause its
affiliates to take, all reasonable steps necessary or appropriate, and shall
use, and shall cause its affiliates to use, all commercially reasonable efforts,
to obtain as promptly as practicable all consents, waivers, licenses, approvals,
orders and authorizations of, or to make as promptly as practicable all
registrations, filings or declarations with, or notices to, any person, entity
or Governmental Authority listed on Schedule G attached hereto and required to
be obtained by the Company or any of its affiliates in connection with the
consummation of the transactions contemplated by this Agreement. Within five
Business Days of the earlier of (i) receipt of an interpretation from the
Premerger Notification Office that the transaction anticipated by this Agreement
is not exempt from the regulatory requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "Act") and (ii) August 2, 1996, the Company shall take, and
shall cause its affiliates to take, all reasonable steps necessary and
appropriate to make all necessary submissions and filings under the Act and
shall request early termination of the waiting periods under the Act.

     (c) The Company shall cooperate with the Reinsurer and its affiliates in
seeking to obtain all such consents, waivers, licenses, approvals, orders and
authorizations, and to make all such registrations, filings, declarations and
notices and shall provide, and shall cause its affiliates to provide, such
information and communications to any person, entity or Governmental Authority
as such person, entity or Governmental Authority may reasonably request in
connection therewith.

                                   ARTICLE XIV

           REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE REINSURER

     14.01. Organization, Standing and Authority of the Reinsurer. The Reinsurer
is a life insurance company duly organized, validly existing and in good
standing under the laws of the State of Rhode Island and has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on the operations of its business as they are now being
conducted. The Reinsurer is duly licensed and admitted as an insurer or
accredited as a reinsurer under the laws of all States and jurisdictions of the
United States where failure of the Reinsurer to be so licensed and admitted or
accredited would cause the Company to be ineligible for reserve credit for the
reinsurance ceded under this Agreement, and is authorized under the laws and
regulations of said States and jurisdictions to reinsure the Reinsured SPDAs
under this Agreement.

     14.02. Authorization. The Reinsurer has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery by the Reinsurer of this Agreement, and the
performance by the Reinsurer of its obligations under this Agreement, have been
duly authorized by all necessary corporate action. This Agreement, when duly
executed and delivered by the Reinsurer, subject to the due execution and
delivery by the Company, will be a valid and binding obligation of the
Reinsurer, enforceable against the Reinsurer in accordance with its terms.

     14.03. No Conflict or Violation. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not (a) violate any provision of the Articles of Incorporation, Bylaws or other
charter or organizational document of the Reinsurer, or (b) violate any order,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory body against, or binding upon, or any agreement with, or condition
imposed by, any governmental or regulatory body, foreign or domestic, binding
upon the Reinsurer.

     14.04 Intermediaries and Financial Advisors. No reinsurance intermediary or
broker or other advisor has acted directly or indirectly as such for, or is
entitled to any compensation from, the Reinsurer in connection with this
Agreement.

     14.05. Investigations. The Reinsurer will notify the Company immediately,
in writing, of any and all investigations of the Reinsurer or its directors,
principal officers or shareholders conducted by any Federal, state or local
governmental or regulatory agency other than routine state insurance department
examinations.

     14.06.    Approvals of Governmental Authorities.

     (a) Except as set forth on Schedule H hereto, no consent, waiver, license,
approval, order or authorization of, or registration, filing or declaration
with, or notices to, any person, entity or Governmental Authority is required to
be obtained, made or given by or with respect to the Reinsurer in connection
with (i) the execution and delivery of this Agreement by the Reinsurer, or (ii)
the consummation by the Reinsurer of the transactions contemplated hereby.

     (b) Except as provided below, the Reinsurer shall take, and shall cause its
affiliates to take, all reasonable steps necessary or appropriate, and shall
use, and shall cause its affiliates to use, all commercially reasonable efforts,
to obtain as promptly as practicable all consents, waivers, licenses, approvals,
orders and authorizations of, or to make as promptly as practicable all
registrations, filings or declarations with, or notices to, any person, entity
or Governmental Authority listed on Schedule H attached hereto and required to
be obtained by the Reinsurer or any of its affiliates in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
within two days after execution of this Agreement, the Reinsurer shall submit,
or cause to be submitted, a letter to the Premerger Notification Office
requesting an interpretation as to whether the transaction contemplated by this
Agreement is exempt from the reporting requirements of the Act. Within five
Business Days of the earlier of (i) receipt of an interpretation from the
Premerger Notification Office that the transaction anticipated by this Agreement
is not exempt from the regulatory requirements of the Act and (ii) August 2,
1996, the Reinsurer shall take, and shall cause its affiliates to take, all
reasonable steps necessary and appropriate to make all necessary submissions and
filings under the Act and shall request early termination of the waiting periods
under the Act.

     (c) The Reinsurer shall cooperate with the Company and its affiliates in
seeking to obtain all such consents, waivers, licenses, approvals, orders and
authorizations, and to make all such registrations, filings, declarations and
notices and shall provide, and shall cause its affiliates to provide, such
information and communications to any person, entity or Governmental Authority
as such person, entity or Governmental Authority may reasonably request in
connection therewith.

     14.07. Agency and Distribution Agreements. From the date of this Agreement
through the Termination Date, the Reinsurer shall not, and shall not permit any
of its affiliates to, take any action or omit to take any action that would
cause the Company to be in breach of or to violate any term or provision of any
of the Agency and Distribution Agreements listed on Schedule F hereto. The
Reinsurer shall indemnify the Company and its officers, directors, employees,
affiliates, agents, successors and assigns (the "indemnified parties") against,
and hold the indemnified parties harmless from all losses, claims, damages and
liabilities and shall reimburse the indemnified parties for all expenses of any
kind or nature whatsoever (including reasonable attorneys' fees) as incurred,
that are based upon or arise out of the breach by the Reinsurer of its covenants
and obligations provided for in this Section 14.07.

                                   ARTICLE XV

                              CONDITIONS TO CLOSING

     15.01. Conditions Precedent to Obligation of the Reinsurer. The obligation
of the Reinsurer to consummate the Closing is subject to satisfaction of the
following conditions at or prior to the Closing (unless expressly waived in
writing by the Reinsurer at or prior to the Closing):

     (a) All of the terms, covenants and conditions of this Agreement to be
complied with and performed by the Company at or prior to the Closing shall have
been complied with and performed by it, and the representations and warranties
made by the Company in this Agreement shall be true and correct at and as of the
Closing, with the same force and effect as though such representations and
warranties had been made at and as of the Closing.

     (b) The Reinsurer shall have received from the Company a certificate dated
the Closing Date and signed by an executive officer of the Company certifying
that the conditions specified in subsection (a) above have been fulfilled.

     (c) All consents, waivers, licenses, approvals, orders and authorizations
of, and registrations, filings and declarations with, and notices to, any
person, entity or Governmental Authority listed on Schedule H required in
connection with the consummation of the transactions contemplated hereby shall
have been duly obtained, made or given, including the expiration of any
applicable waiting periods, and shall be in full force and effect at the
Closing.

     (d) The Company shall have duly executed and delivered to the Reinsurer the
Form of Joint Election Under IRC Regulation 1.848-2(g)(8) substantially in the
form attached hereto as Exhibit J.

     15.02. Conditions Precedent to Obligation of the Company. The obligation of
the Company to consummate the Closing is subject to satisfaction of the
following conditions at or prior to the Closing (unless expressly waived in
writing by the Company at or prior to the Closing):

     (a) All of the terms, covenants and conditions of this Agreement to be
complied with and performed by the Reinsurer at or prior to the Closing shall
have been complied with and performed by it, and the representations and
warranties made by the Reinsurer in this Agreement shall be true and correct at
and as of the Closing, with the same force and effect as though such
representations and warranties had been made at and as of the Closing.

     (b) The Company shall have received from the Reinsurer a certificate dated
the Closing Date and signed by an executive officer of the Reinsurer certifying
that the conditions specified in subsection (a) above have been fulfilled.

     (c) All consents, waivers, licenses, approvals, orders and authorizations
of, and registrations, filings and declarations with, and notices to, any
person, entity or Governmental Authority listed on Schedule G required in
connection with the consummation of the transactions contemplated hereby shall
have been duly obtained, made or given, including the expiration of any
applicable waiting periods, and shall be in full force and effect.

     (d) The Reinsurer shall have duly executed and delivered to the Company the
Form of Joint Election Under IRC Regulation 1.848-2(g)(8) substantially in the
form attached hereto as Exhibit J.

     (e) The Company shall have received the opinion, dated the Closing Date, of
Bernard R. Beckerlegge, Senior Vice President and General Counsel of the
Reinsurer, in form and substance acceptable to the Company, substantially in the
form attached hereto as Exhibit I.

                                   ARTICLE XVI

                            MISCELLANEOUS PROVISIONS

     16.01. Headings and Schedules. Headings used herein are not a part of this
Agreement and shall not affect the terms hereof. The attached Schedules are a
part of this Agreement.

     16.02. Notices. All notices and communications hereunder shall be in
writing and shall be deemed given if received three (3) days after mailing, or
if by telefax or by hand, when received, and if by overnight mail, on the next
day. Any written notice shall be by either certified or registered mail, return
receipt requested, or overnight delivery service (providing for delivery
receipt) or delivered by hand. All notices or communications with the Reinsurer
under this Agreement shall be addressed as follows:

          Keyport Life Insurance Company
          125 High Street
          Boston, Massachusetts
          Attention:  Paul H. LeFevre, Jr.
          Fax No.:  (617) 526-1618

All notices and communications with the Company under this Agreement from the
date hereof until September 3, 1996 shall be directed to:

          Fidelity and Guaranty Life Insurance Company
          6255 Smith Avenue
          Baltimore, Maryland  21209-3653
          Attention:  Chief Actuary
          Fax No.:  (410) 205-0629

All notices and communications with the Company under this Agreement after
September 3, 1996 shall be directed to:

          Fidelity and Guaranty Life Insurance Company
          100 East Pratt Street
          Baltimore, Maryland  21201
          Attention:  Chief Actuary

          with copies to:

          LeBoeuf, Lamb, Greene & MacRae, L.L.P.
          125 West 55th Street
          New York, New York  10019
          Attention:  Michael Groll
          Fax No.:  (212) 424-8500

          Changes in notice addresses or recipients may be made by the Reinsurer
or the Company by following the procedure specified in this section rather than
the procedure for amendment of this Agreement.

     16.03. Severability and Governing Law. If any term or provision of this
Agreement shall be held void, illegal, or unenforceable, the validity of the
remaining portions or provisions shall not be affected thereby. This Agreement
shall be governed by the laws of the State of Maryland, without giving effect to
principles of conflicts of law thereof.

     16.04. Successors and Assigns. This Agreement may not be assigned by either
party without the prior written consent of the other. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns as permitted herein.

     16.05. Execution in Counterparts. This Agreement may be executed by the
parties hereto in any number of counterparts, and by each of the parties hereto
in separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

     16.06. Currency. All payments and accounts shall be made in United States
Dollars, and all fractional amounts shall be rounded to the nearest whole
dollar.

     16.07. Entire Agreement. This Agreement supersedes all prior discussions
and written and oral agreements and constitutes the sole and entire agreement
between the parties with respect to the subject matter hereof.

     16.08. Amendment or Waiver. No amendment or waiver of any provision of this
Agreement shall be effective unless set forth in writing, signed by duly
authorized officers of the parties hereto. A waiver shall constitute a waiver
only with respect to the particular circumstance for which it is given and not a
waiver of any future circumstance.

     16.09. Interpretation. For purposes of this Agreement, the words "hereof,"
"herein," "hereby," and other words of similar import refer to this Agreement as
a whole unless otherwise indicated. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Whenever the singular is used herein, the same
shall include the plural, and whenever the plural is used herein, the same shall
include the singular, where appropriate.

     16.10. Survival of Representations, Warranties and Agreements. The
Reinsurer or the Company, as the case may be, has the right to rely fully upon
the representations, warranties, covenants and agreements of the Company or the
Reinsurer, as the case may be, contained in this Agreement. All representations
and warranties made by the Company or the Reinsurer in this Agreement shall
survive the execution and delivery hereof. The provisions of Section 3.03,
Section 14.07 and Article XI shall survive the termination of this Agreement.

     16.11. No Third-Party Beneficiaries. Nothing in this Agreement is intended
or shall be construed to give any person, other than the parties hereto, their
successors and permitted assigns, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.

     16.12.    Termination of Agreement.

     (a) This Agreement may be terminated at any time prior to the Closing Date:
(i) by mutual consent of the Company and the Reinsurer or (ii) by either the
Company or the Reinsurer, if the Closing Date shall not have occurred on or
before October 31, 1996; provided, however, that the right to terminate this
Agreement under this Section 16.12 will not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing Date to occur on or before such date.

     (b) If this Agreement is terminated pursuant to Section 16.12(a), this
Agreement shall become void and of no effect with no liability on the part of
any party hereto.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written by their duly authorized
representatives.


                              FIDELITY AND GUARANTY LIFE INSURANCE COMPANY


                              By  /s/ Michel Perreault
                              Name: Michel Perreault
                              Title: Vice President Chief Actuary



                              KEYPORT LIFE INSURANCE COMPANY


                              By /s/ Paul LeFevre
                              Name: Paul LeFevre
                              Title: Senior Vice President and Chief
                                     Financial Officer

<PAGE>

                    AMENDMENT NO. 1 TO COINSURANCE AGREEMENT

                  AMENDMENT NO. 1 TO COINSURANCE AGREEMENT, dated as of
August 8, 1996 (this "Amendment No. 1"), by and between FIDELITY
AND GUARANTY LIFE INSURANCE COMPANY, a life insurance company
organized under the laws of the State of Maryland (the
"Company"), and KEYPORT LIFE INSURANCE COMPANY, a life insurance
company organized under the laws of the State of Rhode Island
(the "Reinsurer").

                  WHEREAS, the Company and the Reinsurer have entered
into the Coinsurance Agreement, dated as of July 26, 1996 (the
"Coinsurance Agreement"); and 

                  WHEREAS, the Company and the Reinsurer desire to amend
and modify the Coinsurance Agreement as set forth herein.

                  NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Company and the Reinsurer hereby agree that the Coinsurance
Agreement shall be, and hereby is, amended and modified as
follows:

         1.       The definition of "Blended Rate" in ARTICLE I is hereby
amended and replaced in its entirety to read as follows:

                  "Blended Rate" means the percentage rate equal to the
                  sum of (i) two-thirds of the one year Treasury Note
                  rate as of 3 p.m. on the Business Day which is two days
                  prior to the Closing Date plus (ii) one-third of the
                  three year Treasury Note rate as of 3 p.m. on the
                  Business Day which is two days prior to the Closing
                  Date.

         2.       This Amendment No. 1 shall be effective when executed
and delivered by the parties hereto.

         3.       Except as amended and modified by this Amendment No. 1,
all other terms of the Coinsurance Agreement shall remain
unchanged.

         4.       This Amendment No. 1 may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same instrument.

         5.       This Amendment No. 1 shall be governed by the laws of
the State of Maryland, without giving effect to principles of
conflicts of law thereof.

                 IN WITNESS WHEREOF, each of the Company and the
Reinsurer has caused this Amendment No. 1 to be executed on its
behalf by its officers thereunto duly authorized, all as of the
day and year first above written.


                                     FIDELITY AND GUARANTY LIFE
                                     INSURANCE COMPANY

                                        /s/ Michel Perreault
                                     By ____________________________
                                        Name: Michel Perreault
                                        Title: Vice President-Actuary





<PAGE>


                                     KEYPORT LIFE INSURANCE COMPANY

                                         /s/ Paul LeFevre
                                     By ____________________________
                                        Name: Paul LeFevre
                                        Title: Senior Vice President 
                                               and CFO


<PAGE>
                    AMENDMENT NO. 2 TO COINSURANCE AGREEMENT


     AMENDMENT NO. 2 TO COINSURANCE AGREEMENT, dated as of November ______, 1996
(this "Amendment No. 2"), by and between FIDELITY AND GUARANTY LIFE INSURANCE
COMPANY, a life insurance company organized under the laws of the State of
Maryland (the "Company"), and KEYPORT LIFE INSURANCE COMPANY, a life insurance
company organized under the laws of the State of Rhode Island (the "Reinsurer").

     WHEREAS, the Company and the Reinsurer have entered into the Coinsurance
Agreement, dated as of July 26, 1996, as amended by Amendment No. 1, dated as of
August 8, 1996 (as so amended, the "Coinsurance Agreement"); and

     WHEREAS, the Company and the Reinsurer desire to amend and modify the
Coinsurance Agreement as set forth herein.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Reinsurer
hereby agree that the Coinsurance Agreement shall be, and hereby is, amended and
modified as follows:

     1. The following definition of "Internal Replacement" is hereby added in
ARTICLE I:

                "Internal Replacement" means any instance in which a Reinsured
          SPDA is surrendered and another annuity contract that is written by
          the company is issued to the owner of the Reinsured SPDA as part of a
          direct exchange.

     2. The definition of "Reinsured SPDA" in ARTICLE I is hereby amended and
replaced in its entirety to read as follows:

                "Reinsured SPDAs" means (I) the SPDAs, including any
          Endorsements thereto and (ii) any single premium deferred annuity
          contracts replacing SPDAs and any endorsements to SPDAs issued by the
          Company on or subsequent to the Effective Date with the consent of the
          Reinsurer. Reinsured SPDAs shall not include (i) Retained Asset
          Account Funds in existence on the Effective Date and (ii) Internal
          Replacements issued in accordance with the terms of Section 9.09 of
          this Agreement.

     3. Section 7.01(a) is hereby amended and replaced in its entirety to read
as follows:

           (a) The Reinsurer shall reimburse the Company, in accordance with
     Sections 7.01(b) and 8.01(b), for an amount equal to:

                (i) 100.14% of the sum of all (A) death benefits, (B) surrender
          or (C) withdrawal payments and periodic payments under annuity
          settlement options elected by the owner, and paid by the Company, with
          respect to Reinsured SPDAs that become due on or after the Effective
          Date; and

                (ii) 99% of the Surrender Value as of the date of exchange with
          respect to Reinsured SPDAs that are surrendered as an Internal
          Replacement on or after the Effective Date (such Account Values,
          together with the death benefits and other payments referred to in the
          foregone clause (i)(A), (i)(B) and (i)(C) above, are referred to
          collectively as "Benefits").

<PAGE>


           The reimbursement for Benefits shall be net of surrender charges
     pursuant to the terms of the relevant Reinsured SPDAs.

     4. ARTICLE IX is hereby retitled, "DURATION, RECAPTURE, TERMINATION AND
     INTERNAL REPLACEMENTS."

     5.   Section 9.09 is hereby added in ARTICLE IX to read as follows:

                "Section 9.09. Internal Replacements. The Company shall request,
          on five (5) Business Days' written notice to the Reinsurer, the right
          to issue an Internal Replacement upon exchange of Reinsured SPDAs. Any
          Reinsured SPDA that is surrendered or exchanged in connection with an
          Internal Replacement shall be treated as surrendered and the Reinsurer
          shall pay to the Company, in accordance with Sections 7.01(a)(ii) and
          8.01(b), an amount equal to 99% of the Surrender Value as of the date
          of such exchange in respect of such Reinsured SPDA. The other annuity
          or insurance contract to which a Reinsured SPDA is converted or for
          which it is exchanged as an Internal Replacement, shall not be a
          Reinsured SPDA under this Agreement."

           6. This Amendment No. 2 shall be effective when executed and
delivered by the parties hereto.

     7. Except as amended and modified by this Amendment No. 2, all other terms
     of the Coinsurance Agreement shall remain unchanged.

     8. This Amendment No. 2 may be executed in two or more counterparts, each
     of which shall be deemed to be an original, but all of which shall
     constitute one and the same instrument.

     9. This Amendment No. 2 shall be governed by the laws of the State of
     Maryland, without giving effect to principles of conflicts of law thereof.

     IN WITNESS WHEREOF, each of the Company and the Reinsurer has caused this
Amendment No. 2 to be executed on its behalf by it officers thereunto duly
authorized, all as of the day and year first above written.


                              FIDELITY AND GUARANTY
                              LIFE INSURANCE COMPANY

                                    /s/ Michel Perreault
                              By:  _______________________________________
                                   Michel Perreault
                                   Vice President, Chief Actuary


                              KEYPORT LIFE INSURANCE COMPANY


                                    /s/ Paul LeFevre
                              By:  _______________________________________
                                   Paul LeFevre
                                   Senior Vice President and Chief Financial
                                   Officer