EQUITRUST LIFE ANNUITY ACCOUNT II
N-4, 1998-08-20
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<PAGE>
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1998
 
                                                              FILE NO. 333-
                                                              FILE NO. 811-
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- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                    FORM N-4
 
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933          /X/
 
                        PRE-EFFECTIVE AMENDMENT NO. ____                     / /
                          POST-EFFECTIVE AMENDMENT NO.                       / /
 
        REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940      /X/
 
                                 AMENDMENT NO.                               / /
                            ------------------------
 
                       EQUITRUST LIFE ANNUITY ACCOUNT II
                           (Exact Name of Registrant)
 
                        EQUITRUST LIFE INSURANCE COMPANY
                              (Name of Depositor)
 
                             5400 University Avenue
                          West Des Moines, Iowa 50266
              (Address of Depositor's Principal Executive Offices)
                  Depositor's Telephone Number: 1-888-349-4656
 
                            ------------------------
 
                           STEPHEN M. MORAIN, ESQUIRE
                             5400 University Avenue
                          West Des Moines, Iowa 50266
               (Name and Address of Agent for Service of Process)
 
                            ------------------------
 
                                    COPY TO:
                            STEPHEN E. ROTH, ESQUIRE
                        Sutherland, Asbill & Brennan LLP
                         1275 Pennsylvania Avenue, N.W.
                          Washington, D.C. 20004-2415
                            ------------------------
 
    APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
 
    SECURITIES BEING OFFERED: FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACTS
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
 
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- --------------------------------------------------------------------------------
<PAGE>
                             CROSS REFERENCE SHEET
 
                      PURSUANT TO RULES 481(a) AND 495(a)
 
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
 
PART A
 
<TABLE>
<CAPTION>
ITEM OF FORM N-4                                                                 PROSPECTUS CAPTION
- -----------------------------------------------------  ----------------------------------------------------------------------
<C>   <S>  <C>    <C>                                  <C>
  1.  Cover Page.....................................  Cover Page
  2.  Definitions....................................  Definitions
  3.  Synopsis.......................................  Expense Tables; Summary
  4.  Condensed Financial Information................  Yields and Total Returns
  5.  General
      (a)  Depositor.................................  EquiTrust Life Insurance Company
      (b)  Registrant................................  EquiTrust Life Annuity Account II
      (c)  Portfolio Company.........................  Investment Options
      (d)  Fund Prospectus...........................  Investment Options
      (e)  Voting Rights.............................  Voting Rights
      (f)  Administrators............................  N/A
  6.  Deductions and Expenses
      (a)  General...................................  Charges and Deductions; Summary
      (b)  Sales Load %..............................  Charges and Deductions; Summary
      (c)  Special Purchase Plan.....................  N/A
      (d)  Commissions...............................  Distribution of the Contracts
      (e)  Expenses -- Registrant....................  Charges and Deductions; Summary
      (f)  Fund Expenses.............................  Investment Options; Charges and Deductions
      (g)  Organizational Expenses...................  N/A
  7.  Contracts
      (a)  Persons with Rights.......................  Summary; Addition, Deletion or Substitution of Investments;
                                                       Description of Annuity Contract; Payment Options; Voting Rights
      (b)    (i)  Allocation of Purchase
                  Payments...........................  Summary; Premiums; Free-Look Period; Allocation of Premiums
            (ii)  Transfers..........................  Summary; Transfer Privilege
           (iii)  Exchanges..........................  Transfers, Assignments or Exchanges of a Contract
      (c)  Changes...................................  Additions, Deletions or Substitutions of Investments; Description of
                                                       Annuity Contract; Modification;
      (d)  Inquiries.................................  Cover page; Inquiries
  8.  Annuity Period.................................  Summary; Payment Options
  9.  Death Benefit..................................  Death Benefit Before the Retirement Date; Death Benefit After the
                                                       Retirement Date
 10.  Purchases and Contract Value
      (a)  Purchases.................................  Summary; Issuance of a Contract; Premiums; Free Look Period;
                                                       Allocation of Premiums; Variable Cash Value;
      (b)  Valuation.................................  Definitions; Variable Cash Value;
      (c)  Daily Calculation.........................  Definitions; Variable Cash Value;
      (d)  Underwriter...............................  Issuance of a Contract; Distribution of the Contracts
 11.  Redemptions
      (a)  -- By Owners..............................  Summary; Transfer Privilege; Surrenders and Partial Surrenders;
                                                       Proceeds on the Retirement Date; Payments; Payment Options; Federal
                                                       Tax Matters
           -- By Annuitant...........................  Summary; Transfer Privilege; Surrenders and Partial Surrenders;
                                                       Proceeds on the Retirement Date; Payments; Payment Options; Federal
                                                       Tax Matters
      (b)  Taxes ORP.................................  N/A
      (c)  Check Delay...............................  Payments
      (d)  Lapse.....................................  N/A
      (e)  Free Look.................................  Summary; Free Look Period
</TABLE>
<PAGE>
<TABLE>
<C>   <S>  <C>    <C>                                  <C>
 12.  Taxes..........................................  Summary; Federal Tax Matters
 13.  Legal Proceedings..............................  Legal Proceedings
 14.  Table of Contents for the Statement of
      Additional Information.........................  Statement of Additional Information
                                                       Table of Contents
 
PART B
<CAPTION>
ITEM OF FORM N-4                                                                   PART B CAPTION
- -----------------------------------------------------  ----------------------------------------------------------------------
<C>   <S>  <C>    <C>                                  <C>
 15.  Cover Page.....................................  Cover Page
 16.  Table of Contents..............................  Table of Contents
 17.  General Information and History................  N/A
 18.  Services
      (a)  Fees and Expenses of Registrant...........  N/A
      (b)  Management Contracts......................  N/A
      (c)  Custodian.................................  N/A
           Independent Public Accountant.............  Experts
      (d)  Assets of Registrant......................  N/A
      (e)  Affiliated Persons........................  N/A
      (f)  Principal Underwriter.....................  Distribution of the Contracts (prospectus)
 19.  Purchase of Securities
       Being Offered.................................  Distribution of the Contracts (prospectus)
       Offering Sales Load...........................  N/A
 20.  Underwriters...................................  Distribution of the Contracts (prospectus)
 21.  Calculation of Performance Data................  Calculation of Yields and Total Returns; Yields and Total Returns
                                                       (prospectus)
 22.  Annuity Payments...............................  Payment Options (prospectus)
 23.  Financial Statements...........................  Financial Statements
 
PART C -- OTHER INFORMATION
<CAPTION>
ITEM OF FORM N-4                                                                   PART C CAPTION
- -----------------------------------------------------  ----------------------------------------------------------------------
<C>   <S>  <C>    <C>                                  <C>
 24.  Financial Statements and Exhibits..............  Financial Statements and Exhibits
      (a)  Financial Statements......................  (a) Financial Statements
      (b)  Exhibits..................................  (b) Exhibits
 25.  Directors and Officers of the Depositor........  Directors and Officers of EquiTrust Life Insurance Company
 26.  Persons Controlled By or Under Common Control
      with the Depositor or Registrant...............  Persons Controlled By or In Common Control with the Depositor or
                                                       Registrant
 27.  Number of Contractowners.......................  Number of owners
 28.  Indemnification................................  Indemnification
 29.  Principal Underwriters.........................  Principal Underwriter
 30.  Location of Accounts and Records...............  Location of Books and Records
 31.  Management Services............................  Management Services
 32.  Undertakings...................................  Undertakings and Representations
      Signature Page.................................  Signatures
</TABLE>
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
 
EquiTrust Life Annuity Account II
Individual Flexible Premium Deferred
Variable Annuity Contract
 
- --------------------------------------------------------------------------------
 
This Prospectus describes the individual flexible premium deferred variable
annuity contract (the "Contract") being offered by EquiTrust Life Insurance
Company (the "Company"). The Contract may be sold to or in connection with
retirement plans, including those that qualify for special federal tax treatment
under the Internal Revenue Code.
 
Premiums and accumulated values are allocated, as designated by the owner, to
one or more of the subaccounts of the EquiTrust Life Annuity Account II (the
"Account"), the Declared Interest Option, or both. The assets of each Subaccount
will be invested solely in shares of the corresponding Investment Options: Value
Growth Portfolio, High Grade Bond Portfolio, High Yield Bond Portfolio, Money
Market Portfolio and Blue Chip Portfolio of EquiTrust Variable Insurance Series
Fund; Equity Income Portfolio, Mid-Cap Growth Portfolio, New America Growth
Portfolio and Personal Strategy Balanced Portfolio of T. Rowe Price Equity
Series, Inc.; International Stock Portfolio of T. Rowe Price International
Series, Inc.; or Dreyfus Variable Investment Fund: Capital Appreciation
Portfolio, Dreyfus Variable Investment Fund: Disciplined Stock Portfolio,
Dreyfus Variable Investment Fund: Growth and Income Portfolio, Dreyfus Variable
Investment Fund: International Equity Portfolio and Dreyfus Variable Investment
Fund: Small Cap Portfolio. The accompanying prospectus for each Fund describes
the investment objectives and attendant risks of each Investment Option. The
accumulated value of the Contracts prior to the retirement date, except for
amounts in the Declared Interest Option, will vary according to the investment
performance of each Investment Option in which the selected Subaccounts are
invested. THE OWNER BEARS THE ENTIRE INVESTMENT RISK ON AMOUNTS ALLOCATED TO THE
ACCOUNT.
 
This Prospectus sets forth basic information about the Contract and the Account
that a prospective investor should know before investing. Additional information
about the Contract and the Account is contained in the Statement of Additional
Information, which has been filed with the Securities and Exchange Commission.
The Statement of Additional Information is dated the same as this Prospectus and
is incorporated herein by reference. The table of contents for the Statement of
Additional Information is on page 31 of this Prospectus. You may obtain a copy
of the Statement of Additional Information free of charge by writing or calling
the Company at the address or phone number shown below.
- --------------------------------------------------------------------------------
 
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR EACH
FUND'S INVESTMENT OPTIONS.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
 
Issued By
 
EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
1-888-349-4656
 
                         THE DATE OF THIS PROSPECTUS IS
                                          , 1998
<PAGE>
- --------------------------------------------------------------------------------
                   TABLE OF CONTENTS
- --------------------------------------------------------------------------------
 
                                                                            PAGE
 
DEFINITIONS...............................................................     3
 
- --------------------------------------------------------------------------------
 
EXPENSE TABLES............................................................     4
 
- --------------------------------------------------------------------------------
 
SUMMARY...................................................................     7
 
- --------------------------------------------------------------------------------
 
THE COMPANY, ACCOUNT AND INVESTMENT OPTIONS...............................     8
 
          EquiTrust Life Insurance Company................................     8
 
          EquiTrust Life Annuity Account II...............................     8
 
          Investment Options..............................................     9
 
          Addition, Deletion or Substitution of Investments...............    11
 
- --------------------------------------------------------------------------------
 
DESCRIPTION OF ANNUITY CONTRACT...........................................    12
 
          Issuance of a Contract..........................................    12
 
          Premiums........................................................    12
 
          Free-Look Period................................................    12
 
          Allocation of Premiums..........................................    12
 
          Variable Accumulated Value......................................    13
 
          Transfer Privilege..............................................    14
 
          Partial Withdrawals and Surrenders..............................    14
 
          Special Transfer and Withdrawal Options.........................    15
 
          Death Benefit Before the Retirement Date........................    15
 
          Death Benefit After the Retirement Date.........................    16
 
          Proceeds on the Retirement Date.................................    16
 
          Payments........................................................    16
 
          Modification....................................................    17
 
          Reports to Owners...............................................    17
 
          Inquiries.......................................................    17
 
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THE DECLARED INTEREST OPTION..............................................    17
 
          Minimum Guaranteed and Current Interest Rates...................    18
 
          Transfers From Declared Interest Option.........................    18
 
          Payment Deferral................................................    18
 
- --------------------------------------------------------------------------------
 
CHARGES AND DEDUCTIONS....................................................    19
 
          Surrender Charge (Contingent Deferred Sales Charge).............    19
 
          Annual Administrative Charge....................................    20
 
          Transfer Processing Fee.........................................    20
 
          Mortality and Expense Risk Charge...............................    20
 
          Investment Option Expenses......................................    20
 
          Premium Taxes...................................................    20
 
          Other Taxes.....................................................    20
 
- --------------------------------------------------------------------------------
 
PAYMENT OPTIONS...........................................................    20
 
          Election of Options.............................................    21
 
          Description of Options..........................................    21
 
- --------------------------------------------------------------------------------
 
YIELDS AND TOTAL RETURNS..................................................    21
 
- --------------------------------------------------------------------------------
 
FEDERAL TAX MATTERS.......................................................    23
 
          Introduction....................................................    23
 
          Tax Status of the Contract......................................    24
 
          Taxation of Annuities...........................................    25
 
          Transfers, Assignments or Exchanges of a Contract...............    27
 
          Withholding.....................................................    27
 
          Multiple Contracts..............................................    27
 
          Taxation of Qualified Plans.....................................    27
 
          Possible Charge for the Company's Taxes.........................    29
 
          Other Tax Consequences..........................................    29
 
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DISTRIBUTION OF THE CONTRACTS.............................................    29
 
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LEGAL PROCEEDINGS.........................................................    30
 
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VOTING RIGHTS.............................................................    30
 
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YEAR 2000.................................................................    31
 
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FINANCIAL STATEMENTS......................................................    31
 
- --------------------------------------------------------------------------------
 
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS.....................    32
 
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                                       2
<PAGE>
- --------------------------------------------------------------------------------
                   DEFINITIONS
- --------------------------------------------------------------------------------
 
<TABLE>
<S>                        <C>
ACCOUNT..................  EquiTrust Life Annuity Account II.
ACCUMULATED VALUE........  The total amount invested under the Contract. It
                           is the sum of the values of the Contract in each
                           Subaccount of the Account plus the value of the
                           Contract in the Declared Interest Option.
ANNUITANT................  The person or persons whose life (or lives)
                           determines the annuity benefits payable under the
                           Contract and whose death determines the death
                           benefit.
BENEFICIARY..............  The person to whom the proceeds payable on the
                           death of the owner/annuitant will be paid.
BUSINESS DAY.............  Each day that the New York Stock Exchange is open
                           for trading, except the day after Thanksgiving,
                           the day before Christmas (in 1998) and any day on
                           which the Home Office is closed because of a
                           weather-related or comparable type of emergency
                           and is unable to segregate orders and redemption
                           requests received on that day.
THE CODE.................  The Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY.....  Same date in each Contract Year as the Contract
                           Date.
CONTRACT DATE............  The date on which a properly completed application
                           is received by the Company at the Home Office. It
                           is the date set forth on the data page of the
                           Contract which is used to determine Contract Years
                           and Contract Anniversaries.
CONTRACT YEAR............  A twelve-month period beginning on the Contract
                           Date or on a Contract Anniversary.
DECLARED INTEREST          An investment option under the Contract funded by
 OPTION..................  the Company's General Account. It is not part of,
                           nor dependent upon, the investment performance of
                           the Account.
DUE PROOF OF DEATH.......  Proof of death satisfactory to the Company. Such
                           proof may consist of the following if acceptable
                           to the Company:
                           (a)  a certified copy of the death certificate;
                           (b)  a certified copy of a court decree reciting a
                           finding of death; or
                           (c)  any other proof satisfactory to the Company.
FUND.....................  An open-end diversified management investment
                           company in which the Account invests.
GENERAL ACCOUNT..........  The assets of the Company other than those
                           allocated to the Account or any other separate
                           account of the Company.
HOME OFFICE..............  The principal offices of the Company at 5400
                           University Avenue, West Des Moines, Iowa 50266.
INVESTMENT OPTION........  A separate investment portfolio of a Fund.
NET ACCUMULATED VALUE....  The accumulated value less any applicable
                           surrender charge.
NON-QUALIFIED CONTRACT...  A Contract that is not a "Qualified Contract."
OWNER....................  The person who owns the Contract and who is
                           entitled to exercise all rights and privileges
                           provided in the Contract.
QUALIFIED CONTRACT.......  A Contract that is issued in connection with plans
                           that qualify for special federal income tax
                           treatment under Sections 401, 403(b) or 408 of the
                           Code.
RETIREMENT DATE..........  The date when the accumulated value will be
                           applied under a payment option, if the annuitant
                           is still living.
SEC......................  U.S. Securities and Exchange Commission.
SUBACCOUNT...............  A subdivision of the Account, the assets of which
                           are invested in a corresponding Investment Option.
VALUATION PERIOD.........  The period that starts at the close of business
                           (3:00 p.m. central time) on one Business Day and
                           ends at the close of business on the next
                           succeeding Business Day.
WRITTEN NOTICE...........  A written request or notice in a form satisfactory
                           to the Company which is signed by the owner and
                           received at the Home Office.
</TABLE>
 
                                       3
<PAGE>
- --------------------------------------------------------------------------------
                   EXPENSE TABLES
- --------------------------------------------------------------------------------
The following expense information assumes that the entire accumulated value is
variable accumulated value.
 
<TABLE>
<S>                                                 <C>
OWNER TRANSACTION EXPENSES
  Sales Charge Imposed on Premiums................  None
  Surrender Charge (contingent deferred sales
   charge) as a percentage of the amount
   surrendered:
</TABLE>
 
<TABLE>
<CAPTION>
CONTRACT YEAR*        SURRENDER CHARGE
- --------------------  -----------------
<S>                   <C>
1...................          6%
2...................          5
3...................          4
4...................          3
5...................          2
6...................          1
7 and after.........          0
</TABLE>
 
  * After the first Contract Year, the owner may make partial withdrawals of up
    to 10% of the accumulated value on the most recent Contract Anniversary
    without incurring a surrender charge. If the Contract is subsequently
    surrendered during the Contract Year, a surrender charge will be applied to
    the partial withdrawals taken. The amount that may be withdrawn without
    incurring a surrender charge is NOT cumulative from Contract Year to
    Contract Year.
 
<TABLE>
<S>                                                 <C>
Transfer Processing Fee...........................  None*
</TABLE>
 
  * The Company does not charge a fee for the first twelve transfers in a
    Contract Year. The Company may charge $25 for each subsequent transfer in a
    Contract Year.
 
<TABLE>
<S>                                                 <C>
ANNUAL ADMINISTRATIVE CHARGE......................  $30
 
ACCOUNT ANNUAL EXPENSES (as a percentage of
 average net assets)
  Mortality and Expense Risk Charge...............  1.40%
  Other Account Expenses..........................  None
    Total Account Expenses........................  1.40%
</TABLE>
 
ANNUAL INVESTMENT OPTION EXPENSES (as a percentage of average net assets)
 
<TABLE>
<CAPTION>
                                                                            OTHER                      TOTAL
                                                                          EXPENSES                    EXPENSES
                                                      ADVISORY        (AFTER WAIVER OR            (AFTER WAIVER OR
INVESTMENT OPTION                                       FEE            REIMBURSEMENT)              REIMBURSEMENT)
- --------------------------------------------------  ------------  -------------------------  --------------------------
<S>                                                 <C>           <C>                        <C>
EquiTrust Variable Insurance Series Fund**
  Value Growth....................................        0.45%               0.10%                     0.55%(1)
  High Grade Bond.................................        0.30%               0.22%                     0.52%
  High Yield Bond.................................        0.45%               0.12%                     0.57%(1)
  Money Market....................................        0.25%               0.23%                     0.48%(1)
  Blue Chip.......................................        0.20%               0.13%                     0.33%
 
T. Rowe Price Equity Series, Inc.
  Equity Income...................................        0.85%               0.00%                     0.85%(2)
  Mid-Cap Growth..................................        0.85%               0.00%                     0.85%(2)
  New America Growth..............................        0.85%               0.00%                     0.85%(2)
  Personal Strategy Balanced......................        0.90%               0.00%                     0.90%(2)
 
T. Rowe Price International Series, Inc.
  International Stock.............................        1.05%               0.00%                     1.05%(2)
 
Dreyfus Variable Investment Fund
  Capital Appreciation Portfolio..................        0.75%(3)             0.05%                    0.80%(4)
  Disciplined Stock Portfolio.....................        0.75%               0.27%                     1.02%(4)
  Growth and Income Portfolio.....................        0.75%               0.05%                     0.80%(4)
  International Equity Portfolio..................        0.75%               0.31%                     1.06%(4)
  Small Cap Portfolio.............................        0.75%               0.03%                     0.78%(4)
</TABLE>
 
- ------------------------
**  The annual investment option expenses for each Investment Option of the Fund
    are net of certain reimbursements by the Fund's investment adviser.
    Operating expenses (including the investment advisory fee but excluding
 
                                       4
<PAGE>
    brokerage, interest, taxes and extraordinary expenses) of an Investment
    Option that exceed 1.50% of the Investment Option's average daily net assets
    for any fiscal year are reimbursed by the Fund's investment adviser up to
    the amount of the advisory fee. In addition, the investment adviser has
    voluntarily agreed to reimburse each Portfolio for expenses that exceed
    0.65%. Absent the reimbursements, the total expenses for the Investment
    Options for the 1997 fiscal year would have been: Value Growth 0.58%, High
    Grade Bond 0.57%, High Yield Bond 0.65% and Money Market 0.55%.
 
(1) Total annual investment option expenses have been restated for the reduction
    in management fees from 0.50% to 0.45% for the Value Growth and High Yield
    Bond Investment Options and 0.30% to 0.25% for the Money Market Investment
    Option, effective May 1, 1997.
 
(2) Total annual investment option expenses are an all-inclusive fee and pay for
    investment management services and other operating costs.
 
(3) The advisory fee is a combined investment advisory and sub-investment
    advisory fee.
 
(4) Total expenses were not reduced for the 1997 fiscal year by any waiver or
    reimbursement.
 
The above tables are intended to assist the owner of a Contract in understanding
the costs and expenses that he or she will bear directly or indirectly. The
tables reflect the expenses for the Account based on the actual expenses for
each Investment Option for the 1997 fiscal year. For a more complete description
of the various costs and expenses see "Charges and Deductions" and the
prospectus for each Investment Option which accompany this Prospectus.
 
EXAMPLES:  An owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
 
    1.  If the Contract is surrendered or is annuitized at the end of the
applicable time period:
 
<TABLE>
<CAPTION>
                                                              3       5       10
SUBACCOUNT                                          1 YEAR  YEARS   YEARS    YEARS
- --------------------------------------------------  ------  ------  ------  -------
<S>                                                 <C>     <C>     <C>     <C>
 
EquiTrust Variable Insurance Series Fund
  Value Growth....................................  $ 111   $ 194   $ 277   $  524
  High Grade Bond.................................    111     193     276      521
  High Yield Bond.................................    112     195     278      526
  Money Market....................................    111     192     274      517
  Blue Chip.......................................    109     188     266      501
 
T. Rowe Price Equity Series, Inc.
  Equity Income...................................    114     203     292      555
  Mid-Cap Growth..................................    114     203     292      555
  New America Growth..............................    114     203     292      555
  Personal Strategy Balanced......................    115     204     295      560
 
T. Rowe Price International Series, Inc.
  International Stock.............................    116     209     302      574
 
Dreyfus Variable Investment Fund
  Capital Appreciation Portfolio..................    116     210     303      577
  Disciplined Stock Portfolio.....................    116     208     300      571
  Growth and Income Portfolio.....................    114     202     290      550
  International Equity Portfolio..................    116     209     302      575
  Small Cap Portfolio.............................    114     201     289      548
</TABLE>
 
                                       5
<PAGE>
    2.  If the Contract is not surrendered or annuitized at the end of the
applicable time period:
 
<TABLE>
<CAPTION>
                                                              3       5       10
SUBACCOUNT                                          1 YEAR  YEARS   YEARS    YEARS
- --------------------------------------------------  ------  ------  ------  -------
<S>                                                 <C>     <C>     <C>     <C>
 
EquiTrust Variable Insurance Series Fund
  Value Growth....................................  $  50   $ 151   $ 254   $  524
  High Grade Bond.................................     49     150     253      521
  High Yield Bond.................................     50     152     255      526
  Money Market....................................     49     149     251      517
  Blue Chip.......................................     48     144     243      501
 
T. Rowe Price Equity Series, Inc.
  Equity Income...................................  $  53   $ 160   $ 270   $  555
  Mid-Cap Growth..................................     53     160     270      555
  New America Growth..............................     53     160     270      555
  Personal Strategy Balanced......................     53     162     272      560
 
T. Rowe Price International Series, Inc.
  International Stock.............................     55     166     280      574
 
Dreyfus Variable Investment Fund
  Capital Appreciation Portfolio..................     55     167     281      577
  Disciplined Stock Portfolio.....................     54     165     278      571
  Growth and Income Portfolio.....................     52     159     267      550
  International Equity Portfolio..................     55     166     280      575
  Small Cap Portfolio.............................     52     158     266      548
</TABLE>
 
The examples provided above assume that no transfer charges or premium taxes
have been assessed. The examples also assume that the annual administrative
charge is $30 and that the accumulated value per contract is $10,000, which
translates the administrative charge into an assumed .30% charge for the
purposes of the examples based on a $1,000 investment.
 
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE ASSUMED 5% ANNUAL RATE OF RETURN IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN THIS ASSUMED RATE.
 
                                       6
<PAGE>
- --------------------------------------------------------------------------------
                   SUMMARY
- --------------------------------------------------------------------------------
THE CONTRACT            ISSUANCE OF A CONTRACT. Contracts may be sold in
                        connection with retirement plans which may or may not
                       qualify for special federal tax treatment under the Code.
                       There is no maximum age for owners on the Contract date.
                       (See "Issuance of a Contract.")
 
                        FREE-LOOK PERIOD. The owner has the right to return the
                        Contract within 20 days after he or she receives it. The
                       returned Contract will become void. The Company will
                       return to the owner an amount equal to the greater of the
                       premiums paid or the accumulated value on the date the
                       returned Contract is received at the Home Office plus
                       administrative charges and charges deducted from the
                       Account. (See "Free-Look Period.")
 
                        PREMIUMS. The minimum amount which the Company will
                        accept as an initial premium is $1,000. Subsequent
                       premiums of not less than $50 may be paid under the
                       Contract. (See "Premiums.")
 
                        ALLOCATION OF PREMIUMS. Premiums under a Contract will
                        be allocated, as designated by the owner, to one or more
                       Subaccounts, the Declared Interest Option, or both. The
                       initial premium will be allocated to the Money Market
                       Subaccount for a 10-day period following the Contract
                       date. At the end of that period, the amount in the Money
                       Market Subaccount will be allocated among the Subaccounts
                       and the Declared Interest Option in accordance with the
                       owner's percentage allocation in the application. The
                       assets of each Subaccount will be invested solely in a
                       corresponding Investment Option. The accumulated value,
                       except for amounts in the Declared Interest Option, will
                       vary according to the investment performance of the
                       Investment Option in which the selected Subaccounts are
                       invested. Interest will be credited to amounts in the
                       Declared Interest Option at a guaranteed minimum rate of
                       3% per year, or a higher current interest rate declared
                       by the Company. (See "Allocation of Premiums.")
 
                        TRANSFERS. On or before the retirement date, the owner
                        may transfer all or part of the amount in a Subaccount
                       or the Declared Interest Option to another Subaccount or
                       the Declared Interest Option subject to certain
                       restrictions.
 
                       The total amount transferred each time must be at least
                       $100 or the entire amount in the Subaccount, if less.
                       Transfers out of the Declared Interest Option must be for
                       no more than 25% of the accumulated value in that option.
                       No fee is currently charged for the first twelve
                       transfers during a Contract year, but the Company may
                       assess a transfer processing fee of $25 for each
                       subsequent transfer during a Contract year. (See
                       "Transfer Privilege.")
 
                        PARTIAL WITHDRAWAL. Upon written notice at any time
                        before the retirement date, the owner may withdraw part
                       of the accumulated surrender value subject to certain
                       limitations. (See "Partial Withdrawals.")
 
                        SURRENDER. Upon written notice received on or before the
                        retirement date, the owner may surrender the Contract
                       and receive its net accumulated value. (See "Surrender.")
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS The following charges and deductions are assessed under
                       the Contract:
 
                        SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE). No
                        charge for sales expense is deducted from premiums at
                       the time premiums are paid. However, if a Contract has
                       not been in force for six full Contract years, upon
                       surrender, partial withdrawal or the application of the
                       accumulated value to certain payment options under
                       certain circumstances, a surrender charge is deducted
                       from the amount surrendered, withdrawn or from the
                       remaining accumulated value.
 
                       For the first Contract year, the charge is 6% of the
                       amount surrendered. Thereafter, the surrender charge
                       decreases by 1% each subsequent Contract year. In no
                       event will the total surrender charge on any Contract
                       exceed 8.5% of the total premiums paid under the
                       Contract. (See "Charge for Partial Withdrawal or
                       Surrender.")
 
                                       7
<PAGE>
                       Subject to certain restrictions, for partial withdrawals
                       in each Contract year after the first Contract year, up
                       to 10% of the accumulated value on the most recent
                       Contract Anniversary may be withdrawn without a current
                       surrender charge. If the Contract is subsequently
                       surrendered during the Contract Year, a surrender charge
                       will be applied to partial withdrawals taken. (See
                       "Amounts Not Subject to Surrender Charge.") The surrender
                       charge may be waived as provided in the Contracts. (See
                       "Waiver of Surrender Charge.")
 
                        ANNUAL ADMINISTRATIVE CHARGE. On the Contract date and
                        on each Contract anniversary prior to the retirement
                       date, the Company deducts an annual administrative charge
                       of $30 from the accumulated value. (See "Annual
                       Administrative Charge.")
 
                        MORTALITY AND EXPENSE RISK CHARGE. The Company deducts a
                        daily mortality and expense risk charge to compensate it
                       for assuming certain mortality and expense risks. The
                       charge is deducted from the assets of the Account at an
                       annual rate of 1.40% (approximately 1.01% for mortality
                       risk and 0.39% for expense risks). (See "Mortality and
                       Expense Risk Charge.")
 
                        INVESTMENT OPTION EXPENSES. Because the Account
                        purchases shares of the various Investment Options, the
                       assets of the Account will reflect the investment
                       advisory fee and other operating expenses incurred by the
                       Investment Options. A table of each Investment Option's
                       advisory fee and other expenses can be found in the
                       Expense Tables at the front of this prospectus. For a
                       description of each Investment Option's advisory fee and
                       other expenses, see the prospectuses for the Investment
                       Options of the Funds.
- --------------------------------------------------------------------------------
ANNUITY PROVISIONS     On the retirement date, the accumulated value (less any
                       applicable surrender charge) will be applied under a
                       payment option, unless the owner chooses to receive the
                       net accumulated value in a lump sum. Payments under these
                       options do not depend upon the Account's performance.
                       (See "Payment Options.")
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS    Generally, a distribution (including a surrender, partial
                       withdrawal or death benefit payment) may result in
                       taxable income. In certain circumstances, a 10% penalty
                       tax may apply. For further discussion of the federal
                       income status of variable annuity contracts, see "Federal
                       Tax Matters."
- --------------------------------------------------------------------------------
OTHER CONTRACTS
                       The Company offers other variable annuity contracts that
                       invest in the same Investment Options of the Funds. These
                       contracts may have different charges that could affect
                       Subaccount performance, and may offer different benefits
                       more suitable to a person's needs. To obtain more
                       information about these contracts, contact the Company.
- --------------------------------------------------------------------------------
                   THE COMPANY, ACCOUNT AND INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
EQUITRUST LIFE INSURANCE COMPANY
                       The Company is a stock life insurance company
                       incorporated in the State of Iowa on June 3, 1966. The
                       Company is principally engaged in the offering of life
                       insurance policies and annuity contracts and is admitted
                       to do business in 38 states--Alabama, Alaska, Arizona,
                       Arkansas, California, Colorado, Delaware, Florida,
                       Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
                       Louisiana, Michigan, Minnesota, Mississippi, Missouri,
                       Montana, Nebraska, Nevada, New Mexico, North Carolina,
                       North Dakota, Ohio, Oklahoma, Oregon, South Carolina,
                       South Dakota, Tennessee, Texas, Utah, Virginia,
                       Washington, Wisconsin and Wyoming. The principal offices
                       of the Company are at 5400 University Avenue, West Des
                       Moines, Iowa 50266
- --------------------------------------------------------------------------------
EQUITRUST LIFE ANNUITY ACCOUNT II
                       The Account was established by the Company as a separate
                       account on January 6, 1998. The Account will receive and
                       invest premiums paid under the Contracts. In addition,
                       the Account may receive and invest premiums for any other
                       variable annuity contracts issued in the future by the
                       Company.
 
                       Although the assets in the Account are the property of
                       the Company, the assets in the Account attributable to
                       the Contracts are not chargeable with liabilities arising
                       out of any other business which the Company may conduct.
                       The assets of the Account are available to cover the
                       general liabilities of the Company only to the extent
                       that the Account's assets exceed its liabilities arising
                       under the Contracts and any other
 
                                       8
<PAGE>
                       contracts supported by the Account. The Company has the
                       right to transfer to the general account any assets of
                       the Account which are in excess of such reserves and
                       other contract liabilities. All obligations arising under
                       the Contracts are general corporate obligations of the
                       Company.
 
                       The Account currently is divided into fifteen Subaccounts
                       but may, in the future, include additional subaccounts.
                       Each Subaccount invests exclusively in shares of a single
                       corresponding Investment Option. Income and realized and
                       unrealized gains or losses from the assets of each
                       Subaccount are credited to or charged against that
                       Subaccount without regard to income, gains or losses from
                       any other Subaccount.
 
                       The Account has been registered as a unit investment
                       trust under the Investment Company Act of 1940 (the "1940
                       Act") and meets the definition of a separate account
                       under the federal securities laws. Registration with the
                       Securities and Exchange Commission does not involve
                       supervision of the management or investment practices or
                       policies of the Account or the Company by the SEC. The
                       Account is also subject to the laws of the State of Iowa
                       which regulate the operations of insurance companies
                       domiciled in Iowa.
- --------------------------------------------------------------------------------
INVESTMENT OPTIONS     The Account invests in shares of the Investment Options.
                       The Investment Options currently include the Value Growth
                       Portfolio, High Grade Bond Portfolio, High Yield Bond
                       Portfolio, Money Market Portfolio and Blue Chip Portfolio
                       of EquiTrust Variable Insurance Series Fund; the Equity
                       Income Portfolio, Mid-Cap Growth Portfolio, New America
                       Portfolio and Personal Strategy Balanced Portfolio of T.
                       Rowe Price Equity Series, Inc. and International Stock
                       Portfolio of T. Rowe Price International Series, Inc.;
                       and the Dreyfus Variable Investment Fund: Capital
                       Appreciation Portfolio, Dreyfus Variable Investment Fund:
                       Disciplined Stock Portfolio, Dreyfus Variable Investment
                       Fund: Growth and Income Portfolio, Dreyfus Variable
                       Investment Fund: International Equity Portfolio and
                       Dreyfus Variable Investment Fund: Small Cap Portfolio.
                       The Account may, in the future, provide for additional
                       investment options. Each Investment Option has its own
                       investment objectives and the income and losses for each
                       Investment Option will be determined separately.
 
                       Each of these Investment Options was formed as an
                       investment vehicle for insurance company separate
                       accounts. The investment objectives and policies of
                       certain Investment Options are similar to the investment
                       objectives and policies of other portfolios that may be
                       managed by the same investment adviser, sub-investment
                       adviser or manager. The investment results of the
                       Investment Options, however, may be higher or lower than
                       the results of such other portfolios. There can be no
                       assurance, and no representation is made, that the
                       investment results of any of the Investment Options will
                       be comparable to the investment results of any other
                       portfolio, even if the other portfolio has the same
                       investment adviser, sub-investment adviser or manager.
 
                       The investment objectives and policies of each Investment
                       Option are summarized below. There is no assurance that
                       any Investment Option will achieve its stated objectives.
                       More detailed information, including a description of
                       risks and expenses, may be found in the prospectus for
                       each Investment Option, which must accompany or precede
                       this Prospectus and which should be read carefully and
                       retained for future reference.
 
EQUITRUST VARIABLE INSURANCE SERIES FUND
 
                       EQUITRUST INVESTMENT MANAGEMENT SERVICES, INC. IS THE
                       INVESTMENT ADVISER TO THE FUND. THE FUND IS COMPRISED OF
                       SIX PORTFOLIOS, THE FOLLOWING FIVE OF WHICH ARE AVAILABLE
                       UNDER THE CONTRACT:
 
                           VALUE GROWTH PORTFOLIO. This Portfolio seeks
                           long-term capital appreciation. The Portfolio pursues
                           this objective by investing primarily in equity
                           securities of companies that the investment adviser
                           believes have a potential to earn a high return on
                           capital and/or in equity securities that the
                           investment adviser believes are undervalued by the
                           market place. Such equity securities may include
                           common stock, preferred stock and securities
                           convertible or exchangeable into common stock.
 
                                       9
<PAGE>
                           HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
                           high a level of current income as is consistent with
                           an investment in a high grade portfolio of debt
                           securities. The Portfolio will pursue this objective
                           by investing primarily in debt securities rated AAA,
                           AA or A by Standard & Poor's or Aaa, Aa or A by
                           Moody's Investors Service, Inc. and in securities
                           issued or guaranteed by the United States government
                           or its agencies or instrumentalities.
 
                           HIGH YIELD BOND PORTFOLIO. This Portfolio seeks as a
                           primary objective, as high a level of current income
                           as is consistent with investment in a portfolio of
                           fixed-income securities rated in the lower categories
                           of established rating services. As a secondary
                           objective, the Portfolio seeks capital appreciation
                           when consistent with its primary objective. The
                           Portfolio pursues these objectives by investing
                           primarily in fixed-income securities rated Baa or
                           lower by Moody's Investors Service, Inc. and/or BBB
                           or lower by Standards & Poor's, or in unrated
                           securities of comparable quality. AN INVESTMENT IN
                           THIS PORTFOLIO MAY ENTAIL GREATER THAN ORDINARY
                           FINANCIAL RISK. (See the Fund Prospectus "Principal
                           Risk Factors--Special Considerations--High Yield
                           Bonds.")
 
                           MONEY MARKET PORTFOLIO. This Portfolio seeks maximum
                           current income consistent with liquidity and
                           stability of principal. The Portfolio will pursue
                           this objective by investing in high quality
                           short-term money market instruments. AN INVESTMENT IN
                           THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
                           GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO
                           ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE
                           ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
                           PER SHARE.
 
                           BLUE CHIP PORTFOLIO. This Portfolio seeks growth of
                           capital and income. The Portfolio pursues this
                           objective by investing primarily in common stocks of
                           well-capitalized, established companies. Because this
                           Portfolio may be invested heavily in particular
                           stocks or industries, an investment in this Portfolio
                           may entail relatively greater risk of loss.
 
T. ROWE PRICE EQUITY SERIES, INC.
 
T. Rowe Price Associates, Inc. is the investment adviser to the Fund.
 
                           EQUITY INCOME PORTFOLIO. This Portfolio seeks to
                           provide substantial dividend income and long-term
                           capital appreciation by investing primarily in
                           established companies considered by the adviser to
                           have favorable prospects for both increasing
                           dividends and capital appreciation.
 
                           MID-CAP GROWTH PORTFOLIO. This Portfolio seeks
                           long-term capital appreciation by investing primarily
                           in common stocks of medium-sized (mid-cap) growth
                           companies which offer the potential for above-average
                           earnings growth.
 
                           NEW AMERICA GROWTH PORTFOLIO. This Portfolio seeks
                           long-term capital growth by investing primarily in
                           common stocks of U.S. growth companies operating in
                           service industries.
 
                           PERSONAL STRATEGY BALANCED PORTFOLIO. This Portfolio
                           seeks the highest total return over time consistent
                           with an emphasis on both capital appreciation and
                           income.
 
T. ROWE PRICE INTERNATIONAL SERIES, INC.
 
Rowe Price-Fleming International, Inc. is the investment adviser to the Fund.
 
                           INTERNATIONAL STOCK PORTFOLIO. This Portfolio seeks
                           to provide capital appreciation through investments
                           primarily in established companies based outside the
                           United States.
 
                                       10
<PAGE>
                       DREYFUS VARIABLE INVESTMENT FUND
 
                       The Dreyfus Corporation serves as the investment adviser
                       to the Fund. Fayez Sarofim and Co. serves as the
                       sub-investment adviser to the Dreyfus Variable Investment
                       Fund: Capital Appreciation Portfolio. The following Fund
                       portfolios are available under the Contract.
 
                           DREYFUS VARIABLE INVESTMENT FUND: CAPITAL
                           APPRECIATION PORTFOLIO. This Portfolio primarily
                           seeks long-term capital growth, consistent with the
                           preservation of capital; current income is a
                           secondary investment objective. This Portfolio
                           invests primarily in the common stocks of domestic
                           and foreign issuers.
 
                           DREYFUS VARIABLE INVESTMENT FUND: DISCIPLINED STOCK
                           PORTFOLIO. This Portfolio seeks to provide investment
                           results that are greater than the total return
                           performance of publicly-traded common stocks in the
                           aggregate, as represented by the Standard & Poor's
                           500 Composite Stock Price Index. The Portfolio will
                           use quantitative statistical modeling techniques to
                           construct a portfolio in an attempt to achieve its
                           investment objective, without assuming undue risk
                           relative to the broad stock market.
 
                           DREYFUS VARIABLE INVESTMENT FUND: GROWTH AND INCOME
                           PORTFOLIO. This Portfolio seeks to provide long-term
                           capital growth, current income and growth of income,
                           consistent with reasonable investment risk by
                           investing primarily in equity securities, debt
                           securities and money market instruments of domestic
                           and foreign issuers.
 
                           DREYFUS VARIABLE INVESTMENT FUND: INTERNATIONAL
                           EQUITY PORTFOLIO. This Portfolio seeks to maximize
                           capital growth through investments in equity
                           securities of foreign issuers located throughout the
                           world.
 
                           DREYFUS VARIABLE INVESTMENT FUND: SMALL CAP
                           PORTFOLIO. This Portfolio seeks maximum capital
                           appreciation by investing primarily in common stocks
                           of domestic and foreign issuers. The Portfolio will
                           be particularly alert to companies considered by the
                           adviser to be emerging smaller-sized companies which
                           are believed to be characterized by new or innovative
                           products, services or processes which should enhance
                           prospects for growth in future earnings.
 
                       The Funds currently sell shares: (a) to the Account as
                       well as to separate accounts of insurance companies that
                       may or may not be affiliated with the Company or each
                       other; and (b) to separate accounts to serve as the
                       underlying investment for both variable insurance
                       policies and variable annuity contracts. The Company
                       currently does not foresee any disadvantages to owners
                       arising from the sale of shares to support variable
                       annuity contracts and variable life insurance policies,
                       or from shares being sold to separate accounts of
                       insurance companies that may or may not be affiliated
                       with the Company. However, the Company will monitor
                       events in order to identify any material irreconcilable
                       conflicts that might possibly arise. In the event of such
                       a conflict, the Company would determine what action, if
                       any, should be taken in response to the conflict. In
                       addition, if the Company believes that a Fund's response
                       to any such conflicts insufficiently protects owners, it
                       will take appropriate action on its own, including
                       withdrawing the Account's investment in that Fund. (See
                       the Fund prospectuses for more detail.)
 
                       The Company may receive compensation from an affiliate(s)
                       of one or more of the Funds based upon an annual
                       percentage of the average assets held in the Investment
                       Options by the Company. These amounts are intended to
                       compensate the Company for administrative and other
                       services provided by the Company to the Funds and/or
                       affiliate(s).
 
                       Each Fund is registered with the SEC as an open-end,
                       diversified management investment company. Such
                       registration does not involve supervision of the
                       management or investment practices or policies of the
                       Fund by the SEC.
- --------------------------------------------------------------------------------
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
                       The Company reserves the right, subject to applicable
                       law, to make additions to, deletions from or
                       substitutions for the shares that are held in the Account
                       or that the Account may purchase. If the shares of an
                       Investment Option are no longer available for investment
                       or if, in the Company's judgment, further investment in
                       any Investment Option should become inappropriate in view
                       of the purposes of the Account, the Company may redeem
                       the shares, if any, of that Investment Option and
 
                                       11
<PAGE>
                       substitute shares of another Investment Option. The
                       Company will not substitute any shares attributable to a
                       Contract's interest in a Subaccount without notice and
                       prior approval of the SEC and state insurance
                       authorities, to the extent required by the 1940 Act or
                       other applicable law.
 
                       The Company also reserves the right to establish
                       additional subaccounts of the Account, each of which
                       would invest in shares corresponding to an Investment
                       Option or in shares of another investment company having
                       a specified investment objective. The Company may, in its
                       sole discretion, establish new subaccounts or eliminate
                       or combine one or more Subaccounts if marketing needs,
                       tax considerations or investment conditions warrant. Any
                       new subaccounts may be made available to existing
                       Contract owners on a basis to be determined by the
                       Company. Subject to obtaining any approvals or consents
                       required by applicable law, the assets of one or more
                       Subaccounts may be transferred to any other Subaccount
                       if, in the sole discretion of the Company, marketing, tax
                       or investment conditions warrant.
 
                       In the event of any such substitution or change, the
                       Company may, by appropriate endorsement, change the
                       Contract to reflect the substitution or change. If the
                       Company deems it to be in the best interest of Contract
                       owners and annuitants, and subject to any approvals that
                       may be required under applicable law, the Account may be
                       operated as a management investment company under the
                       1940 Act, it may be deregistered under that Act if
                       registration is no longer required, it may be combined
                       with other Company separate accounts or its assets may be
                       transferred to another separate account of the Company.
                       In addition, the Company may, when permitted by law,
                       restrict or eliminate any voting rights of owners or the
                       persons who have such rights under the Contracts.
- --------------------------------------------------------------------------------
                   DESCRIPTION OF ANNUITY CONTRACT
- --------------------------------------------------------------------------------
ISSUANCE OF A CONTRACT In order to purchase a Contract, application must be made
                       to the Company through a licensed representative of the
                       Company, who is also a registered representative of
                       EquiTrust Marketing Services, Inc. ("EquiTrust
                       Marketing") (formerly FBL Marketing Services, Inc.), a
                       broker-dealer having a selling agreement with EquiTrust
                       Marketing or a broker-dealer having a selling agreement
                       with such broker-dealer. The Contract Date will be the
                       date the properly completed application is received by
                       the Company at its Home Office. If this date is the 29th,
                       30th or 31st of any month, the Contract Date will be the
                       28th of such month. Contracts may be sold to or in
                       connection with retirement plans that do not qualify for
                       special tax treatment as well as retirement plans that
                       qualify for special tax treatment under the Code. There
                       is no maximum age for owners on the Contract date.
- --------------------------------------------------------------------------------
PREMIUMS               The minimum initial premium which the Company will accept
                       is $1,000. Subsequent premium payments may be paid at any
                       time during the annuitant's lifetime and before the
                       retirement date and must be for at least $50.
 
                       At the time of application, a premium reminder notice
                       schedule may be selected based on an annual, semi-annual
                       or quarterly payment. The owner will receive a premium
                       reminder notice at the specified interval. The owner may
                       change the amount and schedule of the premium reminder
                       notice. Also, under the Automatic Payment Plan, the owner
                       can select a monthly payment schedule pursuant to which
                       premium payments will be automatically deducted from a
                       bank account or other source rather than being "billed."
                       The Contract will not necessarily lapse even if premiums
                       are not paid.
- --------------------------------------------------------------------------------
FREE-LOOK PERIOD       The Contract provides for an initial "free-look" period.
                       The owner has the right to return the Contract within 20
                       days of receiving it. When the Company receives the
                       returned Contract at its Home Office, it will cancel the
                       Contract and refund to the owner an amount equal to the
                       greater of the premiums paid under the Contract or the
                       sum of the accumulated value as of the date the returned
                       Contract is received by the Company at its Home Office
                       plus the amount of the annual administration charge and
                       any charges deducted from the Account.
- --------------------------------------------------------------------------------
ALLOCATION OF PREMIUMS If the application for a Contract is properly completed
                       and is accompanied by all the information necessary to
                       process it, including payment of the initial premium, the
                       initial premium will be allocated to the Money Market
                       Subaccount within two business days of receipt of such
                       premium by the Company at its Home Office. If the
 
                                       12
<PAGE>
                       application is not properly completed, the Company
                       reserves the right to retain the premium for up to five
                       business days while it attempts to complete the
                       application. If the application is not complete at the
                       end of the 5-day period, the Company will inform the
                       applicant of the reason for the delay and the initial
                       premium will be returned immediately, unless the
                       applicant specifically consents to the Company retaining
                       the premium until the application is complete.
 
                       At the time of application, the owner selects how the
                       initial premium is to be allocated among the Subaccounts
                       and the Declared Interest Option. Any allocation must be
                       for at least 10% of a premium payment and be in whole
                       percentages.
 
                       The initial premium will be allocated to the Money Market
                       Subaccount for a 10-day period following the Contract
                       date. After the expiration of the 10-day period, the
                       amount in the Money Market Subaccount will be allocated
                       among the Subaccounts and the Declared Interest Option in
                       accordance with the owner's percentage allocation in the
                       application. Any subsequent premiums will be allocated at
                       the end of the valuation period in which the subsequent
                       premium is received by the Company in the same manner,
                       unless the allocation percentages are changed. Subsequent
                       premiums will be allocated in accordance with the
                       allocation schedule in effect at the time the premium
                       payment is received. However, owners may direct
                       individual payments to a specific Subaccount or the
                       Declared Interest Option (or any combination thereof)
                       without changing the existing allocation schedule.
 
                       The allocation schedule may be changed by the owner at
                       any time by written notice. Changing the allocation
                       schedule will not change the allocation of existing
                       accumulated values among the Subaccounts or the Declared
                       Interest Option.
 
                       The accumulated values allocated to a Subaccount will
                       vary with that Subaccount's investment experience, and
                       the owner bears the entire investment risk. Owners should
                       periodically review their premium allocation schedule in
                       light of market conditions and their overall financial
                       objectives.
- --------------------------------------------------------------------------------
VARIABLE ACCUMULATED VALUE
                       The variable accumulated value will reflect the
                       investment experience of the selected Subaccounts, any
                       premiums paid, any surrenders or partial withdrawals, any
                       transfers and any charges assessed in connection with the
                       Contract. There is no guaranteed minimum variable
                       accumulated value, and, because a Contract's variable
                       accumulated value on any future date depends upon a
                       number of variables, it cannot be predetermined.
 
                        CALCULATION OF  VARIABLE ACCUMULATED VALUE. The variable
                        accumulated value is determined at the end of each
                       valuation period. The value will be the aggregate of the
                       values attributable to the Contract in each of the
                       Subaccounts, determined for each Subaccount by
                       multiplying that Subaccount's unit value for the relevant
                       valuation period by the number of Subaccount units
                       allocated to the Contract.
 
                        DETERMINATION OF NUMBER OF UNITS. Any amounts allocated
                        to the Subaccounts will be converted into Subaccount
                       units. The number of units to be credited to a Contract
                       is determined by dividing the dollar amount being
                       allocated to a Subaccount by the unit value for that
                       Subaccount at the end of the valuation period during
                       which the amount was allocated. The number of units in
                       any Subaccount will be increased at the end of the
                       valuation period by any premiums allocated to the
                       Subaccount during the current valuation period and by any
                       amounts transferred to the Subaccount from another
                       Subaccount or the Declared Interest Option during the
                       current valuation period. The number of units in any
                       Subaccount will be decreased at the end of the valuation
                       period by any amounts transferred from that Subaccount to
                       another Subaccount or the Declared Interest Option, any
                       amounts withdrawn during the current valuation period,
                       any surrender charge assessed upon a partial withdrawal
                       or surrender and the annual administrative charge, if
                       assessed during the current valuation period.
 
                        DETERMINATION OF UNIT VALUE. The unit value for each
                        Subaccount's first valuation period is set at $10. The
                       unit value for a Subaccount is calculated for each
                       subsequent valuation period by dividing (a) by (b) where:
 
                               (a) is the net result of:
 
                                  1.  the value of the net assets in the
                              Subaccount at the end of the preceding valuation
                              period; plus
 
                                       13
<PAGE>
                                  2.  the investment income, dividends and
                              capital gains, realized or unrealized, credited to
                              the Subaccount during the current valuation
                              period; minus
 
                                  3.  the capital losses, realized or
                              unrealized, charged against the Subaccount during
                              the current valuation period; minus
 
                                  4.  any amount charged for taxes or any amount
                              set aside during the valuation period as a
                              provision for taxes attributable to the
                              Subaccount; minus
 
                                  5.  the daily amount charged for mortality and
                              expense risks for each day of the current
                              valuation period; and
 
                               (b) the number of units outstanding at the end of
                           the preceding valuation period.
- --------------------------------------------------------------------------------
TRANSFER PRIVILEGE     Before the retirement date, an owner may transfer all or
                       part of an amount in a Subaccount to another Subaccount
                       or the Declared Interest Option at any time, or transfer
                       up to 25% of an amount in the Declared Interest Option to
                       one or more Subaccounts. However, if a transfer request
                       would reduce the amount in the Declared Interest Option
                       below $1,000, the owner may transfer the entire amount
                       from the Declared Interest Option. The minimum transfer
                       amount must be the lesser of $100 or the entire amount in
                       that Subaccount or the Declared Interest Option.
 
                       The transfer will be made as of the business day on or
                       next following the day written notice requesting such
                       transfer is received at the Home Office. There is no
                       limit on the number of transfers that can be made among
                       or between Subaccounts or the Declared Interest Option.
                       (See "Transfers from Declared Interest Option.")
 
                       There is no charge for the first twelve transfers during
                       a Contract Year. The Company may charge $25 for each
                       subsequent transfer during a Contract Year. For the
                       purpose of assessing the transfer processing fee, all
                       transfer requests received in a valuation period will be
                       considered to be one transfer, regardless of the
                       Subaccounts or Declared Interest Option affected. Unless
                       paid in cash, the transfer processing fee will be
                       deducted on a pro-rata basis from the Subaccounts or
                       Declared Interest Option to which the transfer is made.
 
                       Transfers may be made based upon instructions given by
                       telephone, provided the appropriate election has been
                       made at the time of application or proper authorization
                       is provided to the Company. The Company reserves the
                       right to suspend telephone transfer privileges at any
                       time, for any class of Contracts, for any reason.
- --------------------------------------------------------------------------------
PARTIAL WITHDRAWALS AND SURRENDERS
                        PARTIAL WITHDRAWALS. At any time before the retirement
                        date, an owner may make a partial withdrawal of the
                       accumulated value. The minimum amount which may be
                       withdrawn is $500; the maximum amount is that which would
                       leave the remaining accumulated value equal to or less
                       than $2,000. A partial withdrawal request that would
                       reduce the accumulated value to $2,000 or less will be
                       treated as a full surrender of the Contract. The Company
                       will withdraw the amount requested from the accumulated
                       value as of the Business Day on or next following the day
                       written notice requesting the partial withdrawal is
                       received at the Home Office. Any applicable surrender
                       charge will, at the election of the owner, be deducted
                       from the remaining accumulated value or be deducted from
                       the amount withdrawn. (See "Surrender Charge.")
 
                       The owner may specify the amount of the partial
                       withdrawal to be made from certain Subaccounts or the
                       Declared Interest Option. If the owner does not so
                       specify, or if the amount in the designated Subaccount(s)
                       or Declared Interest Option is inadequate to comply with
                       the request, the partial withdrawal will be made from
                       each Subaccount and the Declared Interest Option based on
                       the proportion that the value in such Subaccount bears to
                       the total accumulated value on the date the request is
                       received at the Home Office.
 
                       A partial withdrawal may have adverse federal income tax
                       consequences, including a penalty tax. (See "Taxation of
                       Annuities.")
 
                        SURRENDER. At any time before the retirement date, the
                        owner may request a surrender of the contract for its
                       net accumulated value. The net accumulated value will be
                       determined as of the Business Day on or next following
                       the date written notice
 
                                       14
<PAGE>
                       requesting surrender and the Contract are received at the
                       Home Office. The net accumulated value will be paid in a
                       lump sum unless the owner requests payment under a
                       payment option. A surrender may have adverse federal
                       income tax consequences. (See "Taxation of Annuities.")
 
                        SURRENDER AND PARTIAL WITHDRAWAL RESTRICTIONS. The
                        owner's right to make surrenders and partial withdrawals
                       is subject to any restrictions imposed by applicable law
                       or employee benefit plan.
 
                        RESTRICTIONS ON DISTRIBUTIONS FROM CERTAIN TYPES OF
                        CONTRACTS. There are certain restrictions on surrenders
                       and partial withdrawals of Contracts used as funding
                       vehicles for Code Section 403(b) retirement plans.
                       Section 403(b)(11) of the Code restricts the distribution
                       under Section 403(b) annuity contracts of: (i) elective
                       contributions made in years beginning after December 31,
                       1988; (ii) earnings on those contributions; and (iii)
                       earnings in such years on amounts held as of the last
                       year beginning before January 1, 1989. Distributions of
                       those amounts may only occur upon the death of the
                       employee, attainment of age 59 1/2, separation from
                       service, disability or financial hardship. In addition,
                       income attributable to elective contributions may not be
                       distributed in the case of hardship.
- --------------------------------------------------------------------------------
SPECIAL TRANSFER AND WITHDRAWAL OPTIONS
                        DOLLAR COST AVERAGING. Dollar Cost Averaging is a
                        special type of automatic transfer. Under this option,
                       an owner may periodically transfer a specified amount in
                       a Subaccount or the Declared Interest Option into up to
                       ten other Subaccounts or the Declared Interest Option.
                       The use of Dollar Cost Averaging is subject to all the
                       same provisions and limitations as regular transfers
                       described above and is considered in the twelve free
                       transfers during a Contract Year.
 
                        SYSTEMATIC WITHDRAWALS. The Systematic Withdrawal option
                        allows for automatic partial withdrawals. Under this
                       option, specified amounts may be periodically withdrawn
                       from the Contract's accumulated value. The owner may
                       specify the allocation of the withdrawals among the
                       Subaccounts and Declared Interest Option. The use of the
                       Systematic Withdrawal option is subject to all the same
                       provisions and limitations as regular partial withdrawals
                       described above.
 
                       The Company prohibits the use of these two options at the
                       same time.
- --------------------------------------------------------------------------------
DEATH BENEFIT BEFORE THE RETIREMENT DATE
                        DEATH OF OWNER. If an owner dies prior to the retirement
                        date, any surviving owner becomes the sole owner. If
                       there is no surviving owner, the annuitant becomes the
                       new owner unless the deceased owner was also the
                       annuitant. If the sole deceased owner was also the
                       annuitant, then the provisions relating to the death of
                       an annuitant (described below) will govern unless the
                       deceased owner was one of two joint annuitants. (In the
                       latter event, the surviving annuitant becomes the owner.)
 
                       The following options are available to the sole surviving
                       owners or new owners:
 
                               1.  If the owner is the spouse of the deceased
                           owner, he or she may continue the Contract as the new
                           owner.
 
                               2.  If the owner is not the spouse of the
                           deceased owner:
 
                                  (a) he or she may elect to receive the net
                              accumulated value in a single sum within 5 years
                              of the deceased owner's death; or
 
                                  (b) he or she may elect to receive the net
                              accumulated value paid out under one of the
                              annuity payment options, with payments beginning
                              within one year after the date of the owner's
                              death and with payments being made over the
                              lifetime of the owner, or over a period that does
                              not exceed the life expectancy of the owner.
 
                       Under either of these options, sole surviving owners or
                       new owners may exercise all ownership rights and
                       privileges from the date of the deceased owner's death
                       until the date that the net accumulated value is paid.
 
                        DEATH OF AN ANNUITANT. If the annuitant dies before the
                        retirement date, the Company will pay the death benefit
                       under the Contract to the beneficiary. If there is no
                       surviving beneficiary, the Company will pay the death
                       benefit to the owner or the owner's estate. If the
                       annuitant's age on the Contract Date was less than 76,
                       the death benefit is equal to the greater of the sum of
                       the premiums paid less the sum of all partial withdrawal
                       reductions (including applicable surrender charges), the
                       accumulated value on the date the Company receives due
                       proof of the annuitant's death, or the
 
                                       15
<PAGE>
                       accumulated value on the most recent Contract Anniversary
                       (plus subsequent premiums paid and less subsequent
                       partial withdrawals). If the annuitant's age on the
                       Contract Date was 76 or older, the death benefit is equal
                       to the greater of the sum of the premiums paid less the
                       sum of all partial withdrawal reductions (including
                       applicable surrender charges) as of the date the Company
                       receives due proof of death, or the accumulated value as
                       of the date the Company receives due proof of death.
 
                       A partial withdrawal reduction is defined as a) the death
                       benefit immediately prior to withdrawal times b) the
                       amount of the partial withdrawal (including applicable
                       surrender charges) divided by c) the accumulated value
                       immediately prior to withdrawal.
 
                       There is no death benefit payable if the annuitant dies
                       after the retirement date. The death benefit will be paid
                       to the beneficiary in a lump sum unless the owner or
                       beneficiary elects a payment option.
 
                       If the annuitant who is also the the owner dies, the
                       provisions described immediately above apply except that
                       the beneficiary may only apply the death benefit payment
                       to an annuity payment option if:
 
                               1.  payments under the option begin within 1 year
                           of the annuitant's death; and
 
                               2.  payments under the option are payable over
                           the beneficiary's life or over a period not greater
                           than the beneficiary's life expectancy.
 
                       If the owner's spouse is the designated beneficiary, the
                       Contract may be continued with such surviving spouse as
                       the new owner.
- --------------------------------------------------------------------------------
DEATH BENEFIT AFTER THE RETIREMENT DATE
                       If an owner dies on or after the retirement date, any
                       surviving owner becomes the sole owner. If there is no
                       surviving owner, the payee receiving annuity payments
                       becomes the new owner. Such owners will have the rights
                       of owners during the annuity period, including the right
                       to name successor payees if the deceased owner had not
                       previously done so.
 
                       If the annuitant dies before 120 payments have been
                       received, any remaining payments will be paid to the
                       beneficiary. There is no death benefit payable if the
                       annuitant dies after the retirement date.
 
                       Other rules may apply to a Qualified Contract.
- --------------------------------------------------------------------------------
PROCEEDS ON THE RETIREMENT DATE
                       The retirement date is selected by the owner. For
                       Non-Qualified Contracts, the retirement date may not be
                       after the later of the annuitant's age 70 or 10 years
                       after the Contract date. For Qualified Contracts, the
                       retirement date must be no later than the annuitant's age
                       70 1/2 or such other date as meets the requirements of
                       the Code.
 
                       On the retirement date, the proceeds will be applied
                       under the life income annuity payment option with ten
                       years guaranteed, unless the owner chooses to have the
                       proceeds paid under another payment option or in a lump
                       sum. (See "Payment Options.") If a payment option is
                       elected, the amount that will be applied is the
                       accumulated value less any applicable surrender charge.
                       If a lump sum payment is chosen, the amount paid will be
                       the net accumulated value on the retirement date.
 
                       The retirement date may be changed subject to these
                       limitations: the owner's written notice must be received
                       at the Home Office at least 30 days before the current
                       retirement date; the requested retirement date must be a
                       date that is at least 30 days after receipt of the
                       written notice; and the requested retirement date must be
                       no later than the annuitant's 70th birthday or any
                       earlier date required by law.
- --------------------------------------------------------------------------------
PAYMENTS               Any surrender, partial withdrawal or death benefit will
                       usually be paid within seven days of receipt of a written
                       request, any information or documentation reasonably
                       necessary to process the request and, in the case of a
                       death benefit, receipt and filing of due proof of death.
                       However, payments may be postponed if:
 
                               1.  the New York Stock Exchange is closed, other
                           than customary weekend and holiday closings, or
                           trading on the exchange is restricted as determined
                           by the SEC; or
 
                                       16
<PAGE>
                               2.  the SEC permits by an order the postponement
                           for the protection of owners; or
 
                               3.  the SEC determines that an emergency exists
                           that would make the disposal of securities held in
                           the Account or the determination of the value of the
                           Account's net assets not reasonably practicable.
 
                       If a recent check or draft has been submitted, the
                       Company has the right to delay payment until it has
                       assured itself that the check or draft has been honored.
 
                       The Company has the right to defer payment of any
                       surrender, partial withdrawal or transfer from the
                       Declared Interest Option for up to six months from the
                       date of receipt of written notice for such a surrender,
                       withdrawal or transfer. If payment is not made within 30
                       days after receipt of documentation necessary to complete
                       the transaction, or such shorter period as required by a
                       particular jurisdiction, interest will be added to the
                       amount paid from the date of receipt of documentation at
                       3% or such higher rate required for a particular state.
- --------------------------------------------------------------------------------
MODIFICATION           Upon notice to the owner, the Company may modify the
                       Contract if:
 
                               1.  necessary to make the Contract or the Account
                           comply with any law or regulation issued by a
                           governmental agency to which the Company is subject;
                           or
 
                               2.  necessary to assure continued qualification
                           of the Contract under the Code or other federal or
                           state laws relating to retirement annuities or
                           variable annuity contracts; or
 
                               3.  necessary to reflect a change in the
                           operation of the Account; or
 
                               4.  the modification provides additional Account
                           and/or fixed accumulation options.
 
                       In the event of most such modifications, the Company will
                       make appropriate endorsement to the Contract.
- --------------------------------------------------------------------------------
REPORTS TO OWNERS      At least annually, the Company will mail to each owner,
                       at such owner's last known address of record, a report
                       containing the accumulated value (including the
                       accumulated value in each Subaccount and the Declared
                       Interest Option) of the Contract, premiums paid and
                       charges deducted since the last report, partial
                       withdrawals made since the last report and any further
                       information required by any applicable law or regulation.
- --------------------------------------------------------------------------------
INQUIRIES              Inquiries regarding a Contract may be made by writing to
                       the Company at its Home Office.
- --------------------------------------------------------------------------------
                   THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
                       An owner may allocate some or all of the premiums and
                       transfer some or all of the accumulated value to the
                       Declared Interest Option, which is part of the General
                       Account and pays interest at declared rates guaranteed
                       for each Contract year (subject to a minimum guaranteed
                       interest rate of 3%). The principal, after deductions, is
                       also guaranteed. The Company's General Account supports
                       its insurance and annuity obligations.
 
                       The Declared Interest Option has not been, and is not
                       required to be, registered with the SEC under the
                       Securities Act of 1933 (the "1933 Act"), and neither the
                       Declared Interest Option nor the Company's General
                       Account has been registered as an investment company
                       under the 1940 Act. Therefore, neither the Company's
                       General Account, the Declared Interest Option, nor any
                       interests therein are generally subject to regulation
                       under the 1933 Act or the 1940 Act. The disclosures
                       relating to these accounts which are included in this
                       Prospectus are for the owner's information and have not
                       been reviewed by the SEC. However, such disclosures may
                       be subject to certain generally applicable provisions of
                       Federal securities laws relating to the accuracy and
                       completeness of statements made in prospectuses.
 
                                       17
<PAGE>
                       The portion of the accumulated value allocated to the
                       Declared Interest Option (the "Declared Interest Option
                       accumulated value") will be credited with rates of
                       interest, as described below. Since the Declared Interest
                       Option is part of the General Account, the Company
                       assumes the risk of investment gain or loss on this
                       amount. All assets in the General Account are subject to
                       the Company's general liabilities from business
                       operations.
- --------------------------------------------------------------------------------
MINIMUM GUARANTEED AND CURRENT INTEREST RATES
                       The Declared Interest Option cash value is guaranteed to
                       accumulate at a minimum effective annual interest rate of
                       3%. The Company intends to credit the Declared Interest
                       Option accumulated value with current rates in excess of
                       the minimum guarantee but is not obligated to do so.
                       These current interest rates are influenced by, but do
                       not necessarily correspond to, prevailing general market
                       interest rates. Any interest credited on the amounts in
                       the Declared Interest Option in excess of the minimum
                       guaranteed rate of 3% per year will be determined in the
                       sole discretion of the Company. The owner, therefore,
                       assumes the risk that interest credited may not exceed
                       the guaranteed rate.
 
                       From time to time, the Company establishes new current
                       interest rates for the Declared Interest Option under the
                       Contracts. The rate applicable for a particular Contract
                       is the rate in effect on the most recent Contract
                       anniversary. This rate remains unchanged for that
                       Contract until the next Contract anniversary (i.e., for
                       the entire Contract year). During each Contract year, the
                       entire Declared Interest Option accumulated value
                       (including amounts allocated or transferred to the
                       Declared Interest Option during that year) is credited
                       with the interest rate in effect for that Contract year.
                       Once credited, interest becomes part of the Declared
                       Interest Option accumulated value.
 
                       The Company reserves the right to change the method of
                       crediting interest from time to time, provided that such
                       changes do not have the effect of reducing the guaranteed
                       rate of interest below 3% per annum or shorten the period
                       for which the current interest rate applies to less than
                       a Contract year (except for the year in which such amount
                       is received or transferred).
 
                        CALCULATION OF DECLARED INTEREST OPTION ACCUMULATED
                        VALUE. The Declared Interest Option accumulated value at
                       any time is equal to amounts allocated and transferred to
                       it, plus interest credited less amounts deducted,
                       transferred or withdrawn.
- --------------------------------------------------------------------------------
TRANSFERS FROM DECLARED INTEREST OPTION
                       An unlimited number of transfers are allowed from the
                       Declared Interest Option to any or all of the Subaccounts
                       in each Contract year. The amount transferred from the
                       Declared Interest Option may not exceed 25% of the
                       Declared Interest Option accumulated value on the date of
                       transfer, unless the balance after the transfer would be
                       less than $1,000, in which case the entire amount may be
                       transferred.
- --------------------------------------------------------------------------------
PAYMENT DEFERRAL       The Company has the right to defer payment of any
                       surrender, partial withdrawal or transfer from the
                       Declared Interest Option up to six months from the date
                       of receipt of the written notice for surrender or
                       transfer.
 
                                       18
<PAGE>
- --------------------------------------------------------------------------------
                   CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
                        GENERAL. No charge for sales expenses is deducted from
                        premiums at the time premiums are paid. However, within
                       certain time limits described below, a surrender charge
                       (contingent deferred sales charge) is deducted from the
                       accumulated value if a partial withdrawal or surrender is
                       made before the retirement date. Also, as described
                       below, a surrender charge may be deducted from amounts
                       applied to certain payment options.
 
                       In the event surrender charges are not sufficient to
                       cover sales expenses, the loss will be borne by the
                       Company; conversely, if the amount of such charges proves
                       more than enough, the excess will be retained by the
                       Company.
 
                        CHARGE FOR PARTIAL WITHDRAWAL OR SURRENDER. During the
                        first six Contract years, if a partial withdrawal or
                       surrender is made, the applicable surrender charge will
                       be as follows:
 
                          CONTRACT YEAR IN           CHARGE AS PERCENTAGE
                          WHICH SURRENDER OCCURS     OF AMOUNT SURRENDERED
                          -------------------------  ---------------------
                          1........................             6%
                          2........................             5
                          3........................             4
                          4........................             3
                          5........................             2
                          6........................             1
                          7 and after..............             0
 
                       No surrender charge is deducted if the partial withdrawal
                       or surrender occurs after six full Contract years.
 
                       In no event will the total surrender charges assessed
                       under a Contract exceed 8.5% of the total premiums paid
                       under that Contract.
 
                       If the Contract is being surrendered, the surrender
                       charge is deducted from the accumulated value in
                       determining the net accumulated value. For a partial
                       withdrawal, the surrender charge may, at the election of
                       the owner, be deducted from the accumulated value
                       remaining after the amount requested is withdrawn or be
                       deducted from the amount of the withdrawal requested.
 
                        AMOUNTS NOT SUBJECT TO SURRENDER CHARGE. For partial
                        withdrawals in each Contract year after the first
                       Contract year, up to 10% of the accumulated value on the
                       most recent Contract Anniversary may be withdrawn without
                       a current surrender charge. If the Contract is
                       subsequently surrendered during the Contract Year, a
                       surrender charge will be applied to partial withdrawals
                       taken during that Contract Year, as well as to the amount
                       surrendered.
 
                       Any amounts surrendered in excess of 10% of the
                       accumulated value will be assessed a surrender charge.
                       This right is not cumulative from Contract year to
                       Contract year.
 
                        SURRENDER CHARGE AT THE RETIREMENT DATE. If any payment
                        option is selected at the retirement date other than
                       options 2-5 described below (see "Payment Options"), the
                       surrender charge is assessed against the accumulated
                       value applied to that option. If payment options 3 or 5
                       are selected, no surrender charge is assessed and if
                       payment options 2 or 4 are selected, the surrender charge
                       is applied by adding the fixed number of years for which
                       payments will be made under the option to the number of
                       Contract years since the Contract date and using this sum
                       in the surrender charge table.
 
                        WAIVER OF SURRENDER CHARGE. Upon written notice from the
                        owner before the retirement date, the surrender charge
                       may be waived after the first Policy Year on any partial
                       withdrawal or surrender if the annuitant is terminally
                       ill as defined in the Contract, stays in a qualified
                       nursing center for 90 days, or is required to satisfy
                       Internal Revenue Code minimum distribution requirements.
 
                                       19
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL ADMINISTRATIVE CHARGE
                       On the Contract date and on each Contract anniversary
                       prior to the retirement date, the Company deducts from
                       the accumulated value an annual administrative charge of
                       $30 to reimburse it for administrative expenses relating
                       to the Contract. (If the Contract date falls on
                       Thanksgiving, the Friday following Thanksgiving or the
                       weekend following Thanksgiving; or on the 27th or 28th
                       day of February, 1999, the annual administrative charge
                       will be deducted on the preceding Business Day.) The
                       charge will be deducted from each Subaccount and the
                       Declared Interest Option based on the proportion that the
                       value in each such Subaccount bears to the total
                       accumulated value. No annual administrative charge is
                       payable during the annuity payment period.
- --------------------------------------------------------------------------------
TRANSFER PROCESSING
FEE                    There is no charge for the first twelve transfers during
                       a Contract Year. The Company may charge $25 for each
                       subsequent transfer during a Contract year. Unless paid
                       in cash, the transfer processing fee will be deducted on
                       a pro-rata basis from the Subaccounts or Declared
                       Interest Option to which the transfer is made.
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE
                       To compensate the Company for assuming mortality and
                       expense risks, the Company deducts a daily mortality and
                       expense risk charge from the assets of the Account. The
                       charge is at an annual rate of 1.40% (daily rate of
                       0.0038091%) (approximately 1.01% for mortality risk and
                       0.39% for expense risk). The Company may realize a profit
                       from this charge.
 
                       The mortality risk the Company assumes is that annuitants
                       may live for a longer period of time than estimated when
                       the guarantees in the Contract were established. Because
                       of these guarantees, each payee is assured that longevity
                       will not have an adverse effect on the annuity payments
                       received. The mortality risk that the Company assumes
                       also includes a guarantee to pay a death benefit if the
                       owner/annuitant dies before the retirement date. The
                       expense risk that the Company assumes is the risk that
                       the administrative fees and transfer fees may be
                       insufficient to cover actual future expenses.
- --------------------------------------------------------------------------------
INVESTMENT OPTION EXPENSES
                       Because the Account purchases shares of the Investment
                       Options, the net assets of the Account will reflect the
                       investment advisory fees and other operating expenses
                       incurred by each Investment Option. (See the Expense
                       Tables in this prospectus and the accompanying Investment
                       Option prospectuses.)
- --------------------------------------------------------------------------------
PREMIUM TAXES          Currently, no charge or deduction is made under the
                       Contracts for premium taxes. The Company reserves the
                       right, however, to deduct such taxes from accumulated
                       value. Various states and other governmental entities
                       levy a premium tax, currently ranging up to 3.5%, on
                       annuity contracts issued by insurance companies. Premium
                       tax rates are subject to change, from time to time, by
                       legislative and other governmental action.
- --------------------------------------------------------------------------------
OTHER TAXES            Currently, no charge is made against the Account for any
                       federal, state or local taxes that the Company incurs or
                       that may be attributable to the Account or the Contracts.
                       The Company may, however, make such a charge in the
                       future for any such tax or economic burden on the Company
                       resulting from the application of the tax laws that it
                       determines to be properly attributable to the Account or
                       Contracts.
- --------------------------------------------------------------------------------
                   PAYMENT OPTIONS
- --------------------------------------------------------------------------------
                       The Contract ends on the retirement date, at which time
                       the accumulated value (or, under certain options, the net
                       accumulated value) will be applied under a payment
                       option, unless the owner elects to receive the net
                       accumulated value in a single sum. If an election of a
                       payment option has not been filed at the Home Office on
                       the retirement date, the proceeds will be paid as a life
                       income annuity with payments for ten years guaranteed.
                       Prior to the retirement date, the owner can have the
                       entire net accumulated value applied under a payment
                       option, or a beneficiary can have the death benefit
                       applied under a payment option. The Contract must be
                       surrendered so that the applicable amount can be paid in
                       a lump sum or a supplemental contract for the applicable
                       payment option can be issued.
 
                                       20
<PAGE>
                       The payment options available are described below. The
                       term "payee" means a person who is entitled to receive
                       payment under that option. The payment options are fixed,
                       which means that each option has a fixed and guaranteed
                       amount to be paid during the annuity payment period that
                       is not in any way dependent upon the investment
                       experience of the Account.
- --------------------------------------------------------------------------------
ELECTION OF OPTIONS    An option may be elected, revoked or changed at any time
                       before the retirement date while the annuitant is living.
                       If an election is not in effect at the annuitant's death
                       or if payment is to be made in one sum under an existing
                       election, the beneficiary may elect one of the options
                       after the death of the owner/annuitant.
 
                       An election of payment options and any revocation or
                       change must be made by written notice and signed by the
                       owner or beneficiary, as appropriate.
 
                       The Company reserves the right to refuse the election of
                       a payment option other than paying the proceeds in a lump
                       sum if: 1) the total payments together would be less than
                       $2,000; 2) each payment would be less than $20; or 3) the
                       payee is an assignee, estate, trustee, partnership,
                       corporation or association.
- --------------------------------------------------------------------------------
DESCRIPTION OF OPTIONS
                        OPTION 1--INTEREST INCOME. To have the proceeds left
                        with the Company to earn interest at a rate to be
                       determined by the Company. Interest will be paid every
                       month or every 3, 6 or 12 months as the payee selects.
                       Under this option, the payee may withdraw part or all of
                       the proceeds at any time.
 
                        OPTION 2--INCOME FOR A FIXED TERM. To have the proceeds
                        paid out in equal installments for a fixed number of
                       years.
 
                        OPTION 3--LIFE INCOME OPTION WITH TERM CERTAIN. To have
                        the proceeds paid in equal amounts (at intervals elected
                       by the payee) during the payee's lifetime with the
                       guarantee that payments will be made for a period of not
                       less than the specified number of years. Under this
                       option, at the death of a payee having no beneficiary (or
                       where the beneficiary died prior to the payee), the
                       present value of the current dollar amount on the date of
                       death of any remaining guaranteed payments will be paid
                       in one sum to the executors or administrators of the
                       payee's estate. Also under this option, if any
                       beneficiary dies while receiving payment, the present
                       value of the current dollar amount on the date of death
                       of any remaining guaranteed payments will be paid in one
                       sum to the executors or administrators of the
                       beneficiary's estate. Calculation of such present value
                       shall be no less than 3%.
 
                        OPTION 4--INCOME FOR FIXED AMOUNT. To have the proceeds
                        paid out in equal installments (at intervals elected by
                       the payee) of a specific amount. The payments will
                       continue until all the proceeds plus interest have been
                       paid out.
 
                        OPTION 5--JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE
                        INCOME. To have proceeds paid out in equal installments
                       for as long as two joint payees live. When one payee
                       dies, installments of two-thirds of the first installment
                       will be paid to the surviving payee until he or she dies.
 
                       The amount of each payment will be determined from the
                       tables in the Contract which apply to the particular
                       option using the payee's age and sex. Age will be
                       determined from the last birthday at the due date of the
                       first payment.
 
                        ALTERNATE PAYMENT OPTION. In lieu of one of the above
                        options, the cash value, cash surrender value or death
                       benefit, as applicable, may be settled under any other
                       payment option made available by the Company or requested
                       and agreed to by the Company.
- --------------------------------------------------------------------------------
                   YIELDS AND TOTAL RETURNS
- --------------------------------------------------------------------------------
                       From time to time, the Company may advertise or include
                       in sales literature yields, effective yields and total
                       returns for the Subaccounts. THESE FIGURES ARE BASED ON
                        HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT
                        FUTURE PERFORMANCE. Each Subaccount may, from time to
                       time, advertise or include in sales literature
                       performance relative to
 
                                       21
<PAGE>
                       certain performance rankings and indices compiled by
                       independent organizations. More detailed information as
                       to the calculation of performance, as well as comparisons
                       with unmanaged market indices, appears in the Statement
                       of Additional Information.
 
                       Effective yields and total returns for the Subaccounts
                       are based on the investment performance of the
                       corresponding Investment Option. Each Investment Option's
                       performance in part reflects the Investment Option's
                       expenses. (See the accompanying Investment Option
                       prospectuses.)
 
                       The yield of the Money Market Subaccount refers to the
                       annualized income generated by an investment in the
                       Subaccount over a specified seven-day period. The yield
                       is calculated by assuming that the income generated for
                       that seven-day period is generated each seven-day period
                       over a 52-week period and is shown as a percentage of the
                       investment. The effective yield is calculated similarly
                       but, when annualized, the income earned by an investment
                       in the Subaccount is assumed to be reinvested. The
                       effective yield will be slightly higher than the yield
                       because of the compounding effect of this assumed
                       reinvestment.
 
                       The yield of a Subaccount (except the Money Market
                       Subaccount) refers to the annualized income generated by
                       an investment in the Subaccount over a specified 30-day
                       or one-month period. The yield is calculated by assuming
                       that the income generated by the investment during that
                       30-day or one-month period is generated each period over
                       a 12-month period and is shown as a percentage of the
                       investment.
 
                       The total return of a Subaccount refers to return
                       quotations assuming an investment under a Contract has
                       been held in the Subaccount for various periods of time.
                       When a Subaccount has been in operation for one, five and
                       ten years, respectively, the total return for these
                       periods will be provided. For periods prior to the date
                       the Account commenced operations, performance information
                       will be calculated based on the performance of the
                       Investment Options and the assumption that the
                       Subaccounts were in existence for the same periods as
                       those indicated for the Investment Options, with the
                       level of Contract charges that were in effect at the
                       inception of the Subaccounts for the Contracts.
 
                       The average annual total return quotations represent the
                       average annual compounded rates of return that would
                       equate an initial investment of $1,000 under a Contract
                       to the redemption value of that investment as of the last
                       day of each of the periods for which total return
                       quotations are provided. Average annual total return
                       information shows the average percentage change in the
                       value of an investment in the Subaccount from the
                       beginning date of the measuring period to the end of that
                       period. This standardized version of average annual total
                       return reflects all historical investment results less
                       all charges and deductions applied against the Subaccount
                       (including any surrender charge that would apply if an
                       owner terminated the Contract at the end of each period
                       indicated, but excluding any deductions for premium
                       taxes).
 
                       In addition to the standard version described above,
                       total return performance information computed on two
                       different non-standard bases may be used in
                       advertisements or sales literature. Average annual total
                       return information may be presented, computed on the same
                       basis as described above, except deductions will not
                       include the surrender charge. In addition, the Company
                       may, from time to time, disclose cumulative total return
                       for Contracts funded by Subaccounts.
 
                       From time to time, yields, standard average annual total
                       returns and non-standard total returns for the Fund's
                       Investment Options may be disclosed, including such
                       disclosures for periods prior to the date the Account
                       commenced operations.
 
                       Non-standard performance data will only be disclosed if
                       the standard performance data for the required periods is
                       also disclosed. For additional information regarding the
                       calculation of other performance data, please refer to
                       the Statement of Additional Information.
 
                                       22
<PAGE>
                       In advertising and sales literature, the performance of
                       each Subaccount may be compared to the performance of
                       other variable annuity issuers in general, or to the
                       performance of particular types of variable annuities
                       investing in mutual funds or investment portfolios of
                       mutual funds with investment objectives similar to each
                       of the Subaccounts. Lipper Analytical Services, Inc.
                       ("Lipper") and the Variable Annuity Research Data Service
                       ("VARDS") are independent services which monitor and rank
                       the performance of variable annuity issuers in each of
                       the major categories of investment objectives on an
                       industry-wide basis.
 
                       Lipper's rankings include variable life insurance issuers
                       as well as variable annuity issuers. VARDS rankings
                       compare only variable annuity issuers. The performance
                       analyses prepared by Lipper and VARDS each rank such
                       issuers on the basis of total return, assuming
                       reinvestment of distributions, but do not take sales
                       charges, redemption fees or certain expense deductions at
                       the separate account level into consideration. In
                       addition, VARDS prepares risk rankings, which consider
                       the effects of market risk on total return performance.
                       This type of ranking provides data as to which funds
                       provide the highest total return within various
                       categories of funds defined by the degree of risk
                       inherent in their investment objectives.
 
                       Advertising and sales literature may also compare the
                       performance of each Subaccount to the Standard & Poor's
                       Index of 500 Common Stocks, a widely used measure of
                       stock performance. This unmanaged index assumes the
                       reinvestment of dividends but does not reflect any
                       "deduction" for the expense of operating or managing an
                       investment portfolio. Other independent ranking services
                       and indices may also be used as a source of performance
                       comparison.
 
                       The Company may also report other information including
                       the effect of tax-deferred compounding on a Subaccount's
                       investment returns, or returns in general, which may be
                       illustrated by tables, graphs or charts. All income and
                       capital gains derived from Subaccount investments are
                       reinvested and can lead to substantial long-term
                       accumulation of assets, provided that the underlying
                       Portfolio's investment experience is positive.
- --------------------------------------------------------------------------------
                   FEDERAL TAX MATTERS
                       THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED
                       AS TAX ADVICE
- --------------------------------------------------------------------------------
INTRODUCTION           This discussion is not intended to address the tax
                       consequences resulting from all of the situations in
                       which a person may be entitled to or may receive a
                       distribution under the annuity contract issued by the
                       Company. Any person concerned about these tax
                       implications should consult a competent tax adviser
                       before initiating any transaction. This discussion is
                       based upon the Company's understanding of the present
                       Federal income tax laws, as they are currently
                       interpreted by the Internal Revenue Service. No
                       representation is made as to the likelihood of the
                       continuation of the present federal income tax laws or of
                       the current interpretation by the Internal Revenue
                       Service. Moreover, no attempt has been made to consider
                       any applicable state or other tax laws.
 
                       The Contract may be purchased on a non-qualified basis
                       ("Non-Qualified Contract") or purchased and used in
                       connection with plans qualifying for favorable tax
                       treatment ("Qualified Contract"). The Qualified Contract
                       is designed for use by individuals whose premium payments
                       are comprised solely of proceeds from and/or
                       contributions under retirement plans which are intended
                       to qualify as plans entitled to special income tax
                       treatment under Sections 401(a), 403(b), or 408 of the
                       Internal Revenue Code of 1986, as amended (the "Code").
                       The ultimate effect of federal income taxes on the
                       amounts held under a Contract, or annuity payments, and
                       on the economic benefit to the owner, the annuitant or
                       the beneficiary depends on the type of retirement plan,
                       on the tax and employment status of the individual
                       concerned, and on the Company's tax status. In addition,
                       certain requirements must be satisfied in purchasing a
                       Qualified Contract with proceeds from a tax-qualified
                       plan and receiving distributions from a Qualified
                       Contract in order to continue receiving
 
                                       23
<PAGE>
                       favorable tax treatment. Therefore, purchasers of
                       Qualified Contracts should seek competent legal and tax
                       advice regarding the suitability of a Contract for their
                       situation, the applicable requirements and the tax
                       treatment of the rights and benefits of a Contract. The
                       following discussion assumes that Qualified Contracts are
                       purchased with proceeds from and/or contributions under
                       retirement plans that qualify for the intended special
                       federal income tax treatment.
- --------------------------------------------------------------------------------
TAX STATUS OF THE CONTRACT
                       The Company believes that the Contract will be subject to
                       tax as an annuity contract under the Code, which
                       generally means that any increase in Account Value will
                       not be taxable until amounts are received from the
                       Contract, either in the form of Annuity payments or in
                       some other form. In order to be subject to annuity
                       contract treatment for tax purposes, the Contract must
                       meet the following Code requirements:
 
                        DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Code
                        provides that separate account investments underlying a
                       contract must be "adequately diversified" in accordance
                       with Treasury regulations in order for the contract to
                       qualify as an annuity contract under Section 72 of the
                       Code. The Account, through each Portfolio of the Fund,
                       intends to comply with the diversification requirements
                       prescribed in regulations under Section 817(h) of the
                       Code, which affect how the assets in the various
                       Subaccounts may be invested. Although the Company does
                       not have control over the Fund in which the Account
                       invests, we believe that each Portfolio in which the
                       Account owns shares will meet the diversification
                       requirements.
 
                        OWNER CONTROL. In certain circumstances, owners of
                        variable annuity contracts may be considered the owners,
                       for federal income tax purposes, of the assets of the
                       separate account used to support their contracts. In
                       those circumstances, income and gains from the separate
                       account assets would be includible in the variable
                       annuity contract owner's gross income. Several years ago,
                       the IRS stated in published rulings that a variable
                       contract owner will be considered the owner of separate
                       account assets if the contract owner possesses incident
                       of ownership in those assets, such as the ability to
                       exercise investment control over the assets. More
                       recently, the Treasury Department announced, in
                       connection with the issuance of regulations concerning
                       investment diversification, that those regulations "do
                       not provide guidance concerning the circumstances in
                       which investor control of the investments of a segregated
                       asset account may cause the investor (I.E., the contract
                       owner), rather than the insurance company, to be treated
                       as the owner of the assets in the account." This
                       announcement also states that guidance would be issued by
                       way of regulations or rulings on the "extent to which
                       policyholders may direct their investments to particular
                       subaccounts without being treated as owners of the
                       underlying assets."
 
                       The ownership rights under the Contracts are similar to,
                       but different in certain respects from, those described
                       by the Service in rulings in which it was determined that
                       contract owners were not owners of separate account
                       assets. For example, the owner of a Contract has the
                       choice of one or more Subaccounts in which to allocate
                       premiums and Contract values, and may be able to transfer
                       among Subaccounts more frequently than in such rulings.
                       These differences could result in the contract owner
                       being treated as the owner of the assets of the Account.
                       In addition, the Company does not know what standards
                       will be set forth, if any, in the regulations or rulings
                       which the Treasury Department has stated it expects to
                       issue. The Company therefore reserves the right to modify
                       the Contract as necessary to attempt to prevent the
                       contract owner from being considered the owner of the
                       assets of the Account.
 
                        REQUIRED DISTRIBUTIONS. In order to be treated as an
                        annuity contract for federal income tax purposes,
                       Section 72(s) of the Code requires any Non-Qualified
                       Contract to provide that: (a) if any owner dies on or
                       after the retirement date but prior to the time the
                       entire interest in the contract has been distributed, the
                       remaining portion of such interest will be distributed at
                       least as rapidly as under the method of distribution
                       being used as of the date of that owner's death; and (b)
                       if any owner dies prior to the annuity commencement date,
                       the entire interest in the Contract will be distributed
                       within five years after the date of the owner's death.
                       These requirements will be considered satisfied as to any
                       portion of the owner's interest which is payable to or
                       for
 
                                       24
<PAGE>
                       the benefit of a "designated beneficiary" and which is
                       distributed over the life of such beneficiary or over a
                       period not extending beyond the life expectancy of that
                       beneficiary, provided that such distributions begin
                       within one year of that owner's death. The owner's
                       "designated beneficiary" is the person designated by such
                       owner as a beneficiary and to whom ownership of the
                       contract passes by reason of death and must be a natural
                       person. However, if the owner's "designated beneficiary"
                       is the surviving spouse of the owner, the Contract may be
                       continued with the surviving spouse as the new owner.
 
                       The Non-Qualified Contracts contain provisions which are
                       intended to comply with the requirements of Section 72(s)
                       of the Code, although no regulations interpreting these
                       requirements have yet been issued. The Company intends to
                       review such provisions and modify them if necessary to
                       assure that they comply with the requirements of Code
                       Section 72(s) when clarified by regulation or otherwise.
 
                       Other rules may apply to Qualified Contracts.
 
                       The following discussion assumes that the Contracts will
                       qualify as annuity contracts for federal income tax
                       purposes.
- --------------------------------------------------------------------------------
TAXATION OF ANNUITIES
                        IN GENERAL. Section 72 of the Code governs taxation of
                        annuities in general. The Company believes that an owner
                       who is a natural person is not taxed on increases in the
                       value of a Contract until distribution occurs by
                       withdrawing all or part of the cash value (e.g., partial
                       surrenders and surrenders) or as annuity payments under
                       the payment option elected. For this purpose, the
                       assignment, pledge, or agreement to assign or pledge any
                       portion of the cash value (and in the case of a Qualified
                       Contract, any portion of an interest in the qualified
                       plan) generally will be treated as a distribution. The
                       taxable portion of a distribution (in the form of a
                       single sum payment or payment option) is taxable as
                       ordinary income.
 
                        NON-NATURAL OWNER. The owner of any annuity contract who
                        is not a natural person generally must include in income
                       any increase in the excess of the cash value over the
                       "investment in the contract" during the taxable year.
                       There are some exceptions to this rule. Certain Contracts
                       will generally be treated as held by a natural person if
                       (a) the nominal owner is a trust or other entity which
                       holds the contract as an agent for a natural person (but
                       not in the case of certain non-qualified deferred
                       compensation arrangements); (b) the Contract is acquired
                       by an estate of a decedent by reason of the death of the
                       decedent; (c) The Contract is issued in connection with
                       certain Qualified Plans; (d) the Contract is purchased by
                       an employer upon the termination of certain Qualified
                       Plans; (e) the Contract is used in connection with a
                       structured settlement agreement; and (f) the Contract is
                       purchased with a single purchase payment when the annuity
                       starting date (as defined in the tax law) is no later
                       than a year from the purchase of the Contract and
                       substantially equal periodic payments are made, not less
                       frequently than annually, during the the annuity period.
                       A prospective owner that is not a natural person may wish
                       to discuss these with a competent tax adviser.
 
                       The following discussion generally applies to Contracts
                       owned by natural persons.
 
                        PARTIAL WITHDRAWALS. In the case of a partial withdrawal
                        from a Qualified Contract, under Section 72(e) of the
                       Code, a ratable portion of the amount received is
                       taxable, generally based on the ratio of the "investment
                       in the contract" to the participant's total accrued
                       benefit or balance under the retirement plan. The
                       "investment in the contract" generally equals the
                       portion, if any, of any premium payments paid by or on
                       behalf of the individual under a Contract which was not
                       excluded from the individual's gross income. For
                       Contracts issued in connection with qualified plans, the
                       "investment in the contract" can be zero. Special tax
                       rules may be available for certain distributions from
                       Qualified Contracts.
 
                                       25
<PAGE>
                       In the case of a partial withdrawal from a Non-Qualified
                       Contract, under Section 72(e) amounts received are
                       generally first treated as taxable income to the extent
                       that the cash value immediately before the partial
                       withdrawal exceeds the "investment in the contract" at
                       that time. Any additional amount withdrawn is not
                       taxable.
 
                       In the case of a surrender under a Qualified or
                       Non-Qualified Contract, the amount received generally
                       will be taxable only to the extent it exceeds the
                       "investment in the contract."
 
                       Section 1035 of the Code provides that no gain or loss
                       shall be recognized on the exchange of one annuity
                       contract for another. If the surrendered contract was
                       issued prior to August 14, 1982, the tax rules formerly
                       provided that the surrender was taxable only to the
                       extent the amount received exceeds the owner's investment
                       in the contract will continue to apply to amounts
                       allocable to investments in that contract prior to August
                       14, 1982. In contrast, contracts issued after January 19,
                       1985 in a Code Section 1035 exchange are treated as new
                       contracts for purposes of the penalty and
                       distribution-at-death rules. Special rules and procedures
                       apply to Section 1035 transactions. Prospective owners
                       wishing to take advantage of Section 1035 should consult
                       their tax adviser.
 
                        ANNUITY PAYMENTS. Although tax consequences may vary
                        depending on the payment option elected under an annuity
                       contract, under Code Section 72(b), generally (prior to
                       recovery of the investment in the contract) gross income
                       does not include that part of any amount received as an
                       annuity under an annuity contract that bears the same
                       ratio to such amount as the investment in the contract
                       bears to the expected return at the annuity starting
                       date. Stated differently, prior to recovery of the
                       investment in the contract, generally, there is no tax on
                       the amount of each payment which represents the same
                       ratio that the "investment in the contract" bears to the
                       total expected value of the annuity payments for the term
                       of the payment; however, the remainder of each income
                       payment is taxable. After the "investment in the
                       contract" is recovered, the full amount of any additional
                       annuity payments is taxable.
 
                        TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be
                        distributed from a Contract because of the death of the
                       owner. Generally, such amounts are includible in the
                       income of the recipient as follows: (i) if distributed in
                       a lump sum, they are taxed in the same manner as a
                       surrender of the contract or (ii) if distributed under a
                       payment option, they are taxed in the same way as annuity
                       payments. For these purposes, the investment in the
                       Contract is not affected by the owner's death. That is,
                       the investment in the Contract remains the amount of any
                       purchase payments which were not excluded from gross
                       income.
 
                        PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a
                        distribution pursuant to a Non-Qualified Contract, there
                       may be imposed a federal penalty tax equal to 10% of the
                       amount treated as taxable income. In general, however,
                       there is no penalty on distributions:
 
                               1.  made on or after the taxpayer reaches age
                           59 1/2;
 
                               2.  made on or after the death of the holder (or
                           if the holder is not an individual, the death of the
                           primary annuitant);
 
                               3.  attributable to the taxpayer becoming
                           disabled;
 
                               4.  as part of a series of substantially equal
                           periodic payments (not less frequently than annually)
                           for the life (or life expectancy) of the taxpayer or
                           the joint lives (or joint life expectancies) of the
                           taxpayer and his or her designated beneficiary;
 
                               5.  made under certain annuities issued in
                           connection with structured settlement agreements;
 
                                       26
<PAGE>
                               6.  made under an annuity contract that is
                           purchased with a single premium when the retirement
                           date is no later than a year from purchase of the
                           annuity and substantially equal periodic payments are
                           made, not less frequently than annually, during the
                           annuity payment period; and
 
                               7.  any payment allocable to an investment
                           (including earnings thereon) made before August 14,
                           1982 in a contract issued before that date.
 
                       Other tax penalties may apply to certain distributions
                       under a Qualified Contract.
 
                       Legislation has been proposed in 1998 that, if enacted,
                       would adversely modify the federal taxation of certain
                       insurance and annuity contracts. For example, one
                       proposal would tax transfers among investment options and
                       tax exchanges involving variable contracts. A second
                       proposal would reduce the "investment in the contract"
                       under cash value life insurance and certain annuity
                       contracts by certain amounts, thereby increasing the
                       amount of income for purposes of computing gain. Although
                       the likelihood of there being any changes is uncertain,
                       there is always the possibility that the tax treatment of
                       the Contracts could change by legislation or other means.
                       Moreover, it is also possible that any change could be
                       retroactive (that is, effective prior to the date of the
                       change). You should consult a tax adviser with respect to
                       legislative developments and their effect on the
                       Contract.
- --------------------------------------------------------------------------------
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
                       A transfer of ownership of a Contract, the designation of
                       an annuitant, payee or other beneficiary who is not also
                       the owner, the selection of certain retirement dates or
                       the exchange of a Contract may result in certain tax
                       consequences to the owner that are not discussed herein.
                       An owner contemplating any such transfer, assignment,
                       selection or exchange of a Contract should contact a
                       competent tax adviser with respect to the potential tax
                       effects of such a transaction.
- --------------------------------------------------------------------------------
WITHHOLDING            Distributions from Contracts generally are subject to
                       withholding for the owner's federal income tax liability.
                       The withholding rate varies according to the type of
                       distribution and the owner's tax status. The owner will
                       be provided the opportunity to elect not have tax
                       withheld from distributions.
 
                       "Eligible rollover distributions" from section 401(a)
                       plans and section 403(b) tax-sheltered annuities are
                       subject to a mandatory federal income tax withholding of
                       20%. An eligible rollover distribution is the taxable
                       portion of any distribution from such a plan, except
                       certain distributions such as distributions required by
                       the Code or distributions in a specified annuity form.
                       The 20% withholding does not apply, however, if the owner
                       chooses a "direct rollover" from the plan to another tax-
                       qualified plan or IRA.
- --------------------------------------------------------------------------------
MULTIPLE CONTRACTS     All non-qualified deferred annuity contracts entered into
                       after October 21, 1988 that are issued by the Company (or
                       its affiliates) to the same owner during any calendar
                       year are treated as one annuity Contract for purposes of
                       determining the amount includible in gross income under
                       Section 72(e). This rule could affect the time when
                       income is taxable and the amount that might be subject to
                       the 10% penalty tax described above. In addition, the
                       Treasury Department has specific authority to issue
                       regulations that prevent the avoidance of Section 72(e)
                       through the serial purchase of annuity contracts or
                       otherwise. There may also be other situations in which
                       the Treasury may conclude that it would be appropriate to
                       aggregate two or more annuity contracts purchased by the
                       same owner. Accordingly, a Contract owner should consult
                       a competent tax adviser before purchasing more than one
                       annuity contract.
- --------------------------------------------------------------------------------
TAXATION OF QUALIFIED PLANS
                       The Contracts are designed for use with several types of
                       qualified plans. The tax rules applicable to participants
                       in these qualified plans vary according to the type of
                       plan and the terms and conditions of the plan itself.
                       Special favorable tax treatment may be available for
                       certain types of contributions and distributions. Adverse
                       tax consequences may result from contributions in excess
                       of specified limits; distributions prior to age 59 1/2
                       (subject to certain exceptions); distributions that do
                       not conform to specified commencement and minimum
                       distribution rules; and in other specified circumstances.
                       Therefore, no attempt is made to provide more than
 
                                       27
<PAGE>
                       general information about the use of the Contracts with
                       the various types of qualified retirement plans. Contract
                       owners, the annuitants, and beneficiaries are cautioned
                       that the rights of any person to any benefits under these
                       qualified retirement plans may be subject to the terms
                       and conditions of the plans themselves, regardless of the
                       terms and conditions of the Contract, but the Company
                       shall not be bound by the terms and conditions of such
                       plans to the extent such terms contradict the Contract,
                       unless the Company consents. Some retirement plans are
                       subject to distribution and other requirements that are
                       not incorporated into our Contract administration
                       procedures. Owners, participants and beneficiaries are
                       responsible for determining that contributions,
                       distributions and other transactions with respect to the
                       Contracts comply with applicable law. For qualified plans
                       under Section 401(a), 403(a), 403(b), and 457, the Code
                       requires that distributions generally must commence no
                       later than the later of April 1 of the calendar year
                       following the calendar year in which the owner (or plan
                       participant) (i) reaches age 70 1/2 or (ii) retires, and
                       must be made in a specified form or manner. If the plan
                       participant is a "5 percent owner" (as defined in the
                       Code), distributions generally must begin no later than
                       April 1 of the calendar year following the calendar year
                       in which the owner (or plan participant) reaches age
                       70 1/2. For IRAs described in Section 408, distributions
                       generally must commence no later than the later of April
                       1 of the calendar year following the calendar year in
                       which the owner (or plan participant) reaches age 70 1/2.
                       Brief descriptions follow of the various types of
                       qualified retirement plans available in connection with a
                       Contract. The Company will amend the Contract as
                       necessary to conform it to the requirements of the Code.
 
                        CORPORATE PENSION AND PROFIT SHARING PLANS AND H.R. 10
                        PLANS. Section 401(a) of the Code permits corporate
                       employers to establish various types of retirement plans
                       for employees, and permits self-employed individuals to
                       establish these plans for themselves and their employees.
                       These retirement plans may permit the purchase of the
                       Contracts to accumulate retirement savings under the
                       plans. Adverse tax or other legal consequences to the
                       plan, to the participant or both may result if this
                       Contract is assigned or transferred to any individual as
                       a means to provide benefit payments, unless the plan
                       complies with all legal requirements applicable to such
                       benefits prior to transfer of the Contract. Employers
                       intending to use the Contract with such plans should seek
                       competent advice.
 
                        INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code
                        permits eligible individuals to contribute to an
                       individual retirement program known as an "Individual
                       Retirement Annuity" or "IRA". These IRAs are subject to
                       limits on the amount that may be contributed, the persons
                       who may be eligible and on the time when distributions
                       may commence. Also, distributions from certain other
                       types of qualified retirement plans may be "rolled over"
                       on a tax-deferred basis into an IRA. Sales of the
                       Contract for use with IRAs may be subject to special
                       requirements of the Internal Revenue Service. Earnings in
                       an IRA are not taxed until distribution. IRA
                       contributions are limited each year to the lesser of
                       $2,000 or 100% of the owner's adjusted gross income and
                       may be deductible in whole or in part depending on the
                       individual's income. The limit on the amount contributed
                       to an IRA does not apply to distributions from certain
                       other types of qualified plans that are "rolled over" on
                       a tax-deferred basis into an IRA. Amounts in the IRA
                       (other than nondeductible contributions) are taxed when
                       distributed from the IRA. Distributions prior to age
                       59 1/2 (unless certain exceptions apply) are subject to a
                       10% penalty tax.
 
                       Employers may establish Simplified Employee Pension (SEP)
                       Plans to provide IRA contributions on behalf of their
                       employees. In addition to all of the general Code rules
                       governing IRAs, such plans are subject to certain Code
                       requirements regarding participation and amounts of
                       contributions.
 
                        SIMPLE RETIREMENT ACCOUNTS. Beginning January 1, 1997,
                        certain small employers may establish Simple Retirement
                       Accounts as provided by Section 408(p) of the Code, under
                       which employees may elect to defer up to $6,000 (as
                       increased for cost of living adjustments) as a percentage
                       of compensation. The sponsoring employer is required
 
                                       28
<PAGE>
                       to make a matching contribution on behalf of contributing
                       employees. Distributions from a Simple Retirement Account
                       are subject to the same restrictions that apply to IRA
                       distributions and are taxed as ordinary income. Subject
                       to certain exceptions, premature distributions prior to
                       age 59 1/2 are subject to a 10% penalty tax, which is
                       increased to 25% if the distribution occurs within the
                       first two years after the commencement of the employee's
                       participation in the plan. The failure of the Simple
                       Retirement Account to meet Code requirements may result
                       in adverse tax consequences.
 
                        ROTH IRAS. Effective January 1, 1998, section 408A of
                        the Code permits certain eligible individuals to
                       contribute to a Roth IRA. Contributions to a Roth IRA,
                       which are subject to certain limitations, are not
                       deductible and must be made in cash or as a rollover or
                       transfer from another Roth IRA or other IRA. A rollover
                       from or conversion of an IRA to a Roth IRA may be subject
                       to tax and other special rules may apply. You should
                       consult a tax adviser before combining any converted
                       amounts with any other Roth IRA contributions, including
                       any other conversion amounts from other tax years.
                       Distributions from a Roth IRA generally are not taxed,
                       except that, once aggregate distributions exceed
                       contributions to the Roth IRA, income tax and a 10%
                       penalty tax may apply to distributions made (1) before
                       age 59 1/2 (subject to certain exceptions) or (2) during
                       the five taxable years starting with the year in which
                       the first contribution is made to the Roth IRA.
 
                        TAX SHELTERED ANNUITIES. Section 403(b) of the Code
                        allows employees of certain Section 501(c)(3)
                       organizations and public schools to exclude from their
                       gross income the premiums paid, within certain limits, on
                       a Contract that will provide an annuity for the
                       employee's retirement. These premiums may be subject to
                       FICA (social security) tax. Code section 403(b)(11)
                       restricts the distribution under Code section 403(b)
                       annuity contracts of: (1) elective contributions made in
                       years beginning after December 31, 1988; (2) earnings on
                       those contributions; and (3) earnings in such years on
                       amounts held as of the last year beginning before January
                       1, 1989. Distribution of those amounts may only occur
                       upon death of the employee, attainment of age 59 1/2,
                       separation from service, disability, or financial
                       hardship. In addition, income attributable to elective
                       contributions may not be distributed in the case of
                       hardship.
 
                        RESTRICTIONS UNDER QUALIFIED CONTRACTS. Other
                        restrictions with respect to the election, commencement
                       or distribution of benefits may apply under Qualified
                       Contracts or under the terms of the plans in respect of
                       which Qualified Contracts are issued.
- --------------------------------------------------------------------------------
POSSIBLE CHARGE FOR THE COMPANY'S TAXES
                       At the present time, the Company makes no charge to the
                       Subaccounts for any Federal, state or local taxes that
                       the Company incurs which may be attributable to such
                       Subaccounts or the Contracts. The Company, however,
                       reserves the right in the future to make a charge for any
                       such tax or other economic burden resulting from the
                       application of the tax laws that it determines to be
                       properly attributable to the Subaccounts or to the
                       Contracts.
- --------------------------------------------------------------------------------
OTHER TAX CONSEQUENCES As noted above, the foregoing comments about the Federal
                       tax consequences under these Contracts are not
                       exhaustive, and special rules are provided with respect
                       to other tax situations not discussed in the Prospectus.
                       Further, the Federal income tax consequences discussed
                       herein reflect the Company's understanding of current law
                       and the law may change. Federal estate and state and
                       local estate, inheritance and other tax consequences of
                       ownership or receipt of distributions under a Contract
                       depend on the individual circumstances of each owner or
                       recipient of the distribution. A competent tax adviser
                       should be consulted for further information.
- --------------------------------------------------------------------------------
                   DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
                       The Contracts will be offered to the public on a
                       continuous basis. The Company does not anticipate
                       discontinuing the offering of the Contracts, but reserves
                       the right to discontinue the offering. Applications for
                       Contracts are solicited by agents who are licensed by
                       applicable state insurance authorities to sell the
                       Company's variable
 
                                       29
<PAGE>
                       annuity contracts and who are also registered
                       representatives of EquiTrust Marketing, broker-dealers
                       having selling agreements with EquiTrust Marketing or
                       broker-dealers having selling agreements with such
                       broker-dealers. EquiTrust Marketing (formerly FBL
                       Marketing Services, Inc.) is registered with the SEC
                       under the Securities Exchange Act of 1934 as a
                       broker-dealer and is a member of the National Association
                       of Securities Dealers, Inc.
 
                       EquiTrust Marketing acts as the Principal Underwriter, as
                       defined in the 1940 Act, of the Contracts for the Account
                       pursuant to an Underwriting Agreement between the Company
                       and EquiTrust Marketing. EquiTrust Marketing is not
                       obligated to sell any specific number of Contracts.
                       EquiTrust Marketing's principal business address is the
                       same as that of the Company.
 
                       The Company may pay broker-dealers with selling
                       agreements up to an amount equal to 8.5% of the premiums
                       paid under a Contract during the first Contract year, 3%
                       of the premiums paid in the second through ninth Contract
                       years and 1% of the premiums paid in the tenth and
                       subsequent Contract years. The Company also may pay other
                       distribution expenses such as production incentive
                       bonuses, agent's insurance and pension benefits, and
                       agency expense allowances. These distribution expenses do
                       not result in any additional charges against the
                       Contracts that are not described under "Charges and
                       Deductions."
- --------------------------------------------------------------------------------
                   LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
                       The Company, like other life insurance companies, is
                       involved in lawsuits. Currently, there are no class
                       action lawsuits naming the Company as a defendant or
                       involving the Account. In some lawsuits involving other
                       insurers, substantial damages have been sought and/or
                       material settlement payments have been made. Although the
                       outcome of any litigation cannot be predicted with
                       certainty, the Company believes that at the present time,
                       there are no pending or threatened lawsuits that are
                       reasonably likely to have a material adverse impact on
                       the Account or the Company.
- --------------------------------------------------------------------------------
                   VOTING RIGHTS
- --------------------------------------------------------------------------------
                       In accordance with its view of current applicable law,
                       the Company will vote the Fund shares held in the Account
                       at regular and special shareholder meetings of the Funds,
                       in accordance with instructions received from persons
                       having voting interests in the corresponding Subaccounts.
                       If, however, the 1940 Act or any regulation thereunder
                       should be amended, or if the present interpretation
                       thereof should change, or the Company otherwise
                       determines that it is allowed to vote the shares in its
                       own right, it may elect to do so.
 
                       The number of votes that an owner has the right to
                       instruct will be calculated separately for each
                       Subaccount, and may include fractional votes. An owner
                       holds a voting interest in each Subaccount to which the
                       accumulated value is allocated. The owner only has voting
                       interest prior to the retirement date. For each owner,
                       the number of votes attributable to a Subaccount will be
                       determined by dividing the accumulated value attributable
                       to that owner's Contract in that Subaccount by the net
                       asset value per share of the Investment Option in which
                       that Subaccount invests.
 
                                       30
<PAGE>
                       The number of votes of an Investment Option which are
                       available to the owner will be determined as of the date
                       coincident with the date established by that Investment
                       Option for determining shareholders eligible to vote at
                       the relevant meeting for that Fund. Voting instructions
                       will be solicited by written communication prior to such
                       meeting in accordance with procedures established by each
                       Fund. Each owner having a voting interest in a Subaccount
                       will receive proxy materials and reports relating to any
                       meeting of shareholders of the Investment Option in which
                       that Subaccount invests.
 
                       Fund shares as to which no timely instructions are
                       received and shares held by the Company in a Subaccount
                       as to which no owner has a beneficial interest will be
                       voted in proportion to the voting instructions which are
                       received with respect to all Contracts participating in
                       that Subaccount. Voting instructions to abstain on any
                       item to be voted upon will be applied to reduce the total
                       number of votes eligible to be cast on a matter.
- --------------------------------------------------------------------------------
                   YEAR 2000
- --------------------------------------------------------------------------------
                       Like other investment funds, financial and business
                       organizations and individuals around the world, the
                       Account could be adversely affected if the computer
                       systems used by the Company and other service providers
                       do not properly process and calculate date-related
                       information and data from and after January 1, 2000. In
                       1997, the Company completed a comprehensive assessment of
                       the Year 2000 issue and developed a plan to address the
                       issue in a timely manner. The Company has and will
                       utilize both internal and external resources to
                       reprogram, or replace, and test the software for Year
                       2000 modifications. The Company anticipates completing
                       the Year 2000 project no later than December 31, 1998,
                       and prior to any anticipated impact on its operating
                       systems.
 
                       The date on which the Company believes it will complete
                       the Year 2000 modifications is based on management's best
                       estimates, which were derived utilizing numerous
                       assumptions of future events. The Company also recognizes
                       there are outside influences and dependencies relative to
                       its Year 2000 effort, over which is has little or no
                       control. However, the Company is putting effort into
                       ensuring these considerations will have minimal impact.
                       These would include the continued availability of certain
                       resources, third party modification plans and many other
                       factors. However, there can be no guarantee that these
                       estimates will be achieved and actual results could
                       differ from those anticipated.
- --------------------------------------------------------------------------------
                   FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
                       The statutory-basis balance sheets of the Company at
                       December 31, 1997 and 1996, and the related
                       statutory-basis statements of operations, changes in
                       capital and surplus and cash flows for the years then
                       ended, as well as the related Report of Independent
                       Auditors are contained in the Statement of Additional
                       Information. The unaudited statutory-basis balance sheet
                       of the Company at June 30, 1998, the related unaudited
                       statutory-basis statement of changes in capital and
                       surplus for the six months then ended, and the related
                       unaudited statements of operations and cash flows for the
                       six months ended June 30, 1998 and 1997 are also included
                       in the Statement of Additional Information.
 
                       It is anticipated that the Account will commence
                       operations in 1998; accordingly, no financial statements
                       currently exist.
 
                                       31
<PAGE>
- --------------------------------------------------------------------------------
                   STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
- --------------------------------------------------------------------------------
 
                                                                            PAGE
- --------------------------------------------------------------------------------
 
GENERAL INFORMATION ABOUT THE COMPANY.....................................     1
 
- --------------------------------------------------------------------------------
 
ADDITIONAL CONTRACT PROVISIONS............................................     1
 
          The Contract....................................................     1
 
          Incontestability................................................     1
 
          Misstatement of Age or Sex......................................     1
 
          Non-Participation...............................................     1
 
- --------------------------------------------------------------------------------
 
CALCULATION OF YIELDS AND TOTAL RETURNS...................................     1
 
          Money Market Subaccount Yields..................................     1
 
          Other Subaccount Yields.........................................     3
 
          Average Annual Total Returns....................................     4
 
          Other Total Returns.............................................     6
 
          Effect of the Administrative Charge on Performance Data.........     6
 
- --------------------------------------------------------------------------------
 
LEGAL MATTERS.............................................................     6
 
- --------------------------------------------------------------------------------
 
EXPERTS...................................................................     7
 
- --------------------------------------------------------------------------------
 
OTHER INFORMATION.........................................................     7
 
- --------------------------------------------------------------------------------
 
FINANCIAL STATEMENTS......................................................     7
 
- --------------------------------------------------------------------------------
 
                                       32
<PAGE>
 -------------------------------------------------------------------------------
                              TEAR AT PERFORATION
 
If you would like a copy of the Statement of Additional Information, please
complete the information below and detach and mail this card to the Company at
the address shown on the cover of this prospectus.
Name ___________________________________________________________________________
Address ________________________________________________________________________
City, State, Zip _______________________________________________________________
<PAGE>
                                     PART B
 
                      STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
                      STATEMENT OF ADDITIONAL INFORMATION
 
                        EQUITRUST LIFE INSURANCE COMPANY
                             5400 University Avenue
                          West Des Moines, Iowa 50266
                                 1-888-349-4656
 
                       EQUITRUST LIFE ANNUITY ACCOUNT II
 
         INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
 
This Statement of Additional Information contains information in addition to the
information described in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") offered by EquiTrust Life Insurance
Company (the "Company"). This Statement of Additional Information is not a
Prospectus, and it should be read only in conjunction with the Prospectuses for
the Contract, and the selected Investment Options of EquiTrust Variable
Insurance Series Fund, T. Rowe Price Equity Series, Inc., T. Rowe Price
International Series, Inc. and Dreyfus Variable Investment Fund. The Prospectus
for the Contract is dated the same as this Statement of Additional information.
You may obtain a copy of the Prospectuses by writing or calling us at our
address or phone number shown above.
 
                                         , 1998
<PAGE>
                      STATEMENT OF ADDITIONAL INFORMATION
                               TABLE OF CONTENTS
 
<TABLE>
<S>                                                                         <C>
GENERAL INFORMATION ABOUT THE COMPANY.....................................     1
ADDITIONAL CONTRACT PROVISIONS............................................     1
  The Contract............................................................     1
  Incontestability........................................................     1
  Misstatement of Age or Sex..............................................     1
  Non-Participation.......................................................     1
CALCULATION OF YIELDS AND TOTAL RETURNS...................................     1
  Money Market Subaccount Yields..........................................     1
  Other Subaccount Yields.................................................     3
  Average Annual Total Returns............................................     4
  Other Total Returns.....................................................     6
  Effect of the Administrative Fee On Performance Data....................     6
LEGAL MATTERS.............................................................     6
EXPERTS...................................................................     7
OTHER INFORMATION.........................................................     7
FINANCIAL STATEMENTS......................................................     7
</TABLE>
<PAGE>
                     GENERAL INFORMATION ABOUT THE COMPANY
 
One hundred percent of the outstanding voting shares of the Company are owned by
Farm Bureau Life Insurance Company which is 100% owned by FBL Financial Group,
Inc. At December 31, 1997, Iowa Farm Bureau Federation owned 66.36% of the
outstanding voting stock of FBL Financial Group, Inc.
 
Iowa Farm Bureau Federation is an Iowa not-for-profit corporation, the members
of which are county Farm Bureau organizations and their individual members. Iowa
Farm Bureau Federation is primarily engaged, through various divisions and
subsidiaries, in the formulation, analysis and promotion of programs (at local,
state, national and international levels) that are designed to foster the
educational, social and economic advancement of its members. The principal
offices of Iowa Farm Bureau Federation are at 5400 University Avenue, West Des
Moines, Iowa 50266.
 
                         ADDITIONAL CONTRACT PROVISIONS
 
THE CONTRACT
 
    The application and all other attached papers are part of the Contract. The
statements made in the application are deemed representations and not
warranties. The Company will not use any statement in defense of a claim or to
void the Contract unless it is contained in the application.
 
INCONTESTABILITY
 
    The Company will not contest the Contract from its Contract date.
 
MISSTATEMENT OF AGE OR SEX
 
    If the age or sex of the annuitant has been misstated, the amount which will
be paid is that which the proceeds would have purchased at the correct age and
sex.
 
NON-PARTICIPATION
 
    The Contracts are not eligible for dividends and will not participate in the
Company's divisible surplus.
 
                    CALCULATION OF YIELDS AND TOTAL RETURNS
 
From time to time, the Company may disclose yields, total returns and other
performance data pertaining to the contracts for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
 
MONEY MARKET SUBACCOUNT YIELDS
 
    From time to time, advertisements and sales literature may quote the current
annualized yield of the Money Market Subaccount for a seven-day period in a
manner which does not take into consideration any realized or unrealized gains
or losses or income other than investment income on shares of the Money Market
Investment Option or on its portfolio securities.
 
This current annualized yield is computed by determining the net change
(exclusive or realized gains and losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment income) at the
end of the seven-day period in the value of a hypothetical account under a
Contract having a balance of 1 unit of the Money Market Subaccount at the
beginning of the period, dividing such net change in account value by the value
of the hypothetical account at the beginning of the period to determine the base
period return, and annualizing this quotient on a 365-day basis.
 
                                       1
<PAGE>
The net change in account value reflects: 1) net income from the Investment
Option attributable to the hypothetical account; and 2) charges and deductions
imposed under the Contract which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for: 1) the annual administrative fee and 2) the mortality and expense
risk charge. For purposes of calculating current yields for a Contract, an
average per unit administrative fee is used based on the $30 administrative fee
deducted at the beginning of each Contract Year. Current Yield will be
calculated according to the following formula:
 
<TABLE>
<S>        <C>        <C>
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS        =          the net change in the value of the Investment Option (exclusive or realized gains
                      or losses on the sale of securities and unrealized appreciation and depreciation
                      and income other than investment income) for the seven-day period attributable to a
                      hypothetical account having a balance of 1 subaccount unit.
ES         =          per unit expenses attributable to the hypothetical account for the seven-day
                      period.
UV         =          the unit value for the first day of the seven-day period.
 
Effective Yield = (1 + ((NCS-ES)/UV)) TO THE POWER OF 365/7 - 1
Where:
NCS        =          the net change in the value of the Investment Option (exclusive of realized gains
                      or losses on the sale of securities and unrealized appreciation and depreciation
                      and income other than investment income) for the seven-day period attributable to a
                      hypothetical account having a balance of 1 subaccount unit.
ES         =          per unit expenses attributable to the hypothetical account for the seven-day
                      period.
UV         =          the unit value for the first day of the seven-day period.
</TABLE>
 
Because of the charges and deductions imposed under the Contract, the yield for
the Money Market Subaccount will be lower than the yield for the Money Market
Investment Option.
 
                                       2
<PAGE>
The current and effective yields on amounts held in the Money Market Subaccount
normally will fluctuate on a daily basis. THEREFORE, THE DISCLOSED YIELD FOR ANY
GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR
RATES OF RETURN. The Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Money Market Investment Option, the types of quality of portfolio
securities held by the Money Market Investment Option and the Money Market
Investment Option operating expenses. Yields on amounts held in the Money Market
Subaccount may also be presented for periods other than a seven-day period.
 
OTHER SUBACCOUNT YIELDS
 
    From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the subaccounts (except the Money Market
Subaccount) for a Contract for 30-day or one month periods. The annualized yield
or a subaccount refers to income generated by the subaccount during a 30-day or
one-month period is assumed to be generated each period over a 12-month period.
 
The yield is computed by: 1) dividing net investment income of the Investment
Option attributable to the subaccount units less subaccount expenses for the
period; by 2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by 3)
compounding that yield for a six-month period; and by 4) multiplying that result
by 2. Expenses attributable to the subaccount include the annual administrative
fee and the mortality and expense risk charge. The yield calculation assumes an
administrative fee of $30 per year per Contract deducted at the beginning of
each Contract year. For purposes of calculating the 30-day or one-month yield,
an average administrative fee per dollar of Contract value in the Account issued
to determine the amount of the charge attributable to the subaccount for the
30-day or one-month period. The 30-day or one-month yield is calculated
according to the following formula:
 
<TABLE>
<S>        <C>        <C>
Yield      =          2 X ((NI - ES)/(U X UV)) + 1) TO THE POWER OF 6 - 1
Where:
NI         =          net income of the Investment Option for the 30-day or one-month period attributable
                      to the subaccount's units.
ES         =          expenses of the subaccount for the 30-day or one-month period.
U          =          the average number of units outstanding.
UV         =          the unit value at the close of the last day in the 30-day one-month period.
</TABLE>
 
                                       3
<PAGE>
Because of the charges and deductions imposed under the Contracts, the yield for
the subaccount will be lower that the yield for the corresponding Investment
Option.
 
The yield on the amounts held in the subaccounts normally will fluctuate over
time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN
INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A subaccount's
actual yield is affected by the types and quality of Investment Option
securities held by the corresponding Investment Option and its operating
expenses.
 
Yield calculations do not take into account the Surrender Charge under the
Contract equal to 1% to 6% of the amount withdrawn or surrendered during the
first six Contract years. For partial withdrawals in each Contract year after
the first Contract year, up to 10% of the accumulated value on the most recent
Contract Anniversary may be withdrawn without a current surrender charge.
 
AVERAGE ANNUAL TOTAL RETURNS
 
    From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the subaccounts for various periods of
time.
 
When a subaccount has been in operation for 1, 5 and 10 years, respectively, the
average annual total return for these periods will be provided. Average annual
total returns for other periods of time may, from time to time, also be
disclosed.
 
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment as of the last day of each
of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent month-end practicable,
considering the type and media of the communication that will be stated in the
communication.
 
                                       4
<PAGE>
Standard average annual total returns will be calculated using subaccount unit
values which the Company calculates on each valuation day based on the
performance of the subaccount's underlying portfolio, the deductions for the
mortality and expense risk charge, and the annual administrative fee. The
calculation assumes that the administrative fee is $30 per year per Contract
deducted at the beginning of each Contract year. For purposes of calculating
average annual total return, an average per dollar administrative fee
attributable to the hypothetical account for the period is used. The calculation
also assumes surrender of the Contract at the end of the period for the return
quotation. Total returns will therefore reflect a deduction of the surrender
charge for any period less than seven years. The total return will then be
calculated according to the following formula:
 
<TABLE>
<S>        <C>        <C>
TR = ((ERV/P)/N)-1
Where:
TR         =          the average annual total return net of subaccount recurring charges.
EHV        =          the ending redeemable value (net of any applicable surrender charge) of the
                      hypothetical account at the end of the period.
P          =          a hypothetical initial payment of $1,000.
N          =          the number of years in the period.
</TABLE>
 
From time to time, sales literature or advertisements may also quote average
annual total returns for periods prior to the date the Account commenced
operations. Such performance information for the subaccounts will be calculated
based on the performance of the Investment Option and the assumption that the
subaccounts were in existence for the same periods as those indicated for the
Investment Option, with the level of Contract charges that were in effect at the
inception of the subaccounts.
 
Such average annual total return information for the Subaccounts is as follows:
 
<TABLE>
<CAPTION>
                                                                     FOR THE      FOR THE      FOR THE       FOR THE PERIOD
                                                                     1-YEAR       5-YEAR       10-YEAR        FROM DATE OF
                                                                     PERIOD       PERIOD       PERIOD         INCEPTION OF
                                                                      ENDED        ENDED        ENDED       INVESTMENT OPTION
SUBACCOUNT                                                          12/31/97     12/31/97     12/31/97         TO 12/31/97
- -----------------------------------------------------------------  -----------  -----------  -----------  ---------------------
<S>                                                                <C>          <C>          <C>          <C>
EquiTrust Variable Insurance Series Fund
  Value Growth...................................................       (1.25)%      11.91%       10.78%             7.66%
  High Grade Bond................................................        2.69         5.73         7.60              8.07
  High Yield Bond................................................        4.52         8.84         9.83             10.04
  Money Market (1)...............................................       (2.48)        2.41           --              3.19
  Blue Chip (2)..................................................       19.86        17.30           --             18.02
 
T. Rowe Price Equity Series, Inc.
  Equity Income (3)..............................................       28.85           --           --             23.73
  Mid-Cap Growth (4).............................................       18.80           --           --             18.80
  New America Growth (3).........................................       21.12           --           --             23.66
  Personal Strategy Balanced (5).................................       18.04           --           --             20.13
 
T. Rowe Price International Series, Inc.
  International Stock (3)........................................        3.09           --           --              8.07
 
Dreyfus Variable Investment Fund
  Capital Appreciation Portfolio (6).............................       28.05           --           --             19.87
  Disciplined Stock Portfolio (7)................................       31.51           --           --             30.67
  Growth and Income Portfolio (8)................................       16.21           --           --             24.64
  International Equity Portfolio (8).............................        9.61           --           --              7.13
  Small Cap Portfolio (9)........................................       16.75        26.14           --             43.96
</TABLE>
 
- ------------------------------
(1)  The Money Market Portfolio commenced operations on February 20, 1990.
(2)  The Blue Chip Portfolio commenced operations on October 15, 1990.
(3)  The Equity Income, New America Growth and International Stock Portfolios
     commenced operations on March 31, 1994.
(4)  The Mid-Cap Growth Portfolio commenced operations on December 31, 1996.
(5)  The Personal Strategy Balanced Portfolio commenced operations on December
     30, 1994.
(6)  The Capital Appreciation Portfolio commenced operations on April 5, 1993.
(7)  The Disciplined Stock Investment Portfolio commenced operations on April
     30, 1996.
(8)  The Growth and Income and International Equity Portfolios commenced
     operations on May 2, 1994.
(9)  The Small Cap Portfolio commenced operations on August 31, 1990.
 
                                       5
<PAGE>
OTHER TOTAL RETURNS
 
    From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered or withdrawn.
 
The Company may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
 
<TABLE>
<S>        <C>        <C>
CTR = (ERV/P) - 1
Where:
CTR        =          The cumulative total return net of subaccount recurring charges for the period.
ERV        =          The ending redeemable value of the hypothetical investment at the end of the
                      period.
P          =          A hypothetical single payment of $1,000.
</TABLE>
 
EFFECT OF THE ADMINISTRATIVE FEE ON PERFORMANCE DATA
 
    The Contract provides for a $30 annual administrative fee to be deducted
annually at the beginning of each Contract Year, from the subaccounts and the
Declared Interest Option based, on the proportion that the value of each such
account bears to the total cash value. For purposes of reflecting the
administrative fee in yield and total return quotations, the annual charge is
converted into a per-dollar per-day charge based on the average contract value
in the Account of all Contracts on the last day of the period for which
quotations are provided. The per-dollar per-day average charge will then be
adjusted to reflect the basis upon which the particular quotation is calculated.
 
                                 LEGAL MATTERS
 
All matters relating to Iowa law pertaining to the Contracts, including the
validity of the Contracts and the Company's authority to issue the Contracts,
have been passed upon by Stephen M. Morain, Esquire, Senior Vice President and
General Counsel of the Company. Sutherland, Asbill & Brennan LLP, Washington
D.C. has provided advice on certain matters relating to the federal securities
laws.
 
                                       6
<PAGE>
                                    EXPERTS
 
The statutory-basis financial statements of the Company at December 31, 1997 and
1996 and for the years then ended, appearing herein, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
 
                               OTHER INFORMATION
 
A registration statement has been filed with the SEC under the Securities Act of
1933 as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all the information set forth in the registration
statement, amendments and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the SEC.
 
                              FINANCIAL STATEMENTS
 
The Company's financial statements included in this Statement of Additional
Information should be considered only as bearing on the Company's ability to
meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Account.
 
                                       7
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors
EquiTrust Life Insurance Company
 
We have audited the accompanying statutory-basis balance sheets of EquiTrust
Life Insurance Company (the Company), formerly known as Continental Western Life
Insurance Company, as of December 31, 1997 and 1996, and the related
statutory-basis statements of operations, changes in capital and surplus, and
cash flow for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, State of Iowa,
which practices differ from generally accepted accounting principles. The
variances between such practices and generally accepted accounting principles
and the effects on the accompanying financial statements are described in Note
1.
 
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of the Company at December 31, 1997 or 1996, or the results of its operations or
its cash flow for the years then ended.
 
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company at
December 31, 1997 and 1996, and the results of its operations and its cash flow
for the years then ended, in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, State of Iowa.
 
                                          /s/ Ernst & Young LLP
Milwaukee, Wisconsin
January 16, 1998
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
                        BALANCE SHEETS--STATUTORY BASIS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                             JUNE 30,     -----------------
                                               1998        1997      1996
                                           ------------   ------   --------
                                           (UNAUDITED)
<S>                                        <C>            <C>      <C>
ADMITTED ASSETS
United States Government and agencies
  bonds                                         $24,252   $5,515   $301,430
Common stocks                                       --        --         82
Mortgage loans                                      --        --     31,697
Policy loans                                        --        --     30,643
Real estate                                         --        --      1,730
Cash and short-term investments                  6,405     2,593     17,926
Other invested assets                               45        --         --
                                           ------------   ------   --------
Cash and invested assets                        30,702     8,108    383,508
 
Property and equipment                              --        --        235
Investment income due and accrued                  217        54      3,702
Premiums deferred and uncollected, less
  loading (1996--$307,000)                          --        --      3,018
Other admitted assets                                2        --      1,719
                                           ------------   ------   --------
Total admitted assets                           $30,921   $8,162   $392,182
                                           ------------   ------   --------
                                           ------------   ------   --------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
  Policy and contract liabilities               $   --    $   --   $349,067
  Accrued expenses and other liabilities            19        --      6,078
  Deferred compensation (NOTE 7)                    --        --      1,464
  Federal income taxes                              25         1         --
  Asset valuation reserve                           20        --      2,216
  Interest maintenance reserve                      54        57         --
                                           ------------   ------   --------
Total liabilities                                  118        58    358,825
 
Capital and surplus:
  Common stock, $1,500 par
   value--authorized 2,500 shares;
   issued and outstanding 2,000 shares           3,000     3,000      3,000
  Additional paid-in capital                    27,748     5,125      7,510
  Unassigned surplus                                55       (21)    22,847
                                           ------------   ------   --------
Total capital and surplus                       30,803     8,104     33,357
                                           ------------   ------   --------
Total liabilities and capital and
  surplus                                       $30,921   $8,162   $392,182
                                           ------------   ------   --------
                                           ------------   ------   --------
</TABLE>
 
SEE ACCOMPANYING NOTES.
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
                   STATEMENTS OF OPERATIONS--STATUTORY BASIS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                           SIX MONTHS ENDED      YEAR ENDED
                                               JUNE 30          DECEMBER 31
                                           ----------------   ----------------
                                            1998      1997     1997     1996
                                           ------    ------   ------   -------
                                             (UNAUDITED)
<S>                                        <C>       <C>      <C>      <C>
Premiums and other revenues:
  Life and annuity premiums                $   --    $   --   $   --   $28,381
  Accident and health premiums                 --        --       --       983
  Net investment income                       324       241      473    26,144
  Amortization of the interest
   maintenance reserve                          3        --        3    (1,231)
  Other revenues                               --        --       --       938
                                           ------    ------   ------   -------
    Total premiums and other revenues         327       241      476    55,215
Benefits paid or provided:
  Death and annuity benefits                   --        --       --    37,002
  Accident and health benefits                 --        --       --       875
                                           ------    ------   ------   -------
    Total benefits paid or provided            --        --       --    37,877
 
Insurance expenses and other deductions:
  Commissions                                  --        --       --     3,207
  General expenses                            130         1       --     5,059
  Insurance taxes, licenses and fees           44        14       --     1,382
                                           ------    ------   ------   -------
    Total insurance expenses and other
     deductions                               174        15       --     9,648
                                           ------    ------   ------   -------
Gain from operations before federal
  income taxes
  and net realized capital gains              153       226      476     7,690
 
Federal income taxes                           57        79      148     1,625
                                           ------    ------   ------   -------
Net gain from operations before net
  realized capital gains                       96       147      328     6,065
 
Net realized capital gains                     --        --       --       591
                                           ------    ------   ------   -------
Net income                                 $   96    $  147   $  328   $ 6,656
                                           ------    ------   ------   -------
                                           ------    ------   ------   -------
</TABLE>
 
SEE ACCOMPANYING NOTES.
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
         STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS--STATUTORY BASIS
 
<TABLE>
<CAPTION>
                                                  ADDITIONAL
                                          COMMON   PAID-IN     UNASSIGNED   TOTAL CAPITAL
                                          STOCK    CAPITAL      SURPLUS      AND SURPLUS
                                          ------  ----------   ----------   -------------
                                                          (IN THOUSANDS)
<S>                                       <C>     <C>          <C>          <C>
Balance at January 1, 1996                $3,000   $ 7,510      $ 15,475      $ 25,985
  Net income for 1996                        --         --         6,656         6,656
  Change in difference between cost and
   admitted asset investment amounts         --         --           (16)          (16)
  Decrease in nonadmitted assets             --         --         1,318         1,318
  Increase in asset valuation reserve        --         --          (591)         (591)
  Other                                      --         --             5             5
                                          ------  ----------   ----------   -------------
Balance at December 31, 1996              3,000      7,510        22,847        33,357
  Transfer of assets to TMG Life
   Insurance Company under assumption
   reinsurance agreement                     --     (2,823)      (22,847)      (25,670)
  Net income for 1997                        --         --           328           328
  Increase in nonadmitted assets             --         --          (349)         (349)
  Other                                      --        438            --           438
                                          ------  ----------   ----------   -------------
Balance at December 31, 1997              3,000      5,125           (21)        8,104
  Net income for six month period ended
   June 30, 1998 (Unaudited)                 --         --            96            96
  Increase in asset valuation reserve
   (Unaudited)                               --         --           (20)          (20)
  Capital contributions (Unaudited)          --     22,623            --        22,623
                                          ------  ----------   ----------   -------------
Balance at June 30, 1998 (Unaudited)      $3,000   $27,748      $     55      $ 30,803
                                          ------  ----------   ----------   -------------
                                          ------  ----------   ----------   -------------
</TABLE>
 
SEE ACCOMPANYING NOTES.
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
                    STATEMENTS OF CASH FLOW--STATUTORY BASIS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                           SIX MONTHS ENDED JUNE    YEAR ENDED DECEMBER
                                                    30                      31
                                           ---------------------   ---------------------
                                             1998        1997        1997        1996
                                           ---------   ---------   ---------   ---------
                                                (UNAUDITED)
<S>                                        <C>         <C>         <C>         <C>
OPERATING ACTIVITIES
Premiums and considerations, net of
  reinsurance                              $      --   $      --   $      --   $  30,013
Net investment income                            177         169         440      23,104
Benefits paid                                     --          --          --     (44,572)
Commissions, general insurance expenses
  and taxes                                     (171)         (1)         --      (8,459)
Federal income taxes                             (33)         --        (180)     (2,023)
Other income received less other
  expenses                                        --          --          --         733
                                           ---------   ---------   ---------   ---------
Net cash provided by (used in) operating
  activities                                     (27)        168         260      (1,199)
 
INVESTING ACTIVITIES
Proceeds from investments sold, matured,
  or repaid:
  Bonds                                           --          --       5,793     131,843
  Mortgage loans                                  --          --          --         855
  Real estate                                     --          --          --       5,114
                                           ---------   ---------   ---------   ---------
  Total investment proceeds                       --          --       5,793     137,812
 
Cost of investments acquired:
  Bonds                                      (18,750)         --      (5,518)   (138,785)
  Mortgage loans                                  --          --          --      (5,533)
                                           ---------   ---------   ---------   ---------
Total investments acquired                   (18,750)         --      (5,518)   (144,318)
                                           ---------   ---------   ---------   ---------
Net cash provided by (used in) investing
  activities                                 (18,777)        168         275      (6,506)
 
FINANCING ACTIVITIES
Capital contributions                         22,623          --          --          --
Other cash applied                               (33)    (15,918)    (15,868)         --
                                           ---------   ---------   ---------   ---------
Net change in cash and short-term
  investments                                  3,813     (15,750)    (15,333)     (7,705)
 
Cash and short-term investments at
  beginning of period                          2,592      17,926      17,926      25,631
                                           ---------   ---------   ---------   ---------
Cash and short-term investments at end
  of period                                $   6,405   $   2,176   $   2,593   $  17,926
                                           ---------   ---------   ---------   ---------
                                           ---------   ---------   ---------   ---------
</TABLE>
 
SEE ACCOMPANYING NOTES.
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
                 NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS
 
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
 
EquiTrust Life Insurance Company (the Company), formerly Continental Western
Life Insurance Company, is a life insurance company domiciled in the state of
Iowa and licensed in 38 states. All in force policies, annuities and
certificates of the Company were ceded to TMG Life Insurance Company (TMG Life),
formerly an affiliated company, through an assumption reinsurance agreement as
of January 1, 1997. At December 31, 1997, the Company had no insurance in force.
The Company was purchased by Farm Bureau Life Insurance Company (Farm Bureau) on
December 30, 1997, and became a wholly owned subsidiary of Farm Bureau which, in
turn, is wholly owned by FBL Financial Group, Inc. The Company was previously
wholly owned by TMG Life which is owned by The Mutual Group (U.S.), Inc. [TMG
(U.S.)], which itself is a wholly owned subsidiary of The Mutual Life Assurance
Company of Canada.
 
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
 
BASIS OF PRESENTATION
 
The financial statements have been prepared in conformity with accounting
practices prescribed or permitted by the Insurance Division, Department of
Commerce, State of Iowa (Insurance Division). Such practices differ from
generally accepted accounting principles (GAAP). The more significant variances
from GAAP are as follows: (a) costs of acquiring new business are expensed as
incurred rather than deferred and amortized over the life of the policies; (b)
carrying values of bonds designated under GAAP as available-for-sale securities
are based on values specified by the National Association of Insurance
Commissioners (NAIC) rather than fair values; (c) policy reserves on traditional
life products are based on statutory mortality and interest rates rather than
expected mortality and interest rates; (d) reinsurance amounts are netted
against the corresponding amounts rather than reported gross; (e) policy
reserves on universal life and investment products are stated using statutory
discounting methodologies rather than at full account values; (f) deferred
income taxes are not provided for the differences between the financial
statement and income tax bases of assets and liabilities; (g) after-tax net
realized capital gains or losses attributed to changes in interest rates are
deferred and amortized over the remaining life of the investment rather than
recognized as pre-tax gains or losses in the statement of operations when the
sale is completed; (h) declines in the estimated realizable value of investments
are recognized through a formula-determined reserve carried as a liability whose
changes are charged directly to surplus rather than reducing the carrying value
of the related investment and recognizing realized losses in the statements of
operations; (i) certain assets designated as "nonadmitted," principally agents'
debit balances and furniture and equipment, are excluded from the accompanying
balance sheets and are charged directly to unassigned surplus; (j) revenues for
universal life and investment products consist of premiums received rather than
policy charges; (k) pension expense is recognized in accordance with rules and
regulations permitted by the Employee Retirement Income Security Act of 1974
rather than Statement of Financial Accounting Standards (SFAS) No. 87,
"Employers' Accounting for Pensions"; (l) accrued postretirement benefits other
than pensions do not include a provision for benefits that are not fully vested;
and (m) assets and liabilities continue to be shown at historical values rather
than restated fair values when a change in ownership occurs.
 
The National Association of Insurance Commissioners (NAIC) is in the process of
codifying statutory accounting practices (Codification). Codification will
likely change, to some extent, prescribed statutory accounting practices and may
result in changes to the accounting practices that the Company used to prepare
its statutory-basis financial statements. Codification, which was approved by
the NAIC in 1998, will require adoption by the various states before it becomes
the prescribed statutory basis of accounting for insurance companies
domesticated within those states. Accordingly, before Codification becomes
effective for the Company, the State of Iowa must adopt Codification as the
prescribed basis of accounting on which domestic insurers must report their
statutory-basis results to the Insurance Division. At this time, it is unclear
whether the State of Iowa will adopt Codification.
 
PERMITTED PRACTICE
 
The statutory-basis financial statements are prepared in accordance with
accounting practices prescribed or permitted by the Insurance Division.
"Prescribed" statutory accounting practices include regulations and general
administrative rules, as well as a variety of publications of the NAIC.
"Permitted" statutory accounting practices encompass all practices that are not
prescribed, may differ from insurance company to insurance company, and may
change in the future.
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
           NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS (CONTINUED)
 
1.  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
The Company has received approval from the Insurance Division to account for the
disposition of many of the balance sheet items related to the assumption
reinsurance agreement as a change in surplus rather than reporting their effect
in the income statement. The majority of the assets and liabilities of the
Company were transferred to TMG Life effective January 1, 1997, leaving only
that amount of invested assets, capital and surplus required to maintain minimum
capital. An analysis of these transferred amounts follows (in thousands):
 
<TABLE>
<S>                                                            <C>
Assets:
  Bonds                                                        $ 295,713
  Common stocks                                                       82
  Mortgage loans                                                  31,697
  Real estate                                                      1,730
  Policy loans                                                    30,643
  Cash and short-term investments                                 16,333
  Other admitted assets                                            8,297
                                                               ---------
Total                                                            384,495
Less liabilities                                                 358,825
                                                               ---------
Net transferred                                                $  25,670
                                                               ---------
                                                               ---------
Capital and surplus:
  Contributed capital                                          $   2,823
  Unassigned surplus                                              22,847
                                                               ---------
Total                                                          $  25,670
                                                               ---------
                                                               ---------
</TABLE>
 
INTERIM FINANCIAL INFORMATION
 
The financial statements as of June 30, 1998 and for the six-month periods ended
June 30, 1998 and 1997 and related disclosures in these notes have not been
audited. The interim financial statements have been prepared in accordance with
statutory accounting principles. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals unless noted otherwise herein)
considered necessary for a fair presentation have been included. Operating
results for the six-month period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998.
 
INVESTMENTS
 
Investment values have been determined in accordance with methods adopted by the
NAIC. Bonds are valued at amortized cost or NAIC designated value. The amortized
cost for loan-backed bonds is valued using the interest method including
anticipated prepayments.
 
Prepayment assumptions are obtained from internal estimates and are based on the
current interest rate and economic environment. The retrospective adjustment
method is used to value all such securities except for interest-only securities,
which are valued using the prospective method. Common stocks are reported at
market value. Real estate is carried at cost less encumbrances and accumulated
depreciation is calculated on a straight-line basis over the estimated useful
lives of the properties. Short-term investments are valued at cost which
approximates market. Mortgage loans and policy loans are valued at the unpaid
principal balance.
 
As required by the NAIC, the Company maintains an Asset Valuation Reserve (AVR),
a separately stated liability on the statutory balance sheet which is computed
under a prescribed formula to provide for possible credit losses and declines in
the value of bonds, stocks, mortgage loans, real estate, short-term investments
and other invested assets. Changes to the AVR are reported directly on the
statement of changes in capital and surplus.
 
Interest income from bonds and mortgage loans is adjusted for amortization of
premiums and accretion of discounts to maturity, or in the case of
mortgage-backed securities, over the estimated life of the security. Accrual of
interest is nonadmitted on investments that have become 90 days past due or if
management doubts the collectibility of principal
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
           NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS (CONTINUED)
 
1.  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
or interest on an investment that is currently performing. Investments are
restored to accrual status when brought current, or when management no longer
doubts the ultimate collectibility of principal and interest. Mortgage loan
origination fees are deferred and recognized as income over the life of the
loan.
 
Net unrealized gains or losses in the carrying value of investments are
reflected in unassigned surplus. Realized gains and losses are determined by
specific identification of cost of investments sold and are recorded in the
statement of operations net of tax and net of amounts transferred to the
Interest Maintenance Reserve (IMR). The IMR is maintained as prescribed by the
NAIC and represents the accumulation of deferred after-tax net realized capital
gains and losses from sales of investments that are attributable to changes in
interest rates. These deferred gains and losses are amortized into income over
the remaining period to maturity. Amortization of the IMR is reported in the
statement of operations.
 
CASH AND SHORT-TERM INVESTMENTS
 
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of twelve months or less to be
short-term investments.
 
POLICY RESERVES
 
Future policy benefit reserves on life policies are provided principally under
the Commissioners' Reserve Valuation Method using primarily 1958 and 1980
Commissioners' Standard Ordinary mortality tables assuming interest rates from
2 1/2 to 6 percent. All reserves are calculated using the mean reserve method.
 
Liabilities for future policy benefits on annuity policies are generally based
on policy values including interest additions at current rates.
 
The Company had no insurance in force as of December 31, 1997. The Company had
insurance in force of $174,086,000 for which gross premiums were less than the
net valuation premiums required by the Insurance Division as of December 31,
1996. Policy reserves of $401,000 were held by the Company to cover these
deficiencies at December 31, 1996. Tabular interest, tabular less actual reserve
released, tabular cost, and tabular interest on funds not involving life
contingencies are determined by formula as prescribed by the NAIC.
 
POLICY AND CONTRACT CLAIMS
 
The liabilities for insurance claims are determined using estimates of the
ultimate net cost of all reported and unreported claims which are unpaid at year
end. Although it is not possible to measure the degree of variability inherent
in such estimates, management believes that the liabilities for insurance claims
are adequate. The estimates are reviewed periodically and adjusted as necessary
with such adjustments being reflected in current operations.
 
PREMIUMS
 
Premiums for traditional life policies are recognized as revenue when due.
Premiums for accident and health policies are recognized ratably over the period
of insurance coverage. Universal life insurance and annuity premiums are
recognized as revenue when received.
 
REINSURANCE
 
The Company cedes reinsurance and participates in various pools and
associations. These reinsurance arrangements allow management to control
exposure to potential losses arising from large risks. Reinsurance premiums,
commissions, expense reimbursements, and reserves related to reinsured business
are accounted for on bases consistent with those used in accounting for the
original policies issued and with the terms of the reinsurance contracts.
Premiums, benefits and expenses, premiums receivable, and policy reserves are
reported in the financial statements net of reinsured amounts.
 
PROPERTY AND EQUIPMENT
 
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful
lives of the related property.
 
FEDERAL INCOME TAXES
 
Federal income taxes have been provided on income currently taxable in
accordance with the provisions of the Internal Revenue Code that relate to life
insurance companies.
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
           NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS (CONTINUED)
 
1.  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
RECLASSIFICATIONS
 
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 presentation.
 
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
 
The following methods and assumptions were used by the Company in estimating the
fair value of each class of financial instruments.
 
INVESTMENTS
 
Fair values for bonds and stocks are generally based on quoted market prices.
Fair values for mortgage loans are calculated as the net present value of future
loan payments, which are assumed to be received in accordance with the terms of
the contracts, using discount rates based on the Treasury yield curve and the
Company's current mortgage pricing. Fair values for policy loans are estimated
through discounted cash flow analyses using interest rates reflective of current
asset yields and assumed annual repayment rates. The recorded values of cash,
short-term investments and accrued investment income approximate their fair
value.
 
INVESTMENT-TYPE CONTRACTS
 
The Company underwrites certain investment-type contracts comprising mainly
individual annuities and supplementary contracts without life contingencies. The
fair value of liabilities related to these contracts, included in annuity
reserves, was determined using a price behavior model that projects monthly cash
flows and calculates their present value under various interest rate assumptions
using the Treasury yield curve and specific assumptions for mortality, lapse
rates, policy loads, crediting rates, expenses and surrender charges that are
particular to each type of annuity product. Probabilities assigned to the
interest rate assumptions are used to calculate the expected present value of
the cash flows.
 
The fair values of contract liabilities are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
 
The carrying amounts and fair values of the Company's financial instruments were
as follows at December 31:
 
<TABLE>
<CAPTION>
                                                                           1997                     1996
                                                                  ----------------------  ------------------------
                                                                   AMORTIZED     FAIR      AMORTIZED      FAIR
                                                                     COST        VALUE       COST         VALUE
                                                                  -----------  ---------  -----------  -----------
                                                                                   (IN THOUSANDS)
<S>                                                               <C>          <C>        <C>          <C>
ASSETS
Investments:
  Bonds                                                            $   5,515   $   5,555  $   301,430  $   305,507
  Common stocks                                                           --          --           82           82
  Mortgage loans                                                          --          --       31,697       33,731
  Policy loans                                                            --          --       30,643       30,171
  Cash and short-term investments                                      2,593       2,593       17,926       17,926
  Accrued investment income                                               54          54        3,702        3,702
 
LIABILITIES
Investment-type contracts                                                 --          --       78,412       90,183
</TABLE>
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
           NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS (CONTINUED)
 
3. INVESTMENTS
 
The amortized cost and the fair or comparable value of investments in bonds are
summarized as follows:
 
<TABLE>
<CAPTION>
                                                                              GROSS        GROSS
                                                               AMORTIZED   UNREALIZED   UNREALIZED      FAIR
                                                                 COST         GAINS       LOSSES        VALUE
                                                              --------------------------------------------------
<S>                                                           <C>          <C>          <C>          <C>
                                                                                (IN THOUSANDS)
At December 31, 1997--U.S. Treasury                           $     5,515   $      40    $      --   $     5,555
                                                              --------------------------------------------------
Total bonds                                                   $     5,515   $      40    $      --   $     5,555
                                                              --------------------------------------------------
                                                              --------------------------------------------------
At December 31, 1996:
  U.S. Treasury                                               $   111,757   $     827    $      78   $   112,506
  U.S. government agencies, states and political
   subdivisions                                                    89,530       1,987          243        91,274
  Industrial and other                                            100,143       2,311          727       101,727
                                                              --------------------------------------------------
Total bonds                                                   $   301,430   $   5,125    $   1,048   $   305,507
                                                              --------------------------------------------------
                                                              --------------------------------------------------
</TABLE>
 
At December 31, 1997, the Company's bond investment was rated as a Class 1 by
the NAIC (i.e.; investment grade bonds) and is due to mature in 1999.
 
Proceeds from investments in bonds sold, redeemed or otherwise disposed of
during 1997 and 1996 were $5,793,000 and $498,858,000, respectively. Gross gains
of $94,000 and $902,000 were realized in 1997 and 1996, respectively. Gross
losses of $1,029,000 were realized on those dispositions in 1996. Substantially
all 1997 and 1996 gains and losses from bonds were transferred to the IMR. On
January 1, 1997, bonds with an admitted asset value of $295,713,000 were
transferred to TMG Life as part of the assumption reinsurance agreement. No gain
or loss was realized on the transfer.
 
At December 31, 1997, bonds and cash with an admitted asset value of $8,108,000
were on deposit with state insurance departments to meet regulatory
requirements.
 
The Company sold its home office building during 1996 for a gain of $909,000.
This gain is included with net realized gains on investments in the
statutory-basis statement of operations.
 
Components of net investment income are as follows:
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER
                                                             31
                                                    --------------------
                                                      1997       1996
                                                    --------------------
<S>                                                 <C>        <C>
                                                       (IN THOUSANDS)
Bonds                                               $     407  $  21,156
Mortgage loans                                             --      2,680
Short-term investments                                     70      1,989
Amortization of interest maintenance reserve               --      1,285
                                                    --------------------
                                                          477     27,110
Less investment expenses                                   (4)      (966)
                                                    --------------------
Net investment income                               $     473  $  26,144
                                                    --------------------
                                                    --------------------
</TABLE>
 
Realized capital gains are reported net of federal income taxes and amounts
transferred to the IMR as follows:
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER
                                                             31
                                                    --------------------
                                                      1997       1996
                                                    --------------------
<S>                                                 <C>        <C>
                                                       (IN THOUSANDS)
Realized capital gains                              $      94  $     782
Less amount transferred (to) from IMR                     (61)        83
                                                    --------------------
                                                           33        865
Less federal income taxes on realized capital
  gains before effect
  of transfer to IMR                                      (33)      (274)
                                                    --------------------
Net realized capital gains                          $      --  $     591
                                                    --------------------
                                                    --------------------
</TABLE>
 
At December 31, 1996, the Company had a nonadmitted IMR asset of $663,000.
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
           NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS (CONTINUED)
 
4. STATUTORY CAPITAL AND SURPLUS RESTRICTIONS
 
Prior approval of insurance regulatory authorities is required for payment of
dividends to the Company's stockholder which exceed an annual limitation. During
1998, the Company may pay dividends to its stockholder of approximately $510,000
without prior approval of the Insurance Division.
 
5. FEDERAL INCOME TAXES
 
The Company files a separate tax return. The Company's taxable income differs
from gain from operations before income taxes as reported in the financial
statements due to differences in reporting investment income, policy reserves,
depreciation, agents' deferred compensation, premium income, expenses, realized
gains and losses and the impact of differences in asset valuations.
 
6. REINSURANCE
 
Prior to January 1, 1997, the maximum amount the Company retained on any one
life was $500,000 of basic life coverage. The Company retained all its risk on
accidental death insurance risks with an issue limit of $200,000. Amounts in
excess of retention limits were reinsured with other life insurance companies
under reinsurance treaties principally on yearly renewable term and coinsurance
bases.
 
The effect of ceded reinsurance on the Company's statutory-basis financial
statements in 1996 was as follows (in thousands):
 
<TABLE>
<S>                                                             <C>
Premiums receivable                                             $     550
Policy reserves and liabilities:
  Life                                                             30,552
  Annuity                                                          24,070
Policy and contract claims                                            305
Premiums:
  Life                                                              5,147
  Annuity                                                             217
Policy benefits paid or provided:
  Life                                                              2,098
  Annuity                                                          (2,462)
</TABLE>
 
On January 1, 1997, the Company entered into an assumption reinsurance agreement
with TMG Life. Under the agreement, TMG Life assumed all of the Company's rights
and obligations for policies, annuities and certificates issued by the Company
prior to January 1, 1997.
 
7. RETIREMENT AND COMPENSATION PLANS
 
Prior to January 1, 1997, the Company participated in several benefit programs
sponsored by TMG (U.S.). In conjunction with execution of the assumption
reinsurance agreement, all of the Company's employees became employees of TMG
(U.S.). As the Company had no employees during 1997, no contributions were made
to any benefit plans for the year ended December 31, 1997 and all liabilities
associated with the benefit plans were assumed by TMG (U.S.).
 
Prior to January 1, 1997, the Company participated in a noncontributory
defined-benefit plan sponsored by TMG (U.S.) covering substantially all of its
employees. Benefits provided were based on years of service and the employee's
compensation. Funding and accounting policies were to contribute annually the
maximum amount that can be currently deducted for income tax purposes. Total
contributions to the plan were $466,000 for the year ended December 31, 1996.
The funded status of the TMG (U.S.) plan was determined using an effective date
of January 1, 1996, an interest rate of 7.0% compounded annually and a salary
scale of 5.5%. At December 31, 1996, the Company's separately determined
accumulated benefit obligation under the Plan was $1,812,000. The net assets
available for benefits at December 31, 1996 were $1,381,000. The Company is not
obligated under the TMG (U.S.) plan subsequent to the sale of the Company to
Farm Bureau Life Insurance Company.
 
Prior to January 1, 1997, the Company participated in a 401(k) savings plan
sponsored by TMG (U.S.). Participating employees were allowed to contribute up
to 12% of their base compensation to the 401(k) plan. The Company would match
50% of the amount contributed by each employee up to the first 6% of
compensation and also made discretionary contributions. Participants are
immediately vested in Company contributions. Company contributions to the 401(k)
plan were $40,000 for the year ended December 31, 1996.
 
<PAGE>
                        EQUITRUST LIFE INSURANCE COMPANY
 
           NOTES TO FINANCIAL STATEMENTS--STATUTORY BASIS (CONTINUED)
 
7.  RETIREMENT AND COMPENSATION PLANS (CONTINUED)
 
Prior to January 1, 1997, the Company provided defined postretirement health and
life insurance benefits on a noncontributory basis. Eligible employees were
those with ten or more years of service who retired under the TMG Life pension
plan. Health insurance benefits for retirees under age 65 were the same as for
active employees provided the retiree maintained continuity of coverage. For
retirees attaining age 65, health insurance was available as a Medicare
supplement. Life insurance benefits are 100% of final earnings in the first year
of retirement, reducing 10% per year to a minimum benefit of $10,000. The
estimated net postretirement benefit cost for the year ended December 31, 1996
was $15,000.
 
At December 31, 1996, the unfunded postretirement benefit obligation for
retirees and other fully eligible or vested plan participants was $353,000. The
estimated postretirement benefit obligation for active nonvested employees was
$441,000 at December 31, 1996. The discount rate used in determining the
accumulated postretirement benefit was 7.0% in 1996 and the health care cost
trend rate was 6.0% graded to 5.5% over 8 years. Effective January 1, 1997, TMG
(U.S.) assumed all liabilities related to the postretirement benefits.
 
Prior to January 1, 1997, the Company sponsored a deferred compensation plan for
its agents. Benefit expenses related to the plan were $172,000 for the year
ended December 31, 1996. The liability accrued at December 31, 1996 under this
plan was $1,218,000. At December 31, 1996, the Company had liabilities of
$246,000 related to a discontinued employee deferred compensation plan, the
activity under which consists of interest accumulations and withdrawals.
 
8. RELATED-PARTY TRANSACTIONS
 
During 1997 and 1996, the Company paid to TMG (U.S.) investment advisory and
management fees of $4,000 and $422,000, respectively.
 
TMG Life provided group health insurance to the Company prior to January 1,
1997. Premiums paid by the Company to TMG Life were $80,000 for the year ended
December 31, 1996. TMG (U.S.) provided the Company with administrative services
and computer facilities for which it was charged a fee of $502,000 for the year
ended December 31, 1996. The Company provided TMG Life with underwriting, policy
issuing and administrative services, for which it charged a fee of $876,000 for
the year ended December 31, 1996. No fees were paid or received by the Company
during 1997 for such services.
 
9. COMMITMENTS AND CONTINGENCIES
 
The Company is involved in various lawsuits and other contingencies that have
arisen from the normal conduct of business. Contingent liabilities arising from
litigation and other matters are not considered material to the financial
position of the Company. TMG Life, as part of the sale agreement, has assumed
all accrued, absolute and contingent liabilities that may arise out of or
related to the business of the Company prior to December 30, 1997. At June 30,
1998, management is not aware of any claims which would result in a material
loss to the Company.
<PAGE>
                                     PART C
 
                               OTHER INFORMATION
<PAGE>
                                     PART C
 
                               OTHER INFORMATION
 
ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS
 
    (a) Financial Statements
 
All required financial statements are included in Part B.
 
    (b) Exhibits
 
<TABLE>
<C>   <C>    <S>
       (1)   *Certified resolution of the board of directors of
             EquiTrust Life Insurance Company (the "Company")
              establishing EquiTrust Life Annuity Account II (the
              "Account").
       (2)   Not Applicable.
       (3)   *(a)Form of Underwriting agreement among the Company,
             the Account and EquiTrust Marketing Services, Inc.
                 ("EquiTrust Marketing").
             *(b)Form of Sales Agreement.
             *(c)Form of Wholesaling Agreement.
       (4)   *Contract Form.
       (5)   *Contract Application.
       (6)   *(a) Articles of Incorporation of the Company.
             *(b) By-Laws of the Company.
       (7)   Not Applicable.
       (8)   *(a) Participation agreement relating to EquiTrust
                  Variable Insurance Series Fund.
             *(b) Participation agreement relating to Dreyfus
                  Variable Investment Fund.
             *(c) Participation agreement relating to T. Rowe Price
             Equity Series, Inc. and T. Rowe Price International
                  Series, Inc.
       (9)   * Opinion and Consent of Stephen M. Morain, Esquire.
      (10)   *(a) Consent of Sutherland, Asbill & Brennan, LLP.
             *(b) Consent of Ernst & Young LLP.
             *(c) Opinion and Consent of Christopher G. Daniels,
             FSA, MSAA, Life Product Development and Pricing Vice
                  President.
      (11)   Not Applicable.
      (12)   Not Applicable.
      (13)   Not Applicable.
      (14)   *Powers of Attorney.
</TABLE>
 
- ------------------------
*   Attached as an exhibit.
 
ITEM 25.  DIRECTORS AND OFFICERS OF THE COMPANY
 
Incorporated herein by reference to the prospectus in the Form S-6 registration
statement (File No. 333-45813) for certain variable life insurance contracts
issued by the Company and filed with the Commission on July 23, 1998.
 
ITEM 26.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
  REGISTRANT
 
The registrant is a segregated asset account of the Company and is therefore
owned and controlled by the Company. All of the Company's outstanding voting
common stock is owned by FBL Financial Group, Inc. This Company and its
affiliates are described more fully in the prospectus included in this
registration statement. Various companies and other entities controlled by FBL
Financial Group, Inc., may therefore be considered to be under common control
with the registrant or the Company. Such other companies and entities, together
with the identity of the owners of their common stock (where applicable), are
set forth on the following diagram.
 
                    SEE ORGANIZATION CHART ON FOLLOWING PAGE
 
                                       1
<PAGE>
                           FBL FINANCIAL GROUP, INC.
 
                                OWNERSHIP CHART
                                    01-01-98
 
         [CHART]
 
                                       2
<PAGE>
ITEM 27.  NUMBER OF CONTRACT OWNERS
 
As of the date of the prospectus included in this registration statement, no
Contracts have been sold.
 
ITEM 28.  INDEMNIFICATION
 
Article XII of the Company's By-Laws provides for the indemnification by the
Company of any person who is a party or who is threatened to be made a party to
any threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Article
XII also provides for the indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or another enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification will be made in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
 
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
ITEM 29.  PRINCIPAL UNDERWRITER
 
    (a) EquiTrust Marketing Services, Inc. is the registrant's principal
underwriter and also serves as the principal underwriter of certain variable
annuity contracts and variable life insurance policies issued by other separate
accounts of the Company or its life insurance company affiliates supporting
other variable products, or to variable annuity and variable life insurance
separate accounts of insurance companies not affiliated with the Company.
 
    (b) Officers and Directors of EquiTrust Marketing Services, Inc.
 
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS*                                             POSITIONS AND OFFICES
- ------------------------------------------------------  ------------------------------------------------------------------------
<S>                                                     <C>
Stephen M. Morain                                       General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
Senior Vice President, General Counsel and Director      General Counsel, Secretary and Director, Farm Bureau Management
                                                         Corporation; Senior Vice President, General Counsel and Director, FBL
                                                         Financial Group, Inc.; Senior Vice President and General Counsel, Farm
                                                         Bureau Life Insurance Company and other affiliates of the foregoing.
                                                         Holds various positions with affiliates of the foregoing. Director,
                                                         Computer Aided Design Software, Inc., and Iowa Business Development
                                                         Finance Corporation Chairman, Edge Technologies, Inc.
William J. Oddy                                         Chief Operating Officer, FBL Financial Group, Inc., Farm Bureau Life
Chief Operating Officer and Director                     Insurance Company, Western Farm Bureau Life Insurance Company and other
                                                         affiliates of the foregoing. Holds various positions with affiliates of
                                                         the foregoing.
</TABLE>
 
                                       3
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS*                                             POSITIONS AND OFFICES
- ------------------------------------------------------  ------------------------------------------------------------------------
<S>                                                     <C>
Dennis M. Marker                                        Investment Vice President, Administration, FBL Financial Group, Inc.
Investment Vice President, Administration, Secretary     Holds various positions with affiliates of the foregoing.
and Director
Thomas R. Gibson                                        Chief Executive Officer and Director, FBL Financial Group, Inc.; Chief
Chief Executive Officer and Director                     Executive Officer, Farm Bureau Life Insurance Company, Western Farm
                                                         Bureau Life Insurance Company and other affiliates of the foregoing.
                                                         Holds various positions with affiliates of the foregoing.
Timothy J. Hoffman                                      Chief Property/Casualty Officer, FBL Financial Group, Inc.; Vice
Vice President and Director                              President, Farm Bureau Life Insurance Company, Western Farm Bureau Life
                                                         Insurance Company and other affiliates of the foregoing. Holds various
                                                         positions with affiliates of the foregoing.
James W. Noyce                                          Chief Financial Officer, Farm Bureau Life Insurance Company, FBL
Chief Financial Officer, Treasurer and Director          Financial Group, Inc., Western Farm Bureau Life Insurance Company and
                                                         other affiliates of the foregoing. Holds various positions with
                                                         affiliates of the foregoing.
Thomas E. Burlingame                                    Vice President - Associate General Counsel, FBL Financial Group, Inc.
Director                                                 Holds various positions with affiliates of the foregoing.
F. Walter Tomenga                                       Vice President - Corporate Affairs and Marketing Services, FBL Financial
Director                                                 Group, Inc. Holds various positions with affiliates of the foregoing.
Lynn E. Wilson                                          Vice President - Life Sales, FBL Financial Group, Inc. Holds various
President and Director                                   positions with affiliates of the foregoing.
Lou Ann Sandburg                                        Vice President - Investments and Assistant Treasurer, FBL Financial
Vice President, Investments and Director                 Group, Inc., Farm Bureau Life Insurance Company, Western Farm Bureau
                                                         Life Insurance Company and other affiliates of the foregoing. Holds
                                                         various positions with affiliates of the foregoing.
James P. Brannen                                        Tax and Investment Accounting Vice President, FBL Financial Group, Inc.
Tax and Investment Accounting Vice President             Holds various positions with affiliates of the foregoing.
Sue A. Cornick                                          Market Conduct and Mutual Funds Vice President and Assistant Secretary,
Market Conduct and Mutual Funds Vice President and       EquiTrust Investment Management Services, Inc., EquiTrust Money Market
Assistant Secretary                                      Fund, Inc., EquiTrust Series Fund, Inc. and EquiTrust Variable
                                                         Insurance Series Fund.
Kristi Rojohn                                           Assistant Mutual Funds Manager and Assistant Secretary, EquiTrust
Assistant Mutual Funds Manager and Assistant Secretary   Investment Management Services, Inc.; Assistant Secretary, EquiTrust
                                                         Money Market Fund, Inc., EquiTrust Series Fund, Inc. and EquiTrust
                                                         Variable Insurance SeriesFund.
Elaine A. Followwill                                    Compliance Assistant and Assistant Secretary, EquiTrust Investment
Compliance Assistant and Assistant Secretary             Management Services, Inc.; Assistant Secretary, EquiTrust Money Market
                                                         Fund, Inc., EquiTrust Series Fund, Inc. and EquiTrust Variable
                                                         Insurance Series Fund
Roger F. Grefe                                          Investment Management Vice President, FBL Financial Group, Inc. and
Investment Management Vice President                     EquiTrust Investment Management Services, Inc.
Robert Rummelhart                                       Fixed Income Vice President, FBL Financial Group, Inc. and EquiTrust
Fixed Income Vice President                              Investment Management Services, Inc.
</TABLE>
 
                                       4
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS*                                             POSITIONS AND OFFICES
- ------------------------------------------------------  ------------------------------------------------------------------------
<S>                                                     <C>
Charles T. Happel                                       Portfolio Manager, EquiTrust Investment Management Services, Inc.
Portfolio Manager
Laura Kellen Beebe                                      Portfolio Manager, EquiTrust Investment Management Services, Inc.
Portfolio Manager
</TABLE>
 
- ------------------------
* The principal business address of all of the persons listed above is 5400
  University Avenue, West Des Moines, Iowa 50266.
 
ITEM 30.  LOCATION BOOKS AND RECORDS
 
All of the accounts, books, records or other documents required to be kept by
Section 31(a) of the Investment Company Act of 1940 and rules thereunder, are
maintained by the Company at 5400 University Avenue, West Des Moines, Iowa
50266.
 
ITEM 31.  MANAGEMENT SERVICES
 
All management contracts are discussed in Part A or Part B of this registration
statement.
 
ITEM 32.  UNDERTAKINGS AND REPRESENTATIONS
 
    (a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for as long as purchase payments under the contracts offered
herein are being accepted.
 
    (b) The registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a statement of additional information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove and send to the Company for a statement
of additional information.
 
    (c) The registrant undertakes to deliver any statement of additional
information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request to the Company at the
address or phone number listed in the prospectus.
 
    (d) The Company represents that in connection with its offering of the
contracts as funding vehicles for retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code of 1986, it is relying on a no-
action letter dated November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the
Investment Company Act of 1940, and that paragraphs numbered (1) through (4) of
that letter will be complied with.
 
    (e) The Company represents that the aggregate charges under the Contracts
are reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by the Company.
 
                                       5
<PAGE>
                                   SIGNATURES
 
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, EquiTrust Life Annuity Account II has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of West Des Moines, State of Iowa, on the 10th day
of August, 1998.
 
                                     EquiTrust Life Insurance Company
                                     EquiTrust Life Annuity Account II
 
                                     By:        /s/ EDWARD M. WIEDERSTEIN
                                          -------------------------------------
                                                  Edward M. Wiederstein
                                                        PRESIDENT
                                            EquiTrust Life Insurance Company
 
                                     Attest:         /s/ RICHARD D. HARRIS
                                          -------------------------------------
                                                    Richard D. Harris
                                                SENIOR VICE PRESIDENT AND
                                                   SECRETARY-TREASURER
                                            EquiTrust Life Insurance Company
 
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the dates set
forth below.
 
             SIGNATURE                         TITLE                  DATE
- -----------------------------------  -------------------------  ----------------
 
     /s/ EDWARD M. WIEDERSTEIN       President and Director
- -----------------------------------   [Principal Executive      August 10, 1998
       Edward M. Wiederstein          Officer]
 
                                     Senior Vice President and
       /s/ RICHARD D. HARRIS          Secretary-Treasurer
- -----------------------------------   [Principal Financial      August 10, 1998
         Richard D. Harris            Officer]
 
        /s/ JAMES W. NOYCE           Chief Financial Officer
- -----------------------------------   [Principal Accounting     August 10, 1998
          James W. Noyce              Officer]
 
- -----------------------------------  Vice President and         August 10, 1998
         Thomas R. Gibson*            Director
 
- -----------------------------------  Director                   August 10, 1998
        Timothy J. Hoffman*
 
- -----------------------------------  Director                   August 10, 1998
        Stephen M. Morain*
 
- -----------------------------------  Director                   August 10, 1998
         William J. Oddy*
 
<PAGE>
                                   SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, EquiTrust Life
Annuity Account II, has duly caused this Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized in the City of West Des
Moines, State of Iowa, on the 10th day of August, 1998.
 
                                     EquiTrust Life Annuity Account II
                                     (Registrant)
 
                                     By:  EquiTrust Life Insurance Company
                                          (Depositor)
 
                                     By:        /s/ EDWARD M. WIEDERSTEIN
                                          -------------------------------------
                                                  Edward M. Wiederstein
                                                        PRESIDENT
                                            EquiTrust Life Insurance Company
 
            /s/ STEPHEN M. MORAIN         Attorney-In-Fact, Pursuant to
 *   -----------------------------------,  Power of Attorney.
              Stephen M. Morain
<PAGE>
                                 EXHIBIT INDEX
 
<TABLE>
<C>        <S>                                                      <C>
     1     Certified resolution of the board of directors of
            EquiTrust Life Insurance Company establishing
           EquiTrust Life Annuity Account II.
 
   3(a)    Form of Underwriting agreement among the Company, the
            Account and EquiTrust Marketing Services, Inc.
 
   3(b)    Form of Sales Agreement.
 
   3(c)    Form of Wholesaling Agreement.
 
     4     Contract Form.
 
     5     Contract Application.
 
   6(a)    Articles of Incorporation of the Company.
 
   6(b)    By-Laws of the Company.
 
   8(a)    Participation agreement relating to EquiTrust Variable
            Insurance Series Fund.
 
   8(b)    Participation agreement relating to Dreyfus Variable
            Investment Fund.
 
   8(c)    Participation agreement relating to T. Rowe Price
            Equity Series, Inc. and T. Rowe Price International
           Series, Inc.
 
     9     Opinion and Consent of Stephen M. Morain, Esquire.
 
  10(a)    Consent of Sutherland, Asbill & Brennan LLP.
 
  10(b)    Consent of Ernst & Young LLP.
 
  10(c)    Opinion and Consent of Christopher G. Daniels, FSA,
            MSAA, Life Product Development and Pricing Vice
            President.
 
    14     Powers of Attorney.
</TABLE>

<PAGE>

                                RESOLUTIONS ADOPTED BY
                              THE BOARD OF DIRECTORS OF
                          EQUITRUST LIFE INSURANCE COMPANY
                                   January 6, 1998


RESOLVED, that the Board of Directors of EquiTrust Life Insurance Company (the
"Company"), hereby establishes a separate account, pursuant to the provisions of
Section 508A.1 of the Insurance Laws of the State of Iowa, designated EquiTrust
Life Annuity Account II (hereinafter the "Variable Account"), for the following 
use and purposes, and subject to such conditions as hereinafter set forth; and

FURTHER RESOLVED, that the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable life insurance
policies (the "Policies"), and shall constitute a funding medium to support
reserves under such Policies issued by the Company; and

FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account shall be credited to or charged
against the Variable Account, without regard to other income, gains or losses of
the Company; and

FURTHER RESOLVED, that the assets of the Variable Account equal to the reserves
and other liabilities under the Policies and any other variable life insurance
policies issued through the Variable Account may not be charged with liabilities
arising out of any other business the Company may conduct; and

FURTHER RESOLVED, that the Variable Account shall be divided into investment
subaccounts (the "Subaccounts"), each of which shall invest in the shares of a
mutual fund portfolio, and net premiums under the Policies shall be allocated
among the Subaccounts in accordance with instructions received from owners of
the Policies; and

FURTHER RESOLVED, that the Executive Committee be, and hereby is, authorized 
to add or remove any Subaccount of the Variable Account or add or remove any 
mutual fund portfolio as may hereafter be deemed necessary or appropriate; and

FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account, without
regard to other income, gains or losses of any other Subaccount of the Variable
Account; and 


                                          1
<PAGE>

FURTHER RESOLVED, that the Executive Committee be, and it hereby is, 
authorized to invest such amount or amounts of the Company's cash in the 
Variable Account or in any Subaccount thereof or in any mutual fund portfolio 
as may be deemed necessary or appropriate to facilitate the commencement of 
the Variable Account's and/ or the mutual fund portfolio's operations and/or 
to meet any minimum capital requirements under the Investment Company Act of 
1940, as amended (the "1940 Act"); and

FURTHER RESOLVED, that the Chief Executive Officer, Chief Operating Officer, and
Chief Financial Officer (hereafter, the "empowered officers") and each of them,
with full power to act without the others, be, and they hereby are, severally
authorized to transfer cash from time to time from the Company's general account
to the Variable Account, or from the Variable Account to the general account, as
deemed necessary or appropriate and consistent with the terms of the Policies;
and

FURTHER RESOLVED, that the Board of Directors of the Company reserves the right
to change the designation of the Variable Account hereafter to such other
designation as it may deem necessary or appropriate; and

FURTHER RESOLVED, that the empowered officers and each of them, with full 
power to act without the others, with such assistance from the Company's 
independent certified public accountants, legal counsel and independent 
consultants or others as they may require, be, and they hereby are, severally 
authorized and directed to take all action necessary to:  (a) register the 
Variable Account as a unit investment trust under the 1940 Act; (b) register 
the Policies under the Securities Act of 1933 (the "1933 Act"); and (c) take 
all other actions that are necessary in connection with the offering of the 
Policies for sale and the operation of the Variable Account in order to 
comply with the 1940 Act, the 1933 Act, the Securities Exchange Act of 1934 
and other applicable Federal laws, including the filing of any registration 
statements, any undertakings, no-action requests, consents, applications for 
exemptions from the 1940 Act or other applicable federal laws, and any 
amendments to the foregoing as the empowered officers of the Company shall 
deem necessary or appropriate; and

FURTHER RESOLVED, that the empowered officers and each of them, with full 
power to act without the others, are severally authorized to prepare, execute 
and cause to be filed with the Securities and Exchange Commission on behalf 
of the Variable Account, and by the Company as sponsor and depositor, a 
Notification of Registration on Form N-8A, and a N-4 registering the Variable 
Account  under the 1940 Act and registering the Policies under the 1933 Act, 
and any and all amendments to the foregoing on behalf of the Variable Account 
and the Company and on behalf of and as attorneys-in-fact for the empowered 
officers and/ or any other officer of the Company; and

FURTHER RESOLVED, that Stephen M. Morain, Senior Vice President and General
Counsel (and any successor to such position), is duly appointed as agent for
service under any such registration statement, duly authorized to receive
communications and notices from the Securities and Exchange Commission with
respect thereto; and


                                          2
<PAGE>

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized on behalf of the Variable
Account and on behalf of the Company to take any and all such action that each
of them may deem necessary or advisable in order to offer and sell the Policies,
including any registrations, filings and qualifications both of the Company, its
officers, agents and employees, and of the Policies, under the insurance and
securities laws of any of the states of the United States of America or other
jurisdictions, and in connection therewith to prepare, execute, deliver and file
all such applications, requests, undertakings, reports, covenants, resolutions,
applications for exemptions, consents to service of process and other papers and
instruments as may be required under such laws, and to take any and all further
action which such officers or legal counsel of the Company may deem necessary or
desirable (including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications for as long
as the officers or legal counsel deem it to be in the best interests of the
Variable Account and the Company; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and they hereby are, severally authorized in the
names and on behalf of the Variable Account and the Company:  (a) to execute and
file irrevocable written consents on the part of the Variable Account and of the
Company to be used in such states wherein such consents to service of process
may be required under the insurance or securities laws therein in connection
with the registration or qualification of the Policies; and (b) to appoint the
appropriate state official, or such other person as may be allowed by insurance
or securities laws, agent of the Variable Account and of the Company for the
purpose of receiving and accepting process; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and hereby are, severally authorized to establish
procedures under which the Company will provide voting rights for owners of the
Policies with respect to securities owned by the Variable Account; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute such
agreement or agreements as deemed necessary and appropriate (a) with a qualified
entity under which such entity will be appointed principal underwriter and
distributor for the Policies, (b) with one or more qualified entities to provide
administrative services in connection with the establishment and maintenance


                                          3
<PAGE>

of the Variable Account and the administration of the Policies, and (c) with the
designated mutual fund portfolios and/ or the principal underwriter and
distributor of such mutual fund portfolios for the purchase and redemption of
portfolio shares; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute and
deliver such agreements and other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.


                                          4

<PAGE>

                               UNDERWRITING AGREEMENT


     AGREEMENT dated as of this _____________ day of June, 1998 by and between
EquiTrust Life Insurance Company, an Iowa corporation ("Insurer"), on its behalf
and on behalf of EquiTrust Life Variable Account II and EquiTrust Life Annuity
Account II (the "Separate Accounts"), and EquiTrust Marketing Services, Inc.
("Distributor"), a Delaware corporation.

                                     WITNESSETH

     WHEREAS, Distributor is a broker-dealer that engages in the distribution of
variable insurance products and other investment products; and

     WHEREAS, Insurer desires to issue certain variable insurance products
described more fully below to the public through Distributor acting as principal
underwriter;

     NOW THEREFORE, in consideration of their mutual promises, Insurer and
Distributor hereby agree as follows:

1.   Additional Definitions

     a.   Contracts - The class or classes of variable insurance products set
forth on Schedule 1 to this Agreement as in effect at the time this Agreement is
executed, and such other classes of variable products that may be added to
Schedule 1 from time to time in accordance with Section 11.b of this Agreement,
and including any riders to such contracts and any other contracts offered in
connection therewith.  For the purpose of this Agreement generally, a "class of
Contracts" shall mean those Contracts issued by Insurer on the same policy form
or forms and covered by the same registration statement.

     b.   Registration Statement - With respect to each class of contracts, the
most recent post-effective registration statement filed with the SEC or the most
recent effective post-effective amendment thereto, including financial
statements included therein and all exhibits thereto. For purposes of Section 9
of this Agreement, the term "Registration Statement" means any document which is
or at any time was a Registration Statement within the meaning of this Section
1.b.

     c.   Prospectus - With respect to each class of Contracts, the prospectus
for such class of Contracts included within the Registration Statement for such
class of Contracts; provided, however, that if the most recently filed
prospectus filed pursuant to Rule 497 under the 1993 Act subsequent to the date
on which the Registration Statement became effective differs from the prospectus
on file at the time the Registration Statement became effective, the term
"Prospectus" shall refer to the most recently filed prospectus filed under Rule
497 from and after the date on which it shall have been filed. For 

<PAGE>

purposes of Section 9 the term "any Prospectus" means any document which is or
at any time was a Prospectus within the meaning of this Section 1.c.

     d.   Fund - registered investment companies in which the Separate Accounts
invest.

     e.   Variable Accounts - separate accounts supporting a class or classes of
Contracts and specified in Schedule 1 as in effect at the time this Agreement is
executed, or as it may be amended from time to time in accordance with Section
11.b of this Agreement. 

     f.   1933 Act - The Securities Act of 1933, as amended.

     g.   1934 Act - The Securities Exchange Act of 1934, as amended.

     h.   1940 Act - The Investment Company Act of 1940, as amended.

     i.   SEC - The Securities and Exchange Commission.

     j.   NASD - The National Association of Securities Dealers, Inc. and any
affiliates.

     k.   Regulations - The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time this
Agreement is executed or thereafter promulgated.

     l.   Selling Broker-Dealer - A person registered as a broker-dealer and
licensed as a life insurance agent or affiliated with a person so licensed, and
authorized to distribute the Contracts pursuant to a sales agreement as provided
for in Section 4 of this Agreement. 

     m.   Agent Manual - Any manual and other written rules, regulations and
procedures provided by Insurer to insurance agents appointed to sell its
insurance contracts, as revised from time to time.

     n.   Representative - When used with reference to Distributor or a Selling
Broker-Dealer, an individual who is an associated person, as that term is
defined in the 1934 Act, thereof.

     o.   Application - An application for a Contract.

     p.   Premium - A payment made under a Contract by an applicant or purchaser
to purchase benefits under the Contract.

<PAGE>

     q.   Home Office -- the home office identified in the Prospectus as the
location at which Premiums and Applications are accepted.


2.   Authorization and Appointment

     a.   Scope and Authority.  Insurer hereby authorizes Distributor on an
exclusive basis, and Distributor accepts such authority, subject to the
registration requirements of the 1933 Act and the 1940 Act and the provisions of
the 1934 Act and conditions herein, to be the distributor and principal
underwriter for the sale of the contracts to the public in each state and other
jurisdiction in which the Contracts may lawfully be sold during the term of this
Agreement.  Insurer hereby authorizes Distributor to grant authority to Selling
Broker-Dealers to solicit Applications and Premiums to the extent the
Distributor deems appropriate and consistent with the marketing program for the
Contracts or a class of Contracts, subject to the conditions set forth in
Section 4 of this Agreement.  The Contracts shall be offered for sale and
distribution at premium rates set from time to time by Insurer.  Distributor
shall use its best efforts to market the Contracts actively through Selling
Broker-Dealers in accordance with Section 4 of this Agreement, subject to
compliance with applicable law, including rules of the NASD.

     b.   Limits on Authority.  Distributor shall act as an independent
contractor and nothing herein contained shall constitute Distributor or its
agents, officers, or employees as agents, officers or employees of Insurer
solely by virtue of their activities in connection with the sale of the
Contracts hereunder.  Distributor and its Representatives shall not have
authority, on behalf of Insurer to make, alter, or discharge any Contract or
other insurance policy or annuity entered into pursuant to a Contract; to waive
any Contract forfeiture provision; to extend the time of paying any Premium; or
to receive monies or Premiums (except for the sole purpose of forwarding monies
or Premiums to Insurer).  Distributor shall not expend, nor contract for the
expenditure of, funds of the Insurer.  Distributor shall not possess or exercise
any authority on behalf of Insurer other than that expressly conferred on
Distributor by this Agreement.


3.   Solicitation Activities

     a.   Distributor Representatives.  The Distributor will not solicit
applications from the public for the Contracts through Distributor
Representatives.

     b.   Representations and Warranties of Distributor.  Distributor represents
and warrants to Insurer that Distributor is and shall remain registered during
the term of this Agreement as a broker-dealer under the 1934 Act, is a member of
the NASD, and is duly registered under applicable state securities laws, and
that Distributor is and shall remain during the term of the Agreement in
compliance with Section 9(a) of the 1940 Act.

<PAGE>

4.   Selling Broker-Dealers.  Insurer and Distributor shall insure that sales of
the contracts by Selling Broker-Dealers comply with the following conditions,
and any additional conditions Insurer may specify from time to time.

     a.   Every Selling Broker-Dealer shall be both registered as a
broker-dealer with the SEC and a member of the NASD and licensed as an insurance
agent, if required, with authority to sell variable products or associated with
an insurance agent so licensed.  Any individuals to be authorized to act on
behalf of Selling Broker-Dealer shall be duly registered with the NASD as
representatives of Selling Broker-Dealer with authority to sell variable
products, and shall be licensed as insurance agents with authority to sell
variable products.  Insurer shall verify that Selling Broker-Dealer and its
Representatives are duly licensed under applicable state insurance law to sell
the Contracts or, if Broker-Dealer is not so licensed, that it is associated
with an entity so licensed.

     b.   Every Selling Broker-Dealer (or, if applicable, its associated
insurance agency) and each of its Representatives shall have been appointed by
Insurer, provided that Insurer reserves the right to refuse to appoint any
proposed person, or once appointed, to terminate such appointment.

     c.   Every Selling Broker-Dealer must enter into a written sales agreement
with Distributor which sales agreement, among other things, will require such
Selling Broker-Dealer to use its best efforts to solicit applications for the
Contracts and to comply with applicable laws and regulations, including the
Insurer's rules and regulations as reflected in the Agents Manual or otherwise
communicated to agents appointed by the Insurer, and will contain such other
provisions as the Distributor deems to be consistent herewith.

     d.   In view of the fact that Insurer and Distributor want to ensure that
Contracts will be sold to purchasers for whom the Contracts will be suitable,
the written Sales Agreement shall require that Selling Broker-Dealers and their
Representatives not make recommendations to an applicant to purchase a Contract
in the absence of reasonable grounds to believe that the purchase of the
Contract is suitable for the applicant.  While not limited to the following, a
determination of suitability shall be based on information supplied by an
applicant after reasonable inquiry concerning the applicant's other security
holdings, insurance and investment objectives, financial situation and needs,
and the likelihood that the applicant will continue to make premium payments
contemplated by the Contract applied for and will keep the Contract in force for
a sufficient period of time so that Insurer's acquisition costs are amortized
over a reasonable period of time.


5.   Marketing Materials

     a.   Preparation and Filing.  Insurer shall be primarily responsible for
the design and preparation of all promotional, sales and advertising material
related to the 

<PAGE>

Contracts.  Distributor shall be responsible for filing such material as
required, with the NASD and any state securities regulatory authorities at
Insurers expense.  Insurer shall be responsible for filing all promotional,
sales or advertising material, as required, with any state insurance regulatory
authorities.  Insurer shall be responsible for preparing the Contract Forms and
filing them with applicable state insurance regulatory authorities, and for
preparing the Prospectuses and Registration Statements and filing them with the
SEC and state regulatory authorities, to the extent required. The parties shall
notify each other expeditiously of any comments provided by the SEC, NASD or any
securities or insurance regulatory authority on such material, and will
cooperate expeditiously in resolving and implementing any comments, as
applicable.

     b.   Use in Solicitation Activities.  Insurer shall be responsible for
furnishing Distributor with such Applications, Prospectuses and other materials
for use by Distributor and any Selling Broker-Dealers in their solicitation
activities with respect to the Contracts.  Insurer shall notify Distributor of
those states or jurisdictions which require delivery of a statement of
additional information with a prospectus to a prospective purchaser.


6.   Compensation and Expenses.

     a.   Insurer shall pay compensation for sales of the Contracts in
accordance with Schedule 2 hereto.  Upon Distributor's request, Insurer shall
pay compensation payable to Selling-Broker-Dealers, on Distributor's behalf,
subject to the provisions of Section 7 of this Agreement.

     b.   Insurer shall pay all expenses in connection with:

     (1)  the preparation and filing of each registration statement (including
     each pre-effective and post-effective amendment thereto) and the
     preparation and filing of each Prospectus (including any preliminary and
     each definitive Prospectus);

     (2)  the preparation, underwriting, issuance and administration of the
     Contracts;

     (3)  any registration, qualification or approval or other filing of the
     Contracts or Contract forms required under the securities or insurance laws
     of the states in which the Contracts will be offered;

     (4)  all registration fees for the Contracts payable to the SEC; 

     (5)  the printing of promotional materials, definitive Prospectuses for the
     Contracts and any supplements thereto for distribution;  

     (6)  any applicable postage costs; and 

<PAGE>

     (7)  any out-of-pocket expenses incurred by Distributor in carrying out its
     obligations under this Agreement.


7.   Compliance.

     a.   Maintaining Registration and Approvals.  Insurer shall be responsible
for maintaining the registration of the Contracts with the SEC and any state
securities regulatory authority with which such registration is required, and
for gaining and maintaining the approval of the Contract forms where required
under the insurance laws and regulations of each state or other jurisdiction in
which the Contracts are to be offered.

     b.   Confirmations and the 1934 Act Compliance.  Insurer, as agent for the
Distributor, shall confirm to each applicant for and purchaser of a Contract in
accordance with Rule 10b-10 under the 1934 Act acceptance of premiums and such
other transactions as are required by Rule 10b-10 or administrative
interpretations thereunder.  Insurer shall maintain and preserve such books and
records with respect to such confirmations in conformity with the requirements
of Rules 17a-3 and 17a-4 under the 1934 Act to the extent such requirements
apply.  Insurer shall maintain all such books and records and hold such books
and records on behalf of and as agent for Distributor whose property they are
and shall remain, and acknowledges that such books and records are at all times
subject to inspection by the SEC in accordance with Section 17(a) of the 1934
Act.

     c.   Issuance and Administration of Contracts.  Insurer shall be
responsible for issuing the Contracts and administering the Contracts and the
Variable Account, provided, however, that Distributor shall have full
responsibility for the securities activities of all persons employed by the
Insurer, engaged directly or indirectly in the Contract operations, and for the
training, supervision and control of such persons to the extent of such
activities.

8.   Investigations and Proceedings.

     a.   Cooperation.  Distributor and Insurer shall cooperate fully in any
securities or insurance regulatory investigation or proceeding or judicial
proceeding arising in connection with the offering, sale or distribution of the
Contracts distributed under this Agreement.  Without limiting the forgoing,
Insurer and Distributor shall notify each other promptly of any customer
complaint or notice of any regulatory investigation or proceeding or judicial
proceeding received by either party with respect to the Contracts.

     b.   Customer Complaints.  In the case of any customer complaints,
Distributor and Insurer will cooperate in investigating such complaint and any
response by Distributor to such complaint or Insurer to such complaint will be
sent to the other party for review and approval not less than five business days
prior to its being sent to the 

<PAGE>

customer or regulatory authority, except that if a more prompt response is
required, the response shall be communicated by telephone or electronic mail.

9.   Indemnification.

     a.   By Insurer.  Insurer shall indemnify and hold harmless Distributor and
each person who controls or is associated with Distributor within the meaning of
such terms under the federal securities laws, and any officer, director,
employee or agent of the foregoing, against any and all losses, claims, damages
or liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
Distributor and/or any such person may become subject, under any statute or
regulation, any NASD rule or interpretation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities:

     (1)  arise out of or are based upon any untrue statement or alleged untrue
     statement of a material fact or omission or alleged omission to state a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading, in light of the circumstances in which
     they were made, contained in any (i) Registration Statement or in any
     Prospectus or (ii) blue sky application or other document executed by
     Insurer specifically for the purpose of qualifying any or all of the
     Contracts for sale under the securities laws of any jurisdiction; provided
     that Insurer shall not be liable in any such case to the extent that such
     loss, claim, damage or liability arises out of, or is based upon, an untrue
     statement or alleged untrue statement or omission or alleged omission made
     in reliance upon information furnished in writing to Insurer by Distributor
     specifically for use in the preparation of any such Registration Statement
     or any such blue sky application or any amendment thereof or supplement
     thereto;

     (2)  result from any breach by Insurer of any provision of this Agreement.

     This indemnification agreement shall be in addition to any liability that
     Insurer may otherwise have; provided, however, that no person shall be
     entitled to indemnification pursuant to this provision if such loss, claim,
     damage or liability is due to the willful misfeasance, bad faith, gross
     negligence or reckless disregard of duty by the person seeking
     indemnification.

     b.   By Distributor.  Distributor shall indemnify and hold harmless Insurer
and each person who controls or is associated with the Insurer within the
meaning of such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim asserted), to
which Insurer and/or any such person may become subject under any statute 

<PAGE>

or regulation, any NASD rule or interpretation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:

     (1)  arise out of or are based upon any untrue statement or alleged untrue
     statement of a material fact or omission or alleged omission to state a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading, in light of the circumstances in which
     they were made, contained in any (i) Registration Statement or in any
     Prospectus or (ii) blue sky application or other document executed by
     Insurer specifically for the purpose of qualifying any or all of the
     Contracts for sale under the securities laws of any jurisdiction; in each
     case to the extent, but only to the extent, that such untrue statement or
     alleged untrue statement or omission or alleged omission was made in
     reliance upon information furnished in writing by Distributor to Insurer
     specifically for use in the preparation of any such Registration Statement
     or any such blue sky application or any amendment thereof or supplement
     thereto;

     (2)  result from any breach by Distributor of any provision of this
     Agreement.
     
     This indemnification shall be in addition to any liability that Distributor
     may otherwise have; provided, however, that no person shall be entitled to
     indemnification pursuant to this provision if such loss, claim, damage or
     liability is due to the willful misfeasance, bad faith, gross negligence or
     reckless disregard of duty by the person seeking indemnification.

     c.   General.  Promptly after receipt by a party entitled to
indemnification ("Indemnified Person") under this Section 9 of notice of the
commencement of any action as to which a claim will be made against any person
obligated to provide indemnification under this Section 9 ("Indemnifying
Party"), such indemnified person shall notify the indemnifying party in writing
of the commencement thereof as soon as practicable thereafter, but failure to so
notify the indemnifying party shall not relieve the indemnifying party from any
liability which it may have to the indemnified person otherwise than on account
of this Section 9.  The indemnifying party will be entitled to participate in
the defense of the indemnified person but such participation will not relieve
such indemnifying party of the obligation to reimburse the indemnified person
for reasonable legal and other expense incurred by such indemnified person in
defending himself or herself.

The indemnification provisions contained in this Section 9 shall remain
operative in full force and effect, regardless of any termination of this
Agreement.  A successor by law of Distributor or Insurer, as the case may be,
shall be entitled to the benefits of the indemnification provisions contained in
this Section 9.

10.  Termination.  This Agreement shall terminate automatically if it is
assigned by a party without the prior written consent of the other party.  (The
term "assigned" shall not include any transaction exempted from Section 15(b)(2)
of the 1940 Act.)  This 

<PAGE>

Agreement may be terminated at any time for any reason by either party upon 60
days' written notice to the other party, without payment of any penalty.  This
Agreement may be terminated at the option of either party to this Agreement upon
the other party's material breach of any provision of this Agreement or of any
representation or warranty made in this Agreement, unless such breach has been
cured within 10 days after receipt of notice of breach from the non-breaching
party.  Upon termination of this Agreement all authorizations, rights and
obligations shall cease except the obligation to settle accounts hereunder,
including commissions on Premiums subsequently received for Contracts in effect
at the time of termination or issued pursuant to Applications received by
Insurer prior to termination.

11.  Miscellaneous.

     a.   Binding Effect.  This Agreement shall be binding on and shall inure to
the benefit of the respective successors and assigns of the parties hereto
provided that neither party shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party.

     b.   Schedules.  The parties to this Agreement may amend Schedule 1 to this
Agreement from time to time to reflect the addition of any class of Contracts
and Variable Accounts.  The provisions of this Agreement shall be equally
applicable to each such class of Contracts and each Variable Account that may be
added to the Schedule, unless the context otherwise requires.  Insurer may amend
Schedule 2 unilaterally, from time to time.  Any other change in the terms or
provisions of this Agreement shall be by written agreement between Insurer and
Distributor.

     c.   Rights, Remedies, etc. are Cumulative.  The rights, remedies and
obligations contained in this Agreement are cumulative and are in addition to
any and all rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.  Failure of either
party to insist upon strict compliance with any conditions of this Agreement
shall not be construed as a waiver of any of the conditions, but the same shall
remain in full force and effect.  No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.

     d.   Notices.  All notices hereunder are to be made in writing and shall be
given:

     If to Insurer, to:

     EquiTrust Life Insurance Company
     5400 University Avenue
     West Des Moines, Iowa  50266

<PAGE>


     If to Distributor, to:

     EquiTrust Marketing Services, Inc.
     5400 University Avenue
     West Des Moines, Iowa  50266

     or such address as such party may hereafter specify in writing.  Each such
notice to a party shall be either hand delivered or transmitted by registered or
certified United States mail with return receipt requested, or by overnight mail
by a nationally recognized courier, and shall be effective upon delivery.

     e.   Interpretation; Jurisdiction.  This Agreement constitutes the whole
Agreement between the parties hereto with respect to the subject matter hereof,
and supersedes all prior written or oral understandings, agreements or
negotiations between the parties with respect to such subject matter.  No prior
writings by or between the parties with respect to the subject matter hereof
shall be used by either party in connection with the interpretation of any
provision of this Agreement.  This Agreement shall be construed and its
provisions interpreted under and in accordance with the laws of the state of
Iowa without giving effect to principles of conflict of laws.

     f.   Severability.  In the event that any provision of this Agreement would
require a party to take action prohibited by applicable federal or state law or
prohibit a party from taking action required by applicable federal or state law,
then it is the intention of the parties hereto that such provision shall be
enforced to the extent permitted under the law, and, in any event, that all
other provisions of this Agreement shall remain valid and duly enforceable as if
the provision at issue had never been a part hereof.

     g.   Section and Other Headings.  The headings in this Agreement are
included for convenience of reference only and in no way define or delineate any
of the provisions hereof or otherwise affect their construction or effect.

     h.   Counterparts.  This Agreement may be executed in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

     i.   Regulation.  This Agreement shall be subject to the provisions of the
1933 Act, 1934 Act and the 1940 Act and the rules and regulations of the NASD,
from time to time in effect, including such exemptions from the 1940 Act as the
SEC may grant, and the terms hereof shall be interpreted and construed in
accordance therewith.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by such authorized officers on the date specified below.


INSURER:

By:                                                         Date
   -------------------------------------                        -----------

Name
    ------------------------------------

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


DISTRIBUTOR:

By:                                                         Date
   -------------------------------------                        -----------

Name
    ------------------------------------

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

<PAGE>

SCHEDULE 1
Separate Accounts
Effective
          --------------------

[put contract names in]
EquiTrust Life Variable Account 

EquiTrust Life Annuity Account



SCHEDULE 2
Compensation
Effective
          --------------------


<PAGE>


                                   SALES AGREEMENT


     Agreement dated as of __________________, by and among EquiTrust Life
Insurance Company ("Insurer"), an Iowa insurance company; EquiTrust Marketing
Services, Inc. ("Distributor"), a Delaware Corporation which is a registered
broker-dealer with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc.; ______________________, an ___________ corporation
("Broker-Dealer") also a registered broker/dealer with the SEC under the
Exchange Act and a member of the NASD; and ________________ a licensed insurance
agency associated with Broker/Dealer ("Insurance Agency"); and each additional
insurance agency , if any , signatory hereto (all such insurance agencies
referred to collectively as "Agency").

                                     RECITALS:

     A.   Pursuant to an agreement with Distributor (the "Underwriting
Agreement"), Insurer has appointed Distributor as the principal underwriter of
the class or classes of variable insurance contracts identified in Schedule 1 to
this Agreement at the time that this Agreement is executed, and such other class
or classes of variable insurance contracts that may be added to Schedule 1 from
time to time in accordance with Section 10 of this Agreement (each, a "class of
Contracts"; all such classes, the "Contracts").  Each class of Contracts will be
issued by Insurer through one or more separate accounts of Insurer ("Separate
Accounts").  Pursuant to the Underwriting Agreement, Insurer has authorized
Distributor to enter into separate written agreements with broker-dealers
pursuant to which such broker-dealers would be authorized to participate in the
sale of the Contracts and would agree to use their best efforts to solicit
applications for the Contracts.

     B.   Broker-Dealer and Insurance Agency are engaged in the business of
selling various investment products, including variable insurance contracts.

     C.   The parties to this Agreement desire that Broker-Dealer and Insurance
Agency be authorized to solicit applications for the sale of the Contracts,
subject to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the parties agree as follows:

1.   ADDITIONAL DEFINITIONS

     a.   REGISTRATION STATEMENT - With respect to each class of Contracts, the
          most recent effective registration statement(s) filed with the SEC or
          the most recent effective post-effective amendment(s) thereto,
          including financial statements included therein and all exhibits
          thereto.

     b.   PROSPECTUS - With respect to each class of Contracts, the prospectus
          for such class of Contracts included within the Registration Statement
          for such class of


<PAGE>

          Contracts; provided, however, that, if the most recently filed
          prospectus filed pursuant to Rule 497 under the 1933 Act subsequent to
          the date on which the Registration Statement became effective differs
          from the prospectus on file at the time the Registration Statement
          became effective, the term "Prospectus" shall refer to the most
          recently filed prospectus filed under Rule 497 from and after the date
          on which it shall have been filed.

     c.   1933 ACT - The Securities Act of 1933, as amended.

     d.   1934 ACT - The Securities Exchange Act of 1934, as amended.

     e.   1940 ACT - The Investment Company Act of 1940, as amended.

     f.   FUND - Registered investment companies in which the Separate Account
          invests.

     g.   AGENT - An individual associated with Insurance Agency and
          Broker-Dealer who is appointed by Insurer as an agent for the purpose
          of soliciting applications.

     h.   PREMIUM - A payment made under a Contract to purchase benefits under
          such Contract.

     i.   ADMINISTRATIVE OFFICE - The administrative office of the Insurer
          identified in the most recently filed prospectus filed pursuant to
          Rule 497.

     j.   AGENT'S MANUAL  - Any written rules, regulations and procedures
          provided by Insurer to insurance agents appointed to sell the
          Contracts, which may be collected in a manual, as revised from time to
          time.

     k.   SEC - The Securities and Exchange Commission.

     l.   NASD - The National Association of Securities Dealers, Inc. and its
          affiliates.

2.   AUTHORIZATION OF BROKER-DEALER AND INSURANCE AGENT

     a.   Pursuant to the authority granted to it in the Underwriting Agreement,
          Distributor hereby authorizes Broker-Dealer under the securities laws,
          and Insurer hereby authorizes Insurance Agency under the insurance
          laws, each in a non-exclusive capacity, to sell the Contracts.
          Broker-Dealer and Insurance Agency accept such authorization and shall
          use their best efforts to find purchasers for the Contracts in each
          case acceptable to Insurer.  Distributor and Insurer acknowledge that
          Broker-Dealer and Insurance Agency are each an independent contractor
          in the performance of their respective duties and obligations under
          this Agreement.  Accordingly, Broker-Dealer and Insurance Agency are
          not obliged or expected to give full time and energies to the
          performance of their obligations hereunder, nor are Broker-Dealer and
          Insurance Agency obliged or expected to represent Distributor or
          Insurer exclusively.  Nothing herein contained shall constitute


<PAGE>

          Broker-Dealer, Insurance Agency, the Agents or any agents or
          representatives of Broker-Dealer or Insurance Agency as employees of
          Distributor or Insurer in connection with the solicitation of
          applications and Premiums for the Contracts.

     b.   Broker-Dealer and Insurance Agency acknowledge that no territory is
          exclusively assigned hereunder, and that Insurer and Distributor may
          in their sole discretion authorize and appoint one or more persons in
          any jurisdiction in which Broker-Dealer and Insurance Agency transact
          business, to solicit applications and Premiums for the Contracts.

     c.   Insurance Agency is vested under this Agreement with power and
          authority to select and recommend individuals associated with
          Insurance Agency for appointment as Agents of the Insurer, and only
          individuals so recommended by Insurance Agency shall become Agents,
          provided that the conditions of Section 3 are satisfied, and provided
          further that Insurer reserves the right to refuse to appoint any
          proposed agent or, once appointed, to terminate or refuse to renew the
          appointment at any time with or without cause.  [INITIAL AND RENEWAL
          STATE APPOINTMENT FEES FOR INSURANCE AGENCY AND APPOINTEES OF
          INSURANCE AGENCY AS AGENTS OF INSURER WILL BE PAID BY INSURER IN
          ACCORDANCE WITH ITS THEN-APPLICABLE REQUIREMENTS.]

     d.   Neither Broker-Dealer nor Insurance Agency shall expend or contract
          for the expenditure of the funds of Distributor or Insurer, except as
          may otherwise be agreed in writing.  Broker-Dealer and Insurance
          Agency each shall pay all expenses incurred by each of them in the
          performance of this Agreement, unless otherwise specifically provided
          for in this Agreement or unless Distributor and Insurer shall have
          agreed in advance in writing to share the cost of any such expenses.
          Neither Broker-Dealer nor Insurance Agency shall possess or exercise
          any authority on behalf of Insurer or Distributor other than that
          expressly conferred on Broker-Dealer or Insurance Agency by this
          Agreement.  In particular, and without limiting the foregoing, neither
          Broker-Dealer nor Insurance Agency shall have any authority, nor shall
          either grant such authority to any Agent, on behalf of Insurer: to
          make, alter or discharge any Contract or other insurance policy or
          annuity entered into pursuant to a Contract; to waive any Contract
          forfeiture provision; to extend the time of paying any Premiums; or to
          receive any monies or Premiums from applicants for or purchasers of
          the Contracts (except for the sole purpose of forwarding monies or
          Premiums to Insurer).

     e    Broker-Dealer and Insurance Agency acknowledge that Insurer has the
          right in its sole discretion to reject any applications or Premiums
          received by it and to return or refund to an applicant such
          applicant's Premiums.


<PAGE>

3.   LICENSING AND REGISTRATION OF BROKER-DEALER, INSURANCE AGENCY AND AGENTS

     a.   Broker-Dealer represents and warrants that it is a broker-dealer
          registered with the SEC under the 1934 Act, and is a member of the
          NASD.  Broker-Dealer shall, at all times when performing its functions
          and fulfilling its obligations under this Agreement, be duly
          registered as a broker-dealer under the 1934 Act and in each state or
          other jurisdiction in which Broker-Dealer intends to perform its
          functions and fulfill its obligations hereunder, as required, and be a
          member in good standing of the NASD.

     b.   Insurance Agency represents and warrants that it is a licensed life
          insurance agent where required to solicit applications.  Insurance
          Agency shall, at all times when performing its functions and
          fulfilling its obligations under this Agreement, be duly licensed to
          sell the Contracts in each state or other jurisdiction in which
          Insurance Agency intends to perform its functions and fulfill its
          obligations hereunder.

     c.   Broker-Dealer and Insurance Agency shall ensure that no individual
          shall solicit applications or Premiums for the Contracts on their
          behalf in any state or other jurisdiction in which the Contracts may
          lawfully be sold unless (i) such individual is an associated person of
          Broker-Dealer (as that term is defined in Section 3(a)(18) of the 1934
          Act) and duly registered with the NASD and any applicable state
          securities regulatory authority as a registered person of
          Broker-Dealer qualified to solicit applications or Premiums for the
          Contracts in such state or jurisdiction, (ii) duly licensed,
          registered or otherwise qualified to solicit applications or Premiums
          for the Contracts to be offered and sold by such individual under the
          insurance laws of such state or jurisdiction, and (iii) duly appointed
          by Insurer to solicit applications or Premiums for Contracts in such
          state or jurisdiction.  INSURER SHALL BE SOLELY RESPONSIBLE FOR
          BACKGROUND INVESTIGATIONS OF THE AGENTS TO DETERMINE THEIR
          QUALIFICATIONS, GOOD CHARACTER AND MORAL FITNESS TO SELL THE
          CONTRACTS.  ALL MATTERS CONCERNING THE LICENSING OF ANY INDIVIDUALS
          RECOMMENDED FOR APPOINTMENT BY INSURANCE AGENCY UNDER ANY APPLICABLE
          STATE INSURANCE LAW SHALL BE A MATTER DIRECTLY BETWEEN INSURANCE
          AGENCY AND SUCH INDIVIDUAL, AND SHALL FURNISH INSURER WITH PROOF, OF
          PROPER LICENSING OF SUCH INDIVIDUAL OR OTHER PROOF, REASONABLY
          ACCEPTABLE TO INSURER, OF SATISFACTION BY SUCH INDIVIDUAL AS AN AGENT
          OF INSURER.  INSURANCE AGENCY AND BROKER-DEALER SHALL NOTIFY INSURER
          AND DISTRIBUTOR IMMEDIATELY UPON TERMINATION (FOR WHATEVER REASON) OF
          AN AGENT'S ASSOCIATION WITH BROKER-DEALER AND INSURANCE AGENCY.

     d.   Without limiting the foregoing, Broker-Dealer and Insurance Agency
          represent that they are in compliance with the terms and conditions of
          HOWARD & HOWARD (SUB. NOM. FIRST OF AMERICA BROKERAGE SERVICE, INC.)
          (avail. Sept. 28, 1995) issued by the Staff of the SEC with respect to
          the non-registration as a broker-dealer of an insurance agency
          associated with a registered broker-dealer.  Broker-Dealer and
          Insurance Agency shall notify Distributor immediately in writing if
          Broker-Dealer and/or Insurance Agency fail to comply with any such
          terms and


<PAGE>

          conditions and shall take such measures as may be necessary and as
          promptly as practicable under the circumstances to cure any such
          non-compliance.

4.   BROKER-DEALER AND INSURANCE AGENCY COMPLIANCE

     a.   Broker-Dealer, and not Distributor, shall be responsible for
          securities training, supervision and control of the Agents in
          connection with their solicitation activities with respect to the
          Contracts and shall supervise Agents' compliance with applicable
          federal and state securities law and NASD requirements in connection
          with such solicitation activities.

     b.   Broker-Dealer and Insurance Agency hereby represent and warrant that
          they are duly in compliance with all applicable federal and state
          securities laws and regulations, and all applicable insurance laws and
          regulations.  Broker-Dealer and Insurance Agency each shall carry out
          their respective obligations under this Agreement in continued
          compliance with such laws and regulations.  Further, Broker-Dealer and
          Insurance Agent shall comply, and shall ensure that Agents comply,
          with the rules and procedures set for the in the Agents Manual, and
          the rules set forth below, and Broker-Dealer and Insurance Agency
          shall be solely responsible for such compliance.

          (1)  Broker-Dealer, Insurance Agency and Agents shall not offer or
               attempt to offer the Contracts, nor solicit applications or
               Premiums for the Contracts, nor deliver Contracts, in any state
               or jurisdiction in which the Contracts have not been approved for
               sale.  For purposes of determining where the Contracts may be
               offered and applications or Premiums solicited, Broker-Dealer and
               Insurance Agency may rely on written notification, as revised
               from time to time, that they receive from Insurer pursuant to
               this Agreement.

          (2)  Broker-Dealer, Insurance Agency and Agents shall not solicit
               applications or Premiums for the Contracts without delivering the
               Prospectus for the Contracts, and, where required by state
               insurance law, the then-currently effective statement of
               additional information for the Contracts, and the then-currently
               effective prospectus(es) for the Fund(s).

          (3)  Broker-Dealer, Insurance Agency and Agents shall not recommend
               the purchase of a Contract to an applicant unless each has
               reasonable grounds to believe that such purchase is suitable for
               the applicant in accordance with, among other things, applicable
               regulations of any state insurance regulatory authority, the SEC
               and the NASD.  While not limited to the following, a
               determination of suitability shall be based on information
               supplied by the applicant after a reasonable inquiry concerning
               the applicant's insurance and investment objectives, financial
               situation and needs and the likelihood that the applicant will
               continue to make premium payments.  Each application or related
               documentation obtained by an


<PAGE>

               agent of Broker-Dealer shall bear the initials of a principal of
               Broker-Dealer indicating the application has been reviewed by
               such principal for suitability, completeness and accuracy.

          (4)  Broker-Dealer, Insurance Agency and all Agents shall accept
               initial Premiums in the form of a check or money order only if
               made payable to the name of Insurer and signed by the applicant
               for the Contract.  Broker-Dealer, Insurance Agency and Agent
               shall not accept third-party checks or cash for Premiums.

          (5)  Broker-Dealer, Insurance Agency and Agents shall not encourage a
               prospective applicant to surrender or exchange an instrument
               contract in order to purchase a Contract, nor to encourage a
               Contract owner to lapse, terminate, surrender, exchange or cancel
               his or her Contract or discontinue paying Premiums thereunder.

          (6)  Broker-Dealer and Insurance Agency shall ensure that all checks
               and money orders and applications for the Contracts received by
               either of them or an Agent shall be remitted promptly, and in any
               event not later than noon of the next business day after receipt,
               to the Administrative Office.  In the event that any other
               Premiums are sent to an Agent, Insurance Agency or Broker-Dealer,
               rather than to the Administrative Office, Insurance Agency and
               Broker-Dealer shall promptly (and in any event, not later than
               noon of the next business day) remit such Premiums to the
               Administrative Office.  Insurance Agency and Broker-Dealer
               acknowledge that if any Premium is held at any time by either of
               them such Premium shall be held on behalf of Insurer, and
               Insurance Agency or Broker-Dealer shall segregate such Premium
               from their own funds and promptly (and in any event, by noon of
               the next business day) remit such Premium to the Insurer.  All
               such Premium, whether by check, money order or wire, shall at all
               times be the property of Insurer.

          (7)  Upon issuance of a Contract by Insurer and delivery of such
               Contracts to Insurance Agency, Insurance Agent or Agent shall
               promptly deliver such Contract to its purchaser.  For purposes of
               this provision, "promptly" shall be deemed to mean not later than
               five calendar days.  Broker-Dealer and Insurance Agency shall
               return promptly to Insurer all receipts, if applicable, for
               delivered Contracts, all undelivered Contracts and all receipts,
               if applicable, for cancellation, in accordance with the
               instructions set forth in the Agents Manual.  Broker-Dealer,
               Insurance Agency, and the Agents in connection with the offer or
               sale of the Contracts, shall not give any information or make any
               representations or statements, written or oral, concerning the
               Contracts, a Fund or Fund shares, other than or inconsistent with
               information or representations contained in the Prospectuses,
               statements of additional information and Registration Statements
               for the Contracts, or a Fund, or in reports or proxy statements


<PAGE>

               therefor, or in promotional, sales or advertising material or
               other information supplied and approved in writing by Distributor
               and Insurer.

     c.   Broker-Dealer and Insurance Agency understand, acknowledge, and
          represent that Contracts and Premiums thereunder shall not be
          solicited, offered, or sold in connection with any so-called "market
          timing" or "asset reallocation" program, plan, arrangement or service
          that has not been approved in advance in writing by Insurer and
          Distributor.  Should Distributor or Insurer determine in their sole
          discretion that Broker-Dealer or Insurance Agency is soliciting,
          offering, or selling, or has solicited, offered, or sold, Contracts or
          Premiums subject to any so-called "market timing" or "asset
          reallocation" program, plan, arrangement or service, Distributor or
          Insurer may take such action which is necessary, in their sole
          discretion, to halt such solicitations, offers or sales.  Furthermore,
          in addition to any indemnification provided in Section 11 of this
          Agreement and any other liability that Broker-Dealer and Insurance
          Agency might have, Broker-Dealer and Insurance Agency shall each be
          liable to Distributor and Insurer and each Fund affected by any
          so-called "market timing" or "asset reallocation" program, plan,
          arrangement or service, for any damages or losses, actual or
          consequential, sustained by Distributor or Insurer or any Fund, as a
          result of any so-called "market timing" or "asset reallocation"
          program, plan, arrangement or service which causes such losses or
          damages following solicitation, offer, or sale of a Contract or
          Premiums subject to "market timing" or "asset reallocation" or similar
          service by Broker-Dealer or Insurance Agency.

     c.   Broker-Dealer and Insurance Agency shall promptly furnish to Insurer
          or its authorized agent any reports and information that Insurer may
          reasonably request for the purpose of meeting Insurer's reporting and
          recordkeeping requirements under the insurance laws of any state,
          under any applicable federal and state securities laws, rules and
          regulations.

     d.   Broker-Dealer shall secure and maintain a fidelity bond (including
          coverage for larceny and embezzlement), issued by a reputable bonding
          company, covering all of its directors, officers, agents and employees
          who have access to funds of Insurer or Distributor.  This bond shall
          be maintained at Broker-Dealer's expense in at least the amount
          prescribed under Rule 3020 of the NASD Conduct Rules.  Broker-Dealer
          shall provide Distributor with a copy of said bond before executing
          this Agreement.  Broker-Dealer shall also secure and maintain errors
          and omissions insurance acceptable to Insurer and covering
          Broker-Dealer and Agents (registered representatives).  Broker-Dealer
          hereby assigns any proceeds received from a fidelity bonding company,
          errors and omissions or other liability coverage, to Insurer or
          Distributor as their interest may appear, to the extent of their loss
          due to activities covered by the bond, policy or other liability
          coverage.  If there is any deficiency, whether due to a deductible or
          otherwise, Broker-Dealer shall promptly pay such amounts on demand.
          Broker-Dealer hereby agrees to indemnify and hold harmless Insurer and
          Distributor from any such deficiency and from the costs of collection
          thereof, including reasonable attorneys' fees.


<PAGE>


5.   SALES MATERIALS

     a.   During the term of this Agreement, Distributor and Insurer will
          provide Broker-Dealer and Insurance Agency, without charge, with as
          many copies of Prospectuses (and any supplements thereto), current
          Fund prospectuses (and any supplements thereto), and applications for
          the Contracts, as Broker-Dealer or Insurance Agency may reasonably
          request.  Upon termination of this Agreement, Broker-Dealer and
          Insurance Agency will promptly return to Distributor any Prospectuses,
          applications, Fund prospectuses, and other materials and supplies
          furnished by Distributor or Insurer to Broker-Dealer or Insurance
          Agency or to the Agents.

     b.   During the term of this Agreement, Distributor and Insurer will be
          responsible for providing and approving all promotional, sales and
          advertising material to be used by Broker-Dealer and Insurance Agency
          in the course of their solicitation activities hereunder.  Distributor
          will file such materials or will cause such materials to be filed with
          the SEC, the NASD, and/or with any state securities regulatory
          authorities, as appropriate.  Broker-Dealer and Insurance Agency shall
          not use or implement, nor shall they allow any Agent to use or
          implement, any promotional, sales or advertising material relating to
          the Contracts or otherwise advertise the Contracts without the prior
          written approval of Distributor and Insurer.

6.   COMMISSIONS AND EXPENSES

     a.   COMPENSATION.  During the term of this Agreement, Broker-Dealer and
          Insurance Agency shall be compensated for services performed
          hereunder, based on the Contracts for which Insurance Agency is the
          Broker-of-Record and at the COMMISSION RATES AND FEES SET FORTH IN
          SCHEDULE 2 TO THIS AGREEMENT, as such SCHEDULE 2 MAY BE AMENDED OR
          MODIFIED UPON _____ DAYS NOTICE.  ANY amendment to Schedule 2 will be
          applicable to any Contract for which an application or Premium is
          received by the Administrative Office on or after the effective date
          of such amendment or which is in effect after the effective date of
          such amendment.  Compensation shall be paid on behalf of Insurer and
          Distributor to Insurance Agency on its behalf and on behalf of
          Broker-Dealer.  Compensation with respect to any Contract shall be
          paid to Insurance Agency only for so long as Insurance Agent is the
          Broker-of-Record for such Contract.

     b.   CONDITIONS TO COMPENSATION.  Broker-Dealer and Insurance Agency
          recognize that all compensation payable to them hereunder will be
          disbursed by or on behalf of Insurer after Premiums are received and
          accepted by Insurer and that no compensation of any kind other than
          that described in this Agreement is payable to Insurance Agency for
          the performance of its obligations hereunder.


<PAGE>

     c.   REFUND OF COMPENSATION.  No compensation shall be payable, and
          Broker-Dealer agrees to reimburse Distributor for any compensation
          paid to Broker-Dealer or its Representatives, or Insurance Agency
          under each of the following conditions:  (i) if Insurer, in its sole
          discretion, determines not to issue the Contract applied for; (ii) if
          Insurer refunds the Premiums upon the applicant's surrender or
          withdrawal pursuant to any "free-look" privilege; (iii) if Insurer
          refunds the Premiums paid by applicant as a result of a complaint by
          applicant, recognizing that Insurer has sole discretion to refund
          Premiums; and (iv) if Insurer determines that any person signing an
          application who is required to be licensed or any other person or
          entity receiving compensation for soliciting purchase of the Contracts
          is not duly licensed to sell the Contracts in the jurisdiction of such
          sale or attempted sale.


     d.   INDEBTEDNESS AND RIGHT OF SETOFF.  Nothing contained herein shall be
          construed as giving Broker-Dealer or Agent the right to incur any
          indebtedness on behalf of Insurer or Distributor.  Broker-Dealer
          hereby authorizes Insurer and Distributor to set off liabilities of
          Broker-Dealer to Insurer and Distributor against any and all amounts
          otherwise payable to Broker-Dealer.

     e.   COMMISSION SHARING.  Broker-Dealer and Insurance Agency represent that
          no commissions or other compensation will be paid for services
          rendered in soliciting the purchase of the contracts by any person or
          entity not duly registered or licensed by the required authorities and
          appointed by Insurer to sell the Contract in the state in which such
          solicitation occurred; provided however, that this provision shall not
          prohibit the payment of compensation of the surviving spouse or other
          beneficiary of a person entitled to receive such compensation pursuant
          to a bona fide contract calling for such payment.

7.   INTERESTS IN AGREEMENT.  Agents shall have no interest in this Agreement or
     right to any commissions to be paid to Insurance Agency hereunder.
     Insurance Agency shall be solely responsible for the payment of any
     commission or consideration of any kind to Agents.  Broker-Dealer and
     Insurance Agency shall be solely responsible under applicable tax laws for
     the reporting of compensation paid to Agents.  Insurance Agency shall have
     no right to withhold or deduct any commission from any Premiums in respect
     of the Contracts which it may collect, subject to Schedule 2 to this
     Agreement.  Insurance Agency shall have no interest in any compensation
     paid by Insurer to Distributor, now or hereafter, in connection with the
     sale of any Contracts hereunder.

8.   TERM AND EXCLUSIVITY OF AGREEMENT.  This Agreement may not be assigned
     except by written mutual consent and shall continue for an indefinite term,
     subject to the termination by either party by ten-days' advance written
     notice to the other party, except that in the event Distributor or
     Broker-Dealer ceases to be a registered broker-dealer or a member of the
     NASD, this Agreement shall immediately terminate.  Upon its termination,
     all authorizations, rights and obligations shall cease, except the
     agreements in SECTIONS  5, 8, 11, 12, 14, 15, 18   and the payment of any
     accrued but unpaid compensation to Broker-Dealer and Insurance Agent.


<PAGE>

9.   COMPLAINTS AND INVESTIGATIONS

     a.   Distributor, Insurer, Broker-Dealer and Insurance Agency each shall
          cooperate fully in any securities or insurance regulatory
          investigation or proceeding or judicial proceeding arising in
          connection with the Contracts marketed under this Agreement.
          Broker-Dealer and Insurance Agency will be notified promptly of any
          customer complaint or notice of any regulatory investigation or
          proceeding or judicial proceeding received by Distributor or Insurer
          with respect to Broker-Dealer, Insurance Agency or any Agent; and
          Broker-Dealer and Insurance Agency will promptly notify Distributor
          and the Insurer of any written customer complaint or notice of any
          regulatory investigation or proceeding or judicial proceeding received
          by Broker-Dealer or Insurance Agency with respect to themselves or any
          Agent in connection with this Agreement or any Contract.

     b.   In the case of a customer complaint, Distributor, Insurer,
          Broker-Dealer and Insurance Agency will cooperate in investigating
          such complaint and any response by Broker-Dealer or Insurance Agency
          to such complaint will be sent to Distributor for approval not less
          than five business days prior to its being sent to the customer or
          regulatory authority, except that if a more prompt response is
          required, the proposed response shall be communicated by telephone or
          facsimile.

10.  MODIFICATION OF AGREEMENT.  This Agreement supersedes all prior agreements,
     either oral or written, between the parties relating to the Contracts and,
     except for any amendment of Schedule 1 pursuant to the terms of Section 2
     hereof or Schedule 2 pursuant to the terms of Section 6 hereof, may not be
     modified in any way unless by written agreement signed by all of the
     parties.

11.  INDEMNIFICATION

     a.   Broker-Dealer and Insurance Agency, jointly and severally, shall
          indemnify and hold harmless Distributor and Insurer and each person
          who controls or is associated with Distributor or Insurer within the
          meaning of such terms under the federal securities laws, and any
          officer, director, employee or agent of the foregoing, against any and
          all losses, claims, damages or liabilities, joint or several
          (including any investigative, legal and other expenses reasonably
          incurred in connection with, and any amounts paid in settlement of,
          any action, suit or proceeding or any claim asserted), to which they
          or any of them may become subject under any statute or regulation, at
          common law or otherwise, insofar as such losses, claims, damages or
          liabilities arise out of or are based upon:

          (1)  violation(s) by Broker-Dealer, Insurance Agency, or an Agent of
               federal or state securities law or regulation(s), insurance law
               or regulation(s), or any rule or requirement of the NASD:


<PAGE>


          (2)  any unauthorized use of promotional, sales or advertising
               material, any oral or written misrepresentations or any unlawful
               sales practices concerning the Contracts, by Broker-Dealer,
               Insurance Agency or an Agent;

          (3)  claims by the Agents or other agents or representatives of
               Insurance Agency or Broker-Dealer for commissions or other
               compensation or remuneration of any type;

          (4)  any failure on the part of Broker-Dealer, Insurance Agency, or an
               Agent to submit Premiums or applications to Insurer, or to submit
               the correct amount of a Premium, on a timely basis and in
               accordance with this Agreement and the Agents Manual, subject to
               applicable law;

          (5)  any failure on the part of Broker-Dealer, Insurance Agency, or an
               Agent to deliver Contracts to purchasers thereof on a timely
               basis and in accordance with the Agents Manual; or

          (6)  a breach by Broker-Dealer or Insurance Agency of any provision of
               this Agreement.

          (7)  any other acts or omission of Broker-Dealer, Insurance Agency or
               Agent which results in a claim against Distributor, Insurer their
               agents or employees.

               This indemnification will be in addition to any liability which
               Broker-Dealer and Insurance Agency may otherwise have.

     b.   Distributor and Insurer, jointly and severally, shall indemnify and
          hold harmless Broker-Dealer and Insurance Agency and each person who
          controls or is associated with Broker-Dealer or Insurance Agency
          within the meaning of such terms under the federal securities laws,
          and any officer, director, employee or agent of the foregoing, against
          any and all losses, claims, damages or liabilities, joint or several
          (including any investigative, legal and other expenses reasonably
          incurred in connection with, and any amounts paid in settlement of,
          any action, suit or proceeding or any claim asserted), to which they
          or any of them may become subject under any statute or regulation,
          NASD rule or regulation, at common law or otherwise, insofar as such
          losses, claims, damages or liabilities arise out of or based upon any
          breach by Distributor or Insurer of any provision of this Agreement.
          This indemnification will be in addition to any liability which
          Distributor and Insurer, jointly and severally, may otherwise have.

     c.   Promptly after receipt by a party entitled to indemnification
          ("indemnified person") under this Section 11 of notice of the
          commencement of any action as to which a claim will be made against
          any person obligated to provide indemnification under this Section 11
          ("indemnifying party"), such indemnified


<PAGE>

          person shall notify the indemnifying party in writing of the
          commencement thereof as soon as practicable thereafter, but failure to
          so notify the indemnifying party shall not relieve the indemnifying
          party from any liability which it may have to the indemnified person
          otherwise than on account of this Section 11, except to the extent
          that the omission results in a failure of actual notice to the
          indemnifying party and such indemnifying party is damaged solely as a
          result of the failure to give such notice.  The indemnifying party
          will be entitled to participate in the defense of the indemnified
          person but such participation will not relieve such indemnifying party
          of the obligation to reimburse the indemnified person for reasonable
          legal and other expenses incurred by such indemnified person in
          defending himself or itself. The indemnifying party, upon the request
          of the indemnified party, shall retain counsel reasonably satisfactory
          to the indemnified party to represent the indemnified party and any
          others the indemnifying party may designate in such proceeding and
          shall pay the fees and disbursements of such counsel related to such
          proceeding.  In any such proceeding, any indemnified party shall have
          the right to retain its own counsel, but the fees and expenses of such
          counsel shall be at the expense of such indemnified party unless (i)
          the indemnifying party and indemnified party shall have mutually
          agreed to the retention of such counsel or (ii) the named parties to
          any such proceeding (including any impleaded parties) include both the
          indemnifying party and the indemnified party and representation of
          both parties by the same counsel would be inappropriate due to actual
          or potential differing interests between them.  The indemnifying party
          shall not be liable for any settlement of any proceeding effected
          without its written consent, but if such proceeding for the plaintiff,
          the indemnifying party shall indemnify the indemnified party from and
          against any loss or liability by reason of such settlement or
          judgement.

          The indemnification provisions contained in this Section 11 shall
          remain operative in full force and effect, regardless of any
          termination of this Agreement.  A successor by law of Distributor or
          Insurer, as the case may be, shall be entitled to the benefits of the
          indemnification provisions contained in this Section 11.  After
          receipt by a party entitled to indemnification ("indemnified party")
          under this Section 11 of notice of the commencement of any action, if
          a claim in respect thereof is to be made against any person obligated
          to provide indemnification under this Section 11 ("indemnifying
          party"), such indemnified party will notify the indemnifying party in
          writing of the commencement thereof as soon as practicable thereafter,
          provided that the omission so to notify the indemnifying party will
          not relieve it from any liability under this Section 11.

12.  RIGHTS, REMEDIES, ETC., ARE CUMULATIVE.  The rights, remedies and
     obligations contained in this Agreement are cumulative and are in addition
     to any and all rights, remedies and obligations, at law or in equity, which
     the parties hereto are entitled to under state and federal laws.  Failure
     of a party to insist upon strict compliance with any of the conditions of
     this Agreement shall not be construed as a waiver of any of the conditions,
     but the same shall remain in full force and effect.  No waiver of any of
     the provisions of this


<PAGE>

     Agreement shall be deemed, or shall constitute, a waiver of any other
     provisions, whether or not similar, nor shall any waiver constitute a
     continuing waiver.

13.  NOTICES.  All notices hereunder are to be made in writing and shall be
     given:

          If to Insurer, to:


          EquiTrust Life Insurance Company
          5400 University Avenue
          West Des Moines, Iowa  50266


          If to Distributor, to:

          EquiTrust Marketing Services, Inc.
          5400 University Avenue
          West Des Moines, Iowa  50266


          If to Broker-Dealer, to:



          If to Insurance Agency, to:




such other address as such party may hereafter specify in writing.  Each such
notice to a party shall be either hand delivered or transmitted by registered or
certified United States mail with return receipt requested, or by overnight mail
by a nationally recognized courier, and shall be effective upon delivery.

14.  INTERPRETATION, JURISDICTION, ETC.  This Agreement constitutes the whole
agreement between the parties hereto with respect to the subject matter hereof,
and supersedes all prior oral or written understandings, agreements or
negotiations between the parties with respect to the subject matter hereof.  No
prior writings by or between the parties hereto with respect to the subject
matter hereof shall be used by a party in connection with the interpretation of
any provision of this Agreement.  This Agreement shall be construed and its
provisions interpreted under and in accordance with the laws of the State of
Iowa without giving effect to principles of conflict of laws.

15.  ARBITRATION.  Any controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by arbitration in accordance
with the Commercial Arbitration


<PAGE>

Rules of the American Arbitration Association, and judgement upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.

16.  HEADINGS.  The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

17.  COUNTERPARTS.  This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same instrument.

18.  SEVERABILITY.  In the event that any provision of this Agreement would
require a party to take action prohibited by applicable federal or state law or
prohibit a party from taking action required by applicable federal or state law,
then it is the intention of the parties hereto that such provision shall be
enforced to the extent permitted under the law, and, in any event, that all
other provisions of this Agreement shall remain valid and duly enforceable as if
the provision at issue had never been a part hereof.


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
     duly executed as of the day and year first above written.


     EQUITRUST LIFE INSURANCE COMPANY

     By:_____________________________________

     Name:___________________________________

     Title:____________________________________



     EQUITRUST MARKETING SERVICES, INC.

     By:_____________________________________

     Name:___________________________________

     Title:____________________________________


<PAGE>

     RETAIL BROKER-DEALER

     By:______________________________________

     Name:___________________________________

     Title:_____________________________________



     INSURANCE AGENCY:  ________________________

     By:_______________________________________

     Name:____________________________________

     Title:______________________________________




<PAGE>


                                      SCHEDULE 1

                         CONTRACTS SUBJECT TO THIS AGREEMENT

                      Effective _________________________, 1998



<PAGE>

                                  Schedule 2

                             COMPENSATION SCHEDULE

                      Effective _____________________, 1998


<PAGE>

                               WHOLESALING AGREEMENT


     This Agreement dated this _______ day of ___________________, ________ is
by and among EquiTrust Life Insurance Company, an Iowa corporation ("Insurer"),
EquiTrust Marketing Services, Inc. ("Distributor") a Delaware corporation which
is a registered broker-dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 (the "Exchange Act") and a
member of the National Association of Securities Dealers, Inc. ("NASD");
____________________________________ ("Wholesaler"), also a registered
broker-dealer with the SEC under the Exchange Act and a member of the NASD; and
__________________________________, a licensed insurance agency associated with
Wholesaler ("Agency"); and each additional insurance agency, if any, signatory
hereto (all such insurance agencies referred to collectively as "Agency").


                                    WITNESSETH:

     WHEREAS, Insurer has appointed Distributor as the principal underwriter 
and distributor of the variable insurance contracts issued by Insurer, and 
has agreed with Distributor that Distributor shall be responsible for the 
recruitment of third parties who will promote the offer and sale of these 
variable contracts; and

     WHEREAS, Insurer and Distributor on the one hand, and Wholesaler, on the 
other hand, desire to establish an arrangement whereby Wholesaler will 
recommend to Distributor and Insurer certain third parties (the "Retailers") 
who will promote the offer and sale of the variable life insurance and 
variable annuities issued by Insurer (collectively the "Policies").

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

1.   APPOINTMENT OF WHOLESALER

Subject to the terms and conditions of this Agreement, Insurer and 
Distributor hereby authorize and appoint Wholesaler, on a non-exclusive 
basis, to recommend to Insurer and Distributor Retailers who will promote the 
offer and sale of Policies. Wholesaler hereby accepts such authorization and 
appointment on a non-exclusive basis and agrees to use its best efforts to 
find Retailers acceptable to Insurer who will promote the offer and sale of 
Policies.  Wholesaler acknowledges that no territory is exclusively assigned 
to Wholesaler hereby, and that Distributor and Insurer may enter into 
agreements with other third party wholesalers and broker-dealers providing 
for the sale of the Policies.  Further, Wholesaler acknowledges that Insurer 
and Distributor may enter into agreements with other representatives of a 
Retailer previously dealing with Wholesaler if such 

<PAGE>

representatives are contracted by other third-party Wholesalers.  Further, 
any compensation as provided for in Section 7 hereof, shall only be based and 
paid on those Policies written by Retailers during the period that such 
Retailer is recognized by Insurer as appointed through Wholesaler and during 
which there is outstanding a valid, binding and enforceable selling agreement 
between such Retailer, Distributor and Insurer.  Without limiting any 
provision otherwise contained in this Agreement, Wholesaler shall conduct its 
business in accordance with generally accepted customs and practices of the 
life insurance industry.

2.   THE POLICIES

The Policies issued by Insurer to which this Agreement applies are listed in 
Exhibit A, which by this reference is incorporated herein.  Exhibit A may be 
amended from time to time by Insurer.  Insurer in its sole discretion and 
without notice to Wholesaler, may suspend sales of any Policies or may amend 
any contracts or policies evidencing such Policies if, in Insurer's opinion, 
such suspension or amendment is: (1) necessary for compliance with federal, 
state, or local laws, regulations, or administrative order(s); or, (2) 
necessary to prevent administrative or financial hardship to Insurer.  In all 
other situations, Insurer shall provide 30 days notice to Wholesaler prior to 
suspending sales of any Policies or amending any contracts or policies 
evidencing such Policies.

3.   SECURITIES REGISTRATION AND LICENSING

Wholesaler shall, at all times when performing its functions under this 
Agreement, be either registered as, or a registered representative in good 
standing with, a securities broker-dealer in good standing with the SEC and 
NASD and licensed or registered as a securities broker-dealer, or 
representative, in the states and other local jurisdictions that require such 
licensing or registration in connection with variable insurance contract 
sales activities.  Any personnel through which Wholesaler acts shall be 
registered and licensed individually as required. Wholesaler hereby 
represents and warrants to Distributor it is not currently under 
investigation, formal or informal, by any securities or insurance regulatory 
authority.

4.   INSURANCE LICENSING

Wholesaler shall, at all times when performing its functions under this 
Agreement, be validly licensed as an insurance agent or agency in the states 
and other local jurisdictions that require such licensing or registration in 
connection with the Wholesaler's variable life insurance and variable annuity 
contract sales activities; or, in those states in which Wholesaler cannot or 
does not obtain a corporate agent's license, shall maintain an ownership 
interest in, or contractual relationship with, Agency, which shall be validly 
licensed as an insurance agency in such jurisdiction or jurisdictions.  Such 
contractual relationship shall be set forth in an agreement substantially 
equivalent to that set forth as Exhibit B.  Any personnel through which 
Wholesaler acts shall be licensed individually as required. Wholesaler shall 
provide Insurer with a list of all licensed insurance agencies 

<PAGE>

relied upon by Wholesaler to comply with this paragraph and covenants to 
maintain the completeness and accuracy of such list, and to cause each such 
agency to become a signatory hereto.

5.   RECOMMENDATION AND ACCEPTANCE OF RETAILERS

Wholesaler will recruit and recommend potential Retailers to sell the 
Policies. Insurer shall have sole discretion to accept or reject any such 
recommendation. Acceptance shall occur only upon and by way of execution of a 
selling agreement between Retailer, Distributor and Insurer.

6.   WHOLESALING SERVICES

Wholesaler shall use its best efforts to provide certain services and support 
to Retailers to facilitate the offering and selling of Policies.  Such 
activities shall include, but not be limited to, assistance in the 
appointment of agents; distribution of sales material, newsletters and field 
service bulletins (subject to Section 12, hereof); assistance with the sales 
promotional activities with Retailers; and training of sales staff and 
registered representatives of Retailers with respect to the features of the 
Policies.

7.   COMPENSATION

Compensation for the services performed in accordance with Section 6 above, 
will be, pursuant to the terms and conditions in Exhibit C, a percentage of 
purchase payments made to Insurer on account of Policies issued upon 
applications procured through Retailers in accordance with this Agreement.  
Compensation shall be paid to Wholesaler unless applicable state insurance 
law requires that compensation be paid to Agency.  Upon the termination of 
this Agreement all compensation payable to Wholesaler hereunder shall cease, 
except that compensation will be paid on premiums accompanying applications 
obtained by Retailers recruited by Wholesaler and dated prior to such 
termination.  Exhibit C may be amended by Insurer by providing written notice 
to Wholesaler.  Such amendment shall apply only to applications dated after 
the effective date of such amendment, provided, however, that Insurer 
reserves the right to apply such amendment with respect to all subsequent 
premiums and renewal premiums received after the effective date of such 
amendment.  In the event Wholesaler is disqualified from continued 
registration with the NASD, Insurer shall not be obligated to pay 
commissions, fees or additional compensation pursuant to this Agreement, the 
payment of which would represent a violation of NASD rules.

8.   SUPERVISION OF REGISTERED REPRESENTATIVES

Wholesaler, and not Distributor, shall have full responsibility for the 
training and supervision of all of its own registered persons who are engaged 
directly or indirectly in the offer or sale of the variable insurance 
contract hereunder, and all such persons shall be subject to the control of 
and supervision of Wholesaler with respect to such person's 

<PAGE>

securities-regulated activities, and to the control of Agency with respect to 
such person's insurance-regulated activities, in connection with the 
solicitation and sale of and other communication with respect to variable 
insurance and annuity contracts hereunder.  Wholesaler and Agency shall not, 
solely by virtue of this Agreement, be obligated to supervise the registered 
representative of any Retailer.

9.   COMPLIANCE WITH NASD CONDUCT RULES AND FEDERAL AND STATE SECURITIES LAWS

Wholesaler shall fully comply with the rules and requirements of the NASD and 
of the Exchange Act and all other applicable federal or state laws and will 
establish such rules and procedures as may be necessary to cause diligent 
supervision of the securities activities of its registered persons.  Upon 
request by Distributor, Wholesaler shall furnish such appropriate records as 
may be necessary to establish such diligent supervision.

10.  REGULATIONS

All parties agree to observe and comply with the existing laws and rules or 
regulations of applicable local, state, or federal regulatory authorities and 
with those which may be enacted or adopted during the term of this Agreement 
regulating the business contemplated hereby in any jurisdiction in which the 
business described herein is to be transacted, and to provide information or 
reports with respect to their duties hereunder pursuant to request by any 
regulatory authority having jurisdiction with respect thereto.

11.  INVESTIGATIONS; CUSTOMER COMPLAINTS

Wholesaler agrees to fully cooperate in any insurance, securities or other 
regulatory or judicial investigation or proceeding arising in connection with 
the Policies, Insurer, Distributor, Wholesaler, Agency and/or any of the 
Retailers recruited by Wholesaler.  Wholesaler and Agency shall permit 
appropriate federal and state insurance and other regulatory authorities to 
audit their records and shall furnish the foregoing authorities with any 
information which such authorities may request in order to ascertain whether 
Wholesaler or Agency is complying with all applicable laws and/or 
regulations.  Wholesaler and Agency agree to cooperate with Insurer in 
resolving all customer complaints with respect to the Policies, Wholesaler, 
Agency or any Retailer.

12.  PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING

Wholesaler shall be provided, without any expense to Wholesaler, with 
prospectuses relating to the Policies ("Prospectuses") and such other 
material as Distributor determines to be necessary or desirable for use in 
connection with sales of the Policies or the recruitment of Retailers.  No 
materials or any advertising relating to the recruitment of Retailers, or the 
Policies shall be used by Wholesaler unless the specific item has been 
approved in writing by Distributor prior to such use. In addition, Wholesaler 
shall not print, publish or distribute any advertisement, circular or any 
document relating to 

<PAGE>

Insurer, Distributor or the Policies unless such advertisement, circular, or 
document shall have been approved in writing by Insurer and Distributor prior 
to such use.  No representations in connection with the recruitment of 
Retailers, or the sale of the Policies, other than those contained in the 
currently effective registration statements and Prospectuses for the Policies 
filed with the SEC, or in the aforesaid approved materials, shall be made by 
Wholesaler.  Wholesaler shall only recruit Retailers who are licensed in 
states where Policies have been approved by state authorities.  Upon 
termination of this Agreement, all Prospectuses, sales promotion material, 
advertising, circulars, and documents relating to the recruitment of 
Retailers, or the sales of the Policies shall be promptly turned over to 
Insurer free from any claim or retention of rights by the Wholesaler.

13.  BOOKS AND RECORDS

Wholesaler shall maintain the books, accounts, and records as required by 
applicable laws and regulations.  The books, accounts and records of 
Wholesaler shall clearly and accurately disclose the nature and details of 
Wholesaler's activities related hereto.  Wholesaler shall keep confidential 
all information obtained pursuant to this Agreement (including, without 
limitation, names of purchasers of Policies) and shall disclose such 
information only if Insurer has authorized such disclosure in writing, or if 
such disclosure is expressly required by applicable federal or state 
authorities.  Distributor shall have access to all books, accounts and 
records of Wholesaler pertaining to the Policies.

14.  RIGHT OF OFFSET, LIABILITY OF WHOLESALER, AND LEGAL PROCEEDINGS

Wholesaler hereby authorizes Insurer to set off from all amounts otherwise 
payable to Wholesaler all liabilities of Wholesaler or Retailers to Insurer.  
Wholesaler shall be jointly and severally liable with Retailers for the 
payment of all monies due to Insurer which may arise out of this Agreement or 
any other agreement between Wholesaler, Retailer and Insurer including, but 
not limited to, any liability for any chargebacks or for any amounts advanced 
by or otherwise due Insurer hereunder. The determination of the amount of any 
liabilities shall be at the sole discretion of Insurer.  The parties agree 
Insurer retains the absolute and unilateral right to settle and resolve all 
claims or causes of action, in its sole discretion, raised or asserted by any 
person concerning the actions of Wholesaler or Retailers. Wholesaler's joint 
and several liability shall not be contingent on input by Wholesaler in any 
such settlements or resolutions.  A first lien is hereby reserved to Insurer 
upon any sums due to Wholesaler from Insurer for the satisfaction of any 
liability arising pursuant to this Agreement.  Insurer and Distributor do not 
waive any of its other rights to pursue collection of any indebtedness owed 
by Wholesaler or Retailers to Insurer. In the event Insurer initiates legal 
action to collect any indebtedness of Wholesaler or Retailers, or their 
agents, Wholesaler shall reimburse Insurer for reasonable attorney fees and 
expenses in connection therewith.  As used in this Section 14, "Insurer" 
shall be deemed to refer to, and shall include, all affiliates of Insurer.

<PAGE>

15.  INDEMNIFICATION

Insurer and Distributor hereby agrees to indemnify and hold harmless Agency, 
Wholesaler and each of its affiliates, officers or directors against any 
losses, expenses (including reasonable attorneys' fees), claims, damages or 
liabilities to which Agency, Wholesaler or such affiliates, officers or 
directors becomes subject insofar as such losses, claims, damages or 
liabilities (or actions in respect thereof) arise out of or are based upon 
Insurer's performance, non-performance or breach of this Agreement, or are 
based upon any untrue statement contained in any registration statement (or 
any post-effective amendment thereof) or in the Prospectus or any amendment 
or supplement to the Prospectus.

Wholesaler and Agency hereby agree, jointly and severally, to indemnify and 
hold harmless Insurer and Distributor and each of their current and former 
affiliates, directors and officers and each person, if any, who controls or 
has controlled Insurer or Distributor within the meaning of the federal 
securities laws, against any losses, expenses (including reasonable 
attorneys' fees), claims (including, but not limited to, claims for 
commissions or other compensation), damages or liabilities to which Insurer 
and Distributor and any such affiliates, director or officer or controlling 
person may become subject insofar as such losses, claims, damages or 
liabilities (or actions in respect thereof) arise out of or are based upon 
Wholesaler's or Retailer's recruited by Wholesaler, performance, 
non-performance, or breach of this Agreement or any other agreement between 
Wholesaler, Retailer and Insurer including, but not limited to, any 
unauthorized use of sales materials, any misrepresentations, or any sales 
practices concerning the Policies.

16.  INTEREST

Any unpaid obligation of Wholesaler to Insurer or Distributor under this 
Agreement shall accrue interest at the lesser of the rate of fifteen percent 
per annum, or the maximum interest rate otherwise permitted by applicable law.

17.  LIMITATIONS

Nothing in this Agreement shall be construed as authorizing Wholesaler to 
incur any indebtedness on behalf of Insurer or Distributor or any of its 
affiliates.  No party other than Insurer and Distributor shall have the 
authority on behalf of Insurer or Distributor to enter into any selling 
agreement, or to make, alter, waive or discharge any policy, contract, or 
certificate issued by Insurer, to waive any forfeiture or to grant, permit, 
nor extend the time for making any payments nor to guarantee earnings or 
rates, nor to alter the forms which Insurer may prescribe or substitute other 
forms in place of those prescribed by Insurer, nor to enter into any 
proceeding in a court of law or before a regulatory agency in the name of or 
on behalf of Insurer.

<PAGE>

18.  INDEPENDENT CONTRACTORS

Wholesaler, Agency and Retailers are independent contractors with respect to 
Insurer and Distributor.  Nothing contained within this Agreement shall be 
construed as creating a partnership between the parties hereto.  Wholesaler, 
Agency and their respective agents, representatives, and employees shall not 
at any time hold themselves out to the public to be employees of Insurer or 
Distributor.

19.  NOTICES

All notices or communications shall be sent to the address shown below or to 
such other address as the party may request by giving written notice to the 
other parties:

          Insurer:

          EquiTrust Life Insurance Company
          Suite 440
          5000 Westown Parkway
          West Des Moines, Iowa  50266

          Distributor:

          EquiTrust Marketing Services, Inc.
          5400 University Avenue
          West Des Moines IA  50266


          Wholesaler:


          (b)  For purpose of communications pertaining to compliance and
supervision, Wholesaler hereby designates the following person and address to
receive such communications and notices at the following address:


          ---------------------------------------------


          ---------------------------------------------


          ---------------------------------------------


          ---------------------------------------------

Wholesaler covenants to promptly notify Insurer and Distributor of any change 
in such designated person or address.

<PAGE>

20.  ENTIRE AGREEMENT

This Agreement is the entire agreement and understanding between the parties 
hereto with respect to the subject matter hereof and supersedes all prior 
agreements and understandings among such parties with respect to such subject 
matter.  No course of dealing, course of performance and no parole evidence 
of any nature shall be used to supplement or modify any terms hereof, 
provided, however, any obligation of Wholesaler to Insurer or any of its 
affiliates pursuant to a prior agreement of any type shall continue as an 
obligation thereunder.

21.  SEVERABILITY

Any provision of this Agreement which is found to be invalid, void or illegal 
shall in no way affect, impair or invalidate any other provision hereof, and 
such other provisions shall remain in full force and effect.

22.  AMENDMENT OF AGREEMENT

Insurer and Distributor reserve the right to amend this Agreement at any 
time, and the receipt of compensation on any Policy written by any Retailer 
recruited by Wholesaler after notice of any such amendment has been sent to 
Wholesaler shall constitute the Wholesaler's agreement to any such amendment.

23.  ASSIGNMENT

This Agreement may not be assigned except upon the written consent of all 
parties; provided, however, that the rights, obligations, duties and 
responsibilities of Distributor hereunder may be assigned to a properly 
qualified affiliate of Insurer upon the written consent of Insurer and 
Distributor. 

24.  WAIVER

Failure of any party to insist upon strict compliance with any of the 
conditions of this Agreement shall not be construed as a waiver of any of the 
conditions, but the same shall remain in full force and effect.  No waiver of 
any of the provisions of this Agreement shall be deemed, or shall constitute 
a waiver of any other provisions, whether or not similar, nor shall any 
waiver constitute a continuing waiver.

25.  BINDING EFFECT

This Agreement shall be binding on and shall inure to the benefit of the 
parties to hereto and their respective successors and assigns; provided that 
Wholesaler may not assign this Agreement or any rights or obligations 
hereunder without the prior written consent of Insurer.

<PAGE>

26.  GOVERNING LAW

This Agreement shall be construed in accordance with and governed by the laws 
of the state of Iowa.

27.  TERMINATION

This Agreement may be terminated, without cause, by any party upon thirty 
(30) days prior written notice; and may be terminated for failure to perform 
satisfactorily or other cause by any party immediately; and shall be 
terminated if Insurer or Wholesaler shall cease to be broker-dealers, or a 
registered representative of such a registered broker-dealer, under the 
Exchange Act or members in good standing with the NASD.  Without limiting the 
foregoing, Insurer or Distributor may terminate this Agreement if it is 
determined by Insurer or Distributor, in their sole and absolute discretion, 
that Wholesaler is not adequately recruiting Retailers or promoting or 
providing services to facilitate the solicitations for and sales of the 
Policies.  Upon termination of this Agreement, the terms of Sections 8, 11, 
12, 13,14, 15, 16, 17 and 26 shall survive and be binding upon the parties 
hereto.

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement 
to be duly executed as of the day and year first above written.

INSURER:

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

Name:
     ------------------------------

Title:
      -----------------------------


DISTRIBUTOR:

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

Name:
     ------------------------------

Title:
      -----------------------------


WHOLESALER:

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

Name:
     ------------------------------

Title:
      -----------------------------


AGENCY

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

Name:
     ------------------------------

Title:
      -----------------------------

<PAGE>

                                     EXHIBIT A
                                          
                                    THE POLICIES




EquiTrust Life Annuity Account

EquiTrust Life Variable Account

<PAGE>

                                     EXHIBIT B
                         ADMINISTRATIVE SERVICES AGREEMENT
                                      BETWEEN
                                          
                              [INSERT BROKER/DEALER].
                                          
                                        AND
                                          
                             [INSERT INSURANCE AGENCY]



              This Administrative Services Agreement, made as of the _____ 
day of __________, 199___, by and between ___________________. 
("Broker/Dealer"), a corporation organized and existing under the laws of the 
State of ___________, and _________________________. ("Insurance Agency"), a 
corporation organized and existing under the laws of the State of ______.

                                    WITNESSETH:

              WHEREAS, Broker/Dealer is a broker/dealer registered with the 
Securities and Exchange Commission ("SEC"); 

              WHEREAS, Broker/Dealer desires to market variable insurance
product in (_______);

              WHEREAS; variable insurance products may be sold in (_______) only
by persons that are licensed insurance agencies;

              WHEREAS; (________) imposes requirements relating to domestic
incorporation of insurance agencies that Broker/Dealer cannot satisfy;

              WHEREAS; Insurance Agency is a licensed insurance agency and is
associated with Broker/Dealer through stock ownership or contractual
arrangement; and

              WHEREAS; Broker/Dealer and Insurance Agency desire to enter 
into an arrangement for the offer and sale of variable insurance products 
through common employees and representatives of Broker/Dealer and Insurance 
Agency that complies with the terms and conditions of the First of America 
Brokerage Service, Inc. no-action letter issued by the SEC staff (pub. avail 
Sept. 28, 1995) so that neither Insurance Agency nor its unregistered 
employees (defined below) will be required to register separately with the 
SEC as broker/dealers pursuant to Section 15(b) of the Securities Exchange 
Act of 1934 (the "1934 Act");

              NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties set forth below, the parties hereto agree as
follows:


                                     ARTICLE 1

DEFINITIONS

       1.1    DUAL REPRESENTATIVES.  Individuals who are registered principals
or representatives of Broker/Dealer and licensed insurance agents associated
with Insurance Agency.

<PAGE>

       1.2    EFFECTIVE DATE.  The date as of which this Agreement is executed.

       1.3    UNREGISTERED EMPLOYEES.  Individuals associated with Broker/Dealer
or Insurance Agency that do not hold all of the required registrations, licenses
and qualifications to sell Variable Products.

       1.4    VARIABLE PRODUCTS.  The variable life insurance policies and
variable annuity contracts offered from time to time by Broker/Dealer and
Insurance Agency in (__________).


                                     ARTICLE 2
                     REPRESENTATIONS, WARRANTIES AND COVENANTS

       2.1    ORGANIZATION AND GOOD STANDING.  Each party hereto represents and
warrants that it is a corporation duly organized, validly existing and in good
standing under the laws of that jurisdiction set forth on page one (1) of this
Agreement; has all requisite corporate power to carry on its business as it is
now being conducted and is qualified to do business in each jurisdiction in
which such qualification is necessary under applicable law.

       2.2    REGISTRATION OF BROKER/DEALER.  Broker/Dealer represents and
warrants that, at all times when performing its functions and fulfilling its
obligations under this Agreement, it is or will be registered as a broker/dealer
with the SEC and in each state or other jurisdiction in which Broker/Dealer
intends to perform its functions and fulfill its obligations hereunder, if
required, and is or will be a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD").

       2.3    LICENSING AND APPOINTMENT OF INSURANCE AGENCY.  Insurance Agency
represents and warrants that, at all times when performing its functions and
fulfilling its obligations under this Agreement, it is or will be:  (a) licensed
to sell Variable Products in each state or other jurisdiction in which Insurance
Agency intends to perform its functions and fulfill its obligations hereunder;
and (b) appointed by the insurance company issuing the Variable Products.

       2.4    AUTHORIZATION.  Each party hereto represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate action, and when so executed and delivered this Agreement will be the
valid and binding obligation of such party enforceable in accordance with its
terms.

       2.5    NO CONFLICTS. Each party hereto represents and warrants that the
consummation of the transactions contemplated herein, and the fulfillment of the
terms of this Agreement, will not conflict with, result in any breach of any of
the terms and provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of such party, or
any indenture, agreement, mortgage, deed of trust, or other instrument to which
such party is a party or by which it is bound, or violate any law, or, to the
best of such party's knowledge, any order, rule or regulation applicable to such
party of any court or of any federal or state regulatory body, administrative
agency or any other governmental instrumental having jurisdiction over such
party or any of its properties.


                                     ARTICLE 3
                 RESPONSIBILITIES AND OBLIGATIONS OF BROKER/DEALER

       3.1    REGISTRATION OF DUAL REPRESENTATIVES: ASSOCIATED PERSONS. 
Broker/Dealer shall ensure that each Dual Representative will be registered and
qualified as necessary with the NASD and any appropriate state regulatory
authority, and will be deemed an associated person of Broker/Dealer within the
meaning of Section 3(a)(18) of the 1934 Act.

<PAGE>

       3.2    TRAINING AND SUPERVISION.  Broker/Dealer, through its designated
principals or members of its staff authorized to supervise employees, shall
train, supervise, control, and assume responsibility for all of the securities
activities of the Dual Representatives in connection with the offer and sale of
Variable Products.

       3.3    CONDUCT MANUALS TO UNREGISTERED EMPLOYEES.  Broker/Dealer shall
provide conduct manuals to be given to Unregistered Employees of Insurance
Agency that specify the limitations on their permissible activities, as set
forth below in Section 4.4.  Insurance Agency shall provide such conduct manuals
to its Unregistered Employees.  A form of such manual is attached hereto as
EXHIBIT A.

       3.4    SUPERVISORY PROCEDURES TO DUAL REPRESENTATIVES.  Broker/Dealer
shall require Dual Representatives to adhere to the policies and procedures
contained in Broker/Dealer's written Supervisory Procedures for registered
representatives, and Broker/Dealer shall monitor their compliance in this
regard.

       3.5    COMPLIANCE WITH APPLICABLE LAW.  Broker/Dealer shall comply, and
shall require that the Dual Representatives comply, with all applicable
statutory and regulatory requirements of the federal and state securities laws,
rules, regulations and regulatory policies and all applicable NASD rules and
regulatory policies.

       3.6    ADVERTISEMENTS AND PROMOTIONAL MATERIALS.  Neither Broker/Dealer
nor Insurance Agency shall use any advertisements or promotional materials
unless a designated principal of Broker/Dealer shall have approved such
advertisements and promotional materials prior to their distribution to ensure
that they are in compliance with federal and state securities laws and NASD
rules.  Broker/Dealer shall assume full responsibility for all such
advertisements and promotional materials, and all such materials shall be deemed
to be Broker/Dealer's materials.

       3.7    MAINTENANCE OF BOOKS AND RECORDS.  Broker/Dealer shall maintain
books and records relating to transactions in Variable Products in its home
office in _________________>  Where state insurance law mandates, duplicate
books and records relating to the sales of Variable Products may be maintained
by Insurance Agency, as stated below in Section 4.6.  Such books and records
will be deemed books and records of Broker/Dealer and will be readily accessible
for examination by the SEC, the NASD, and other self-regulatory organizations of
which Broker/Dealer may become a member and other governmental authorities.


                                     ARTICLE 4
                RESPONSIBILITIES AND OBLIGATIONS OF INSURANCE AGENCY

       4.1    ASSOCIATED PERSON.  Insurance Agency shall be deemed an associated
person of Broker/Dealer within the meaning of Section 3(a)(18) of the 1934 Act.

       4.2    DUAL REPRESENTATIVES.  All securities services in connection with
the sale of Variable Products will be provided by the Insurance Agency only
through the Dual Representatives.  Insurance Agency shall ensure that the Dual
Representatives will effect securities transactions and provide securities
services related to variable insurance products.

       4.3    SUSPENSION.  Insurance Agency shall terminate or suspend from all
Variable Products activities conducted by Insurance Agency any Dual
Representative whom the SEC, the NASD or any other self-regulatory organization
bars or suspends from association with Broker/Dealer or any other broker/dealer.

       4.4    UNREGISTERED EMPLOYEES.  Insurance Agency shall ensure that its
Unregistered Employees shall not:  (a) engage in any securities activities; or
(b) receive any compensation based on transactions in securities or the
provision of securities advice.  Insurance Agency shall further ensure that 

<PAGE>

its Unregistered Employees will not recommend any security, give investment
advice with respect to securities, discuss the merits of any security or type of
security, or handle any question that might require familiarity with the
securities industry.  Insurance Agency shall require all Unregistered Employees
to refer all Variable Products-related questions to Dual Representatives. 
Insurance Agency shall further ensure that Unregistered Employees will not
handle or maintain customer funds in connection with securities transactions
other than providing clerical or ministerial assistance.  These obligations
concerning Unregistered Employees are included in Broker/Dealer's conduct manual
for Unregistered Employees, which will be provided to Unregistered Employees of
Insurance Agency, as stated in Sections 3.3 and 4.5, and is attached hereto as
Exhibit A.

       4.5    MONITORING UNREGISTERED EMPLOYEES.  Insurance Agency shall monitor
the activities of its Unregistered Employees, and ensure their compliance with
the limitations on their permissible activities as set forth in Broker/Dealer's
conduct manual for Unregistered Employees.

       4.6    MAINTENANCE OF BOOKS AND RECORDS.  Where state insurance law
mandates, duplicates of those books and records maintained by Broker/Dealer
relating to the sales of Variable Products will be maintained by Insurance
Agency, although such books and records will be deemed books and records will be
deemed books and records of Broker/Dealer.  Insurance Agency shall ensure that
such books and records will be readily accessible for examination by the SEC,
and NASD, any other self-regulatory organization of which Broker/Dealer may
become a member, and other governmental authorities.


                                     ARTICLE 5
                           PAYMENTS FOR VARIABLE PRODUCTS

       5.1    CUSTOMER CHECKS: HANDLING CUSTOMER FUNDS.  Broker/Dealer and
Insurance Agency shall take all necessary and appropriate steps to ensure that
the following procedures are observed:


       (a)    Initial checks and applications for the purchase of Variable
              Products shall be forwarded by Broker/Dealer by noon of the
              following business day to the insurance company issuing the
              Variable Products and shall bear the initials of a principal of
              the Broker/Dealer indicating that the application has been
              reviewed by such principal for suitability, completeness and
              accuracy;

       (b)    any subsequent payments will be sent directly by the customer to
              the insurance company issuing the Variable Products;

       (c)    if any checks or applications are received by Broker/Dealer or
              Insurance Agency, such checks and applications will be forwarded
              to the insurance company issuing the Variable Products by
              Broker/Dealer, or its Dual Representatives, by noon of the next
              business day following such receipt;

       (d)    if the insurance company issuing the Variable Products receives
              customer checks and applications directly, Broker/Dealer shall
              request from such insurance company copies necessary to make any
              required suitability determinations; and

       (e)    only Dual Representatives (and no Unregistered Employees) will: 
              (i) handle checks routed through Broker/Dealer and Insurance
              Agency; and (ii) receive or handle customer funds in connection
              with the sale of Variable Products.  

Neither Broker/Dealer, Insurance Agency, nor any of their employees shall 
cash premium checks, or use any portion of a premium check for a commission, 
if any, or for any other purpose other than as a premium.

<PAGE>

                                     ARTICLE 6
                                    COMPENSATION


       6.1    COMPENSATION.  (INSERT COMPENSATION TERMS OR REFER TO 
SCHEDULE.) Insurance Agency shall pay to Broker/Dealer as compensation for 
Broker/Dealer's services hereunder one hundred (100) percent of the 
compensation it receives for the sale of Variable Products, net of any 
payments made to Dual Representatives, so that such compensation can be 
included in the revenues of the Broker/Dealer for purposes of complying with 
applicable laws, rules, regulations, and regulatory policies.  Any 
compensation paid to Dual Representatives for securities transactions shall 
be determined solely by Broker/Dealer and such payments shall be paid as 
directed by, and on behalf of, Broker/Dealer and shall be included in the 
revenues of the Broker/Dealer.

ARTICLE 7
                                 GENERAL PROVISIONS

       7.1    TERM OF AGREEMENT:  TERMINATION.  This Agreement will become
effective as of the Effective Date and will remain in effect for a period of one
year, and will automatically continue in effect for one-year periods thereafter.
This Agreement may be terminated earlier by agreement in writing by all the
parties hereto.  After termination takes effect, Insurance Agency shall not hold
itself out as being authorized or able to sell Variable Products or as being
associated with Broker/Dealer.  Furthermore, upon termination of this Agreement,
all authorizations, rights, and obligations shall cease except:  (a) the
agreements contained in Sections 4.6 and 7.10 hereof; and (b) the obligation to
settle accounts hereunder.

       7.2    ASSIGNMENT SUCCESSION.  This Agreement will not be assignable by
any party hereto except that each party may assign its rights (but not its
obligations) hereunder to any affiliated company, provided that such company is
properly licensed and registered.  This Agreement will insure to the benefit of
and be binding upon the parties and each of their successors.

       7.3    ENTIRE AGREEMENT:  MODIFICATION.  This Agreement contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties, and no waiver,
modification or change of any of its provisions will be valid unless in writing
and signed by the parties hereto, or in the case of a waiver, by the party
waiving compliance.

       7.4    WAIVER OF BREACH.  Failure of any party to enforce any provision
of this Agreement will not constitute a course of conduct or waiver in the
future of the right to enforce the same or any other provision.

       7.5    SEVERABILITY:  PARTIAL INVALIDITY.  The parties to this Agreement
desire and intend that the terms and conditions of this Agreement be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought.  The parties agree
specifically that, if any particular term or condition of this Agreement is
adjudicated, or becomes by operation or law, invalid or unenforceable, this
Agreement will be deemed amended to delete the portion that is adjudicated, or
that becomes by operation of law, invalid or unenforceable, the deletion or
reduction to apply only with respect to the operation of the term or condition,
and the remainder of the Agreement to remain in full force and effect.  A
deletion or reduction resulting from any adjudication will apply only with
respect to the operation of that term in the particular jurisdiction in which
the adjudication is made.

<PAGE>

       7.6    NOTICES.  Any notice, request, demand or other communication
required or permitted hereunder will be in writing and will be delivered in one
of the following manners:  by personal delivery, which will be effective on the
day so delivered; by registered or certified mail, which will be effective three
days after mailing; by telecopier, which will be effective when receipt is
acknowledged; and by courier guaranteeing next day delivery, which will be
effective on the earlier of the second business day after timely delivery to the
courier or the day of actual delivery by the courier.  All notices to a party
will be sent to the following addresses or to such other address or person as
such party may designate by notice to each other party hereunder:

              (a)    TO BROKER/DEALER:



              (b)    TO INSURANCE AGENCY:



       7.7    GOVERNING LAW.  This Agreement will be governed by and construed
in accordance with the internal laws of the State of (__________) without regard
to the conflict of law provisions thereof.

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

       7.9    HEADINGS.  The headings in the sections of this Agreement are
inserted for convenience only and will not constitute a part hereof.

       7.10   COMPLAINTS AND INVESTIGATIONS.  The parties will notify each other
promptly if either receives any customer complaint or notice of any regulatory
investigation or proceeding or judicial proceeding with respect to their
respective activities or the activities of any Dual Representative.  The parties
will cooperate fully in investigating any such complaint and in responding to
any such proceeding.

              IN WITNESS HEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date and year first above written.

                     [Broker/Dealer].


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

                                          Name:
                                               ---------------------------------

                                          Title:
                                                --------------------------------


                     [Insurance Agency]

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

                                          Name:
                                               ---------------------------------

                                          Title:
                                                --------------------------------

<PAGE>

                                     EXHIBIT A
                                   CONDUCT MANUAL
                                          
                             CONDUCT MANUAL RELATING TO
                      ACTIVITIES OF UNREGISTERED EMPLOYEES OF
                                          
                                 [INSURANCE AGENCY]
                                          
             IN CONNECTION WITH THE SALE OF VARIABLE INSURANCE PRODUCTS


              Since you are not licensed or qualified to sell variable insurance
products ("Variable Products"), you must be very careful not to perform any
activities or provide any information to customers that could confuse a customer
as to your role in the sale of Variable Products.  Under federal and state
securities laws, and state insurance laws, only properly licensed registered,
and qualified persons may solicit customers or recommend or discuss insurance or
investment products with a customer.

              In sum, this means that you should provide only "clerical" and
"ministerial" services.  The permissible activities for employees of
______________________. ("Insurance Agency") who do not hold all the required
securities registrations and insurance licenses (hereinafter "Unregistered
Employees") shall be limited to:

              (a)    referring prospective customers to an individual who holds
                     all the requisite insurance and securities qualifications
                     (a "Dual Representative");

              (b)    arranging an appointment with or taking a message for a
                     Dual Representative if a Dual Representative is absent or
                     unavailable;

              (c)    referring telephone calls and other written and oral
                     communications to a Dual Representative; and

              (d)    referring all Variable Products-related questions to a Dual
                     Representative.

              When engaging in any of the foregoing permissible activities,
Unregistered Employees shall limit his or her discussion of the Variable
Products to statements advising customers of the availability of information
about the Variable Products from the broker/dealer affiliated with Insurance
Agency, i.e., _________________-, and the referral of such customer to a Dual
Representative.  Such Unregistered Employees shall not offer investment advice,
make recommendations, discuss the features, merits, investment options, or
suitability of any Variable Product or handle any question that might require
familiarity with the securities industry.  Such Unregistered Employees shall not
handle or maintain customer funds in connection with securities transactions,
handle or maintain securities, or have any involvement in securities
transactions other than providing clerical or ministerial advice.  Nothing in
this Conduct Manual shall limit the ability of Insurance Agency or its employees
to provide administrative or clerical services to _________________________.

<PAGE>

                                     EXHIBIT C
                                          
                                    COMPENSATION

<PAGE>

- --------------------------------------------------------------------------------

NON-PARTICIPATING
FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY POLICY

RETIREMENT BENEFIT PAYABLE ON THE RETIREMENT DATE. DEATH BENEFIT PAYABLE AT 
DEATH BEFORE THE RETIREMENT DATE. FLEXIBLE PREMIUMS PAYABLE FOR THE 
ANNUITANT'S LIFE OR UNTIL THE RETIREMENT DATE. THE ACCUMULATED VALUE IN THE 
VARIABLE ACCOUNT IS BASED ON THE INVESTMENT EXPERIENCE OF THAT ACCOUNT, AND 
MAY INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. THE 
VARIABLE FEATURES OF THIS POLICY ARE DESCRIBED ON PAGES 9 AND 10.

EquiTrust Life Insurance Company will pay the benefits of this policy subject
to all of its terms.

RIGHT TO EXAMINE POLICY

The owner may cancel this policy by delivering or mailing a written notice or
sending a telegram or fax to the agent through whom it was purchased or the 
EquiTrust Life Insurance Company, 5400 University Avenue, West Des Moines, 
Iowa 50266-5997 and by returning the policy or contract before midnight of 
the twentieth day after the date you receive the policy. Notice given by mail 
and return of the policy or contract by mail are effective on being 
postmarked, properly addressed and postage prepaid. EquiTrust Life will 
refund, within seven days after it receives the returned policy, an amount 
equal to the greater of the premiums paid or the sum of:

a)   the accumulated value of the policy on the date the policy is received at
     the home office;
b)   any administrative charges which were deducted; and
c)   amounts equal to daily charges against the variable account.

Signed for and on behalf of EquiTrust Life Insurance Company at its home
office at 5400 University Avenue, West Des Moines, Iowa, 50266-5997, effective
as of the date of issue of this policy.



/s/ Edward M. Wiederstein                         /s/ Richard D. Harris
               President                                    Secretary



EQUITRUST LIFE INSURANCE COMPANY                [LOGO]
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266-5997

- --------------------------------------------------------------------------------

<PAGE>

This policy is a legal contract between the owner and EquiTrust Life Insurance
Company.

READ YOUR POLICY CAREFULLY

INDEX OF MAJOR POLICY PROVISIONS

POLICY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  Page 3
     Annuitant; Age; Sex; Policy Number; Policy Date; Owner(s);
     Normal Retirement Date; Interest Rates; Schedule of Forms
     and Premiums; Schedule of Charges; Schedule of Investment
     Options.

SECTION 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .  Page 5
     1.1 You or Your; 1.2 Annual Administrative Charge; 1.3
     Annuitant; 1.4 Age; 1.5 Beneficiary; 1.6 Business Day; 1.7
     Declared Interest Option; 1.8 Due Proof of Death; 1.9
     Eligibility for Waiver of Surrender Charge; 1.10 Fund;
     1.11 General Account; 1.12 Home Office; 1.13 Owner;
     1.14 Physician; 1.15 Policy Anniversary; 1.16 Policy
     Date; 1.17 Policy Year; 1.18 Retirement Date; 1.19 SEC;
     1.20 Surrender Charge; 1.21 Qualified Nursing Care Center;
     1.22 Valuation Period; 1.23 Variable Account; 1.24 We, Our,
     Us or the Company.

SECTION 2 - THE CONTRACT. . . . . . . . . . . . . . . . . . . . . . .  Page 6
     2.1 Retirement Date; 2.2 Contract; 2.3 Modification; 2.4
     Incontestable Clause; 2.5 Misstatement of Age or Sex; 2.6
     Return of Policy and Policy Settlement; 2.7 Termination;
     2.8 Non-Participation.

SECTION 3 - OWNERSHIP AND BENEFICIARIES . . . . . . . . . . . . . . .  Page 7
     3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or
     Beneficiary; 3.4 Assignment.

SECTION 4 - PREMIUMS. . . . . . . . . . . . . . . . . . . . . . . . .  Page 7
     4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Unscheduled
     Premiums; 4.4 Allocation of Premiums.

SECTION 5 - ANNUITY AND DEATH BENEFITS. . . . . . . . . . . . . . . .  Page 8
     5.1 Annuity Benefit; 5.2 Death Benefit; 5.3 Death of Owner;
     5.4 Death Proceeds at Death of Annuity During Accumulation
     Period.

SECTION 6 - VARIABLE ACCOUNT  . . . . . . . . . . . . . . . . . . . .  Page 9
     6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios;
     6.4 Transfers.

SECTION 7 - ACCUMULATED VALUE BENEFITS. . . . . . . . . . . . . . . . Page 10
     7.1 Accumulated Value; 7.2 Net Accumulated Value; 7.3
     Variable Accumulated Value; 7.4 Subaccount Units; 7.5 Unit
     Value; 7.6 Declared Interest Option Accumulated Value;
     7.7 Declared Interest Option Interest; 7.8 Surrender; 7.9
     Surrender Charge; 7.10 Ten Percent Withdrawal Privilege;
     7.11 Waiver of Surrender Charge; 7.12 Partial Withdrawal;
     7.13 Delay of Payment; 7.14 Tax Charges; 7.15 Annual Report.

SECTION 8 - PAYMENT OF PROCEEDS . . . . . . . . . . . . . . . . . . . Page 14
     8.1 Choice of Options; 8.2 Payment Options; 8.3 Interest
     and Mortality; 8.4 Requirements; 8.5 Effective Date;
     8.6 Death of Payee; 8.7 Withdrawal of Proceeds; 8.8 Claims
     of Creditors.

PAYMENT OPTION TABLES . . . . . . . . . . . . . . . . . . . . . . . . Page 15

Any additional benefits and endorsements which apply to this policy are listed
on the policy data page and are described in the forms which follow page 15 of
this policy.

<PAGE>

                                    POLICY DATA

Annuitant                                         [JOHN DOE]

Age                                               [35]

Sex                                               [MALE]

Policy Number                                     [12345]

Policy Date                                       [03-01-1998]

Owner(s)                                          [JOHN DOE]

Normal Retirement Date                            [11-01-2026]

On Declared Interest Option:
     Guaranteed Interest Rate                     3.00%
     Current Interest Rate                        [5.50%]
     Current Interest Rate guaranteed to:         [03-01-1999]

*************************SCHEDULE OF FORMS AND PREMIUMS*************************

Form No.            Description
- -------             -----------
434-062(06-98)      NON-PARTICIPATING FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY

<PAGE>

                                SCHEDULE OF CHARGES
 
Annual Administrative Charge:                     [$45.00 per year]
Transfer Charge:                                  [$25]
Mortality and Expense Risk Charge:                [.0038091% of the variable
                                                  cash value per day (equivalent
                                                  to 1.40% per year).]

A surrender charge will apply during the first [9] policy years.
[The surrender charge will be as shown in the following table:

                                   Surrender Charge
Policy Year                   (as a percent of Accumulated Value)
- -----------                   -----------------------------------
          1                                                  8.5%
          2                                                  8.0%
          3                                                  7.5%
          4                                                  7.0%
          5                                                  6.5%
          6                                                  6.0%
          7                                                  5.0%
          8                                                  3.0%
          9                                                  1.0%
 Thereafter                                                    0%]

However, the total surrender charge assessed will never exceed 8.5% of the
premiums paid.

                          SCHEDULE OF INVESTMENT OPTIONS

General Account:         The general assets of EquiTrust Life Insurance
                         Company.

Separate Account:        EquiTrust Life Annuity Account II

Subaccounts:                  Fund
EquiTrust-Value Growth        EquiTrust Variable Insurance Series Fund
EquiTrust-High Grade Bond     EquiTrust Variable Insurance Series Fund
EquiTrust-High Yield Bond     EquiTrust Variable Insurance Series Fund
EquiTrust-Money Market        EquiTrust Variable Insurance Series Fund
EquiTrust-Blue Chip           EquiTrust Variable Insurance Series Fund
T.Rowe-Intl Stock             T.Rowe Price International Series, Inc.
T.Rowe-MidCap Growth          T.Rowe Price Equity Series, Inc.
T.Rowe-New America Growth     T.Rowe Price Equity Series, Inc.
T.Rowe-Equity Income          T.Rowe Price Equity Series, Inc.
T.Rowe-Pers Strategy Bal      T.Rowe Price Equity Series, Inc.
Dreyfus-Intl Equity           Dreyfus Variable Investment Fund
Dreyfus- Small Cap            Dreyfus Variable Investment Fund
Dreyfus-Cap Appreciation      Dreyfus Variable Investment Fund
Dreyfus-Discip Stock          Dreyfus Variable Investment Fund
Dreyfus-Growth & Income       Dreyfus Variable Investment Fund


                              Form Number 434-062(06-98)
                                Policy Number 1234567


                                          4

<PAGE>

- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------

1.1 YOU OR YOUR
means the owner, or owners, of this policy.

1.2 ANNUAL ADMINISTRATIVE CHARGE
means a fee that is charged yearly. The annual administrative charge may go up
or down but is guaranteed not to exceed $45. The annual administrative charge as
of the policy date is shown on the policy data page.

1.3 ANNUITANT
The person (or persons) whose life (or lives) determine(s) the annuity and
death benefit. No more than two Annuitants may be named. Provisions referring to
the death of an Annuitant mean the last surviving Annuitant.

1.4 AGE
means age at the last birthday.

1.5 BENEFICIARY
The person (or persons) named by you to whom the proceeds payable on the 
death of the Annuitant will be paid. Prior to the retirement date, if no 
beneficiary survives the annuitant, you or your estate will be the 
beneficiary.

1.6 BUSINESS DAY
means a day when the New York Stock Exchange is open for trading, except for the
day after Thanksgiving, any other designated Company holidays, and any day the
home office is closed because of a weather-related or comparable type of
emergency. Assets are valued at the close of the business day.

1.7 DECLARED INTEREST OPTION
means an option pursuant to which accumulated value accrues interest at a
guaranteed minimum rate. The declared interest option is supported by the
general account.

1.8 DUE PROOF OF DEATH
Proof of death satisfactory to us. Such proof may consist of a certified copy
of the death record, a certified copy of a court decree reciting a finding of
death, or any other proof satisfactory to us.

1.9 ELIGIBILITY FOR WAIVER OF SURRENDER CHARGE
means the annuitant:
a)   is diagnosed by a Qualified Physician as having a terminal illness. A
     terminal illness is any disease or medical condition which the
     Qualified Physician expects will result in death within one year;
b)   stays in a Qualified Nursing Care Center for 90 days; or
d)   is required to satisfy the minimum distribution requirement of 
     Sec. 401(a) 9 of the Internal Revenue Code.

1.10 FUND
means the investment options shown on the policy data page. The corresponding
funds are registered with the SEC under the Investment Company Act of 1940 as
open-end diversified management investment companies or unit investment trusts.

1.11 GENERAL ACCOUNT
means all our assets other than those allocated to the variable account or any
other separate account. We have complete ownership and control of the assets of
the general account.

1.12 HOME OFFICE
means EquiTrust Life Insurance Company at its home office, 5400 University
Avenue, West Des Moines, Iowa, 50266-5997.

1.13 OWNER
The person (or persons) who own(s) the policy and who is entitled to exercise
all rights and privileges provided in the policy. The original owner(s) is shown
on the policy data page.

1.14 QUALIFIED PHYSICIAN
means a licensed, medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the annuitant, or a member
of the immediate family of either you or the annuitant.

1.15 POLICY ANNIVERSARY
means the same date in each year as the policy date.

1.16 POLICY DATE
means the policy date shown on the policy data page. This date is used to
determine policy years and anniversaries. The date of issue is equal to the
policy date.

1.17 POLICY YEAR
means the 12-month period that begins on the policy date or on a policy
anniversary.

1.18 RETIREMENT DATE
means the policy anniversary nearest the


                                          5

<PAGE>

retirement age chosen in the application. If no age is chosen, age 70 will be
used. Subject to the payment option provisions, the owner may change the
retirement date at any time. However, the retirement date may not be changed
after payments begin.

1.19 SEC
means the Securities and Exchange Commission, a U.S. government agency.

1.20 SURRENDER CHARGE
means a fee that is applied at the time of any partial or full surrender. The
surrender charges are shown on the policy data page.

1.21 QUALIFIED NURSING CARE CENTER
means a long term care center that is licensed to operate according to the laws
of their location. The following are qualified nursing care centers:
     a)   Skilled Nursing Center - means a center:
          i)   That provides skilled nursing care supervised by a licensed
               physician;
          ii)  That provides 24-hour nursing care by, or supervised, an R.N.;
               and
          iii) That keeps daily medical record of each patient.

     b) Intermediate Care Center - means a center:

          i)   That provides 24-hour nursing care by, or supervised by an R.N.
               or an L.P.N.; and
          ii)  That keeps a daily medical record of each patient.

     c) Hospital - means a center:

          i)   That operates for the care and treatment of sick or injured
               persons as inpatients;
          ii)  That provides 24-hour nursing care by, or supervised by, an R.N.;
          iii) That is supervised by a staff of licensed physicians; and
          iv)  That has medical, diagnostic, and major surgery capabilities or
               access to such capabilities.


     Qualified Nursing Care Center does not include:
     a)   Drug or alcohol treatment centers;
     b)   Home for the aged or mentally ill, community living centers, or places
          that primarily provide domiciliary, residency or retirement care;
     c)   Places owned or operated by a member of the annuitant's immediate
          family.

1.22 VALUATION PERIOD
means the period between the close of business on a business day and the close
of business on the next business day.

1.23 VARIABLE ACCOUNT
means the Separate Account shown on the policy data page. It is a unit 
investment trust registered with the SEC under the Investment Company Act of 
1940.

1.24 OUR, US OR THE COMPANY
means the EquiTrust Life Insurance Company.

- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------

2.1 RETIREMENT DATE
The owner may choose a retirement date on the application. However, such
retirement date may not be after the latest of the annuitant's 70th birthday or
the 10th policy anniversary. If no date is chosen on the application, age 70
will be used. The owner may change the retirement date at any time. However, the
retirement date may not be changed after payments begin. However, if the policy
is subject to Internal Revenue Service minimum distribution requirements, we
will begin distributions as required.

2.2 CONTRACT
This policy is a legal contract. We issue this policy in consideration of the 
first premium and the statements in the application. The entire contract 
consists of:
a)   the basic policy;
b)   any endorsements or additional benefit riders;
c)   the attached copy of your application; and
d)   any amendments, supplemental applications or other attached papers.

We rely on statements made in the application for the policy. These statements
in the absence of fraud are deemed representations and not warranties. No
statement will void this policy or be used in defense of a claim unless:
a)   it is contained in the application; and
b)   such application is attached to this policy.

2.3 MODIFICATION
No one can change any part of this policy except


                                          6
<PAGE>

the owner and one of our officers. Both must agree to a change, and it must be
in writing. No agent may change this policy or waive any of its provisions.

2.4 INCONTESTABLE CLAUSE
We will not contest this policy from its policy date.

2.5 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the premium actually paid would have bought
at the correct age or sex.

2.6 RETURN OF POLICY AND POLICY SETTLEMENT
We reserve the right to have this policy sent to us for any:
a) modification; b) death settlement; c) surrender or partial surrender; 
d) assignment; e) change of owner or beneficiary; f) election; or g) exercise
of any policy privilege.

We will send a payment contract to replace this policy if any payment option is
chosen. All sums to be paid by us under this policy are considered paid when
tendered by us at our home office.

2.7 TERMINATION
This policy ends when any one of the following events occurs:
a)   the owner requests that the policy be canceled;
b)   the annuitant dies; or
c)   the policy is surrendered.

2.8 NON-PARTICIPATION
This policy does not share in the Company's surplus or profits.

- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARIES
- --------------------------------------------------------------------------------

3.1 OWNERSHIP
The owner has all rights, title and interest in the policy during the
accumulation period and while the annuitant is living. You may exercise all
rights and options stated in the policy, subject to the rights of any
irrevocable beneficiary.

3.2 BENEFICIARY
Beneficiaries are as named in the application, unless changed by the owner. The
interests of any beneficiary in a class who dies before the annuitant will pass
to any survivors of the class, unless the policy provides otherwise. Secondary
beneficiaries will have the right to receive the proceeds only if no primary
beneficiary survives. If no beneficiary survives the annuitant, we will pay the
proceeds to you or your estate.

In finding and identifying beneficiaries we may rely on sworn statements, other
facts, or evidence we deem satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to the amount paid.

3.3 CHANGE OF OWNER OR BENEFICIARY
While the annuitant lives, a change of owner or beneficiary can be made at any 
time, subject to the following rules:
a)   the change must be in writing on a form acceptable to us;
b)   it must be signed by the owner;
c)   if the owner is more than one person, the written notice for change must be
     signed by all persons named as owner;
d)   the form must be sent to and recorded by us;
e)   a request for change of beneficiary must be signed by any irrevocable
     beneficiary; and
f)   the change will take effect on the date signed, but it will not apply to
     any payment or action by us before we receive the form.

3.4 ASSIGNMENT
No assignment of this policy will bind us unless:
a)   it is in writing on a form acceptable to us;
b)   signed by the owner; and
c)   received by us at our home office.

We will not be responsible for the validity of an assignment.

- --------------------------------------------------------------------------------
SECTION 4 - PREMIUMS
- --------------------------------------------------------------------------------

4.1 PREMIUM PAYMENT
Premium payments may be made at any time. However, we reserve the right to limit
or restrict the amount of a premium payment as we deem appropriate. Premiums are
to be paid at our home office. The first premium must be equal to or greater
than $1,000. Thereafter, premium payments are flexible as to both timing and
amount. Each premium is to be paid at our home office. No payment may be less
than $50 without our consent.

4.2 PAYMENT FREQUENCY
The first premium is due on or prior to the policy


                                          7
<PAGE>

date. We will send periodic reminder notices to the owner. The minimum amount
for which such notice will be sent will be $50. A reminder notice may be sent
for different periods, which may be 12, 6, or 3 months. The reminder notice
period may be changed upon request.

4.3 UNSCHEDULED PREMIUMS
Unscheduled premium payments of at least $50 may be made at any time prior to 
the maturity date. The Company may, in its discretion, waive the $50 minimum 
requirements. The Company reserves the right to limit the number and amount 
of unscheduled premium payments.

4.4 ALLOCATION OF PREMIUM
The owner will determine the percentage of premium that will be allocated to
each subaccount of the variable account and to the declared interest option. The
owner may choose to allocate all the premium, a percentage or nothing to a
particular subaccount or to the declared interest option. Any allocation must be
for at least 10% of the premium. A fractional percent may not be chosen.

On the policy date, premiums will be initially allocated to the money market
subaccount. On the eleventh day following the policy date, we will transfer part
or all of the accumulated value in the money market subaccount to the
subaccounts or the declared interest option in accordance with the premium
allocation percentages shown in the application. For any premium received after
we receive the signed form, the premium will be allocated in accordance with the
premium allocation percentages shown in the application or the most recent
written instructions of the owner.

The owner may change the allocation for future premiums at any time, subject to
the following rules:
a)   the policy must be in force;
b)   there must be an accumulated value;
c)   the change must be in writing on a form acceptable to us;
d)   the form must be signed by the owner;
e)   the change will take effect on the business day on or next following the
     date we receive the signed form at our home office.

A change of allocation of future premiums does not affect current accumulated
values.

- --------------------------------------------------------------------------------
SECTION 5 - ANNUITY AND DEATH BENEFITS
- --------------------------------------------------------------------------------

5.1 ANNUITY BENEFIT
If the annuitant lives to the retirement date, we will pay the annuitant a 
monthly income for the rest of the annuitant's life beginning on the retirement
date if:
a)   this policy is in force on the retirement date;
b)   the owner has not elected to have the accumulated value paid in a single
     sum; and
c)   the owner has not elected a payment option.


The amount of payments will be obtained by applying the accumulated value under
payment option 3. We will make at least 120 payments. After 120 payments the
annuitant must be living to receive further payments. If the annuitant dies
before 120 payments have been received, any remaining payments will be paid to
the beneficiary. If no beneficiary survives, we will pay the commuted value, as
determined by us, of any remaining payments to the estate of the last
beneficiary to die.

5.2 DEATH OF ANNUITANT DURING ACCUMULATION PERIOD
If the sole annuitant dies during the accumulation period and the annuitant is
not an owner, we will pay the death benefit to the beneficiary. The beneficiary
may elect to apply this sum under one of the annuity payment options as payee.
See Section 5.3 if you are the annuitant.

5.3 DEATH OF OWNER
If any owner dies prior to the retirement date and the deceased owner is the
sole annuitant, we will pay the death benefit to the beneficiary in one sum
within five (5) years of the deceased owner's death. The beneficiary may elect
(within 60 days of the date we receive due proof of death) to apply this sum
under one of the annuity payment options as payee, provided:

     a)   payments under the annuity payment option begin not later than one (1)
          year after the owner's death; and
     b)   payments will be payable for the life of the beneficiary, or over a
          period not greater than the beneficiary's life expectancy.

If any owner dies and the deceased owner is not the annuitant (or a co-annuitant
survives the


                                          8
<PAGE>

deceased owner/annuitant), the new owner will be the surviving owner if any. The
new owner will be the annuitant (unless otherwise provided) if there are no
surviving owners. If the sole new owner is the deceased owner's spouse, the
contract may be continued. If the new owner is someone other than the deceased
owner's spouse, the surrender value of the policy must be distributed within
five (5) years of the deceased owner's death.

If any owner dies on or after the retirement date, but before all proceeds
payable under this contract have been distributed, we will continue payments to
the annuitant (or, if the deceased owner was the annuitant, to the beneficiary)
under the payment method in effect at the time of the deceased owner's death.

For purposes of this section, if any owner of this contract is not an
individual, the death or change of any annuitant shall be treated as the death
of an owner.

5.4 DEATH PROCEEDS AT DEATH OF ANNUITANT DURING ACCUMULATION PERIOD
The death proceeds will be determined based on the annuitant's age on the policy
date. If there is more than one annuitant, we will use the age of the last
surviving annuitant.

If the annuitant's age on the policy date is:
a)   less than 76, the death proceeds will be equal to the greater of:
     1)   the sum of all premium payments less any partial withdrawals, as of
          the date due proof of death is received;
     2)   the accumulated value as of the date due proof of death is received;
     3)   the death benefit anniversary amount as of the date of death plus any
          premium payment made and less any partial withdrawals since the most
          recent death benefit anniversary prior to death;

          The death benefit anniversary amount is equal to the accumulated value
          on the most recent policy anniversary. The death benefit anniversary
          amount is determined on the first policy anniversary and on each
          subsequent policy anniversary thereafter.

b)   76 or greater, the death benefit is equal to the greater of:
     1)   the sum of all premium payments less any partial withdrawals, as of 
          the date due proof of death is received; or
     2)   the accumulated value as of the date due proof of death is received.

- --------------------------------------------------------------------------------
SECTION 6 - VARIABLE ACCOUNT
- --------------------------------------------------------------------------------

6.1 VARIABLE ACCOUNT
We own the assets of the variable account. We will value the assets of the
variable account each business day. The assets of such account will be kept
separate from the assets of our general account and any other separate accounts.
Income, and realized and unrealized gains or losses from assets in the variable
account will be credited to or charged against such account without regard to
our other income, gains or losses.

That portion of the assets of the variable account which equals the reserves and
other policy liabilities of the policies which are supported by the variable
account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our general account any assets of the
variable account which are in excess of such reserves and other policy
liabilities.

While the variable account is registered with the SEC and thereby subject to SEC
rules and regulations, it is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies incorporated in Iowa. The
investment policy of the variable account will not be changed without the
approval of the Insurance Commissioner of the State of Iowa. The approval
process is on file with the insurance commissioner of the state in which this
policy was delivered.

We also reserve the right to transfer assets of the variable account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"variable account," as used in this policy, shall then mean the variable account
to which the assets were transferred.

When permitted by law, we also reserve the right to:
a)   deregister the variable account under the Investment Company Act of 1940;
b)   manage the variable account under the direction


                                          9

<PAGE>

     of a committee;
c)   restrict or eliminate any voting rights of owners, or other persons who
     have voting rights as to the variable account; and
d)   combine the variable account with other separate accounts.

6.2 SUBACCOUNTS
The variable account is divided into subaccounts. The subaccounts are listed on
page 4. Subject to obtaining any approvals or consents required by applicable
law, we reserve the right to eliminate or combine any subaccounts and the right
to transfer the assets of one or more subaccounts to any other subaccount. We
also reserve the right to add new subaccounts and make such subaccounts
available to any class or series of policies as we deem appropriate. Each new
subaccount would invest in a new investment option of the fund, or in shares of
another investment company. The owner will determine the percentage of premium
that will be allocated to each subaccount in accordance with the allocation of
premium provision.

6.3 FUND INVESTMENT OPTIONS
The fund has several investment options each of which corresponds to one of the
subaccounts of the variable account. The investment options are listed on the
policy data page. Premiums allocated to a subaccount will automatically be
invested in the fund investment option associated with that subaccount. The
owner will share only in the income, gains or losses of the investment option(s)
where shares are held.

We have the right, subject to compliance with any applicable laws, to make:
a) additions to; 
b) deletions from; or 
c) substitutions for;
the shares of a fund investment option that are held by the variable account or
that the account may purchase.

We also reserve the right to dispose of the shares of an investment option of
the fund listed on page 4 and to substitute shares of another investment option
of such fund or another mutual fund investment option, if:

a)   the shares of the investment option are no longer available for investment;
     or
b)   if in our judgment further investment in the investment option should
     become inappropriate in view of the purposes of the variable account.

In the event of any substitution or change, we may, by appropriate endorsement,
make such changes in this and other policies as may be necessary or appropriate
to reflect the substitution or change.

6.4 TRANSFERS
The owner may transfer all or part of the accumulated value among the
subaccounts of the variable account and between the subaccounts and
the declared interest option, subject to the following rules:
a)   The transfer request must be in writing on a form acceptable to us.
b)   The form must be signed by the owner.
c)   The transfer will take effect as of the end of the valuation period during
     which we receive the signed form at our home office.
d)   The owner may transfer amounts among the subaccounts of the variable
     account an unlimited number of times in a policy year.
e)   The owner may transfer amounts from the declared interest option to the
     variable account an unlimited number of times. Amounts transferred from the
     declared interest option are considered transferred on a last-in-first-out
     basis.
f)   The first twelve transfers in each policy year will be made without a
     transfer charge. Thereafter, each time amounts are transferred a transfer
     charge may be imposed. This transfer charge is shown on the policy data
     page.
g)   The accumulated value on the date of the transfer will not be affected by
     the transfer except to the extent of the transfer charge. Unless paid in
     cash, the transfer charge will be deducted on a pro rata basis from the
     declared interest option and/or the subaccounts to which the transfer is
     made.
h)   The owner must transfer at least:
          (1)  a total of $100; or
          (2)  the total accumulated value in the subaccount or the total
               accumulated value in the declared interest option, if the total
               amount transferred is less than $100.
i)   No more than 25% of the accumulated value in the declared interest option
     may be transferred unless the balance in the declared interest option after
     the transfer would be less than $1,000. If the balance in the declared
     interest option would fail below $1,000, the accumulated value in the
     declared interest option may be transferred.


                                          10

<PAGE>

- --------------------------------------------------------------------------------
SECTION 7 - ACCUMULATED VALUE BENEFITS
- --------------------------------------------------------------------------------

7.1 ACCUMULATED VALUE
The accumulated value of this policy will be the sum of:
a)   the accumulated value in the subaccounts of the variable account; plus
b)   the accumulated value in the declared interest option.

All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered.

7.2 NET ACCUMULATED VALUE
The net accumulated value of this policy will be the accumulated value less a
surrender charge. All of the values are the same or more than the minimums set
by the laws of the state where the policy is delivered.

7.3 VARIABLE ACCUMULATED VALUE
On the business day on or next following the day we receive a completed
application and the minimum initial premium, the variable accumulated value is
the total amount of premium, if any, allocated to the subaccounts of the
variable account. After such date, the policy's variable accumulated value is
equal to the sum of the policy's accumulated value in each subaccount. The value
in a subaccount is equal to a) multiplied by b) where:
a)   is the current number of subaccount units; and
b)   is the current unit value.

The variable accumulated value will vary from business day to business day
reflecting changes in a) and b) above.

7.4 SUBACCOUNT UNITS
When transactions are made which affect the variable accumulated value, dollar
amounts are converted to subaccount units. The number of subaccount units for a
transaction is determined by dividing the dollar amount of the transaction by
the current unit value.

The number of units for a subaccount attributable to a policy increases when:
a)   premiums are allocated under the policy to that subaccount; or
b)   transfers from the declared interest option or other subaccounts are
     credited under the policy to that subaccount.

The number of units for a subaccount attributable to a policy decreases when:
a)   the owner makes a surrender or partial withdrawal from that subaccount;
b)   transfers are made from that subaccount to the declared interest option 
     or other subaccounts; or 
c)   the annual administrative charge shown on the policy data page is deducted
     (the annual administrative charge will be prorated among the subaccounts 
     and the declared interest option).

7.5 UNIT VALUE
The unit value for a subaccount on any business day is determined by dividing
each subaccount's net asset value by the number of units outstanding
at the time of calculation. The unit value for each subaccount was set initially
at $10.00 when the subaccounts first purchased fund shares. The
unit value for each subsequent valuation period is calculated by dividing a) by
b), where:
a)   is:
     (1)  the value of the net assets of the subaccount at the end of the
          preceding valuation period; plus
     (2)  the investment income and capital gains, realized or unrealized,
          credited to the net assets of that subaccount during the valuation
          period for which the unit value is being determined; minus
     (3)  the capital losses, realized or unrealized, charged against those net
          assets during the valuation period; minus
     (4)  any amount charged against the subaccount for taxes, or any amount set
          aside during the valuation period by the Company as a provision for
          taxes attributable to the operation or maintenance of that subaccount;
          minus
     (5)  the mortality and expense risk shown on the policy data page. This
          charge may go up or down but will never exceed 0.0038091% of the net
          daily assets in that subaccount for each day in the valuation period.
          The maximum charge corresponds to a charge of 1.40% per year of the
          average daily net assets of the subaccount for mortality and expense
          risks.

b)   is the number of units outstanding at the end of the preceding valuation
     period.


                                          11

<PAGE>

The unit value for a valuation period applies for each day in the period. We
will value the net assets in each subaccount at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.

7.6 DECLARED INTEREST OPTION ACCUMULATED VALUE
The declared interest option accumulated value as of the eleventh day following
the policy date is the premium allocated to the declared interest option as of
that date. Thereafter, the declared interest option accumulated value changes
every valuation period.

The declared interest option accumulated value increases when:
a)   premiums are allocated to the declared interest option; or
b)   transfers from the other subaccounts are credited to the declared interest
     option; or
c)   any interest is credited to the declared interest option.

The declared interest option accumulated value decreases when:
a)   the owner makes a surrender or partial withdrawal from the declared
     interest option; or
b)   transfers are made from the declared interest option to other subaccounts;
     or
c)   the annual administrative charge shown on the policy data page is deducted
     (the annual administrative charge will be prorated among the subaccounts
     and the declared interest option).

For the purposes of the above calculation, interest does not accrue on amounts
deducted for policy charges, amounts transferred from or on amounts surrendered
or withdrawn from the declared interest option. Interest is accrued on the
accumulated value of the declared interest option on a daily basis and is
credited no less frequently than once a policy year.

7.7 DECLARED INTEREST OPTION INTEREST
The guaranteed minimum interest rate applied to the declared interest option
accumulated value is an effective rate of 3.0% per year. Interest in excess of
the minimum rate may be applied. The amount of the excess interest credited for
any policy year will be set by us at the start of that policy year and will be
guaranteed for such year.

7.8 SURRENDER
Before the retirement date, the owner may surrender the policy, subject to the
following rules:
a)   The owner must send a written request to us along with such information or
     evidence as may be required by law or as may be needed to process the
     request.
b)   The amount of any such surrender may be paid in cash or we will apply part
     or all of it under a payment option.
c)   We have the right to defer payment of a surrender from the declared
     interest option for up to 6 months.
d)   The amount of accumulated value surrendered will be subject to a surrender
     charge.
e)   Upon surrender, the policy will terminate.

7.9 SURRENDER CHARGE
The surrender charge is shown on the policy data page. The total surrender
charges assessed will never exceed 8.5% of premiums paid.

If all of the accumulated value is applied under payment option 2, 3, 4 or 5,
the surrender charge will be reduced as follows:
a)   if option 3 or 5 is used, the surrender charge will be zero; or
b)   if option 2 or 4 is used, the surrender charge will be applied, however,
     the fixed number of years for which payment will be made is added to the
     number of years the contract has been in force to determine what the charge
     will be.

All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered.

7.10 TEN PERCENT WITHDRAWAL PRIVILEGE
After the first policy year, amounts up to the "withdrawal privilege amount" may
be withdrawn from the policy during each policy year without being subject to
the surrender charge. The withdrawal privilege amount will be equal to 10% of
the accumulated value on the most recent policy anniversary. If the policy is
subsequently surrendered during the policy year, the surrender charge will be
applied to any partial withdrawals taken during that policy year, as well as the
amount surrendered.

7.11 WAIVER OF SURRENDER CHARGE
The owner may make a surrender of this policy without incurring a surrender
charge if the annuitant becomes eligible for waiver of the surrender charge.


                                          12

<PAGE>

The waiver of the surrender charge is subject to the following rules:
a)   We must receive a written request on our form signed by the owner.
b)   The policy must be in force or not providing benefits under any payment
     option.
c)   Proof must be provided that the conditions of eligibility requirements for
     waiver of the surrender charge have been met, including an attending
     physician's statement and any other proof we may require. We reserve the
     right to seek a second medical opinion or have an examination performed at
     our expense by a physician we choose.
d)   If there are joint annuitants, you may exercise this waiver privilege once,
     for either the first or second annuitant, but not both.
e)   The annuitant must become eligible for waiver of surrender charge after the
     first contract year ends.

7.12 PARTIAL WITHDRAWAL
Before the retirement date, the owner may obtain a partial withdrawal of the
accumulated value, subject to the following rules:
a)   The amount of any partial withdrawal must be at least $500;
b)   If the accumulated value after a partial withdrawal is less than $2,000, we
     have the right to pay the remaining accumulated value to the owner as a
     full surrender;
c)   The accumulated value will be reduced by the amount of any partial
     withdrawal and any surrender charge applying to such withdrawal. The owner
     may tell us how to allocate a partial withdrawal among the subaccounts and
     the declared interest option. If the owner does not so instruct, we will
     prorate the partial withdrawal among the subaccounts and the declared
     interest option. The allocation will be in the same proportion that the
     accumulated value in each of the subaccounts and the accumulated value in
     the declared interest option bears to the total accumulated value on the
     date we receive the request;
d)   Amounts withdrawn from the declared interest option are considered
     withdrawn on the last-in-first-out basis.

7.13 DELAY OF PAYMENT
Proceeds from full surrenders and partial surrenders will usually be mailed to
the owner within seven days after the owner's signed request is received in our
home office. We will usually mail any death claim proceeds within seven days
after we receive due proof of death. We have the right to delay such payment
whenever:
a)   the New York Stock Exchange is closed other than on customary weekend and
     any holiday closing;
b)   trading on the New York Stock Exchange is restricted as determined by the
     SEC;
c)   the SEC, by order, permits postponement for the protection of policyowners;
d)   as a result of an emergency, as determined by the SEC, it is not reasonably
     possible to dispose of securities or to determine the value of the net
     assets of the variable account.

We have the right to defer payment which is derived from any amount paid to us
by check or draft until we are satisfied the check or draft has been paid by the
bank on which it is drawn.

We also have the right to delay making a full surrender or partial surrender,
from the declared interest option for up to six months from the date we receive
the owner's request.

7.14 TAX CHARGES
The Company may deduct state and local government premium tax from the
accumulated value, if such taxes are applicable in your state. The Company may
also make a charge against the accumulated value of this policy for any tax or
economic burden on the Company resulting from the application of federal, state
or local tax laws that the Company determines to be properly attributable to the
separate account or the policies. The charge will be applied by:
a)   redeeming the number of subaccount units from the separate account equal to
     the pro rata share of the charge applicable to the subaccounts; or
b)   deducting from the declared interest option accumulated value the pro rata
     portion of the charge applicable to the declared interest option.

7.15 ANNUAL REPORT
At least once each year we will send a report, without charge, to the owner
which shows:
a)   all premiums paid and charges made since the last report;
b)   the current accumulated value including the value in each subaccount and
     the declared interest option; and
c)   any partial surrenders since the last report.

                                          13
<PAGE>

An illustrative report will be sent to the owner upon request. A fee may be
charged for this report.

- --------------------------------------------------------------------------------
SECTION 8 - PAYMENT OF PROCEEDS
- --------------------------------------------------------------------------------

8.1 CHOICE OF OPTIONS
The owner may choose to have the proceeds of this policy paid under a payment
option. After the annuitant's death, the beneficiary may choose an option if the
owner had not done so before the annuitant's death. If no payment option is
chosen, we will pay the proceeds of this policy in one sum. We may also fulfill
our obligation under this policy by paying the proceeds in one sum if:

a)   the proceeds are less than $2,000;
b)   periodic payments become less than $20; or
c)   the payee is an assignee, estate, trustee, partnership, corporation, or
     association.

8.2 PAYMENT OPTIONS
The choice of payment options are:
1)   INTEREST INCOME -- The proceeds will be left with us to earn interest. The
     interest will be paid every 1, 3, 6 or 12 months as the payee chooses. The
     rate of interest will be determined by us. The payee may withdraw all or
     part of the proceeds at any time.

2)   INCOME FOR FIXED TERM -- The proceeds will be paid out in equal
     installments for a fixed term of years.

3)   LIFE INCOME WITH TERM CERTAIN -- The proceeds will be paid out in equal
     installments for as long as the payee lives, but for not less than a term
     certain. The owner or payee may choose one of the terms certain shown in
     the payment option tables.

4)   INCOME FOR FIXED AMOUNT -- The proceeds will be paid out in equal
     installments of a specified amount. The payments will continue until all
     proceeds plus interest have been paid out.

5)   JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME -- The proceeds will
     be paid out in equal monthly installments for as long as two joint payees
     live. When one payee dies, installments of two-thirds of the first
     installment will be paid to the surviving payee. Payments will stop when
     the surviving payee dies.

The proceeds may be paid in any other manner requested and agreed to by us, or
under any other payment options made available by the Company.

8.3 INTEREST AND MORTALITY
The minimum interest rate used in computing any payment option is 3% per year.
Higher interest rates may be used on the effective date of the payment contract.
We may at any time declare additional interest on these funds. The amount of
additional interest and how it is determined will be set by us.

The mortality table which is used for options 3) and 5) is the "1983 Table a"
individual annuity mortality table.

8.4 WITHDRAWAL OF PROCEEDS
The payee may not withdraw the funds under a payment option unless agreed to in
the payment contract. We have the right to defer a withdrawal for up to 6
months. We may also refuse to allow partial withdrawals of less than $250.

8.5 CLAIMS OF CREDITORS
Payments under any payment option will be exempt from the claims of creditors to
the maximum extent allowed by law.


                                          14

<PAGE>

PAYMENT OPTION TABLES
(PER $1,000 OF PROCEEDS)

- --------------------------------------------------------------------------------
                       Option 2 - Income for Fixed Term 
                     Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
     Number of
       Years                       Annual                        Monthly
- --------------------------------------------------------------------------------
         5                             211.99                         17.91
         10                            113.82                          9.61
         15                             81.33                          6.87
         20                             65.26                          5.51
         25                             55.76                          4.71
         30                             49.53                          4.18
- --------------------------------------------------------------------------------



                         Guaranteed Settlement Option 5
               Joint and Two-thirds to Survivor Monthly Life Income
                    Monthly Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
                                        Female Age
     Male
      Age      55             60             62             65             70
               -----------------------------------------------------------------
   60          4.44           4.71           4.82           5.01           5.34
   62          4.53           4.81           4.93           5.13           5.50
   65          4.65           4.97           5.11           5.33           5.75
   70          4.88           5.24           5.41           5.68           6.20
   75          5.11           5.52           5.71           6.04           6.68
- --------------------------------------------------------------------------------



<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------------------------
                                        GUARANTEED SETTLEMENT OPTION 3
                                        LIFE INCOME WITH TERM CERTAIN
                                   MONTLY INSTALLMENTS PER $1,000 PROCEEDS
- ---------------------------------------------------------------------------------------------------------
                              MALE                                            FEMALE
- ---------------------------------------------------------------------------------------------------------
                         YEARS CERTAIN                                     YEARS CERTAIN

    Age    0         5         10        15        20        0         5         10        15        20
- ---------------------------------------------------------------------------------------------------------
<S>       <C>        <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
   55     $4.70      4.68      4.62      4.53      4.39      4.25      4.25      4.22      4.18      4.11
   56      4.80      4.78      4.72      4.61      4.45      4.34      4.33      4.30      4.25      4.17
   57      4.91      4.89      4.82      4.69      4.51      4.42      4.41      4.38      4.32      4.23
   58      5.03      5.00      4.92      4.78      4.58      4.52      4.50      4.47      4.40      4.30
   59      5.15      5.12      5.03      4.87      4.64      4.61      4.60      4.56      4.48      4.37
   60      5.28      5.25      5.14      4.96      4.71      4.72      4.70      4.66      4.57      4.44

- ---------------------------------------------------------------------------------------------------------

   61      5.42      5.39      5.26      5.06      4.78      4.83      4.81      4.76      4.66      4.51
   62      5.57      5.53      5.39      5.16      4.84      4.95      4.93      4.86      4.75      4.58
   63      5.74      5.69      5.52      5.26      4.90      5.07      5.05      4.98      4.85      4.65
   64      5.91      5.85      5.66      5.36      4.96      5.21      5.18      5.10      4.95      4.72
   65      6.10      6.03      5.81      5.46      5.02      5.35      5.32      5.22      5.05      4.79

- ---------------------------------------------------------------------------------------------------------

   66      6.29      6.21      5.96      5.56      5.08      5.51      5.47      5.36      5.16      4.86
   67      6.50      6.41      6.11      5.66      5.13      5.67      5.63      5.50      5.26      4.93
   68      6.73      6.62      6.28      5.76      5.18      5.85      5.80      5.65      5.37      5.00
   69      6.97      6.84      6.44      5.86      5.23      6.04      5.98      5.80      5.49      5.06
   70      7.23      7.07      6.61      5.96      5.27      6.25      6.18      5.96      5.60      5.12

- ---------------------------------------------------------------------------------------------------------

   71      7.51      7.32      6.78      6.05      5.31      6.47      6.39      6.14      5.71      5.18
   72      7.80      7.58      6.96      6.14      5.34      6.71      6.62      6.31      5.83      5.23
   73      8.12      7.85      7.14      6.23      5.37      6.97      6.86      6.50      5.94      5.28
   74      8.45      8.14      7.32      6.31      5.40      7.26      7.12      6.69      6.04      5.32
   75      8.82      8.44      7.49      6.38      5.42      7.56      7.39      6.89      6.14      5.35
- ---------------------------------------------------------------------------------------------------------

</TABLE>


                                          15

<PAGE>

               NON-PARTICIPATING
               FLEXIBLE PREMIUM
               DEFERRED VARIABLE ANNUITY POLICY


               If you have any questions concerning this policy or if anyone
               suggests that you change or replace this policy, please contact
               your EquiTrust Life agent or our home office. (515-225-5400)


EQUITRUST LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266-5997

- --------------------------------------------------------------------------------

<PAGE>

<TABLE>
<CAPTION>
<S><C>
EQUITRUST LIFE
INSURANCE COMPANY
P.O. Box 9353                                    ANNUITY APPLICATION
Des Moines IA 50306-9353                        (PLEASE PRINT CLEARLY)
- -----------------------------------------------------------------------------------------------------------------------------------
1.  ANNUITANT (OWNER)                                                      Sex: / / Male  / / Female

    Name___________________________________________________________        S.S. No./Tax ID:________________________________________

    Address:_______________________________________________________        Date of Birth:__________________________________________

    City:_____________________________  State ________ ZIP ________        Daytime Phone (   )_____________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
2.  JOINT-ANNUITANT (OWNER) (NOT AVAILABLE FOR QUALIFIED PLANS)            Sex: / / Male  / / Female

    Name___________________________________________________________        S.S. No./Tax ID:________________________________________

    Address:_______________________________________________________        Date of Birth:__________________________________________

    City:_____________________________  State ________ ZIP ________        Daytime Phone (   )_____________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
3.  OWNER IF ANNUITANT(S) ARE NOT ALSO THE OWNER(S), THEN SPECIFY THE OWNER HERE   Sex: / / Male  / / Female

    Name___________________________________________________________        S.S. No./Tax ID:________________________________________

    Address:_______________________________________________________        Date of Birth:__________________________________________

    City:_____________________________  State ________ ZIP ________        Daytime Phone (   )_____________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
4.  BENEFICIARY as to proceeds at death of the Annuitant; Survivors within a class (Primary or Secondary) entitled to the 
    proceeds shall share equally unless otherwise specified.

                             NAME                  ADDRESS                 RELATIONSHIP TO                    SOCIAL SECURITY
                                                                             ANNUITANT                             NUMBER

Primary ___________________________________________________________________________________________________________________________

Secondary _________________________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
5.  PLAN TYPE (Check the appropriate boxes.)                           6.  MATURITY DATE___________________________________________
    / / Non-qualified                                                      (If not stated: age 95, nonqualified; age 70 1/2, 
    QUALIFIED: (CHECK THE APPROPRIATE PLAN DESCRIPTION)                    qualified)
    / / IRA   / / SEP/IRA   / / Simple IRA
    / / Roth IRA   / / Roth Conversion IRA   
    / / Keogh/Corporate Pension    / / Sec. 457 Def. Comp.
    / / TSA/403(b)
    / / Other _____________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
7.  PREMIUM PAYMENTS
    SINGLE/INITIAL PREMIUM PAYMENT $_______________________________        FUTURE PREMIUM PAYMENTS $_______________________________
    (Minimums: $1,000 Qualified - $5,000 non-qualified)                    (Minimum $50)
    By: / / Check   / / Transfer   / / Rollover                            By: / / Mo. EFT    / / Salary Savings   / / Other
    Year for which contribution applies ___________ (IF QUALIFIED)             / / Quarterly  / / Semiannual    / / Annual
- -----------------------------------------------------------------------------------------------------------------------------------
8.  NET PREMIUM PAYMENTS.  The net premium payments (as described in the prospectus) are to be allocated to the appropriate 
    subaccounts as follows:

          [1. Value Growth                         _________%              9. T. Rowe Price Equity Income               _________%
           2. High Grade Bond                      _________%             10. T. Rowe Price Personal Strategy Balanced  _________%
           3. High Yield Bond                      _________%             11. Dreyfus International Equity              _________%
           4. Money Market                         _________%             12. Dreyfus Small Cap Stock                   _________%
           5. Blue Chip                            _________%             13. Dreyfus Capital Appreciation              _________%
           6. T. Rowe Price International Stock    _________%             14. Dreyfus Disciplined Stock                 _________%
           7. T. Rowe Price Mid-Cap Growth         _________%             15. Dreyfus Growth and Income                 _________%
           8. T. Rowe Price New America Growth     _________%             16. Declared Interest Option                  _________%]

    If any portion of a new premium is allocated to a particular subaccount, that portion must be at least 10% on the date the
    allocation takes effect.  All percentage allocations must be in whole numbers and not fractions.

    Net premiums will be initially allocated to the money market account.  On the eleventh day following the policy date, we will 
    transfer part or all of the accumulated value in the money market subaccount to the subaccounts or the declared interest 
    option in accordance with the premium allocation percentage shown above.
- -----------------------------------------------------------------------------------------------------------------------------------

<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
9.  TRANSFER BETWEEN PORTFOLIOS
    I authorize transfers between the subaccounts upon instruction from any person by telephone.                     Yes    No
    If neither box is checked, the telephone privilege will be provided..........................................    / /    / /
    The first twelve transfers in each Policy Year will be made without charge;
    Subsequent transfers in a Policy Year will be assessed a transfer charge of $25.
- -----------------------------------------------------------------------------------------------------------------------------------
10. SPECIAL INSTRUCTIONS___________________________________________    11. WILL THIS CONTRACT REPLACE OR CHANGE ANY EXISTING LIFE
                                                                           INSURANCE OR ANNUITY IN THIS OR ANY OTHER COMPANY? 
    _______________________________________________________________        
                                                                           / /Yes   / /No   If Yes:
    _______________________________________________________________        What Company?___________________________________________
                                                                           What Contract Number?___________________________________
    _______________________________________________________________        
                                                                           Have all required documents been completed in compliance
    _______________________________________________________________        with applicable state regulations?  / /Yes   / /No
- -----------------------------------------------------------------------------------------------------------------------------------
12. SUITABILITY MUST BE COMPLETED BY OWNER.                                ANNUAL EARNINGS                  ESTIMATED NET WORTH

    Occupation_____________________________________________________        / / $ 25,000-$ 49,999            / / $ 25,000-$ 74,999

    Employer_______________________________________________________        / / $ 50,000-$ 99,999            / / $ 75,000-$124,999

    Address________________________________________________________        / / $100,000-$199,999            / / $125,000-$249,999

    City______________________________  State ________ Zip ________

    FINANCIAL OBJECTIVES CHECK ALL THAT APPLY.
      / /Preservation of Capital         / /Income        / /Long Term Growth        / /Maximum Capital Appreciation

    INITIAL SOURCE OF FUNDS: CHECK ALL THAT APPLY.
      / / CDs/Saving Acct.      / / Investments     / / Stocks/Bonds       / / Sale of Personal Property   / / Current Income
      / / Policy Cash Value, Dividend or Loan       / / Policy Surrender   / / Other_________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
13. SIGNATURES

    I/We acknowledge receipt of a current prospectus, declare that all statements in this Application are true to the best of 
    my/our knowledge and belief, and agree that this Application shall be a part of the Annuity Contract issued by the Company.
    Under penalties of perjury, I/we certify that the Social Security Number, as listed on this Application, is correct.  I/WE 
    UNDERSTAND THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT MAY VARY AS TO DOLLAR AMOUNT TO THE EXTENT THEY ARE BASED ON 
    THE INVESTMENT EXPERIENCE OF THE SELECTED PORTFOLIO(S).  With this in mind, I/we feel the Contract applied for will meet 
    anticipated financial needs.

    The accumulation values under the variable accumulation provisions of the Contract being applied for are variable and are not 
    guaranteed as to fixed dollar amounts.


    ___________________________________________________________________________________________________________  __________________
    Signature of Owner (if other than Proposed Annuitant)                                                               Date

    ___________________________________________________________________________________________________________  __________________
    Signature of Annuitant(s)                                                                                           Date

    ___________________________________________________________________________________________________________  __________________
    Witness or Agent/Broker/Registered Representative                                                                   Date
- -----------------------------------------------------------------------------------------------------------------------------------
14. REGISTERED REPRESENTATIVE INFORMATION

    _______________________________________________________________  __________________________________________   __________________
    Agent/Broker/Registered Representative                                       Phone                               Date

    _______________________________________________________________  ______________________________________________________________
    Branch or Agency Number                                          Branch or Agency Address

    _______________________________________________________________  ______________________________________________________________
    Registered Representative Signature                              City                               State               Zip
</TABLE>

<PAGE>

                           CERTIFICATE OF APPROVAL
                              ATTORNEY GENERAL

     Pursuant to provisions of the Iowa Code, the undersigned approves the 
Articles of Amendment (adopted December 31, 1997) to the Articles of 
Incorporation for Continental Western Life Insurance Company and finds them 
in conformance with the laws of the United States and with the laws and 
Constitution of the State of Iowa.

                                       THOMAS J. MILLER
                                       Attorney General of Iowa


12-31-97                              /s/ Scott M. Galenbeck
- --------                              -----------------------
Date                            By:   SCOTT M. GALENBECK
                                      Assistant Attorney General




                           CERTIFICATE OF APPROVAL
                          COMMISSIONER OF INSURANCE

     Pursuant to provisions of the Iowa Code, the undersigned approves the 
Articles of Amendment (adopted December 31, 1997) to the Articles of 
Incorporation for Continental Western Life Insurance Company.

                                       THERESE M. VAUGHAN
                                       Commissioner of Insurance


12-31-97                              /s/ Robert L. Howe
- --------                              -----------------------
Date                            By:   ROBERT L. HOWE
                                      Deputy Commissioner of Insurance

<PAGE>

                                ARTICLES OF AMENDMENT
                                        0F
                   CONTINENTAL WESTERN LIFE INSURANCE COMPANY


TO THE SECRETARY OF STATE OF THE STATE OF IOWA:

     Pursuant to Section 1006 of the Iowa Business Corporation Act, the 
undersigned corporation adopts the following amendment to the corporation's 
Articles of Incorporation.

1.  The name of the corporation is Continental Western Life Insurance Company.

2.  The text of the amendment to the Articles of Incorporation affected 
    hereby is as follows:

    Article I of the Articles of Incorporation is hereby amended by deleting 
    it in its entirety and substituting the following in lieu thereof:


                                    ARTICLE I

                           NAME AND ADDRESS OF COMPANY
                           ---------------------------

         The name of the Corporation is EquiTrust Life Insurance Company and
    its principal place of business is 5400 University Avenue, West Des Moines,
    Iowa 50266.

    ARTICLE IX of the Articles of Incorporation is hereby amended by 
    deleting it in its entirety and substituting the following in lieu thereof:


                                   ARTICLE IX

                      REGISTERED OFFICE AND REGISTERED AGENT
                      --------------------------------------

         The address of the registered office of the Corporation is 5400 
    University Avenue, West Des Moines, Iowa 50266, and the name of its 
    registered agent at such address is Stephen M. Morain, General Counsel.

3.  The date of adoption of this amendment was December 31, 1997.

4.  The amendment was approved by the shareholders. The designation, number 
    of outstanding shares, number of votes entitled to be cast by each voting 
    group entitled

<PAGE>

    to vote separately on the amendment, and the number of votes of each 
    voting group indisputably represented at the meeting is as follows:


                                            VOTES                VOTES
        DESIGNATION         SHARES         ENTITLED           REPRESENTED
         OF GROUP         OUTSTANDING     TO BE CAST          AT MEETING
       ------------      ------------    -----------          -----------
       Common Stock         2,000           2,000                2,000


5.  The total number of votes cast for and against the amendment was as follows:

                             VOTES           VOTES
                              FOR           AGAINST
                             -----          -------
                             2,000             0

6.  The number of votes cast for the amendment was sufficient for approval.

7.  The effective date and time of this document is the 31st day of December,
    1997 at 11:30 a.m.


                                       CONTINENTAL WESTERN LIFE
                                         INSURANCE COMPANY



Dated: December 31, 1997               By: /s/ Richard D. Harris
                                          --------------------------------
                                          Richard D. Harris, Senior Vice
                                          President and Secretary-Treasurer


                                       2
<PAGE>

- ------------------------------------------------------------------------------


                                  STATE OF IOWA

                                INSURANCE DIVISION

                             CERTIFICATE OF SIMILARITY



     I, THERESE M. VAUGHAN, COMMISSIONER OF INSURANCE DO HEREBY CERTIFY THAT 
I AM THE OFFICIAL CHARGED WITH THE GENERAL CONTROL, SUPERVISION AND DIRECTION 
OF ALL INSURANCE BUSINESS TRANSACTED IN THE STATE OF IOWA, AND CHARGED WITH 
THE EXECUTION OF THE LAWS RELATING TO INSURANCE IN SAID JURISDICTION. AS SUCH 
OFFICIAL, I AM CUSTODIAN OF THE RECORDS PERTAINING TO THE INSURANCE DIVISION 
OF IOWA. I FURTHER CERTIFY THAT THE ATTACHED INSTRUMENT IS A TRUE AND CORRECT 
COPY OF THE 

              AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
                 CONTINENTAL WESTERN LIFE INSURANCE COMPANY
                            FILED OCTOBER 3, 1994


AS THE SAME APPEARS OF RECORD IN THIS DIVISION.





                                                  IN WITNESS WHEREOF, I HAVE
                                              HEREUNTO SET MY HAND AND CAUSED 
                                              MY OFFICIAL SEAL TO BE AFFIXED 
                                              AT THE CITY OF DES MOINES THIS 
                                              24TH DAY OF NOVEMBER, A.D. 1997.


                                                /s/ THERESE M. VAUGHAN
                                              --------------------------------
                                                  COMMISSIONER OF INSURANCE


- ------------------------------------------------------------------------------

<PAGE>

                  AMENDED AND RESTATED ARTICLES OF INCORPORATION
                                        OF
                     CONTINENTAL WESTERN LIFE INSURANCE COMPANY


                                     Article I


                             NAME AND ADDRESS OF COMPANY
                             ----------------------------

The name of the Corporation is Continental Western Life Insurance Company and 
its principal place of business is Continental Plaza, 1601 - 74th Street, 
West Des Moines, Iowa 50265.


                                     Article II

                                      DURATION
                                      --------

The period of its duration is perpetual.


                                     Article III

                                      PURPOSE
                                      -------

The purpose for which this Corporation is organized is to engage in any 
lawful activity within the purposes for which insurance corporations may be 
organized under the provisions of Chapters 490 and 508 and any predecessor 
statutes of the Iowa Code.


                                    Article IV

                                  CAPITALIZATION
                                  --------------

The aggregate number of shares which the Corporation has authority to issue 
is 2,500, par value $1,500 per share.



                                   Article V

                                   DIRECTORS
                                   ---------

The governing body of the Corporation is the Board of Directors, elected 
annually by the shareholders. The number of Directors is required to be at 
least five, the maximum to be fixed by the By-laws. The Directors need not 
own shares of the Corporation. Their terms and the manner of their election 
shall be as provided in the By-laws. The Board of Directors may make and 
amend the By-laws of the Corporation.



                                    Article VI

                                    STOCK PLAN
                                    ----------

The Corporation shall operate on the Stock Plan.

<PAGE>

                                   Article VII

                                    INDEMNITY
                                    ---------

Any Director, Officer or Employee of the Corporation who is made a party to 
any civil or criminal action by reason of his position with the Corporation 
may be indemnified by the Corporation to the extent permitted by law.



                                   Article VIII

                                   FISCAL YEAR
                                   -----------

The Corporation's fiscal year shall begin on January 1 of each year and end 
on December 31 of each year.



                                    Article IX

                      REGISTERED OFFICE AND REGISTERED AGENT
                      --------------------------------------

The address of the registered office of the Corporation is Continental Plaza, 
1601 - 74th Street, West Des Moines, Iowa, 50265, and the name of its 
registered agent at such address is Valerie Davenport.



                                    Article X

                                    AMENDMENT
                                    ---------

These Articles may be amended at any meeting of shareholders by the 
affirmative note of a majority of the shareholders present, in person or by 
proxy.

These restated Articles of Incorporation were approved to be effective August 
21, 1994 by the shareholders of Continental Western Life Insurance Company on 
August 21, 1994, and supersede the Corporation's Original Articles of  
Incorporation and all amendments thereto.


IN WITNESS WHEREOF, these Amended and Restated Articles of Incorporation are 
executed on behalf of Continental Western Life Insurance Company.

Dated this 21st day of August, 1994.


                                           By:  /s/   Ken L. Evason
                                              --------------------------------
                                              Ken L. Evason, President


                                           By:  /s/   Guy R. Montag
                                              --------------------------------
                                              Guy R. Montag, Secretary

<PAGE>

                           CERTIFICATE RELATING TO ATTACHED
                                      BYLAWS OF
                      CONTINENTAL WESTERN LIFE INSURANCE COMPANY


     I, Guy R. Montag, hereby certify that I am the Secretary of Continental
Western Life Insurance Company ("Continental Western Life"), an Iowa
corporation, and further confirm that the attached Bylaws of Continental Western
Life are complete and correct.  I also affirm that the same have not been
modified, amended or rescinded, but remain in full force and effect on the date
hereof.

     IN WITNESS WHEREOF, I have executed and delivered this Certificate this
30th day of December, 1997.



                                                  By:       /s/ Guy R. Montag
                                                       -------------------------
                                                            Guy R. Montag
                                                            Secretary



(SEAL)

<PAGE>

                                       BY-LAWS

                                          OF

                      CONTINENTAL WESTERN LIFE INSURANCE COMPANY
                                (an Iowa corporation)
                           Amended Through August 21, 1994


                                 ARTICLE I.  OFFICES

     1.01.  PRINCIPAL AND BUSINESS OFFICES.  The corporation may have such
principal and other business offices, either within or without the State of
Iowa, as the Board of Directors may designate or as the business of the
corporation may require from time to time.

     1.02.  REGISTERED OFFICE.  The registered office of the corporation
required by the Iowa Business Corporation Act to be maintained in the State of
Iowa may be, but need not be, identical with the principal office in the State
of Iowa, and the address of the registered office may be changed from time to
time by the Board of Directors.  The business office of the registered agent of
the corporation shall be identical to such registered office.

                              ARTICLE II.  SHAREHOLDERS

     2.01.  ANNUAL MEETING.  The annual meeting of the shareholders shall be
held on such date as may be fixed by or under the authority of the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may come before the meeting.

     2.02.  SPECIAL MEETING.  Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Chairman, the President, or the Board of Directors or by the person
designated in the written request of the holders of not less than one-tenth of
all shares of the corporation entitled to vote at the meeting.

     2.03.  PLACE OF MEETING.  The Board of Directors may designate any place,
either within or without the State of Iowa, as the place of meeting for any
annual meeting or for any special meeting.  A waiver of notice signed by all
shareholders entitled to vote at a meeting may designate any place, either
within or without the State of Iowa, as the place for the holding of such
meeting.  If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal business office of the
corporation in the State of Iowa or such other suitable place in the county of
such principal office as may be designated by the person calling such meeting,
but any meeting may be adjourned to reconvene at any place designated by vote of
a majority of the shares represented thereat.

     2.04.  NOTICE OF MEETING.  Written notice stating the place, day and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called shall be delivered not less than three (3) days
(unless a longer period is required by law) nor more than ten days before the
date of the meeting, either personally or by mail, by or at the


                                          1

<PAGE>

direction of the Chairman, the President, or the Secretary, or other officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting.  If mailed, such notice shall be deemed to be delivered  when
deposited in the United States mail, addressed to the shareholder at their
address as it appears on the stock record books of the corporation, with postage
thereon prepaid.

     2.05.  CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.  For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days.  If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting.  In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty days and, in the case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.  If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the close of business on the date on
which notice of the meeting is mailed or on the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders.  When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall be applied
to any adjournment thereof except where the determination has been made through
the closing of the stock transfer books and the stated period of closing has
expired.

     2.06.  VOTING RECORDS.  The officer or agent having charge of the stock
transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
such meeting, or any adjournment thereof, with the address of and the number of
shares held by each.  Such record shall be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes of the
meeting.  The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such record or transfer books or to
vote at any meeting of shareholders.  Failure to comply with the requirements of
this section shall not affect the validity of any action taken at such meeting.

     2.07.  QUORUM. Except as otherwise expressly required by law, a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders.  If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders
unless the vote of a greater number is required by law.  Though less than a
quorum of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without further
notice.  At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.


                                          2

<PAGE>

     2.08.  CONDUCT OF MEETINGS.  The Chairman, and in his or her absence, the
President, or a Vice-President in the order provided under Section 4.07, and in
their absence, any person chosen by the shareholders present shall call the
meeting of the shareholders to order and shall act as chairman of the meeting,
and the Secretary of the corporation shall act as secretary of all meetings of
the shareholders, but, in the absence of the Secretary the presiding officer may
appoint any other person to act as secretary of the meeting.

     2.09.  PROXIES.  At all meetings of shareholders, a shareholder entitled
to vote may vote in person or by proxy appointed in writing by the shareholder
or by his duly authorized attorney-in-fact.  Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting.  Unless
otherwise provided in the proxy, a proxy may be revoked at any time before it is
voted, either by written notice filed with the Secretary or the acting Secretary
of the meeting or by oral notice given by the shareholder or the presiding
officer during the meeting.  The presence of a shareholder who has filed his or
her proxy shall not of itself constitute a revocation.  No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.  The Board of Directors shall have the power and authority to make
rules establishing presumptions as to the validity and sufficiency of proxies.

     2.10.  VOTING OF SHARES.  Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at a meeting of shareholders.

     2.11   VOTING OF SHARES BY CERTAIN HOLDERS.

     (a)  OTHER CORPORATIONS.  Shares standing in the name of another 
corporation may be voted either in person or by proxy, by the President of 
such corporation or any other officer appointed by such President.  A proxy 
executed by any principal officer of such other corporation or assistant 
thereto shall be conclusive evidence of the signer's authority of this act, 
in the absence of express notice to this corporation, given in writing to the 
Secretary of this corporation, of the designation of some other person by the 
Board of Directors or the by-laws of such other corporation.

     (b)  LEGAL REPRESENTATIVES AND FIDUCIARIES.  Shares held by an
administrator, executor, guardian, conservator, trustee in bankruptcy, receiver,
or assignee for creditors may be voted by them, either in person or by proxy,
without a transfer of such shares into their name, provided that there is filed
with the Secretary before or at the time of meeting proper evidence of their
incumbency and the number of shares held.  Shares standing in the name of a
fiduciary may be voted by them, either in person or by proxy.  A proxy executed
by a fiduciary, shall be conclusive evidence of the signer's authority to act,
in the absence of express notice to this corporation, given in writing to the
Secretary of this corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.

     (c)  PLEDGES.  A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.

     (d)  TREASURY STOCK AND SUBSIDIARIES.  Neither treasury shares, nor shares
held by another corporation if a majority of the shares entitled to vote for the
election of directors of such


                                          3

<PAGE>

other corporation is held by this corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares entitled to vote,
but shares of its own issue held by this corporation in a fiduciary capacity, or
held by such other corporation in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares entitled to vote.

     2.12.  WAIVER OF NOTICE BY SHAREHOLDERS.  Whenever any notice whatever is
required to be given to any shareholder of the corporation under the articles of
incorporation or by-laws or any provision of law, a waiver thereof in writing,
signed at any time, whether before or after the time of the meeting, by the
shareholder entitled to such notice, shall be deemed equivalent to the giving of
such notice; provided that such waiver in respect to any matter of which notice
is required under any provision of the Iowa Business Corporation Act shall
contain the same information as would have been required to be included in such
notice, except the time and place of meeting.

     2.13.  UNANIMOUS CONSENT WITHOUT MEETING.  Any action required or
permitted by the articles of incorporation or by-laws or any provision of law to
be taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.

                           ARTICLE III.  BOARD OF DIRECTORS

     3.01.  GENERAL POWERS AND NUMBER.  The business and affairs of the
corporation shall be managed by its Board of Directors.  The number of directors
of the corporation shall be no less than five (5) and no more than sixteen (16).

     3.02.  TENURE AND QUALIFICATIONS.  Each director shall hold office until
the next annual meeting of shareholders and until their successor shall have
been elected, or until their prior death, resignation or removal.  A director
may be removed from office by affirmative vote for the election of such
director, taken at a meeting of shareholders called for that purpose.  A
director may resign at any time by filing their written resignation with the
Secretary of the corporation.  Except as may be otherwise required by applicable
law, directors need not be residents of the State of Iowa or shareholders of the
corporation.

     3.03.  REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice that this by-law as soon as practical after
the annual meeting of shareholders, and each adjourned session thereof.  The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Iowa, for the holding of regular meetings without other
notice than such resolution.

     3.04.  SPECIAL MEETINGS.  Special meetings of the Board of Directors may
be called by or at the request of the Chairman, President, or Secretary or any
two directors.  The Chairman, President or Secretary calling any special meeting
of the Board of Directors may fix any place, either within or without the State
of Iowa, as the place for holding any special meeting of the Board of Directors
called by them, and if no other place is fixed, the place of the meeting shall
be the principal business office of the corporation in the State of Iowa.


                                          4
<PAGE>


     3.05.  NOTICE; WAIVER.  Notice of each meeting of the Board of Directors
(unless otherwise provided in or pursuant to Section 3.03) shall be given by
written notice delivered personally or mailed or given by telegram to each
director at their business address or at such other address as such director
shall have designated in writing filed with the Secretary.  If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid.  If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company.  Whenever any notice whatever is required to be given to
any director of the corporation under the articles of incorporation or by-laws
or any provision of law, a waiver thereof in writing, signed at any time,
whether before or after the time of meeting, by the director entitled to such
notice, shall be deemed equivalent to the giving of such notice.  The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting and objects thereat to the transaction
of any business because the meeting is not lawfully called or convened.  Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.

     3.06.  QUORUM.  Except as otherwise provided by law or these by-laws, a
majority of the number of directors as provided in Section 3.01 shall constitute
a quorum for the transaction of business at any meeting of the Board of
Directors, but a majority of the directors present (though less than such
quorum) may adjourn the meeting from time to time without further notice.

     3.07.  MANNER OF ACTING.  The act of the majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or these
by-laws.

     3.08.  CONDUCT OF MEETINGS.  The Chairman, and in his or her absence, the
President, shall call meetings of the Board of Directors to order and shall act
as chairman of the meeting.  The Secretary of the corporation shall act as
secretary of all meetings of the Board of Directors, but in the absence of the
Secretary, the presiding officer may appoint any Assistant Secretary or any
director or other person present to act as secretary of the meeting.

     A board meeting may be conducted by:

     a)   A conference among directors using any means of communication through
which the directors may simultaneously hear each other during the conference
constitutes a board meeting, if the same notice is given of the conference as
would be required by the by-laws for a meeting, and if the number of directors
participating in the conference would be sufficient to constitute a quorum at a
meeting.  Participation in a meeting by that means constitutes presence in
person at the meeting; or

     b)   Any means of communication through which the director, other directors
so participating, and all directors physically present at the meeting may
simultaneously hear such other during the meeting.  Participation in a meeting
by that means constitutes presence in person at the meeting.


                                          5

<PAGE>

     3.09.  VACANCIES.  Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of directors then in office, though less than a quorum of the Board of
Directors; provided, that in case of a vacancy created by the removal of a
director by vote of the shareholders, the shareholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.

     3.10.  PRESUMPTION OF ASSENT.  A director of the corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he or she is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his or her dissent shall be
entered in the minutes of the meeting or unless he or she shall file his or her
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting.  Such right to dissent shall not apply to a director
who voted in favor of such action.

     3.11.  COMMITTEES.  The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of directors as provided in Section
3.01 may designate one or more committees elected by the Board of Directors,
which to the extent provided in said resolution as initially adopted, and as
thereafter supplemented or amended by further resolution adopted by a like vote,
and subject to Section 490.825 of the Iowa Business Corporation Act, shall have
and may exercise, when the Board of Directors is not in session, the powers of
the Board of Directors in the management of the business and affairs of the
corporation, except action in respect to dividends to shareholders, election of
the principal officers or the filling of vacancies in the Board of Directors or
committees created pursuant to this section.  The Board of Directors may elect
one or more of its members as alternate members of any such committee who may
take the place of any absent member or members at any meeting of such committee,
upon request by the Chairman or President or upon request by the chairman of
such meeting.  Each such committee shall fix its own rules governing the conduct
of its activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.

     3.12.  UNANIMOUS CONSENT WITHOUT MEETING.  Any action required or
permitted by the articles of incorporation or by-laws or any provision of law to
be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors then in office.

                                 ARTICLE IV. OFFICERS

     4.01.  NUMBER.  The principal officers of the corporation shall be a
Chairman, a President, one or more Vice-Presidents, one or more of which may be
designated Executive or Senior Vice Presidents, a Secretary and a Treasurer,
each of whom shall be elected or appointed by the Board of Directors.  Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the Board of Directors.  Any two or more offices may be held by
the same person, except the offices of President and Secretary and the offices
of President and Vice-President.


                                          6

<PAGE>

     4.02.  ELECTION AND TERM OF OFFICE.  The officers of the corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders.  If the election of officers is not held at such
meeting, such election shall be held as soon thereafter as conveniently may be.
Each officer shall hold office until his or her successor has been duly elected
or until his or her prior death, resignation or removal.

     4.03.  REMOVAL.  Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.  Election or appointment shall not of
itself create contract rights.

     4.04.  VACANCIES.  A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.

     4.05.  CHAIRMAN OF THE BOARD.  The Chairman of the Board shall, when
present, preside at all meetings of the shareholders and of the Board of
Directors.  He or she shall have such power and duties as may be from time to
time prescribed by the by-laws or by resolution of the Board of Directors.

     4.06.  PRESIDENT.  The President shall be the principal operating officer
of the corporation subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
corporation.  He or she shall have authority subject to such rules as may be
prescribed by the Board of Directors, to appoint such agents and employees of
the corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them.  Such agents and
employees shall hold office at the discretion of the President.  He or she shall
have authority to sign, execute and acknowledge, on behalf of the corporation,
all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and
all other documents or instruments necessary or proper to be executed in the
course of the corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by law
or the Board of Directors, he or she may authorize any Vice-President or other
officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his place and stead.  In general he or she shall
perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Directors from time to time.  The President
shall be a member of the Board of Directors.

     4.07.  THE VICE-PRESIDENTS.  In the absence of the President or in the
event of his or her death, inability or refusal to act, or in the event for any
reason it shall be impractical for the President to act personally, the
Vice-President (or in the event there be more than one Vice-President, the
Vice-Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.  Any Vice-President
may sign, with the Secretary or Assistant Secretary, certificates for shares of
the corporation; and shall perform such other duties and have such authority as
from time to time may be delegated or assigned to them by the President or by
the Board of Directors.


                                          7

<PAGE>

The execution of any instrument of the corporation by any Vice-President shall
be conclusive evidence, as to third parties, of their authority to act in stead
of the President.

     4.08.  THE SECRETARY.  The Secretary shall: (a) keep the minutes of the 
meetings of the shareholders and of the Board of Directors in one or more 
books provided for that purpose; (b) see that all notices are duly given in 
accordance with the provisions of these by-laws or as required by law; (c) be 
custodian of the corporate records and of seal of the corporation and see 
that the seal of the corporation is affixed to all documents the execution of 
which on behalf of the corporation under its seal is duly authorized; (d) 
keep or arrange for the keeping of a register of the post office address of 
each shareholder which shall be furnished to the Secretary by such 
shareholder; (e) sign with the President, or a Vice-President, certificates 
for shares of the corporation, the issuance of which shall have been 
authorized by resolution of the Board of Directors; (f) have general charge 
of the stock transfer books of the corporation; and (g) in general perform 
all duties incident to the office of Secretary and have such other duties and 
exercise such authority as from time to time may be delegated or assigned 
to him or her by the President or by the Board of Directors.

     4.09.  THE TREASURER.  The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for monies due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Section 5.04, and (c) in general perform all of the
duties incident to the office of Treasurer and have such other duties and
exercise such other authority as from time to time may be delegated or assigned
to him or her by the President or by the Board of Directors.  If required by the
Board of Directors, the Treasurer shall give a bond for the faithful discharge
of his or her duties in such sum and with such surety or sureties as the Board
of Directors shall determine.

     4.10.  ADDITIONAL OFFICERS.  The Board of Directors may appoint Assistant
Treasurers, Assistant Secretaries and such other officers and agents as it may
deem appropriate, and such other officers and agents shall hold their offices
for such terms and shall exercise such powers and perform such duties as may be
determined from time to time by the Board of Directors, the Chairman or the
President.  The Board of Directors from time to time may delegate to any officer
or agent the power to appoint subordinate officers or agents and to prescribe
their respective rights, terms of office, authorities and duties.

     4.11.  SALARIES.  The salaries of the principal officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that they are also a director
of the corporation.


                  ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS:
                                SPECIAL CORPORATE ACTS

     5.01.  CONTRACTS.  The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of or on behalf of the corporation, and such
authorization may be general or confined to specific instances.  In


                                          8

<PAGE>

the absence of other designation, all deeds, mortgages and instruments of 
assignment or pledge made by the corporation shall be executed in the name of 
the corporation by the Chairman, the President or one of the Vice-Presidents 
and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant 
Treasurer; the Secretary or an Assistant Secretary, when necessary or 
required, shall affix the corporate seal thereto; and when so executed no 
other party to such instrument or any third party shall be required to make 
any inquiry into the authority of the signing officer or officers.

     5.02.  LOANS.  No indebtedness for borrowed money shall be contracted on
behalf of the corporation and no evidences of such indebtedness shall be issued
in its name unless authorized by or under the authority of a resolution of the
Board of Directors.  Such authorization may be general or confined to specific
instances.

     5.03.  CHECKS, DRAFTS, ETC.  All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.

     5.04.  DEPOSITS.  All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.

     5.05.  VOTING OF SECURITIES OWNED BY THIS CORPORATION.  Subject always 
to the specific directions of the Board of Directors, (a) any shares or other 
securities issued by any other corporation and owned or controlled by this 
corporation may be voted at any meeting of security holders by the Chairman, 
the President or any Vice-President of this corporation who may be present, 
and (b) whenever, in the judgment of the Chairman or the President, or in the 
absence of any Vice-President, it is desirable for this corporation to 
execute a proxy or written consent in respect to any shares or other 
securities issued by any other corporation and owned by this corporation, such
proxy or consent shall be executed in the name of this corporation by the 
Chairman, President or one of the Vice-Presidents of this corporation, 
without necessity of any authorization by the Board of Directors, affixation 
of corporate seal, countersignature or attestation by another officer.  Any 
person or persons designated in the manner above stated as the proxy or 
proxies of this corporation shall have full right, power and authority to 
vote the shares or other securities issued by such other corporation and 
owned by this corporation the same as such shares or other securities might 
be voted by this corporation.

                ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

     6.01.  CERTIFICATES OF SHARES.  Certificates representing shares of the
corporation shall be in such form, consistent with Section 490.625 of the Iowa
Business Corporation Act, as shall be determined by the Board of Directors.
Such certificates shall be signed by the President or a Vice-President and by
the Secretary or an Assistant Secretary.  All certificates for shares shall be
consecutively numbered or otherwise identified.  The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation.  All certificates surrendered to the


                                          9

<PAGE>

corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except as provided in Section 6.06.

     6.02.  FACSIMILE SIGNATURES AND SEAL.  The seal of the corporation on any
certificates for shares may be a facsimile.  The signatures of the President or
Vice-President and the Secretary or Assistant Secretary upon a certificate may
be facsimiles if the certificate is manually signed on behalf of a transfer
agent, or a registrar, other than the corporation itself or an employee of the
corporation.

     6.03.  SIGNATURE BY FORMER OFFICERS.  In case any officer who has signed or
whose facsimile signature has been placed upon any certificate for shares, shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he or she were such officer
at the date of its issue.

     6.04.  TRANSFER OF SHARES.  Prior to due presentment of a certificate for
shares for registration of transfer the corporation may treat the registered
owner of such shares as the person exclusively entitled to vote, to receive
notification and otherwise to have and exercise all the rights and power of an
owner.  Where a certificate for shares is presented to the corporation with a
request to register for transfer, the corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the corporation had no duty to inquire into adverse claims
or has discharged any such duty.  The corporation may require reasonable
assurance that said endorsements are genuine and effective and in compliance
with such other regulations as may be prescribed by or under the authority of
the Board of Directors.

     6.05.  RESTRICTIONS ON TRANSFER.  The face or reverse side of each
certificate representing shares shall bear conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.

     6.06.  LOST, DESTROYED OR STOLEN CERTIFICATES.  Where the owner claims
that his or her certificates for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the corporation has notice that such shares have been acquired
by a bona fide purchaser, and (b) files with the corporation a sufficient
indemnity bond, and (c) satisfies such other reasonable requirements as may be
prescribed by or under the authority of the Board of Directors.

     6.07.  CONSIDERATION FOR SHARES.  The shares of the corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors, provided that any shares having a par value shall not be issued
for consideration less than the par value thereof.  The consideration to be paid
for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
corporation.  When payment of the consideration for which shares are to be
issued has been received by the corporation, such shares shall be deemed to be
fully paid and nonassessable by the corporation.  No certificates shall be
issued for any share until such share is fully paid.

                                          10

<PAGE>

     6.08.  STOCK REGULATIONS.  The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
the statutes of the State of Iowa as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
corporation.

                                  ARTICLE VII. SEAL

     7.01.  CORPORATE SEAL.  The Board of Directors shall provide a corporate
seal which shall be circular in form and shall have inscribed thereon the name
of the corporation and the state of incorporation or "Corporate Seal."

                               ARTICLE VIII. AMENDMENTS

     8.01.  BY SHAREHOLDERS.  These by-laws may be altered, amended or repealed
and new by-laws may be adopted by the shareholders by affirmative vote of not
less than a majority of the shares present or represented at any annual or
special meeting of the shareholders at which a quorum is in attendance.

     8.02.  BY DIRECTORS.  These by-laws may also be altered, amended or
repealed and new by-laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no by-law adopted by the shareholders shall be
amended or repealed by the Board of Directors if the by-law so adopted so
provides.

     8.03.  IMPLIED AMENDMENTS.  Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
by-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
by-laws so that the by-laws would be consistent with such action, shall be given
the same effect as though the by-laws had been temporarily amended or suspended
so far, but only so far as is necessary to permit the specific action so taken
or authorized.

                             ARTICLE IX. INDEMNIFICATION

     9.01.  GENERAL INDEMNIFICATION.  Each director, officer and employee, 
and former director, officer and employee shall be indemnified to the extent 
permitted by law against any and all personal liability for damages and 
expenses reasonably incurred in connection with any action, suit, proceeding 
or claim or liability, civil, criminal or administrative, to which such 
person may be a party by reason of the lawful discharge of his or her past or 
present duties on behalf of the Company, or any of the Company's Employee 
Benefit plans.  The Company shall defend each such person in all actions, 
suits or proceedings which may arise.  This right of indemnification shall 
not be exclusive of any other rights to which the person may be entitled by 
law or agreement, and shall be in addition to any liability coverage 
purchased by the Company.  It shall take effect after such coverage, if any, 
is exhausted.

     No such indemnification shall be made with respect to any matter as to
which the person shall have been finally adjudged to be liable for gross
negligence or misconduct in the performance of his or her duty to the Company.


                                          11

<PAGE>


                             PARTICIPATION AGREEMENT

                                      AMONG

                    EQUITRUST VARIABLE INSURANCE SERIES FUND,

                 EQUITRUST INVESTMENT MANAGEMENT SERVICES, INC.,

                                       AND

                        EQUITRUST LIFE INSURANCE COMPANY


     THIS AGREEMENT, made and entered into as of this 5th day of June, 1998 
by and among EquiTrust Life Insurance Company (hereinafter, the "Company"), 
an Iowa insurance company, on its own behalf and on behalf of each segregated 
asset account of the Company set forth on Schedule A hereto as may be amended 
from time to time (each account hereinafter referred to as the "Account"), 
and the undersigned fund, a business trust organized under the laws of the 
Commonwealth of Massachusetts (hereinafter referred to as the "Fund") and 
EquiTrust Investment Management Services, Inc. (hereinafter the 
"Underwriter"), a Delaware corporation.

     WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and

     WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and

     WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(l5) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and

     WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933,



<PAGE>

                                        2


as amended (hereinafter the "1933 Act"); and

     WHEREAS, EquiTrust Investment Management Services, Inc. (hereinafter
referred to as the "Adviser") is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and

     WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and

     WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and

     WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and

     WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and

     WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;

     NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:

ARTICLE I. SALE OF FUND SHARES

     1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.

     1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the SEC, and the Fund shall use its best efforts to calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Board") may refuse to sell shares of any Designated Portfolio
to any person, or



<PAGE>

                                        3


suspend or terminate the offering of shares of any Designated Portfolio if such
action is required by law or by regulatory authorities having jurisdiction, or
is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Designated Portfolio.

     1.3 The Fund and the Underwriter agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Designated Portfolios will be sold to the general public. The Fund and
the Underwriter will not sell Fund shares to any insurance company or separate
account unless an agreement containing provisions substantially the same as
Articles I, III and VII of this Agreement is in effect to govern such sales.

     1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.

     1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the designee
of the Fund for receipt of purchase and redemption orders from the Account, and
receipt by such designee shall constitute receipt by the Fund; provided that the
Company receives the order by 3:00 p.m. central time and the Fund receives
notice of such order by 9:30 a.m. central time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the SEC.

     1.6 The Company agrees to purchase and redeem the shares of each Designated
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus.

     1.7 The Company shall pay for Fund shares one Business Day after receipt of
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
3:00 p.m. central time. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 3:00 p.m. central time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. For purposes
of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund.

     1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock



<PAGE>

                                        4


certificates will not be issued to the Company or any Account. Shares ordered
from the Fund will be recorded in an appropriate title for each Account or the
appropriate subaccount of each Account.

     1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated Portfolio shares in additional shares of that
Portfolio. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.

     1.10 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 5:30
p.m. central time) and shall use its best efforts to make such net asset value
per share available by 6:00 p.m. central time. If the net asset value is
materially incorrect through no fault of the Company, the Company on behalf of
each Account, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct net asset value in accordance with
Fund procedures. Any material error in the net asset value shall be reported to
the Company promptly upon discovery. Any administrative or other costs or losses
incurred for correcting underlying Contract owner accounts shall be at Company's
expense.

     1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.

ARTICLE II. REPRESENTATIONS AND WARRANTIES

     2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws,
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Iowa insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.

     2.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with  the laws of the state of Iowa and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend the Registration



<PAGE>


                                        5


Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.

     2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have
the Board, a majority of whom are not interested persons of the Fund, formulate
and approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.

     2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Iowa to the extent required to perform this Agreement.

     2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.

     2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and any applicable state and
federal securities laws.

     2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with the laws of the State of Iowa and any applicable
state and federal securities laws.

     2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.

     2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $2.5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any



<PAGE>

                                        6


amounts received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund if, and when, applicable. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies. The Company
agrees to exercise its best efforts to ensure that other individuals/entities
not employed or controlled by the Company and dealing with the money and/or
securities of the Fund maintain a similar bond or coverage in a reasonable
amount.

ARTICLE III. PROSPECTUSES. STATEMENTS OF ADDITIONAL INFORMATION. AND PROXY
STATEMENTS: VOTING

     3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus as set in type
or on a diskette, at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company (at the Company's expense) once each year (or
more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense).

     3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.

     3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners in the Fund. The Underwriter (at the Company's
expense) shall provide the Company with copies of the Fund's annual and semi-
annual reports to shareholders in such quantity as the Company shall reasonably
request for use in connection with offering the Variable Contracts issued by the
Company. If requested by the Company in lieu thereof, the Underwriter shall
provide such documentation (which may include a final copy of the Fund's annual
and semi-annual reports as set in type or on diskette) and other assistance as
is reasonably necessary in order for the Company (at the Company's expense) to
print such shareholder communications for distribution to Contract owners.

     3.4 The Company shall:

            (i)     solicit voting instructions from Contract owners;

            (ii)    vote the Fund shares in accordance with instructions
                    received from



<PAGE>

                                        7


                    Contract owners; and

            (iii)   vote Fund shares for which no instructions have been
                    received in the same proportion as Fund shares of such
                    Designated Portfolio for which instructions have been
                    received,

so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.

     3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.

     3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.


ARTICLE IV. SALES MATERIAL AND INFORMATION

     4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
that the Company develops or uses and in which the Fund (or a Portfolio thereof)
or the Adviser or the Underwriter is named, at least ten calendar days prior to
its use. No such material shall be used if the Fund or its designee reasonably
object to such use within ten calendar days after receipt of such material. The
Fund or its designee reserves the right to reasonably object to the continued
use of such material, and no such material shall be used if the Fund or its
designee so object.

     4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.

     4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause to
be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use. No such material shall be




<PAGE>

                                        8


used if the Company reasonably objects to such use within ten calendar days
after receipt of such material. The Company reserves the right to reasonably
object to the continued use of such material and no such material shall be used
if the Company so objects.

     4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.

     4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, within a reasonable time after the filing of
such document(s) with the SEC or other regulatory authorities.

     4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, within a reasonable time
after the filing of such document(s) with the SEC or other regulatory
authorities.

     4.7 For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following
that refer to the Fund or any affiliate of the Fund: advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(I.E., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.

ARTICLE V. FEES AND EXPENSES

     5.1 The Fund and the Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-l to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise



<PAGE>

                                        9


payable to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.

     5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, except as otherwise provided herein. The Fund shall
see to it that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Fund, in accordance with applicable state laws prior to their
sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.

     5.3 The Company shall bear the expenses of printing the Fund's prospectus
(in accordance with 3.1) and of distributing the Fund's prospectus, proxy
materials, and reports to Contract owners and prospective Contract owners.

ARTICLE VI. DIVERSIFICATION AND QUALIFICATION

     6.1 The Fund will invest the assets of each Designated Portfolio in such a
manner as to ensure that the Contracts will be treated as annuity, endowment, or
life insurance contracts, whichever is appropriate, under the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations issued thereunder (or
any successor provisions). Without limiting the scope of the foregoing, each
Designated Portfolio of the Fund will comply with Section 817(h) of the Code and
Treasury Regulation SECTION 1.817-5, and any Treasury interpretations thereof,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts, and any amendments or other modifications or successor
provisions to such Section or Regulations. In the event of a breach of this
Article VI by the Fund, it will take all reasonable steps (a) to notify the
Company of such breach and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Regulation 817.5.

     6.2 The Fund represents that each Designated Portfolio is or will be
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.

     6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance, endowment contracts, or
annuity insurance contracts, under applicable provisions of the Code, and that
it will make every effort to maintain such treatment, and that it will notify
the Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future. The Company agrees that any prospectus offering a
contract that is a "modified



<PAGE>

                                       10


endowment contract" as that term is defined in Section 7702A of the Code (or any
successor or similar provision), shall identify such contract as a modified
endowment contract.

ARTICLE VII. POTENTIAL CONFLICTS.

     7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.

     7.2. The Company will report any potential or existing conflicts of which
it is aware to
the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.

     7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.

     7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be



<PAGE>

                                       11


limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.

     7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by the company for the purchase (and redemption) of shares of
the Fund.

     7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.

     7.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.



<PAGE>

                                       12


ARTICLE VIII. INDEMNIFICATION

     8.1 INDEMNIFICATION BY THE COMPANY

            8.1(a). The Company agrees to indemnify and hold harmless the Fund
and the Underwriter and each of their officers and directors and each person, if
any, who controls the Fund or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:

            (i)     arise out of or are based upon any untrue statements or
                    alleged untrue statements of any material fact contained in
                    the Registration Statement, prospectus, or statement of
                    additional information ("SAI") for the Contracts or
                    contained in the Contracts or sales literature or other
                    promotional material for the Contracts (or any amendment or
                    supplement to any of the foregoing), or arise out of or are
                    based upon the omission or the alleged omission to state
                    therein a material fact required to be stated therein or
                    necessary to make the statements therein not misleading,
                    provided that this agreement to indemnify shall not apply as
                    to any Indemnified Party if such statement or omission or
                    such alleged statement or omission was made in reliance upon
                    and in conformity with information furnished to the Company
                    by or on behalf of the Fund for use in the Registration
                    Statement, prospectus or SAI for the Contracts or in the
                    Contracts or sales literature or other promotional material
                    (or any amendment or supplement) or otherwise for use in
                    connection with the sale of the Contracts or Fund shares; or

            (ii)    arise out of or as a result of statements or representations
                    (other than statements or representations contained in the
                    Registration Statement, prospectus or sales literature or
                    other promotional material of the Fund not supplied by the
                    Company or persons under its control) or wrongful conduct of
                    the Company or persons under its authorization or control,
                    with respect to the sale or distribution of the Contracts or
                    Fund Shares; or

            (iii)   arise out of any untrue statement or alleged untrue
                    statement of a material fact contained in a Registration
                    Statement, prospectus, SAI, or sales literature or other
                    promotional material of the Fund or any amendment thereof or
                    supplement thereto or the omission or alleged omission to
                    state therein a material fact required to be stated therein
                    or necessary to make the statements therein not misleading
                    if such a statement or omission was made in reliance upon
                    information furnished to the Fund by or on behalf



<PAGE>

                                       13


                    of the Company; or

            (iv)    arise as a result of any material failure by the Company to
                    provide the services and furnish the materials under the
                    terms of this Agreement (including a failure, whether
                    unintentional or in good faith or otherwise, to comply with
                    the qualification requirements specified in Article VI of
                    this Agreement); or

            (v)     arise out of or result from any material breach of any
                    representation and/or warranty made by the Company in this
                    Agreement or arise out of or result from any other material
                    breach of this Agreement by the Company,

as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.

            8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.

            8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.

            8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.




<PAGE>

                                       14


     8.2    INDEMNIFICATION BY THE UNDERWRITER

            8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and

               (i)    arise out of or are based upon any untrue statement or
                      alleged untrue statement of any material fact contained in
                      the Registration Statement or prospectus or SAI or sales
                      literature or other promotional material of the Fund (or
                      any amendment or supplement to any of the foregoing), or
                      arise out of or are based upon the omission or the alleged
                      omission to state therein a material fact required to be
                      stated therein or necessary to make the statements therein
                      not misleading, provided that this agreement to indemnify
                      shall not apply as to any Indemnified Party if such
                      statement or omission or such alleged statement or
                      omission was made in reliance upon and in conformity with
                      information furnished to the Underwriter or Fund by or on
                      behalf of the Company for use in the Registration
                      Statement or prospectus for the Fund or in sales
                      literature or other promotional material (or any amendment
                      or supplement) or otherwise for use in connection with the
                      sale of the Contracts or Fund shares; or

               (ii)   arise out of or as a result of statements or
                      representations (other than statements or representations
                      contained in the Registration Statement, prospectus or
                      sales literature or other promotional material for the
                      Contracts not supplied by the Underwriter or persons under
                      its control) or wrongful conduct of the Fund or
                      Underwriter or persons under their control, with respect
                      to the sale or distribution of the Contracts or Fund
                      shares; or

               (iii)  arise out of any untrue statement or alleged untrue
                      statement of a material fact contained in a Registration
                      Statement, prospectus, SAI, or sales literature or other
                      promotional material of the Contracts, or any amendment
                      thereof or supplement thereto, or the omission or alleged
                      omission to state therein a material fact required to be
                      stated therein or necessary to make the statement or
                      statements therein not misleading, if such statement or
                      omission



<PAGE>

                                       15


                      was made in reliance upon information furnished to the
                      Company by or on behalf of the Fund; or

               (iv)   arise as a result of any material failure by the Fund to
                      provide the services and furnish the materials under the
                      terms of this Agreement (including a failure, whether
                      unintentional or in good faith or otherwise, to comply
                      with the diversification and other qualification
                      requirements specified in Article VI of this Agreement);
                      or

               (v)    arise out of or result from any material breach of any
                      representation and/or warranty made by the Underwriter in
                      this Agreement or arise out of or result from any other
                      material breach of this Agreement by the Underwriter;

as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.

            8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.

            8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.

            8.2(d). The Company agrees promptly to notify the Underwriter of the




<PAGE>

                                       16


commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.

     8.3    INDEMNIFICATION BY THE FUND

            8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:

               (i)    arise as a result of any material failure by the Fund to
                      provide the services and furnish the materials under the
                      terms of this Agreement (including a failure, whether
                      unintentional or in good faith or otherwise, to comply
                      with the diversification and other qualification
                      requirements specified in Article VI of this Agreement);
                      or

               (ii)   arise out of or result from any material breach of any
                      representation and/or warranty made by the Fund in this
                      Agreement or arise out of or result from any other
                      material breach of this Agreement by the Fund;

as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.

            8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.

            8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own



<PAGE>

                                       17


expense, in the defense thereof. The Fund also shall be entitled to assume the
expense thereof, with counsel satisfactory to the party named in the action and
to settle the claim at its own expense; provided, however, that no such
settlement shall, without the Indemnified Parties' written consent, include any
factual stipulation referring to the Indemnified Parties or their conduct. After
notice from the Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.

            8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.

ARTICLE IX. APPLICABLE LAW

     9.1    This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Iowa.

     9.2    This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.

ARTICLE X. TERMINATION

     10.1   This Agreement shall continue in full force and effect until the
first to occur of:

            (a)   termination by any party, for any reason with respect to some
                  or all Designated Portfolios, by six (6) months' advance
                  written notice delivered to the other parties; or

            (b)   termination by the Company by written notice to the Fund and
                  the Underwriter with respect to any Designated Portfolio based
                  upon the Company's determination that shares of the Fund are
                  not reasonably available to meet the requirements of the
                  Contracts; provided that such termination shall apply only to
                  the Designated Portfolio not reasonably available; or

            (c)   termination by the Company by written notice to the Fund and
                  the Underwriter in the event any of the Designated Portfolio's
                  shares are not registered, issued or sold in accordance with
                  applicable state and/or federal law or such law precludes the
                  use of such shares as the underlying



<PAGE>

                                       18


                  investment media of the Contracts issued or to be issued by
                  the Company; or

            (d)   termination by the Fund or Underwriter in the event that
                  formal administrative proceedings are instituted against the
                  Company by the NASD, the SEC, the Insurance Commissioner or
                  like official of any state or any other regulatory body
                  regarding the Company's duties under this Agreement or related
                  to the sale of the Contracts, the operation of any Account, or
                  the purchase of the Fund shares; provided, however, that the
                  Fund or Underwriter determines in its sole judgment exercised
                  in good faith, that any such administrative proceedings will
                  have a material adverse effect upon the ability of the Company
                  to perform its obligations under this Agreement; or

            (e)   termination by the Company in the event that formal
                  administrative proceedings are instituted against the Fund or
                  Underwriter by the NASD, the SEC, or any state securities or
                  insurance department or any other regulatory body; provided,
                  however, that the Company determines in its sole judgment
                  exercised in good faith, that any such administrative
                  proceedings will have a material adverse effect upon the
                  ability of the Fund or Underwriter to perform its obligations
                  under this Agreement; or

            (f)   termination by the Company by written notice to the Fund and
                  the Underwriter with respect to any Designated Portfolio in
                  the event that such Designated Portfolio ceases to qualify as
                  a Regulated Investment Company under Subchapter M or fails to
                  comply with the Section 817(h) diversification requirements
                  specified in Article VI hereof, or if the Company reasonably
                  believes that such Designated Portfolio may fail to so qualify
                  or comply; or

            (g)   termination by the Fund or Underwriter by written notice to
                  the Company in the event that the Contracts fail to meet the
                  qualifications specified in Section 6.3 hereof; or if the Fund
                  or Underwriter reasonably believes that such Contracts may
                  fail to so qualify; or

            (h)   termination by either the Fund or the Underwriter by written
                  notice to the Company, if either one or both of the Fund or
                  the Underwriter respectively, shall determine, in their sole
                  judgment exercised in good faith, that the Company has
                  suffered a material adverse change in its business,
                  operations, financial condition, or prospects since the date
                  of this Agreement or is the subject of material adverse
                  publicity; or

            (i)   termination by the Company by written notice to the Fund and
                  the Underwriter, if the Company shall determine, in its sole
                  judgment exercised in good faith, that the Fund or the
                  Underwriter has suffered a



<PAGE>

                                       19

                  material adverse change in its business, operations, financial
                  condition or prospects since the date of this Agreement or is
                  the subject of material adverse publicity.

     10.2   EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be permitted
to reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.2 shall not apply to
any termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement. The parties further agree
that this Section 10.2 shall not apply to any termination under Section 10.1(g)
of this Agreement.

     10.3   The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act. Upon request, the Company will promptly furnish to the Fund and
the Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.

     10.4   Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.

ARTICLE XI. NOTICES

     Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.

     If to the Fund:

            EquiTrust Variable Insurance Series Fund
            Attn:  Sue Cornick
            5400 University Avenue
            West Des Moines, IA  50266



<PAGE>

                                       20


     If to the Company:

            EquiTrust Life Insurance Company
            Attn:  Sue Cornick
            5400 University Avenue
            West Des Moines, IA  50266



     If to Underwriter:

            EquiTrust Investment Management Services, Inc.
            Attn:  Sue Cornick
            5400 University Avenue
            West Des Moines, IA  50266


ARTICLE XII. MISCELLANEOUS

     12.1 All references herein to the Adviser relate solely to the Adviser of
such individual Fund, as appropriate. All persons dealing with a Fund must look
solely to the property of such Fund, and in the case of a series company, the
respective Designated Portfolio listed on Schedule A hereto as though such
Designated Portfolio had separately contracted with the Company and the
Underwriter for the enforcement of any claims against the Fund. The parties
agree that neither the Board, officers, agents or shareholders assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.

     12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain.

     12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

     12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

     12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.



<PAGE>

                                       21

     12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Iowa Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with Iowa
variable annuity laws and regulations and any other applicable law or
regulations.

     12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.

     12.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.

     12.9 The Company shall furnish or cause to be furnished, to the Fund or its
designee copies of the following reports:

     (a)  the Company's annual statement (prepared under statutory accounting
          principles) and annual report (prepared under generally accepted
          accounting principles ("GAAP"), if any), as soon as practical and in
          any event within 90 days after the end of each fiscal year.

     (b)  the Company's quarterly statements (statutory) (and GAAP, if any), as
          soon as practical and in any event within 45 days after the end of
          each quarterly period.




<PAGE>

                                       22


     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.

COMPANY:                      EquiTrust Life Insurance Company

                              By its authorized officer

                              By: /s/ William J. Oddy

                              Title: Executive Vice President, General 
                                     Manager & Director

                              Date: June 5, 1998.


FUND:                         EquiTrust Variable Insurance Series Fund

                              By its authorized officer

                              By: /s/ Richard D. Harris

                              Title: Senior Vice President Secretary - 
                                     Treasurer & Trustee

                              Date: June 5, 1998.


UNDERWRITER:                  EquiTrust Investment Management Services, Inc.

                              By its authorized officer

                              By: /s/ William J. Oddy

                              Title: President

                              Date: June 5, 1998.

<PAGE>

                                       23


                                   SCHEDULE A


NAME OF SEPARATE ACCOUNT AND DATE ESTABLISHED BY BOARD OF DIRECTORS

EquiTrust Life Variable Account  1/6/98
EquiTrust Life Annuity Account  1/6/98
EquiTrust Life Variable Account II  1/6/98
EquiTrust Life Annuity Account II  1/6/98

CONTRACTS FUNDED BY SEPARATE ACCOUNT

Flexible Premium Variable Life Insurance Policies
Flexible Premium Deferred Variable Annuity Contracts

DESIGNATED PORTFOLIOS

Value Growth Portfolio
High Grade Bond Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Blue Chip Portfolio


<PAGE>

                             FUND PARTICIPATION AGREEMENT


This Agreement is entered into as of the 8th day of June, 1998, between 
EquiTrust Life Insurance Company, a life insurance company organized under the 
laws of the State of Iowa ("Insurance Company"), and each of DREYFUS VARIABLE 
INVESTMENT FUND; THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; DREYFUS 
LIFE AND ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX FUND); AND 
DREYFUS INVESTMENT PORTFOLIOS (each a "Fund").

                                      ARTICLE I
                                     DEFINITIONS

1.1    "Act" shall mean the Investment Company Act of 1940, as amended.

1.2    "Board" shall mean the Board of Directors or Trustees, as the case may
       be, of a Fund, which has the responsibility for management and control of
       the Fund.

1.3    "Business Day" shall mean any day for which a Fund calculates net asset
       value per share as described in the Fund's Prospectus.

1.4    "Commission" shall mean the Securities and Exchange Commission.

1.5    "Contract" shall mean a variable annuity or life insurance contract that
       uses any Participating Fund (as defined below) as an underlying
       investment medium.  Individuals who participate under a group Contract
       are "Participants".

1.6    "Contractholder" shall mean any entity that is a party to a Contract with
       a Participating Company (as defined below).

1.7    "Disinterested Board Members" shall mean those members of the Board of a
       Fund that are not deemed to be "interested persons" of the Fund, as
       defined by the Act.

1.8    "Dreyfus" shall mean The Dreyfus Corporation and its affiliates,
       including Dreyfus Service Corporation.

1.9    "Participating Companies" shall mean any insurance company (including
       Insurance Company) that offers variable annuity and/or variable life
       insurance contracts to the public and that has entered into an agreement
       with one or more of the Funds.


                                        - 1 -
<PAGE>

1.10   "Participating Fund" shall mean each Fund, including, as applicable, any
       series thereof, specified in Exhibit A, as such Exhibit may be amended
       from time to time by agreement of the parties hereto, the shares of which
       are available to serve as the underlying investment medium for the
       aforesaid Contracts.

1.11   "Prospectus" shall mean the current prospectus and statement of
       additional information of a Fund, as most recently filed with the
       Commission.

1.12   "Separate Account" shall mean EquiTrust Life Annuity Account and 
       EquiTrust Life Variable Account, individually, each a separate account
       established by Insurance Company in accordance with the laws of the State
       of Iowa.

1.13   "Software "Program" shall mean the software program used by a Fund for
       providing Fund and account balance information including net asset value
       per share.  Such Program may include the Lion System.  In situations
       where the Lion System or any other Software Program used by a Fund is not
       available, such information may be provided by telephone.  The Lion
       System shall be provided to Insurance Company at no charge.

1.14   "Insurance Company's General Account(s)" shall mean the general
       account(s) of Insurance Company and its affiliates that invest in a Fund.

                                      ARTICLE II
                                   REPRESENTATIONS

2.1    Insurance Company represents and warrants that (a) it is an insurance
       company duly organized and in good standing under applicable law; (b) it
       has legally and validly established the Separate Account pursuant to the
       Iowa Insurance Code for the purpose of offering to the public certain
       individual and group variable annuity and life insurance contracts; (c)
       it has registered the Separate Account as a unit investment trust under
       the Act to serve as the segregated investment account for the Contracts;
       and (d) the Separate Account is eligible to invest in shares of each
       Participating Fund without such investment disqualifying any 
       Participating Fund as an investment medium for insurance company separate
       accounts supporting variable annuity contracts or variable life insurance
       contracts.

2.2    Insurance Company represents and warrants that (a) the Contracts will be
       described in a registration statement filed under the Securities Act of
       1933, as amended ("1933 Act"); (b) the Contracts will be issued and sold
       in compliance in all material respects with all applicable federal and
       state laws; and (c) the sale of the Contracts shall comply in all
       material respects with state insurance law requirements.  Insurance
       Company agrees to notify each Participating Fund promptly of any
       investment restrictions, of which Insurance Company has knowledge, 
       imposed by state insurance law and applicable to the Participating Fund.


                                        - 2 -
<PAGE>

2.3    Insurance Company represents and warrants that the income, gains and
       losses, whether or not realized, from assets allocated to the Separate
       Account are, in accordance with the applicable Contracts, to be credited
       to or charged against such Separate Account without regard to other
       income, gains or losses from assets allocated to any other accounts of
       Insurance Company.  Insurance Company represents and warrants that the
       assets of the Separate Account are and will be kept separate from
       Insurance Company's General Account and any other separate accounts
       Insurance Company may have, and will not be charged with liabilities from
       any business that Insurance Company may conduct or the liabilities of any
       companies affiliated with Insurance Company.

2.4    Each Participating Fund represents that it is registered with the
       Commission under the Act as an open-end, management investment company
       and possesses, and shall maintain, all legal and regulatory licenses,
       approvals, consents and/or exemptions required for the Participating Fund
       to operate and offer its shares as an underlying investment medium for
       Participating Companies.

2.5    Each Participating Fund represents that it is currently qualified as a
       regulated investment company under Subchapter M of the Internal Revenue
       Code of 1986, as amended (the "Code"), and that it will make every effort
       to maintain such qualification (under Subchapter M or any successor or
       similar provision) and that it will notify Insurance Company immediately
       upon having a reasonable basis for believing that it has ceased to so
       qualify or that it might not so qualify in the future.

2.6    Insurance Company represents and agrees that the Contracts are currently,
       and at the time of issuance will be, treated as life insurance policies
       or annuity contracts, whichever is appropriate, under applicable
       provisions of the Code, and that it will make every effort to maintain
       such treatment and that it will notify each Participating Fund and
       Dreyfus immediately upon having a reasonable basis for believing that the
       Contracts have ceased to be so treated or that they might not be so
       treated in the future.  Insurance Company agrees that any prospectus
       offering a Contract that is a "modified endowment contract," as that term
       is defined in Section 7702A of the Code, will identify such Contract as a
       modified endowment contract (or policy).

2.7    Each Participating Fund agrees that its assets shall be managed and
       invested in a manner that complies with the requirements of Section
       817(h) of the Code.

2.8    Insurance Company agrees that each Participating Fund shall be permitted
       (subject to the other terms of this Agreement) to make its shares
       available to other Participating Companies and Contractholders.

2.9    Each Participating Fund represents and warrants that any of its
       directors, trustees, officers, employees, investment advisers, and other
       individuals/entities who deal with the money and/or securities of the
       Participating Fund are and shall continue to be at all times


                                        - 3 -
<PAGE>

      covered by a blanket fidelity bond or similar coverage for the benefit of
      the Participating Fund in an amount not less than that required by Rule
      17g-1 under the Act.  The aforesaid Bond shall include coverage for
      larceny and embezzlement and shall be issued by a reputable bonding
      company.

2.10  Insurance Company represents and warrants that all of its employees and
      agents who deal with the money and/or securities of each Participating
      Fund are and shall continue to be at all times covered by a blanket
      fidelity bond or similar coverage in an amount not less than $2.5 million.
      The aforesaid Bond shall include coverage for larceny and embezzlement 
      and shall be issued by a reputable bonding company.

2.11  Insurance Company agrees that Dreyfus shall be deemed a third party
      beneficiary under this Agreement and may enforce any and all rights
      conferred by virtue of this Agreement.

                                     ARTICLE III
                                     FUND SHARES

3.1   The Contracts funded through the Separate Account will provide for the
      investment of certain amounts in shares of each Participating Fund.

3.2   Each Participating Fund agrees to make its shares available for purchase
      at the then applicable net asset value per share by Insurance Company and
      the Separate Account on each Business Day pursuant to rules of the
      Commission.  Notwithstanding the foregoing, each Participating Fund may
      refuse to sell its shares to any person, or suspend or terminate the
      offering of its shares, if such action is required by law or by
      regulatory authorities having jurisdiction or is, in the sole discretion
      of its Board, acting in good faith and in light of its fiduciary duties
      under federal and any applicable state laws, necessary and in the
      best interests of the Participating Fund's shareholders.

3.3   Each Participating Fund agrees that shares of the Participating Fund will
      be sold only to (a) Participating Companies and their separate accounts
      or (b) "qualified pension or retirement plans" as determined under
      Section 817(h)(4) of the Code.  Except as otherwise set forth in this
      Section 3.3, no shares of any Participating Fund will be sold to the
      general public.

3.4   Each Participating Fund shall use its best efforts to provide closing net
      asset value, dividend and capital gain information on a per-share basis
      to Insurance Company by 6:00 p.m. Eastern time on each Business Day.  Any
      material errors in the calculation of net asset value, dividend and
      capital gain information shall be reported immediately upon discovery to
      Insurance Company.  Non-material errors will be corrected in the next
      Business Day's net asset value per share.


                                         -4-

<PAGE>

3.5   At the end of each Business Day, Insurance Company will use the
      information described in Sections 3.2 and 3.4 to calculate the unit values
      of the Separate Account for the day.  Using this unit value, Insurance
      Company will process the day's Separate Account transactions received by
      it by the close of the trading on the floor of the New York Stock
      Exchange (currently 4:00 p.m. Eastern time) to determine the net dollar
      amount of each Participating Fund's shares that will be purchased or
      redeemed at that day's closing net asset value per share.  The net
      purchase or redemption orders will be transmitted to each Participating
      Fund by Insurance Company by 11:00 a.m. Eastern time on the Business Day
      next following Insurance Company's receipt of that information.  Subject
      to Sections 3.6 and 3.8, all purchase and redemption orders for Insurance
      Company's General Accounts shall be effected at the net asset value per
      share of each Participating Fund next calculated after receipt of the
      order by the Participating Fund or its Transfer Agent.

3.6   Each Participating Fund appoints Insurance Company as its agent for the
      limited purpose of accepting orders for the purchase and redemption of
      Participating Fund shares for the Separate Account.  Each Participating
      Fund will execute orders at the applicable net asset value per share
      determined as of the close of trading on the day of receipt of such
      orders by Insurance Company acting as agent ("effective trade date"),
      provided that the Participating Fund receives notice of such orders by
      11:00 a.m. Eastern time on the next following Business Day and, if such
      orders request the purchase of Participating Fund shares, the conditions
      specified in Section 3.8, as applicable, are satisfied.  A redemption or
      purchase request that does not satisfy the conditions specified above and
      in Section 3.8, as applicable, will be effected at the net asset value
      per share computed on the Business Day immediately preceding the next
      following Business Day upon which such conditions have been satisfied in
      accordance with the requirements of this Section and Section 3.8. 
      Insurance Company represents and warrants that all orders submitted by 
      the Insurance Company for execution on the effective trade date shall
      represent purchase or redemption orders received from Contractholders
      prior to the close of trading on the New York Stock Exchange on the
      effective trade date.

3.7   Insurance Company will make its best efforts to notify each applicable
      Participating Fund in advance of any unusually large purchase or
      redemption orders.

3.8   If Insurance Company's order requests the purchase of a Participating
      Fund's shares, Insurance Company will pay for such purchases by wiring
      Federal Funds to the Participating Fund or its designated custodial
      account on the day the order is transmitted.  Insurance Company shall
      make all reasonable efforts to transmit to the applicable Participating
      Fund payment in Federal Funds by 12:00 noon Eastern time on the Business
      Day the Participating Fund receives the notice of the order pursuant to
      Section 3.5.  Each applicable Participating Fund will execute such orders
      at the applicable net asset value per share determined as of the close of
      trading on the effective trade date if the Participating Fund receives
      payment in Federal Funds by 12:00 midnight Eastern time on the Business
      Day the Participating Fund receives the notice of the order pursuant to


                                         -5-

<PAGE>

      Section 3.5.  If payment in Federal Funds for any purchase is not
      received or is received by a Participating Fund after 12:00 noon Eastern
      time on such Business Day, Insurance Company shall promptly, upon each
      applicable Participating Fund's request, reimburse the respective
      Participating Fund for any charges, costs, fees, interest or other
      expenses incurred by the Participating Fund in connection with any
      advances to, or borrowings or overdrafts by, the Participating Fund, or
      any similar expenses incurred by the Participating Fund, as a result of
      portfolio transactions effected by the Participating Fund based upon such
      purchase request.  If Insurance Company's order requests the redemption
      of any Participating Fund's shares valued at or greater than $1 million
      dollars, the Participating Fund will wire such amount to Insurance
      Company within seven days of the order.

3.9   Each Participating Fund has the obligation to ensure that its shares are
      registered with applicable federal agencies at all times.

3.10  Each Participating Fund will confirm each purchase or redemption order
      made by Insurance Company.  Transfer of Participating Fund shares will be
      by book entry only.  No share certificates will be issued to Insurance
      Company.  Insurance Company will record shares ordered from a
      Participating Fund in an appropriate title for the corresponding account.

3.11  Each Participating Fund shall credit Insurance Company with the
      appropriate number of shares.

3.12  On each ex-dividend date of a Participating Fund or, if not a Business
      Day, on the first Business Day thereafter, each Participating Fund shall
      communicate to Insurance Company the amount of dividend and capital gain,
      if any, per share.  All dividends and capital gains shall be
      automatically reinvested in additional shares of the applicable
      Participating Fund at the net asset value per share on the ex-dividend
      date.  Each Participating Fund shall, on the day after the ex-dividend
      date or, if not on a Business Day, on the first Business Day thereafter,
      notify Insurance Company of the number of shares so issued.

                                      ARTICLE IV
                                STATEMENTS AND REPORTS

4.1   Each Participating Fund shall provide monthly statements of account as of
      the end of each month for all of Insurance Company's accounts by the
      fifteenth (15th) Business Day of the following month.

4.2   Each Participating Fund shall distribute to Insurance Company copies of
      the Participating Fund's Prospectuses, proxy materials, notices, periodic
      reports and other printed materials (which the Participating Fund
      customarily provides to its shareholders) in quantities as

                                         -6-
<PAGE>
       
       Insurance Company may reasonably request for distribution to each
       Contractholder and Participant.

4.3    Each Participating Fund will provide to Insurance Company at least
       one complete copy of all registration statements, Prospectuses,
       reports, proxy statements, sales literature and other promotional
       materials, applications for exemptions, requests for no-action
       letters, and all amendments to any of the above, that relate to
       the Participating Fund or its shares, contemporaneously with the
       filing of such document with the Commission or other regulatory
       authorities.

4.4    Insurance Company will provide to each Participating Fund at least one
       copy of all registration statements, Prospectuses, reports, proxy
       statements, sales literature and other promotional materials,
       applications for exemptions, requests for no-action letters, and all
       amendments to any of the above, that relate to the Contracts or the
       Separate Account, contemporaneously with the filing of such document
       with the Commission.

                                      ARTICLE V
                                       EXPENSES

5.1    The charge to each Participating Fund for all expenses and costs of the
       Participating Fund, including but not limited to management fees,
       administrative expenses and legal and regulatory costs, will be made in
       the determination of the Participating Fund's daily net asset value per
       share.

5.2    Except as provided in this Article V and, in particular in the next
       sentence, Insurance Company shall not be required to pay directly any
       expenses of any Participating Fund or expenses relating to the
       distribution of its shares. Insurance Company shall pay the following
       expenses or costs:

       a. Such amount of the production expenses of any Participating
          Fund materials, including the cost of printing a Participating
          Fund's Prospectus, or marketing materials for prospective
          Insurance Company Contractholders and Participants as Dreyfus and
          Insurance Company shall agree from time to time.

       b. Distribution expenses of say Participating Fund materials or
          marketing materials for prospective Insurance Company
          Contractholders and Participants.  

       c. Distribution expenses of any Participating Fund materials or
          marketing materials for Insurance Company Contractholders and
          Participants.



                                         -7-

<PAGE>

       Except as provided herein, all other expenses of each Participating Fund
       shall not be borne by Insurance Company.

                                      ARTICLE VI
                                   EXEMPTIVE RELIEF

6.1    Insurance Company has reviewed a copy of (i) the amended order dated
       December 31, 1997 of the Securities and Exchange Commission under
       Section 6(c) of the Act with respect to Dreyfus Variable Investment Fund
       and Dreyfus Life and Annuity Index Fund, Inc.; and (ii) the order dated
       February 5, 1998 of the Securities and Exchange Commission under Section
       6(c) of the Act with respect to The Dreyfus Socially Responsible Growth
       Fund, Inc. and Dreyfus Investment Portfolios, and, in particular, has
       reviewed the conditions to the relief set forth in each related Notice.
       As set forth therein, if Dreyfus Variable Investment Fund, Dreyfus Life
       and Annuity Index Fund, Inc., The Dreyfus Socially Responsible Growth
       Fund, Inc. or Dreyfus Investment Portfolios is a Participating Fund,
       Insurance Company agrees, as applicable, to report any potential or
       existing conflicts promptly to the respective Board of Dreyfus Variable
       Investment Fund, Dreyfus Life and Annuity Index Fund, Inc., The Dreyfus
       Socially Responsible Growth Fund, Inc. and/or Dreyfus Investment
       Portfolios, and, in particular, whenever contract voting instructions
       are disregarded, and recognizes that it will be responsible for
       assisting each applicable Board in carrying out its responsibilities
       under such application. Insurance Company agrees to carry out such
       responsibilities with a view to the interests of existing
       Contractholders.

6.2    If a majority of the board, or a majority of Disinterested Board
       Members, determines that a material irreconcilable conflict exists with
       regard to Contractholder investments in a Participating Fund, the Board
       Shall give prompt notice to all Participating Companies and any other
       Participating Fund. If the Board determines that Insurance Company is
       responsible for causing or creating said conflict, Insurance Company
       shall at its sole cost and expense, and to the extent reasonably
       practicable (as determined by a majority of the Disinterested Board
       Members), take such action as is necessary to remedy or eliminate
       the irreconcilable material conflict. Such necessary action may
       include, but shall not be limited to:

       a. Withdrawing the assets allocable to the Separate Account from the
          Participating Fund and reinvesting such assets in another
          Participating Fund (if applicable) or a different investment
          medium, or submitting the question of whether such segregation
          should be implemented to a vote of all affected contractholders;
          and/or

       b. Establishing a new registered management investment company.


                                         -8-

<PAGE>


6.3    If a material irreconcilable conflict arises as a result of a decision
       by Insurance Company to disregard Contractholder voting instructions and
       said decision represents a minority position or would preclude a
       majority vote by all Contractholders having an interest in a
       Participating Fund, Insurance Company may be required, at the Board's
       election, to withdraw the investments of the Separate Account in that
       Participating Fund.

6.4    For the purpose of this Article, a majority of the Disinterested Board
       Members shall determine whether or not any proposed action adequately
       remedies any irreconcilable material conflict, but in no event will any
       Participating Fund be required to bear the expense of establishing a new
       funding medium for any Contract. Insurance Company shall not be required
       by this Article to establish a new funding medium for any Contract if an
       offer to do so has been declined by vote of a majority of the
       Contractholders materially adversely affected by the irreconcilable
       material conflict.


6.5    No action by Insurance Company taken or omitted, and no action by the
       Separate Account or any Participating Fund taken or omitted as a result
       of any act or failure to act by Insurance Company pursuant to this
       Article VI, shall relieve Insurance Company of its obligations under,
       or otherwise affect the operation of, Article V, VOTING OF PARTICIPATING
       FUND SHARES.

                                     ARTICLE VII
                         VOTING OF PARTICIPATING FUND SHARES

7.1    Each Participating Fund shall provide Insurance Company with copies, at
       no cost to Insurance Company, of the Participating Fund's proxy
       material, reports to shareholders and other communications to
       shareholders in such quantity as Insurance Company shall reasonably
       require for distributing to Contractholders or Participants. 

       Insurance Company shall:

       (a)     solicit voting instructions from Contractholders or Participants
               on a timely basis and in accordance with applicable law;

       (b)     vote the Participating Fund shares in accordance with
               instructions received from Contractholders or Participants; and

       (c)     vote the Participating Fund shares for which no instructions have
               been received in the same proportion as Participating Fund shares
               for which instructions have been received.

       Insurance Company agrees at all times to vote its General Account shares
       in the same proportion as the Participating Fund shares for which
       instructions have been received from Contractholders or Participants.
       Insurance Company further agrees to be


                                         -9-
<PAGE>

      responsible for assuring that voting the Participating Fund shares for
      the Separate Account is conducted in a manner consistent with other
      Participating Companies.

7.2   Insurance Company agrees that it shall not, without the prior written
      consent of each applicable Participating Fund and Dreyfus, solicit, induce
      or encourage Contractholders to (a) change or supplement the
      Participating Fund's current investment adviser or (b) change, modify,
      substitute, add to or delete from the current investment media for the
      Contracts.

                                    ARTICLE VIII
                           MARKETING AND REPRESENTATIONS

8.1   Each Participating Fund or its underwriter shall periodically furnish
      Insurance Company with the following documents, in quantities as
      Insurance Company may reasonably request:

      a.       Current Prospectus and any supplements thereto; and

      b.       Other marketing materials.

      Expenses for the production of such documents shall be borne by Insurance
      Company in accordance with Section 5.2 of this Agreement.

8.2   Insurance Company shall designate certain persons or entities that shall
      have the requisite licenses to solicit applications for the sale of
      Contracts.  No representation is made as to the number or amount of
      Contracts that are to be sold by Insurance Company.  Insurance Company
      shall make reasonable efforts to market the Contracts and shall comply
      with all applicable federal and state laws in connection therewith.

8.3   Insurance Company shall furnish, or shall cause to be furnished, to each
      applicable Participating Fund or its designee, each piece of sales
      literature or other promotional material in which the Participating Fund,
      its investment adviser or the administrator is named, at least fifteen
      Business Days prior to its use. No such material shall be used unless the
      Participating Fund or its designee approves such material.  Such approval
      (if given) must be in writing and shall be presumed not given if not
      received within ten Business Days after receipt of such material.  Each
      applicable Participating Fund or its designee, as the case may be, shall
      use all reasonable efforts to respond within ten days of receipt.

8.4   Insurance Company shall not give any information or make any
      representations or statements on behalf of a Participating Fund or
      concerning a Participating Fund in connection with the sale of the
      Contracts other than the information or representations contained in the
      registration statement or Prospectus of, as may be amended or


                                         -10-
<PAGE>

      supplemented from time to time, or in reports or proxy statements for,
      the applicable Participating Fund, or in sales literature or other
      promotional material approved by the applicable Participating Fund.

8.5   Each Participating Fund shall furnish, or shall cause to be furnished, to
      Insurance Company, each piece of the Participating Fund's sales
      literature or other promotional material in which Insurance Company or
      the Separate Account is named, at least fifteen Business Days prior to
      its use. No such material shall be used unless Insurance Company approves
      such material.  Such approval (if given) must be in writing and shall be
      presumed not given if not received within ten Business Days after receipt
      of such material.  Insurance Company shall use all reasonable efforts to
      respond within ten days of receipt.

8.6   Each Participating Fund shall not, in connection with the sale of
      Participating Fund shares, give any information or make any 
      representations on behalf of Insurance Company or concerning insurance
      company, the Separate Account, or the Contracts other than the 
      information or representations contained in a registration statement or 
      prospectus for the Contracts, as may be amended or supplemented from time
      to time, or in published reports for the Separate Account that are in the 
      public domain or approved by Insurance Company for distribution to 
      Contractholders or Participants, or in sales literature or other 
      promotional material approved by Insurance Company.

8.7   For purposes of this Agreement, the phrase "sales literature or other
      promotional material" or words of similar import include, without
      limitation, advertisements (such as material published, or designed for
      use, in a newspaper, magazine or other periodical, radio, television,
      telephone or tape recording, videotape display, signs or billboards,
      motion pictures or other public media), sales literature (such as any
      written communication distributed or made generally available to
      customers or the public, including brochures, circulars, research reports,
      market letters, form letters, seminar texts, or reprints or excerpts of 
      any other advertisement, sales literature, or published article), 
      educational or training materials or other communications distributed or 
      made generally available to some or all agents or employees, registration
      statements, prospectuses, statements of additional information,
      shareholder reports and proxy materials, and any other material 
      constituting sales literature or advertising under National Association of
      Securities Dealers, Inc. rules, the Act or the 1933 Act.

                                      ARTICLE IX
                                   INDEMNIFICATION

9.1   Insurance Company agrees to indemnify and hold harmless each
      Participating Fund, Dreyfus, each respective Participating Fund's
      investment adviser and sub-investment adviser (if applicable), each
      respective Participating Fund's distributor, and their respective
      affiliates, and each of their directors, trustees, officers, employees,
      agents and


                                         -11-
<PAGE>

      each person, if any, who controls or is associated with any of the
      foregoing entities or persons within the meaning of the 1933 Act
      (collectively, the "Indemnified Parties" for purposes of Section 9.1),
      against any and all losses, claims, damages or liabilities joint or
      several (including any investigative, legal and other expenses reasonably
      incurred in connection with, and any amounts paid in settlement of, any
      action, suit or proceeding or any claim asserted) for which the
      Indemnified Parties may become subject, under the 1933 Act or otherwise,
      insofar as such losses, claims, damages or liabilities (or actions in
      respect to thereof) (i) arise out of or are based upon any untrue
      statement or alleged untrue statement of any material fact contained in
      information furnished by Insurance Company for use in the registration
      statement or Prospectus or sales literature or advertisements of the
      respective Participating Fund or with respect to the Separate Account or
      Contracts, or arise out of or are based upon the omission or the alleged
      omission to state therein a material fact required to be stated therein
      or necessary to make the statements therein not misleading; (ii) arise
      out of or as a result of conduct, statements or representations (other
      than statements or representations contained in the Prospectus and sales
      literature or advertisements of the respective Participating Fund) of
      Insurance Company or its agents, with respect to the sale and
      distribution of Contracts for which the respective Participating Fund's
      shares are an underlying investment; (iii) arise out of the wrongful
      conduct of Insurance Company or persons under its control with respect to
      the sale or distribution of the Contracts or the respective Participating
      Fund's shares; (iv) arise out of Insurance Company's incorrect calculation
      and/or untimely reporting of net purchase or redemption orders; or (v)
      arise out of any breach by Insurance Company of a material term of this
      Agreement or as a result of any failure by Insurance Company to provide
      the services and furnish the materials or to make any payments provided
      for in this Agreement. Insurance Company will reimburse any Indemnified
      Party in connection with investigating or defending any such loss, claim,
      damage, liability or action; provided, however, that with respect to
      clauses (i) and (ii) above Insurance Company will not be liable in any
      such case to the extent that any such loss, claim, damage or liability
      arises out of or is based upon any untrue statement or omission or
      alleged omission made in such registration statement, prospectus, sales
      literature, or advertisement in conformity with written information
      furnished to Insurance Company by the respective Participating Fund
      specifically for use therein. This indemnity agreement will be in
      addition to any liability which Insurance Company may otherwise have.

9.2   Each Participating Fund severally agrees to indemnify and hold harmless
      Insurance Company and each of its directors, officers, employees, agents
      and each person, if any, who controls Insurance Company within the meaning
      of the 1933 Act against any losses, claims, damages or liabilities to 
      which Insurance Company or any such director, officer, employee, agent or
      controlling person may become subject, under the 1933 Act or otherwise,
      insofar as such losses, claims, damages or liabilities (or actions in
      respect thereof) (1) arise out of or are based upon any untrue statement
      or alleged untrue statement of any material fact contained in the 
      registration statement or Prospectus or sales literature or advertisements
      of the respective Participating Fund: (2) arise out of or


                                         -12-
<PAGE>

     are based upon the omission to state in the registration statement or
     Prospectus or sales literature or advertisements of the respective
     Participating Fund any material fact required to be stated therein or
     necessary to make the statements therein not misleading; or (3) arise out
     of or are based upon any untrue statement or alleged untrue statement of
     any material fact contained in the registration statement or Prospectus or
     sales literature or advertisements with respect to the Separate Account or
     the Contracts and such statements were based on information provided to
     Insurance Company by the respective Participating Fund; and the respective
     Participating Fund will reimburse any legal or other expenses reasonably
     incurred by Insurance Company or any such director, officer, employee,
     agent or controlling person in connection with investigating or defending
     any such loss, claim, damage, liability or action; provided, however, that
     the respective Participating Fund will not be liable in any such case to
     the extent that any such loss, claim, damage or liability arises out of or
     is based upon an untrue statement or omission or alleged omission made in
     such registration statement, Prospectus, sales literature or advertisements
     in conformity with written information furnished to the respective
     Participating Fund by Insurance Company specifically for use therein.  This
     indemnity agreement will be in addition to any liability which the
     respective Participating Fund may otherwise have.

9.3  Each Participating Fund severally shall indemnify and hold Insurance
     Company harmless against any and all liability, loss, damages, costs or
     expenses which Insurance Company may incur, suffer or be required to pay
     due to the respective Participating Fund's (1) incorrect calculation of the
     daily net asset value, dividend rate or capital gain distribution rate; (2)
     incorrect reporting of the daily net asset value, dividend rate or capital
     gain distribution rate; and (3) untimely reporting of the net asset value,
     dividend rate or capital gain distribution rate; provided that the
     respective Participating Fund shall have no obligation to indemnify and
     hold harmless Insurance Company if the incorrect calculation or incorrect
     or untimely reporting was the result of incorrect information furnished by
     Insurance Company or information furnished untimely by Insurance Company or
     otherwise as a result of or relating to a breach of this Agreement by
     Insurance Company.

9.4  Promptly after receipt by an indemnified party under this Article of notice
     of the commencement of any action, such indemnified party will, if a claim
     in respect thereof is to be made against the indemnifying party under this
     Article, notify the indemnifying party of the commencement thereof. The
     omission to so notify the indemnifying party will not relieve the
     indemnifying party from any liability under this Article IX, except to the
     extent that the omission results in a failure of actual notice to the
     indemnifying party and such indemnifying party is damaged solely as a
     result of the failure to give such notice. In case any such action is
     brought against any indemnified party, and it notified the indemnifying
     party of the commencement thereof, the indemnifying party will be entitled
     to participate therein and, to the extent that it may wish, assume the
     defense thereof, with counsel satisfactory to such indemnified party, and
     to the extent that the indemnifying party has given notice to such effect
     to the indemnified party and is


                                         -13-
<PAGE>

     performing its obligations under this Article, the indemnifying party shall
     not be liable for any legal or other expenses subsequently incurred by such
     indemnified party in connection with the defense thereof, other than
     reasonable costs of investigation. Notwithstanding the foregoing, in any
     such proceeding, any indemnified party shall have the right to retain its
     own counsel, but the fees and expenses of such counsel shall be at the
     expense of such indemnified party unless (i) the indemnifying party and the
     indemnified party shall have mutually agreed to the retention of such
     counsel or (ii) the named parties to any such proceeding (including any
     impleaded parties) include both the indemnifying party and the indemnified
     party and representation of both parties by the same counsel would be
     inappropriate due to actual or potential differing interests between them.
     The indemnifying party shall not be liable for any settlement of any
     proceeding effected without its written consent.

     A successor by law of the parties to this Agreement shall be entitled to
     the benefits of the indemnification contained in this Article IX. The
     provisions of this Article IX shall survive termination of this Agreement.

9.5  Insurance Company shall indemnify and hold each respective Participating
     Fund, Dreyfus and sub-investment adviser of the Participating Fund
     harmless against any tax liability incurred by the Participating Fund under
     Section 851 of the Code arising from purchases or redemptions by Insurance
     Company's General Accounts or the account of its affiliates.

                                      ARTICLE X
                             COMMENCEMENT AND TERMINATION

10.1 This Agreement shall be effective as of the date hereof and shall continue
     in force until terminated in accordance with the provisions herein.

10.2 This Agreement shall terminate without penalty:

     a.   As to any Participating Fund, at the option of Insurance Company or
          the Participating Fund at any time from the date hereof upon 180 days'
          notice, unless a shorter time is agreed to by the respective
          Participating Fund and Insurance Company;

     b.   As to any Participating Fund, at the option of Insurance Company, if
          shares of that Participating Fund are not reasonably available to meet
          the requirements of the Contracts as determined by Insurance Company.
          Prompt notice of election to terminate shall be furnished by Insurance
          Company, said termination to be effective ten days after receipt of
          notice unless the Participating Fund makes available a sufficient
          number of shares to meet the requirements of the Contracts within said
          ten-day period;


                                         -14-
<PAGE>

c.   As to a Participating Fund, at the option of Insurance Company, upon the
     institution of formal proceedings against that Participating Fund by the
     Commission, National Association of Securities Dealers or any other
     regulatory body, the expected or anticipated ruling, judgment or outcome of
     which would, in Insurance Company's reasonable judgment, materially impair
     that Participating Fund's ability to meet and perform the Participating
     Fund's obligations and duties hereunder. Prompt notice of election to
     terminate shall be furnished by Insurance Company with said termination to
     be effective upon receipt of notice;

d.   As to a Participating Fund, at the option of each Participating Fund, upon
     the institution of formal proceedings against Insurance Company by the
     Commission, National Association of Securities Dealers or any other
     regulatory body, the expected or anticipated ruling, judgment or outcome of
     which would, in the Participating Fund's reasonable judgment, materially
     impair Insurance Company's ability to meet and perform Insurance Company's
     obligations and duties hereunder. Prompt notice of election to terminate
     shall be furnished by such Participating Fund with said termination to be
     effective upon receipt of notice;

e.   As to a Participating Fund, at the option of that Participating Fund, if
     the Participating Fund shall determine, in its sole judgment reasonably
     exercised in good faith, that Insurance Company has suffered a material
     adverse change in its business or financial condition or is the subject of
     material adverse publicity and such material adverse change or material
     adverse publicity is likely to have a material adverse impact upon the
     business and operation of that Participating Fund or Dreyfus, such
     Participating Fund shall notify Insurance Company in writing of such
     determination and its intent to terminate this Agreement, and after
     considering the actions taken by Insurance Company and any other changes in
     circumstances since the giving of such notice, such determination of the
     Participating Fund shall continue to apply on the sixtieth (60th) day
     following the giving of such notice, which sixtieth day shall be the
     effective date of termination;

f.   As to a Participating Fund, upon termination of the Investment Advisory
     Agreement between that Participating Fund and Dreyfus or its successors
     unless Insurance Company specifically approves the selection of a new
     Participating Fund investment adviser. Such Participating Fund shall
     promptly furnish notice of such termination to Insurance Company;

g.   As to a Participating Fund, in the event that Participating Fund's shares
     are not registered, issued or sold in accordance with applicable federal
     law, or such law precludes the use of such shares as the underlying
     investment medium of Contracts issued or to be issued by Insurance Company.
     Termination shall be effective immediately as to that Participating Fund
     only upon such occurrence without notice;


                                         -15-
<PAGE>

       h.    At the option of a Participating Fund upon a determination by its
             Board in good faith that it is no longer advisable and in the best
             interests of shareholders of that Participating Fund to continue to
             operate pursuant to this Agreement.  Termination pursuant to this
             Subsection (h) shall be effective upon notice by such Participating
             Fund to Insurance Company of such termination;

       i.    At the option of a Participating Fund if the Contracts cease to
             qualify as annuity contracts or life insurance policies, as
             applicable, under the Code, or if such Participating Fund
             reasonably believes that the Contracts may fail to so qualify;

       j.    At the option of any party to this Agreement, upon another party's
             breach of any material provision of this Agreement;

       k.    At the option of a Participating Fund, if the Contracts are not
             registered, issued or sold in accordance with applicable federal
             and/or state law; or

       l.    Upon assignment of this Agreement, unless made with the written
             consent of every other non-assigning party.

       Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
       10.2k herein shall not affect the operation of Article V of this
       Agreement.  Any termination of this Agreement shall not affect the
       operation of Article IX of this Agreement.

10.3   Notwithstanding any termination of this Agreement pursuant to Section
       10.2 hereof, each Participating Fund and Dreyfus may, at the option of
       the Participating Fund, continue to make available additional shares of
       that Participating Fund for as long as the Participating Fund desires
       pursuant to the terms and conditions of this Agreement as provided below,
       for all Contracts in effect on the effective date of termination of this
       Agreement (hereinafter referred to as "Existing Contracts"). 
       Specifically, without limitation, if that Participating Fund and Dreyfus
       so elect to make additional Participating Fund shares available, the
       owners of the Existing Contracts or Insurance Company, whichever shall
       have legal authority to do so, shall be permitted to reallocate
       investments in that Participating Fund, redeem investments in that
       Participating Fund and/or invest in that Participating Fund upon the
       making of additional purchase payments under the Existing Contracts.  In
       the event of a termination of this Agreement pursuant to Section 10.2
       hereof, such Participating Fund and Dreyfus, as promptly as is
       practicable under the circumstances, shall notify Insurance Company
       whether Dreyfus and that Participating Fund will continue to make that
       Participating Fund's shares available after such termination.  If such 
       Participating Fund shares continue to be made available after such
       termination, the provisions of this Agreement shall remain in effect and
       thereafter either of that Participating Fund or Insurance Company may
       terminate the Agreement as to that Participating Fund, as so continued
       pursuant to this Section 10.3, upon prior written


                                         -16-
<PAGE>

       notice to the other party, such notice to be for a period that is
       reasonable under the circumstances but, if given by the Participating
       Fund, need not be for more than six months.

10.4   Termination of this Agreement as to any one Participating Fund shall not
       be deemed a termination as to any other Participating Fund unless
       Insurance Company or such other Participating Fund, as the case may be,
       terminates this Agreement as to such other Participating Fund in
       accordance with this Article X.

                                      ARTICLE XI
                                      AMENDMENTS

11.1   Any other changes in the terms of this Agreement, except for the addition
       or deletion of any Participating Fund as specified in Exhibit A, shall be
       made by agreement in writing between Insurance Company and each
       respective Participating Fund.

                                     ARTICLE XII
                                        NOTICE

12.1   Each notice required by this Agreement shall be given by certified mail,
       return receipt requested, to the appropriate parties at the following
       addresses:

       Insurance Company: EquiTrust Life Insurance Company
                          5400 University Avenue
                          West Des Moines, Iowa  50266

                    Attn: Sue Cornick

       Participating Funds: [Name of Fund]
                                   c/o Premier Mutual Fund Services, Inc.
                                   200 Park Avenue
                                   New York, New York 10166
                                   Attn:  Vice President and Assistant Secretary

       with copies to: [Name of Fund]
                                   c/o The Dreyfus Corporation
                                   200 Park Avenue
                                   New York, New York 10166
                                   Attn: Mark N. Jacobs, Esq.
                                         Steven F. Newman

                                   Stroock & Stroock & Lavan
                                   180 Maiden Lane
                                   New York, New York 10038-4982


                                         -17-
<PAGE>

                                   Attn: Lewis G. Cole, Esq.
                                         Stuart H. Coleman, Esq.

       Notice shall be deemed to be given on the date of receipt by the
       addresses as evidenced by the return receipt.

                                    MISCELLANEOUS

13.1   This Agreement has been executed on behalf of each Fund by the
       undersigned officer of the Fund in his capacity as an officer of the
       Fund.  The obligations of this Agreement shall only be binding upon the
       assets and property of the Fund and shall not be binding upon any
       director, trustee, officer or shareholder of the Fund individually.  It
       is agreed that the obligations of the Funds are several and not joint,
       that no Fund shall be liable for any amount owing by another Fund and
       that the Funds have executed one instrument for convenience only.

                                         LAW

14.1   This Agreement shall be construed in accordance with the internal laws of
       the State of New York, without giving effect to principles of conflict of
       laws.

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

                                       EQUITRUST LIFE INSURANCE COMPANY

                                       By: /s/ William J. Oddy
                                          -----------------------------
                                       Its: Executive Vice President & 
                                            General Manager
                                           ----------------------------

Attest: /s/ Dennis M. Marker
       -----------------------------

                                       DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
                                       (d/b/a DREYFUS STOCK INDEX FUND)

                                       By: /s/ Michael S. Petrucelli
                                          -----------------------------
                                       Its: Vice President
                                           ----------------------------


                                         -18-
<PAGE>

Attest: /s/ Doreen Plante
       -----------------------------

                                        THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
                                        FUND, INC.

                                        By: /s/ Michael S. Petrucelli
                                           -----------------------------
                                        Its: Vice President
                                            ----------------------------

Attest: /s/ Doreen Plante
       -----------------------------

                                        DREYFUS VARIABLE INVESTMENT FUND

                                        By: /s/ Michael S. Petrucelli
                                           -----------------------------
                                        Its: Vice President
                                            ----------------------------

Attest: /s/ Doreen Plante
       -----------------------------

                                        DREYFUS INVESTMENT PORTFOLIOS

                                        By: /s/ Michael S. Petrucelli
                                           -----------------------------
                                        Its: Vice President
                                            ----------------------------

Attest: /s/ Doreen Plante
       -----------------------------


                                         -19-
<PAGE>

                                      EXHIBIT A

                             LIST OF PARTICIPATING FUNDS


Dreyfus Variable Investment Fund
     Capital Appreciation Portfolio
     Disciplined Stock Portfolio
     Growth and Income Portfolio
     International Equity Portfolio
     Small Cap Portfolio


                                         -20-

<PAGE>


PARTICIPATION AGREEMENT

Among

T. ROWE PRICE EQUITY SERIES, INC.,

T. ROWE PRICE INTERNATIONAL SERIES, INC.,

T. ROWE PRICE INVESTMENT SERVICES, INC.,

and

EQUITRUST LIFE INSURANCE COMPANY



     THIS AGREEMENT, made and entered into as of this 8th day of June, 1998
by and among EquiTrust Life Insurance Company (hereinafter, the "Company"), a
Iowa insurance company, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each account hereinafter referred to as the "Account"), and the
undersigned funds, each, a corporation organized under the laws of Maryland
(each hereinafter referred to as the "Fund") and T. Rowe Price Investment
Services, Inc. (hereinafter the "Underwriter"), a Maryland corporation.

     WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and

     WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and

     WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and

     WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and


<PAGE>


     WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc.  (each hereinafter referred to as the "Adviser") are each
duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and

     WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and

     WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and

     WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and

     WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and

     WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;

     NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:

ARTICLE I.  Sale of Fund Shares

     1.1   The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.

     1.2   The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by the
Company and the Account on those days on which the Fund calculates its net asset
value pursuant to rules of the SEC, and the Fund shall use its best efforts to
calculate such net asset value on each day which the New York Stock Exchange is
open for trading.  Notwithstanding the foregoing, the Board of Directors of the
Fund (hereinafter the "Board") may refuse to sell shares of any Designated
Portfolio to any person, or suspend or terminate the offering of shares of any
Designated Portfolio if such action is required by law or by regulatory
authorities having jurisdiction, or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Designated Portfolio.

     1.3   The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts.  No


<PAGE>


shares of any Designated Portfolios will be sold to the general public.  The
Fund and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III and VII of this Agreement is in effect to govern such
sales.

     1.4   The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.

     1.5   For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day.  "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.

     1.6   The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.

     1.7   The Company shall pay for Fund shares one Business Day after receipt
of an order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof.  Payment shall be in federal funds transmitted by wire by
3:00 p.m. Baltimore time.  If payment in Federal Funds for any purchase is not
received or is received by the Fund after 3:00 p.m. Baltimore time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request.  For
purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.

     1.8   Issuance and transfer of the Fund's shares will be by book entry
only.  Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.

     1.9   The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares.  The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional shares
of that Portfolio.  The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash.
The Fund shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.


<PAGE>


     1.10  The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. Baltimore time) and shall use its best efforts to make such net
asset value per share available by 7 p.m. Baltimore time.  If the net asset
value is materially incorrect through no fault of the Company, the Company on
behalf of each Account, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct net asset value in
accordance with Fund procedures.  Any material error in the net asset value
shall be reported to the Company promptly upon discovery.  Any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at Company's expense.

     1.11  The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.

ARTICLE II.  Representations and Warranties

     2.1   The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws,
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements.  The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Iowa insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.

     2.2   The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the state of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act.  The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares.  The Fund
shall qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund or the
Underwriter.

     2.3   The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future.  To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have
the Board, a majority of whom are not interested persons of the Fund, formulate
and approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.

     2.4   The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,


<PAGE>


fees and expenses are and shall at all times remain in compliance with the laws
of the state of Iowa to the extent required to perform this Agreement.

     2.5   The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.

     2.6   The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.  The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and any applicable state and
federal securities laws.

     2.7   The Underwriter represents and warrants that the Adviser is and
shall remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of Iowa and any
applicable state and federal securities laws.

     2.8   The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time.  The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.

     2.9   The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $2.5
million.  The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company.  The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund if, and when, applicable.  The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.  The Company
agrees to exercise its best efforts to ensure that other individuals/entities
not employed or controlled by the Company and dealing with the money and/or
securities of the Fund maintain a similar bond or coverage in a reasonable
amount.

ARTICLE III.  Prospectuses, Statements of Additional Information, and Proxy
Statements; Voting

     3.1   The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) as the Company may reasonably
request.  If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus as set in type
or on a diskette, at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company (at the Company's expense) once each year (or
more frequently if the prospectus for the Fund is amended) to have the


<PAGE>


prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense).

     3.2   The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.

     3.3   The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners in the Fund.  The Underwriter (at the Company's
expense) shall provide the Company with copies of the Fund's annual and semi-
annual reports to shareholders in such quantity as the Company shall reasonably
request for use in connection with offering the Variable Contracts issued by the
Company.  If requested by the Company in lieu thereof, the Underwriter shall
provide such documentation (which may include a final copy of the Fund's annual
and semi-annual reports as set in type or on diskette) and other assistance as
is reasonably necessary in order for the Company (at the Company's expense) to
print such shareholder communications for distribution to Contract owners.

     3.4   The Company shall:

           (i)    solicit voting instructions from Contract owners;

           (ii)   vote the Fund shares in accordance with instructions received
from Contract owners; and

           (iii)  vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Designated Portfolio for which
instructions have been received,

so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law.  The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.

     3.5   Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.

     3.6   The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b).  Further, the Fund will act
in accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.

ARTICLE IV.  Sales Material and Information


<PAGE>


     4.1   The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or uses and in which the Fund (or a Portfolio
thereof) or the Adviser or the Underwriter is named, at least ten calendar days
prior to its use.  No such material shall be used if the Fund or its designee
reasonably object to such use within ten calendar days after receipt of such
material.  The Fund or its designee reserves the right to reasonably object to
the continued use of such material, and no such material shall be used if the
Fund or its designee so object.

     4.2   The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature or other promotional material approved by the
Fund or its designee or by the Underwriter, except with the permission of the
Fund or the Underwriter or the designee of either.

     4.3   The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use.  No such material shall be used if the
Company reasonably objects to such use within ten calendar days after receipt of
such material.  The Company reserves the right to reasonably object to the
continued use of such material and no such material shall be used if the Company
so objects.

     4.4   The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.

     4.5   The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, within a reasonable time after the filing of
such document(s) with the SEC or other regulatory authorities.

     4.6   The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, SAIs, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Contracts or the Account, within a
reasonable time after the filing of such document(s) with the SEC or other
regulatory authorities.

     4.7   For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund:  advertisements


<PAGE>


(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.

ARTICLE V.  Fees and Expenses

     5.1   The Fund and the Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter.  No such payments shall be made directly by the
Fund.  Currently, no such payments are contemplated.

     5.2   All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, except as otherwise provided herein.  The
Fund shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws prior to
their sale.  The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.

     5.3   The Company shall bear the expenses of printing the Fund's
prospectus (in accordance with 3.1) and of distributing the Fund's prospectus,
proxy materials, and reports to Contract owners and prospective Contract owners.

ARTICLE VI.  Diversification and Qualification

     6.1   The Fund will invest the assets of each Designated Portfolio in such
a manner as to ensure that the Contracts will be treated as annuity, endowment,
or life insurance contracts, whichever is appropriate, under the Internal
Revenue Code of 1986, as amended (the  Code ) and the regulations issued
thereunder (or any successor provisions).  Without limiting the scope of the
foregoing, each Designated Portfolio of the Fund will comply with Section 817(h)
of the Code and Treasury Regulation 1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations.  In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify


<PAGE>


the Fund so as to achieve compliance within the grace period afforded by
Regulation 817.5.

     6.2   The Fund represents that each Designated Portfolio is or will be
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.

     6.3   The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance, endowment contracts, or
annuity insurance contracts, under applicable provisions of the Code, and that
it will make every effort to maintain such treatment, and that it will notify
the Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future.  The Company agrees that any prospectus offering a
contract that is a "modified endowment contract" as that term is defined in
Section 7702A of the Code (or any successor or similar provision), shall
identify such contract as a modified endowment contract.

ARTICLE VII.  Potential Conflicts.

     7.1   The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund.  An irreconcilable material conflict
may arise for a variety of reasons, including:  (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners.  The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.

     7.2   The Company will report any potential or existing conflicts of which
it is aware to the Board.  The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised.  This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.

     7.3   If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including:  (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of


<PAGE>


any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.

     7.4   If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board.  Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice that this provision is being implemented, and until the end of
that six month period the Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.

     7.5   If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the company for the purchase (and redemption) of
shares of the Fund.

     7.6   For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts.  The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.  In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.

     7.7   If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement


<PAGE>


shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.

ARTICLE VIII.  Indemnification

     8.1   Indemnification By the Company

           8.1(a).  The Company agrees to indemnify and hold harmless the Fund
and the Underwriter and each of their officers and directors and each person, if
any, who controls the Fund or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:

           (i)    arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Registration
Statement, prospectus, or statement of additional information ( SAI ) for the
Contracts or contained in the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the Registration Statement, prospectus or SAI for the
Contracts or in the Contracts or sales literature or other promotional material
(or any amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or

           (ii)   arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature or other promotional material of the
Fund not supplied by the Company or persons under its control) or wrongful
conduct of the Company or persons under its authorization or control, with
respect to the sale or distribution of the Contracts or Fund Shares; or

           (iii)  arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus, SAI, or
sales literature or other promotional material of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the Company;
or

           (iv)   arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the qualification requirements specified in Article VI of this
Agreement); or


<PAGE>


           (v)    arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company,

as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.

           8.1(b).  The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.

           8.1(c).  The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision.  In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action.  The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct.  After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.

           8.1(d).  The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.


<PAGE>


     8.2   Indemnification by the Underwriter

           8.2(a).  The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and

               (i)    arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or prospectus or SAI or sales literature or other promotional material
of the Fund (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus for the Fund or in sales
literature or other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or

               (ii)   arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature or other promotional
material for the Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or Fund
shares; or

               (iii)  arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, prospectus,
SAI, or sales literature or other promotional material of the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund; or

               (iv)   arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification requirements specified
in Article VI of this Agreement); or

               (v)    arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Underwriter;


<PAGE>


as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.

           8.2(b).  The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.

           8.2(c).  The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision.  In case any such action is
brought against the Indemnified Party, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof.  The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct.  After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.

           8.2(d).  The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.

     8.3   Indemnification By the Fund

           8.3(a).  The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:

               (i)    arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to


<PAGE>


comply with the diversification and other qualification requirements specified
in Article VI of this Agreement); or

               (ii)   arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the Fund;

as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.

           8.3(b).  The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.

           8.3(c).  The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision.  In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof.  The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.

           8.3(d).  The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceeding against it or any
of its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.

ARTICLE IX.  Applicable Law

     9.1   This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.

     9.2   This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.


<PAGE>


ARTICLE X.  Termination

     10.1  This Agreement shall continue in full force and effect until the
first to occur of:

           (a) termination by any party, for any reason with respect to
some or all Designated Portfolios, by six (6) months' advance written notice
delivered to the other parties; or

           (b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio based upon the
Company's determination that shares of the Fund are not reasonably available to
meet the requirements of the Contracts; provided that such termination shall
apply only to the Designated Portfolio not reasonably available; or

           (c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or

           (d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the Company by the
NASD, the SEC, the Insurance Commissioner or like official of any state or any
other regulatory body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of any Account, or the
purchase of the Fund shares; provided, however, that the Fund or Underwriter
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Company to perform its obligations under this Agreement; or

           (e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or Underwriter by the
NASD, the SEC, or any state securities or insurance department or any other
regulatory body; provided, however, that the Company determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Fund or Underwriter to
perform its obligations under this Agreement; or

           (f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in the event that such
Designated Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M or fails to comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if the Company reasonably
believes that such Designated Portfolio may fail to so qualify or comply; or

           (g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the qualifications
specified in Section 6.3 hereof; or if the Fund or Underwriter reasonably
believes that such Contracts may fail to so qualify; or

           (h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this Agreement
or is the subject of material adverse publicity; or


<PAGE>


           (i)    termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole judgment exercised
in good faith, that the Fund or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity.

     10.2  Effect of Termination.  Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts").  Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts.  The parties agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement.  The parties
further agree that this Section 10.2 shall not apply to any termination under
Section 10.1(g) of this Agreement.

     10.3  The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company s assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a  Legally Required Redemption ), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act.  Upon request, the Company will promptly furnish to the Fund
and the Underwriter the opinion of counsel for the Company (which counsel shall
be reasonably satisfactory to the Fund and the Underwriter) to the effect that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.

     10.4  Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.

ARTICLE XI.  Notices

     Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.

           If to the Fund:
               T. Rowe Price Associates, Inc.
               100 East Pratt Street
               Baltimore, Maryland  21202
               Attention:  Henry H. Hopkins, Esq.


           If to the Company:
               Equitrust Life Insurance Company
               5400 University Avenue


<PAGE>


               West Des Moines, Iowa 50266
               Attention:  Sue Cornick


           If to Underwriter:
               T. Rowe Price Investment Services
               100 East Pratt Street
               Baltimore, Maryland  21202
               Attention:  Henry H. Hopkins, Esq.


ARTICLE XII.  Miscellaneous

     12.1  All references herein to the Fund are to each of the undersigned
Funds as if this agreement were between such individual Fund and the Underwriter
and the Company.  All references herein to the Adviser relate solely to the
Adviser of such individual Fund, as appropriate.  All persons dealing with a
Fund must look solely to the property of such Fund, and in the case of a series
company, the respective Designated Portfolio listed on Schedule A hereto as
though such Designated Portfolio had separately contracted with the Company and
the Underwriter for the enforcement of any claims against the Fund.  The parties
agree that neither the Board, officers, agents or shareholders assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.

     12.2  Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all



<PAGE>


information reasonably identified as confidential in writing by any other party
hereto and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the affected party until such
time as such information may come into the public domain.

     12.3  The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

     12.4  This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

     12.5  If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.

     12.6  Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Iowa Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with Iowa
variable annuity laws and regulations and any other applicable law or
regulations.

     12.7  The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.

     12.8  This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.

     12.9  The Company shall furnish or cause to be furnished, to the Fund or
its designee copies of the following reports:

     (a)   the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted accounting
principles ( GAAP ), if any), as soon as practical and in any event within 90
days after the end of each fiscal year.

     (b)   the Company s quarterly statements (statutory) (and GAAP, if any),
as soon as practical and in any event within 45 days after the end of each
quarterly period.

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.


<PAGE>


COMPANY:  EQUITRUST LIFE INSURANCE COMPANY

     By its authorized officer


     By: /s/ William J. Oddy

     Title: Executive Vice President,
            General Manager & Director

     Date: June 8, 1998


FUND: T. ROWE PRICE EQUITY SERIES, INC.

     By its authorized officer


     By: /s/ Henry H. Hopkins

     Title:                             Vice President

     Date: June 8, 1998


FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.

     By its authorized officer


     By: /s/ Henry H. Hopkins

     Title:                             Vice President

     Date: June 8, 1998


<PAGE>


UNDERWRITER:   T. ROWE PRICE INVESTMENT SERVICES, INC.

     By its authorized officer


     By: /s/ Darrell N. Braman

     Title:                             Vice President

     Date: June 8, 1998


<PAGE>


SCHEDULE A


Name of Separate Account and Date Established by Board of Directors:

     EquiTrust Life Variable Account
     1/6/98
     EquiTrust Life Variable Account II
     1/6/98

Contracts Funded by Separate Account:

     Flexible Premium Variable Life Insurance Policy

Designated Portfolios:

     T. Rowe Price Equity Series, Inc.
           - Equity Income Portfolio
           - Mid-Cap Growth Portfolio
           - New America Growth Portfolio
           - Personal Strategy Balanced Portfolio
     T. Rowe Price International Series, Inc.
           - International Stock Portfolio

Name of Separate Account and Date Established by Board of Directors:

     EquiTrust Life Annuity Account
     1/6/98
     EquiTrust Life Annuity Account II
     1/6/98

Contracts Funded by Separate Account:

     Flexible Premium Deferred Variable Annuity Contract

Designated Portfolios:

     T. Rowe Price Equity Series, Inc.
           - Equity Income Portfolio
           - Mid-Cap Growth Portfolio
           - New America Growth Portfolio
           - Personal Strategy Balanced Portfolio
     T. Rowe Price International Series, Inc.
           - International Stock Portfolio

<PAGE>

EquiTrust letterhead




                                  August 10, 1998



Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549

Gentlemen,

With reference to the Registration Statement on Form N-4 filed by EquiTrust Life
Insurance Company ("Company") and its EquiTrust Life Annuity Account II with the
Securities and Exchange Commission covering certain variable annuity contracts,
I have examined such documents and such law as I considered necessary and
appropriate, and on the basis of such examinations, it is my opinion that:

(1)  Company is duly organized and validly existing under the laws of the State
     of Iowa.

(2)  The variable annuity contracts, when issued as contemplated by the said
     Form N-4 Registration Statement will constitute legal, validly issued and
     binding obligations of EquiTrust Life Insurance Company.

I hereby consent to the filing of this opinion as an exhibit to the said Form
N-4 Registration Statement and to the reference to my name under the caption
"Legal Matters" in the Prospectus contained in the said Registration Statement. 
In giving this consent, I am not admitting that I am in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.

                                        Very truly yours,

                                        /s/ Stephen M. Morain

                                        Stephen M. Morain
                                        Senior Vice President
                                        & General Counsel

<PAGE>

Sutherland, Asbill & Brennan LLP letterhead



August 19, 1998



EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa  50266

Gentlemen:

We hereby consent to the reference to our name under the caption "Legal 
Matters" in the statement of additional information filed as part of the 
registration statement on Form N-4 for EquiTrust Life Annuity Account II.  In 
giving this consent, we do not admit that we are in the category of persons 
whose consent is required under Section 7 of the Securities Act of 1933.

Sincerely,

SUTHERLAND, ASBILL & BRENNAN LLP

/s/ Stephen E. Roth, Esq.

Stephen E. Roth

<PAGE>

Ernst & Young LLP letterhead



The Board of Directors
EquiTrust Life Insurance Company

We consent to the reference to our firm under the captions "Financial 
Statements" and "Experts" and to the use of our report dated January 16, 1998 
with respect to EquiTrust Life Insurance Company, in the Registration 
Statement (Form N-4) and related Prospectus of EquiTrust Life Annuity 
Account II for the registration of individual flexible premium deferred variable
annuity contracts.

Sincerely,

/s/ Ernst & Young LLP

Des Moines, Iowa
August 14, 1998

<PAGE>

EquiTrust letterhead


                                  August 10, 1998



EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266

Gentlemen:

This opinion is furnished in connection with the registration by EquiTrust 
Life Insurance Company of a flexible premium deferred variable annuity 
contract ("Contract") under the Securities Act of 1933, as amended.  The 
prospectus included in the Initial Filing to the Registration Statement on 
Form N-4 describes the Contract.  I have provided actuarial advice concerning 
the preparation of the contract form described in the Registration Statement, 
and I am familiar with the Registration Statement and exhibits thereto.

It is my professional opinion that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred and the risks assumed by the insurance
company.

I hereby consent to the use of this opinion as an exhibit to the Initial 
Filing to the Registration Statement.

                         Sincerely,

                         /s/ Christopher G. Daniels

                         Christopher G. Daniels, FSA, MSAA
                         Life Product Development and Pricing Vice President
                         EquiTrust Life Insurance Company

<PAGE>

                                  POWER OF ATTORNEY

The undersigned directors of EquiTrust Life Insurance Company, an Iowa
corporation (the "Company"), hereby constitute and appoint Edward M.
Wiederstein, and Stephen M. Morain, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance policies or annuity
contracts: registration statements on any form or forms under the Securities Act
of 1933 and under the Investment Company Act of 1940, and any and all amendments
and supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and him or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.

IN WITNESS WHEREOF, the undersigned has hereto set his or her hand on the date
set forth below.

NAME                                              DATE
- ----                                              ----

/s/ Thomas R. Gibson                              January 6, 1998     
- -----------------------------------               ---------------
Thomas R. Gibson


/s/ Richard D. Harris                             January 6, 1998     
- -----------------------------------               ---------------
Richard D. Harris   


/s/ Timothy J. Hoffman                            January 6, 1998     
- -----------------------------------               ---------------
Timothy J. Hoffman  


/s/ Stephen M. Morain                             January 6, 1998     
- -----------------------------------               ---------------
Stephen M. Morain


/s/ James W. Noyce                                January 6, 1998     
- -----------------------------------               ---------------
James W. Noyce


/s/ William J. Oddy                               January 6, 1998     
- -----------------------------------               ---------------
William J. Oddy


/s/ Edward M. Wiederstein                         January 6, 1998     
- -----------------------------------               ---------------
Edward M. Wiederstein



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