<PAGE>
                                                                                
                            INVESTMENT SERVICES AGREEMENT

     This is an INVESTMENT SERVICES AGREEMENT (this "Agreement") made effective
as of the 24th day of April, 1998, by and between INTEGRITY CAPITAL ADVISORS,
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 (the "Subsidiaries") of ARM Financial Group,
Inc. ("ARM"), 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 one or more segregated custodial accounts with account numbers as
designated by ARM in writing from time to time (the "Accounts") maintained with
Chase Manhattan Bank and/or such other banks as designated by ARM 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 face amount 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;


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     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 


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     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 be 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 non-public 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 


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shall be those set forth in Section 11 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.  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 by operation of law.  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.


     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 


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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, 4th 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
Agreement a legal, valid, and enforceable provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible.   


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     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.


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     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.

                                   INTEGRITY CAPITAL ADVISORS, INC.


                                   By: /s/ Robert H. Scott
                                      -----------------------------------

                                   Name: Robert H. Scott
                                        ---------------------------------

                                   Title: General Counsel
                                         --------------------------------



                                   ARM CAPITAL ADVISORS, LLC



                                   By: /s/ Christopher T. Kracke
                                      -----------------------------------

                                   Name: Christopher T. Kracke
                                        ---------------------------------

                                   Title: Chief Financial Officer
                                         --------------------------------



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                                      APPENDIX A

                                     SUBSIDIARIES


                               312 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.  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.