Document:

<PAGE>

                                       NOTE

                                  Houston, Texas

$3,197,000.00                                                     March 29, 2001

    FOR VALUE RECEIVED, ITEQ, Inc., a Delaware corporation, promises to pay to
the order of TMI Manufacturing Inc., a Delaware corporation, at 5051
Westheimer, Suite 300, Houston, Texas  77056 (or such other place as the holder
hereof may hereafter designate in writing), in immediately available funds and
in lawful money of the United States of America, the principal sum of Three
Million One Hundred Ninety-Seven Thousand Dollars ($3,197,000.00) (or the
unpaid balance of all principal advanced against this note, if that amount is
less), together with interest on the unpaid principal balance of this note from
time to time outstanding at the Stated Rate and interest on all past due
amounts, both principal and accrued interest, from the respective due dates
thereof until paid at the Past Due Rate; PROVIDED, that for the full term of
this note the interest rate produced by the aggregate of all sums paid or
agreed to be paid to the holder of this note for the use, forbearance or
detention of the debt evidenced hereby (including, but not limited to, all
interest on this note at the Stated Rate) shall not exceed the Ceiling Rate.

    1.   DEFINITIONS. As used in this note, the following terms shall have the
respective meanings indicated:

    (a)  "BUSINESS DAY" means a day when Payee is open for business.

    (b)  "CEILING RATE" means, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or Texas
laws permits the higher interest rate, stated as a rate per annum.  On each
day, if any, that the Texas Finance Code establishes the Ceiling Rate, the
Ceiling Rate shall be the "weekly ceiling" (as defined in the Texas Finance
Code) for that day.  Payee may from time to time, as to current and future
balances, implement any other ceiling under the Texas Finance Code by notice to
Maker, if and to the extent permitted by the Texas Finance Code.  Without
notice to Maker or any other person or entity, the Ceiling Rate shall
automatically fluctuate upward and downward as and in the amount by which such
maximum nonusurious rate of interest permitted by applicable law fluctuates.

    (c)  "CREDIT DOCUMENTS" means any and all papers now or hereafter
governing, evidencing, guaranteeing or securing or otherwise relating to all or
any part of the indebtedness evidenced by this note, including without
limitation this note.

    (d)  "DEBT" means the indebtedness evidenced by this note and the
indebtedness to Payee incurred under or evidenced by the Credit Documents.

<PAGE>

    (e)  "MAKER" means ITEQ, Inc., a Delaware corporation.

    (f)  "MATURITY DATE" means the maturity of this note, December 31, 2001, as
the same may hereafter be accelerated pursuant to the provisions of this note
or any of the other Credit Documents.

    (g)  "OBLIGOR" means any person or entity now or hereafter primarily or
secondarily obligated to pay all or any part of the Debt.

    (h)  "PAST DUE RATE" means, on any day, a rate per annum equal to the
Stated Rate plus two percent (2%) per annum.

    (i)  "PAYEE" means TMI Manufacturing Inc., a Delaware corporation, and any
other holder or holders of this note from time to time and, upon acquisition of
this note by any holder or holders other than the named payee, effective as of
the time of such acquisition, the term "Payee" shall mean all of the then
holders of this note, to the exclusion of all prior holders not then retaining
or reserving an interest in this note, to the end that all the rights, powers,
remedies, liens, benefits and privileges accruing and to accrue hereunder to
Payee, as such term is used herein, shall inure to the benefit of and be owned
and held by the holder or holders of this note from time to time, whether such
holder acquires this note through succession to or assignment from a prior
Payee.

    (j)  "SECURITY AGREEMENT" means the Security Agreement dated of even date
herewith between Maker and Payee.

    (k)  "STATED RATE" means, on any day, a rate per annum equal to four and
eighty-six one-hundredths percent (4.86%) (being the short-term applicable
federal rate for the month of March 2001).

    2.   ADVANCES; SECURITY. This note evidences all advances made in
accordance with its terms.  In addition, this note evidences any amounts paid
by Payee on behalf of Maker pursuant to SECTION 4(d)(i) of that certain
Agreement for Secured Party Sale and Purchase, dated the date hereof, between
Payee and Fleet National Bank, as agent for the secured lenders of Maker (the
"SECURED PARTY AGREEMENT").  The advances contemplated herein shall be made as
follows: (a) Payee shall advance to Maker at the time of the consummation of
the secured party sale contemplated by the Secured Party Agreement (the
"FORECLOSURE SALE") the sum of $1,020,000, which amount shall only be used by
Maker to satisfy the obligations described on EXHIBIT A attached hereto when
such obligations become due in accordance with their terms, (b) upon
expenditure of the amount initially advanced to Maker pursuant to SECTION 2(a)
above, Payee shall advance to Maker (or shall pay on Maker's behalf), as of the
first day of each calendar month after the consummation of the Foreclosure
Sale, an additional amount sufficient to, along with any remaining unexpended
prior amounts advanced by Payee under this SECTION 2, satisfy

                                   Page 2

<PAGE>

the obligations of Maker (or any of its then subsidiaries) which are set forth
on EXHIBIT B and which are due and payable during that calendar month, (c) in
the event that the provisions of SECTION 6 become applicable, Payee shall
promptly advance to Maker the face amount of this note (LESS all amounts
previously advanced (or paid) under this note), and (d) Payee may make such
other advances, in its sole and absolute discretion, as Maker may request in
writing.  Notwithstanding any of the foregoing, Payee shall not have any
obligation to make any advances to Maker hereunder prior to the consummation of
the Foreclosure Sale or in excess of the face amount of this note.  This note
is secured by the Security Agreement.

    3.   COMPUTATION OF INTEREST. Interest on the amount of each advance
against this note shall be computed on the amount of that advance and from the
date it is made.  Such interest shall be computed for the actual number of days
elapsed in a year consisting of 365 or 366 days, as the case may be.

    4.   MANDATORY PAYMENTS OF PRINCIPAL AND INTEREST.

    (a)  The principal of this note, together with accrued and unpaid interest
on the unpaid principal balance of this note, shall be due and payable on the
Maturity Date.

    (b)  All payments hereon made pursuant to this Paragraph shall be applied
first to accrued interest, the balance to principal.

    (c)  If any payment provided for in this note shall become due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest on this note.

    5.   NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in this note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Credit Documents, which under applicable laws are
or may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate.  In this connection,
Maker and Payee stipulate and agree that it is their common and overriding
intent to contract in strict compliance with applicable usury laws.  In
furtherance thereof, none of the terms of this note or any of the other Credit
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the Ceiling Rate.  Maker or other parties now or hereafter becoming liable for
payment of the indebtedness evidenced by this note shall never be liable for
interest in excess of the Ceiling Rate.  If, for any reason whatever, the
interest paid or received on this note during its full term produces a rate
which exceeds the Ceiling Rate, the holder of this note shall credit against
the principal of this note (or, if such indebtedness shall have been paid in
full, shall refund to the payor of such interest) such portion of said interest
as shall be necessary to cause the interest paid on this note to produce a rate
equal to the Ceiling

                                   Page 3

<PAGE>

Rate.  All sums contracted for, charged or received by the holder of this note
for the use, forbearance or detention of the indebtedness evidenced hereby
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread, using the actuarial method, throughout the full stated
term of this note.  The provisions of this Paragraph shall control all
agreements, whether now or hereafter existing and whether written or oral,
between Maker and Payee.

    6.   BREACH OF MERGER AGREEMENT. Payee hereby agrees that in the event
that either HNT Inc., a Delaware corporation, or HNT Acquisitions Inc., a
Delaware corporation, breaches any provision of that certain Agreement and Plan
of Merger (the "MERGER AGREEMENT"), dated the date hereof, between such parties
and ITEQ, in such a manner as to excuse Maker's obligation to consummate the
Merger (as defined in the Merger Agreement) in accordance with the terms of the
Merger Agreement, then Maker shall cease to have any further liabilities under
this note or any of the Credit Documents.

    7.   DEFAULT. The occurrence of any of the following events shall
constitute default under this note, whereupon the obligation (if any) of Payee
to make any further advances against this note shall cease and terminate and
the owner or holder hereof may, at its, his or her option, exercise any or all
rights, powers and remedies afforded under any of the Credit Documents and by
law, including the right to declare the unpaid balance of principal and accrued
interest on this note at once mature and payable:

    (a)  Maker commences a voluntary case in bankruptcy or a voluntary petition
seeking reorganization or to effect a plan or other arrangement with creditors.

    (b)  in respect of Maker, an involuntary case shall be commenced with any
court or other authority seeking liquidation, reorganization or a creditor's
arrangement of any such party, and such petition seeking liquidation,
reorganization or a creditor's arrangement or such order appointing a receiver
or trustee is not vacated or stayed, or such writ, warrant of attachment or
similar process is not vacated, released or bonded off within one hundred
eighty (180) days after its entry or levy.

    8.   NO WAIVER BY PAYEE.  No delay or omission of Payee or any other holder
hereof to exercise any power, right or remedy accruing to Payee or any other
holder hereof shall impair any such power, right or remedy or shall be
construed to be a waiver of the right to exercise any such power, right or
remedy.  Payee shall not be obligated or be deemed obligated to notify Maker
that it is requiring Maker to strictly comply with the terms and provisions of
this note and the other Credit Documents before accelerating this note and
exercising its other remedies hereunder or under the other Credit Documents
because of Maker's failure to timely perform its obligations under this note
and the other Credit Documents.

    9.   COSTS AND ATTORNEYS' FEES.  If any holder of this note retains an
attorney in connection with any default or to collect, enforce or defend this
note or any of the Credit

                                   Page 4

<PAGE>

Documents in any lawsuit or in any probate, reorganization, bankruptcy or other
proceeding, or if Maker sues any holder in connection with this note or any of
the Credit Documents and does not prevail, then Maker agrees to pay to each
such holder, in addition to principal and interest, all reasonable
out-of-pocket costs and expenses incurred by such holder in trying to collect
this note or in any such suit or proceeding, including reasonable attorneys'
fees.

    10.  WAIVERS BY MAKER AND OTHERS. Except to the extent, if any, that notice
of default is expressly required herein or in any of the other Credit
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting
and the filing of suit for the purpose of fixing liability and consent that the
time of payment hereof may be extended and re-extended from time to time
without notice to any of them.  Each such person agrees that his, her or its
liability on or with respect to this note shall not be affected by any release
of or change in any guaranty or security at any time existing or by any failure
to perfect or to maintain perfection of any lien against or security interest
in any such security or the partial or complete unenforceability of any
guaranty or other surety obligation, in each case in whole or in part, with or
without notice and before or after maturity.

    11.  FUNDING. Payee represents and warrants to Maker that it has, or will
have immediately prior to the consummation of the Foreclosure Sale, sufficient
funds available to make all advances required hereunder as well as pay all
amounts required to be paid by it pursuant to the noncompetition agreements
between Payee and each of William P. Reid and Douglas R. Harrington, Jr.

    12.  VENUE; CHOICE OF LAW. This note is performable in Harris County,
Texas, which shall be a proper place of venue for suit on or in respect of this
note.  Maker and Payee hereby irrevocably agree that any legal proceeding in
respect of this note shall be brought in the district courts of Harris County,
Texas, or in the United States District Court for the Southern District of
Texas, Houston Division (collectively, the "SPECIFIED COURTS").  Maker and
Payee hereby irrevocably submit to the nonexclusive jurisdiction of the state
and federal courts of the State of Texas.  Maker and Payee hereby irrevocably
waive, to the fullest extent permitted by law, any objection which either may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this note or any of the Credit Documents brought
in any Specified Court, and hereby further irrevocably waive any claims that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.  Maker and Payee further irrevocably consent to the
service of process out of any of the Specified Courts in any such suit, action
or proceeding by the mailing of copies thereof by certified mail, return
receipt requested, postage prepaid, to Maker or Payee, as the case may be.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE
LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME
IN EFFECT.

                                   Page 5

<PAGE>

    13.  ENTIRE AGREEMENT. This note and the other Credit Documents embody the
entire agreement and understanding between Payee and Maker and other parties
with respect to their subject matter and supersede all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter.  Maker acknowledges and agrees that there is no oral agreement between
Maker and Payee which has not been incorporated in this note and the other
Credit Documents.

    IN WITNESS WHEREOF, the undersigned, by their respective duly authorized
and acting executive officers, have each executed this Note as of the date
first set forth above.

                                          ITEQ, INC.

                                          By:
                                             -----------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------

                                          TMI MANUFACTURING INC.

                                          By:
                                             -----------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------

                                   Page 6

<PAGE>

                                  EXHIBIT A
                                  ---------

<TABLE>
<CAPTION>

                      USE OF AMOUNT INITIALLY ADVANCED

<S>                                                     <C>
Transaction Expenses - Investment Banking               $500,000
Transaction Expense - Legal                             $150,000
Proxy Costs                                             $40,000
Transaction Expenses - Accounting                       $25,000
Separation Expense                                      $390,000
Corporate Administrative Costs                          $165,000
Corporate Payroll                                       $17,000
Trade Credit - Corporate                                $500,000
Accrued Interest                                        $363,000
Estimated Franchise Taxes                               $80,000
401(k) Administration                                   $65,000
Accounting Fees - Audit                                 $150,000
Accounting Fees - Tax                                   $50,000
Miscellaneous Legal                                     $25,000
                                                        --------

Subtotal                                                $2,520,000
Less Cash on Hand                                      ($1,500,000)
                                                        -----------

Net Initial Advance                                     $1,020,000

</TABLE>

<PAGE>

                                  EXHIBIT B
                                  ---------

<TABLE>
<CAPTION>

                      SCHEDULE OF REMAINING OBLIGATIONS

                    May 1          June 1          July 1
USE                 Draw           Draw            Draw           TOTAL
---                 -----          ------          ------         -----
<S>                <C>            <C>              <C>           <C>

Corp. Admin
 Costs             $165,000       $165,000         None          $330,000

Corp. Severance     None          $17,000          $133,000      $150,000

Insurance          $120,000        None            None          $120,000

Accounting Fees-
 Tax                None           None            $385,000      $385,000

Accounting Fees-
 401(k)             None           None            $40,000       $40,000

Legal Fees          None          $50,000          $92,000       $142,000
                   --------------------------------------------------------

                   $285,000       $232,000         $650,000      $1,167,000

</TABLE><PAGE>   1

                             REINSURANCE AGREEMENT #

                          (MODIFIED COINSURANCE TREATY)

                    (hereinafter referred to as "Agreement")

                                     between

                      SAGE LIFE ASSURANCE OF AMERICA, INC.

                             (STAMFORD, CONNECTICUT)

                   (hereinafter referred to as the "Company")

                                       and

                     LIFE REASSURANCE CORPORATION OF AMERICA

                             (STAMFORD, CONNECTICUT)

                     (hereinafter referred to as "Life Re")

                           EFFECTIVE: FEBRUARY 1, 1999

                     LIFE REASSURANCE CORPORATION OF AMERICA
                               969 HIGH RIDGE ROAD
                               STAMFORD, CT 06905
<PAGE>   2
                                    PREAMBLE

        This Reinsurance Agreement ("Agreement") is entered into by and between
SAGE LIFE ASSURANCE OF AMERICA, INC., a Delaware insurance corporation (the
"Company") and LIFE REASSURANCE CORPORATION OF AMERICA, a Connecticut insurance
corporation ("Life Re"). The Company and Life Re mutually agree to reinsure on
the terms and conditions set forth in this Agreement. This Agreement is solely
between the Company and Life Re, and performance of the obligations of each
party under this Agreement will be rendered solely to the other party. In no
instance will anyone other than the Company or Life Re have any rights under
this Agreement.

                        ARTICLE I - REINSURANCE COVERAGE

1.       EFFECTIVE DATE

         The reinsurance under this Agreement is effective as of February 1,
1999.

2.       AUTOMATIC REINSURANCE

         Reinsurance of variable annuity and variable life insurance risks (the
"Risks") is on a combination of coinsurance and modified coinsurance in
accordance with the original policy forms issued by the Company. The Company
will cede and Life Re will accept reinsurance under the contracts, policies or
plans set forth in SCHEDULE A, written by the Company. The contracts, policies,
and plans set forth in SCHEDULE A that are reinsured under this Agreement are
hereinafter referred to collectively as "Reinsured Contracts" and individually
as a "Reinsured Contract." The Company agrees that the assets backing the
Modified Coinsurance Reserves established for the Reinsured Contracts will be
segregated through the maintenance by the Company of separate accounts for such
reserves.

3.       AMOUNTS

         Life Re will reinsure a quota share of each Reinsured Contract as set
out in SCHEDULE A. The quota share of each Reinsured Contract is hereinafter
referred to as "Life Re's Share."

4.       OTHER REINSURANCE

         The Company agrees to maintain other reinsurance acceptable to Life Re
for life insurance net amounts at risk in excess of the Company's retention
limits set forth in SCHEDULE A ("Other Reinsurance").

                                       2
<PAGE>   3
5.       The liability of Life Re on any Other Reinsurance under this Agreement
begins and ends at the same time as that of the Company.

6.       Life Re will not participate in a unilateral enhancement of policy
provisions unless agreed to in writing prior to the granting of the enhancement.
Notwithstanding the preceding sentence, the Company retains the right to set any
non-guaranteed elements of the Reinsured Contracts, including, without
limitation, cost of insurance charges and interest crediting rates. Additions or
substitutions of funds or Guarantee Periods are not deemed to be enhancements.

                              ARTICLE II - RESERVES

1.       THE FOLLOWING PORTION OF THE RESERVES WILL BE REINSURED ON A MODIFIED
         COINSURANCE RESERVE BASIS:

     Separate Account Reserves

         a)       CARVM or other required reserves for the variable annuities
                  held in the Variable Account;

         b)       CARVM or other required reserves for the variable annuities
                  held in the Fixed Account;

         c)       CRVM or other required reserves for the variable life products
                  held in the Variable Account;

         d)       CRVM or other required reserves for the variable life products
                  held in the Fixed Account;

     General Account Reserves

         a)       Policy loan reserves for the variable life products.

2.       THE FOLLOWING PORTION OF THE RESERVES WILL BE REINSURED ON A
         COINSURANCE RESERVE BASIS:

     Separate Account Reserves - None

     General Account Reserves

         a)       Deferred Variable Annuity Reserves:

                                       3
<PAGE>   4
                  Any reserves for ancillary benefits in excess of those
                  supported by the reserves held in the Separate Accounts. Such
                  ancillary benefits may include the following:

                  i)       Guaranteed minimum death benefit reserves;

                  ii)      Accidental death benefit reserves;

                  iii)     Waiver of surrender charge reserves;

                  iv)      Annuitization reserves; and

                  v)       Any other statutory reserves that are required to be
                           held in the General Account in support of the
                           deferred variable annuity products.

         b)       Variable Life Insurance Reserves

                  i)       Accidental death benefit reserves;

                  ii)      Any waiver of surrender charge reserves;

                  iii)     Any accelerated death benefit reserves; and

                  iv)      Any other statutory reserves that are required to be
                           held in the General Account in support of the
                           variable life insurance products.

3.       FUNDS WITHHELD

         The Company will withhold funds from Life Re in an amount equal to the
         CARVM Account. The CARVM Account is the expense allowance provided by
         the use of the Commissioners Annuity Reserve Valuation method ("CARVM")
         or the Commissioners Reserve Valuation Method ("CRVM") and, at any
         point in time, is equal to the excess of the policyholder account value
         over the CARVM or CRVM reserves calculated. The calculated CARVM or
         CRVM reserves will be based on the regulatory requirements in the
         Company's State of domicile including, but not limited to, Actuarial
         Guideline 33 ("Determining CARVM Reserves for Annuity Contracts with
         Elective Benefits") and Actuarial Guideline 34 ("Variable Annuity
         Minimum Guaranteed Death Benefit Reserves").

                       ARTICLE III - AMOUNTS DUE REINSURER

1.       REINSURANCE PREMIUMS

                                       4
<PAGE>   5
         The Company will pay Life Re, Life Re's Share of the premium the
Company receives for the Reinsured Contracts.

2.       REINSTATEMENTS

         In connection with all reinstatements, the Company will pay Life Re,
Life Re's Share of all reinsurance premiums and interest in like manner as the
Company has received under the Reinsured Contracts.

3.       BENEFITS FROM OTHER REINSURANCE

        The Company will pay to Life Re, Life Re's Share of any benefit or
similar payments received by or due to the Company in accordance with the terms
of other reinsurance on the Reinsured Contracts.

                                       5
<PAGE>   6
4.       SERVICE FEES FROM THE FUNDS

         The Company will pay to Life Re, Life Re's Share of fees paid to the
Company by mutual fund companies and/or their affiliated distributors or
managers in connection with participation agreements and/or service agreements
entered into by the Company and such mutual fund companies and/or distributors
or managers.

                        ARTICLE IV - AMOUNTS DUE COMPANY

1.       COMMISSION AND EXPENSE ALLOWANCES

         Life Re will pay to the Company Life Re's Share of the commission and
expense allowances related to the Reinsured Contracts as defined in SCHEDULE B.

2.       BENEFITS

         Life Re will pay to the Company Life Re's Share of:

         a)       the gross amount of all death benefits, including any
                  accelerated death benefit (i.e., without deduction for
                  reserves), paid by the Company, plus

         b)       the cash surrender values, withdrawals and maturities paid by
                  the Company, plus

         c)       on annuitizations elected in accordance with the benefits
                  guaranteed in the underlying contracts, the annuitization
                  benefits paid by the Company, plus

         d)       on all other annuitizations, the cash surrender value of the
                  underlying contract that would be due and payable by the
                  Company.

3.       COST OF OTHER REINSURANCE

         Life Re will pay the Company Life Re's Share of any premiums paid for
Other Reinsurance on the Reinsured Contracts.

4.       MODIFIED COINSURANCE RESERVE ADJUSTMENT

         a)       For any accounting period in which the Modified Coinsurance
                  Reserve Adjustment is positive, Life Re will pay the Company
                  such amount. For any accounting period in which the Modified
                  Coinsurance Reserve Adjustment is negative, the Company will
                  pay Life Re such amount.

         b)       The Modified Coinsurance Reserve Adjustment for the accounting
                  period shall be

                                       6
<PAGE>   7
                  equal to (i) minus (ii) minus (iii), where

                  (i)      equals Life Re's Share of the Modified Coinsurance
                           Reserve at the end of the current accounting period;

                  (ii)     equals Life Re's Share of the Modified Coinsurance
                           Reserve at the end of the preceding accounting
                           period; and

                  (iii)    equals the Modified Coinsurance Reserve Investment
                           Credit, as defined in Paragraph (c), below.

         c)       The Modified Coinsurance Reserve Investment Credit is equal to
                  Life Re's Share of the Separate Account investment credits
                  accrued under the Reinsured Contracts during the accounting
                  period plus Life Re's Share of policy loan interest earned
                  during the accounting period. Investment credit is equal to
                  fund earnings credited to policyholder account values before
                  deduction of mortality and expense and other separate account
                  and product level charges, but after deduction of investment
                  management expense and other trust level expenses.

5.       CHANGE IN FUNDS WITHHELD (CARVM ACCOUNT ADJUSTMENT)

         a)       For any accounting period in which the CARVM Account
                  Adjustment is positive, Life Re will pay the Company Life Re's
                  Share of such amount. For any accounting period in which the
                  CARVM Account Adjustment is negative, the Company will pay
                  Life Re Life Re's Share of such amount.

         b)       The CARVM Account Adjustment for the accounting period shall
                  be equal to the CARVM Account, so defined in Article II
                  paragraph 3, at the end of the current accounting period minus
                  the CARVM account at the end of the preceding accounting
                  period.

6.       EXPERIENCE REFUND

         Life Re will pay the Company an experience refund as calculated in
accordance with SCHEDULE C.

                       ARTICLE V - SETTLEMENTS AND REPORTS

1.       ACCOUNTING PERIOD

         The accounting period for this Agreement shall be a calendar quarter,
except that the first accounting period hereunder shall run from the Effective
Date of this Agreement through June 30, 2000. Life Re and the Company shall each
reconcile the reinsurance transactions hereunder as

                                       7
<PAGE>   8
prescribed in SCHEDULE D at the end of each calendar quarter and any amounts due
at the end of such calendar quarter shall be remitted by Life Re or the Company,
whichever is applicable, within twenty (20) days after the end of the calendar
quarter.

2.       AMOUNTS DUE

         The determination of the amounts due shall be on a net basis by
offsetting any payment due from one party under this Agreement against any
payment that is due from the other party under this Agreement. If any amount
cannot be determined on an exact basis, payment of the amount shall be made on
an estimated basis and any final adjustments shall be made as soon as
practicable.

3.       INTEREST ON DELINQUENT PAYMENTS

         If either party is in arrears in remitting amounts due to the other
party, such amounts will be considered delinquent and interest will be added to
the amount to be remitted. Interest will be calculated from (i) the time such
amounts are due to (ii) the date the payor pays the amount owed to the other
party. The rate of interest charged on delinquent payments will be equal to the
90 day Treasury Bill rate as of the due date of the delinquent amount.

4.       REPORTS BY THE COMPANY

         Quarterly reports as prescribed in SCHEDULE D shall be provided by the
Company to Life Re not later than fifteen (15) days after the end of each
calendar quarter. In addition, the Company will provide information not later
than forty-five (45) days after the end of each calendar year reasonably
necessary for Life Re to prepare its various financial reports.

                               ARTICLE VI - CLAIMS

1.       CLAIMS ADMINISTRATION

         The Company shall have the sole responsibility for the settlement of
claims with its claimants. The Company will furnish to Life Re claim information
simultaneous with the quarterly reinsurance report. Upon request, the Company
will also furnish to Life Re copies of claim papers and proofs.

2.       CONTESTED CLAIMS

         Whenever the Company has formed a preliminary opinion that a claim
might be denied or contested, and prior to any final action by the Company
indicating to the claimant that the claim is being denied or contested, the
Company will give Life Re the opportunity to review the

                                       8
<PAGE>   9
complete claim file. Life Re will review this file promptly and, at its option,
(a) pay Life Re's full share as if the claim was not contested, in full
discharge of Life Re's obligation to the Company for that claim, or (b) after
consultation with the Company join in the contest, or ratify the denial, in
which case Life Re will communicate to the Company in writing Life Re's decision
to participate in the contest, or ratify the denial, with respect to that claim.

3.       EXPENSES

         Life Re will share in the claim expense of any contest or compromise of
a claim in which it chooses to participate in proportion to Life Re's Share.
Life Re will share in the total amount of any reduction in liability on such
claims in proportion to Life Re's Share. Claim expense will include without
limitation the cost of investigation, legal fees, court costs, and interest
charges. Compensation of salaried officers and employees and any possible
extra-contractual damages will not be reimbursed by Life Re. Life Re will not be
liable for expenses incurred in connection with a dispute or contest arising out
of conflicting claims of entitlement to policy proceeds or benefits.

4.       MISSTATEMENTS

         In the event of an increase or reduction in the amount of the Company's
insurance on any policy reinsured hereunder because of an overstatement or
understatement of age or misstatement of sex, established after the death of the
insured, the Company and Life Re will share in such increase or reduction in
proportion to their respective amounts at risk under that policy.

5.       ASSISTANCE AND ADVICE

         At the request of the Company, Life Re will advise the Company on any
claim concerning business reinsured under this Agreement and, when such a claim
appears to be of doubtful validity, Life Re will assist the Company in its
determination of liability and in the best procedure to follow with respect to
the claim.

                     ARTICLE VII - REINSTATEMENTS & CHANGES

1.       REINSTATEMENTS

         A policy of the Company, ceded to Life Re on an automatic basis, that
was reduced, terminated, or lapsed, if reinstated by the Company under its
regular rules, will be reinstated automatically to the amount that would be in
force had the policy not been reduced, terminated, or lapsed.

2.       PROGRAM OF INTERNAL REPLACEMENT

         Should the Company, its affiliates, successors, or assigns, initiate a
program of internal replacement, as defined below, that would include any of the
risks reinsured hereunder, the Company will immediately notify the reinsurer.
For each risk reinsured hereunder that has been

                                       9
<PAGE>   10
replaced under a program of internal replacement, the reinsurer shall have the
option, at its sole discretion, of either treating the risks reinsured as
recaptured, or continuing reinsurance on the new policy under this Agreement.
The term "program of internal replacement" shall mean any program offered to a
class of policy owners in which a policy or any portion of a policy is exchanged
for another policy, not reinsured under this Agreement, which is written by the
Company, its affiliates, successors, or assigns.

                            ARTICLE VIII - INSOLVENCY

         All reinsurance under this Agreement will be paid on demand by Life Re
directly to the Company, its liquidator, receiver, or statutory successor, on
the basis of the liability of the Company under the policy or policies reinsured
without diminution because of the insolvency of the Company. In the event of the
insolvency of the Company, the liquidator, receiver, or statutory successor of
the Company will give written notice to Life Re of a pending claim against Life
Re or the Company on any policy reinsured within a reasonable time after the
claim is filed in the conservation, liquidation, or insolvency proceedings.
While the claim is pending, Life Re may investigate and interpose, at its own
expense, in the proceedings where the claim is to be adjudicated, any defenses
that it may deem available to the Company or its liquidator, receiver, or
statutory successor. The expense incurred by Life Re will be charged, subject to
court approval, against the Company as an expense of the conservation,
liquidation, or insolvency to the extent of a proportionate share of the benefit
that accrues to the Company as a result of the defenses by Life Re. Where two or
more reinsurers are involved and a majority in interest elect to defend a claim,
the expense will be apportioned in accordance with the terms of this Agreement
as if the expense had been incurred by the Company.

                            ARTICLE IX - ARBITRATION

         Life Re and the Company intend that any dispute between them under or
with respect to this Agreement be resolved without resort to any litigation.
Accordingly, Life Re and the Company agree that they will negotiate diligently
and in good faith to agree on a mutually satisfactory resolution of any such
dispute; provided, however, that if any such dispute cannot be so resolved by
them within sixty calendar days (or such longer period as the parties may agree)
after commencing such negotiations, Life Re and the Company agree that they will
submit such dispute to arbitration in the manner specified in, and such
arbitration proceeding will be conducted in accordance with, the rules of the
American Arbitration Association.

         The arbitration hearing will be before a panel of three arbitrators,
each of whom must be a present or former officer of a life insurance or life
reinsurance company, excluding officers of the parties to this Agreement, their
affiliates or subsidiaries or past employees of any of these entities. Life Re
and the Company will each appoint one arbitrator by written notification to the
other

                                       10
<PAGE>   11
party within thirty calendar days after the date of the mailing of the
notification initiating the arbitration. These two arbitrators will then select
the third arbitrator within sixty calendar days after the date of the mailing of
the notification initiating arbitration.

        If either Life Re or the Company fails to appoint an arbitrator, or
should the two arbitrators be unable to agree upon the choice of a third
arbitrator, the president of the American Arbitration Association or of its
successor organization or (if necessary) the president of any similar
organization designated by lot of Life Re and the Company within thirty calendar
days after the request will appoint the necessary arbitrators.

        The arbitrators will deliver their decision within forty-five (45) days
of the arbitration hearing. The vote or approval of a majority of the
arbitrators will decide any question considered by the arbitrators; provided,
however, that if no two arbitrators reach the same decision, then the average of
the two closest mathematical determinations will constitute the decision of all
three arbitrators. The place of arbitration will be Stamford, Connecticut. Each
decision (including without limitation each award) of the arbitrators will be
final and binding on all parties and will be nonappealable, and (at the request
of either Life Re or the Company) any award of the arbitrators may be confirmed
by a judgment entered by any court of competent jurisdiction. No such award or
judgment will bear interest. Unless otherwise decided by the arbitrators, each
party will be responsible for paying (a) all fees and expenses charged by its
respective counsel, accountants, actuaries, and other representatives in
conjunction with such arbitration and (b) one-half of the fees and expenses
charged by each arbitrator.

                                       11
<PAGE>   12
                               ARTICLE X - DAC TAX

         Life Re and the Company hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulation under Section 848 of the
Internal Revenue Code of 1986, as amended.

         (a)      The term "party" will refer to either Life Re or the Company
                  as appropriate.

         (b)      The terms used in this Article are defined by reference to
                  Regulation 1.848-2. The term "net consideration" will refer to
                  net consideration as defined in Regulation Section 1.848-2(f).

         (c)      Each party shall attach a schedule to its federal income tax
                  return that identifies the relevant reinsurance agreements for
                  which the joint election under the Regulation has been made.

         (d)      The party with net positive consideration, as defined in the
                  Regulation promulgated under Code Section 848, for such
                  agreement for each taxable year, shall capitalize specified
                  policy acquisition expenses with respect to such agreement
                  without regard to the general deductions limitation of Section
                  848(c)(1).

         (e)      Each party agrees to exchange information pertaining to the
                  amount of net consideration under such agreement each year to
                  ensure consistency.

                         ARTICLE XI - GENERAL PROVISIONS

1.       REINSURER'S RIGHT OF NOTICE OF UNUSUAL PRACTICES

         In providing reinsurance facilities to the Company under this
Agreement, Life Re has granted the Company considerable authority with respect
to automatic binding power, reinstatements, claim settlements, and the general
administration of the reinsurance account. To facilitate transactions, Life Re
has required the minimum amount of information and documentation possible,
reflecting its utmost faith and confidence in the Company. Life Re assumes that,
except as otherwise notified by the Company, the underwriting, claims and other
insurance practices employed by the Company with respect to reinsurance ceded
under this Agreement are generally consistent with the customary and usual
practices of the insurance industry as a whole. If the Company changes or
modifies its practices or engages in exceptional or uncustomary practices, the
Company agrees to make those practices known to Life Re before assigning any
liability to Life Re with respect to any reinsurance issued under such
practices.

2.       POLICY FORMS AND RATES

         Upon request, the Company will furnish Life Re with a copy of its
application forms,

                                       12
<PAGE>   13
policy and rider forms, premium and non-forfeiture value manuals, reserve
tables, actuarial memoranda, and any other forms or tables needed for proper
handling of reinsurance under this Agreement. Life Re must agree in writing
before incurring additional liability resulting from any changes to policies,
policy riders or amendments reinsured under this Agreement.

3.       REINSURANCE CONDITIONS

         The reinsurance is subject to the same limitations and conditions as
the insurance under the policy or policies written by the Company on which the
reinsurance is based.

4.       ERRORS AND OMISSIONS

         If either the Company or Life Re unintentionally fails to perform an
obligation that affects this Agreement and such failure results in an error on
the part of the Company or Life Re, the error will be corrected by restoring
both the Company and Life Re to the positions they would have occupied had no
such error occurred. For business reported but not covered under the provisions
of this Agreement, Life Re shall be obligated only for the return of premium
paid, plus interest as provided below.

         Any amounts due under this Section 4 will bear interest at a rate
agreed upon by the Company and Life Re or at a rate equal to the Interest Rate
as described in Article V.3.

5.       OFFSET

         Any amount which either the Company or Life Re is contractually
obligated to pay to the other party may be paid out of any amount which is due
and unpaid under this Agreement. The application of this offset provision will
not be deemed to constitute diminution in the event of insolvency.

6.       INSPECTION

         Upon reasonable notice, Life Re may inspect any and all books, records,
documents or similar information relating to or affecting reinsurance under this
Agreement at the home office of the Company during normal business hours.

7.       ENTIRE AGREEMENT

         This Agreement and the Schedules attached hereto supersede all prior
discussions and written and oral agreements between the parties with respect to
the subject matter of this Agreement. This Agreement and the Schedules attached
hereto contain the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.

8.       AMENDMENT

         This Agreement may be modified or amended only with a written
instrument properly signed on behalf of the Company and Life Re.

                                       13
<PAGE>   14
9.       COUNTERPARTS

         This Agreement may be executed simultaneously in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.

10.      NO ASSIGNMENT

         Except as otherwise provided herein, neither party hereto may assign
this Agreement or any right hereunder or part hereof without the prior written
consent of the other party hereto.

11.      BINDING EFFECT

         This Agreement is binding upon and will inure to the benefit of the
parties and their respective successors and permitted assignees.

12.      NOTICES

         Any notice, request, instruction, or other document to be given
hereunder by any party hereto to the other party hereto will be in writing and
(a) delivered personally, (b) sent by facsimile, (c) delivered by overnight
express, or (d) sent by registered or certified mail, postage prepaid, as
follows:

If to the Company, to:

                      Sage Life Assurance of America, Inc.
                      300 Atlantic Street, 3rd Floor
                      Stamford, CT 06901
                      Attention: President
                      Facsimile: (203) 324-6173

If to Life Re, to:

                      Life Reassurance Corporation of America
                      969 High Ridge Road
                      Stamford, Connecticut 06905
                      Attention: General Counsel
                      Facsimile: 203/321-3200

or at such other address for a party as will be specified by like notice. Each
notice or other communication required or permitted under this Agreement that is
addressed as provided in this Article XI will, if delivered personally or by
overnight express, be deemed given upon delivery; will, if delivered by
facsimile or similar facsimile transmission, be deemed delivered when
electronically confirmed; and will, if delivered by mail in the manner described
above, be deemed

                                       14
<PAGE>   15
given on the third business day after the day it is deposited in a regular
depository of the United States Mail.

                       ARTICLE XII - DURATION OF AGREEMENT

1.       GENERAL

         This Agreement will be effective on and after the Effective Date stated
in Article I. It is unlimited in duration but may be amended by mutual consent
of the Company and Life Re. This Agreement may be terminated as to new
reinsurance by either party by giving _____________ written notice to the other
at any point on and after the ______ anniversary of the effective date of this
Agreement or, if earlier, Life Re having invested in excess of ___________in
capital in connection with this Agreement as determined by the Total Experience
Account Balance defined in SCHEDULE C. Termination as to new reinsurance does
not affect existing reinsurance. Existing reinsurance will remain in force until
termination of the Company's policy or policies on which the reinsurance is
based in accordance with the terms of this Agreement or upon recapture of this
Agreement as provided in Section 2 herein. Notwithstanding the foregoing, Life
Re may terminate this Agreement as to new and existing reinsurance in the event
the Company does not pay amounts due to Life Re, as provided in Section 3
herein.

2.       RECAPTURE

         (a)      STANDARDS FOR RECAPTURE

         The Company may recapture all of the Risks reinsured under this
Agreement (i) at any time after the first Reinsured Contract has been in force
for _____ complete years, or (ii) immediately upon notification that (x) Life
Re's A.M. Best rating has decreased by two rating grades from the date of this
agreement or (y) the commencement by Life Re or an entity against Life Re of an
action declaring Life Re's insolvency. If the Company elects to recapture any
Reinsured Contract, it must recapture every Reinsured Contract under this
Agreement, regardless of the amount of time such Reinsured Contracts have been
in force.

         (b)      RECAPTURE ALLOWANCE

         In consideration for the recapture of the Reinsured Contracts, the
Company shall pay Life Re a Recapture Allowance equal to the outstanding Total
Experience Account Balance on the date of recapture, as defined in SCHEDULE C.

3.       NONPAYMENT

         The payment of amounts due to Life Re is a condition precedent to the
liability of Life Re under this Agreement. If either party fails to pay any
funds due to the other party as provided in this Agreement and such amounts are
more than 90 days in arrears, the party that is not paid shall

                                       15
<PAGE>   16
advise the other party that the notifying party will terminate this Agreement if
payment is not forthcoming on a date that is 120 days from original payment due
date. If payment is thereafter not received by the 120th day, this Agreement
shall automatically terminate, unless termination is waived in writing by the
party not paid.

                                       16
<PAGE>   17
                            ARTICLE XIII - EXECUTION

         IN WITNESS WHEREOF, Life Re and the Company have executed this
Agreement on the dates set forth below.

                                                 SAGE LIFE ASSURANCE OF
                                                 AMERICA, INC.

                                                 By:
                                                 Name:
                                                 Title:
                                                 Date: ________________________

                                                 LIFE REASSURANCE CORPORATION
                                                 OF AMERICA

                                                 By:
                                                 Name:
                                                 Title:
                                                 Date: _________________________

                                       17
<PAGE>   18
                                   SCHEDULE A

QUOTA SHARE PERCENTAGES:

Deferred Variable Annuity - With Surrender Charges ("DVA") ______%

Deferred Variable Annuity - With No Surrender Charges ("DVA") ______%

Modified Single Premium Variable Life ("MSPVL") ______%

REINSURANCE RETENTION LIMITS:

Deferred Variable Annuity (with and without Surrender Charges)

Retention Limit

Basic Death Benefit: ____% of the excess of the Guaranteed Minimum Death Benefit
over the account value.

Accidental Death Benefit: ____% of the Accidental Death Benefit

The items above are subject to the following limitations imposed by other
reinsurance referenced in Article III section 3:

1.       The maximum basic death benefit reinsured on any one life is
         __________.
2.       The maximum annual aggregate basic death benefit paid by the reinsurer
         during any calendar year is capped at _____ basis points of the average
         aggregate account value.

Modified Single Premium Variable Life

Retention Limit

The retained basic death benefit and accidental death benefit is ________% of
the combined risk up to a maximum retention of ________ per life.

The items above are subject to the following limitations imposed by other
reinsurance referenced in Article III section 3:

1.       The maximum basic death benefit reinsured on any one life is _________.
2.       The ADB cannot exceed ________ and expires at attained age ____.

                                       18
<PAGE>   19
                             DVA GROUP POLICY FORMS

<TABLE>
<S>      <C>                        <C>
1.       GENERIC FORMS THAT APPLY:  DVA-C-9712 (BASIC CONTRACT)

                                    DVA-C-ADB-9712 (ACCIDENTAL DEATH BENEFIT RIDER)

                                    DVA-C-WSC-9712 (WAIVER SURRENDER CHARGE RIDER)

                                    DVA-C-IRA-9712 (IRA RIDER)

                                    DVA-C-(S)IRA-9712 (IRA RIDER)

                                    DVA-C-(R)IRA-9712 (IRA RIDER)

                                    AP-DVA-C-9805 (APPLICATION)

                                    MGC-C-9712 (MASTER GROUP CONTRACT)
</TABLE>

2.       STATE VARIATIONS AS APPLICABLE BY STATE

                           DVA INDIVIDUAL POLICY FORMS

<TABLE>
<S>      <C>                        <C>
1.       GENERIC FORMS THAT APPLY:  DVA-9712 (BASIC CONTRACT)

                                    DVA1-9712 (BASIC CONTRACT)

                                    DVAZ-9712 (BASIC CONTRACT)

                                    DVA-ADB-9712 (ACCIDENTAL DEATH BENEFIT RIDER)

                                    DVA-WSC-9712 (WAIVER SURRENDER CHARGE RIDER)

                                    DVA-IRA-9717 (IRA RIDER)

                                    DVA-(S)IRA-9712 (IRA RIDER)

                                    DVA-(R)IRA-9712 (IRA RIDER)

                                    AP-DVA-9805 (APPLICATION)
</TABLE>

2.       STATE VARIATIONS AS APPLICABLE BY STATE

                                       19
<PAGE>   20
                            MSPVL GROUP POLICY FORMS

<TABLE>
<S>      <C>                        <C>
1.       GENERIC FORMS THAT APPLY:  MSPVL-C-9801 (BASIC CONTRACT)

                                    MSPVL-C-ACCDB-9801 (ACCELERATED DEATH BENEFIT RIDER)

                                    MSPVL-C-ADB-9801 (ACCIDENTAL DEATH BENEFIT RIDER)

                                    MSPVL-C-COI-9801 (CHANGE OF INSURED RIDER)

                                    MSPVL-C-WSC-9801 (WAIVER SURRENDER CHARGE RIDER)

                                    AP-MSPVL-C-9806 (APPLICATION)

                                    TIA-MSPVL-C-9806 (TEMPORARY INSURING AGREEMENT)

                                    APII-MSPVL-C-9806 (PART II OF APPLICATION)
</TABLE>

2.       STATE VARIATIONS AS APPLICABLE BY STATE

                          MSPVL INDIVIDUAL POLICY FORMS

<TABLE>
<S>      <C>                        <C>
1.       GENERIC FORMS THAT APPLY:  MSPVL-9801 (BASIC CONTRACT)

                                    MSPVL1-9801 (BASIC CONTRACT)

                                    MSPVL-ACCDB-9801 (ACCELERATED DEATH BENEFIT RIDER)

                                    MSPVL-ADB-9801 (ACCIDENTAL DEATH BENEFIT RIDER)

                                    MSPVL-COI-9801 (CHANGE OF INSURED RIDER)

                                    MSPVL-WSC-9801 (WAIVER SURRENDER CHARGE RIDER)

                                    AP-MSPVL-9806 (APPLICATION)

                                    TIA-MSPVL-9806 (TEMPORARY INSURING AGREEMENT)

                                    APII-MSPVL-9806 (PART II OF APPLICATION)
</TABLE>

2.       STATE VARIATIONS AS APPLICABLE BY STATE

                                       20
<PAGE>   21
                                   SCHEDULE B

                            DEFERRED VARIABLE ANNUITY

                             WITH SURRENDER CHARGES

<TABLE>
<CAPTION>
       EXPENSE                                        ALLOWANCE
<S>                                                   <C>
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
</TABLE>

                                       21
<PAGE>   22
                            DEFERRED VARIABLE ANNUITY

                            WITH NO SURRENDER CHARGES

<TABLE>
<CAPTION>
       EXPENSE                                        ALLOWANCE
<S>                                                   <C>
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
</TABLE>

                                       22
<PAGE>   23
                      MODIFIED SINGLE PREMIUM VARIABLE LIFE

<TABLE>
<CAPTION>
       EXPENSE                                        ALLOWANCE
<S>                                                   <C>
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
</TABLE>

                                       23
<PAGE>   24
                                   SCHEDULE C

                                EXPERIENCE REFUND

                                       24
<PAGE>   25
                                   SCHEDULE D

                        SUMMARY OF MONETARY TRANSACTIONS

1.       DUE LIFE RE

         Reinsurance Premiums
         Consideration on Reinstatements
         Benefits from Other Reinsurance
         Modified Coinsurance Reserve Adjustment (if negative)
         Change in Funds Withheld (CARVM Account Adjustment) (if negative)
         Service Fees from the Funds

         Total Due Life Re

2.       DUE COMPANY

         Commission and Expense Allowances
         Death Benefits
         Surrender, Withdrawal, and Maturity Benefits
         Annuitization Benefits
         Cost of Other Reinsurance
         Modified Coinsurance Reserve Adjustment (if positive)
         Change in Funds Withheld (CARVM Account Adjustment) (if positive)
         Experience Refund

         Total Due Company

3.       NET DUE LIFE RE, if positive
         NET DUE COMPANY, if negative
         (1 LESS 2)

4.       OTHER INFORMATION
         Reinsured Account Value
         Reinsured Statutory Reserves
         Reinsured CARVM Account
         Reinsurer's Target Surplus

                                       25

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