<PAGE>

                            INVESTMENT SERVICES AGREEMENT

     This is an INVESTMENT SERVICES AGREEMENT (this "Agreement") made effective
as of the 7 day of November, 1997, by and between ARM FINANCIAL GROUP, INC., a
Delaware corporation ("Company"), and ARM CAPITAL ADVISORS, LLC, a Delaware
limited liability company ("Advisor") which is registered as an investment
adviser under the Investment Advisers Act of 1940 (the "Advisers Act").

                                       RECITALS

     WHEREAS, certain subsidiaries of Company (the "Subsidiaries"), as
identified on Appendix A hereto (as such Appendix A may be revised by Company
from time to time), have allocated all or a portion of their assets to several
segregated custodial accounts with account numbers as designated by Company in
writing from time to time (the "Accounts") maintained with Chase Manhattan Bank
and/or such other banks as designated by Company in writing from time to time
(the "Custodians"); and

     WHEREAS, Company has agreed to provide investment services with respect to
the assets in the Accounts, but has reserved the right to sub-contract such
investment services to an affiliate or third party; and

     WHEREAS, Advisor's management has extensive experience in asset/liability
and investment portfolio management and supervision; and

     WHEREAS, in order to achieve certain operating economies and improve the
investment services to the benefit of the Subsidiaries and the Subsidiaries'
policyholders and/or certificateholders, Company desires to retain Advisor to
supervise and manage the assets now or hereafter contained in the Accounts; and

     WHEREAS, Company and Advisor wish to assure that all charges incurred
hereunder are reasonable and in accordance with the requirements of the
Advisers Act, the Investment Company Act of 1940, the appropriate investment
provisions of the applicable state of domicile for each of the Subsidiaries,
and all other applicable laws, rules and regulations (collectively, "Laws");
and

     WHEREAS, Company and Advisor wish to identify the investment advisory
services to be rendered by Advisor, and to provide a method for determining the
fees to be paid by Company in connection with such services;

<PAGE>

     NOW, THEREFORE, in consideration of the premises and of the mutual promises
set forth herein, the adequacy and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, Company and Advisor agree as follows:

     1. PERFORMANCE OF SERVICES. Subject to the terms, conditions, and
limitations of this Agreement, Advisor agrees, to the extent requested by
Company, to perform diligently and in a manner consistent with past practice the
investment advisory services as set forth in Appendix B attached hereto and made
a part of this Agreement (collectively, the "Services") with respect to the
assets now or hereafter contained in the Accounts. All charges for services
incurred hereunder shall be reasonable and in accordance with or as required by
any Laws. Advisor agrees to maintain sufficient facilities and trained personnel
of the kind necessary to perform this Agreement.

          (a) CAPACITY OF PERSONNEL AND STATUS OF FACILITIES. Whenever Advisor
     utilizes its personnel to perform the services pursuant to this Agreement,
     such personnel shall be subject to Advisor's direction and control, and
     Company shall have no liability to such personnel for their welfare,
     salaries, fringe benefits, legally required employer contributions, tax
     obligations or other obligations. No facility of Advisor used in performing
     services for Company shall be deemed to be transferred, assigned, conveyed,
     or leased by performance or use pursuant to this Agreement.

          (b) EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing any
     services hereunder which require the exercise of judgment by Advisor,
     Advisor shall perform such services in accordance with any standards and
     guidelines which Company develops and communicates to Advisor in writing.
     In performing any services hereunder, Advisor shall at all times act in a
     manner reasonably calculated to be in or not opposed to the best interests
     of Company and the Subsidiaries.

          (c) CONTROL. The performance of services by Advisor for Company
     pursuant to this Agreement shall in no way impair the absolute control of
     the business and operations of Company or Advisor by their respective
     Boards of Directors. Advisor shall act hereunder


                                          2

<PAGE>

     so as to assure the maintenance of the operational controls and the
     separate operating identity of Company.

     2. CHARGES. Company agrees to pay to Advisor for services provided by
Advisor pursuant to this Agreement the fees set forth on Appendix C attached
hereto (as such Appendix may be revised by the parties hereto from time to
time).

     3. PAYMENT. Advisor shall periodically submit to Company a written
statement of the amount owed by Company for services rendered pursuant to this
Agreement for the appropriate period, and Company shall pay such amount to
Advisor within thirty (30) days of such written statement.

     4. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall he deemed to
grant Advisor an exclusive right to provide services to Company, and Company
retains the right to contract with any third party, affiliated or unaffiliated,
for the performance of services as are available to or have been requested by
Company pursuant to this Agreement. It is also understood and agreed that
Advisor's services are not exclusively for Company. Advisor shall remain free to
provide services to other persons, pursuant to objectives which may or may not
be similar to the strategy adopted as appropriate for Company.

     5. CONFIDENTIALITY. In rendering its services hereunder, Advisor may be
furnished with information concerning the Company's businesses and affairs
("Confidential Information").  Advisor agrees (a) except as required by law, to
keep all Confidential Information confidential and not to disclose or reveal any
Confidential Information and (b) not to use Confidential Information for any
purpose other than rendering services hereunder.

     6. CONTACT PERSONS. Company and Advisor each shall appoint one or more
individuals who shall serve as contact persons for the purpose of carrying out
this Agreement. Such contact persons shall be authorized to act on behalf of
their respective parties as to the matters pertaining to this Agreement.
Effective upon execution of this Agreement, the initial contact persons


                                          3

<PAGE>

shall be those set forth in Section 10 of this Agreement. Each party shall
notify the other, in writing, as to the name, address, and telephone number of
any replacement for any such designated contact person.

     7. TERMINATION. This Agreement may be terminated by either party hereto at
any time, upon 180 days' or more advance written notice, provided that Advisor
shall not have the right, by unilateral action, to terminate this Agreement
prior to December 31, 1997. No penalty shall be charged to Company upon
termination of this Agreement, and following any such termination Advisor shall
promptly deliver to Company all books and records that are, or are deemed by
this Agreement to be, the property of Company and/or the Subsidiaries.

     8. NO ASSIGNMENT. This Agreement and any rights pursuant hereto shall not
be assignable by either party hereto. Except as and to the extent specifically
provided in this Agreement or as required by applicable Laws, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto, or their respective legal successors, any rights, remedies,
obligations, or liabilities, or to relieve any person other than the parties
hereto, or their respective legal successors, from any obligations or
liabilities that would otherwise be applicable; and the representations,
warranties, covenants, and agreements contained in this Agreement shall be
binding upon, extend to and inure to the benefit of, the parties hereto, their,
and each of their, successors respectively.

     9. INDEPENDENT CONTRACTOR. In rendering its services hereunder, Advisor
shall act as an independent contractor, and any duties of Advisor arising
hereunder shall be owed exclusively to Company.

     10. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of New York
applicable to contracts made and to be performed entirely within that State.


                                          4

<PAGE>

      11. NOTICE. All notices, statements or requests provided for hereunder
shall be deemed to have been duly given when actually given (orally or in
writing) or when delivered by hand to an officer of the other party, or when
deposited with the U.S. Postal Service, as first class certified or registered
mail, postage prepaid, overnight courier services, telex or telecopier,
addressed:


          (a)  If to Company to:

               ARM Financial Group, Inc.
               515 West Market Street, 8th Floor
               Louisville, KY 40202-3271
               Telecopier: (502) 582-7995
               Attention: Robert H. Scott

          (b)  If to Advisor to:

               ARM Capital Advisors, LLC
               200 Park Avenue, 20th Floor
               New York, New York 10166
               Telecopier: (212) 973-2201
               Attention: Emad A. Zikry


or to such other persons or places as each party may from time to time designate
by written notice sent as aforesaid.

     12. COMPLIANCE WITH LAWS. Advisor shall at all times comply with the terms
of this Agreement and all applicable Laws.

     13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of Advisor or Company under this Agreement will not
be materially and adversely affected thereby, (a) such provision will be
fully severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part
hereof; (c) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance herefrom; and (d) in lieu of such
illegal, invalid, or unenforceable provision, there will be added
automatically as a part of this

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<PAGE>

Agreement a legal, valid, and enforceable provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible.

     14. SECTION HEADINGS. Section headings contained herein are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

     15. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

     16. INTEGRATION. This Agreement is the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior written or oral agreements related to the matters referenced herein.


                                          6

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate by their respective officers duly authorized so to do,
as of the date and year first above written.

                                        ARM FINANCIAL GROUP, INC.


                                        By:  /s/ John Franco
                                           -------------------------------------
                                        Name:  John Franco
                                        Title:  Co-Chief Executive Officer

                                        By:  /s/ Martin H. Ruby
                                           -------------------------------------
                                        Name:  Martin H. Ruby
                                        Title:  Co-Chief Executive Officer


                                        ARM CAPITAL ADVISORS, LLC


                                        By:  /s/ Emad Zikry
                                           -------------------------------------
                                        Name:  Emad Zikry
                                        Title:  President


                                          7

<PAGE>

                                      APPENDIX A

                                     SUBSIDIARIES


                           Integrity Life Insurance Company
                      National Integrity Life Insurance Company
                               SBM Certificate Company


<PAGE>

                                      APPENDIX B

                             INVESTMENT ADVISORY SERVICES

     Subject to the terms, conditions and limitations of this Agreement and the
supervision by the Subsidiaries' Boards of Directors of the assets now or
hereafter contained in the respective Accounts, Advisor shall provide the
following services:

     1.  Except as otherwise expressly provided herein, Advisor shall be free to
buy, sell, exchange, convert, or otherwise trade the assets now or hereafter
contained in the Accounts in the exercise of its sole discretion, provided
Advisor acts in a manner consistent with any and all written direction received
from Company as to each of the Investment Policies adopted by the Board of
Directors of the respective Subsidiaries, as the same may be modified from time
to time. Advisor shall acquire or dispose of any specific investment if so
directed by Company and/or the Board of Directors of the applicable
Subsidiaries.

     2.  All investments made by Advisor shall be in those classes of
investments as permitted or required by any Laws; PROVIDED, HOWEVER, that
nothing contained herein shall authorize Advisor to purchase or dispose of,
without the applicable Subsidiaries' prior written approval, any interest in
real property or mortgages.

     3.  In the course of its investment advisory services activity, Advisor MAY
NOT pledge, mortgage or hypothecate the assets in the Accounts, or enter into
any investment which would violate any Laws.

     4.  Advisor shall not at any time have custody or possession of any of the
assets in the Accounts. Custody and possession of any and all assets in the
Accounts shall at all times be maintained in one or more segregated custodial
accounts maintained with the Custodians, and held on behalf of and in the name
of the respective Subsidiaries. All transactions authorized by this Agreement
shall be carried out through such custodial accounts maintained with the
Custodians. Advisor shall not be responsible for any act or omission of the
Custodians thereunder.
<PAGE>

                                      APPENDIX C

                                   SCHEDULE OF FEES

     COMPUTATION OF FEES. During 1997, Advisor shall provide to Company, at no
cost to Company, investment management services at current levels of support for
Company's insurance company subsidiaries and Company's client's risk-based
monies (where Company retains the risk of Advisor's performance). After December
31, 1997, Company shall have the right to engage Advisor to perform the above
described investment management services at an annualized cost of (A) twenty
basis points (.0020) times the first $100 million of the average market value
of assets under management, (B) seven basis points (.0007) times the average
market value of assets under management in excess of $100 million and up to $2
billion, (C) six basis points (.0006) times the average market value of assets
under management in excess of $2 billion and up to $3 billion, and (D) five
basis points (.0005) times the average market value of assets under management
in excess of $3 billion. Such fee to be calculated and payable on the average of
the market value of all assets in the Accounts on the first and last days of
each calendar month.