EXHIBIT (7) ASSUMPTION REINSURANCE AGREEMENT

EXHIBIT (7)

ASSUMPTION REINSURANCE AGREEMENT

Between

Xxxxxxx Xxxxx Life Insurance Company
Tandem Insurance Group, Inc.
Royal Tandem Life Insurance Company

and

Family Life Insurance Company

Dated: March 21, 1991
2
TABLE OF CONTENTS

Page

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

A. Administrative Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

B. Assumption Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

C. Assumption Date(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

D. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

E. Indemnity Reinsurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

F. Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

G. Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II
ASSUMPTION OF RISK . . . . . . . . . . . . . . . . . . . . . 2

A. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Assumption on Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

C. Assumption After the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

D. Assumption Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARTICLE III
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . 5

A. Assets Other Than Separate Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

B. Separate Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

C. Ceding Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

D. Release of MLLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE IV
BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE V
ASSUMPTION CERTIFICATES . . . . . . . . . . . . . . . . . . . . 7

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TABLE OF CONTENTS (cont.)

Page

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FLIC . . . . . . . . . . . . . . . . 7

A. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

B. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

C. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

D. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF REINSURERS . . . . . . . . . . . . . . . 9

A. Representations and Warranties of MLLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

B. Representations and Warranties of TIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

1. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

C. Representations and Warranties of TIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

3. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 17

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TABLE OF CONTENTS (cont.)

Page

ARTICLE IX
ARBITRATION . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE X
NOTICE . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE XI
CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . 23

A. Governmental Filings and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

B. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

C. Establishment of Separate Accounts by MLLIC,
TIG and Royal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

D. No Pending Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE XII
EFFECTIVE DATE, CLOSING AND LOCATION . . . . . . . . . . . . . . . . 25

ARTICLE XIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE XIV
COVENANTS OF FLIC . . . . . . . . . . . . . . . . . . . . 26

A. Nonsolicitation of Policyholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

B. Covenant Not to Disclose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

C. Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

ARTICLE XV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 28

A. Acknowledgement of Indemnity Reinsurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

B. Maintenance of Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

C. Acknowledgement of Administrative Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

D. Trademark and Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

E. No Ceding Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

F. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

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TABLE OF CONTENTS (cont.)

Page

G. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

H. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

I. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

J. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

K. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

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EXHIBITS

A. ADMINISTRATIVE SERVICE AGREEMENT BETWEEN FLIC AND MLLIC

B. INDEMNITY REINSURANCE AGREEMENT BETWEEN FLIC AND MLLIC

C. POLICIES TO BE ASSUMED BY XXXXXXX XXXXX LIFE INSURANCE COMPANY

D. POLICIES TO BE ASSUMED BY TANDEM INSURANCE GROUP, INC.

E. POLICIES TO BE ASSUMED BY ROYAL TANDEM LIFE INSURANCE COMPANY

F. ASSUMPTION CERTIFICATE

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ASSUMPTION REINSURANCE AGREEMENT

This Assumption Reinsurance Agreement ("Agreement") is made and
entered into this 21st day of March, 1991, by and between Xxxxxxx Xxxxx Life
Insurance Company, a Washington insurance corporation ("MLLIC"), Tandem
Insurance Group, Inc., an Illinois corporation ("TIG"), Royal Tandem Life
Insurance Company, a New York corporation ("Royal"), (MLLIC, TIG and Royal are
also individually referred to herein as "Reinsurer" and collectively as
"Reinsurers") and Family Life Insurance Company, a Washington insurance
corporation ("FLIC").

ARTICLE I

DEFINITIONS

For the purposes of this Agreement, the following terms shall have the
following definitions:

A. Administrative Services Agreement shall mean the Administrative
Services Agreement between FLIC and MLLIC dated _________________ and
attached hereto as Exhibit A.

B. Assumption Closings shall mean the closings at which any of the
Policies are assumed on an assumption reinsurance basis by a Reinsurer
as contemplated by Article II.

C. Assumption Date(s) shall mean, with respect to any of the Policies,
the date on which a particular policy or contract included in the
Policies is assumed by a Reinsurer pursuant to Article II.

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D. Effective Date shall mean such date as is described in Article XII,
which date shall be the initial Assumption Date.

E. Indemnity Reinsurance Agreement shall mean the Indemnity Reinsurance
Agreement between FLIC and MLLIC dated December 28, 1990, and attached
hereto as Exhibit B.

F. Policies shall mean, collectively, all life insurance policies and
annuity contracts of FLIC which are subject to the Indemnity
Reinsurance Agreement, and as to each Reinsurer individually, shall
mean those of the Policies reinsured by MLLIC, TIG or Royal as
identified by form number and jurisdiction in Exhibits C, D and E to
this Agreement respectively.

G. Stock Purchase Agreement shall mean the proposed agreement between
Xxxxxxx Xxxxx Insurance Group, Inc., Family Life Insurance Company,
Financial Industries Corporation and an affiliated company of
Financial Industries Corporation, pursuant to which it is intended
that controlling interest of FLIC will be acquired by an affiliated
company of Financial Industries Corporation.

ARTICLE II

ASSUMPTION OF RISK

A. Generally.

FLIC hereby agrees to cede, transfer, sell, bargain and convey unto
the Reinsurers by way of assumption reinsurance all of its obligations, rights,
privileges and liabilities under the

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Policies, and the Reinsurers hereby agree to assume, subject to the terms and
conditions of this Agreement, all obligations and liabilities of FLIC with
respect to the Policies under the terms of each policy or contract included in
the Policies to the maximum extent allowed by law. In connection with such
assumption the Reinsurers shall be entitled to any and all defenses, offsets,
counterclaims, and cross actions to which FLIC would otherwise be entitled,
whether the same be known to exist or hereafter discovered.

B. Assumption on Effective Date.

On the Effective Date of this Agreement, which shall be the initial
Assumption Date, each Reinsurer shall assumption reinsure in accordance with
the terms of this Agreement, all of the Policies which are in force at that
time and as to which the policyowners or contractowners thereof reside in
jurisdictions where the Reinsurer designated to assume such of the Policies, as
stated in Exhibits C, D and E, is authorized or permitted by law to assumption
reinsure such Policies.

C. Assumption After the Effective Date.

After the Effective Date, FLIC and Reinsurers shall make all required
regulatory filings and use their best efforts to obtain all licenses,
authorizations and regulatory approvals necessary for the assumption by
Reinsurers of any of the Policies which Reinsurers could not lawfully assume on
the Effective Date. Both FLIC and Reinsurers shall assist each other by
providing all necessary information and assistance as shall be reasonably

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requested by the other party for purposes of satisfying all regulatory
requirements relating to the assumption by Reinsurers of all Policies. After
satisfying all necessary legal requirements in a jurisdiction, the appropriate
Reinsurer shall have the obligation from time to time to assume those Policies
whose owners reside in such jurisdiction at an Assumption Closing.

Reinsurers agree to undertake the responsibility to take all actions
necessary to accomplish the purposes of this Article II.C. and further agree
that FLIC shall be required to take independent corporate action, at no expense
to FLIC, only when such action by FLIC is necessary as a precondition to
proceeding to an Assumption Closing as to a particular jurisdiction.

D. Assumption Closing.

Each assumption by a Reinsurer of Policies shall take place at an
Assumption Closing to be held at such location as is mutually agreed by the
parties, at a time and date, designated by the Reinsurer, after all necessary
legal requirements for such assumption have been met (including the expiration
or termination of all applicable waiting periods, if any, including any
extensions thereof, required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act).

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ARTICLE III

TRANSFER OF ASSETS

On each Assumption Date(s), including the initial Assumption
Date, as to each of the Policies to be assumption reinsured on such date(s):

A. Assets Other Than Separate Account Assets.

1. If MLLIC is the assuming Reinsurer, MLLIC shall retain
statutorily admissible assets equal to the statutory reserve
established by MLLIC for such Policies pursuant to the
Indemnity Reinsurance Agreement, computed in accordance with
statutory accounting requirements.

2. If TIG or Royal is the assuming Reinsurer, MLLIC shall
transfer to TIG or Royal, as the case may be, statutorily
admissible assets equal to the statutory reserve established
by MLLIC for such Policies pursuant to the Indemnity
Reinsurance Agreement, computed in accordance with statutory
accounting requirements.

B. Separate Account Assets. FLIC shall transfer to MLLIC, TIG or Royal,
as the case may be, assets representing the contract liabilities
attributable to the variable portion of the variable annuity contracts
participating in the separate account known as the Xxxxxxx Xxxxx
Variable Annuity Account.

C. Ceding Commission. Any transfer of assets by MLLIC to TIG or Royal as
identified in A. above shall be reduced by the appropriate proportion
of the ceding commission previously

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paid by MLLIC to FLIC pursuant to the Indemnity Reinsurance Agreement.

D. Release of MLLIC. Upon any asset transfers identified in A. and B.
above, MLLIC shall be released from any and all liability under the
Indemnity Reinsurance Agreement as to those of the Policies assumed
at any Assumption Closing at which such asset transfers occurred to
the extent that such liability is transferred to the appropriate
Reinsurer.

ARTICLE IV

BOOKS AND RECORDS

On the Assumption Dates FLIC shall transfer and deliver to the
appropriate Reinsurer, at no expense to FLIC, all books, records, computer
files, computer tapes and discs, other software and correspondence pertaining
to the Policies assumption reinsured on such dates as may be required by the
Reinsurer for the proper administration and servicing thereof, to the extent
that MLLIC does not already have possession thereof pursuant to the
Administrative Services Agreement. All correspondence and inquiries concerning
any of the Policies which are received by FLIC subsequent to the Assumption
Date of such of the Policies shall be promptly forwarded to Xxxxxxx Xxxxx
Insurance Group Services, Inc., 0000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx,
Xxxxxxx, 00000, Attention: Manager, Policyholder Services Department.

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ARTICLE V

ASSUMPTION CERTIFICATES

As soon as possible after the Assumption Dates, and in any event
within the time prescribed by applicable insurance laws, the appropriate
Reinsurer shall mail to the last known address of each policyowner or
contractowner of the Policies an Assumption Certificate in a form substantially
similar to the form attached hereto as Exhibit F or in such other form as may
be required by the insurance regulatory authority of the state in which the
policyowner or contractowner resides.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF FLIC

FLIC hereby represents and warrants to the Reinsurers that:

A. Organization, Standing and Power. FLIC is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Washington and is duly licensed, qualified or admitted to
do business and is in good standing in all jurisdictions in which the
ownership, use or leasing of its assets or properties or the conduct
or nature of its business makes such licensing, qualification or
admission necessary. FLIC is not licensed to do an insurance business
in the State of New York. FLIC has full corporate power and authority
to enter into this Agreement and perform its obligations hereunder.

B. Authority. The execution, delivery and compliance with the terms of
this Agreement by FLIC and performance by FLIC of

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its obligations hereunder has been duly and validly authorized by all
necessary corporate action on the part of FLIC and this Agreement
constitutes a valid and binding obligation of FLIC which is
enforceable against FLIC in accordance with its terms.

C. Effect of Agreement. The execution and delivery of this Agreement by
FLIC does not and the performance by FLIC of its obligations under
this Agreement will not:

(1) violate any existing term or provision of any law or any writ,
judgment, decree, injunction or similar order applicable to
FLIC;

(2) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a
default under, any of the terms, conditions, or provisions of
the articles or certificate of incorporation or bylaws of
FLIC;

(3) result in the creation or imposition of any lien, charge, or
encumbrance upon FLIC or any of its assets or properties that
individually or in the aggregate with any other liens,
charges, or encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability of FLIC to
perform its obligations under this Agreement; or

(4) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or

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both) a default under, or give to any person or entity any
right of termination, cancellation, acceleration, or
modification in or with respect to, any contract or agreement
to which FLIC is a party or by which its assets or properties
may be bound, and as to which any such conflicts, violations,
breaches, defaults or rights individually or in the aggregate
have or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement, or
on the ability of FLIC to perform its obligations under this
Agreement, except as to any rights preserved by federal or
state laws to the policyholders or contractholders of the
Policies.

D. Brokers and Finders. All negotiations relative to this Agreement and
the transaction contemplated hereby have been carried out by FLIC
directly with the Reinsurers without the intervention of any person on
behalf of FLIC (except firms engaged by and to be compensated solely
by FLIC) in such manner as to give rise to any valid claim by any
person against the Reinsurers for a finder's fee, brokerage commission
or similar payment.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF REINSURERS

A. Representations and Warranties of MLLIC. MLLIC hereby represents and
warrants to FLIC that:

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1. Organization, Standing and Power. MLLIC is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Washington and is duly licensed,
qualified or admitted to do business and is in good standing
in all jurisdictions in which the ownership, use or leasing of
its assets or properties or the conduct or nature of its
business makes such licensing, qualification or admission
necessary, except as previously disclosed by MLLIC to FLIC in
writing. MLLIC has full corporate power and authority to
enter into this Agreement and to perform its obligations
hereunder, subject to the limitation of authority stated
herein and any contrary finding of any regulatory authority as
described in Article XI A. herein.

2. Authority. The execution, delivery and compliance with the
terms of this Agreement by MLLIC and performance by MLLIC of
its obligations hereunder has been duly and validly authorized
by all necessary corporate action on the part of MLLIC and
this Agreement constitutes a valid and binding obligation of
MLLIC which is enforceable against MLLIC in accordance with
its terms.

3. Effect of Agreement. The execution and delivery of this
Agreement by MLLIC do not, and the performance by MLLIC of its
obligations under this Agreement will not:

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(a) violate any existing term or provision of any law or
any writ, judgment, decree, injunction or similar
order applicable to MLLIC;

(b) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, any of the terms,
conditions, or provisions of the articles or
certificate of incorporation or bylaws of MLLIC;

(c) result in the creation or imposition of any lien,
charge, or encumbrance upon MLLIC or any of its
assets or properties that individually or in the
aggregate with any other liens, charges, or
encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability
of MLLIC to perform its obligations under this
Agreement; or

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conflicts, violations, breaches, defaults or rights
individually or in the aggregate have or may
reasonably be expected to have a material adverse
effect on the validity or enforceability of this
Agreement, or on the ability of MLLIC to perform its
obligations under this Agreement.

4. Brokers and Finders. All negotiations relative to this
Agreement and the transaction contemplated hereby have been
carried out by MLLIC directly with FLIC without the
intervention of any person on behalf of MLLIC (except firms
engaged by and to be compensated solely by MLLIC) in such
manner as to give rise to any valid claim by any person
against FLIC for a finder's fee, brokerage commission or
similar payment.

B. Representations and Warranties of TIG. TIG hereby represents and
warrants to FLIC that:

1. Organization, Standing and Power. TIG is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Illinois and is duly licensed, qualified
or admitted to do business and is in good standing in all
jurisdictions in which the ownership, use or leasing of its
assets or properties or the conduct or nature of its business
makes such licensing, qualification or admission necessary
except as previously disclosed by TIG to FLIC in writing. TIG
has full corporate power and authority to enter into

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this Agreement and to perform its obligations hereunder,
subject to the limitation of authority stated herein and any
contrary finding of any regulatory authority as described in
Article XI A. herein.

2. Authority. The execution, delivery and compliance with the
terms of this Agreement by TIG and performance by TIG of its
obligations hereunder has been duly and validly authorized by
all necessary corporate action on the part of TIG and this
Agreement constitutes a valid and binding obligation of TIG
which is enforceable against TIG in accordance with its terms.

3. Effect of Agreement. The execution and delivery of this
Agreement by TIC, do not, and the performance by TIG of its
obligations under this Agreement will not:

(a) violate any existing term or provision of any law or
any writ, judgment, decree, injunction or similar
order applicable to TIG;

(c) result in the creation or imposition of any lien,
charge, or encumbrance upon TIG or any of its assets
or properties that individually or in the

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aggregate with any other liens, charges, or
encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability
of TIG to perform its obligations under this
Agreement; or

(d) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, or give to any person
or entity any right of termination, cancellation,
acceleration, or modification in or with respect to,
any contract or agreement to which TIG is a party or
by which its assets or properties may be bound, and
as to which any such conflicts, violations, breaches,
defaults or rights individually or in the aggregate
have or may reasonably be expected to have a material
adverse effect on the validity or enforceability of
this Agreement, or on the ability of TIG to perform
its obligations under this Agreement.

4. Brokers and Finders. All negotiations relative to this
Agreement and the transaction contemplated hereby have been
carried out by TIG directly with FLIC without the intervention
of any person on behalf of TIG (except firms engaged by and to
be compensated solely by TIG) in such manner as to give rise
to any valid claim by

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any person against FLIC for a finder's fee, brokerage
commission or similar payment.

C. Representations and Warranties of Royal. Royal hereby represents and
warrants to FLIC that:

1. Organization, Standing and Power. Royal is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of New York and is duly licensed, qualified
or admitted to do business and is in good standing in all
jurisdictions in which the ownership, use or leasing of its
assets or properties or the conduct or nature of its business
makes such licensing, qualification or admission necessary,
except as previously disclosed by Royal to FLIC in writing.
Royal has full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder,
subject to the limitation of authority stated herein and any
contrary finding of any regulatory authority as described in
Article XI A. herein.

2. Authority. The execution, delivery and compliance with the
terms of this Agreement by Royal and performance by Royal of
its obligations hereunder has been duly and validly authorized
by all necessary corporate action on the part of Royal and
this Agreement constitutes a valid and binding obligation of
Royal which is enforceable against Royal in accordance with
its terms.

- 15 -
22
3. Effect of Agreement. The execution and delivery of this
Agreement by Royal do not, and the performance by Royal of its
obligations under this Agreement will not:

(a) violate any existing term or provision of any law or
any writ, judgment, decree, injunction or similar
order applicable to Royal;

(c) result in the creation or imposition of any lien,
charge, or encumbrance upon Royal or any of its
assets or properties that individually or in the
aggregate with any other liens, charges, or
encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability
of Royal to perform its obligations under this
Agreement; or

- 16 -
23
with respect to, any contract or agreement to which
Royal is a party or by which its assets or properties
may be bound, and as to which any such conflicts,
violations, breaches, defaults or rights individually
or in the aggregate have or may reasonably be
expected to have a material adverse effect on the
validity or enforceability of this Agreement, or on
the ability of Royal to perform its obligations under
this Agreement.

4. Brokers and Finders. All negotiations relative to this
Agreement and the transaction contemplated hereby have been
carried out by Royal directly with FLIC without the
intervention of any person on behalf of Royal (except firms
engaged by and to be compensated solely by Royal) in such
manner as to give rise to any valid claim by any person
against FLIC for a finder's fee, brokerage commission or
similar payment.

ARTICLE VIII

INDEMNIFICATION

Each Reinsurer agrees that it will investigate, pay, defend or settle
and bear the sole cost and expense of all claims, surrenders and litigation
which are incurred under the Policies assumed by it hereunder on and after the
respective Assumption Dates and that it will indemnify FLIC, FLIC's directors,
officers, employees, agents and successors and assigns and agrees to hold FLIC
free and harmless of and from any and all loss,

- 17 -
24
liability and expense (including but not limited to extra contractual,
punitive, exemplary and/or consequential damages, reasonable attorneys fees and
court costs or settlement fees or costs) upon or by reason of such claims,
surrenders or litigation in connection with the Policies.

In the event of a claim or surrender payment being made or litigation
expense being incurred by FLIC on or after the Assumption Dates in connection
with the Policies assumed on such Assumption Dates, FLIC shall notify the
appropriate Reinsurer of such payment and such Reinsurer shall promptly
reimburse FLIC to the extent of any such payment or incurred expense.

If process is served upon FLIC with respect to any of the Polices
after the Assumption Date as to such of the Policies, FLIC shall give prompt
notice thereof to the appropriate Reinsurer, and such Reinsurer then, in its
own name and at its own cost and expense, may interpose any defense in, or may
settle, compromise or otherwise dispose of, such action at such Reinsurer's
discretion. Any correspondence or inquiries or requests related to any of the
Policies assumption reinsured hereunder shall promptly be forwarded by FLIC to
the appropriate Reinsurer.

Subject to the conditions and provisions of this Agreement, each
Reinsurer hereby agrees to indemnify and hold FLIC or any successor of FLIC
harmless, as to the Policies assumed by that Reinsurer, from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities,

- 18 -
25
deficiencies, costs and expenses of all kinds whatsoever, including, without
limitation, interest, penalties and reasonable attorneys' fees, damages,
awards, and fines assessed against or imposed upon or incurred by the party
indemnified (collectively, "Losses") arising or resulting from a breach of any
term, condition or provision contained in this Agreement or any facts or
circumstances constituting such a breach by the indemnifying party, other than
for Losses arising or resulting from the gross negligence or willful misconduct
of FLIC.

The party indemnified shall give the indemnifying party ten (10) days
written notice of any claims asserted against or imposed upon or incurred by
the party indemnified, for which indemnification or reimbursement may be sought
on account of the provisions of this Agreement, but the omission so to notify
the indemnifying party shall not release that party from any liability which it
may have to the party indemnified otherwise than on account of the provisions
of this Agreement.

The indemnifying party may give the party indemnified written notice,
within five (5) days of receipt of written notice of claim as required above,
of its election to conduct the defense of such demand, claim, action, or
proceeding or other matter as set out above at its own expense. If the
indemnifying party has given the party indemnified notice of election to
conduct the defense, the party indemnified shall nevertheless have the right to
participate in the defense thereof, but such participation shall be fully at
the expense of the party

- 19 -
26
indemnified without a right of further reimbursement of the expense of such
participation. If the indemnifying party shall not notify the party
indemnified of its election of the right to defend such claim, action or
proceeding, the party indemnified may, but need not, conduct the defense of any
claim, action or proceeding. The party indemnified may at any time notify the
indemnifying party of its intention to settle, compromise or satisfy any such
claim, action or proceeding (the defense of which the indemnifying party has
not previously elected to conduct) and may make such settlement, compromise or
satisfaction (at the indemnifying party's expense) unless the indemnifying
party shall notify the party indemnified in writing within fifteen (15) days
after receipt of such notice of intention to settle, compromise or satisfy its
election to assume at its sole expense the defense of any such claim, action or
proceeding and promptly thereafter take appropriate action to implement such
defense. Any such settlement, compromise or satisfaction made by the party
indemnified of, or any such final judgment or decree entered in any claim,
action or proceeding defended only by the party indemnified shall be deemed to
have been consented to by, and shall be binding upon, the indemnifying party as
fully as though it alone has assumed the defense thereof and a final judgment
or decree had been entered in such proceeding or action by a court of competent
jurisdiction in the amount of such settlement, compromise, judgment or decree.

- 20 -
27
ARTICLE IX

ARBITRATION

Any dispute which may arise under this Agreement between FLIC and any
Reinsurer shall be settled by an equitable rather than a strictly legal
interpretation pursuant to arbitration conducted in accordance with the
commercial Rules of the American Arbitration Association. In such cases, the
parties will submit their differences to three (3) arbiters, who shall be
officers of insurance companies other than the parties and their affiliates, or
subsidiaries: one (1) to be selected by FLIC, one (1) to be selected by the
Reinsurer, and the third to be selected by the arbiters named by the parties
herein. In the event of disagreement between the arbiters, the decisions will
rest with the majority. The decision of the majority of the arbiters shall be
binding upon the parties herein without appeal. The arbiters will be relieved
of all judicial formality and may abstain from the strict rules of law.

Arbitration may be initiated by either FLIC or the Reinsurer (the
petitioner) by written notice to the other party identifying the nature of the
dispute, demanding arbitration and naming its arbiter. The other party (the
respondent) shall have 10 days after receipt of said notice within which to
designate its arbiter. The third arbiter shall be chosen by the two arbiters
named by the parties within 10 days thereafter and the arbitration shall be
held at the place hereinafter set forth 10 days after the appointment of the
third arbiter. Should the two

- 21 -
28
arbiters not be able to agree on the choice of the third, then the appointment
shall be as follows: Each party will chose three arbiters, two of which shall
be refused by the opposing party. The third arbiter shall then be selected by
lot from the remaining two. If the respondent does not name its arbiter and
the respondent will not be aggrieved thereby.

Arbitration shall take place in Philadelphia, Pennsylvania or any
other site agreed upon by the arbiters. The expense of the arbitration
proceeding shall be borne by the losing party; provided that each party shall
be responsible for expenses it incurs with respect to preparation for and
presentation of evidence and witnesses at the proceeding, including the expense
of the arbiter it selects. The decision of the arbiters may be entered as a
final judgment in any court of competent jurisdiction.

ARTICLE X

NOTICE

Any notice allowed or required by the provisions of this Agreement
shall be sent by certified mail, postage pre-paid, return receipt requested, to
each party addressed as follows or to such other address as may be requested by
such party by giving notice pursuant to this provision:

FLIC FAMILY LIFE INSURANCE COMPANY
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: President

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29
with a copy to: Family Life Insurance Company
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel

MLLIC XXXXXXX XXXXX LIFE INSURANCE COMPANY
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: President

with a copy to: Xxxxxxx Xxxxx Insurance Group, Inc.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel

TIG Tandem Insurance Group, Inc.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: President

with a copy to: Xxxxxxx Xxxxx Insurance Group, Inc.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel

Royal Royal Tandem Life Insurance
0 Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President

with a copy to: Xxxxxxx Xxxxx Insurance Group, Inc.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel

ARTICLE XI

CONDITIONS PRECEDENT TO CLOSING

The obligation of either FLIC or the appropriate Reinsurer to
effectuate an Assumption Closing(s) on each Assumption Date(s) shall be subject
to the following conditions having been complied with on or before each
Assumption Date(s) with respect to those of the Policies assumed on such date:

- 23 -
30
A. Governmental Filings and Approvals. All required filings with and
consents and approvals of state insurance regulatory authorities have
been made or obtained. The Insurance Commissioner or the State of
Washington shall approve or not express objection to this Agreement.
If the approval or consent of any insurance regulatory authority other
than the Insurance Commissioner of the State of Washington is
required, the failure to acquire the approval or consent of such
regulatory authority shall not void this Agreement. Rather, the lack
of such approval or consent shall preclude an Assumption Closing
respecting any of the Policies affected thereby until the approval or
consent of any such regulatory authority has been obtained;

B. Consents.

All consents required from third parties other than regulatory
authorities shall have been obtained;

C. Establishment of Separate Accounts by MLLIC, TIG and Royal.

All necessary consents or approvals of the U.S. Securities and
Exchange Commission and any other appropriate regulatory authorities
shall have been obtained to allow MLLIC, TIG and Royal to establish
new separate accounts and to permit the transfer of the assets
attributable to the variable portion of the variable annuity contracts
reinsured hereunder in the Xxxxxxx Xxxxx Variable Annuity Account from
FLIC to the new MLLIC, TIG or Royal separate account on the Effective
Date, and registration statements filed on behalf of the MLLIC,

- 24 -
31
TIG or Royal separate accounts pursuant to the Securities Act of 1993
relating to the variable annuity contracts to be assumption reinsured
by MLLIC, TIG or Royal shall have been declared effective;

D. No Pending Actions. No action, suit or proceeding by any governmental
or regulatory authority seeking to restrain or prohibit the consummation of
this transaction shall be threatened by any governmental or regulatory
authority of competent jurisdiction.

ARTICLE XII

EFFECTIVE DATE, CLOSING AND LOCATION

The Effective Date shall be such time and date as is designated by the
Reinsurers, which shall be on or before, or as soon as reasonably practicable
after, the closing date of the Stock Purchase Agreement, based upon the
Reinsurers actively pursuing any and all necessary regulatory approvals or
consents related to this Agreement in a timely fashion. The initial Assumption
Closing shall occur on the Effective Date and shall take place at such location
as FLIC and Reinsurers may unanimously agree.

ARTICLE XIII

TERMINATION

A. This Agreement may be terminated and abandoned without liability to
the terminating party on or prior to the Effective Date by unanimous
consent of FLIC and the Reinsurers.

- 25 -
32
B. This Agreement shall be terminated after the Effective Date:

1. By unanimous written consent of FLIC and the Reinsurers; or

2. On the final Assumption Date. The final Assumption Date is
the Assumption Date of any Policies the policyowners or
contractowners of which reside in the jurisdiction which is
the final jurisdiction in which any Reinsurer must obtain any
necessary licensure, authority or approval from regulatory
authorities to assumption reinsure the last of the Policies to
be assumed.

3. The indemnification provisions of ARTICLE VIII herein shall survive
the termination of this Agreement under this section B.

ARTICLE XIV

COVENANTS OF FLIC

A. Nonsolicitation of Policyholders. FLIC covenants and agrees that for
a period of ten years after the Effective Date, it will not, whether
for its own account or for the account of any other person, firm,
corporation or other business organization, use a list of all or any
portion of the policyholders or contractholders of the Policies to
solicit such policyholders or contractholders, provide a list of all
or any portion of such policyholders or contractholders to any third
party or intentionally interfere with any Reinsurer's relationship
with any such policyholders or

- 26 -
33
contractholders. This covenant shall not preclude FLIC from
soliciting or issuing a policy to any policyholder or contractholder
of the Policies if the initial contract and the relationship between
FLIC and such policyholder or contractholder are established totally
independent of the list of all or any portion of the policyholders or
contractholders of the Policies which may be accessible to FLIC, and
are otherwise established in FLIC's normal course of business.

B. Covenant Not to Disclose. FLIC covenants and agrees that it will not
at any time reveal, divulge or make known to any person (other than
the Reinsurers, or any of their respective officers, employees or
agents) or use for FLIC's own account the names and addresses of the
policyholders or contractholders of the Policies or any other
confidential or proprietary records, data, trade secrets or other
information relating to such policyholders or contractholders, or the
Policies. FLIC further covenants and agrees that it shall retain all
such knowledge and information which it shall acquire or develop
respecting such confidential information in trust for the exclusive
benefit of the Reinsurers and their successors and assigns.

C. Conflicting Agreements. The provisions of this Article shall
supersede and be controlling as to any provisions to the contrary or
inconsistent herewith in any agents contracts or agreements between
FLIC and the agents who

- 27 -
34
produced the Policies or any other agreement which contains provisions
relating to this subject matter.

ARTICLE XV

MISCELLANEOUS

A. Acknowledgement of Indemnity Reinsurance Agreement. FLIC and the
Reinsurers acknowledge the existence of the Indemnity Reinsurance
Agreement and agree that any of the Policies intended to be assumption
reinsured pursuant to this Agreement but which, for any regulatory or
other reason, may not be assumption reinsured as of the Effective
Date, shall continue to be indemnity reinsured under the Indemnity
Reinsurance Agreement until such time as they may be assumption
reinsured under this Agreement. FLIC further agrees that as to any
policyholders or contractholders whose policies or contracts were
initially assumed by a Reinsurer, but which, due to any right of
rejection, regulatory action or any other reason must remain with or
be returned to FLIC, such policies or contracts will be treated as the
same and continuing FLIC policies or contracts as existed on the
Effective Date and not as newly issued policies or contracts.

B. Maintenance of Separate Account. In order to accommodate any variable
annuity contractholders of FLIC whose contracts for any reason cannot
be assumed by MLLIC, TIG or Royal on the Effective Date, and therefore
whose contracts must remain with or be returned to FLIC after the
Effective Date,

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35
and to otherwise facilitate the Indemnity Reinsurance Agreement, FLIC
agrees to maintain the separate account known as the Xxxxxxx Xxxxx
Variable Annuity Account, at no expense to FlIC.

C. Acknowledgement of Administrative Services Agreement. FLIC and MLLIC
acknowledge that the Administrative Services Agreement is to become
effective as of the closing date of the Stock Purchase Agreement and
that, pursuant to the Administrative Services Agreement, MLLIC will
administer and service such of the Policies that must remain indemnity
reinsured after the closing date of the Stock Purchase Agreement for
the period of time that such of the Policies remain indemnity
reinsured under the Indemnity Reinsurance Agreement.

D. Trademark and Other Considerations. On the Effective Date, FLIC shall
transfer to the appropriate Reinsurer all of FLIC's rights, title and
interest in and to any and all service marks, tradenames and
trademarks, whether common law or registered (federal or state), which
are used exclusively in connection with the Policies, except any
relating to a corporate name now used by FLIC (the "Transferred
Names"), any and all copyrights and copyrighted materials, whether
common law or registered (federal or state), which are used
exclusively in connection therewith (the "Transferred Copyrights"),
including, without limitation, any and all registrations of such
Transferred Names or Transferred

- 29 -
36
Copyrights and any and all forms or other documents whatsoever
relating thereto. The appropriate Reinsurer shall grant to FLIC a
royalty free license to use any and all services marks, tradenames and
trademarks, whether common law or registered (federal or state), which
are used exclusively in connection with the Policies, except any
relating to a corporate name now used by FLIC ("Licensed Names"), any
and all copyrights and copy righted materials, whether common law or
registered (federal or state), which are used in connection with the
Policies (the "Licensed Copyrights"), including, without limitation,
any and all registrations of such Licensed Names or Licensed
Copyrights, and any and all forms for other documents whatsoever
relating thereto for such time as this Agreement remains in effect.
In addition, FLIC shall permit the appropriate Reinsurer to use and
copy any and all policy forms, insurance forms and filings and other
registrations and similar documents relating to the Policies.

The use by FLIC of the aforesaid license shall be limited to the
marketing of insurance products by FLIC through insurance producers
who are affiliated with Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx,
Incorporated.

E. No Ceding Commissions. No fee or commission shall be payable with
respect to this Agreement either by FLIC to any Reinsurer or by any
Reinsurer to FLIC.

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37
F. Entire Agreement. This Agreement, including the exhibits attached
hereto and pertinent provisions of the Stock Purchase Agreement,
constitutes the entire understanding between FLIC and the Reinsurers.

G. Amendment. This Agreement cannot be changed, modified or varied
except in writing signed by duly authorized representatives of both
FLIC and the Reinsurers, except that the Reinsurers may unanimously
agree in writing to amend Exhibits C, D and E to this Agreement
without the consent of FLIC, provided such amendment shall not result
in the removal of any of the Policies from the coverage of this
Agreement.

H. Costs and Expenses. Subject to the terms of the Administrative
Services Agreement and this Agreement, whether or not the transaction
contemplated hereby is consummated, all costs and expenses incurred in
connection with this Agreement and the transaction contemplated hereby
shall be paid by the party incurring such costs and expenses.

I. Further Assurances. FLIC and the Reinsurers agree to perform such
additional acts and execute such additional documents and agreements
as may be necessary or desirable to carry out the purpose and
objectives of this Agreement.

J. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original,

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38
but all of which shall constitute one and the same instrument.

K. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.

IN WITNESS WHEREOF, FLIC, MLLIC, TIG and Royal have caused this Agreement to be
executed by their respective officers duly authorized to do so, as of the date
first written above.

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39
FAMILY LIFE INSURANCE COMPANY

ATTEST: /s/ XXXXXX XXXXX BY: /s/ XXXXX X. XXXXXXXX
--------------------------- ---------------------------
Xxxxxx Xxxxx Xxxxx X. Xxxxxxxx

TITLE: Vice President
------------------------

XXXXXXX XXXXX LIFE INSURANCE COMPANY

ATTEST: /s/ XXXXXX XXXXX BY: /s/ XXXXX X. XXXXXXXX
--------------------------- ---------------------------
Xxxxxx Xxxxx Xxxxx X. Xxxxxxxx

TITLE: Senior Vice President
------------------------

TANDEM INSURANCE GROUP, INC.

ATTEST: /s/ XXXXXX XXXXX BY: /s/ XXXXX X. XXXXXXXX
--------------------------- ---------------------------
Xxxxxx Xxxxx Xxxxx X. Xxxxxxxx

TITLE: Senior Vice President
------------------------

ROYAL TANDEM LIFE INSURANCE COMPANY

ATTEST: /s/ XXXXXX XXXXX BY: /s/ XXXXX X. XXXXXXXX
--------------------------- ---------------------------
Xxxxxx Xxxxx Xxxxx X. Xxxxxxxx

TITLE: Senior Vice President
------------------------

- 33 -
40
EXHIBIT A

ASSUMPTION REINSURANCE AGREEMENT

Administrative Services Agreement
between
FLIC and MLLIC
41
ADMINISTRATIVE SERVICES AGREEMENT

AGREEMENT made as of the ____ day of _______________, 19__, by
and between the Family Life Insurance Company ("FLIC") and Xxxxxxx Xxxxx Life
Insurance Company ("MLLIC"), both insurance corporations domiciled in the state
of Washington.

WHEREAS, MLLIC AND FLIC have entered into an Indemnity
Reinsurance Agreement dated December 28, 1990, in connection with the
restructuring of FLIC in preparation for the sale of FLIC to a third party; and

WHEREAS, MLLIC acknowledges that certain of the life insurance
policies and annuity contracts issued by FLIC and reinsured under said
Indemnity Reinsurance Agreement are to be assumed by MLLIC or insurers
affiliated with MLLIC, following the completion of the sale of FLIC to a third
party; and

WHEREAS, FLIC desires to appoint MLLIC to service certain of
FLIC's life insurance policies and annuity contracts and MLLIC desires to
accept such appointment.

NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:

SECTION 1

Terms of Appointment

1.01 Subject to the conditions set forth in this
Agreement, FLIC hereby employs and appoints MLLIC to service the life insurance
policies and annuity contracts which are the subject of the Indemnity
Reinsurance Agreement between FLIC and MLLIC dated December 28, 1990 (the
"Indemnity Reinsurance Agreement"), and which have not been assumption
reinsured by
42
MLLIC, Tandem Insurance Group, Inc. ("TIG") or Royal Tandem Life Insurance
Company ("Royal") pursuant to the Assumption Reinsurance Agreement between
FLIC, MLLIC, TIG and Royal dated March 21, 1991 ("Assumption Reinsurance
Agreement"), as well as FLIC's variable annuity contracts known as the Real
Estate Variable Annuity contracts (Form AY-7). Such life insurance policies
and annuity contracts are hereinafter referred to as the "Policies".

1.02 MLLIC hereby accepts such employment and
appointment and agrees that on and after the Effective Date of its appointment
it will act for FLIC in servicing the Policies.

1.03 MLLIC agrees to provide the necessary
facilities, equipment, and personnel to perform its duties and obligations
hereunder in accordance with industry practice, either directly or by
subcontract with any other party.

1.04 MLLIC agrees that it will perform, either
directly or by subcontract with any other party, all functions necessary for
the proper administration of the Policies, which includes but is not limited
to, those contract servicing functions as set forth in Exhibit A attached
hereto and made a part hereof.

SECTION 2

Term

2.01 Subject to termination as hereinafter provided, this
Agreement shall remain in full force and effect for such

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43
period of time as the Indemnity reinsurance Agreement shall remain in effect.

SECTION 3

Fees

3.01 In recognition of the fact that, during the
term of this Agreement, MLLIC will assume by indemnity reinsurance 100% of
FLIC's liabilities under the Policies pursuant to the Indemnity Reinsurance
Agreement and that MLLIC will therefore retain all revenue and profit with
respect to the Policies, the parties agree that the sole consideration to be
paid by FLIC to MLLIC for MLLIC's services under this Agreement shall be one
dollar ($1.00) per year.

SECTION 4

Representations and Warranties of MLLIC

MLLIC represents and warrants to FLIC as follows:

4.01 It is a corporation duly organized and
existing and in good standing under the laws of the State of Washington.

4.02 It is empowered under applicable laws and by
its charter and bylaws to enter into and perform the services contemplated in
this Agreement.

4.03 All requisite corporate proceedings have been
taken to authorize it to enter into and perform the services contemplated in
this Agreement.

4.04 All of the prospectuses, Securities and
Exchange Commission ("SEC") registration statements, insurance

- 3 -
44
policies, annuity contracts and other forms necessary to the performance of
this Agreement shall have received and will continue to receive all required
approvals of regulatory agencies and shall be in compliance with all federal,
state, and local laws and regulations.

SECTION 5

Representations and Warranties of FLIC]

FLIC represents and warrants to MLLIC as follows:

5.01 It is a corporation duly organized and
existing and in good standing under the laws of the State of Washington.

5.02 It is empowered under the applicable laws and
regulations and by its charter and bylaws to enter into and perform this
Agreement.

5.03 All requisite corporate proceedings have been
taken to authorize it to enter into and perform this Agreement.

SECTION 6

Indemnification

6.01 MLLIC shall not be responsible for, and FLIC
irrevocably releases and shall indemnity and hold MLLIC harmless from and
against, any and all costs, expenses, losses, damages, charges, counsel fees,
payments and liability, which may be asserted against MLLIC or for which it may
be held to be liable, arising solely out of or solely attributable to FLIC's
gross negligence or willful misconduct; provided that only those acts or
omissions of FLIC which occur after the closing date of the

- 4 -
45
Stock Purchase Agreement between Xxxxxxx Xxxxx Insurance Group, Inc., FLIC,
Financial Industries Corp. and an affiliate of Financial Industries Corp. dated
March 19, 1991, (the "Stock Purchase Agreement") may give rise to MLLIC's right
to indemnification as above stated.

6.02 MLLIC shall be responsible for and shall
indemnify and hold FLIC harmless from and against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of
or attributable to MLLIC's willful refusal or failure to comply with the terms
of this Agreement, or which arise out of MLLIC's negligence or willful
misconduct or which arise out of the breach of any representation or warranty
of MLLIC hereunder.

6.03 At any time MLLIC may contact a person
indicated on FLIC's "Schedule of Authorized Personnel" as a person authorized
to give instructions under this section with respect to any matter arising in
connection with this Agreement.

6.04 FLIC shall immediately provide MLLIC with
written notice of any change of authority of persons authorized and enumerated
in Exhibit B to provide MLLIC with instructions or directions relating to
service to be performed by MLLIC under this Agreement.

6.05 In no event and under no circumstances shall
either party under this Agreement be liable to the other party under any
provision of this Agreement for consequential damages.

- 5 -
46
SECTION 7

Covenants of FLIC and MLLIC

7.01 MLLIC shall establish and maintain facilities
and procedures for the safekeeping of policy forms, check forms and facsimile
signature imprinting devices, if any, and all other documents, reports,
records, books, files, and other materials relative to this Agreement.

7.02 FLIC shall have full and free access, during
ordinary business hours, to all documents, records, reports, books, files, and
other materials relative to this Agreement and maintained by MLLIC.

7.03 It is expressly understood and agreed that
all documents, reports, records, books, files and other materials relative to
this Agreement shall be the sole property of FLIC and that such property shall
be held by MLLIC, in accordance with this Agreement, during the term of this
Agreement and shall be surrendered to FLIC promptly upon request.

7.04 FLIC shall, on a timely basis, provide MLLIC,
at no expense to FLIC, with all information in FLIC's possession which MLLIC
may reasonably request to assist MLLIC in performing the service functions
MLLIC undertakes under this Agreement.

7.05 Nothing contained herein shall create, or be
deemed or considered by the parties hereto or by any third party as creating,
the relationship of principal and agent or of partnership or of joint venture
between the parties hereto.

- 6 -
47
SECTION 8

Termination of Agreement

8.01 This Agreement may be terminated by mutual
agreement of the parties at any time.

8.02 This Agreement is automatically terminated
upon termination of the Indemnity Reinsurance Agreement.

8.03 If either of the parties hereto shall
materially breach this Agreement or be materially in default in the performance
of any of its duties and obligations hereunder (the defaulting party), the
other party hereto may give written notice thereof to the defaulting party and
if such default or breach shall not have been remedied within thirty (30) days
after such written notice is given, then the party giving such written notice
may terminate this Agreement by giving thirty (30) days written notice of such
termination to the defaulting party. Termination of this Agreement by default
or breach by FLIC shall not constitute a waiver of any rights of MLLIC in
reference to services performed prior to such termination or rights of MLLIC to
be reimbursed for out-of-pocket expenditures; termination of this Agreement by
default or breach by MLLIC shall not constitute a waiver by FLIC of any other
rights it might have under this Agreement.

- 7 -
48
SECTION 9

Assignment

9.01 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party hereto without the prior written
consent of the other; however, MLLIC shall have the right at its sole
discretion to subcontract any and all of its duties under this Agreement to any
affiliate or any other party. No such subcontract shall act so as to relieve
MLLIC of any and all of its responsibilities hereunder to FLIC.

9.02 This Agreement shall insure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.

SECTION 10

Miscellaneous

10.01 FLIC or its duly authorized independent auditors and
appropriate regulatory agencies will have the right under this Agreement to
perform on-site audits of records and accounts directly pertaining to the
Policies services by MLLIC hereunder at MLLIC's offices in accordance with
reasonable procedures and at reasonable frequencies. MLLIC will make available
to FLIC's auditors and representatives of the appropriate regulatory agencies
all reasonably requested records, data and access to operating procedures.

10.02 The parties hereto agree that all tapes, books,
reference manuals, instructions, records, information and data pertaining to
the business of the other party, and the

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49
policy or contract owners serviced for FlIC hereunder which are exchanged or
received pursuant to the negotiation of and/or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person, other than as provided in section 10.01 above. Subject to
FLIC's right of access to any such information or documents as may be necessary
for FLIC to comply with required state or federal reports or filings, all such
tapes, books, reference manuals, instructions, records, information and data in
the possession of each of the parties hereto shall remain with or be returned
to as the case may be, FLIC or MLLIC, upon the termination of this Agreement,
subject to the terms of the Indemnity Reinsurance Agreement and the Assumption
Reinsurance Agreement.

10.03 It is understood and agreed that all services
performed hereunder by MLLIC shall be as an independent contractor and not as
an employee of FLIC.

10.04 It is understood and agreed that this Agreement shall
supersede the Service Agreement between Xxxxxxx Xxxxx Insurance Group, Inc.,
FLIC and MLLIC dated November 29, 1990 as to the Policies and shall be
substituted for such Service Agreement in Article VI A. 2.(b) of the Indemnity
Reinsurance Agreement.

10.05 This Agreement, the Indemnity Reinsurance Agreement
and the Assumption Reinsurance Agreement, constitute the entire agreement
between the parties hereto as to the subject matter hereof, and supersede any
prior agreement with respect to

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50
the subject matter hereof, whether oral or written. This Agreement may not be
modified except in a written instrument executed by both of the parties hereto.

SECTION 11

Effective Date

11.01 This Agreement shall become effective (the "Effective
Date") on the same date as the closing date of the Stock Purchase Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf by and through
their duly authorized officers as of the day and year first above written.

FAMILY LIFE INSURANCE COMPANY

Attest By:
-------------- --------------------------------

-----------------------------------
Title

XXXXXXX XXXXX LIFE INSURANCE COMPANY

Attest By:
-------------- --------------------------------

-----------------------------------
Title

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51
EXHIBIT A

LIFE INSURANCE AND FIXED AND VARIABLE ANNUITY
CONTRACT SERVICING FUNCTIONS
PERFORMED BY XXXXXXX XXXXX LIFE INSURANCE COMPANY
FOR
FAMILY LIFE INSURANCE COMPANY

A. CONTRACT ISSUE AND UNDERWRITING

1. Reviews form of application and applies FLIC's issue and
underwriting criteria to application for an insurance to
annuity contract. (The above criteria shall be the issue and
underwriting criteria of FLIC on the Effective Date of this
Agreement and such criteria may be amended only by mutual
written agreement of FLIC and MLLIC.) Causes to have printed
and maintains supply of insurance and annuity contracts.

2. Prepares contract data page and issues contract for paid
business and mails to contract owners or agents.

3. Establishes and maintains all policyholder, participant,
annuitant, and contract owner records, as applicable. Upon
request of FLIC or insurance regulatory authorities a complete
copy of any record will be forwarded to the requesting party
by overnight delivery.

4. Maintains and preserves records with respect to the Xxxxxxx
Xxxxx Variable Annuity Account as required by Rules 31a-1 and
31a-2 under the Investment Company Act of 1940.

5. Notifies dealer/agent of any error or missing data needed to
establish policy holder, participant, annuitant or contract
owner records.

6. Causes to have printed and maintains supply of confirmation
statements. Prepares and mails confirmation statements of
purchases to contract owners with copies to dealer/agents.

7. Deposits monies received with application into depository
account of FLIC.

8. Causes to have printed and maintains inventory of all
issue-related forms, contracts, endorsements and adoption
agreements.

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52
X. XXXXXXXX AND COLLECTION

1. Receives purchase payments and reconciles amount paid with
returned billing statements or other remittance media.

2. Prepares and mails confirmation statement of premiums or
purchase payments to policyholders with copies to
dealer/agents.

3. Prepares pre-authorized checks ("PAC"), individual bills, or
group billing lists for all periodic payment contracts
(confirmation statement can double as billing statement, if
desired). Causes to be printed and maintains supply of PAC
authorization forms.

4. Generates and deposits pre-authorized checks on appropriate
schedule.

5. Updates the contract owner master records and all other
records to reflect payments received.

6. Deposits all cash received under the contracts into a
designated bank account.

7. Transmits bank transfer authorization summaries prepared for
each valuation period on variable contracts.

C. BANKING

1. Copies all checks and assigns them a control number.
Balances, edits, endorses and prepares daily deposits.
Generates pre-authorized checks on scheduled basis.

2. Deposits are placed into a depository account.

3. Transfers funds from the depository account to one of the
following:

a. General Account of FLIC
b. Investment Vehicles(s) Custodian Account(s)
in the case of variable contracts
c. Disbursement Account of FLIC

4. Prepares checks for policyholder annuitants in "payout" phase.
Checks are also prepared for partial and full surrenders as
well as death claims.

D. ACCOUNTING/AUDITING

1. Retains systems generated reports in accordance with a
retention schedule mutually established. Provides

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53
access to such reports for internal and external auditing.

2. Cooperates in annual audit of general account and separate
account financials conducted for purposes of financial
statement certification and publication and accommodates other
client or regulatory audits, as required.

3. Provides information for general ledger maintenance.

E. CONTRACT OWNER SERVICES/RECORD MAINTENANCE

1. Receives and implements all contract owner service requests
including information requests, beneficiary changes, transfer
of assets between eligible investment vehicles, and changes of
any other information maintained on the system.

2. Researches all inquiries using both data stored in the system
and microfilm records. Responds directly to any questions or
inquiries as mutually defined.

3. Provides a set of transaction registers confirming all changes
made to policyholder, participant, annuitant or contract owner
accounts. Copies all communications from participants,
annuitants, and contract owners. A copy will be delivered
promptly to the FLIC at its principal office upon FLIC's
request or that of any insurance regulatory authority.
Further, upon request of FLIC or insurance regulatory
authorities a complete copy of any record will be forwarded to
the requesting party by overnight delivery.

4. Reviews forms, causes to be printed and maintains adequate
supply for field use.

5. Copies of complaints will be promptly delivered to FLIC at its
principal office.

6. Communicates all interest rate changes and other changes with
regard to the Policies to policyholders and contractholders
and to FLIC's agents who market and service the Policies.

F. DISBURSEMENT (SURRENDERS, CLAIMS)

1. Receives requests for partial or full surrenders and death
claims from contract owners and beneficiaries. Retains and
accounts for any contract administrative charges and
applicable premium taxes.

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54
2. Processes all surrender requests and death claims against the
policyholder and the participant master files pursuant to
FLIC's guidelines. (FLIC's guidelines shall be those in
effect on the Effective Date of this Agreement and such
guidelines may be amended only by mutual written agreement of
FLIC and MLLIC.)

3. Prepares checks for surrenders and death claims and forwards
to contract owner or beneficiary (including confirmation).

4. Prepares and mails confirmation statements of disbursement
transactions to contract owners with copies to dealer/agents.

5. Prepares report on surrenders and death claims.

6. Reviews, causes to have printed, and maintains adequate supply
of checks.

7. Provides information about death claims to FLIC at its
principal office.

8. Withholds appropriate federal and state income tax.

G. COMMISSIONS

1. Receives application and payment from field. Verifies
validity of application and license status of both writing and
general agents.

2. Creates and maintains detailed commission transaction records
for each financial transaction processed.

3. Creates commission adjustment transactions as necessary due to
cancellations, lapses, and the like.

4. Prepares commission statements and checks including overrides
to three levels.

5. Prepares commission interface to FLIC in machine readable form
as required.

6. Creates agent tax reporting forms.

H. BENEFIT PROCESSING

1. Receives information for policyholders or annuitants going
into the annuity (payout) phase.

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55
2. Calculates the amount of the initial amount for payout based
on tables supplied by FLIC.

3. Deducts applicable premium taxes.

4. Establishes and maintains policyholder and annuitant records.

5. Withholds appropriate federal and state income tax.

I. PROXY PROCESSING

1. Receives record date information and proxy solicitation from
underlying investment vehicle(s).

2. Prepares proxy ballots.

3. Mails solicitation and resolicitations, if necessary.

4. Maintains all proxy registers and other required proxy
material.

J. PERIODIC REPORTS TO CONTRACT OWNERS

1. Prepares and mails statement of account to each participant,
annuitant or contract owner. Mails on required schedule.

2. Inserts and mails all semi-annual reports of the underlying
funds to variable contract owners.

K. REGULATORY REPORTS AND FILINGS

1. Provides relevant financial information for preparation of
general account and separate account convention blanks.

2. Prepare Federal Tax Reports 1099-R, W-2P, W-2 and 5498 for
contract owners as required. Mails to contract owners and
appropriate authorities.

3. Responds to any requests from plan administrators or trustees
for information affecting the plan or participants for
qualified plans.

4. Responds to requests for calculations applicable to annuity
payments as may be necessary for tax calculations.

5. Provides relevant financial data for preparation of Separate
Account Annual SEC Reports and any other

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56
reports or filings required for registered investment
companies.

6. Drafts and files Registration Statements and other SEC related
documents, where required, and performs services necessary to
meet SEC requirements with respect to any of the Policies
which are variable contracts.

7. Prepares and submits all state insurance regulatory policy
form filings required with respect to the Policies.

L. AGENT LICENSE RECORDKEEPING

1. Receives agent license status information from FLIC.

(a) New Agents
(b) Changes in Status
(c) Agents Terminated

2. Edits against agent records when processing transactions
against a policy.

M. ADVERTISING AND MARKETING

1. Develops all advertising materials to be used in connection
with the Policies and provides for dissemination to FLIC's
agents and the general public, subject to FLIC's guidelines.
(FLIC's guidelines shall be those in effect on the Effective
Date of this Agreement and such guidelines may be amended only
by mutual written agreement of FLIC and MLLIC. Such
guidelines and all advertising material must be maintained in
compliance with applicable laws and regulations, as amended,
at all times.)

2. Makes all filings and obtains any regulatory approvals
required with regard to advertising of the Policies.

N. VALUATION OF RESERVES AND ACTUARIAL OPINION

1. Designs, maintains and executes systems to provide the
necessary valuation of reserves and related items as required
for statutory, GAAP, and tax accounting.

2. Provides the formal actuarial opinion and related reports
required by NAIC Annual Statement blank, the SEC and external
auditors.

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57
O. REGULATORY SUPERVISION AND COMPLIANCE

1. Provides regulatory supervision and compliance, to the extent
MLLIC is legally permitted, as to all servicing functions
contemplated by this Agreement.

- 7 -
58
EXHIBIT B

FAMILY LIFE INSURANCE COMPANY

SCHEDULE OF AUTHORIZED PERSONNEL

The following individuals are authorized to give information or direction to
MLLIC with respect to matters arising in connection with the servicing to be
performed under this Agreement:

Xxxxxxx X. Xxxxxxxxx - Senior Vice President and Controller

Xxxxx X. Xxxxxxx - Senior Vice President
59
EXHIBIT B

ASSUMPTION REINSURANCE AGREEMENT

Indemnity Reinsurance Agreement
between
FLIC and MLLIC
60
INDEMNITY REINSURANCE AGREEMENT

Between

FAMILY LIFE INSURANCE COMPANY

and

XXXXXXX XXXXX LIFE INSURANCE COMPANY

Dated: December 28, 1990
--
61
TABLE OF CONTENTS

Page
----

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

A. Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

B. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

C. Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

D. Policy Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

E. Qualifying Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

F. Reinsurance Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

G. Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

H. Statutory Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. Third Party Reinsurance Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II
SCOPE OF REINSURANCE . . . . . . . . . . . . . . . . . . . . 2

A. Coinsurance of General Account Statutory Reserve
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1. Coinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Reserve Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Modified Coinsurance of Separate Account Statutory
Reserve Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE III
LIABILITY . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE IV
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 3

A. Reinsurance Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

B. Administration of Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

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62
TABLE OF CONTENTS (cont.)

Page
----

C. Third Party Reinsurance Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

D. Policy Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

E. Declaration of Policy Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

F. Oversights - Clerical Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

G. Access to Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

H. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I. Headings and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

J. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

K. Regulatory Filings and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

L. Guaranty Fund Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

M. No Additional Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

N. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

O. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

P. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE V
RESERVES . . . . . . . . . . . . . . . . . . . . . . . . 5

A. Establishment of General Account Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

B. Establishment of Separate Account Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1. Policy Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2. Policy Account Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

C. Reserve Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

D. Reserve Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE VI
ACCOUNTING AND SETTLEMENT . . . . . . . . . . . . . . . . . . . 6

A. Net Daily Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

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63
TABLE OF CONTENTS (cont.)

Page
----

B. Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

1. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2. Joint Payment Account Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

C. Cash Settlement and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1. Daily Cash Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. Monthly Cash Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3. Form of Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

4. Right to Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

5. General Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE VII
TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . 10

A. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

B. Termination by MLLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE VIII
INSOLVENCY . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE IX
ARBITRATION . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE X
PARTIES TO AGREEMENT . . . . . . . . . . . . . . . . . . . 12

ARTICLE XI
EFFECTIVE DATE AND CLOSING . . . . . . . . . . . . . . . . . 12

ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 12

ARTICLE XIII
COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE XIV
EXECUTION . . . . . . . . . . . . . . . . . . . . . 13

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64
EXHIBITS

A. Policies Reinsured

B. Third Party Reinsurance Agreements

C. Service Agreement between Xxxxxxx Xxxxx Insurance Group, Inc., FLIC
and MLLIC dated November 29, 1990

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65
INDEMNITY REINSURANCE AGREEMENT

This Agreement is executed this 28th day of December, 1990 by and between
FAMILY LIFE INSURANCE COMPANY, a Washington insurance corporation ("FLIC") and
XXXXXXX XXXXX LIFE INSURANCE COMPANY, a Washington insurance corporation
("MLLIC"). FLIC and MLLIC mutually agree to reinsure on the terms and
conditions set out below.

ARTICLE I
DEFINITIONS

For the purposes of this Agreement, the following terms shall have the
following definitions:

A. Business Day shall mean a day other than a Saturday or Sunday on which
banks are not required or permitted to close in the sate of
Washington.

B. Effective Date shall mean the date this Indemnity Reinsurance
Agreement becomes effective as stated in Article XI.

C. Policies shall mean all insurance policies and annuity contracts
indemnity reinsured under this Agreement, as specified in Exhibit A
attached to this Agreement.

D. Policy Account shall mean the portion of the Separate Account assets
and liabilities as shall from time to time relate to the Policies.

E. Qualifying Assets shall mean assets which qualify as admissible assets
of MLLIC under statutory accounting principles and the laws and
regulations of the State of Washington.

F. Reinsurance Period shall mean the period of time from the Effective
Date of this Agreement through the termination of this Agreement.

G. Separate Account means the "Xxxxxxx Xxxxx Variable Annuity Account" of
FLIC as described in the prospectuses relating to the variable annuity
contracts included in the Policies.

H. Statutory Reserve shall mean all reserves computed in accordance with
statutory accounting requirements.

I. Third Party Reinsurance Agreements shall mean the third party
reinsurance agreements listed on Exhibit B to this Agreement, under
which FLIC cedes a portion of its net risk retained under the
Policies.

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66
ARTICLE II

SCOPE OF REINSURANCE

MLLIC agrees to assume from and indemnify FLIC and FLIC agrees to cede to and
reinsure with MLLIC, on an indemnity reinsurance basis, one hundred percent
(100%) of FLIC's liability which remains under the Policies after reinsurance
under the third Party Reinsurance Agreements, in accordance with the terms and
conditions of this Agreement. If, and to the extent, MLLIC may be precluded by
the law of any jurisdiction from indemnity reinsuring the Policies owned by
residents of that jurisdiction, such Policies will be indemnity reinsured in
accordance with the provisions of this Agreement as soon as practicable after
the preclusion is removed as to such jurisdiction.

A. Coinsurance of General Account Statutory Reserve Liabilities.

1. Coinsurance. The indemnity reinsurance effected under this
Agreement shall be based on 100% coinsurance with respect to
general account Statutory Reserve liabilities established by
FLIC with respect to the Policies.

2. Reserve Transfers. As to Policies in force on the Effective
Date, FLIC shall transfer Qualifying Assets to MLLIC in an
amount equal to the excess of (i) aggregate Statutory Reserve
liabilities established by FLIC with respect to the Policies
over (ii) separate account Statutory Reserves established by
FLIC with respect to the Policies plus a ceding commission of
Seventy-Five Million Dollars ($75,000,000).

B. Modified Coinsurance of Separate Account Statutory Reserve
Liabilities. The indemnity reinsurance effected under this Agreement
shall be based on 100% modified coinsurance with respect to separate
account Statutory Reserve liabilities established with respect to the
Policies.

ARTICLE III

LIABILITY

The liability of MLLIC on any Policy shall begin simultaneously with that of
FLIC, but not prior to the Effective Date of this Agreement. The reinsurance
under this Agreement with respect to any Policy shall continue for as long as
the liability of FLIC under such Policy continues, subject to the provisions of
Article VII.

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67
ARTICLE IV

GENERAL PROVISIONS

A. Reinsurance Conditions. The reinsurance hereunder is subject to the
same limitations and conditions as the insurance provided under the
Policies, except as otherwise specifically provided herein.

B. Administration of Policies. FLIC, or its designee, shall administer
and service all Policies reinsured hereunder and perform all
accounting for such Policies commencing on the Effective Date of this
Agreement.

C. Third Party Reinsurance Agreements. FLIC represents to MLLIC that the
Third Party Reinsurance Agreements constitute all reinsurance treaties
or agreements entered into by FLIC with respect to the Policies. FLIC
further represents and warrants that the Third Party Reinsurance
Agreements remain in full force and effect and that no party is in
default under any Third Party Reinsurance Agreement.

D. Policy Changes. FLIC agrees to obtain MLLIC's prior written approval
of any changes FLIC makes in policy and contract forms reinsured
hereunder that would require filings with state regulatory
authorities. MLLIC's liability for risks reinsured under this
Agreement shall be increased or decreased by 100% of the increase or
decrease in FLIC's liability attributable to such changes.

E. Declaration of Policy Interest Rates. Some of the Policies ceded
under this Agreement provide that FLIC may in its discretion, from
time to time, as provided in the policy or contract, declare interest
rates that are used to determine policy or contract values. During
the Reinsurance Period, FLIC agrees that MLLIC shall have the right to
designate such discretionary interest rates to be declared on the
Policies and the effective dates thereof, subject to the approval of
FLIC, which approval will not be unreasonably withheld. FLIC and
MLLIC will by letter agreement establish a procedure whereby FLIC will
indicate its approval of interest rates and the effective dates
thereof, as designated by MLLIC within two Business Days of receipt
thereof from MLLIC. FLIC agrees to allow MLLIC to be the source of
communication of such interest rate changes and their effective dates
to FLIC's agents who are marketing the Policies.

F. Oversights - Clerical Errors. Should FLIC fail to state accurately
the amount of business to be ceded in accordance with the provisions
of this Agreement, or should FLIC or MLLIC fail to comply with any of
the other terms of this

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68
Agreement, and if this is shown to be unintentional and the result of
a misunderstanding, oversight or clerical error on the part of either
FLIC or MLLIC, then this Agreement shall not be deemed abrogated
thereby, but both companies shall be restored to the position they
would have occupied had no such oversight or misunderstanding or
clerical error occurred.

G. Access to Records. FLIC, MLLIC or their duly accredited
representatives shall have the right to audit and review the business
records and practices of the other which relate to the Policies
reinsured hereunder. Such audits shall be conducted at the expense of
the auditing party and shall occur during the normal business hours of
the party being audited. The party being audited shall have a duty to
cooperate fully with such audit and shall make available all materials
requested by the auditing party.

H. Amendments. This Agreement may be amended by mutual agreement of the
parties. Any such Amendments shall be in writing and executed by an
officer of each party.

I. Headings and Exhibits. Article and Paragraph headings are not a part
of this Agreement and shall not affect the terms hereof. The Exhibits
attached are part of this Agreement.

J. Notice. Any notice allowed or required by the provisions cf this
Agreement shall be sent by certified mail, postage prepaid, return
receipt requested, to each party addressed as follows or to such other
address as may be requested by such party by giving notice pursuant to
this provision:

FLIC FAMILY LIFE INSURANCE CoMPANY
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: President

with a copy to:

Xx. X. XxXxx Snow
Senior Vice President and General Counsel
Family Life Insurance Company
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000

MLLIC XXXXXXX XXXXX LIFE INSURANCE COMPANY
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: President

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69
with a copy to:

Xxxxxxx Xxxxx Insurance Group, Inc.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel

K. Regulatory Filings and Approvals. It shall be a condition precedent
to closing that any regulatory filings or approvals, required in the
opinion of FLIC and MLLIC to be made or obtained prior to the closing
of this Agreement, are in fact made or obtained before the Effective
Date.

L. Guaranty Fund Assessments. In the event FLIC is required to pay any
assessment to any insurance guaranty or insolvency or other similar
fund maintained by any jurisdiction, the portion, if any, of FLIC's
assessment that relates to Policies reinsured hereunder (the "Related
Assessment") shall be paid by MLLIC. MLLIC shall pay to FLIC any
Related Assessment which shall have become due, promptly on demand
therefor by FLIC. If at any time FLIC shall be allowed to recover any
such assessment (e.g., through policy surcharges or reduction of
premium taxes) the portion of any such recovery received or otherwise
realized any FLIC shall be paid to MLLIC (based upon the total portion
of such recovery attributable to Policies reinsured by MLLIC).

M. No Additional Reinsurance. No additional reinsurance treaties or
agreements will be effected by FLIC with respect to the Policies after
the date of this Agreement without written consent of MLLIC. In
addition, FLIC will not amend any terms of its existing reinsurance
treaties or agreements without the prior written consent of MLLIC.

N. Further Actions. Both FLIC and MLLIC shall take all such further
actions and shall execute all such further agreements and documents,
as shall be reasonably requested by either FLIC or MLLIC to effect
this transaction.

O. Governing Law. This Agreement shall be governed by the laws of the
State of Washington.

P. Entire Agreement. This Agreement, including the exhibits attached
hereto, constitutes the entire understanding between FLIC and MLLIC
with regard to this subject matter.

ARTICLE V

RESERVES

A. Establishment of General Account Reserve. MLLIC shall be responsible
for establishing and maintaining the proper

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70
general account Statutory Reserves for the Policies as required by
state insurance regulatory authorities and as is consistent with
coinsurance accounting principles.

B. Establishment of Separate Account Reserves.

1. Policy Account. For each Policy which is a variable annuity
contract, an amount equal to the Xxxxxxx Xxxxx Variable
Annuity Account value or for variable annuity contracts
annuitized on a variable basis, the annuitized contract
reserves, shall be held by FLIC in the Separate Account.

2. Policy Account Reserve. The total Policy Account Statutory
Reserve liability for each Policy relating to the assets held
in the Policy Account pursuant to Article V B. 1. shall be
shown by FLIC on its Separate Account balance sheet,
consistent with modified coinsurance accounting principles.

C. Reserve Reports. FLIC or its designee shall provide MLLIC, within
five (5) Business Days after the end of each calendar month, valuation
summary reports which shall itemize reserves and contracts in force by
plan code, in a format mutually agreed upon by FLIC and MLLIC. Such
reports shall reflect 100% of any changes in the reserves described in
Article V A. above which occurred during the accounting period for
which such reports are made. These reports shall include statutory,
tax and generally accepted accounting principles ("GAAP") reserves.

D. Reserve Credit. MLLIC shall take all steps necessary (including,
without limitation, at MLLIC's sole election, permitting FLIC to
withhold funds, establishing a reserve trust account or post a letter
of credit) to cause the full statutory reserve credit contemplated
under this Agreement to be available to FLIC in each applicable
jurisdiction as of the filing of any quarterly or annual financial
statements by FLIC.

ARTICLE VI

ACCOUNTING AND SETTLEMENT

A. Net Daily Adjustment. FLIC shall pay to MLLIC, or MLLIC shall pay to
FLIC, as the case may be, on each Business Day, any Net Daily
Adjustment for the preceding Business Day. The Net Daily Adjustment
shall, for Policies reinsured by MLLIC, be the amount calculated by
comparing:

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71
1. the sum of:

(a) the gross premiums collected on all Policies;

(b) the interest payments and principal repayments on all Policy
loans;

(d) the amount of funds transferred from the Separate Account to
the general account of FLIC in connection with the payment of
surrender, death, withdrawal, annuity or Policy loan benefits,
or in connection with a transfer to a fixed account option
within a variable annuity Policy;

(e) the amount of any net gain from any investment or
disinvestment in the Separate Account, whenever occurring,
having resulted in a value other than the corresponding value
charged or credited under the Policies (i.e., breakage); and

(f) any other fees, charges, premiums or costs, or portion
thereof, collected during the preceding Business Day, which
would be payable to the general account of FLIC in the absence
of this indemnity reinsurance of the Policies.

2. with the sum of the following:

(a) the commissions paid (net of refunds), as specified in the
FLIC General Agency Agreement with Xxxxxxx Xxxxx Life Agency,
Inc., for all Policies;

(b) the administrative expense allowances, defined as any net
charges under the Service Agreement between Xxxxxxx Xxxxx
Insurance Group, Inc., FLIC and MLLIC dated November 29, 1990,
("Service Agreement"), attached hereto as Exhibit "C", payable
by FLIC for the administration of the Policies, or any charges
payable by FLIC to MLLIC under any subsequent services
agreement which supersedes the Services Agreement;

(c) the amount of any state, municipal or other premium or gross
receipts taxes paid with respect to Policy premiums collected;

(d) the amount of brokerage and any similar charges paid by FLIC
in connection with the purchase, sale, redemption or
maintenance of Separate Account assets;

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72
(e) the Third Party Reinsurance premiums paid by FLIC;

(f) the Policy benefits paid, including death benefits (net of
Third Party Reinsurance reimbursements), full or partial cash
surrender benefits, full or partial withdrawal benefits,
maturity benefits, annuity payments, Policy loan benefits and
premium (or other) refunds;

(g) the amount of funds transferred from the general account of
FLIC to the Separate Account in connection with maintaining
the Policy Account;

(h) the amount of any net loss from any investment or
disinvestment in the Separate Account, whenever occurring,
having resulted in a value other than the corresponding value
charged or credited under the Policies (i.e., breakage); and

(i) any other fees, charges, premiums or costs, or portion
thereof, payable on such day by the general account of FLIC
under the terms of the Policies.

Reimbursements listed above shall not be made with respect to items
accrued by FLIC prior to the Effective Date.

If the sum of items in 1. exceeds the sum of items in 2. for the
preceding Business Day, then (subject to the provisions of Section C.) such
excess shall be paid by FLIC to MLLIC by wire transfer of immediately available
funds before the end of business on the current Business Day. Conversely, if
the sum of the items in 2. exceeds the sum of the items in 1. for the preceding
Business Day, then (subject to the provisions of Section C.) such excess shall
be paid by MLLIC to FLIC by wire transfer of immediately available funds before
the end of business on the current Business Day.

B. Benefit Payments.

1. Generally.

(a) The amount of MLLIC's payment with respect to benefit
payments under the Policies as identified in A. 2.
(f) above shall be net of MLLIC's share of the
amounts then held in the Policies Account pursuant to
Article V B. 1. hereof, or transferred from the
Separate Account pursuant to A. 1. (d) above.

(b) MLLIC shall have full responsibility and authority
for all benefit payment determinations or
settlements, and shall be solely responsible for

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73
all expenses associated with benefit payment
determinations or settlements. Such benefit payment
authority shall be subject to FLIC's guidelines as in
effect on the Effective Date of this Agreement and
any amendments to such guidelines may only be made by
mutual written agreement of FLIC and MLLIC.

2. Joint Payment Account Option. At any time during the
Reinsurance Period, upon ten (10) days notice to FLIC, MLLIC
at its sole option may require the establishment of a joint
bank account for the purpose of making such benefit payments
of the type identified in A. 2. (f) above, with the signatures
of both FLIC and MLLIC required for checks drawn on such
account.

C. Cash Settlement and Accounting.

1. Daily Cash Settlements. At the end of each Business Day, FLIC
shall notify MLLIC of the payments required the next Business
Day under Section A. above. MLLIC or FLIC, as the case may
be, shall make the required payments on such next Business Day
by wire transfer of New York clearinghouse funds. Daily
statements may be based upon reasonable approximations. Daily
statements shall be in a form agreed to by FLIC and MLLIC in
writing.

2. Monthly Cash Statements. At the end of the Business Day next
succeeding the end of each calendar month, FLIC will provide
MLLIC with a statement for the month. Monthly statements
shall be in a form agreed to by FLIC and MLLIC in writing.
The statement may reflect a correction or adjustment, in which
event MLLIC or FLIC, as the case may be, shall make any
required payment on the day following notification thereof in
accordance with the method for cash payments prescribed by
Section C. 1. above. Any further adjustment as may be
required shall be made promptly following agreement of the
parties or completion of any audit pursuant to Section C. 4.
below.

3. Form of Statements. All statements provided pursuant to
Sections C. 1. and 2. above shall summarize the items to be
settled in reasonable detail. It is intended that the
statements be transmitted by facsimile or other similar means
of convenient written communication, but, in the event that
any statement cannot be transmitted after application of
reasonable efforts, FLIC may notify MLLIC of any settlement
due by oral communication, in which case FLIC shall provide

- 9 -
74
hard copy of the settlement statement as promptly as
practicable.

4. Right to Audit. MLLIC shall have the right to audit the
amounts contained in any statements delivered under Section C.
3. For such purposes, MLLIC and its employees, professional
advisors and agents shall have a right to review and copy the
relevant books and records of FLIC and to discuss such matters
with employees of FLIC during normal business hours. FLIC
agrees to instruct its independent public accountants and
actuaries to provide information to MLLIC and render
reasonable assistance to them in conducting any such audit.

5. General Right of Offset. Notwithstanding any provision of
this Agreement, any and all amounts due from MLLIC to FLIC or
from FLIC to MLLIC under this Agreement may be offset against
amounts due from one party to the other under this Agreement
or under any other written agreement hereafter entered into by
and between the parties, in settling and making payments on a
net basis of amounts due under this Agreement and any
subsequent written agreements.

ARTICLE VII

TERM AND TERMINATIoN

A. Term. Except as otherwise provided herein, this Agreement shall be
for an unlimited duration.

B. Termination by MLLIC. MLLIC shall have the right to terminate this
Agreement, with or without cause, upon thirty (30) days notice to FLIC
with respect to future business only, without recapture, unless the
parties otherwise mutually agree.

ARTICLE VIII

INSOLVENCY

Any risks or obligations reinsured pursuant to this Agreement shall be
payable by MLLIC on the basis of the liability under this Agreement without
diminution because of any insolvency of FLIC. In the event of insolvency and
the appointment of a conservator, liquidator or statutory successor of FLIC,
all amounts payable by MLLIC hereunder shall be payable to such conservator,
liquidator or statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of claims allowed against the
insolvent company by any court of competent jurisdiction or by any conservator
or statutory

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75
successor of FLIC having authority to allow such claims, without diminution
because of such insolvency or because such conservator, liquidator or statutory
successor has failed to pay all or a portion of any claim. Payments by MLLIC
as set forth above shall be made directly to FLIC or to its conservator,
liquidator or statutory successor. The conservator, liquidator or statutory
successor of FLIC shall give written notice of the pendency of any claim
against FLIC indicating the Policy reinsured within a reasonable time after
such claim is filed, and MLLIC may interpose, at its own expense in the
proceeding where such claim is to be adjudicated, any defense or defenses which
MLLIC may deem available to FLIC or its conservator, liquidator or statutory
successor. The expense thus incurred by MLLIC shall be payable subject to
court approval out of the estate of FLIC as part of the expense of conservation
or liquidation to the extent of a proportionate share of the benefit which may
accrue to said estate solely as a result of the defense undertaken by MLLIC.
Any debts or credits, liquidated or unliquidated, in favor of or against either
FLIC or MLLIC with respect to this Agreement which exist on the date of the
entry of a receivership or liquidation order, are deemed mutual debits or
credits as the case may be and shall be set off and only the balance shall be
allowed or paid.

ARTICLE IX

ARBITRATION

Any dispute which may arise between FLIC and MLLIC under this
Agreement shall be settled by an equitable rather than a strictly legal
interpretation pursuant to arbitration conducted in accordance with the
commercial Rules of the American Arbitration Association. In such cases, the
parties will submit their differences to three (3) arbiters, who shall be
officers of insurance companies other than the parties and their affiliates, or
subsidiaries: one (1) to be selected by FLIC, one (1) to be selected by MLLIC,
and the third to be selected by the arbiters named by the parties herein. In
the event of disagreement between the arbiters, the decisions will rest with
the majority. The decision of the majority of the arbiters shall be binding
upon the parties herein without appeal. The arbiters will be relieved of all
judicial formality and may abstain from the strict rules of law.

Arbitration may be initiated by either FLIC or MLLIC (the petitioner)
by written notice to the other party identifying the nature of the dispute,
demanding arbitration and naming its arbiter. The other party (the respondent)
shall have 10 days after receipt of said notice within which to designate its
arbiter. The third arbiter shall be chosen by the two arbiters named by the
parties within 10 days thereafter and the arbitration shall be held at the
place hereinafter set forth 10 days after the appointment of the third arbiter.
Should the two

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76
arbiters not be able to agree on the choice of the third, then the appointment
shall be as follows: Each party will chose three arbiters, two of which shall
be refused by the opposing party. The third arbiter shall then be selected by
lot from the remaining two. If the respondent does not name its arbiter within
10 days, the petitioner may designate the second arbiter and the respondent
will not be aggrieved thereby.

Arbitration shall take place in New York, New York or any other site
agreed upon by the arbiters. The expense of the arbitration proceeding shall
be borne by the losing party; provided that each party shall be responsible for
expenses it incurs with respect to preparation for and presentation of evidence
and witnesses at the proceeding, including the expense of the arbiter it
selects. The decision of the arbiters may be entered as a final judgment on
any court of competent jurisdiction.

ARTICLE X

PARTIES TO AGREEMENT

This Agreement is an indemnity reinsurance agreement solely between
FLIC and MLLIC and performance of the obligations of each party under this
Agreement shall be rendered solely to the ether party. In no instance shall
anyone other than FLIC or MLLIC have any rights under this Agreement, and FLIC
shall be and remain solely liable to any policyholder, contractholder or
beneficiary under any policy or contract reinsured hereunder.

ARTICLE XI

EFFECTIVE DATE AND CLOSING

This Agreement shall become effective on December 25, 1990 but assets
and liabilities shall be valued as of 11:59 p.m., Eastern Standard Time on
December 31, 1990.

ARTICLE XII

MISCELLANEOUS

The invalidity or unenforceability of any term or provision hereof
shall not affect the validity or enforceability of any other term or provision
hereof. No provision of this Agreement shall be construed against either party
on the ground that such party drafted the provision or caused it to be drafted.
This Agreement shall bind and inure to the sole benefit of the Parties and
their respective successors and assigns and shall not confer any benefit on any
other person.

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77
ARTICLE XIII

COUNTERPARTS

This Agreement may be executed in counterparts with the same effect as if FLIC
and MLLIC had executed a single instrument. Each counterpart shall be deemed
an original of this Agreement.

ARTICLE XIV

EXECUTION

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

FAMILY LIFE INSURANCE COMPANY

BY: /s/ X. XXXXX SNOW BY: /s/ XXXXX X. XXXXXX
----------------------------- ---------------------------
X. XxXxx Snow Xxxxx X. Xxxxxx

TITLE: Senior Vice President TITLE:Vice President & Actuary
-------------------------- ------------------------

XXXXXXX XXXXX LIFE INSURANCE COMPANY

BY: /s/ XXXXXXX XXXXXXXXX BY: /s/ XXXXX X. XXXXXX
-------------------------------- --------------------------
Xxxxxxx Xxxxxxxxx Xxxxx X. Xxxxxx

TITLE:Senior Vice President, C.F.O. TITLE:Vice President & Actuary
----------------------------- ------------------------

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78
EXHIBIT A

INDEMNITY REINSURANCE AGREEMENT

The life insurance policies and annuity contracts 100% indemnity reinsured
pursuant to this Agreement are all policies and contracts of the form numbers
and descriptions listed below which:

(1) are in force on the Effective Date of this Agreement; or

(2) are issued by FLIC on or after the Effective Date of this Agreement
and during the Reinsurance Period.

FLIC also agrees to take, upon MLLIC's request, all actions necessary to market
all policy and contract forms of a similar nature as MLLIC may develop and
designate in the future and further agrees that all such policies and contracts
will be added to the above list of forms which are covered by this Agreement.

Policy Number Description
------------- -----------

LIFE

AL- 698 Single Premium Whole Life (NJ)
AL- 772 Single Premium Whole Life (Enhanced version)
AL- 773 NC version of AL- 772
AL- 774 1187 MN version of AL- 772
AL- 790 Single Premium Whole Life (Rate version)
AL- 792 Second-to-die Single Premium Whole Life
AL- 798 NC version of AL- 790
AL- 799 1187 MN version of AL- 790
AL- 819 NC version of AL- 792
AL- 820 1187 MN version of AL- 792
AL- 858 CA/WA version of AL- 772
AL- 863 CA/WA version of AL- 790
AL- 877 CA/WA version of AL- 792
AL- 917 IN version of AL- 792
AL-1031 Seven Pay Whole Life
AL-1041 Interest-Sensitive Whole Life
XX-0000 XX version of AL-1041
* AL- 710 MN version of AL-698

ANNUITIES
AY- 2 1185 Variable Annuity
AY- 9 286 Single Premium Deferred Annuity
AY- 9 483 PA version of AY- 9 286
AY- 15 486 Flexible Premium Annuity
AY- 16 988 MN version of AY- 2 1185
AY- 17 988 MN version of AY- 15 486
AY- 19 988 MN version of AY- 9 286

AY- 24 988 OR version of AY- 2 1185
AY- 25 988 OR qualified version of AY- 2 1185
AY- 26 OR qualified version of AY- 9 286
AY- 27 OR qualified version of AY- 15 486
AY- 31 Single Premium Deferred Annuity
(Select 1 & 3 Year, no bailout)
AY- 32 Single Premium Deferred Annuity
(Select 1 & 3 Year, bailout)
AY- 33 Single Premium Deferred Annuity
(Select 4 year guarantee)
AY- 68 583 Structured Settlement Annuity (with
life contingency)
AY-326 MA version of AY- 9 286
AY-360 Group Modified Guaranteed Annuity
AY-371 Immediate Annuity
* AY- 2 1180 Variable Annuity
* AY- 2 182 Variable Annuity
* AY- 3 1180 Companion Fixed to Variable Annuity
* AY- 3 182 Companion Fixed to Variable Annuity
* AY- 3 283 Companion Fixed to Variable Annuity
* AY- 4 Structured Settlement Annuity (without
life contingency)

* No longer issued
80
EXHIBIT B

INDEMNITY REINSURANCE AGREEMENT

Third Party Reinsurance Agreements

Life Automatic Reinsurance Agreement (No. 2240-7), effective June 1, 1986, by
and between Family Life Insurance Company and Transamerica Occidental Life
Insurance Company.

Reinsurance Agreement, effective June 2, 1986, by and between Family Life
Insurance Company and The Lincoln National Life Insurance Company.

Automatic Reinsurance Agreement, effective January 1, 1988, by and between
Family Life Insurance Company and North American Reassurance Company.

Automatic Reinsurance Agreement, effective October 1, 1989, by and between
Family Life Insurance Company and North American Reassurance Company.

Automatic Reinsurance Agreement (No. 1183), effective August 1, 1989, by and
between Family Life Insurance Company and Phoenix Mutual Life Insurance
Company.
81
EXHIBIT C

INDEMNITY REINSURANCE AGREEMENT

Service Agreement
between
Xxxxxxx Xxxxx Insurance Group, Inc.
FLIC and MLLIC

dated November 29, 1990
82
SERVICE AGREEMENT
BETWEEN
XXXXXXX XXXXX INSURANCE GROUP, INC.,
FAMILY LIFE INSURANCE COMPANY
AND
XXXXXXX XXXXX LIFE INSURANCE COMPANY

This Service Agreement is entered into as of the 29th day of November,
1990 between Family Life Insurance Company, a Washington corporation ("FLIC"),
Xxxxxxx Xxxxx Life Insurance Company, a Washington corporation ("MLLIC") and
Xxxxxxx Xxxxx Insurance Group, Inc., a Delaware corporation, for itself and for
its affiliates other than FLIC and MLLIC ("MLIG").

W I T N E S S E T H:

WHEREAS, FLIC is a wholly-owned subsidiary of MLIG, and MLLIC is a
wholly-owned subsidiary of FLIC and

WHEREAS, each party to this Agreement desires to utilize certain
services to be provided by the other parties in carrying out certain of their
respective corporate functions, and

WHEREAS, each party is willing to furnish, or cause its affiliates to
furnish, such services on the terms and conditions hereinafter set forth;

NOW, THEREFORE, the parties do hereby mutually agree as follows,
effective as to FLIC and MLLIC respectively, only so long as it is an affiliate
of MLIG:
83
- 2 -

1. Each party will provide or contract or arrange with any of its
affiliates for the providing of, as available, services as listed in Exhibit I
hereto, if and to the extent requested by the other. Exhibit I may be modified
from time to time by agreement between the parties.

2. For services provided, the service recipient agrees to pay the
service provider:

(a) the amounts as may be specified in one or more
Schedules, pertaining to particular categories of services, as may be executed
by the parties and attached to and incorporated into this Agreement; or

(b) if not so specified, to pay those charges (direct and
indirect) and expenses incurred by the service provider which, as reasonably
determined by the service provider and demonstrated to the reasonable
satisfaction of service recipient, reflect actual cost of such services to the
service provider, provided that

(1) charges and expenses for personnel shall be
based on a reasonable allocation of the time
spent on service recipient matters relative
to time spent on other matters;
84
- 3 -

(2) charges and expenses for property or other
services shall be based on a reasonable
allocation of the proportion of and period of
time such property or services is utilized
for service recipient matters relative to
that utilized for other matters, and;

(3) no charges or expenses shall exceed those
charged by the service provider in the
relevant market for comparable personnel,
property or services as the case may be.

After the end of each month, the service provider will send the service
recipient a xxxx covering service charges and expenses which have been
incurred, or the amount of which has been ascertained, during such month, and
the service recipient will pay for such charges and expenses upon receipt of
the xxxx.

3. The books, accounts and records of MLIG, its affiliates
providing services hereunder, FLIC and MLLIC as to all transactions hereunder
shall be maintained so as to clearly and accurately disclose the nature and
details of the transactions, including such accounting information as is
necessary to support the reasonableness of the charges, expenses or fees
hereunder. The service recipient shall have the right, at its own expense,
85
- 4 -

and at any reasonable time, to make an audit of the services rendered and the
amounts charged therefor.

4. The term of this Agreement shall commence as of the date
hereinabove indicated and continue until December 31, 1990, and thereafter
shall be deemed to be renewed automatically, upon the same terms and
conditions, for successive periods of one year each, until any party, at least
60 days prior to the expiration of the original term or of any extended term,
shall give written notice to the other parties of its intention not to renew
the Agreement, provided that, notwithstanding the foregoing, electronic data
processing services will be made available to the service recipient for up to
six months following any such termination, if the service recipient shall so
request.

5. It is understood that (a) MLIG, any of its affiliates or
subsidiaries, will invest for their own account and may act as investment
advisor for others and that MLIG or such others or persons or organizations
affiliated with MLIG could have investment interests adverse to the interests
of FLIC or MLLIC in the same or related investments; (b) MLIG is not obligated
to make available to FLIC or MLLIC any particular investment opportunity which
comes to MLIG or its subsidiaries or affiliates, regardless of whether such
opportunity is consistent with the investment policies of FLIC or MLLIC; and
(c) FLIC and MLLIC shall retain full control over their respective investment
activities, and MLIG
86
- 5 -

or any of its affiliates or subsidiaries shall have no power or authority by
virtue of this Agreement, whether as agent or otherwise, to obligate or commit
FLIC or MLLIC for the acquisition or disposition of any investment.

6. All differences between MLIG, FLIC and MLLIC on which
agreement cannot be reached will be decided by arbitration. The arbitrators
will interpret this Agreement in accordance with the usual business practices,
rather than strict technicalities or rules of law. Three arbitrators will
decide any differences. They must be officers of life insurance companies
other than the parties to this agreement, their parents, subsidiaries and
affiliates. One of the arbitrators is to be appointed by service provider and
one by the service recipient, and these two will select a third. If the two
are unable to agree on a third, the choice will be left to the President of the
American Council of Life Insurance or its successor organization. The
arbitrators' decision will be by majority vote and no appeal will be taken from
it. The costs of the arbitration will be borne by the losing party unless the
arbitrators decide otherwise.

7. No assignment of this Agreement shall be made by any party
without the consent of the other parties.
87
- 6 -

8. Subject to the foregoing Clause 7, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of the parties
hereto.

9. This Agreement shall supersede that Management Services
Agreement between FLIC and MLLiC dated April 28, 1986.

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.

XXXXXXX XXXXX INSURANCE GROUP, INC.

By:
-------------------------------

FAMILY LIFE INSURANCE COMPANY

By:
-------------------------------

XXXXXXX XXXXX LIFE INSURANCE COMPANY

By:
-------------------------------
88
- 7 -

EXHIBIT I

To Service Agreement
Between MLIG, FLIC and MLLIC

Personnel, Property and Services (except as provided under separate agreements
or Schedules):

1. Accounting and auditing.

2. Actuarial.

3. Administration.

4. Advertising, marketing and public relations.

5. Claims (pursuant to the service recipient's
guidelines and subject to final approval by the
service recipient).

6. Corporate Secretary.

7. Development of software programs.

8. Electronic data processing.

9. Financial and cash advice or management.

10. Investment advisory or management.

11. Legal.

12. Office and general supplies.

13. Payroll services.

14. Personnel.

15. Premium billing and collection.

16. Printing.

17. Product design and development.

18. Regulatory filings and reports.

19. Storage.
89
- 8 -

20. Underwriting (pursuant to the service recipient's
guidelines and subject to final approval by the
service recipient).
90
AMENDMENT NO. 1

INDEMNITY REINSURANCE AGREEMENT

between

FAMILY LIFE INSURANCE COMPANY

and

XXXXXXX XXXXX LIFE INSURANCE COMPANY

dated December 28, 1990
(hereafter referred to as "Agreement")

The Agreement, to which this amendment is attached and made a
part of, is amended this 21st day of March, 1991 as follows:

A) Article V D. is replaced as follows:

"If, under the insurance laws and regulations of any
jurisdiction the full statutory reserve credit contemplated by
this Agreement is or becomes unavailable to FLIC as to such
jurisdiction, MLLIC shall take any and all action necessary to
make such full statutory reserve credit available to FLIC. In
doing so, MLLIC shall have the discretion to utilize any means
available under the laws of the applicable jurisdiction to
make such full statutory reserve credit available to FLIC,
which may include, but not be limited to, permitting FLIC to
withhold funds, establishing a reserve trust account or
posting a letter of credit. If a letter of credit is utilized
it shall be furnished and maintained by MLLIC for the benefit
of FLIC and be clean, irrevocable and unconditional and
otherwise of such nature and amount as to satisfy the
requirements of the particular jurisdiction for purposes of
establishing full statutory reserve credit for FLIC.

In the event that MLLIC shall fail or refuse to
fulfill any of its obligations under this Agreement relating
to the payment of

Page 1 of 3
91
liability, FLIC shall be entitled to proceed under the terms
and conditions of any letter of credit, trust agreement or any
other agreement relating to the same and seize and take
possession of the funds represented by the same and apply
those funds to reduce MLLIC's obligations to FLIC."

B) Paragraph 1.(a) of Section A., Net Daily Adjustment,
of Article VI, ACCOUNTING AND SETTLEMENT is replaced as follows:

"the gross premium collected on all policies, net of premiums
to be allocated to the Separate Account pursuant to contract
owner instructions;"

C) Exhibit A to the Agreement is amended as follows:

1. to add the following to the second full
paragraph thereof: "Any expenses incurred by
FLIC in connection with the actions it may be
necessarily required to take regarding the
marketing of additional policy and contract
forms shall be the responsibility of, and
shall be paid or reimbursed by, MLLIC."

2. to delete "(NJ)" from the description of
policy form number AL- 698; and

3. to add the following policies:

LIFE:
AL- 698-1 Texas version of AL- 698
with 1 year guarantee

AL- 698-3 Texas version of AL- 698
with 3 year guarantee

AL- 698-5 Texas version of AL- 698
with 5 year guarantee

AL- 772-1 Texas version of AL- 772
with 1 year guarantee

AL- 772-3 Texas version of AL- 772
with 3 year guarantee

AL- 772-5 Texas version of AL- 772

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with 5 year guarantee

AL- 790-1 Texas version of AL- 790
with 1 year guarantee

AL- 790-3 Texas version of AL- 790
with 1 year guarantee

AL- 790-5 Texas version of AL- 790
with 5 year guarantee

FIXED ANNUITIES:
AY- 9 483-1 Texas version of AY- 9 483
with 1 year guarantee

AY- 9 483-3 Texas version of AY- 9 483
with 3 year guarantee

AY- 9 483-5 Texas version of AY- 9 483
with 5 year guarantee

AY-70 Connecticut version of
AY- 9 286

IN WITNESS WHEREOF, FLIC and MLLIC have caused this Amendment
to be executed by their respective officers duly authorized to do so.

FAMILY LIFE INSURANCE COMPANY

BY
-------------------------------------

TITLE
----------------------------------

XXXXXXX XXXXX LIFE INSURANCE COMPANY

BY
-------------------------------------

TITLE
----------------------------------

Page 3 of 3
93
EXHIBIT C

ASSUMPTION REINSURANCE AGREEMENT

Policies to be Assumed by XXXXXXX XXXXX LIFE INSURANCE COMPANY

All policies and contracts listed below the owners of which reside in the
listed jurisdictions, which are in force on the Effective Date of this
Agreement or are issued by FLIC subsequently thereto pursuant to the Stock
Purchase Agreement and the Indemnity Reinsurance Agreement.

JURISDICTIONS POLICY FORM NUMBERS AND DESCRIPTION
------------- -----------------------------------

LIFE:

District of Columbia,
Guam, the Virgin Islands AL - 698 Single Premium Whole Life
and all states except AL - 698-1 TX version of AL - 698 with 1 year guarantee
Alabama, Maine, New AL - 698-3 TX version of AL - 698 with 3 year guarantee
Hampshire, New York, AL - 698-5 TX version of AL - 698 with 5 year guarantee
North Carolina, Ohio and AL - 772 Single Premium Whole Life (Enhanced version)
Vermont AL - 772-1 TX version of AL - 772 with 1 year guarantee
AL - 772-3 TX version of AL - 772 with 3 year guarantee
AL - 772-5 TX version of AL - 772 with 5 year guarantee
AL - 774 1187 MN version of AL - 772
AL - 790 Single Premium Whole Life (Rate version)
AL - 790-1 TX version of AL - 790 with 1 year guarantee
AL - 790-3 TX version of AL - 790 with 3 year guarantee
AL - 790-5 TX version of AL - 790 with 5 year guarantee
AL - 792 Second-to-die Single Premium Whole Life
AL - 799 1187 MN version of AL - 790
AL - 820 1187 MN version of AL - 792
AL - 858 CA/WA version of AL - 772
AL - 863 CA/WA version of AL - 790
AL - 877 CA/WA version of AL - 792
AL - 917 IN version of AL - 792
AL - 1031 Seven Pay Whole Life
AL - 1041 Interest-Sensitive Whole Life
*AL - 710 MN version of AL - 698

FIXED ANNUITIES:

AY - 9 286 Single Premium Deferred Annuity
AY - 9 483 PA version of AY - 9 286
AY - 9 483-1 TX version of AY - 9 483 with 1 year guarantee
AY - 9 483-3 TX version of AY - 9 483 with 3 year guarantee
AY - 9 483-5 TX version of AY - 9 483 with 5 year guarantee
AY - 15 486 Flexible Premium Annuity
AY - 17 988 MN version of AY - 15 286
AY - 19 988 MN version of AY - 9 286
AY - 26 OR qualified version of AY - 9 286
AY - 27 OR qualified version of AY - 15 286
AY - 31 Single Premium Deferred Annuity (Select 1 & 3 Year, no bailout)
AY - 32 Single Premium Deferred Annuity (Select 1 & 3 Year, bailout)
AY - 33 Single Premium Deferred Annuity (Select 5 year guarantee)
AY - 68 583 Structured Settlement Annuity (with life contingency)
AY - 79 CT version of AY - 9 286
AY - 326 MA version of AY - 9 286
AY - 360 Group Modified Guaranteed Annuity
AY - 371 Immediate Annuity
*AY - 4 Structured Settlement Annuity (without life contingency)

94
EXHIBIT C

ASSUMPTION REINSURANCE AGREEMENT (cont.)

VARIABLE ANNUITIES:

District of Columbia,
Guam, the Virgin Islands AY - 2 1185 Variable Annuity
and all states except AY - 24 988 OR version of AY - 2 1185
Alabama, Delaware, Maine, AY - 25 988 OR qualified version of AY - 2 1185
Minnesota, New Hampshire, *AY - 2 1180 Variable Annuity
New York, North Carolina, *AY - 2 182 Variable Annuity
Ohio and Vermont *AY - 3 1180 Companion Fixed to Variable Annuity
*AY - 3 182 Companion Fixed to Variable Annuity
*AY - 3 283 Companion Fixed to Variable Annuity

*No longer issued

95
EXHIBIT D

ASSUMPTION REINSURANCE AGREEMENT

Policies to be Assumed by TANDEM INSURANCE GROUP, INC.

JURISDICTIONS POLICY FORM NUMBERS AND DESCRIPTION
96
EXHIBIT E

ASSUMPTION REINSURANCE AGREEMENT

Policies to be Assumed by ROYAL TANDEM LIFE INSURANCE COMPANY

JURISDICTIONS POLICY FORM NUMBERS AND DESCRIPTION
97
EXHIBIT F

ASSUMPTION REINSURANCE AGREEMENT

ASSUMPTION CERTIFICATE

Policy or Contract Number:
---------------------------------------

This is to certify that as of 12:01 a.m. (standard time at the address
of the owner of the above captioned policy or contract) on _________________,
1991, (Name of Reinsurer) , a _________________ stock insurance company,
hereby assumes all liability for performance of the terms of the policy or
contract identified above and issued by FAMILY LIFE INSURANCE COMPANY, a
Washington stock insurance company, the same as if it had been originally
issued by (Name of Reinsurer) .

Signed at the executive offices of (Name of Reinsurer) at
______________________.

------------------------------------------------
, President

------------------------------------------------
, Secretary

IMPORTANT

This certificate becomes a part of your policy and should be attached thereto.
All correspondence and inquiries should be directed to (Name of
Reinsurer) , ____________________________________
____________________________________ (address).

Form No.
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EXHIBIT (7) ASSUMPTION REINSURANCE AGREEMENT

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