<PAGE>
Registration No. 333-13087
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
_______________
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
(Exact name of trust)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Exact name of depositor)
ONE SUN LIFE EXECUTIVE PARK, WELLESLEY HILLS, MASSACHUSETTS 02181
(Address of depositor's principal executive office)
Copies to:
MARGARET SEARS MEAD, SECRETARY RUTH S. EPSTEIN, ESQ.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) COVINGTON & BURLING
ONE SUN LIFE EXECUTIVE PARK 1201 PENNSYLVANIA AVENUE, N.W.
WELLESLEY HILLS, MASSACHUSETTS 02181 P.O. BOX 7566
(Name and address of agent for service) WASHINGTON, D.C. 20044
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT IS REGISTERING AN INDEFINITE AMOUNT OF SECURITIES UNDER THE
SECURITIES ACT OF 1933.
______________________
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
______________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
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 THIS 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>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
REGISTRATION ON FORM S-6
CROSS-REFERENCE SHEET
REQUIRED BY RULE 404(C) UNDER THE SECURITIES ACT OF 1933
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
1 COVER PAGE.
2 COVER PAGE; THE COMPANY, THE VARIABLE ACCOUNT AND
THE FUNDS -- THE COMPANY.
3 COVER PAGE; THE COMPANY, THE VARIABLE ACCOUNT AND
THE FUNDS -- THE COMPANY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE VARIABLE ACCOUNT.
4 DISTRIBUTION OF THE POLICIES.
5 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS --
THE VARIABLE ACCOUNT.
6 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS --
THE VARIABLE ACCOUNT.
9 LEGAL PROCEEDINGS
10 SUMMARY OF THE POLICY; THE POLICY; PREMIUM
PAYMENTS; DEATH BENEFIT; ACCOUNT VALUE; CHARGES,
DEDUCTIONS AND REFUNDS; POLICY LOANS; GENERAL
PROVISIONS -- ADDITIONS, DELETIONS OR SUBSTITUTION OF
INVESTMENTS; GENERAL PROVISIONS -- CHANGE IN THE
OPERATION OF THE VARIABLE ACCOUNT; GENERAL PROVISIONS
-- MATURITY; GENERAL PROVISIONS -- MODIFICATION;
GENERAL PROVISIONS -- VOTING RIGHTS; FEDERAL TAX
STATUS.
11 SUMMARY OF THE POLICY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE VARIABLE ACCOUNT; THE
COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS -- THE
FUNDS.
I-2
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
12 SUMMARY OF THE POLICY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE FUNDS.
13 SUMMARY OF THE POLICY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE FUNDS, CHARGES,
DEDUCTIONS AND REFUNDS; DISTRIBUTION OF THE POLICIES.
14 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY.
15 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY; THE
POLICY -- FREE LOOK PERIOD; PREMIUM PAYMENTS -- PLANNED
PERIODIC PREMIUMS; PREMIUM PAYMENTS -- ALLOCATION OF NET
PREMIUM; ACCOUNT VALUE -- ACCOUNT VALUE IN THE
SUB-ACCOUNTS; ACCOUNT VALUE -- TRANSFER PRIVILEGES.
16 PREMIUM PAYMENTS -- ALLOCATION OF NET PREMIUM; ACCOUNT
VALUE -- ACCOUNT VALUE IN THE SUB-ACCOUNTS; ACCOUNT
VALUE -- NET INVESTMENT FACTOR; ACCOUNT VALUE --
ACCOUNT VALUE IN THE LOAN ACCOUNT; ACCOUNT VALUE --
TRANSFER PRIVILEGES; ACCOUNT VALUE -- ALLOCATION OF
PARTIAL SURRENDER; POLICY LOANS.
17 THE POLICY -- FREE LOOK PERIOD; ACCOUNT VALUE --
SURRENDER; ACCOUNT VALUE -- PARTIAL SURRENDER;
ACCOUNT VALUE -- ALLOCATION OF PARTIAL SURRENDER;
POLICY LOANS.
18 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE VARIABLE ACCOUNT; ACCOUNT VALUE -- ACCOUNT
VALUE IN THE SUB-ACCOUNTS; ACCOUNT VALUE -- NET
INVESTMENT FACTOR.
I-3
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
19 GENERAL PROVISIONS -- REPORT TO OWNER; OTHER
CONTRACTUAL ARRANGEMENTS -- ADMINISTRATION.
20 NOT APPLICABLE.
21 DEATH BENEFIT -- BENEFITS AT DEATH; ACCOUNT VALUE --
ACCOUNT VALUE IN THE LOAN ACCOUNT; POLICY LOANS.
22 NOT APPLICABLE.
23 THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS.
24 NOT APPLICABLE.
25 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY.
26 NOT APPLICABLE.
27 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY.
28 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY; THE COMPANY'S DIRECTORS AND EXECUTIVE
OFFICERS.
29 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY; THE COMPANY'S DIRECTORS AND EXECUTIVE
OFFICERS.
30 NOT APPLICABLE.
31 NOT APPLICABLE.
32 NOT APPLICABLE.
33 NOT APPLICABLE.
I-4
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
34 NOT APPLICABLE.
35 DISTRIBUTION OF THE POLICIES.
37 NOT APPLICABLE.
38 DISTRIBUTION OF THE POLICIES.
39 DISTRIBUTION OF THE POLICIES.
40 NOT APPLICABLE.
41 DISTRIBUTION OF THE POLICIES.
42 NOT APPLICABLE.
43 NOT APPLICABLE.
44 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY; THE
POLICY -- FREE LOOK PERIOD; PREMIUM PAYMENTS -- PLANNED
PERIODIC PREMIUMS; PREMIUM PAYMENTS -- ALLOCATION OF NET
PREMIUM; ACCOUNT VALUE -- ACCOUNT VALUE IN THE
SUB-ACCOUNTS; ACCOUNT VALUE -- TRANSFER PRIVILEGES.
45 NOT APPLICABLE.
46 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY; THE
POLICY -- FREE LOOK PERIOD; PREMIUM PAYMENTS -- PLANNED
PERIODIC PREMIUMS; PREMIUM PAYMENTS -- ALLOCATION OF NET
PREMIUM; ACCOUNT VALUE -- ACCOUNT VALUE IN THE
SUB-ACCOUNTS; ACCOUNT VALUE -- TRANSFER PRIVILEGES.
47 NOT APPLICABLE.
48 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY; THE COMPANY, THE VARIABLE ACCOUNT AND
THE FUNDS -- THE VARIABLE ACCOUNT.
49 NOT APPLICABLE.
50 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE VARIABLE ACCOUNT.
51 COVER PAGE; THE POLICY; PREMIUM PAYMENTS; DEATH
BENEFIT; ACCOUNT VALUE; CHARGES, DEDUCTIONS AND
REFUNDS; POLICY LOANS; GENERAL PROVISIONS.
I-5
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
52 GENERAL PROVISIONS -- ADDITION, DELETION OR SUBSTITUTION OF
INVESTMENTS; GENERAL PROVISIONS -- CHANGE IN THE OPERATION
OF THE VARIABLE ACCOUNT; GENERAL PROVISIONS -- MODIFICATION.
53 FEDERAL TAX STATUS -- TAX TREATMENT OF THE COMPANY.
54 NOT APPLICABLE.
55 NOT APPLICABLE.
I-6
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
ATTACHED HERETO AND MADE A PART HEREOF IS THE PROSPECTUS OF SUN LIFE OF
CANADA (U.S.) VARIABLE ACCOUNT G DATED JANUARY 21, 1997.
<PAGE>
SUBJECT TO COMPLETION
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY PROSPECTUS
JANUARY 21, 1997
SUN LIFE CORPORATE VUL-SM-
--------------------------------------------------
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA.
ONE SUN LIFE EXECUTIVE PARK (ATTN: CORPORATE MARKETS)
WELLESLEY HILLS, MASSACHUSETTS 02181
(800) 432-1102 EXT. 2438
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This Prospectus describes Sun Life Corporate VUL, a flexible premium
variable universal life insurance policy (the "Policy") offered by Sun Life
Assurance Company of Canada (U.S.) (the "Company"). The Policy is designed for
use by corporations and other employers, to provide life insurance benefits,
flexibility of premium payments, and a variety of investment options.
The Policy provides a choice of two death benefit options and two tests to
be used to determine if the Policy qualifies as "life insurance" under federal
tax laws. The Policy has a Cash Surrender Value which generally increases with
the payment of each Premium, decreases to reflect charges, and varies with the
investment performance of the underlying investment options. There is no minimum
Cash Surrender Value. You may also borrow against your Account Value, within
certain limits. Additional life insurance coverage is available under an
Additional Protection Benefit Rider.
The Policy will remain in effect so long as the Account Value less your
Policy Debt is sufficient to cover charges assessed against the Policy.
The Policy allows you to allocate Net Premiums and Account Value among 17
Sub-Accounts, each of which invests in a corresponding investment portfolio of
one of the following mutual funds: MFS/Sun Life Series Trust, Fidelity Variable
Insurance Products Fund, Fidelity Variable Insurance Products Fund II, Neuberger
& Berman Advisers Management Trust, JPM Series Trust II and Templeton Variable
Products Series Fund.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
MFS/SUN LIFE SERIES TRUST, FIDELITY VARIABLE INSURANCE PRODUCTS FUND, FIDELITY
VARIABLE INSURANCE PRODUCTS FUND II, NEUBERGER & BERMAN ADVISERS MANAGEMENT
TRUST, JPM SERIES TRUST II AND TEMPLETON VARIABLE PRODUCTS SERIES FUND. YOU
SHOULD RETAIN THESE PROSPECTUSES FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary 1
Definitions 4
Summary of the Policy 7
Use of the Policy 8
The Company, the Variable Account and the Funds 8
The Company 8
The Variable Account 9
The Funds 9
Performance Information 12
The Policy 14
Application and Issuance of a Policy 14
Free Look Period 15
Premium Payment 15
Planned Periodic Premiums 15
General Premium Limits 15
Tax Limits on Premium Payments 16
Allocation of Net Premium 16
Modified Endowment Contracts 16
Death Benefit 16
Death Benefit Compliance Test 16
Death Benefit Options 17
Benefits at Death 17
Changes in the Death Benefit Option 17
APB Rider 18
Minimum Face Amount 18
Changes in Face Amount 18
Decreases in Face Amount 19
Increases in Face Amount 19
Account Value 19
Account Value in the Sub-Accounts 19
Net Investment Factor 20
Account Value in the Loan Account 21
Transfer Privileges 21
Surrender 21
Partial Surrender 21
Allocation of Partial Surrender 22
Insufficient Value 22
Grace Period 22
Charges, Deductions and Refunds 22
Expense Charges Deducted as a Percent of Premium 22
Sales Load Refund at Surrender 23
Expense Charges Deducted as a Percent of Assets 23
Expenses of the Underlying Funds 23
Expense Charges Deducted on a Per Policy Basis 24
Monthly Cost of Insurance 24
Reduction of Charges 24
</TABLE>
2
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Policy Loans 25
General Provisions 25
Addition, Deletion or Substitution of Investments 25
Alteration 25
Assignments 25
Change in Operation of the Variable Account 26
Conversion 26
Deferral of Payment 26
Entire Contract 26
Illustrations 26
Incontestability 26
Maturity 27
Misstatement of Age or Sex (Non-Unisex Policy) 27
Modification 27
Nonparticipating 27
Procedure 27
Report to Owner 27
Rights of Beneficiary 27
Rights of Owner 27
Splitting Units 28
Suicide 28
Termination 28
Voting Rights 28
Distribution of the Policies 29
Other Contractual Arrangements 29
Administration 29
Custodian 29
Reinsurance 29
Federal Tax Status 29
Tax Treatment of the Company and the Variable Account 30
Taxation of Policy Proceeds 30
The Company's Directors and Executive Officers 32
State Regulation 35
Legal Proceedings 35
Legal Matters 35
Experts 36
Accountants 36
Registration Statements 36
Financial Statements 36
Appendix A--Illustrations of Death Benefits, Account Values
and Cash Surrender Values A-1
</TABLE>
-------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUSES.
3
<PAGE>
DEFINITIONS
The following terms as used in the Prospectus have the indicated meanings.
ACCOUNT VALUE: The sum of the amounts in each Sub-Account of the Variable
Account with respect to the Policy and the amount of the Loan Account.
ADDITIONAL PROTECTION BENEFIT RIDER ("APB RIDER"): A rider available that
allows you to add life insurance coverage to the Policy.
ANNIVERSARY: The same day in each succeeding year as the day of the year
corresponding to the Issue Date.
APB RIDER DEATH BENEFIT: The death benefit under the APB Rider.
APB RIDER FACE AMOUNT: The amount of APB Rider coverage you request, as
specified in the Application. It is used in determining the Death Benefit. You
may apply for a varying amount of APB Rider coverage, subject to the Company's
limits and requirements, as described in this prospectus.
APPLICATION: Your application for the Policy.
ATTAINED AGE: The Insured's Issue Age plus the number of completed Policy
Years.
BASE DEATH BENEFIT: The death benefit under the Policy, exclusive of any
APB Rider Death Benefit or any other supplemental benefits.
BENEFICIARY: The person or entity entitled to receive the Policy Proceeds
as they become due at death.
BUSINESS DAY: Any day that we are open for business.
CASH SURRENDER VALUE: The Account Value decreased by the balance of any
outstanding Policy Debt, increased by the Sales Load Refund at Surrender, if
any.
CLASS: The risk, underwriting, and substandard table rating, if any,
classification of the Insured.
COMPANY: Sun Life Assurance Company of Canada (U.S.) (also referred to as
"we, us, our").
DAILY RISK PERCENTAGE: The daily rate for deduction of the mortality and
expense risk charge.
DEATH BENEFIT: The sum of the Base Death Benefit and the APB Rider Death
Benefit, if any.
DUE PROOF: Such evidence as we may reasonably require in order to establish
that Policy Proceeds are due and payable.
EFFECTIVE DATE OF COVERAGE: Initially, the Investment Start Date; with
respect to any increase in the Total Face Amount, the Monthly Anniversary Day
that falls on or next follows the date we approve the supplemental application
for such increase; with respect to any decrease in the Total Face Amount, the
Monthly Anniversary Day that falls on or next follows the date we receive your
request.
EXPENSE CHARGES APPLIED TO PREMIUM: The expense charges applied to Premium,
consisting of the charges for premium tax, the federal deferred acquisition cost
("DAC") tax, and the sales load.
FUND: A mutual fund in which a Sub-Account invests.
GENERAL ACCOUNT: The assets held by us other than those allocated to the
Sub-Accounts of the Variable Account or any other separate account of the
Company. There is no General Account investment option available under this
Policy.
INSURED: The person on whose life the Policy is issued.
INVESTMENT START DATE: The date the first Premium is applied, which will be
the later of the Issue Date, the Business Day we approve the application for a
Policy, or the Business Day we receive a Premium equal to or in excess of the
Minimum Premium.
ISSUE AGE: The Insured's age as of the Insured's birthday nearest the Issue
Date.
4
<PAGE>
ISSUE DATE: A date specified in your Policy as the date from which Policy
Anniversaries, Policy Years and Policy Months are measured.
LOAN ACCOUNT: An account established for the Policy, the value of which is
the principal amount of any outstanding loan against the Policy, plus credited
interest thereon.
MATURITY: The Anniversary on which the Insured's Attained Age is 100.
MINIMUM PREMIUM: The Premium amount due and payable as of the Issue Date,
as specified in your Policy. The Minimum Premium varies based on the Issue Age,
sex, and Class of the Insured and the Total Face Amount of the Policy.
MONTHLY ANNIVERSARY DAY: The same day in each succeeding month as the day
of the month corresponding to the Issue Date.
MONTHLY COST OF INSURANCE: A deduction made on a monthly basis for the
insurance coverage provided by the Policy.
MONTHLY EXPENSE CHARGE: A per Policy deduction made on a monthly basis for
administration and other expenses.
MORTALITY AND EXPENSE RISK PERCENTAGE: The annual percentage rate deducted
from the Account Value in the Sub-Accounts for the mortality and expense risk
charge. This annual rate is converted to a daily rate, the Daily Risk
Percentage, and deducted from the Account Value on a daily basis.
NET PREMIUM: The amount you pay as the Premium less the Expense Charges
Applied to Premium.
OUR PRINCIPAL OFFICE: Sun Life Assurance Company of Canada (U.S.) (Attn:
Corporate Markets), One Sun Life Executive Park, Wellesley Hills, Massachusetts,
02181, or such other address as we may specify to you by written notice.
OWNER: The person, persons or entity entitled to the ownership rights
stated in the Policy while the Insured is alive (also referred to as "you,
your").
PARTIAL SURRENDER: A surrender of a portion of the Account Value in
exchange for a payment to the Owner, in accordance with the Policy.
POLICY: The life insurance contract, Sun Life Corporate VUL, including the
Application, any riders or endorsements and any applications therefor.
POLICY DEBT: The principal amount of any outstanding loan against the
Policy, plus accrued but unpaid interest on such loan.
POLICY MONTH: A Policy Month is a one-month period commencing on the Issue
Date or any Monthly Anniversary Day and ending on the next Monthly Anniversary
Day.
POLICY PROCEEDS: The amount determined in accordance with the terms of this
Policy that is payable at the death of the Insured prior to Maturity. This
amount is the Base Death Benefit, decreased by the amount of any outstanding
Policy Debt, and increased by the amounts payable under any APB Rider Death
Benefit and any other supplemental benefits.
POLICY YEAR: A Policy Year is a one-year period commencing on the Issue
Date or any Anniversary and ending on the next Anniversary.
PREMIUM: An amount paid to us by the Owner or on the Owner's behalf as
consideration for the benefits provided by the Policy.
SALES LOAD REFUND AT SURRENDER: The portion of any Premium paid in the
Policy Year of surrender which is refunded upon surrender in the first three
Policy Years, determined in the manner specified in the Policy.
SERVICE CENTER: Andesa TPA, Inc., 1605 N. Cedar Crest Blvd., Suite 502,
Allentown, Pennsylvania, 18104-2351, or such other service center or address as
we may hereafter specify to you by written notice.
5
<PAGE>
SPECIFIED FACE AMOUNT: The amount of life insurance coverage you request as
specified in the Policy, exclusive of any APB Rider. It is used in determining
the Death Benefit. You may increase or decrease the Specified Face Amount as
described in this Prospectus.
SUB-ACCOUNTS: Sub-Accounts into which the assets of the Variable Account
are divided, each of which corresponds to an investment choice available to you.
TARGET PREMIUM: An amount of Premium specified in your Policy. The Target
Premium varies based on the Insured's Issue Age, sex, and Specified Face Amount.
The sales load deduction applied to Premiums paid in the first seven Policy
Years and the Sales Load Refund at Surrender for surrender in the first three
Policy Years is higher on premium paid up to Target Premium and lower on premium
paid above Target Premium. Use of the APB Rider will affect Target Premium and
policy Values as described in this prospectus in the section DEATH BENEFIT--APB
Rider.
TOTAL FACE AMOUNT: The sum of the Specified Face Amount and the APB Rider
Face Amount.
UNIT: A unit of measurement that we use to calculate the value of each
Sub-Account.
UNIT VALUE: The value of each Unit of assets in a Sub-Account.
VALUATION DATE: Any day that benefits vary and on which the New York Stock
Exchange, we, and the relevant Fund are open for business. A Valuation Date will
also include any day that may be required by any applicable Securities and
Exchange Commission Rules and Regulations.
VALUATION PERIOD: A period of time from one determination of Unit Values to
the next subsequent determination of Unit Values. We will determine Unit Values
for each Valuation Date as of the close of the New York Stock Exchange on that
Valuation Date.
VARIABLE ACCOUNT: Sun Life of Canada (U.S.) Variable Account G, a separate
account of the Company consisting of assets set aside by the Company, the
investment performance of which is kept separate from that of the general assets
of the Company (also referred to as "Variable Account G").
WE, US AND OUR: The Company and the Company's.
YOU AND YOUR: The Owner and the Owner's.
6
<PAGE>
SUMMARY OF THE POLICY
The Policy is an individual flexible premium variable universal life
insurance policy offered by Sun Life Assurance Company of Canada (U.S.). The
Policy may be owned by an individual, a corporation or other entity. The Policy
may be used for such purposes as financing nontax qualified executive benefit
plans. The Policy is subject to our policy issue rules. You must have an
insurable interest in the life of the Insured. (See "USE OF THE POLICY.")
Premium payments under the Policy are flexible, and you choose the amount
and frequency of your Premium payments. The Policy will remain in effect so long
as your Account Value less Policy Debt is sufficient to cover any charges
against the Policy. (See "PREMIUM PAYMENTS.")
Net Premiums and Account Value may be allocated among any of the investment
options available under the Policy, each of which is represented by a
Sub-Account under the Policy. Each Sub-Account invests in a corresponding
portfolio (the "Portfolios") of one of the following mutual funds (the "Funds"):
MFS/Sun Life Series Trust
<TABLE>
<S> <C>
- - Capital Appreciation Series - Total Return Series
- - Emerging Growth Series - World Growth Series
- - Government Securities Series
</TABLE>
Fidelity Variable Insurance Products Fund ("VIP") and Fidelity Variable
Insurance Products
Fund II ("VIP II")
<TABLE>
<S> <C>
- - VIP II Contrafund Portfolio - VIP High Income Portfolio
- - VIP Equity Income Portfolio - VIP II Index 500 Portfolio
- - VIP Growth Portfolio - VIP Money Market Portfolio
</TABLE>
Neuberger & Berman Advisers Management Trust
<TABLE>
<S> <C>
- - Limited Maturity Bond Portfolio - Partners Portfolio
</TABLE>
JPM Series Trust II
<TABLE>
<S> <C>
- - Bond Portfolio - Small Company Portfolio
- - Equity Portfolio
</TABLE>
Templeton Variable Products Series Fund
<TABLE>
<S> <C>
- - Templeton Stock Fund
</TABLE>
(See "THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS -- The Funds.")
You may change your allocation percentages and transfer your Account Value
among Sub-Accounts, within certain limits. (See "PREMIUM PAYMENTS -- Allocation
of Net Premium" and "ACCOUNT VALUE -- Transfer Privileges.")
The Policy offers a choice of death benefit options and a choice between two
tests to be used to determine if the Policy qualifies as "life insurance" under
federal tax laws. The two tests are the Cash Value Accumulation Test and the
Guideline Premium Test. If the Cash Value Accumulation Test is chosen, only
death benefit Option A is available. Death benefit Option A results in a level
Base Death Benefit equal to the Specified Face Amount, unless the life insurance
test requires a greater amount. Death benefit Option B results in a variable
Base Death Benefit equal to the Specified Face Amount plus Account Value, unless
the life insurance test chosen requires a greater amount. The life insurance
test you choose cannot be changed after issue. If you choose the Guideline
Premium Test, you may change your death benefit option. (See "DEATH BENEFIT.")
We deduct from Premium payments a charge to cover our federal deferred
acquisition tax cost, which is currently 1.25% of Premium (guaranteed not to
exceed this rate), and for premium tax, which is currently the rate charged in
your state of residence for state and local taxes (guaranteed not to exceed 4%
of Premium in most states). In each of the first seven Policy Years, we deduct a
sales load equal to 8.75% of Premium up to
7
<PAGE>
Target Premium, as specified in your Policy, and 2.25% of Premium in excess of
Target Premium. No sales load is deducted after the seventh Policy Year. We also
deduct a daily mortality and expense risk charge, currently at an annual rate of
0.75% of the Variable Account's net asset value for the first ten Policy Years
and 0.35% thereafter (guaranteed not to exceed 0.90%), and monthly cost of
insurance charges for the insurance protection provided under the Policy. We
deduct a Monthly Expense Charge of $13.75 during the first Policy Year, and
$7.50 thereafter (guaranteed not to exceed $13.75 per month). Account Value also
reflects the deduction of management fees and other expenses incurred by the
underlying investment Portfolios. (See "CHARGES, DEDUCTIONS AND REFUND.")
There are no surrender charges. Upon full surrender during the first three
Policy Years, you will receive a partial refund of the sales load deducted in
that year. Partial Surrenders are permitted once per Policy Year after the first
Policy Year. No refund of sales load is provided for Partial Surrenders. Loans
are available under the Policy at any time. (See "CHARGES, DEDUCTIONS AND
REFUNDS.")
An APB Rider, which provides additional life insurance coverage, is
available with the Policy as an optional benefit. The cost of the APB Rider is
included in the Monthly Cost of Insurance deduction. (See "DEATH BENEFIT -- APB
Rider.")
The Policy offers other benefits and features described in greater detail in
this Prospectus. You should consult the Policy concerning the insurance coverage
and rights afforded to you under the Policy.
This summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. Further detail is provided in the Prospectus
and the Policy.
USE OF THE POLICY
The Policy is designed to provide to corporations and other entities life
insurance coverage on their employees or other persons in whose lives they have
an insurable interest, and may be used in connection with various types of
non-tax qualified executive benefit plans. At the same time, the Policy provides
an Account Value which will be to some extent responsive to changes in the
economic environment, including inflationary forces and changes in rates of
return available from various types of investments. A range of investment
options is provided under the Policy. You, as the Owner, will have all rights
and privileges under the Policy.
The Policy's Account Value and Cash Surrender Value will fluctuate and are
subject to the risks of changing economic conditions, as well as the risks
inherent in the ability of the various Funds' managements to make necessary
changes in their portfolios to anticipate changes in economic conditions. There
is no minimum or guaranteed Account Value attainable or Cash Surrender Value
payable under the Policy.
It may not be advantageous to replace existing insurance or supplement an
existing life insurance policy with the Policy.
THE COMPANY, THE VARIABLE ACCOUNT, AND THE FUNDS
THE COMPANY
The Company is a stock life insurance company incorporated under the laws of
Delaware on January 12, 1970. Its Executive Office mailing address is One Sun
Life Executive Park, Wellesley Hills, Massachusetts 02181, telephone (617)
237-6030. It has obtained authorization to do business in forty-eight states,
the District of Columbia and Puerto Rico, and it is anticipated that the Company
will be authorized to do business in all states except New York. The Company
issues life insurance policies and individual and group annuities. The Company
has formed a wholly-owned subsidiary, Sun Life Insurance and Annuity Company of
New York, which issues individual fixed and combination fixed/variable annuity
contracts and group life and long-term disability insurance in New York. The
Company's other subsidiaries are Massachusetts Financial Services Company and
Sun Capital Advisers, Inc., registered investment advisers, Sun Investment
Services Company, a registered broker-dealer and investment adviser, Sun Benefit
Services, Company, Inc., which offers claims, administrative and pension
brokerage services, New London Trust, F.S.B., a federally
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chartered savings bank, Massachusetts Casualty Insurance Company, which issues
individual disability income policies, and Sun Life Financial Services Limited,
which provides administrative services to Sun Life Assurance Company of Canada
in connection with non-U.S. business.
The Company is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada, 150 King Street West, Toronto, Ontario, Canada MFH 1J9. Sun Life
Assurance Company of Canada is a mutual life insurance company incorporated
pursuant to Act of Parliament of Canada in 1865 and currently transacts business
in all of the Canadian provinces and territories, in all states except New York,
and in the District of Columbia, Puerto Rico, the Virgin Islands, Great Britain,
Ireland, Hong Kong, Bermuda and the Philippines.
THE VARIABLE ACCOUNT
Pursuant to a resolution of the Board of Directors, the Variable Account was
established by the Company on July 25, 1996. Under Delaware insurance law and
under the Policy, the income, gains or losses of the Variable Account are
credited to or charged against the assets of the Variable Account without regard
to the other income, gains or losses of the Company. These assets are held in
relation to the Policies described in this Prospectus and such other variable
life insurance contracts as we have issued and designated and may, in the
future, issue and designate as providing benefits which vary in accordance with
the investment performance of the Variable Account. Although the assets
maintained in the Variable Account will not be charged with any liabilities
arising out of any other business conducted by the Company, all obligations
arising under the Policy, including the promise to make all benefit payments,
are general corporate obligations of the Company.
The Company is the legal owner of the assets of the Variable Account. We are
required to maintain at all times assets in the Variable Account with a total
market value at least equal to the reserves and other liabilities relating to
the variable life insurance benefits under the contracts participating in the
Variable Account. In addition to these assets, the Variable Account's assets may
include amounts we have contributed to commence operation of the Variable
Account, and may include accumulations of the charges we make against the
Variable Account. From time to time these additional assets may be transferred
in cash to our General Account. Before making any such transfer, we will
consider any possible adverse impact the transfer might have on the Variable
Account.
The Variable Account meets the definition of a separate account under the
federal securities laws and is registered as a unit investment trust under the
Investment Company Act of 1940. Registration with the Securities and Exchange
Commission (the "Commission") does not involve supervision of the management or
investment practices or policies of the Variable Account or of the Company by
the Commission. For state law purposes, the Variable Account is treated as a
part or division of the Company. We are the custodian of the assets of the
Variable Account.
The assets of the Variable Account are divided into Sub-Accounts, each of
which invests exclusively in shares of a single corresponding investment
portfolio. Currently there are 17 Sub-Accounts, and Sub-Accounts may be added or
deleted in the future. Income, gains and losses, whether or not realized, from
the assets of each Sub-Account are credited to or charged against that
Sub-Account without regard to income, gains or losses in other Sub-Accounts of
the Variable Account. All amounts allocated to the Variable Account will be used
to purchase shares of one or more of the Funds, as you designate. Deductions and
surrenders from the Variable Account will, in effect, be made by redeeming the
number of Fund shares at net asset value equal in total value to the amount to
be deducted. The Variable Account will be fully invested in Fund shares at all
times.
The Variable Account can choose to receive distributions from the Funds in
either cash or additional shares. It is expected that the Variable Account will
choose to receive distributions in additional shares. If the Variable Account
chooses to receive distributions in cash, it will reinvest the cash in the Funds
to purchase additional shares at their net asset value.
THE FUNDS
The following is a brief description of the Funds and a summary of the
investment objectives of each Portfolio. More comprehensive information,
including a discussion of potential risks, is found in the current prospectuses
for each Fund, which are distributed with and must accompany this Prospectus.
You should
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read the accompanying prospectuses carefully before investing. Additional
prospectuses and the Statements of Additional Information for each of the Funds
can be obtained from the Company's Office at the address and telephone number
listed on the cover of this Prospectus.
MFS/SUN LIFE SERIES TRUST. MFS/Sun Life Series Trust (the "MFS Series
Fund") is an open-end investment management company registered under the
Investment Company Act of 1940 (a "mutual fund") organized as a Massachusetts
business trust. The MFS Series Fund is managed by Massachusetts Financial
Services, Inc. ("MFS"), a subsidiary of the Company. In addition, the World
Growth Series is managed by the following subadvisers: Oechsle International
Advisors, L.P., an independent international investment adviser, Foreign &
Colonial Management Limited ("FCM"), and Foreign & Colonial Emerging Markets
Limited, a subsidiary of FCM. The MFS Series Fund is composed of nineteen
independent portfolios of securities, five of which are currently available for
investment by the Variable Account.
- CAPITAL APPRECIATION SERIES seeks capital appreciation by investing in
securities of all types, with major emphasis on common stocks.
- EMERGING GROWTH SERIES seeks long term growth of capital by investing
primarily (i.e., at least 80% of its assets under normal circumstances) in
common stocks of emerging growth companies. Emerging growth companies
include companies that MFS believes are early in their life cycle but
which have the potential to become major enterprises. Dividend and
interest income from portfolio securities, if any, is incidental to its
objective of long-term growth of capital.
- GOVERNMENT SECURITIES SERIES seeks current income and preservation of
capital by investing in U.S. Government and U.S. Government-related
securities.
- TOTAL RETURN SERIES seeks primarily to obtain above-average income
(compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is
to take advantage of opportunities for growth of capital and income.
Assets will be allocated and reallocated from time to time between money
market, fixed income and equity securities. Under normal market
conditions, at least 25% of the series assets will be invested in fixed
income securities and at least 40% and no more than 75% of its assets will
be invested in equity securities.
- WORLD GROWTH SERIES seeks capital appreciation by investing in securities
of companies worldwide growing at rates expected to be well above the
growth rate of the overall U.S. economy.
FIDELITY VIP FUND AND VIP FUND II. Variable Insurance Products Fund ("VIP")
and Variable Insurance Products Fund II ("VIP II") are mutual funds organized as
Massachusetts business trusts. VIP and VIP II are both managed by Fidelity
Management & Research Company ("FMR"), located at 82 Devonshire Street, Boston,
Massachusetts 02109. FMR is the management arm of Fidelity Investments, which
was established in 1946 and is one of the largest investment management
organizations in the United States. Various Fidelity companies perform
activities required for the operation of VIP and VIP II, and affiliates of FMR
may assist it in the choosing of investments for the funds.
Each of the VIP and VIP II is composed of five portfolios of securities, for
a total of 10 portfolios, of which six portfolios, in the aggregate, are
available for investment under the Policy.
- VIP II CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
Portfolio purchases will normally be common stock and securities
convertible into common stock of companies believed to be undervalued due
to an overly pessimistic appraisal by the public.
- VIP EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily
in income producing equity securities. The portfolio seeks to achieve a
yield in excess of the composite yield of the Standard & Poor's 500
Composite Stock Index ("S&P 500"), a recognized measure of U.S. stock
market performance. At least 65% of the portfolio's assets will be
invested in income-producing common or preferred stock, with the remainder
normally invested in convertible and non-convertible debt obligations.
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- VIP GROWTH PORTFOLIO seeks capital appreciation. Portfolio purchases
normally will be common stocks of both smaller, less-known companies and
well-known, established companies although the investments are not
restricted to any one type of security. Dividend income will only be
considered if it might have an effect on stock values.
- VIP HIGH INCOME PORTFOLIO seeks a high level of current income by
investing in high income producing, lower-rated debt securities (sometimes
called "junk bonds"), preferred stocks including convertible securities
and restricted securities.
- VIP II INDEX 500 PORTFOLIO seeks investment results that correspond to the
total return of common stocks publicly traded in the United States, as
presented by the S&P 500. The portfolio will primarily invest in equity
securities of companies that compose the S&P 500. The portfolio will also
purchase short-term debt securities for cash management purposes and use
various investment techniques, such as futures contracts, to adjust its
exposure to the S&P 500.
- VIP MONEY MARKET PORTFOLIO seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity.
The Portfolio will invest in high quality U.S. dollar-denominated money
market instruments of domestic and foreign issuers.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST. Neuberger & Berman Advisers
Management Trust ("AMT") is a mutual fund organized as a Delaware business
trust. AMT is composed of seven separate portfolios (each an "AMT Portfolio").
Each AMT Portfolio invests all of its net investable assets in its corresponding
series (each an "AMT Series") of Advisers Managers Trust, an open-end management
investment company. All AMT Series of Advisers Managers Trust are managed by
Neuberger & Berman Management Inc. Each AMT Series invests in accordance with an
investment objective, policies, and limitations identical to those of its
corresponding AMT Portfolio. The Policy provides for investment in shares of the
two AMT Portfolios described below.
- LIMITED MATURITY BOND PORTFOLIO primarily seeks the highest current income
and total return consistent with low risk to principal and liquidity; and
secondarily, total return. AMT Limited Maturity Bond Portfolio invests in
a diversified portfolio of fixed and variable rate debt securities and
seeks to increase income and preserve or enhance total return by actively
managing average portfolio duration in light of market conditions and
trends. This AMT Series' dollar-weighted average portfolio duration may
range up to four years.
- PARTNERS PORTFOLIO seeks capital growth through an investment approach
that is designed to increase capital with reasonable risk. Its investment
program seeks securities believed to be undervalued based on strong
fundamentals such as low price-to-earning ratios, consistent cash flow,
and support from asset values.
JPM SERIES TRUST II. The JPM Series Trust II ("JPM") is a mutual fund
organized as a Delaware business trust. JPM is composed of five separate
portfolios of securities, each of which has separate investment objectives and
policies. The Policy provides for investment in the three portfolios of JPM
described below.
- JPM BOND PORTFOLIO seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity by investing broadly
in the fixed-income markets.
- JPM EQUITY PORTFOLIO seeks to provide a high total return by investing in
selected equity securities of large and mid-sized U.S. corporations with
market capitalizations above $1.5 billion.
- JPM SMALL COMPANY PORTFOLIO seeks to provide a high total return by
investing in equity securities of companies primarily with market
capitalizations of less than $2 billion.
TEMPLETON VARIABLE PRODUCTS SERIES FUND. Templeton Variable Products Series
Fund ("TVPSF") is a mutual fund organized as a Massachusetts business trust.
TVPSF has contracted with Templeton Investment Counsel, Inc. to manage the
Templeton Stock Fund. TVPSF is composed of six separate series, each of which
has separate investment objectives and policies. The Policy provides for
investment in the series of TVPSF described below.
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- TEMPLETON STOCK FUND seeks capital growth through a policy of investing
primarily in common stocks issued by companies, large and small,
throughout the world. In pursuit of this objective, the fund will normally
maintain at least 65% of its assets in common and preferred stocks.
INVESTMENT ADVISORY FEES AND EXPENSES. Each Fund has an investment adviser
and pays an investment advisory fee, which is deducted daily from each Fund's
net assets. In addition, each Fund incurs operational and other expenses that
are deducted from each Fund's net assets. See the prospectus for each Fund for
the amount of these fees and expenses.
Certain of the investment advisers to the Funds may reimburse us for
administrative costs in connection with administering the Funds as variable
funding options. These amounts are not charged to the Funds or Owners, but are
paid from assets of the advisers.
MIXED AND SHARED FUNDING. Shares of all the Funds are sold to insurance
company separate accounts that issue both variable annuity and variable life
insurance policies ("mixed funding"). Shares of all Funds other than the MFS
Series Fund are sold to separate accounts of insurance companies that may or may
not be affiliated with the Company or each other ("shared funding"). The MFS
Series Fund sells shares only to separate accounts of the Company and its
affiliates. It is conceivable that, in the future, such mixed or shared funding
may not be advantageous for certain variable life insurance or variable annuity
policy owners. Although neither the Company nor the Funds currently foresee any
such disadvantages either to variable life insurance or to variable annuity
policy owners, the Company and each Fund's Board of Trustees/Directors have
agreed to monitor events in order to identify any material irreconcilable
conflicts between policy owners that may arise and to determine what action, if
any, should be taken in response thereto. If such a conflict were to occur, one
of the separate accounts might withdraw its investment in a Fund. This might
force that Fund to sell portfolio securities at disadvantageous prices.
PERFORMANCE INFORMATION
From time to time we may advertise "Total Return" and "Average Annual Total
Return." Such figures are based on historical earnings and are not intended to
indicate future performance.
"Total Return" for a Portfolio refers to the total of the income generated
by the Portfolio net of total Portfolio operating expenses plus capital gains
and losses, realized or unrealized. "Total Return" for the Sub-Accounts refers
to the total of the income generated by the Portfolio net of total Portfolio
operating expenses plus capital gains and losses, realized or unrealized, and
net of the mortality and expense risk charge. "Average Annual Total Return"
reflects the hypothetical annually compounded return that would have produced
the same cumulative return if the Portfolio's or Sub-Account's performance had
been constant over the entire period. Because Average Annual Total Returns tend
to smooth out variations in the return of the Portfolio, they are not the same
as actual year-by-year results.
Performance information may be compared, in reports and promotional
literature, to: (i) the S&P 500, Dow Jones Industrial Average, Lehman Brothers
Aggregate Bond Index or other unmanaged indices so that investors may compare
the Sub-Account results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities markets in general;
(ii) other groups of variable life separate accounts or other investment
products tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds and other investment products by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons, such as Morningstar, Inc., who rank such
investment products on overall performance or other criteria; or (iii) the
Consumer Price Index (a measure for inflation) to assess the real rate of return
from an investment in the Sub-Account. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
We may provide in advertising, sales literature, periodic publications or
other materials information on various topics of interest to Owners and
prospective Owners. These topics may include the relationship between sectors of
the economy and the economy as a whole and its effect on various securities
markets, investment strategies and techniques (such as value investing, market
timing, dollar cost averaging, asset allocation, constant ratio transfer and
account rebalancing), the advantages and disadvantages of investing
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in tax-deferred and taxable investments, customer profiles and hypothetical
purchase and investment scenarios, financial management and tax and retirement
planning, and investment alternatives to certificates of deposit and other
financial instruments, including comparisons between the Policies and the
characteristics of and market for such financial instruments.
The Policies are first being offered to the public in 1997. However, total
return data may be advertised based on the period of time that the Portfolios
have been in existence. The results for any period prior to the Policies being
offered will be calculated as if the Policies had been offered during that
period of time, with all charges assumed to be those applicable to the Policies.
PORTFOLIO PERFORMANCE FOR PERIOD ENDING: NOVEMBER 30, 1996
The following performance information of the Portfolios reflects the total
of the income generated by the Portfolio net of total Portfolio operating
expenses plus capital gains and losses, realized or unrealized. It does not
reflect any Policy or Variable Account charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN OF THE PORTFOLIOS
- -------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO
INCEPTION LIFE OF
PORTFOLIO DATE 1 YR. 3 YR. 5 YR. 10 YR. PORTFOLIO
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
MFS/Sun Life Capital Appreciation Series 07/19/85 25.41% 18.65% 20.15% 15.85% 16.44%
MFS/Sun Life Emerging Growth Series 05/01/95 22.07% NA NA NA 31.90%
MFS/Sun Life Government Securities Series 07/19/85 4.07% 5.82% 7.27% 8.02% 8.79%
MFS/Sun Life Total Return Series 05/02/88 17.89% 12.96% 12.95% NA 12.46%
MFS/Sun Life World Growth Series 11/16/93 17.02% 13.02% NA NA 12.92%
Fidelity VIP II Contrafund Portfolio 01/03/95 22.58% NA NA NA 32.14%
Fidelity VIP Equity Income Portfolio 10/09/86 19.59% 19.80% 20.18% 13.58% 13.72%
Fidelity VIP Growth Portfolio 10/09/86 14.66% 18.37% 18.80% 15.30% 15.30%
Fidelity VIP High Income Portfolio 09/19/85 13.81% 10.72% 14.77% 11.04% 11.96%
Fidelity VIP II Index 500 Portfolio 08/27/92 27.58% 20.68% NA NA 18.00%
Fidelity VIP Money Market Portfolio 04/01/82 5.38% 5.11% 4.52% 5.96% 6.99%
Neuberger & Berman AMT Limited Maturity Bond
Portfolio 09/10/84 5.31% 5.07% 5.73% 6.76% 8.35%
Neuberger & Berman AMT Partners Portfolio 03/22/94 31.12% NA NA NA 22.40%
JPM Bond Portfolio 01/03/95 4.39% NA NA NA 10.13%
JPM Equity Portfolio 01/03/95 25.40% NA NA NA 30.00%
JPM Small Company Portfolio 01/03/95 18.72% NA NA NA 25.65%
Templeton Stock Fund 08/24/88 23.16% 16.38% 18.04% NA 13.34%
</TABLE>
The annualized yield for the Fidelity VIP Money Market Portfolio for the
seven days ending November 30, 1996 was 5.26%.
SUB-ACCOUNT INVESTMENT PERFORMANCE
Although as of the date of this Prospectus the Sub-Accounts have not
commenced operations and therefore have no performance history, the following
performance information of the Sub-Accounts assumes that the Sub-Accounts have
been in operation for the same periods as the corresponding Portfolio and
investing in the corresponding Portfolio. It reflects the total of the income
generated by the Portfolio net of total Portfolio operating expenses, plus
capital gains and losses, realized or unrealized, net of the mortality and
expense risk charge (at the current rate of 0.75% of net asset value for the
first ten years and 0.35% thereafter, rather than the guaranteed rate of 0.90%).
THE FOLLOWING SUB-ACCOUNT PERFORMANCE FIGURES DO NOT REFLECT THREE OTHER
SIGNIFICANT CHARGES. IF THESE CHARGES WERE INCLUDED, THE TOTAL RETURN FIGURES
WOULD BE LOWER. FIRST, THE TOTAL RETURN
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FIGURES DO NOT REFLECT THE DEDUCTION FROM PREMIUMS OF THE EXPENSE CHARGES
APPLIED TO PREMIUM. SECOND, MONTHLY COST OF INSURANCE CHARGES HAVE NOT BEEN
DEDUCTED. THIRD, THE FIGURES DO NOT REFLECT THE DEDUCTION OF THE MONTHLY EXPENSE
CHARGE.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN OF THE SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT 1 YR. 3 YR. 5 YR. 10 YR. LIFE OF SUB-ACCOUNT
- ------------------------------------------------------- ---------- ---------- ---------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
MFS/Sun Life Capital Appreciation Series 24.48% 17.77% 19.26% 14.99% 15.63%
MFS/Sun Life Emerging Growth Series 21.16% NA NA NA 30.92%
MFS/Sun Life Government Securities Series 3.30% 5.03% 6.47% 7.22% 8.03%
MFS/Sun Life Total Return Series 17.01% 12.12% 12.11% NA 11.62%
MFS/Sun Life World Growth Series 16.15% 12.18% NA NA 12.08%
Fidelity VIP II Contrafund Portfolio 21.67% NA NA NA 31.16%
Fidelity VIP Equity Income Portfolio 18.70% 18.91% 19.29% 12.73% 12.88%
Fidelity VIP Growth Portfolio 13.81% 17.49% 17.92% 14.44% 14.45%
Fidelity VIP High Income Portfolio 12.96% 9.90% 13.92% 10.21% 11.17%
Fidelity VIP II Index 500 Portfolio 26.63% 19.78% NA NA 17.12%
Fidelity VIP Money Market Portfolio 4.60% 4.33% 3.74% 5.17% 6.33%
Neuberger & Berman AMT Limited Maturity Bond Portfolio 4.53% 4.29% 4.94% 5.97% 7.62%
Neuberger & Berman AMT Partners Portfolio 30.14% NA NA NA 21.49%
JPM Bond Portfolio 3.61% NA NA NA 9.31%
JPM Equity Portfolio 24.47% NA NA NA 29.03%
JPM Small Company Portfolio 17.84% NA NA NA 24.72%
Templeton Stock Fund 22.24% 15.51% 17.16% NA 12.50%
</TABLE>
THE POLICY
This Prospectus describes the standard features of the Policy. There may be
differences in your Policy due to requirements of the state where your Policy is
issued. Any such changes will be defined in your Policy.
APPLICATION AND ISSUANCE OF A POLICY
To purchase a Policy, you must submit an application to our Principal
Office, so that we may follow certain underwriting procedures designed to
determine the insurability of the proposed Insured. We offer the Policy on a
regular (medical) underwriting, simplified underwriting, and guaranteed issue
basis (each such basis is referred to as an underwriting Class). The proposed
Insured generally must be less than 81 years old for medical issue, 76 years old
for simplified issue, and 71 years old for guaranteed issue underwriting
classes. Medical and simplified issue policies may require medical exams and
further information before the proposed application is approved. Availability of
guaranteed issue policies must be pre-approved based on information you provide
on a master application along with specific requirements which must be met by
all members of the group of proposed Insureds. Proposed Insureds must be
acceptable risks based on our underwriting limits and standards. A policy cannot
be issued until the underwriting process has been completed to our satisfaction
and we reserve the right to reject an application that does not meet our
underwriting requirements or to "rate" an insured as a substandard risk, which
will result in the charging of increased Monthly Cost of Insurance charges
and/or flat extra charges.
The Policy is designed for use only by an Owner who has an insurable
interest in the life of the Insured. Under the applicable state law and for tax
purposes, the Policy will not qualify as life insurance unless this insurable
interest requirement is satisfied. You should consult with a qualified adviser
to ensure that you have an insurable interest in the life of the Insured up to
the full amount of the Death Benefit. You should consult with a qualified
adviser when determining the Total Face Amount of the Policy and prior to
undertaking any action or making any change that increases the Policy's Death
Benefit.
Pending approval of the application, any initial Premium will be held in our
General Account. Upon approval of the application, your Policy on the life of
the Insured will be issued to you, which will set forth your rights and our
obligations. The Minimum Premium is due and payable as of the Issue Date. The
Effective Date of Coverage for the Policy, which initially is the Investment
Start Date, will be the later of the Issue Date, the date we approve the
application for the Policy, or the date you pay a Premium equal to or in excess
of the Minimum Premium. If an application is not approved, any Premium payment
will be returned promptly.
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FREE LOOK PERIOD
Your Policy has a "Right to Return" provision, which gives you certain
cancellation rights. If you are not satisfied with your Policy, you may return
it by delivering or mailing it to our Principal Office or to the sales
representative through whom you purchased the Policy within 20 days from the
date of receipt (unless a different period is applicable under state law) or
within 45 days after your application is signed, whichever period ends later
(the "Free Look Period").
A Policy returned under this provision will be deemed void as though it had
never been applied for. You will receive a refund equal to the sum of (1) the
difference between any Premium payments made, including fees and charges, and
the amounts allocated to the Variable Account, (2) the value of the amounts
allocated to the Variable Account on the date the cancellation request is
received by the Company or the sales representative through whom you purchased
the Policy, and (3) any fees or charges imposed on amounts allocated to the
Variable Account. However, if your Policy provides for a full refund under its
"Right to Return" provision, you will receive a refund of all Premium payments
made, with no adjustment for investment experience.
If your Policy provides for such a full refund during the Free Look Period,
beginning on the Investment Start Date all Net Premium will be allocated to the
VIP Money Market Sub-Account until the expiration of the Free Look Period, at
which time your Account Value and future Net Premium will be allocated in
accordance with your instructions. (See "PREMIUM PAYMENTS -- Allocation of Net
Premium.")
PREMIUM PAYMENT
The Policy is designed to offer you a wide range of Premium flexibility. In
general, subject to the limits described below, you may choose the frequency and
amount of Premium payments (your Premium pattern). The charges and deductions
and Policy rights with respect to transfers, loans and partial surrenders remain
the same regardless of the Premium pattern you choose. Your Premium pattern may
affect whether the Policy is treated as a Modified Endowment Contract, which can
cause Policy distributions and loans to be subject to tax. (See "FEDERAL TAX
STATUS -- Taxation of Policy Proceeds.")
All Premium payments are payable to us, and should be mailed to our
Principal Office.
PLANNED PERIODIC PREMIUMS
While you are not required to make Premium payments according to a fixed
schedule, you may select a planned periodic Premium schedule and corresponding
billing period, subject to our Premium limits. In general, the billing period
must be annual or semiannual. We will send reminder notices for the planned
periodic Premium at the beginning of each billing period unless reminder notices
have been suspended as described below. However, you are not required to pay the
planned periodic Premium; you may increase or decrease Premium payments, subject
to our limits, and you may skip a planned payment or make unscheduled payments.
You may change your planned payment schedule or the billing period, subject to
our approval. Depending on the investment performance of the Sub-Accounts you
select, the planned periodic Premium may not be sufficient to keep your Policy
in force, and you may need to change your planned payment schedule or make
additional payments in order to prevent termination of your Policy. We will
suspend reminder notices at your written request, and we reserve the right to
suspend reminder notices if Premiums are not being paid (except for notices in
connection with the grace period (see "ACCOUNT VALUE -- Grace Period")). We will
notify you prior to suspending reminder notices.
GENERAL PREMIUM LIMIT
We reserve the right to limit the number of Premium payments we accept on an
annual basis. No Premium payment may be less than $100 without our consent,
although we will accept a smaller Premium payment if it is necessary to keep
your Policy in force. We reserve the right not to accept a Premium payment that
causes the Base Death Benefit to increase by an amount that exceeds the Premium
received. Evidence of insurability satisfactory to us may be required before we
accept such a Premium. Moreover, you should consult with a qualified adviser
concerning whether such a Premium causes the Death Benefit to exceed your
insurable interest in the Insured. (See "THE POLICY -- Application and Issuance
of a Policy.")
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TAX LIMITS ON PREMIUM PAYMENTS
If the death benefit compliance test you have specified is the Guideline
Premium Test (see "DEATH BENEFIT -- Death Benefit Compliance Test"), we will not
accept Premium payments that would, in our opinion, cause the Policy to fail to
qualify as life insurance under that test. The maximum Premium limit for each
year is the largest Premium that can be paid such that the sum of all Premiums
paid will not exceed the limitations referred to in Section 7702 of the Internal
Revenue Code, or any successor provision. Maximum Premium limits for each year
(based on reasonable industry interpretations) will be shown in your annual
report. If a Premium payment is made in excess of these limits, we will accept
only that portion of the Premium within those limits, and will refund the
remainder to you. No such maximum Premium limitations apply under the Cash Value
Accumulation Test.
ALLOCATION OF NET PREMIUM
The Net Premium is the amount you pay as the Premium less the Expense
Charges Applied to Premium. In general, Net Premium will be allocated to the
Sub-Accounts in accordance with the allocation percentages specified by you,
subject to special provisions applicable during the Free Look Period. (See "THE
POLICY -- Free Look Period.") Your initial allocation of Net Premium will be
specified in the application. There are no limitations concerning the number of
Sub-Accounts to which Net Premium may be allocated, although the minimum
allocation for any Sub-Account to which you choose to allocate Account Value is
5% of Net Premium, and percentages must be in whole numbers.
You may change the allocation of future Net Premium at any time pursuant to
written or telephone request to the Service Center. Telephone requests will be
honored only if we have a properly completed telephone authorization form for
you on file. We and our agents and affiliates will not be responsible for losses
resulting from acting upon telephone requests reasonably believed to be genuine.
We will use reasonable procedures to confirm that instructions communicated by
telephone are genuine. The procedures we follow for transactions initiated by
telephone include requirements that you identify yourself by name and identify a
personal identification number. For additional protection, all changes in
allocation percentages by telephone may be recorded. An allocation change will
be effective as of the date the Service Center receives the request for that
change. The Policy also permits certain transfers of Account Value among
Sub-Accounts. (See "ACCOUNT VALUE -- Transfer Privileges.")
MODIFIED ENDOWMENT CONTRACTS
Federal income tax law provides special rules for the income taxation of
proceeds from life insurance policies that are defined as "Modified Endowment
Contracts." If your Policy is a Modified Endowment Contract, some or all of the
Policy loans, surrenders, partial surrenders and other distributions under the
Policy will likely be taxable and subject to an additional 10% tax. Whether your
Policy is a Modified Endowment Contract depends primarily upon whether you have
paid Premiums in excess of a prescribed "7-pay" limit or undertaken other
actions with respect to the Policy. For further discussion of this determination
and the rules that will apply, see "FEDERAL TAX STATUS -- Taxation of Policy
Proceeds."
At the time a Premium is received that would, in our opinion, cause the
Policy to become a Modified Endowment Contract based on reasonable industry
interpretations, the Company will so notify the Owner and will not credit the
Premium unless it has received specific instructions from the Owner to do so. If
such instructions are not received within 24 hours of the date we send
notification to the Owner, the Premium will be immediately returned.
DEATH BENEFIT
DEATH BENEFIT COMPLIANCE TEST
The Policy must satisfy either of two death benefit compliance tests in
order to qualify as life insurance under Section 7702 of the Internal Revenue
Code: the Cash Value Accumulation Test or the Guideline Premium Test. Each test
effectively requires that the Policy's Death Benefit must always be equal to or
greater than the Account Value multiplied by a certain percentage (the "Death
Benefit Percentage"). Thus, the Policy has been structured so that your Base
Death Benefit may increase above your Specified Face Amount in order to comply
with the applicable test. The Death Benefit Percentage for the Guideline Premium
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<PAGE>
Test varies only by age. The Death Benefit Percentage for the Cash Value
Accumulation Test varies by age and sex. As a general matter, the Death Benefit
Percentages for the Guideline Premium Test are lower than those for the Cash
Value Accumulation Test. The Guideline Premium Test also imposes maximum Premium
limits whereas the Cash Value Accumulation Test does not.
You must select and specify one of the two death benefit compliance tests in
your application. Once your policy is issued, you may not change this selection.
In general, where maximum accumulation of Account Value during the initial
Policy Years is a primary objective, the Cash Value Accumulation Test is more
appropriate. Where your primary objective is the most economically efficient
method of obtaining a specified amount of coverage, the Guideline Premium Test
is generally more appropriate. Since your selection of the death benefit
compliance test depends on complex factors and may not be changed, you should
consult with a qualified tax adviser before making this election.
DEATH BENEFIT OPTIONS
The Policy provides the following two death benefit options for determining
the Base Death Benefit. You must select and specify one of the two death benefit
options in your application. You may change your death benefit option in the
manner described below.
Option A -- Specified Face Amount. The Base Death Benefit is the greater of
the Specified Face Amount, or the Account Value multiplied by the applicable
Death Benefit Percentage.
Option B -- Specified Face Amount Plus Account Value. The Base Death Benefit
is the greater of the Specified Face Amount plus the Account Value, or the
Account Value multiplied by the applicable Death Benefit Percentage. Option B is
not available if the death benefit compliance test is the Cash Value
Accumulation Test.
At any time the Base Death Benefit is defined as the Account Value
multiplied by the applicable Death Benefit Percentage, and the Base Death
Benefit less the Account Value exceeds the Total Face Amount, we reserve the
right to distribute Account Value to you as a partial surrender to the extent
necessary so that the Base Death Benefit less the Account Value equals the Total
Face Amount. You will not have the option of providing evidence of insurability
to maintain your level of death benefit.
BENEFITS AT DEATH
The Policy Proceeds will be paid as they become due upon the death of the
Insured prior to Maturity. We will make payment when we receive Due Proof of
that death. The Policy Proceeds equal the amount of the Base Death Benefit
decreased by the amount of any outstanding Policy Debt, and increased by the
amounts payable under any APB Rider Death Benefit and any other supplemental
benefits. The Death Benefit used to determine Policy Proceeds is based on the
Specified Face Amount, Total Face Amount and Account Value in effect, on the
date of death.
CHANGES IN THE DEATH BENEFIT OPTION
If the death benefit compliance test you have chosen is the Guideline
Premium Test, you may change the death benefit option either from Option A to
Option B, or from Option B to Option A. If the death benefit compliance test you
have chosen is the Cash Value Accumulation Test, only Option A is available, and
you may not change to Option B. Changes in the death benefit option are subject
to our underwriting rules in effect at the time of change. Requests for a change
must be made in writing to our Service Center. The effective date of the change
will be the Policy Anniversary on or next following the date of receipt of your
request.
If the death benefit option change is from Option B to Option A, the
Specified Face Amount will be increased by the Account Value. If the death
benefit option change is from Option A to Option B, the Specified Face Amount
will be reduced by the Account Value. In either case, the amount of the Base
Death Benefit at the time of change will not be altered, but the change in death
benefit option will affect the determination of the Base Death Benefit from that
point on. Under the Guideline Premium Test, a change in death benefit option
could cause total Premiums theretofore paid to exceed the maximum premium
limitation determined under the test. The change also could reduce the maximum
premium limitation for future Premium payments. If the change results in total
Premiums paid exceeding the maximum premium
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<PAGE>
limitation, the Company will require you to undertake a partial surrender of the
Policy (see "DEATH BENEFIT -- Partial Surrender" and "FEDERAL TAX STATUS --
Taxation of Policy Proceeds"). You should consult a qualified tax adviser prior
to changing the death benefit option.
APB RIDER
The Policy can be issued with an APB Rider, which provides life insurance
coverage, annually renewable to Attained Age 100, on the life of the Insured.
The amount of coverage under the APB Rider, the APB Rider Death Benefit, is
initially the APB Rider Face Amount that you have the flexibility to specify in
your Policy. Subsequently, the amount of the APB Rider Death Benefit is adjusted
automatically by the Company; if the Base Death Benefit under the Policy exceeds
the Specified Face Amount (or for death benefit Option B, the Specified Face
Amount plus Account Value) as a result of an increase in Account Value (see
"DEATH BENEFIT -- Death Benefit Compliance Test"), the APB Rider Death Benefit
will be reduced by an equivalent amount, under the formula set forth below.
The APB Rider Death Benefit is the greater of zero or the result of (a) less
(b) where:
(a) is the APB Rider Face Amount, and
(b) is the excess, if any, of the Base Death Benefit over
- the Specified Face Amount for death benefit Option A policies, or
- the Specified Face Amount plus the Account Value for death benefit
Option B policies.
The cost of the APB Rider is included in the Monthly Cost of Insurance
deduction. (See "CHARGES, DEDUCTIONS AND REFUNDS -- Monthly Cost of Insurance.")
Two otherwise identical policies with the same Total Face Amount will have
different Target Premiums depending on the mixture of Specified Face Amount and
APB Rider Face Amount. The policy with more APB Rider will have lower Target
Premium (see "DEFINITIONS -- Target Premium") and consequently, lower sales load
deductions (see "CHARGES, DEDUCTIONS AND REFUNDS"); however, conversion rights
do not apply to the APB Rider (see "GENERAL PROVISIONS -- Conversion") and
guaranteed maximum cost of insurance rates associated with the APB Rider Death
Benefit exceed those associated with the Base Death Benefit (see"CHARGES,
DEDUCTIONS AND REFUNDS -- Monthly Cost of Insurance").
An APB Rider will terminate on the earliest of the following dates: (1)
receipt of your written request for termination, (2) lapse of the Policy because
of insufficient value, or (3) termination of the Policy.
MINIMUM FACE AMOUNT
The sum of the Specified Face Amount and the APB Rider Face Amount, the
Total Face Amount, generally must be at least equal to a minimum of $50,000, of
which the Specified Face Amount must be at least equal to a minimum of $5,000.
The Company reserves the right to waive these minimums and also reserves the
right to offer the Policy only in conjunction with an APB Rider with a certain
APB Rider Face Amount.
CHANGES IN FACE AMOUNT
After the end of the first Policy Year, you may change the Specified Face
Amount and, if it is part of the Policy, the APB Rider Face Amount. Unless you
specify otherwise, a change in the Policy's Total Face Amount will first be
applied, to the extent possible, to the APB Rider Face Amount. You must send
your request for a change to our Service Center, in writing. The Effective Date
of Coverage for changes is:
- for any increase in coverage, the Monthly Anniversary Day that falls on or
next follows the date we approve the supplemental application for such
increase, and
- for any decrease in coverage, the Monthly Anniversary Day that falls on or
next follows the date we receive your request.
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<PAGE>
DECREASES IN FACE AMOUNT
The Specified Face Amount may not decrease to less than the minimum
Specified Face Amount. A decrease in Specified Face Amount or APB Rider Face
Amount may not decrease the Policy's Total Face Amount to an amount less than
the minimum Total Face Amount. A decrease in face amount will be applied to the
initial face amount and to each increase in face amount in the following order:
- first, to the most recent increase;
- second, to the next most recent increases in reverse chronological order;
and
- finally, to the initial face amount.
If you have chosen the Guideline Premium Test, a decrease in the Specified
Face Amount or APB Rider Face Amount could cause total Premiums theretofore paid
to exceed the maximum premium limitation determined under the test. The decrease
also will reduce the maximum premium limitation for future Premium payments. If
the decrease results in total Premiums paid exceeding the maximum premium
limitation, the Company will require you to undertake a partial surrender of the
Policy (see"DEATH BENEFIT -- Partial Surrender" and "FEDERAL TAX STATUS --
Taxation of Policy Proceeds"). You should consult a qualified tax adviser prior
to decreasing the Specified Face Amount or APB Rider Face Amount.
INCREASES IN FACE AMOUNT
An increase in the face amount is subject to our underwriting rules in
effect at the time of the increase. You may be required to submit evidence of
the Insured's insurability satisfactory to us. Moreover, you should consult with
a qualified adviser concerning whether your insurable interest in the Insured
will support such an increase. (See "THE POLICY -- Application and Issuance of a
Policy.")
ACCOUNT VALUE
The Account Value is the sum of the amounts in each Sub-Account of the
Variable Account with respect to your Policy, plus the amount of the Loan
Account. The Account Value varies depending upon the Premiums paid, Expense
Charges Applied to Premium, Mortality and Expense Risk Percentage deductions,
Monthly Expense Charges, Monthly Cost of Insurance charges, Policy loans and
loan repayments, Partial Surrenders, fees, and the Net Investment Factor
(determined as provided below) for the Sub-Accounts to which your Account Value
is allocated.
We measure the amounts in the Sub-Accounts in terms of Units and Unit
Values. On any given day, the amount you have in a Sub-Account is equal to the
Unit Value multiplied by the number of Units credited to you in that
Sub-Account. The Units for each Sub-Account will have different Unit Values.
Amounts allocated to a Sub-Account will be used to purchase Units of the
Sub-Account. Units are redeemed when you make partial surrenders, undertake
Policy loans or transfer amounts from a Sub-Account, and for payment of the
Mortality and Expense Risk Charge, the Monthly Expense Charge, and the Monthly
Cost of Insurance Charge. The number of Units of each Sub-Account purchased or
redeemed is determined by dividing the dollar amount of the transaction by the
Unit Value for the Sub-Account. The Unit Value for each Sub-Account was
initially established at $10.00. The Unit Value for any subsequent Valuation
Date is equal to the Unit Value for the preceding Valuation Date multiplied by
the Net Investment Factor. The Unit Value of a Sub-Account for any Valuation
Date is determined as of the close of the Valuation Period ending on that
Valuation Date.
Transactions are processed on the date we receive a Premium at Our Principal
Office or any acceptable written or telephonic request is received at the
Service Center. If your Premium or request is received on a date that is not a
Valuation Date, or after the close of the New York Stock Exchange on a Valuation
Date, the transaction will be processed on the next subsequent Valuation Date.
ACCOUNT VALUE IN THE SUB-ACCOUNTS
The Account Value attributable to each Sub-Account of the Variable Account
on the Investment Start Date equals:
- that portion of Net Premium received and allocated to the Sub-Account,
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<PAGE>
less
- the Monthly Expense Charges due on the Issue Date and subsequent Monthly
Anniversary Days through the Investment Start Date, and
- the Monthly Cost of Insurance deductions due from the Issue Date through
the Investment Start Date.
The Account Value attributable to each Sub-Account of the Variable Account
on subsequent Valuation Dates is equal to:
- the Account Value attributable to the Sub-Account on the preceding
Valuation Date multiplied by that Sub-Account's Net Investment Factor,
less the Daily Risk Percentage multiplied by the number of days in the
Valuation Period multiplied by the Account Value in the Sub-Account,
plus
- that portion of Net Premium received and allocated to the Sub-Account
during the current Valuation Period,
- any amounts transferred by you to the Sub-Account from another Sub-Account
during the current Valuation Period,
- that portion of any loan repayment allocated to the Sub-Account during the
current Valuation Period, and
- that portion of any interest credited on the Loan Account which is
allocated to the Sub-Account during the current Valuation Period,
less
- any amounts transferred by you from the Sub-Account to another Sub-Account
during the current Valuation Period,
- that portion of any partial surrenders deducted from the Sub-Account
during the current Valuation Period,
- that portion of any Policy loan transferred from the Sub-Account to the
Loan Account during the current Valuation Period,
- if a Monthly Anniversary Day occurs during the current Valuation Period,
that portion of the Monthly Expense Charge for the Policy month just
beginning charged to the Sub-Account,
- if a Monthly Anniversary Day occurs during the current Valuation Period,
that portion of the Monthly Cost of Insurance for the Policy month just
ending charged to the Sub-Account, and
- if you surrender during the current Valuation Period, that portion of the
pro-rata Monthly Cost of Insurance for the Policy month charged to the
Sub-Account.
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less than or equal to one; therefore your
Account Value allocated to the Sub-Account may increase, decrease or remain the
same.
The Net Investment Factor for each Sub-Account for any Valuation Period is
determined by dividing (a) by (b) where
(a) is the net result of:
(1) the net asset value of a Fund share held in the Sub-Account
determined as of the end of the Valuation Period, plus
(2) the per share amount of any dividend or other distribution declared
on Fund shares held in the Sub-Account if the"ex-dividend" date
occurs during the Valuation Period, plus or minus
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<PAGE>
(3) a per share credit or charge with respect to any taxes paid, or
reserved for by the Company during the Valuation Period which are
determined by the Company to be attributable to the operation of the
Sub-Account (no federal income taxes are applicable under present
law); and
(b) is the net asset value of a Fund share held in the Sub-Account
determined as of the end of the preceding Valuation Period.
ACCOUNT VALUE IN THE LOAN ACCOUNT
The Account Value in the Loan Account is zero on the Investment Start Date.
The Account Value in the Loan Account on any day after the Investment Start
Date equals:
- the Account Value in the Loan Account on the preceding day credited with
interest at the rate specified in the Policy as the "interest credited on
Loan Account rate" of 4%,
plus
- any amount transferred from Sub-Accounts to the Loan Account for Policy
loans requested on that day,
less
- any loan repayments made on that day, and
- if that day is a Policy Anniversary, any amount transferred to the
Sub-Accounts by which the Loan Account Value exceeds the outstanding
Policy loan.
TRANSFER PRIVILEGES
Subject to our rules as they may exist from time to time and to any limits
that may be imposed by the Funds, including those set forth in the Policy, you
may at any time transfer to another Sub-Account all or a portion of the Account
Value allocated to a Sub-Account. We will make transfers pursuant to an
authorized written or telephone request to the Service Center. Telephone
requests will be honored only if we have a properly completed telephone
authorization form for you on file. We and our agents and affiliates will not be
responsible for losses resulting from acting upon telephone requests reasonably
believed to be genuine. We will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. The procedures we follow for
transactions initiated by telephone include requirements that you identify
yourself by name and identify a personal identification number. Transfers may be
requested by indicating the transfer of either a specified dollar amount or a
specified percentage of the Sub-Account's value from which the transfer will be
made. If you request a transfer based on a specified percentage of the
Sub-Account's value, that percentage will be converted into a request for the
transfer of a specified dollar amount based on application of the specified
percentage to the Sub-Account's value at the time the request is received.
These transfer privileges are subject to our consent. We reserve the right
to impose limitations on transfers, including, but not limited to: (1) the
minimum amount that may be transferred; and (2) the minimum amount that may
remain in a Sub-Account following a transfer from that Sub-Account. In addition,
transfer privileges are subject to any restrictions that may be imposed by the
Funds.
SURRENDER
You may surrender the Policy for the Cash Surrender Value at any time. The
Cash Surrender Value is the Account Value, decreased by the balance of any
outstanding Policy Debt, increased by the Sales Load Refund at Surrender, if
any.
PARTIAL SURRENDER
You may make a Partial Surrender of the Policy once each Policy Year after
the first Policy Year by written request to the Service Center. The maximum
amount of any Partial Surrender is the Account Value decreased by the balance of
any outstanding Policy Debt. Unless you provide evidence satisfactory to us that
the Insured is still an acceptable risk based on our underwriting limits and
standards, the Total Face Amount will be reduced to the extent necessary so
that:
- the Death Benefit less the Account Value immediately after the Partial
Surrender,
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<PAGE>
does not exceed
- the Death Benefit less the Account Value immediately before the Partial
Surrender.
If you provide such evidence, you will have the option of keeping the Death
Benefit equal to what it was immediately prior to the Partial Surrender. The
Specified Face Amount remaining in force after the Partial Surrender must be no
lower than the minimum Specified Face Amount. A Partial Surrender may not
decrease the Policy's Total Face Amount to an amount less than the minimum Total
Face Amount.
ALLOCATION OF PARTIAL SURRENDER
You may allocate the Partial Surrender among the Sub-Accounts of the
Variable Account. If you do not specify the allocation, then the Partial
Surrender will be allocated among the Sub-Accounts in the same proportion that
the Account Value of each Sub-Account bears to the aggregate Account Value of
all Sub-Accounts on the date of Partial Surrender.
INSUFFICIENT VALUE
If, on a Valuation Date, the Account Value less the outstanding Policy Debt
is less than or equal to zero, then the Policy will terminate for no value,
subject to the grace period.
GRACE PERIOD
If, on a Valuation Date, your Policy will terminate by reason of
insufficient value, we will allow a grace period. This grace period will allow
61 calendar days from that Valuation Date for the payment of a Net Premium that
is sufficient to cover the deductions from the Account Value. These deductions
include the Monthly Cost of Insurance, the Monthly Expense Charge and the Daily
Risk Percentage charge. Notice of Premium due will be mailed to your last known
address or the last known address of any assignee of record. We will assume that
your last known address is the address shown on the application (or notice of
assignment), unless we receive written notice of a change in address in a form
satisfactory to us. If the Premium due is not paid within 61 days after the
beginning of the grace period, then the Policy and all rights to benefits will
terminate without value at the end of the 61 day period. The Policy will
continue to remain in force during this grace period. If the Policy Proceeds
become payable during the grace period, then any overdue Monthly Cost of
Insurance and Monthly Expense Charge will be deducted from the amount payable by
us.
CHARGES, DEDUCTIONS AND REFUNDS
EXPENSE CHARGES DEDUCTED AS A PERCENT OF PREMIUM
The Expense Charges Applied to Premium will be the sum of the charges for
premium tax, the federal deferred acquisition cost ("DAC") tax, and the
applicable sales load rates. The Expense Charges Applied to Premium are
multiplied by each Premium you pay and the result will be deducted from the
Premium payment.
All states and a few cities and municipalities impose taxes on premiums paid
for life insurance. These charges vary from 2% to 4% of premium in most states,
depending on the state of residence of the Owner (Kentucky currently charges a
tax of 7% of premium). The premium tax percentage rate charged against the
Premium on your Policy will be determined from time to time and will equal the
rate we expect to pay for premium taxes in your state of residence. In no event
will the premium tax rate exceed 4%, except that for Kentucky Policy Owners, in
no event will the premium tax rate exceed 9%. In the event your state of
residence changes, the premium tax rate will be adjusted to reflect the rate for
the new state of residence.
We also make a deduction of 1.25% of Premium, which is the rate
approximately equal to our expenses in paying federal DAC taxes associated with
the Policies. The charge for DAC tax expenses is guaranteed not to exceed this
rate.
A sales load rate of 8.75% is deducted from Premium paid up to Target
Premium for each of the first seven Policy Years. A sales load rate of 2.25% is
deducted from Premium paid in excess of Target Premium for each of the first
seven Policy Years. The amount of Target Premium is specified in your Policy.
All Premium paid in a Policy Year is aggregated to determine which portion of a
Premium exceeds Target Premium. There
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<PAGE>
is no sales load imposed after the seventh Policy Year. The sales load rates are
guaranteed not to exceed these amounts. The sales load is designed primarily to
compensate us for a portion of the expenses incurred in distributing the Policy,
including agent compensation, the cost of prospectuses, and advertising. We may
reduce or waive the sales load for certain group or sponsored arrangements or
corporate purchasers. (See "CHARGES, DEDUCTIONS, AND REFUNDS -- Reduction of
Charges.")
SALES LOAD REFUND AT SURRENDER
If you surrender your Policy during the first three Policy Years, a portion
of the sales load charged against the Premium payments made in the Policy Year
of surrender will be refunded. We will refund 6% of Premium paid up to Target
Premium, and the entire sales load charged against Premium paid in excess of
Target Premium. The refund only applies to Premiums paid in the Policy Year of
surrender (rather than applying to Premiums paid since issue). This refund is
not available for partial surrenders or Policy loans. There is no refund for
surrenders occurring after the third Policy Year.
EXPENSE CHARGES DEDUCTED AS A PERCENT OF ASSETS
We deduct a daily charge from the assets of the Variable Account for
mortality and expense risks we assume in connection with the Policy. The amount
of the daily charge is the Daily Risk Percentage multiplied by the net asset
value of the Variable Account. The Daily Risk Percentage will be determined by
us from time to time based on our expectations of future interest, mortality
experience, persistency, expenses and taxes. During the first ten Policy Years,
the Daily Risk Percentage is currently .0020471%, which is equivalent to an
annual rate of 0.75%; beginning in the eleventh Policy Year, the Daily Rate
Percentage decreases to .0009572%, which is equivalent to an annual rate of
0.35%. In no event will the Daily Risk Percentage exceed .0024548%, which is
equivalent to an annual rate of .90%.
The Company does not take any federal, state or local taxes into account
when determining the Net Investment Factor (see "FEDERAL TAX STATUS -- Tax
Treatment of the Company and the Variable Account"). We reserve the right to
impose charges for such taxes.
EXPENSES OF THE UNDERLYING FUNDS
Because the Variable Account purchases shares of the Funds, your Account
Value will reflect investment management fees and other expenses incurred by the
Funds. The following table illustrates these fees and expenses paid by each of
the Portfolios of Funds as a percentage of average net assets based on
information for the year ended December 31, 1995. These fees and expenses are
more fully described in the accompanying prospectuses.
<TABLE>
<CAPTION>
RATIO OF TOTAL FUND EXPENSES TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------
<S> <C>
MFS/Sun Life Capital Appreciation Series 0.83%
MFS/Sun Life Emerging Growth Series 1.00%
MFS/Sun Life Government Securities Series 0.63%
MFS/Sun Life Total Return Series 0.76%
MFS/Sun Life World Growth Series 1.07%
Fidelity VIP II Contrafund Portfolio 0.73%
Fidelity VIP Equity-Income Portfolio 0.61%
Fidelity VIP Growth Portfolio 0.70%
Fidelity VIP High Income Portfolio 0.71%
Fidelity VIP II Index 500 Portfolio 0.28%
Fidelity VIP Money Market Portfolio* 0.33%
Neuberger & Berman AMT Limited Maturity Bond Portfolio 0.71%
Neuberger & Berman AMT Partners Porfolio 1.09%
JPM Bond Portfolio** 0.75%
JPM Equity Portfolio** 0.90%
JPM Small Company Portfolio** 1.15%
Templeton Stock Fund 0.66%
</TABLE>
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- ---------
*FMR voluntarily agreed to reimburse a portion of the Portfolio's expenses
during the period. Without this reimbursement, the expense ratio would have
been higher.
**JPM and Chubb Life voluntarily agreed to reimburse a portion of the
Portfolio's expenses during the period. Without this reimbursement, the
expense ratios would have been higher.
EXPENSE CHARGES DEDUCTED ON A PER POLICY BASIS
We deduct a Monthly Expense Charge of $13.75 at the beginning of each month
during the first Policy Year and $7.50 for months thereafter. The Monthly
Expense Charge will be determined from time to time based on our expectations of
future expenses. However, the Monthly Expense Charge will not be greater than
$13.75 in any Policy month. This charge is designed to reimburse us for actual
administrative costs we incur, and we do not expect to make a profit from this
charge. The Monthly Expense Charge deduction will be allocated among
Sub-Accounts in the same proportion that the Account Value of each Sub-Account
bears to the aggregate Account Value of all Sub-Accounts immediately prior to
the deduction.
MONTHLY COST OF INSURANCE
We deduct a Monthly Cost of Insurance charge from your Account Value to
cover anticipated costs of providing insurance coverage. This charge is made, in
arrears, at the end of each Policy Month. If you surrender your Policy on any
day other than a Monthly Anniversary Day, a pro-rata charge will be made. The
Monthly Cost of Insurance deduction will be allocated among Sub-Accounts in the
same proportion that the Account Value of each Sub-Account bears to the
aggregate Account Value of all Sub-Accounts immediately prior to the deduction.
The Monthly Cost of Insurance deduction is the sum of
- the monthly cost of insurance rate (described below )multiplied by the Net
Amount at Risk (as defined below) divided by 1000; the "Net Amount at
Risk" equals the Base Death Benefit at the end of the Policy Month before
the deduction of the Monthly Cost of Insurance less the Account Value at
the end of the Policy Month before the deduction of the Monthly Cost of
Insurance;
- the monthly cost of insurance rate for the APB Rider Death Benefit, if
any, times the APB Rider Death Benefit divided by 1000;
- the monthly rider cost for any other riders that are a part of the Policy;
- the flat extra, if any, specified in the Policy, times the Total Face
Amount divided by 1000.
The Account Value deduction occurs first to the initial Total Face Amount and
second to successive increases.
The monthly cost of insurance rates are based on the length of time the
Policy has been in force and the Insured's sex (in the case of Non-Unisex
Policies), Issue Age, Class and table rating, if any. The monthly cost of
insurance rates for the Base Death Benefit and the APB Rider Death Benefit are
currently the same but may differ in the future. The monthly cost of insurance
rates will be determined by us from time to time based on our expectations of
future experience with respect to mortality, persistency, interest rates,
expenses and taxes. However, the maximum monthly cost of insurance rates for the
Base Death Benefit for Insureds that are not rated substandard risks will not
exceed the monthly rates based on the 1980 CSO Mortality Tables A (for male and
unisex) and G (for females). Generally, the maximum monthly cost of insurance
rates for the APB Rider Death Benefit for Insureds that are not rated
substandard risks will not exceed 125% of the monthly rates based on the 1980
CSO Mortality Tables A (for male and unisex) and G (for females). Monthly cost
of insurance rates for Classes with substandard risk ratings are based on
multiples of these tables. Flat extras apply only with respect to certain types
of substandard risk Classes, and, if applicable, will be specified in your
Policy.
REDUCTION OF CHARGES
We reserve the right to reduce any of the charges and deductions described
in this section in connection with the sale of any Policy when it is expected
that the nature of the sale will result in savings of costs underlying the
charge or deduction. We will determine the propriety and amount of the reduction
in our
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discretion. We may modify the qualification requirements that enable a sale to
receive such a reduction as experience is gained. Any such reduction will not be
unfairly discriminatory against the interests of any Policy Owner.
POLICY LOANS
You may request a Policy loan of up to 90% of your Account Value, decreased
by the balance of any outstanding Policy Debt on the date the Policy loan is
made. Account Value equal to the amount of the Policy loan will be transferred
from the Sub-Accounts to the Loan Account on the date the Policy loan is made.
You may allocate the Policy loan among the Sub-Accounts. If you do not specify
the allocation, then the Policy loan will be allocated among the Sub-Accounts in
the same proportion that the Account Value of each Sub-Account bears to the
aggregate Account Value of all Sub-Accounts immediately prior to the loan.
Interest on the Policy loan will accrue daily at the Policy loan interest
rate of 5% in Policy Years one through ten and 4.25% thereafter. This interest
shall be due and payable to us in arrears on each Policy Anniversary. Any unpaid
interest will be added to the principal amount as an additional Policy loan and
will bear interest at the same rate and in the same manner as the prior Policy
loan.
All funds we receive from you will be credited to your Policy as Premium
unless we have received written notice, in form satisfactory to us, that the
funds are for loan repayment. In the event you have a loan against the Policy,
it is generally advantageous to repay the loan rather than make a Premium
payment because Premium payments incur expense charges whereas loan repayments
do not. Loan repayments will first reduce the outstanding balance of the Policy
loan and then accrued but unpaid interest on such loans. We will accept
repayment of any Policy loan at any time before Maturity. The amount of the loan
repayment up to the outstanding balance of the Policy loan will be transferred
from the Loan Account to the Sub-Accounts. You may allocate the loan repayment
among the Sub-Accounts. If you do not specify the allocation, then the loan
repayment will be allocated among the Sub-Accounts in the same proportion that
the Account Value of each Sub-Account bears to the total Account Value less the
Loan Account immediately prior to the loan repayment.
GENERAL PROVISIONS
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Shares of any or all of the Portfolios may not always be available for
purchase by the Sub-Accounts of the Variable Account, or we may decide that
further investment in any such shares is no longer appropriate. In either event,
shares of other registered open end investment companies or unit investment
trusts may be substituted both for Portfolio shares already purchased by the
Variable Account and/or as the security to be purchased in the future, provided
that these substitutions have been approved, if required, by the Securities and
Exchange Commission. In addition, the investment policy of the Variable Account
will not be changed without the approval of the Insurance Commissioner of the
State of Delaware. We also reserve the right to eliminate or combine existing
Sub-Accounts or to transfer assets between Sub-Accounts. In the event of any
substitution or other act pursuant to this provision, we may make appropriate
amendment to the Policy to reflect the substitution.
ALTERATION
Our sales representatives do not have the authority to either alter or
modify the Policy or to waive any of its provisions. The only persons with this
authority are our president, actuary, secretary, or one of our vice presidents.
ASSIGNMENTS
During the lifetime of the Insured, you may assign all or some of your
rights under the Policy. All assignments must be filed at our Service Center and
must be in written form satisfactory to us. The assignment will then be
effective as of the date you signed the form, subject to any action taken before
it was received by us at our Service Center. We are not responsible for the
validity or legal effect of any assignment.
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CHANGE IN THE OPERATION OF THE VARIABLE ACCOUNT
At our election, and subject to any necessary vote by those having voting
rights, the Variable Account may be operated as a unit investment trust or a
management company under the Investment Company Act of 1940. It is currently
registered as an investment company under the Investment Company Act of 1940 and
may be deregistered in the event registration is no longer required. In the
event of any change in the operation of the Variable Account pursuant to this
provision, we may make appropriate amendment to the Policy to reflect the change
and take such other action as may be necessary and appropriate to effect the
change.
CONVERSION
You may convert the Policy into a flexible premium universal life policy
offered by Sun Life Assurance Company of Canada during the first 24 months after
the Issue Date while the Policy is in force. Choice of a new policy is subject
to our approval and will be restricted to those policies that offer the same
Class and rating as your Policy. The new policy will be issued with the same
Class and rating as the Policy without evidence of the insured's insurability.
The conversion provision does not apply to the APB Rider, if any, or to any
supplemental benefits that may be attached to the Policy. Riders or supplemental
benefits will terminate automatically when the Policy is converted.
DEFERRAL OF PAYMENT
We will usually pay any amount due from the Variable Account within seven
days after the Valuation Date following our receipt of written notice or, in the
case of death of the Insured, Due Proof of such death. Payment of any amount
payable from the Variable Account on death, surrender, partial surrender, or
Policy loan may be postponed whenever:
- the New York Stock Exchange ("NYSE") is closed, other than customary
weekend and holiday closing, or trading on the NYSE is otherwise
restricted,
- the Securities and Exchange Commission, by order, permits postponement for
the protection of Policy Owners, or
- an emergency exists as determined by the Securities and Exchange
Commission, as a result of which disposal of securities is not reasonably
practicable, or it is not reasonably practicable to determine the value of
the assets of the Variable Account.
ENTIRE CONTRACT
The entire contract with us consists of the Policy, including the
Application and any attached copies of supplemental applications for increases
in the face amount. Any illustrations prepared in connection with the Policy do
NOT form a part of our contract with you and are intended solely to provide
information about possible future performance, based solely on data available at
the time such illustrations are prepared.
ILLUSTRATIONS
Upon request, we will provide you with an illustration of future Account
Value and Death Benefits. This illustration will be furnished to you for a
nominal fee not to exceed $25.
INCONTESTABILITY
All statements made in the Application or in a supplemental application are
representations and not warranties. We will rely on these statements when
approving the issuance, increase in face amount, increase in Base Death Benefit
over Premium paid, or change in death benefit option of the Policy. No statement
can be used by us in defense of a claim unless the statement was made in the
application or in a supplemental application. In the absence of fraud, after the
Policy has been in force during the lifetime of the Insured for a period of two
years from its Issue Date, we cannot contest it except for non-payment of
Premiums in accordance with the Insufficient Value provision. However, any
increase in the Total Face Amount which is effective after the Issue Date will
be incontestable only after such increase has been in force during the lifetime
of the Insured for two years from the effective date of coverage of such
increase. Any increase in Base Death Benefit over Premium paid or increase in
Base Death Benefit due to a death benefit option change will be incontestable
only after such increase has been in force during the lifetime of the Insured
for two years from the date of the increase.
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MATURITY
If the Insured is living and the Policy is in force on the date of Maturity,
the Cash Surrender Value is payable to you. It is possible that insurance
coverage may not continue to Maturity, even if planned periodic Premiums are
paid in a timely manner.
MISSTATEMENT OF AGE OR SEX (NON-UNISEX POLICY)
If the age or (in the case of a Non-Unisex Policy) sex of the Insured is
stated incorrectly in the Application, the amounts payable by us will be
adjusted as follows:
- Misstatement discovered at death: The Death Benefit will be recalculated
to that which would be purchased by the most recently charged Monthly Cost
of Insurance rate for the correct age or (for a Non-Unisex Policy) sex.
- Misstatement discovered prior to death: The Account Value will be
recalculated from the Issue Date using the Monthly Cost of Insurance rates
based on the correct age or (for a Non-Unisex Policy) sex.
MODIFICATION
Upon notice to you, we may modify the Policy if such modification:
- is necessary to make the Policy or the Variable Account comply with any
law or regulation issued by a governmental agency to which the Company or
the Variable Account is subject, or
- is necessary to assure continued qualification of the Policy under the
Internal Revenue Code or other federal or state laws as a life insurance
policy, or
- is necessary to reflect a change in the operation of the Variable Account
or the Sub-Accounts, or
- adds, deletes or otherwise changes Sub-Account options.
We also reserve the right to modify certain provisions of the Policy as stated
in those provisions. In the event of any such modification, we may make
appropriate amendment to the Policy to reflect such modification.
NONPARTICIPATING
The Policy does not pay dividends.
PROCEDURE
You do not need the consent of a Beneficiary or a contingent Owner in order
to exercise any of your rights. However, you must give us written notice of the
requested action. The request must be filed at our Service Center and must be in
written form satisfactory to us. Your request will then, except as otherwise
specified in the Policy, be effective as of the date you signed the form,
subject to any action taken before it was received by us at our Service Center.
REPORT TO OWNER
We will send you a report at least once each Policy Year. The report will
show current Policy values, Premiums paid, and deductions made since the last
report. It will also show the balance of any outstanding Policy loans and
accrued interest on such loans. There is no charge for this report.
RIGHTS OF BENEFICIARY
The Beneficiary has no rights in the Policy until the death of the Insured.
If a Beneficiary is alive at that time, the Beneficiary will be entitled to
payment of the Policy Proceeds as they become due.
RIGHTS OF OWNER
While the Insured is alive, unless you have assigned any of these rights,
you may:
- transfer ownership to a new Owner;
- name a contingent Owner who will automatically become the Owner of the
Policy if you die before the Insured;
- change or revoke a contingent Owner;
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- change or revoke a Beneficiary;
- exercise all other rights in the Policy;
- increase or decrease the Specified Face Amount or APB Rider Face Amount,
subject to the provisions of the Policy;
- change the death benefit option, subject to the provisions of the Policy.
When you transfer your rights to a new Owner, you automatically revoke any prior
contingent Owner designation. When you want to change or revoke a prior
Beneficiary designation, you have to specify that action. You do not affect a
prior Beneficiary when you merely transfer ownership, or change or revoke a
contingent Owner designation.
SPLITTING UNITS
We reserve the right to split or combine the value of Units. In effecting
any such change, strict equity will be preserved and no change will have a
material effect on the benefits or other provisions of the Policy.
SUICIDE
In most states, if the Insured, whether sane or insane, commits suicide
within two years after the Issue Date, we will not pay any part of the Policy
Proceeds. We will refund to you the Premiums paid, less the amount of any Policy
Debt and any Partial Surrenders.
TERMINATION
The Policy terminates on the earlier of the date we receive your request to
surrender, the expiration date of the grace period (see "Account Value -- Grace
Period"), the date of death of the Insured, or the date of Maturity.
VOTING RIGHTS
To the extent required by law, we will vote shares of the Funds held by each
Sub-Account in accordance with instructions received from Policy Owners with
Account Value allocated to the relevant Sub-Account. Each person having a voting
interest will be provided with proxy materials of the relevant Fund together
with an appropriate form with which to give us voting instructions. Shares held
in each Sub-Account for which no timely instructions are received will be voted
in proportion to the instructions received from all persons with an interest in
such Sub-Account who furnish us with voting instructions. We will also vote
shares held in the Separate Account that we own and which are not attributable
to Policies in the same proportion.
We will determine the number of votes as to which you have the right to give
voting instructions as of the record date established for the relevant Fund.
This number is determined by dividing your Account Value in the Sub-Account, if
any, by the net asset value of one share in the corresponding Fund in which the
assets of the Sub-Account are invested.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
(1) to cause a change in the subclassification or investment objective of one or
more of the Funds; or (2) to approve or disapprove an investment advisory
contract for a Fund. In addition, we may disregard voting instructions in favor
of any change in the investment policies or in any investment advisor or
principal underwriter initiated by Policy Owners or the Board of
Trustees/Directors any of the Funds. Our disapproval of any such change must be
reasonable and, in the case of a change in investment policies or investment
adviser, based on a good faith determination that such change would be contrary
to state law or otherwise is inappropriate in light of the objectives and
purposes of the Fund. In the event we disregard voting instructions, a summary
of and the reasons for that action will be included in the next periodic report
to Policy Owners.
If the Investment Company Act of 1940 or any rules thereunder should be
amended or if the present interpretation of the Investment Company Act of 1940
or such rules should change, and as a result the Company determines that it is
permitted to vote shares in its own right, whether or not such shares are
attributable to the Policies, we reserve the right to do so.
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DISTRIBUTION OF THE POLICIES
The Policy will be sold by licensed insurance agents in those states where
the Policy may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD") and who
have entered into distribution agreements with the Company and the General
Distributor, Sun Investment Services Company ("Sun Investment"). Sun Investment
is a corporation organized under the laws of Delaware on August 6, 1970, and is
a wholly-owned subsidiary of the Company. Sun Investment is a broker-dealer
registered under the Securities Exchange Act of 1934 and is a member of the
NASD. As such, it serves as the principal underwriter for the Policies. Sun
Investment is located at One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02181.
The maximum commission payable by us will be 15% of Premium in the first
Policy Year and 9% of Premium in Policy Years two through seven. A maximum
commission rate of 0.10% of Account Value in the Sub-Accounts for Policy Years
one through seven and 0.20% of Account Value in the Sub-Accounts thereafter may
also be paid.
We may also pay expense allowances, bonuses, and training allowances.
Registered representatives who meet specified production levels may qualify,
under our sales incentive programs, to receive non-cash compensation such as
expense-paid trips, expense-paid educational seminars and merchandise.
OTHER CONTRACTUAL ARRANGEMENTS
ADMINISTRATION
We have entered into a contract with Andesa TPA, Inc. (1605 N. Cedar Crest
Blvd., Suite 502, Allentown, Pennsylvania, 18104-2351) under which Andesa TPA,
Inc. has agreed to perform certain administrative functions relating to the
Policies and the Variable Account. These functions include, among other things,
maintaining records of the name, address, taxpayer identification number, Policy
number and Account Value of each Policy and other pertinent information
necessary for the administration of the Policies. Andesa TPA, Inc. is not an
affiliate of the Company.
CUSTODIAN
We are the custodian of the assets of the Variable Account. We will purchase
shares in connection with amounts allocated to the Sub-Accounts in accordance
with the instructions of the Owner, redeem shares for the purposes of meeting
the contractual obligations of the Variable Account and pay charges relative to
the Variable Account. The shares of the Funds purchased by the Variable Account,
to the extent represented by separate certificates, will be kept physically
segregated and held separate from the assets of our General Account or any other
separate account.
REINSURANCE
We intend to reinsure a portion of the risks assumed under the Policies. You
will not have any rights against the reinsurer(s); we remain fully liable for
the benefits under the Policy.
FEDERAL TAX STATUS
The discussion contained herein is general in nature, is based upon the
Company's understanding of current federal income tax laws and is not intended
as tax advice. Congress has the power to enact legislation affecting the tax
treatment of life insurance contracts, and such legislation -- as well as any
new judicial or administrative interpretation of federal income tax law-could be
applied retroactively. Also, because the Internal Revenue Code of 1986, as
amended (the "Code"), is not in force in the Commonwealth of Puerto Rico, some
references in this discussion will not apply to Policies issued in Puerto Rico.
Any person contemplating the purchase of a Policy or any transaction involving a
Policy should consult a qualified tax adviser. THE COMPANY DOES NOT MAKE ANY
REPRESENTATION OR PROVIDE ANY GUARANTEE REGARDING THE TAX STATUS, FEDERAL, STATE
OR LOCAL, OF ANY POLICY OR ANY TRANSACTION INVOLVING THE POLICIES.
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TAX TREATMENT OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Subchapter L of the
Code. Although the operations of the Variable Account are accounted for
separately from other operations of the Company for purposes of federal income
taxation, the Variable Account currently is not separately taxable as a
regulated investment company or other taxable entity.
Taxes paid or reserved for by the Company that are attributable to the
earnings of the Variable Account could affect the Net Investment Factor, which
affects your Account Value (see "ACCOUNT VALUE -- Net Investment Factor). Under
existing federal income tax law, however, the income (consisting primarily of
interest, dividends and net capital gains) of the Variable Account, to the
extent that it is applied to increase reserves under the Policy, is not taxable
to the Company. Similarly, no significant state or local income taxes are
attributable to the earnings of the Variable Account. Therefore, the Company
currently does not take any federal, state or local taxes into account when
determining the Net Investment Factor. The Company may take taxes into account
when determining the Net Investment Factor in future years if, due to a change
in law, a change in the Company's tax status or otherwise, such taxes are
attributable to the earnings of the Variable Account.
TAXATION OF POLICY PROCEEDS
Section 7702 of the Code provides that, if certain tests are met, a life
insurance policy will be treated as a life insurance contract for tax purposes.
Provided that the Owner has an insurable interest in the Insured, the Company
believes that the Policy meets these tests, and hence should receive the same
federal income tax treatment as a fixed life insurance contract. As such: (1)
the Death Benefit will be eligible for exclusion from the gross income of the
Beneficiary under Section 101 of the Code; and (2) the Owner will not be deemed
to be in constructive receipt of the increases in Cash Surrender Values,
including additions attributable to interest, dividends, appreciation or gains
realized upon transfers among the Sub-Accounts, under the Policy until actual
receipt thereof. CORPORATE OWNERS, HOWEVER, MIGHT BE SUBJECT TO ALTERNATIVE
MINIMUM TAX ON THE ANNUAL INCREASES IN CASH SURRENDER VALUES AND ON THE DEATH
BENEFIT.
To qualify as a life insurance contract under Section 7702 of the Code, the
Policy must satisfy certain actuarial requirements. Section 7702 specifies that
the required actuarial calculations be based on mortality charges that meet the
reasonable mortality charge requirements set forth in the Code, and other
charges reasonably expected to be actually paid. The law relating to
reasonableness standards for mortality and other charges is based on statutory
language and certain IRS pronouncements that do not address all relevant issues.
Accordingly, although the Company believes that the mortality and other charges
that are used in the calculations (including those used with respect to Policies
issued to so-called "sub-standard risks") meet the applicable requirements, it
cannot offer complete assurance. It is possible that future regulations will
contain standards that would require the Company to modify the mortality and
other charges used in the calculations, and the Company reserves the right to
make any such modifications.
For a variable contract like the Policy to qualify as life insurance for
federal income tax purposes, it also must comply with the diversification rules
found in Code Section 817 and the regulations promulgated thereunder. The
Company believes that the Variable Account complies with the diversification
requirements prescribed by Treas. Reg. Section 1.817-5. When these regulations
were proposed, the preamble to the regulations stated that the Internal Revenue
Service may promulgate guidelines under which a variable contract will not be
treated as a life insurance contract for tax purposes if the owner has excessive
control over the investments underlying the contract. Although the Company
believes that the Owner does not have excessive control over the assets
underlying the Policy, it cannot offer complete assurance prior to the issuance
of such guidelines, which may have retroactive effect. If guidelines are
promulgated, the Company will take any action (including modification of the
Policy or the Variable Account) necessary to comply with the guidelines.
Upon the complete surrender or lapse of a Policy, the amount by which the
sum of the Policy's Cash Surrender Value and any unpaid Policy Debt exceeds the
Owner's Investment in the Policy (as defined below) is treated as ordinary
income subject to tax. Any loss incurred upon surrender generally is not
deductible.
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For purposes of the preceding paragraph and the following paragraphs, the
term Investment in the Policy means (i) the aggregate amount of any Premiums or
other consideration paid for a Policy, minus (ii) the aggregate amount received
under a Policy which is excluded from gross income of the Owner (other than loan
amounts), plus (iii) the amount of any loan from, or secured by,a Policy that is
a Modified Endowment Contract (defined below) to the extent that such amount is
included in the gross income of the Owner. The repayment of a Policy loan (or
the payment of interest on a loan) does not affect Investment in the Policy.
The tax consequences of distributions from, and loans taken from or secured
by, a Policy depend on whether the Policy is classified as a Modified Endowment
Contract under Section 7702A of the Code. Due to the flexibility of the payment
of premiums and other rights you have under the Policy, classification of the
Policy as a Modified Endowment Contract will depend upon the individual
operation of each Policy. A Policy is a Modified Endowment Contract if the
aggregate amount paid under the Policy at any time during the first seven Policy
Years exceeds the sum of the net level premiums that would have been paid on or
before such time if the Policy provided for paid up future benefits after the
payment of seven level annual premiums. If there is a reduction in benefits
during the first seven Policy Years, the foregoing computation is made as if the
Policy originally had been issued at the reduced benefit level. If there is a
"material change" to the Policy, the seven year testing period for Modified
Endowment Contract status is restarted. A life insurance contract received in
exchange for a Modified Endowment Contract also will be treated as a Modified
Endowment Contract.
The Company has undertaken measures to prevent payment of a Premium from
inadvertently causing the Policy to become a Modified Endowment Contract (see
"PREMIUM PAYMENTS -- Modified Endowment Contracts"). In general, an Owner should
consult a qualified tax adviser before undertaking any transaction involving the
Policy to determine whether such transaction would cause the Policy to become a
Modified Endowment Contract.
Provided that a Policy is not a Modified Endowment Contract, cash
distributions from the Policy are treated first as a nontaxable return of the
Owner's Investment in the Policy and then as a distribution of the Policy's
inside buildup, which is subject to tax. (An exception to this general rule
occurs in the case that a cash distribution is made in connection with certain
reductions in the Death Benefit under the Policy in the first fifteen contract
years. Such a cash distribution is taxed in whole or in part as ordinary
income.) Loans from, or secured by, a Policy that is not a Modified Endowment
Contract generally are treated as bona fide indebtedness, and hence are not
included in the gross income of the Owner.
If a Policy is a Modified Endowment Contract, distributions from the Policy
are treated as ordinary income subject to tax up to the amount equal to the
excess of the Account Value (which includes unpaid policy loans) immediately
before the distribution over the Investment in the Policy. Loans taken from, or
secured by, such a Policy, as well as due but unpaid interest thereon, are taxed
in the same manner as distributions from the Policy. A 10 percent additional tax
is imposed on the portion of any distribution from, or loan taken from or
secured by, a Modified Endowment Contract that is included in income except
where the distribution or loan is made on or after the Owner attains age 59 1/2,
is attributable to the Owner's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's Beneficiary. These exceptions likely do not apply where the Policy is
not owned by an individual (or held in trust for an individual). For purposes of
the computations described in this paragraph, all Modified Endowment Contracts
issued by the Company (or its affiliates) to the same Owner during any calendar
year are treated as one Modified Endowment Contract.
Because there are limits on the deductibility of policy loan interest, an
Owner should consult a qualified tax adviser regarding the deducting of any
Policy loan interest.
An Owner generally will not recognize gain upon the exchange of the Policy
for another life insurance policy issued by the Company or another insurance
company, except to the extent that the Owner receives cash in the exchange or is
relieved of Policy indebtedness as a result of the exchange. In no event will
the gain recognized exceed the amount by which the Policy's Account Value (which
includes unpaid Policy loans) exceeds the Owner's Investment in the Policy.
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A transfer of the Policy, a change in the Owner, a change in the
Beneficiary, certain other changes to the Policy and particular uses of the
Policy (including use in a so called "split-dollar" arrangement) may have tax
consequences depending upon the particular circumstances and should not be
undertaken prior to consulting with a qualified tax adviser. For instance, if
the Owner transfers the Policy or designates a new Owner in return for valuable
consideration (or, in some cases, if the transferor is relieved of a liability
as a result of the transfer), then the Death Benefit payable upon the death of
the Insured may in certain circumstances be includible in taxable income to the
extent that the Death Benefit exceeds the prior consideration paid for the
transfer and any Premiums and other amounts subsequently paid by the transferee.
Further, in such a case, if the consideration received exceeds the transferor's
Investment in the Policy, the difference will be taxed to the transferor as
ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the individual
circumstances of each Owner or Beneficiary.
THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS
The directors and principal officers of the Company are listed below,
together with information as to their ages, dates of election and principal
business occupations during the last five years (if other than their present
business occupations). Except as otherwise indicated, the directors and officers
of the Company who are associated with Sun Life Assurance Company of Canada
and/or its subsidiaries have been associated with Sun Life Assurance Company of
Canada for more than five years either in the position shown or in other
positions.
JOHN D. MCNEIL, 62, Chairman and Director (1982*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Chairman and a Director of Sun Life Assurance Company of Canada and
Sun Life Insurance and Annuity Company of New York; a Director of Massachusetts
Financial Services Company; President and a Director of Sun Growth Variable
Annuity Fund, Inc.; Chairman and a Trustee of MFS/Sun Life Series Trust;
Chairman and a Member of the Boards of Managers of Money Market Variable
Account, High Yield Variable Account, Capital Appreciation Variable Account,
Government Securities Variable Account, World Governments Variable Account,
Total Return Variable Account and Managed Sectors Variable Account; and a
Director of Shell (Canada) Limited and Canadian Pacific, Ltd.
DONALD A. STEWART, 50, President and Director (1996*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is President and a Director of Sun Life Assurance Company of Canada, and
Sun Life Insurance and Annuity Company of New York; and a Director of
Massachusetts Casualty Insurance Company, Massachusetts Financial Services
Company; and a Director of Spectrum United Holdings Inc., Sun Life Investment
Management Limited; and Sun Life of Canada UK Holdings, plc.
DAVID D. HORN, 55, Senior Vice President and General Manager and Director (1970,
1985*)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Senior Vice President and General Manager for the United States of Sun
Life Assurance Company of Canada; Chairman and President and a Director of Sun
Investment Services Company; Senior Vice President and a Director of Sun Life
Insurance and Annuity Company of New York; Vice President and a Director of Sun
Growth Variable Annuity Fund, Inc.; President and a Director of Sun Benefit
Services Company, Inc., Sun Canada Financial Co., and Sun Life Financial
Services Limited; a Director of Sun Capital Advisers, Inc.; Chairman and a
Director of Massachusetts Casualty Insurance Company; a Trustee of MFS/ Sun Life
Series Trust; and a Member of the Boards of Managers of Money Market Variable
Account, High
- ---------
* Year elected director.
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Yield Variable Account, Capital Appreciation Variable Account, Government
Securities Variable Account, World Governments Variable Account, Total Return
Variable Account and Managed Sectors Variable Account.
ANGUS A. MACNAUGHTON, 65, Director (1985*)
Metro Tower, Suite 1170,
950 Tower Lane
Foster City, California 94404
He is President of Genstar Investment Corporation and a Director of Sun Life
Assurance Company of Canada, Sun Life Insurance and Annuity Company of New York,
Canadian Pacific, Ltd., Stelco, Inc. and Varian Associates, Inc.
JOHN S. LANE, 61, Director (1991*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Senior Vice President, Investments of Sun Life Assurance Company of
Canada; and a Director of Sun Investment Services Company, Sun Capital Advisers,
Inc. and Sun Life Insurance and Annuity Company of New York.
RICHARD B. BAILEY, 69, Director (1983*)
500 Boylston Street
Boston, Massachusetts 02116
He is a Director of Sun Life Insurance and Annuity Company of New York and a
Director/Trustee of certain Funds in the MFS Family of Funds. Prior to October
1, 1991, he was Chairman and a Director of Massachusetts Financial Services
Company.
A. KEITH BRODKIN, 61, Director (1990*)
500 Boylston Street
Boston, Massachusetts 02116
He is Chairman and a Director of Massachusetts Financial Services Company; a
Director of Sun Life Insurance and Annuity Company of New York; and a
Director/Trustee and/or Officer of the Funds in the MFS Family of Funds.
M. COLYER CRUM, 64, Director (1986*)
Harvard Business School
Soldiers Field Road
Boston, Massachusetts 02163
He is a Professor at the Harvard Business School; and a Director of Sun Life
Assurance Company of Canada, Sun Life Insurance and Annuity Company of New York,
Merrill Lynch Ready Assets Trust, Merrill Lynch Basic Value Fund, Inc., Merrill
Lynch Special Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch
U.S.A. Government Reserves, Merrill Lynch Natural Resources Trust, Merrill Lynch
U.S. Treasury Money Fund, MuniVest California Insured Fund, Inc., MuniVest
Florida Fund, Inc., MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey
Fund,Inc., MuniVest New York Insured Fund, Inc., MuniYield Florida Insured Fund,
MuniYield Insured Fund II, Inc., MuniYield Michigan Insured Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund III,
Inc. and MuniYield Pennsylvania Fund.
ROBERT A. BONNER, 52, Vice President, Pensions (1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Individual Insurance for the United States of Sun Life
Assurance Company of Canada.
- ---------
* Year elected director.
33
<PAGE>
ROBERT E. MCGINNESS, 55, Vice President and Counsel (1983)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President and Chief Compliance Officer for the United States of
Sun Life Assurance Company of Canada; Vice President and Counsel and a Director
of Sun Investment Services Company and Sun Benefit Services Company, Inc.;
Secretary and a Director of New London Trust, F.S.B.; and a Director of
Massachusetts Casualty Insurance Company.
C. JAMES PRIEUR, 45, Vice President, Investments (1993)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Investments for the United States of Sun Life
Assurance Company of Canada; Vice President, Investments of Sun Investment
Services Company and Sun Life Insurance and Annuity Company of New York; and a
Director of Sun Capital Advisers, Inc., New London Trust, F.S.B. and Sun Canada
Financial Co.
S. CAESAR RABOY, 60, Senior Vice President and Deputy General Manager (1991)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Senior Vice President and Deputy General Manager, Individual Insurance
for the United States of Sun Life Assurance Company of Canada; Senior Vice
President and Deputy General Manager of Sun Life Insurance and Annuity Company
of New York; and Senior Vice President and Deputy General Manager and a Director
of Sun Life Financial Services Limited. Prior to 1990 he was President and Chief
Operating Officer of Connecticut Mutual Life Insurance Company.
ROBERT P. VROLYK, 43, Vice President and Actuary (1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Finance for the United States of Sun Life Assurance
Company of Canada; Vice President, Controller and Actuary of Sun Life Annuity
Company of New York; a Director of Massachusetts Casualty Insurance Company; and
Vice President and a Director of Sun Canada Financial Co.
MARGARET SEARS MEAD, 46, Assistant Vice President and Secretary (1996)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
She is Assistant Vice President and Counsel for the Unites States of Sun
Life Assurance Company of Canada and Secretary of Sun Life Insurance and Annuity
Company of New York.
L. BROCK THOMSON, 55, Vice President and Treasurer (1974)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Portfolio Management for the United States of Sun Life
Assurance Company of Canada; Vice President and Treasurer of Sun Investment
Services Company, Sun Capital Advisers, Inc., Sun Benefit Services Company, Inc.
and Sun Life Insurance and Annuity Company of New York; and Assistant Treasurer
of Massachusetts Casualty Insurance Company.
The directors, officers and employees of the Company are covered under a
commercial blanket bond and a liability policy. The directors, officers and
employees of Massachusetts Financial Services Company and Sun Investment
Services Company are covered under a fidelity bond and errors and omissions
policy.
- ---------
* Year elected director.
34
<PAGE>
No shares of the Company are owned by any executive officer or director. The
Company is a wholly-owned subsidiary of Sun Life Assurance Company of Canada,
150 King Street West, Toronto, Ontario, Canada M5H 1J9.
STATE REGULATION
The Company is subject to the laws of the State of Delaware governing life
insurance companies and to regulation by the Commissioner of Insurance of
Delaware. An annual statement is filed with the Commissioner of Insurance on or
before March 1st in each year relating to the operations of the Company for the
preceding year and its financial condition on December 31st of such year. Its
books and records are subject to review or examination by the Commissioner or
his agents at any time and a full examination of its operations is conducted at
periodic intervals.
The Company is also subject to the insurance laws and regulations of the
other states and jurisdictions in which it is licensed to operate. The laws of
the various jurisdictions establish supervisory agencies with broad
administrative powers with respect to licensing to transact business, overseeing
trade practices, licensing agents, approving policy forms, establishing reserve
requirements, fixing maximum interest rates on life insurance policy loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. Each insurance company is required to file detailed
annual reports with supervisory agencies in each of the jurisdictions in which
it does business and its operations and accounts are subject to examination by
such agencies at regular intervals.
In addition, many states regulate affiliated groups of insurers, such as the
Company, its parent and its affiliates, under insurance holding company
legislation. Under such laws, inter-company transfers of assets and dividend
payments from insurance subsidiaries may be subject to prior notice or approval,
depending on the size of such transfers and payments in relation to the
financial positions of the companies involved.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for policyholder losses
incurred by insolvent companies. The amount of any future assessments of the
Company under these laws cannot be reasonably estimated. However, most of these
laws do provide that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength and many permit the deduction of
all or a portion of any such assessment from any future premium or similar taxes
payable.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
removal of barriers preventing banks from engaging in the insurance business,
tax law changes affecting the taxation of insurance companies, the tax treatment
of insurance products and its impacton the relative desirability of various
personal investment vehicles, and proposed legislation to prohibit the use of
gender in determining insurance and pension rates and benefits.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. The
Company and its subsidiaries are engaged in various kinds of routine litigation
which, in management's judgment, is not of material importance to their
respective total assets or material with respect to the Variable Account.
LEGAL MATTERS
The organization of the Company, its authority to issue the Policies and the
validity of the form of the Policies have been passed upon by Robert E.
McGinness, Esq., Vice President and Counsel of the Company.
35
<PAGE>
EXPERTS
Actuarial matters concerning the policy have been examined by John E.
Coleman, FSA, MAAA, Product Officer for Corporate Markets of Sun Life Assurance
Company of Canada, as stated in his opinion filed as an exhibit to the
registration statement.
ACCOUNTANTS
The statement of condition of the Variable Account as of December 23, 1996
and the financial statements of the Company as of December 31, 1995 and 1994,
and for the years ended December 31, 1995, 1994 and 1993 included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
REGISTRATION STATEMENTS
A registration statement has been filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 as amended, with
respect to the Policies offered by this Prospectus. This Prospectus does not
contain all the information set forth in the registration statement and the
exhibits filed as part of the registration statement, to all of which reference
is hereby made for further information concerning the Variable Account, the
Company, MFS/Sun Life Series Trust, Fidelity Variable Insurance Products Fund,
Fidelity Variable Insurance Products Fund II, Neuberger & Berman Advisers
Management Trust, JPM Series Trust II, Templeton Variable Products Series Fund,
and the Policy. Statements found in this Prospectus as to the terms of the
Policies and other legal instruments are summaries, and reference is made to
such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of the Company which are included in this
Prospectus, should be considered only as bearing on the ability of the Company
to meet its obligations with respect to the death benefit and the Company's
assumption of the mortality and expense risks. They should not be considered as
bearing on the investment performance of the shares of the MFS Series Fund, VIP,
VIP II, AMT, JPM, and TVPSF held in the Sub-Accounts of the Variable Account.
The Variable Account value of the interests of Owners and Beneficiaries under
the Policies is affected primarily by the investment results of those funds.
36
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENT OF CONDITION--DECEMBER 23, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in Fidelity Variable Insurance Products Fund: Shares Cost Value
--------- --------- ---------
Fidelity VIP Money Market Portfolio....................... 100,000 $ 100,000 $ 100,000
--------- ---------
Net Assets............................................ $ 100,000 $ 100,000
--------- ---------
--------- ---------
NET ASSETS:
<CAPTION>
Value
---------
<S> <C> <C> <C>
Net Assets Applicable to Sponsor........................... $ 100,000
---------
Net Assets............................................ $ 100,000
---------
---------
Value per Unit (10,000 units)............................. $ 10
---------
---------
</TABLE>
SEE NOTES TO STATEMENT OF CONDITION.
37
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
NOTES TO STATEMENT OF CONDITION
1. ORGANIZATION
Sun Life of Canada (U.S.) Variable Account G (the "Variable Account"), a
separate account of Sun Life Assurance Company of Canada (U.S.), the Sponsor,
was established on July 25, 1996 as a funding vehicle for the variable portion
of certain individual variable life insurance contracts. The Variable Account is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 as a unit investment trust.
Net assets applicable to the Sponsor represent seed money provided by the
Sponsor in exchange for units in the Variable Account.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account is invested in shares of certain Portfolios of one of the following
mutual funds as specified by the prospectus: MFS/Sun Life Series Trust, Fidelity
Variable Insurance Products Fund, Fidelity Variable Insurance Products Fund II,
Neuberger & Berman Advisers Management Trust, JPM Series Trust II and Templeton
Variable Products Series Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS--
Investments in shares of an investment portfolio of one of the mutual funds are
recorded at their net asset value.
FEDERAL INCOME TAX STATUS--
The operations of the Variable Account are part of the operations of the Sponsor
and are not taxed separately; the Variable Account is not taxed as a regulated
investment company. The Sponsor qualifies for the federal income tax treatment
granted to life insurance companies under Subchapter L of the Internal Revenue
Code. Under existing federal income tax law, investment income and capital gains
earned by the Variable Account on contract owner reserves are not subject to
tax.
INDEPENDENT AUDITORS' REPORT
TO THE CONTRACT OWNERS PARTICIPATING IN SUN LIFE OF CANADA (U.S.) VARIABLE
ACCOUNT G
AND THE BOARD OF DIRECTORS OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.):
We have audited the accompanying statement of condition of Sun Life of Canada
(U.S.) Variable Account G (the "Variable Account") as of December 23, 1996. This
financial statement is the responsibility of management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit 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. Our procedures included
confirmation with the custodian of securities held for the Variable Account as
of December 23, 1996. 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.
In our opinion, such financial statement presents fairly, in all material
respects, the financial position of the Variable Account as of December 23, 1996
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 10, 1997
38
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (SEE NOTE BELOW)
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- -----------------
(IN 000'S)
<S> <C> <C>
ASSETS
Bonds $ 2,286,265 $ 2,846,067
Preferred stock 0 1,149
Mortgage loans 994,222 1,066,911
Investments in subsidiaries 147,687 138,282
Real estate 96,514 95,575
Other invested assets 47,139 38,387
Policy loans 39,966 38,355
Cash (5,957) (20,280)
Investment income due and accrued 47,704 62,720
Funds withheld on reinsurance assumed 865,487 741,091
Due from separate accounts 201,814 148,675
Other assets 61,549 26,346
-------------- -----------------
General account assets 4,782,390 5,183,278
-------------- -----------------
Unitized separate account assets 6,412,150 5,275,808
Non-unitized separate account assets 2,003,032 2,040,596
-------------- -----------------
$ 13,197,572 $ 12,499,682
-------------- -----------------
-------------- -----------------
LIABILITIES
Policy reserves $ 2,063,481 $ 1,937,301
Annuity and other deposits 1,997,088 2,290,656
Policy benefits in process of payment 3,484 5,884
Accrued expenses and taxes 56,300 44,114
Other liabilities 56,030 36,082
Due to (from) parent and affiliates--net 3,562 9,498
Interest maintenance reserve 26,716 25,217
Asset valuation reserve 54,300 42,099
-------------- -----------------
General account liabilities 4,260,961 4,390,851
-------------- -----------------
Unitized separate account liabilities 6,412,125 5,275,783
Non-unitized separate account liabilities 2,003,032 2,040,596
-------------- -----------------
12,676,118 11,707,230
-------------- -----------------
CAPITAL STOCK AND SURPLUS
Capital Stock--Par value $1,000:
Authorized 10,000 shares,
issued and outstanding 5,900 shares 5,900 5,900
Surplus 515,554 786,552
-------------- -----------------
Total capital stock and surplus 521,454 792,452
-------------- -----------------
$ 13,197,572 $ 12,499,682
-------------- -----------------
-------------- -----------------
</TABLE>
Note: The balance sheet at December 31, 1995 has been taken from the audited
financial statements at that date.
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
UNAUDITED
----------------------
1996 1995
---------- ----------
(IN 000'S)
<S> <C> <C>
INCOME
Premiums and annuity considerations $ 60,473 $ 70,663
Annuity and other deposit funds 97,803 103,761
Transfers to separate accounts--net (31,581) (852)
Net investment income 86,663 96,878
Amortization of interest maintenance
reserve 613 (125)
Realized losses on investments (2,884) (361)
Mortality and expense risk charges 21,194 15,981
Other income--net 13,848 7,608
---------- ----------
246,129 293,553
BENEFITS AND EXPENSES
Increase (decrease) in liability for
annuity and other deposit funds (77,847) 30,216
Increase in policy reserves 36,087 33,641
Death, surrender benefits, and
annuity payments 48,742 51,526
Annuity and other deposit fund
withdrawals 177,255 111,556
Transfers to (from) non-unitized
separate account (2,110) 3,655
---------- ----------
182,127 230,594
Operating expenses 9,532 8,617
Commissions 30,943 24,759
Dividends 6,188 3,887
Taxes, licenses and fees 672 (425)
---------- ----------
229,462 267,432
Net income from operations before
surplus note interest and equity in
income of subsidiaries 16,667 26,121
Surplus note interest (5,432) (7,788)
---------- ----------
Net income from operations before
equity in income of subsidiaries
and federal income tax 11,235 18,333
Equity in income of subsidiaries 23,474 19,593
Federal income tax expense (7,019) (14,201)
---------- ----------
NET INCOME $ 27,690 $ 23,725
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS.
40
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
UNAUDITED
----------------------
1996 1995
---------- ----------
(IN 000'S)
<S> <C> <C>
INCOME
Premiums and annuity considerations $ 200,672 $ 199,730
Annuity and other deposit funds 327,986 622,587
Transfers from (to) separate
accounts--net (89,323) 27,870
Net investment income 262,271 269,529
Amortization of interest maintenance
reserve 994 439
Realized losses on investments (4,325) (2,421)
Mortality and expense risk charges 59,490 44,046
Other income--net 53,959 7,605
---------- ----------
811,724 1,169,385
BENEFITS AND EXPENSES
Increase (decrease) in liability for
annuity and other deposit funds (293,567) 41,351
Increase in policy reserves 126,179 119,218
Death, surrender benefits, and
annuity payments 141,416 139,547
Annuity and other deposit fund
withdrawals 723,536 363,881
Transfers to (from) non-unitized
separate account (80,815) 337,203
---------- ----------
616,749 1,001,200
Operating expenses 31,578 27,356
Commissions 93,938 82,694
Dividends 19,480 16,598
Taxes, licenses and fees 2,145 4,537
---------- ----------
763,890 1,132,385
Net income from operations before
surplus note interest and equity in
income of subsidiaries 47,834 37,000
Surplus note interest (17,636) (23,363)
---------- ----------
Net income from operations before
equity in income of subsidiaries
and federal income tax 30,198 13,637
Equity in income of subsidiaries 61,068 40,259
Federal income tax expense (14,136) (21,525)
---------- ----------
NET INCOME $ 77,130 $ 32,371
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS.
41
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATEMENTS OF CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
UNAUDITED
----------------------
1996 1995
---------- ----------
(IN 000'S)
<S> <C> <C>
CAPITAL STOCK $ 5,900 $ 5,900
PAID-IN SURPLUS 199,355 199,355
SURPLUS NOTES
Balance, beginning of period 650,000 335,000
Paid during period (335,000) 0
---------- ----------
Balance, end of period 315,000 335,000
---------- ----------
UNASSIGNED SURPLUS
Balance, beginning of period (62,801) (84,767)
Net income 77,130 32,371
Change in non-admitted assets (877) (2,435)
Unrealized gains (losses) on real estate (51) 1,096
Change in and transfers of separate account surplus 0 (1)
Change in asset valuation reserve (12,202) (7,990)
---------- ----------
Balance, end of period 1,199 (61,726)
---------- ----------
TOTAL SURPLUS 515,554 472,629
---------- ----------
TOTAL CAPITAL STOCK AND SURPLUS $ 521,454 $ 478,529
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS.
42
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
UNAUDITED
------------------------
1996 1995
----------- -----------
(IN 000'S)
<S> <C> <C>
Cash flows from operating activities:
Net income from operations before
surplus note interest and equity in
income of subsidiaries $ 47,832 $ 37,001
Adjustments to reconcile net income
from operations to net cash provided
by (used in) operating activities:
Increase (decrease) in liability for
annuity and other deposit funds (293,567) 41,351
Increase in policy reserves 126,180 119,218
Increase in investment income due and
accrued 15,015 590
Net accrual and amortization of
discount and premium on investments 1,518 1,820
Realized losses on investments 4,325 2,421
Change in non-admitted assets (877) (2,435)
Change in funds withheld on
reinsurance (124,396) (121,103)
Other (8,532) (12,626)
----------- -----------
Net cash provided by (used in) operating
activities (232,502) 66,237
----------- -----------
Cash flows from investing activities:
Proceeds from sale and maturity of
investments 985,589 1,295,015
Purchase of investments (624,195) (1,288,636)
Net change in short-term investments 211,770 (58,997)
Investment in subsidiaries (1,000)
Dividends from subsidiaries 27,298 13,077
----------- -----------
Net cash provided by (used in) investing
activities 599,462 (39,541)
----------- -----------
Cash flows from financing activities:
Repayment of surplus notes (335,000) 0
Payment of interest on surplus note (17,636) (23,363)
Repayment of seed capital 0 4,036
----------- -----------
Net cash used in financing activities (352,636) (19,327)
----------- -----------
Increase in cash during the period 14,323 7,369
Cash balance, beginning of period (20,280) (11,460)
----------- -----------
Cash balance, end of period $ (5,957) $ (4,091)
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS.
43
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying interim financial statements of Sun Life Assurance Company of
Canada (U.S.) ("the Company") are prepared on the basis of accounting practices
prescribed or permitted by the State of Delaware Department of Insurance
(statutory financial statements). The accompanying financial statements do not
include all of the footnote disclosures required for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The accompanying interim financial statement should be read in
conjunction with the Company's annual financial statements.
Results of nine months ended September 30, 1996 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1996.
The Financial Accounting Standards Board (FASB) has issued certain
pronouncements relating to mutual life insurance companies, and wholly owned
subsidiaries of mutual life insurance companies effective for years beginning
after December 15, 1995. Such pronouncements will no longer allow statutory
financial statements to be described as being prepared in conformity with
generally accepted accounting principles (GAAP). Upon the effective date of the
pronouncements, in order for their financial statements to be described as being
prepared in conformity with GAAP, mutual life insurance companies, and wholly
owned subsidiaries of mutual life insurance companies will be required to adopt
all applicable accounting principles promulgated by the FASB in any general
purpose financial statements that they may issue. If the Company issues general
purpose statutory financial statements for 1996 and reissues statutory financial
statement for prior years, the independent auditor will be able to express an
opinion regarding the presentation of any statutory financial statements in
accordance with accounting practices prescribed or permitted by the State of
Delaware Department of Insurance but will be required to issue an adverse or
qualified opinion on any statutory financial statements regarding their
presentation in conformity with GAAP. The Company has not quantified the effects
of the application of the GAAP pronouncements on its financial statements.
2. MANAGEMENT AND SERVICE CONTRACTS
Expenses under the agreement with the parent which enables the parent to provide
certain services amounted to approximately $3,294,000 and $13,562,000 for the
three and nine month periods in 1996 and $3,673,000 and $13,708,000 for the same
periods in 1995.
3. INVESTMENTS IN SUBSIDIARIES
The following is combined unaudited summarized financial information of the
subsidiaries as of September 30, 1996 and 1995 and for the nine months then
ended:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN 000'S)
<S> <C> <C>
Intangible assets $ 10,668 $ 12,676
Other assets, net of liabilities 140,119 133,093
----------- -----------
Total net assets $ 150,787 $ 145,769
----------- -----------
Total income $ 513,021 $ 426,027
Total expenses (439,852) (381,082)
Income tax expense (32,437) (20,905)
----------- -----------
Net income $ 40,732 $ 24,040
----------- -----------
----------- -----------
</TABLE>
44
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS IN SUBSIDIARIES (CONTINUED):
The following is combined unaudited summarized financial information of the
subsidiaries for the three months ended September 30, 1995 and 1994:
<TABLE>
<S> <C> <C>
Total income $ 183,931 $ 140,805
Total expenses (154,191) (119,698)
Income tax expense (12,983) (11,217)
--------- ---------
Net income $ 16,757 $ 9,890
--------- ---------
--------- ---------
</TABLE>
In determining the equity in income of subsidiaries for the periods, the
Registrant has excluded federal income tax expenses of approximately $10,355,000
and $25,365,000 for the three month and nine month periods in 1996 and
$9,703,000 and $16,219,000 for the same periods in 1995.
The change in equity in income of subsidiaries reported in the summary of
operations, differs from the net income above, due to federal income taxes and a
minority shareholder interest not held by the Registrant.
4. SURPLUS NOTES
The Registrant repaid $335,000,000 of surplus notes to its parent on January 16,
1996 after having received permission from the Delaware Department of Insurance.
45
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT INCOME
Net investment income consisted of:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
(000'S)
<S> <C> <C>
Interest income from bonds $ 135,661 $ 150,962
Interest income from mortgage loans 71,410 74,888
Interest income from policy loans 2,043 2,026
Real estate investment income 7,958 9,150
Interest income on funds withheld 51,589 41,267
Other 1,124 1,723
---------- ----------
Gross investment income $ 269,785 $ 280,016
Investment expenses 7,514 10,487
---------- ----------
$ 262,271 $ 269,529
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
(000'S)
<S> <C> <C>
Interest income from bonds $ 42,418 $ 52,665
Interest income from mortgage loans 23,271 24,227
Interest income from policy loans 711 671
Real estate investment income 2,966 3,752
Interest income on funds withheld 19,886 20,447
Other (53) 39
---------- ----------
Gross investment income $ 89,199 $ 101,801
Investment expenses 2,536 4,923
---------- ----------
$ 86,663 $ 96,878
---------- ----------
---------- ----------
</TABLE>
46
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
-------------- --------------
(IN 000'S)
<S> <C> <C>
ASSETS
Bonds $ 2,846,067 $ 2,471,152
Preferred stock 1,149 0
Mortgage loans 1,066,911 1,120,981
Investments in subsidiaries 138,282 134,807
Real estate 95,574 89,487
Other invested assets 38,387 26,036
Policy loans 38,355 36,584
Cash (20,280) (11,459)
Investment income due and accrued 62,719 56,096
Funds withheld on reinsurance assumed 741,091 566,693
Due from separate accounts 148,675 132,496
Other assets 26,349 27,683
-------------- --------------
General account assets 5,183,279 4,650,556
-------------- --------------
Unitized separate account assets 5,275,808 4,061,821
Non-unitized separate account assets 2,040,596 1,425,445
-------------- --------------
$ 12,499,683 $ 10,137,822
-------------- --------------
-------------- --------------
LIABILITIES
Policy reserves $ 1,937,302 $ 1,765,326
Annuity and other deposits 2,290,656 2,277,104
Policy benefits in process of payment 5,884 5,796
Accrued expenses and taxes 44,114 12,386
Other liabilities 36,080 50,087
Due to parent and affiliates--net 9,498 41,881
Interest maintenance reserve 25,218 18,140
Asset valuation reserve 42,099 28,409
-------------- --------------
General account liabilities 4,390,851 4,199,129
-------------- --------------
Unitized separate account liabilities 5,275,784 4,057,759
Non-unitized separate account liabilities 2,040,596 1,425,445
-------------- --------------
11,707,231 9,682,333
-------------- --------------
CAPITAL STOCK AND SURPLUS
Capital Stock--Par value $1,000:
Authorized 10,000 shares,
issued and outstanding 5,900 shares 5,900 5,900
Surplus 786,552 449,589
-------------- --------------
Total capital stock and surplus 792,452 455,489
-------------- --------------
$ 12,499,683 $ 10,137,822
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
(IN 000'S)
INCOME
Premiums and annuity considerations $ 274,244 $ 313,025 $ 469,157
Annuity and other deposit funds 722,327 699,189 1,205,680
Transfers from separate
accounts--net 21,455 102,213 350
Net investment income 366,598 337,747 253,496
Amortization of interest maintenance
reserve 899 3,316 2,703
Realized losses on investments (1,434) (6,166) (12,403)
Expense allowance on reinsurance
ceded 0 0 8,475
Mortality and expense risk charges 60,954 52,338 42,981
Other income--net 16,666 33,377 46,102
---------- ---------- ----------
1,461,709 1,535,039 2,016,541
BENEFITS AND EXPENSES
Increase (decrease) in liability for
annuity and other deposit funds 13,552 (69,542) 894,128
Increase in policy reserves 171,976 219,334 589,559
Death, surrender benefits, and
annuity payments 189,744 166,889 128,902
Annuity and other deposit fund
withdrawals 531,928 540,352 146,260
Transfers to non-unitized separate
account 331,403 455,688 28,070
---------- ---------- ----------
1,238,603 1,312,721 1,786,919
Operating expenses 37,492 32,231 24,170
Commissions 108,672 150,011 204,016
Dividends 25,722 22,928 8,074
Taxes, licenses and fees 4,774 4,649 4,180
---------- ---------- ----------
1,415,263 1,522,540 2,027,359
---------- ---------- ----------
Net income (loss) from operations
before surplus note interest and
equity in income of subsidiaries 46,446 12,499 (10,818)
Surplus note interest (31,813) (31,150) (26,075)
---------- ---------- ----------
Net income (loss) from operations
before equity in income of
subsidiaries and federal income tax 14,633 (18,651) (36,893)
Equity in income of subsidiaries 59,875 62,629 62,640
Federal income tax expense (38,593) (42,521) (22,491)
---------- ---------- ----------
NET INCOME $ 35,915 $ 1,457 $ 3,256
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATEMENTS OF CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
(IN 000'S)
<S> <C> <C> <C>
CAPITAL STOCK $ 5,900 $ 5,900 $ 5,900
PAID-IN SURPLUS 199,355 199,355 199,355
SURPLUS NOTES
Balance, beginning of year 335,000 335,000 265,000
Issued during year 315,000 0 70,000
---------- ---------- ----------
Balance, end of year 650,000 335,000 335,000
---------- ---------- ----------
UNASSIGNED SURPLUS
Balance, beginning of year (84,766) (57,067) (57,485)
Net income 35,915 1,457 3,256
Writedown of goodwill 0 (18,397) 0
Change in non-admitted assets (2,270) (1,485) (191)
Unrealized gains (losses) on real estate 2,009 (671) (4,440)
Change in and transfers of separate account
surplus (1) (227) 117
Change in asset valuation reserve (13,690) (8,376) 1,676
---------- ---------- ----------
Balance, end of year (62,803) (84,766) (57,067)
---------- ---------- ----------
TOTAL SURPLUS 786,552 449,589 477,288
---------- ---------- ----------
TOTAL CAPITAL STOCK AND SURPLUS $ 792,452 $ 455,489 $ 483,188
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
(IN 000'S)
Cash flows from operating activities:
Net income (loss) from operations
before surplus note interest and
equity in income of subsidiaries $ 46,446 $ 12,499 $ (10,818)
Adjustments to reconcile net income
(loss) from operations to net cash
provided by (used in) operating
activities:
Increase (decrease) in liability for
annuity and other deposit funds 13,552 (69,542) 894,128
Increase in policy reserves 171,976 219,334 589,559
Increase in investment income due and
accrued (6,623) (2,736) (21,746)
Net accrual and amortization of
discount and premium on investments 3,127 7,272 5,911
Realized losses on investments 1,434 6,166 12,403
Change in non-admitted assets (2,270) (1,485) (191)
Change in funds withheld on
reinsurance (174,398) (199,826) (1,087,862)
Other (11,160) (71,746) 24,953
----------- ----------- -----------
Net cash provided by (used in) operating
activities 42,084 (100,064) 406,337
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale and maturity of
investments 1,705,685 1,596,851 1,173,345
Purchase of investments (1,820,843) (1,491,159) (1,618,587)
Net change in short-term investments (254,897) (20,543) (38,782)
Investment in subsidiaries (6,000) (4,894) (15,250)
Dividends from subsidiaries 37,927 37,444 42,520
----------- ----------- -----------
Net cash provided by (used in) investing
activities (338,128) 117,699 (456,754)
----------- ----------- -----------
Cash flows from financing activities:
Issue of surplus notes 315,000 0 70,000
Payment of interest on surplus notes (31,813) (31,150) (26,075)
Repayment of seed capital 4,036 0 0
----------- ----------- -----------
Net cash provided by (used in) financing
activities 287,223 (31,150) 43,925
----------- ----------- -----------
Decrease in cash during the year (8,821) (13,515) (6,492)
Cash balance, beginning of year (11,459) 2,056 8,548
----------- ----------- -----------
Cash balance, end of year $ (20,280) $ (11,459) $ 2,056
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL--
Sun Life Assurance Company of Canada (U.S.) (the Company) is incorporated as a
life insurance company and is currently engaged in the sale of individual fixed
and variable annuities, group fixed and variable annuities and group pension
contracts. The Company also underwrites a block of individual life insurance
business through a reinsurance contract with its parent. Sun Life Assurance
Company of Canada (the parent company) is a mutual life insurance company. The
Company, which is domiciled in the State of Delaware, prepares its financial
statements in accordance with statutory accounting practices prescribed or
permitted by the State of Delaware Insurance Department. Statutory accounting
practices are considered to be generally accepted accounting principles for
mutual insurance companies and subsidiaries of mutuals. Prescribed accounting
practices include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and general
administrative rules. Permitted accounting practices encompass all accounting
practices not so prescribed. The permitted accounting practices adopted by the
Company are not material to the financial statements. Preparation of the
financial statements requires management to make certain estimates and
assumptions.
Assets in the balance sheets are stated at values prescribed or permitted to
be reported by state regulatory authorities. Bonds are carried at cost adjusted
for amortization of premium or accrual of discount. Investments in subsidiaries
are carried on the equity basis. Mortgage loans acquired at a premium or
discount are carried at amortized values and other mortgage loans at the amounts
of the unpaid balances. Real estate investments are carried at the lower of cost
or appraised value, adjusted for accumulated depreciation, less encumbrances.
Depreciation of buildings and improvements is calculated using the straight line
method over the estimated useful life of the property. For life and annuity
contracts, premiums are recognized as revenues over the premium paying period,
whereas commissions and other costs applicable to the acquisition of new
business are charged to operations as incurred. Furniture and equipment
acquisitions are capitalized but treated as nonadmitted assets. Furniture and
equipment depreciation is calculated on a straight line basis over the useful
life of the assets.
MANAGEMENT AND SERVICE CONTRACTS--
The Company has an agreement with its parent company which provides that the
parent company will furnish, as requested, personnel as well as certain services
and facilities on a cost reimbursement basis. Expenses under this agreement
amounted to approximately $20,293,000 in 1995, $18,452,000 in 1994, and
$13,883,000 in 1993.
REINSURANCE--
The Company has agreements with the parent company which provide that the parent
company will reinsure the mortality risks of the individual life insurance
contracts sold by the Company. Under these agreements basic death benefits and
supplementary benefits are reinsured on a yearly renewable term basis and
coinsurance basis, respectively. Reinsurance transactions under these agreements
had the effect of decreasing income from operations by approximately $2,184,000,
$2,138,000, and $1,046,000, for the years ended December 31, 1995, 1994 and
1993, respectively.
Effective January 1, 1991, the Company entered into an agreement with the
parent company under which 100% of certain fixed annuity contracts issued by the
Company were reinsured. Effective December 31, 1993 this agreement was
terminated. This agreement had the effect of decreasing income from operations
by approximately $9,930,000 in 1993.
Effective January 1, 1991, the Company entered into an agreement with the
parent company under which certain individual life insurance contracts issued by
the parent company were reinsured by the
51
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Company on a 90% coinsurance basis. Also, effective January 1, 1991, the Company
entered into an agreement with the parent company which provides that the parent
company will reinsure the mortality risks in excess of $500,000 per policy for
the individual life insurance contracts assumed by the Company in the
reinsurance agreement described above. Such death benefits are reinsured on a
yearly renewable term basis. These agreements had the effect of increasing
income from operations by approximately $11,821,000 in 1995, and decreasing
income by approximately $29,188,000, and $43,591,000 for the years ended
December 31, 1994 and 1993, respectively.
The life reinsurance assumed agreement requires the reinsurer to withhold
funds in amounts equal to the reserves assumed.
The following are summarized pro-forma results of operations of the Company
for the years ended December 31, 1995, 1994 and 1993 before the effect of
reinsurance transactions with the parent company.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other revenues $ 890,560 $ 962,320 $ 762,553
Net investment income and realized gains (losses) 306,893 304,155 293,557
------------ ------------ ------------
Subtotal 1,197,453 1,266,475 1,056,110
------------ ------------ ------------
Benefits and Expenses:
Policyholder benefits 1,030,342 1,092,192 926,827
Other expenses 130,302 130,457 85,575
------------ ------------ ------------
Subtotal 1,160,644 1,222,649 1,012,402
------------ ------------ ------------
Income from operations $ 36,809 $ 43,826 $ 43,708
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The Company has an agreement with an unrelated company which provides
reinsurance of certain individual life insurance contracts on a modified
coinsurance basis and under which all deficiency reserves related to these
contracts are reinsured. Reinsurance transactions under this agreement had the
effect of decreasing income from operations by $1,599,000 in 1995, increasing
income from operations by $1,854,000 in 1994 and decreasing income from
operations by $390,000 in 1993.
SEPARATE ACCOUNTS--
The Company has established unitized separate accounts applicable to various
classes of contracts providing for variable benefits. Contracts for which funds
are invested in separate accounts include variable life insurance and individual
and group qualified and non-qualified variable annuity contracts.
Assets and liabilities of the separate accounts, representing net deposits
and accumulated net investment earnings less fees, held primarily for the
benefit of contract holders are shown as separate captions in the financial
statements. Assets held in the separate accounts are carried at market values.
Deposits to all separate accounts are reported as increases in separate
account liabilities and are not reported as revenues. Mortality and expense risk
charges and surrender fees incurred by the separate accounts are included in
income of the Company.
52
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
The Company has established a non-unitized separate account for amounts
allocated to the fixed portion of certain combination fixed/variable deferred
annuity contracts. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Any difference between the assets and liabilities of the separate accounts
is treated as payable to or receivable from the general account of the Company.
Amounts payable to the general account of the Company were $148,675,000 in 1995
and $132,496,000 in 1994.
OTHER--
Income on investments is recognized on the accrual method.
The reserves for life insurance and annuity contracts, developed by accepted
actuarial methods, have been established and maintained on the basis of
published mortality tables using assumed interest rates and valuation methods
that will provide reserves at least as great as those required by law and
contract provisions.
Net income reported in the Company's statutory Annual Statement differs from
net income reported in these financial statements. Dividends from subsidiaries
are included in income and undistributed income (losses) of subsidiaries are
included as gains (losses) in unassigned surplus in the statutory Annual
Statement. Both the dividends and the undistributed income (losses) are included
in net income in these financial statements.
Investments in non-insurance subsidiaries are carried at their stockholders'
equity value, determined in accordance with generally accepted accounting
principles. Investments in insurance subsidiaries are carried at their statutory
surplus values.
Certain reclassifications have been made in the 1993 and 1994 financial
statements to conform to the classifications used in 1995.
2. INVESTMENTS IN SUBSIDIARIES:
The Company owns all of the outstanding shares of Massachusetts Financial
Services Company (MFS), Sun Life Insurance and Annuity Company of New York (Sun
Life (N.Y.)), Sun Investment Services Company (Sunesco), Sun Benefit Services
Company, Inc. (Sunbesco), Massachusetts Casualty Insurance Company (MCIC), New
London Trust, F.S.B. (NLT), Sun Capital Advisers, Inc. (Sun Capital), and Sun
Life Finance Corporation (Sunfinco).
Effective January 1, 1994, NLT acquired all of the outstanding shares of
Danielson Federal Savings and Loan Association of Danielson, Connecticut. These
two banks have been merged into a newly formed federally chartered savings bank
now called New London Trust, F.S.B.
MFS, a registered investment adviser, serves as investment adviser to the
mutual funds in the MFS family of funds and certain mutual funds and separate
accounts established by the Company, and the MFS Asset Management Group provides
investment advice to substantial private clients.
Clarendon Insurance Agency, Inc., a wholly-owned subsidiary of MFS, serves
as the distributor of certain variable contracts issued by the Company and Sun
Life (N.Y.). Sun Life (N.Y.) is engaged in the sale of individual fixed and
variable annuity contracts and group life and disability insurance contracts in
the state
53
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
2. INVESTMENTS IN SUBSIDIARIES (CONTINUED):
of New York. Sunesco is a registered investment adviser and broker-dealer. MCIC
is a life insurance company which issues only individual disability income
policies. Sun Capital, a registered investment adviser, Sunfinco, and Sunbesco
are currently inactive.
In 1994, the Company reduced its carrying value of MCIC by $18,397,000, the
unamortized amount of goodwill. The reduction was accounted for as a direct
charge to surplus.
During 1995, 1994 and 1993, the Company contributed capital in the following
amounts to its subsidiaries:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
MCIC $6,000,000 $6,000,000 $6,000,000
Sun Capital 0 0 250,000
New London Trust 0 0 9,000,000
</TABLE>
Summarized combined financial information of the Company's subsidiaries as
of December 31, 1995, 1994 and 1993 and for the years then ended, follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN 000'S)
<S> <C> <C> <C>
Intangible assets $ 12,174 $ 13,485 $ 14,891
Other assets, net of liabilities 126,108 121,321 112,332
--------- --------- ---------
Total net assets $ 138,282 $ 134,806 $ 127,223
--------- --------- ---------
--------- --------- ---------
Total income $ 570,794 $ 495,097 $ 424,324
Operating expenses (504,070) (425,891) (355,679)
Income tax expense (31,193) (29,374) (24,507)
--------- --------- ---------
Net income $ 35,531 $ 39,832 $ 44,138
--------- --------- ---------
--------- --------- ---------
</TABLE>
3. STOCK, SURPLUS NOTES, CONTRIBUTIONS AND NOTE RECEIVABLE:
The Company has issued surplus notes to its parent of $335,000,000 during the
years 1982 through 1993 at interest rates between 7.25% and 10%. The Company
subsequently repaid all principal and interest associated with these surplus
notes on January 16, 1996. On December 19, 1995 the Company issued surplus notes
totalling $315,000,000 to an affiliate, Sun Canada Financial Co., at interest
rates between 5.75% and 7.25%. Of these notes, $157,500,000 will mature in the
year 2007, and $157,500,000 will mature in the year 2015. Interest on these
notes is payable semi-annually. Principal and interest on surplus notes are
payable only to the extent that the Company meets specified requirements as
regards free surplus exclusive of the principal amount and accrued interest, if
any, on these notes; and, in the case of principal repayments, with the consent
of the Delaware Insurance Commissioner. Interest payments require the consent of
the Delaware Insurance Commissioner after December 31, 1993. Payment of
principal and interest on the notes issued in 1995 also requires the consent of
the Canadian Office of the Superintendent of Financial Institutions. The Company
expensed $31,813,000, $31,150,000 and $26,075,000 in respect of interest on
surplus notes for the years 1995, 1994 and 1993, respectively. On December 19,
1995, the parent borrowed $120,000,000 at 5.6 % through a short term note from
the Company maturing on January 16, 1996. The note, which is classified under
short-term bonds at December 31, 1995, was repaid in full by the parent at
maturity.
54
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. BONDS:
The amortized cost and estimated market value of investments in debt securities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(IN 000'S)
Long-term bonds:
United States government and
government agencies and authorities $ 467,597 $ 22,783 $ 443 $ 489,937
States, provinces and political
subdivisions 2,252 81 0 2,333
Foreign governments 38,303 4,551 6 42,848
Public utilities 513,704 45,466 203 558,967
Transportation 215,786 22,794 2,221 236,359
Finance 225,074 13,846 84 238,836
All other corporate bonds 1,045,745 67,371 7,415 1,105,701
---------- ---------- ---------- ----------
Total long-term bonds 2,508,461 176,892 10,372 2,674,981
Short-term bonds:
U.S. Treasury Bills, bankers
acceptances and commercial paper 337,606 0 0 337,606
---------- ---------- ---------- ----------
$2,846,067 $176,892 $10,372 $3,012,587
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
(IN 000'S)
Long-term bonds:
United States government and
government agencies and authorities $ 444,100 $ 5,017 $11,010 $ 438,107
States, provinces and political
subdivisions 252 0 17 235
Foreign governments 20,965 147 187 20,925
Public utilities 458,839 11,414 11,619 458,633
Transportation 215,478 5,099 9,444 211,133
Finance 193,355 3,734 4,010 193,080
All other corporate bonds 1,055,455 15,785 31,171 1,040,069
---------- --------- ---------- ----------
Total long-term bonds 2,388,444 41,196 67,458 2,362,182
Short-term bonds:
U.S. Treasury Bills, bankers
acceptances and commercial paper 82,708 0 0 82,708
---------- --------- ---------- ----------
$2,471,152 $41,196 $67,458 $2,444,890
---------- --------- ---------- ----------
---------- --------- ---------- ----------
</TABLE>
55
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. BONDS (CONTINUED):
The amortized cost and estimated market value of bonds at December 31, 1995
and 1994 are shown below by contractual maturity. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
(IN 000'S)
Maturities are:
Due in one year or less $ 678,775 $ 681,119
Due after one year through five
years 844,446 866,230
Due after five years through ten
years 256,552 269,549
Due after ten years 884,187 1,000,908
---------- ----------
2,663,960 2,817,806
Mortgage-backed securities 182,107 194,781
---------- ----------
$2,846,067 $3,012,587
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
(IN 000'S)
Maturities are:
Due in one year or less $ 209,875 $ 209,527
Due after one year through five
years 953,222 930,578
Due after five years through ten
years 319,858 311,360
Due after ten years 877,062 885,462
---------- ----------
2,360,017 2,336,927
Mortgage-backed securities 111,135 107,963
---------- ----------
$2,471,152 $2,444,890
---------- ----------
---------- ----------
</TABLE>
Proceeds from sales of investments in debt securities during 1995, 1994, and
1993 were $1,510,553,000, $1,390,974,000, and $911,644,000, gross gains were
$24,757,000, $15,025,000, and $43,674,000 and gross losses were $5,742,000,
$30,041,000 and $687,000, respectively.
Long-term bonds at December 31, 1995 and 1994 included $20,000,000 of bonds
issued to the Company by a subsidiary company, MFS, during 1987. These bonds
will mature in 2000.
Bonds included above with an amortized cost of approximately $2,059,000 and
$1,561,000 at December 31, 1995 and 1994, respectively, were on deposit with
governmental authorities as required by law.
At year end 1995, the Company had outstanding mortgage-backed securities
(MBS) forward commitments amounting to a par value of $137,675,000 to be funded
through the sale of certain short-term securities shown above.
56
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
5. SECURITIES LENDING:
The Company has a securities lending program operated on its behalf by the
Company's primary custodian, Chemical Bank of New York. The custodian has
indemnified the Company against losses arising from this program. The total par
value of securities out on loan was $250,729,000 at December 31, 1995.
6. MORTGAGE LOANS:
The Company invests in commercial first mortgage loans throughout the United
States. The Company monitors the condition of the mortgage loans in its
portfolio. In those cases where mortgages have been restructured, appropriate
provisions have been made. In those cases where, in management's judgement, the
mortgage loans' values are impaired, appropriate losses are recorded.
The following table shows the geographic distribution of the mortgage
portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
---------- -----------
(IN 000'S)
<S> <C> <C>
California $ 153,811 $ 131,953
Massachusetts 83,999 101,932
Pennsylvania 141,468 136,778
Ohio 83,915 79,478
Washington 91,900 90,422
Michigan 69,125 75,592
New York 81,480 93,178
All other 361,213 411,648
---------- -----------
$1,066,911 $1,120,981
---------- -----------
---------- -----------
</TABLE>
The Company has restructured mortgage loans totalling $49,846,000, against
which there are provisions of $8,799,000 at December 31, 1995.
The Company has made commitments of mortgage loans on real estate into the
future. The outstanding commitments for these mortgages amount to $13,100,000 at
December 31, 1995.
57
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
7. INVESTMENTS--GAINS AND LOSSES:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1994 1993
------- ------- --------
(IN 000'S)
<S> <C> <C> <C>
Net realized gains (losses) (pre-tax):
Bonds $(2,300) $ 0 $ 0
Mortgage loans 418 (5,689) (9,975)
Stocks 0 0 445
Real estate 391 (334) (2,873)
Other assets 57 (143) 0
------- ------- --------
$(1,434) $(6,166) $(12,403)
------- ------- --------
------- ------- --------
Changes in unrealized gains (losses):
Bonds $ 0 $ 0 $ 84
Mortgage loans (1,574) 0 0
Real estate 3,583 (671) (4,113)
Stocks 0 0 (411)
------- ------- --------
$ 2,009 $ (671) $ (4,440)
------- ------- --------
------- ------- --------
</TABLE>
Realized capital gains and losses on bonds and mortgages which relate to
changes in levels of interest rate risk are charged or credited to an interest
maintenance reserve and amortized into income over the remaining contractual
life of the security sold. The realized capital gains and losses credited or
charged to the interest maintenance reserve were a credit of $12,714,000 in
1995, a charge of $14,070,000 in 1994 and a credit of $40,993,000 in 1993. All
gains and losses are net of applicable taxes.
8. INVESTMENT INCOME:
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $205,445 $200,339 $204,405
Interest income from mortgage loans 99,753 106,347 99,790
Interest income from policy loans 2,777 2,670 2,503
Real estate investment income 10,693 8,649 8,593
Interest income on funds withheld 57,373 30,741 19,420
Other 2,627 1,418 645
-------- -------- --------
Gross investment income 378,668 350,164 335,356
Investment expenses 12,070 12,417 12,679
Interest expense on funds withheld 0 0 69,181
-------- -------- --------
$366,598 $337,747 $253,496
-------- -------- --------
-------- -------- --------
</TABLE>
58
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
9. DERIVATIVES:
The Company uses derivative instruments for interest risk management purposes,
including hedges against specific interest rate risk and to minimize the
Company's exposure to fluctuations in interest rates. The Company's use of
derivatives has included U.S. Treasury futures, conventional interest rate
swaps, and forward spread lock interest rate swaps.
In the case of interest rate futures, gains or losses on contracts that
qualify as hedges are deferred until the earliest of the completion of the
hedging transaction, determination that the transaction will no longer take
place, or determination that the hedge is no longer effective. Upon completion
of the hedge, gains or losses are deferred in IMR and amortized over the
remaining life of the hedged assets. At December 31, 1995, there were no futures
contracts outstanding.
In the case of interest rate and foreign currency swap agreements and
forward spread lock interest rate swap agreements, gains or losses on terminated
swaps are deferred in IMR and amortized over the shorter of the remaining life
of the hedged asset or the remaining term of the swap contract. The net
differential to be paid or received on interest rate swaps is recorded monthly
as interest rates change.
<TABLE>
<CAPTION>
SWAPS OUTSTANDING
AT DECEMBER 31, 1995
--------------------------------
NOTIONAL MARKET VALUE
PRINCIPAL AMOUNTS OF POSITIONS
----------------- ------------
(IN 000'S)
<S> <C> <C>
Conventional interest rate swaps $367,000 $3,275
Foreign currency swap 2,745 290
Forward spread lock swaps $ 50,000 $ 112
</TABLE>
The market values of interest rate swaps and forward spread lock agreements
are primarily obtained from dealer quotes. The market value is the estimated
amount that the Company would receive or pay on termination or sale, taking into
account current interest rates and the current creditworthiness of the counter
parties. The Company is exposed to potential credit loss in the event of
non-performance by counterparties. The counterparties are major financial
institutions and management believes that the risk of incurring losses related
to credit risk is remote.
10. LEVERAGED LEASES:
The Company is a lessor in a leveraged lease agreement entered into on October
21, 1994 under which equipment having an estimated economic life of 25-40 years
was leased for a term of 9.75 years. The Company's equity investment represented
22.9% of the purchase price of the equipment. The balance of the purchase price
was furnished by third party long-term debt financing, secured by the equipment
and non-recourse to the Company. At the end of the lease term, the Master Lessee
may exercise a fixed price purchase option to purchase the equipment.
59
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
10. LEVERAGED LEASES (CONTINUED):
The Company's net investment in leveraged leases is composed of the
following elements:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1995 1994
--------- ---------
(IN 000'S)
<S> <C> <C>
Lease contracts receivable $ 111,611 $ 121,716
Less non-recourse debt (111,594) (121,699)
--------- ---------
17 17
Estimated residual value of leased assets 41,150 41,150
Less unearned and deferred income (13,132) (15,292)
--------- ---------
Investment in leveraged leases 28,035 25,875
Less fees (213) (237)
--------- ---------
Net investment in leveraged leases $ 27,822 $ 25,638
--------- ---------
--------- ---------
</TABLE>
The net investment is classified as other invested assets in the
accompanying balance sheets.
11. WITHDRAWAL CHARACTERISTICS OF ANNUITY ACTUARIAL RESERVES AND DEPOSIT
LIABILITIES:
Withdrawal characteristics of general account and separate account annuity
reserves and deposits:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------
AMOUNT % OF TOTAL
---------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal--with adjustment
--with market value adjustment $3,796,596 36.36%
--at book value less surrender charges (surrender
charge >5%) 4,066,126 38.94
--at book value (minimal or no charge or adjustment) 1,278,215 12.24
Not subject to discretionary withdrawal provision 1,301,259 12.46
---------- ----------
Total annuity actuarial reserves and deposit liabilities $10,442,196 100.00%
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------
AMOUNT % OF TOTAL
---------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal--with adjustment
-- with market value adjustment $3,083,623 35.98%
-- at book value less surrender charges (surrender
charge > 5%) 2,915,460 34.02
-- at book value (minimal or no charge or
adjustment) 1,252,843 14.62
Not subject to discretionary withdrawal provision 1,318,092 15.38
---------- ----------
Total annuity actuarial reserves and deposit liabilities $8,570,018 100.00%
---------- ----------
---------- ----------
</TABLE>
12. RETIREMENT PLANS:
The Company participates with its parent company in a non-contributory defined
benefit pension plan covering essentially all employees. The benefits are based
on years of service and compensation.
60
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
12. RETIREMENT PLANS (CONTINUED):
The funding policy for the pension plan is to contribute an amount which at
least satisfies the minimum amount required by ERISA. The Company is charged for
its share of the pension cost based upon its covered participants. Pension plan
assets consist principally of a variable accumulation fund contract held in a
separate account of the parent company.
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 87, which is in accordance with generally accepted accounting
principles.
The following table sets forth the funded status for the pension plan (for
the parent, Sun Life (U.S.), Sun Life (N.Y.) and Sunesco) at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
TOTAL PENSION PLAN
------------------
1995 1994
-------- --------
(IN 000'S)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(40,949) $(38,157)
Accumulated benefit obligation (42,452) (39,686)
-------- --------
-------- --------
Projected benefit obligation for service rendered to
date $(60,885) $(53,494)
Plan assets at fair value 117,178 101,833
-------- --------
Difference between plan assets and projected benefit
obligation 56,293 48,339
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions (9,016) (1,238)
Unrecognized net asset at January 1, 1994, being
recognized over 17 years (30,842) (32,898)
-------- --------
Prepaid pension cost included in other assets $ 16,435 $ 14,203
-------- --------
-------- --------
</TABLE>
The components of the 1995 and 1994 pension cost for the pension plan were:
<TABLE>
<CAPTION>
TOTAL PENSION
PLAN
-----------------
1995 1994
-------- -------
(IN 000'S)
<S> <C> <C>
Service cost $ 3,389 $ 2,847
Interest cost 4,050 3,770
Actual return on plan assets (16,388) (8,294)
Net amortization and deferral 6,715 (818)
-------- -------
Net pension income $ (2,234) $(2,495)
-------- -------
-------- -------
</TABLE>
The Company's share of the group's accrued pension cost at December 31, 1995
and 1994 was $420,000 and $417,000, respectively. The Company's share of net
periodic pension cost was $3,000 and $417,000, respectively.
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation were
7.5% and 4.5%, respectively. The expected long-term rate of return on assets was
7.5%.
61
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
12. RETIREMENT PLANS (CONTINUED):
The Company also participates with its parent and certain affiliates in a
401(k) savings plan for which substantially all employees are eligible. The
Company matches, up to specified amounts, employees' contributions to the plan.
Employer contributions were $185,000, $152,000 and $124,000 for the years ended
December 31, 1995, 1994, and 1993, respectively.
13. OTHER POST-RETIREMENT BENEFIT PLANS:
In addition to pension benefits the Company provides certain health, dental, and
life insurance benefits ("post-retirement benefits") for retired employees and
dependents. Substantially all employees may become eligible for these benefits
if they reach normal retirement age while working for the Company, or retire
early upon satisfying an alternate age plus service condition. Life insurance
benefits are generally set at a fixed amount.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers Accounting for Post-retirement
Benefits other than Pensions". SFAS No. 106 requires the Company to accrue the
estimated cost of retiree benefit payments during the years the employee
provides services. SFAS No. 106 allows recognition of the cumulative effect of
the liability in the year of adoption or the amortization of the obligation over
a period of up to 20 years. The Company has elected to recognize this obligation
of approximately $400,000 over a period of ten years. The Company's cash flows
are not affected by implementation of this standard, but implementation
decreased net income by $142,000, $114,000, and $120,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. The Company's post-retirement
health care plans currently are not funded.
The following table sets forth the plan's funded status, reconciled with
amounts recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------- -------
(IN 000'S)
<S> <C> <C>
Accumulated post-retirement benefit obligation:
--Retirees $ 0 $ 0
--Fully eligible active plan participants (601) (444)
--Other active plan participants 0 0
------- -------
--Accumulated post-retirement benefit obligation in excess
of plan assets (601) (444)
--Unrecognized gains from past experience (55) (110)
--Unrecognized transition obligation 280 320
------- -------
--Accrued post-retirement benefit cost $(376) $(234)
------- -------
------- -------
Net periodic post-retirement benefit cost components:
--Service cost--benefits earned $ 65 $ 49
--Interest cost on accumulated post-retirement benefit
obligation 42 33
--Amortization of transition obligation 40 40
--Net amortization and deferral (5) (8)
------- -------
--Net periodic post-retirement benefit cost $ 142 $ 114
------- -------
------- -------
</TABLE>
The discount rate used in determining the accumulated post-retirement
benefit obligation was 7.5% in 1995 and 8% in 1994, and the assumed health care
cost trend rate was 12.0% graded to 6% over 10 years after which it remains
constant.
62
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
13. OTHER POST-RETIREMENT BENEFIT PLANS (CONTINUED):
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the post-retirement
benefit obligation as of December 31, 1995 by $149,000 and the estimated service
and interest cost components of the net periodic post-retirement benefit cost
for 1995 by $29,000.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and estimated fair values of
the Company's financial instruments at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------
ESTIMATED
CARRYING AMOUNT FAIR VALUE
--------------- ------------
(IN 000'S)
<S> <C> <C>
ASSETS
Bonds 2,846,067 3,012,586
Mortgages 1,066,911 1,111,895
Real estate 95,575 98,437
LIABILITIES
Insurance reserves 124,066 124,066
Individual annuities 434,261 431,263
Pension products 2,227,882 2,265,386
Derivatives -- 3,387
<CAPTION>
DECEMBER 31, 1994
------------------------------
ESTIMATED
CARRYING AMOUNT FAIR VALUE
--------------- ------------
(IN 000'S)
<S> <C> <C>
ASSETS
Bonds $2,471,152 $2,444,890
Mortgages 1,120,981 1,107,012
Real estate 89,487 91,072
LIABILITIES
Insurance reserves 129,302 129,302
Individual annuities 475,557 476,570
Pension products 2,772,618 2,668,382
Derivatives -- 1
</TABLE>
The major methods and assumptions used in estimating the fair values of
financial instruments are as follows:
The fair values of short-term bonds are estimated to be the amortized cost.
The fair values of long-term bonds which are publicly traded are based upon
market prices or dealer quotes. For privately placed bonds, fair values are
estimated using prices for publicly traded bonds of similar credit risk and
maturity and repayment characteristics.
The fair values of the Company's general account reserves and liabilities
under investment-type contracts (insurance, annuity and pension contracts that
do not involve mortality or morbidity risks) are estimated using discounted cash
flow analyses or surrender values. Those contracts that are deemed to have short
term guarantees have a carrying amount equal to the estimated market value.
63
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
The fair values of mortgages are estimated by discounting future cash flows
using current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
15. STATUTORY INVESTMENT VALUATION RESERVES:
The asset valuation reserve (AVR) provides a reserve for losses from investments
in bonds, stocks, mortgage loans, real-estate and other invested assets with
related increases or decreases being recorded directly to surplus.
Realized capital gains and losses on bonds and mortgages which relate to
changes in levels of interest rate risk are charged or credited to an interest
maintenance reserve (IMR) and amortized into income over the remaining
contractual life of the security sold.
The tables shown below present changes in the major elements of the AVR and
IMR.
<TABLE>
<CAPTION>
1995 1994
---------------- ---------------
AVR IMR AVR IMR
------- ------- ------- ------
(IN 000'S) (IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $28,409 $18,140 $20,033 $31,414
Realized capital gains (losses), net of
tax (1,524) 7,977 (1,320) (9,958)
Amortization of investment gains 0 (897) 0 (3,316)
Unrealized investment gains (losses) 3,650 0 (3,537) 0
Required by formula 11,564 0 13,233 0
------- ------- ------- ------
Balance, end of year $42,099 $25,218 $28,409 $18,140
------- ------- ------- ------
------- ------- ------- ------
</TABLE>
16. FEDERAL INCOME TAXES:
The Company and its subsidiaries file a consolidated federal income tax return.
Federal income taxes are calculated for the consolidated group based upon
amounts determined to be payable as a result of operations within the current
year. No provision is recognized for timing differences which may exist between
financial statement and taxable income. Such timing differences include
reserves, depreciation and accrual of market discount on bonds. Cash payments
for federal income taxes were approximately $12,429,000, $43,200,000 and
$25,000,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
17. RISK-BASED CAPITAL:
Effective December 31, 1993 the NAIC adopted risk-based capital requirements for
life insurance companies. The risk-based capital requirements provide a method
for measuring the minimum acceptable amount of adjusted capital that a life
insurer should have, as determined under statutory accounting practices, taking
into account the risk characteristics of its investments and products. The
Company has met the minimum risk-based capital requirements for 1995 and 1994.
18. NEW ACCOUNTING PRONOUNCEMENT:
In April, 1993, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises." Under this
interpretation, annual financial statements of mutual life insurance enterprises
for fiscal years beginning after December 15, 1992, shall provide a brief
description that financial statements prepared on the basis of statutory
accounting practices will no longer be described as prepared in conformity with
64
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
18. NEW ACCOUNTING PRONOUNCEMENT (CONTINUED):
generally accepted accounting principles. In January 1995, Statement of
Financial Accounting Standards No. 120 (SFAS No. 120) "Accounting and Reporting
by Mutual Life Insurance Enterprises for Certain Long Duration Participating
Contracts" was issued. SFAS No. 120 delays the effective date of interpretation
No. 40 until fiscal years beginning after December 15, 1995.
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDER
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
WELLESLEY HILLS, MASSACHUSETTS
We have audited the accompanying balance sheets of Sun Life Assurance
Company of Canada (U.S.) (a wholly-owned subsidiary of Sun Life Assurance
Company of Canada) as of December 31, 1995 and 1994, and the related statements
of operations, capital stock and surplus, and cash flows for each of the three
years in the period ended December 31, 1995. 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.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1994, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 7, 1996
65
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
ACCOUNT VALUES AND CASH SURRENDER VALUES
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS, SURRENDER VALUES
AND ACCUMULATED PREMIUMS
The Tables on the following pages illustrate the way in which a Policy's
Death Benefit, Account Value and Cash Surrender Value could vary over an
extended period of time. They assume that all Premiums are allocated to and
remain in the Variable Account for the entire period shown and are based on
hypothetical gross annual investment returns for the Portfolios (i.e.,
investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross annual rates of 0%, 6%, and 12% over the periods
indicated.
All Tables illustrate a Policy where the Insured is a male, Issue Age 45, in
the preferred (non-tobacco) rate class. These illustrations all assume a Total
Face Amount of $500,000 and payment of an annual Premium of $12,600. Tables 1,
2, 5 & 6 assume a Specified Face Amount of $500,000. Tables 3 and 4 assume a
Specified Face Amount of $50,000 and an APB Rider Face Amount of $450,000.
Tables 1 and 2 are based on guaranteed issue underwriting, Death Benefit Option
A, the Cash Value Accumulation Test and a Specified Face Amount of $500,000.
Tables 3 and 4 are based on the same assumptions, except that the Total Face
Amount reflects a Specified Face Amount of $50,000 and an APB Rider Face Amount
of $450,000. Tables 5 and 6 are based on full medical underwriting, Death
Benefit Option B, the Guideline Premium Test, and a Specified Face Amount of
$500,000. Tables 1, 3 and 5 differ from Tables 2, 4 and 6, respectively, only in
that Tables 1, 3 and 5 reflect the deduction of current Policy charges as
outlined below, while Tables 2, 4 and 6 reflect the deduction of Policy charges
at the guaranteed maximum rates (except that Kentucky Policy Owners will have
higher premium tax deductions than those reflected).
The Account Values and Death Benefits would be different from those shown if
the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below such averages for individual
Policy Years. The values would also be different depending on the allocation of
a Policy's total Account Value among the Sub-Accounts of the Variable Account,
if the actual rates of return averaged 0%, 6% or 12%, but the rates of each
Portfolio varied above and below such averages.
The amounts shown for the Death Benefits and Account Values take into
account all charges and deductions imposed under the Policy based on the
assumptions set forth in the Tables. These include: Expense Charges Applied to
Premium, assuming a premium tax rate of 2% for Tables 1, 3 and 5 and 4% for
Tables 2, 4 and 6. The Daily Risk Percentage charged against the Separate
Account for mortality and expense risks, at an effective annual rate of 0.75%
for the first 10 Policy Years and 0.35% thereafter for Tables 1, 3 and 5, and
0.90% for all Policy Years for Tables 2, 4 and 6; the Monthly Expense Charge of
$13.75 per month for the first Policy Year and $7.50 per month thereafter for
Tables 1, 3 and 5, and $13.75 per month for all Policy Years for Tables 2, 4,
and 6; and the Monthly Cost of Insurance based on current charges for Tables 1,
3 and 5, and guaranteed charges for Tables 2, 4, and 6.
The amounts shown in the Tables also take into account the Portfolios'
advisory fees and operating expenses, which are assumed to be at an annual rate
of 0.76% of the average daily net assets of each Portfolio. This is based upon a
simple average of the advisory fees and expenses of all the Portfolios for the
most recent fiscal year taking into account any applicable expense caps or
expense reimbursement arrangements. Actual fees and expenses of the Portfolios
may be more or less than 0.76%, will vary from year to year, and will depend
upon how Account Value is allocated among the Sub-Accounts. See the individual
prospectus for each Portfolio for more information on Portfolio expenses.
The gross annual rates of investment return of 0%, 6% and 12% correspond to
net annual rates of -1.50%, 4.46%, and 10.41%, respectively, during the first 10
Policy Years and -1.11%, 4.87%, and 10.85%, respectively, thereafter taking into
account the current Daily Risk Percentage and the assumed 0.76% charge for the
Portfolio's advisory fees and operating expenses; and -1.65%, 4.30% and 10.25%,
respectively taking into account the guaranteed Daily Risk Percentage.
A-1
<PAGE>
The hypothetical returns shown in the Tables do not reflect any charges for
income taxes against the Separate Account since no charges are currently made.
If, in the future, such charges are made, in order to produce the illustrated
death benefits and cash values, the gross annual investment rate of return would
have to exceed 0%, 6%, or 12% by a sufficient amount to cover the tax charges.
The second column of each Table shows the amount which would accumulate if
an amount equal to each Premium were invested and earned interest, after taxes,
at 5% per year, compounded annually.
We will furnish upon request a comparable Table using any specific set of
circumstances. In addition to a Table assuming Policy charges at their maximum,
we will furnish a Table assuming current Policy charges.
A-2
<PAGE>
TABLE 1
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, GI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 12%
HYPOTHETICAL 0% HYPOTHETICAL 6% GROSS INVESTMENT
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
PREMIUMS NET -1.50% NET 4.46% NET 10.41%
PAID PLUS ----------------------------------- ----------------------------------- ----------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
- --------- ----------- ----------- ----------- --------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 10,925 10,169 500,000 11,565 10,809 500,000 12,204 11,448
2 27,121 20,651 19,895 500,000 22,559 21,803 500,000 24,544 23,788
3 41,708 30,026 29,270 500,000 33,837 33,081 500,000 37,962 37,206
4 57,023 38,380 38,380 500,000 44,741 44,741 500,000 51,905 51,905
5 73,104 47,270 47,270 500,000 56,845 56,845 500,000 68,072 68,072
6 89,989 55,980 55,980 500,000 69,454 69,454 500,000 85,902 85,902
7 107,719 64,535 64,535 500,000 82,616 82,616 500,000 105,603 105,603
8 126,335 74,029 74,029 500,000 97,516 97,516 500,000 128,601 128,601
9 145,881 83,314 83,314 500,000 113,039 113,039 500,000 153,994 153,994
10 166,406 92,406 92,406 500,000 129,232 129,232 500,000 182,060 182,060
11 187,956 101,678 101,678 500,000 146,682 146,682 500,000 213,923 213,923
12 210,584 110,709 110,709 500,000 164,902 164,902 500,000 249,222 249,222
13 234,343 119,502 119,502 500,000 183,943 183,943 500,000 288,090 288,090
14 259,290 128,052 128,052 500,000 203,856 203,856 500,000 330,859 330,859
15 285,484 136,404 136,404 500,000 224,739 224,739 500,000 377,956 377,956
16 312,989 144,417 144,417 500,000 246,552 246,552 500,000 429,661 429,661
17 341,868 152,125 152,125 500,000 269,395 269,395 501,922 486,444 486,444
18 372,191 159,539 159,539 500,000 293,163 293,163 532,725 548,811 548,811
19 404,031 166,616 166,616 500,000 317,799 317,799 563,520 617,238 617,238
20 437,463 173,376 173,376 500,000 343,345 343,345 594,418 692,332 692,332
Age 60 285,484 136,404 136,404 500,000 224,739 224,739 500,000 377,956 377,956
Age 65 437,463 173,376 173,376 500,000 343,345 343,345 594,418 692,332 692,332
Age 70 631,430 201,236 201,236 500,000 484,908 484,908 751,233 1,190,109 1,190,109
Age 75 878,986 216,310 216,310 500,000 650,644 650,644 914,467 1,968,491 1,968,491
<CAPTION>
POLICY DEATH
YEAR BENEFIT
- --------- -----------
<S> <C>
1 500,000
2 500,000
3 500,000
4 500,000
5 500,000
6 500,000
7 500,000
8 500,000
9 500,000
10 500,000
11 500,000
12 529,453
13 595,687
14 666,134
15 741,247
16 821,144
17 906,317
18 997,280
19 1,094,486
20 1,198,605
Age 60 741,247
Age 65 1,198,605
Age 70 1,843,748
Age 75 2,766,675
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or withdrawals
may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-3
<PAGE>
TABLE 2
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, GI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 12%
HYPOTHETICAL 0% HYPOTHETICAL 6% GROSS INVESTMENT
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
PREMIUMS NET -1.65% NET 4.30% NET 10.25%
PAID PLUS ----------------------------------- ----------------------------------- ----------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
- --------- ----------- ----------- ----------- --------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 9,035 8,279 500,000 9,615 8,859 500,000 10,197 9,441
2 27,121 17,037 16,281 500,000 18,715 17,959 500,000 20,466 19,710
3 41,708 24,758 24,002 500,000 28,061 27,305 500,000 31,646 30,890
4 57,023 31,441 31,441 500,000 36,906 36,906 500,000 43,081 43,081
5 73,104 38,585 38,585 500,000 46,760 46,760 500,000 56,379 56,379
6 89,989 45,429 45,429 500,000 56,875 56,875 500,000 70,904 70,904
7 107,719 51,944 51,944 500,000 67,236 67,236 500,000 86,769 86,769
8 126,335 59,203 59,203 500,000 78,995 78,995 500,000 105,337 105,337
9 145,881 66,076 66,076 500,000 91,044 91,044 500,000 125,672 125,672
10 166,406 72,536 72,536 500,000 103,376 103,376 500,000 147,969 147,969
11 187,956 78,570 78,570 500,000 116,003 116,003 500,000 172,468 172,468
12 210,584 84,159 84,159 500,000 128,935 128,935 500,000 199,442 199,442
13 234,343 89,301 89,301 500,000 142,200 142,200 500,000 229,220 229,220
14 259,290 93,979 93,979 500,000 155,820 155,820 500,000 262,030 262,030
15 285,484 98,173 98,173 500,000 169,819 169,819 500,000 297,607 297,607
16 312,989 101,843 101,843 500,000 184,211 184,211 500,000 336,122 336,122
17 341,868 104,939 104,939 500,000 199,011 199,011 500,000 377,780 377,780
18 372,191 107,397 107,397 500,000 214,233 214,233 500,000 422,784 422,784
19 404,031 109,137 109,137 500,000 229,894 229,894 500,000 471,341 471,341
20 437,463 110,081 110,081 500,000 246,028 246,028 500,000 523,670 523,670
Age 60 285,484 98,173 98,173 500,000 169,819 169,819 500,000 297,607 297,607
Age 65 437,463 110,081 110,081 500,000 246,028 246,028 500,000 523,670 523,670
Age 70 631,430 100,172 100,172 500,000 335,833 335,833 520,281 851,335 851,335
Age 75 878,986 51,312 51,312 500,000 433,735 433,735 609,606 1,316,068 1,316,068
<CAPTION>
POLICY DEATH
YEAR BENEFIT
- --------- -----------
<S> <C>
1 500,000
2 500,000
3 500,000
4 500,000
5 500,000
6 500,000
7 500,000
8 500,000
9 500,000
10 500,000
11 500,000
12 500,000
13 500,000
14 527,558
15 583,667
16 642,379
17 703,859
18 768,268
19 835,781
20 906,607
Age 60 583,667
Age 65 906,607
Age 70 1,318,911
Age 75 1,849,707
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or withdrawals
may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-4
<PAGE>
TABLE 3
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VARIABLE UNIVERSAL LIFE POLICY
MALE, PREFERRED, GI, AGE 45
$50,000 SPECIFIED FACE AMOUNT
$450,000 APB RIDER FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 12%
HYPOTHETICAL 0% HYPOTHETICAL 6% GROSS INVESTMENT
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
PREMIUMS NET -1.50% NET 4.46% NET 10.41%
PAID PLUS ----------------------------------- ----------------------------------- ----------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
- --------- ----------- ----------- ----------- --------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 11,187 10,800 500,000 11,864 11,477 500,000 12,542 12,155
2 27,121 21,536 21,149 500,000 23,559 23,172 500,000 25,664 25,277
3 41,708 31,527 31,139 500,000 35,571 35,184 500,000 39,949 39,562
4 57,023 40,858 40,858 500,000 47,614 47,614 500,000 55,222 55,222
5 73,104 50,350 50,350 500,000 60,525 60,525 500,000 72,453 72,453
6 89,989 59,655 59,655 500,000 73,980 73,980 500,000 91,464 91,464
7 107,719 68,799 68,799 500,000 88,030 88,030 500,000 112,472 112,472
8 126,335 78,244 78,244 500,000 103,191 103,191 500,000 136,212 136,212
9 145,881 87,481 87,481 500,000 118,989 118,989 500,000 162,428 162,428
10 166,406 96,527 96,527 500,000 135,471 135,471 500,000 191,409 191,409
11 187,956 105,770 105,770 500,000 153,253 153,253 500,000 224,331 224,331
12 210,584 114,775 114,775 500,000 171,825 171,825 500,000 260,714 260,714
13 234,343 123,544 123,544 500,000 191,241 191,241 500,000 300,759 300,759
14 259,290 132,072 132,072 500,000 211,554 211,554 500,000 344,822 344,822
15 285,484 140,403 140,403 500,000 232,862 232,862 500,000 393,344 393,344
16 312,989 148,401 148,401 500,000 255,130 255,130 500,000 446,611 446,611
17 341,868 156,095 156,095 500,000 278,388 278,388 518,677 505,109 505,109
18 372,191 163,498 163,498 500,000 302,528 302,528 549,744 569,358 569,358
19 404,031 170,569 170,569 500,000 327,549 327,549 580,809 639,848 639,848
20 437,463 177,326 177,326 500,000 353,492 353,492 611,986 717,205 717,205
Age 60 285,484 140,403 140,403 500,000 232,862 232,862 500,000 393,344 393,344
Age 65 437,463 177,326 177,326 500,000 353,492 353,492 611,986 717,205 717,205
Age 70 631,430 205,250 205,250 500,000 497,229 497,229 770,321 1,229,956 1,229,956
Age 75 878,986 220,582 220,582 500,000 665,457 665,457 935,287 2,031,707 2,031,707
<CAPTION>
POLICY DEATH
YEAR BENEFIT
- --------- -----------
<S> <C>
1 500,000
2 500,000
3 500,000
4 500,000
5 500,000
6 500,000
7 500,000
8 500,000
9 500,000
10 500,000
11 500,000
12 553,868
13 621,883
14 694,247
15 771,426
16 853,539
17 941,092
18 1,034,616
19 1,134,579
20 1,241,666
Age 60 771,426
Age 65 1,241,666
Age 70 1,905,481
Age 75 2,855,524
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or withdrawals
may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-5
<PAGE>
TABLE 4
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VARIABLE UNIVERSAL LIFE POLICY
MALE, PREFERRED, GI, AGE 45
$50,000 SPECIFIED FACE AMOUNT
$450,000 APB RIDER FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 12%
HYPOTHETICAL 0% HYPOTHETICAL 6% GROSS INVESTMENT
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
PREMIUMS NET -1.65% NET 4.30% NET 10.25%
PAID PLUS ----------------------------------- ----------------------------------- ----------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
- --------- ----------- ----------- ----------- --------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 8,788 8,401 500,000 9,393 9,006 500,000 9,999 9,612
2 27,121 16,873 16,486 500,000 18,611 18,224 500,000 20,426 20,039
3 41,708 24,657 24,270 500,000 28,068 27,681 500,000 31,775 31,388
4 57,023 31,754 31,754 500,000 37,388 37,388 500,000 43,764 43,764
5 73,104 38,919 38,919 500,000 47,342 47,342 500,000 57,270 57,270
6 89,989 45,760 45,760 500,000 57,552 57,552 500,000 72,036 72,036
7 107,719 52,240 52,240 500,000 67,999 67,999 500,000 88,182 88,182
8 126,335 58,795 58,795 500,000 79,165 79,165 500,000 106,377 106,377
9 145,881 64,926 64,926 500,000 90,576 90,576 500,000 126,333 126,333
10 166,406 70,596 70,596 500,000 102,223 102,223 500,000 148,260 148,260
11 187,956 75,787 75,787 500,000 114,117 114,117 500,000 172,418 172,418
12 210,584 80,472 80,472 500,000 126,265 126,265 500,000 199,110 199,110
13 234,343 84,639 84,639 500,000 138,697 138,697 500,000 228,705 228,705
14 259,290 88,265 88,265 500,000 151,435 151,435 500,000 261,458 261,458
15 285,484 91,316 91,316 500,000 164,502 164,502 500,000 296,985 296,985
16 312,989 93,734 93,734 500,000 177,911 177,911 500,000 335,446 335,446
17 341,868 95,449 95,449 500,000 191,675 191,675 500,000 377,045 377,045
18 372,191 96,367 96,367 500,000 205,805 205,805 500,000 421,987 421,987
19 404,031 96,373 96,373 500,000 220,315 220,315 500,000 470,476 470,476
20 437,463 95,350 95,350 500,000 235,238 235,238 500,000 522,733 522,733
Age 60 285,484 91,316 91,316 500,000 164,502 164,502 500,000 296,985 296,985
Age 65 437,463 95,350 95,350 500,000 235,238 235,238 500,000 522,733 522,733
Age 70 631,430 70,310 70,310 500,000 318,907 318,907 500,000 849,945 849,945
Age 75 878,986 0 0 0 415,023 415,023 583,306 1,314,042 1,314,042
<CAPTION>
POLICY DEATH
YEAR BENEFIT
- --------- -----------
<S> <C>
1 500,000
2 500,000
3 500,000
4 500,000
5 500,000
6 500,000
7 500,000
8 500,000
9 500,000
10 500,000
11 500,000
12 500,000
13 500,000
14 526,405
15 582,446
16 641,086
17 702,490
18 766,820
19 834,248
20 904,985
Age 60 582,446
Age 65 904,985
Age 70 1,316,758
Age 75 1,846,860
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or withdrawals
may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-6
<PAGE>
TABLE 5
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, MI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION B
GUIDELINE PREMIUM TEST
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 12%
HYPOTHETICAL 0% HYPOTHETICAL 6% GROSS INVESTMENT
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
PREMIUMS NET -1.50% NET 4.46% NET 10.41%
PAID PLUS ----------------------------------- ------------------------------------- ----------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
- --------- ----------- ----------- ----------- --------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 11,109 10,353 510,353 11,753 10,997 510,997 12,397 11,641
2 27,121 21,089 20,333 520,333 23,017 22,261 522,261 25,022 24,266
3 41,708 30,765 30,009 530,009 34,623 33,867 533,867 38,798 38,042
4 57,023 39,420 39,420 539,420 45,869 45,869 545,869 53,126 53,126
5 73,104 48,590 48,590 548,590 58,301 58,301 558,301 69,675 69,675
6 89,989 57,633 57,633 557,633 71,300 71,300 571,300 87,959 87,959
7 107,719 66,452 66,452 566,452 84,786 84,786 584,786 108,053 108,053
8 126,335 76,135 76,135 576,135 99,933 99,933 599,933 131,361 131,361
9 145,881 85,548 85,548 585,548 115,627 115,627 615,627 156,965 156,965
10 166,406 94,677 94,677 594,677 131,873 131,873 631,873 185,085 185,085
11 187,956 103,894 103,894 603,894 149,243 149,243 649,243 216,795 216,795
12 210,584 112,759 112,759 612,759 167,202 167,202 667,202 251,682 251,682
13 234,343 121,234 121,234 621,234 185,736 185,736 685,736 290,047 290,047
14 259,290 129,286 129,286 629,286 204,836 204,836 704,836 332,229 332,229
15 285,484 136,927 136,927 636,927 224,536 224,536 724,536 378,650 378,650
16 312,989 143,928 143,928 643,928 244,625 244,625 744,625 429,522 429,522
17 341,868 150,452 150,452 650,452 265,282 265,282 765,282 485,494 485,494
18 372,191 156,510 156,510 656,510 286,541 286,541 786,541 547,124 547,124
19 404,031 162,023 162,023 662,023 308,345 308,345 808,345 614,939 614,939
20 437,463 167,009 167,009 667,009 330,733 330,733 830,733 689,623 689,623
Age 60 285,484 136,927 136,927 636,927 224,536 224,536 724,536 378,650 378,650
Age 65 437,463 167,009 167,009 667,009 330,733 330,733 830,733 689,623 689,623
Age 70 631,430 181,567 181,567 681,567 449,545 449,545 949,545 1,191,958 1,191,958
Age 75 878,986 172,760 172,760 672,760 574,400 574,400 1,074,400 2,003,188 2,003,188
<CAPTION>
POLICY DEATH
YEAR BENEFIT
- --------- -----------
<S> <C>
1 511,641
2 524,266
3 538,042
4 553,126
5 569,675
6 587,959
7 608,053
8 631,361
9 656,965
10 685,085
11 716,795
12 751,682
13 790,047
14 832,229
15 878,650
16 929,522
17 985,494
18 1,047,124
19 1,114,939
20 1,189,623
Age 60 878,650
Age 65 1,189,623
Age 70 1,691,958
Age 75 2,503,188
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or withdrawals
may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-7
<PAGE>
TABLE 6
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, MI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION B
GUIDELINE PREMIUM TEST
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 12%
HYPOTHETICAL 0% HYPOTHETICAL 6% GROSS INVESTMENT
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
PREMIUMS NET -1.65% NET 4.30% NET 10.25%
PAID PLUS ----------------------------------- ----------------------------------- ----------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
- --------- ----------- ----------- ----------- --------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 8,992 8,236 508,236 9,569 8,813 508,813 10,148 9,392
2 27,121 16,908 16,152 516,152 18,572 17,816 517,816 20,308 19,552
3 41,708 24,495 23,739 523,739 27,758 27,002 527,002 31,300 30,544
4 57,023 30,993 30,993 530,993 36,370 36,370 536,370 42,443 42,443
5 73,104 37,894 37,894 537,894 45,900 45,900 545,900 55,315 55,315
6 89,989 44,434 44,434 544,434 55,585 55,585 555,585 69,244 69,244
7 107,719 50,572 50,572 550,572 65,386 65,386 565,386 84,292 84,292
8 126,335 57,366 57,366 557,366 76,421 76,421 576,421 101,752 101,752
9 145,881 63,676 63,676 563,676 87,548 87,548 587,548 120,608 120,608
10 166,406 69,459 69,459 569,459 98,719 98,719 598,719 140,952 140,952
11 187,956 74,695 74,695 574,695 109,907 109,907 609,907 162,903 162,903
12 210,584 79,353 79,353 579,353 121,070 121,070 621,070 186,585 186,585
13 234,343 83,421 83,421 583,421 132,187 132,187 632,187 212,154 212,154
14 259,290 86,876 86,876 586,876 143,220 143,220 643,220 239,767 239,767
15 285,484 89,687 89,687 589,687 154,125 154,125 654,125 269,592 269,592
16 312,989 91,800 91,800 591,800 164,829 164,829 664,829 301,785 301,785
17 341,868 93,152 93,152 593,152 175,248 175,248 675,248 336,512 336,512
18 372,191 93,660 93,660 593,660 185,271 185,271 685,271 373,932 373,932
19 404,031 93,229 93,229 593,229 194,768 194,768 694,768 414,205 414,205
20 437,463 91,769 91,769 591,769 203,610 203,610 703,610 457,514 457,514
Age 60 285,484 89,687 89,687 589,687 154,125 154,125 654,125 269,592 269,592
Age 65 437,463 91,769 91,769 591,769 203,610 203,610 703,610 457,514 457,514
Age 70 631,430 66,580 66,580 566,580 233,634 233,634 733,634 728,037 728,037
Age 75 878,986 590 590 500,590 221,821 221,821 721,821 1,112,891 1,112,891
<CAPTION>
POLICY DEATH
YEAR BENEFIT
- --------- -----------
<S> <C>
1 509,392
2 519,552
3 530,544
4 542,443
5 555,315
6 569,244
7 584,292
8 601,752
9 620,608
10 640,952
11 662,903
12 686,585
13 712,154
14 739,767
15 769,592
16 801,785
17 836,512
18 873,932
19 914,205
20 957,514
Age 60 769,592
Age 65 957,514
Age 70 1,228,037
Age 75 1,612,891
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or withdrawals
may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-8
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
SUBJECT TO THE TERMS AND CONDITIONS OF SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE UNDERSIGNED REGISTRANT HEREBY UNDERTAKES TO FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION SUCH SUPPLEMENTARY AND PERIODIC
INFORMATION, DOCUMENTS AND REPORTS AS MAY BE PRESCRIBED BY ANY RULE OR
REGULATION OF THE COMMISSION HERETOFORE OR HEREAFTER DULY ADOPTED PURSUANT TO
AUTHORITY CONFERRED IN THAT SECTION.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
INSOFAR AS INDEMNIFICATION FOR LIABILITY ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING PERSONS
OF THE DEPOSITOR PURSUANT TO ITS CERTIFICATE OF INCORPORATION, BY-LAWS, OR
OTHERWISE, THE DEPOSITOR 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 DEPOSITOR OF EXPENSES INCURRED OR PAID BY A DIRECTOR, OFFICER
OR CONTROLLING PERSON OF THE DEPOSITOR 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
DEPOSITOR 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.
REPRESENTATION WITH RESPECT TO SECTION 26(e) OF THE INVESTMENT COMPANY
ACT OF 1940.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) (SUN LIFE OF CANADA (U.S.))
REPRESENTS THAT THE FEES AND CHARGES DEDUCTED UNDER THE POLICY, IN THE
AGGREGATE, ARE REASONABLE IN RELATION TO THE SERVICES RENDERED, THE EXPENSES
TO BE INCURRED, AND THE RISKS ASSUMED BY SUN LIFE OF CANADA (U.S.)
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
THIS REGISTRATION STATEMENT COMPRISES THE FOLLOWING PAPERS AND DOCUMENTS:
THE FACING SHEET
CROSS-REFERENCE SHEET
THE PROSPECTUS CONSISTING OF ___ PAGES
THE UNDERTAKING TO FILE REPORTS
THE UNDERTAKING WITH RESPECT TO INDEMNIFICATION
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE
INVESTMENT COMPANY ACT OF 1940
THE SIGNATURES
WRITTEN CONSENTS OF THE FOLLOWING PERSONS:
ROBERT E. MCGINNESS, ESQ.
II-2
<PAGE>
THE FOLLOWING EXHIBITS:
1. THE FOLLOWING EXHIBITS CORRESPOND TO THOSE REQUIRED BY
PARAGRAPH A OF THE INSTRUCTIONS AS TO EXHIBITS IN FORM N-8B-2:
(1) RESOLUTION OF THE BOARD OF DIRECTORS OF SUN LIFE
ASSURANCE COMPANY OF CANADA (U.S.) DATED DECEMBER 3,
1985 AUTHORIZING THE ESTABLISHMENT OF CANADA (U.S.)
VARIABLE ACCOUNT G.**
(2) NOT APPLICABLE
(3) DISTRIBUTING CONTRACTS:
(A) AGREEMENT BETWEEN TRUST OR DEPOSITOR AND PRINCIPAL
UNDERWRITER.
(B) SPECIMEN OF TYPICAL AGREEMENTS BETWEEN PRINCIPAL
UNDERWRITER AND DEALERS, MANAGERS, SALES
SUPERVISORS AND SALESMEN.
(C) SCHEDULE OF SALES COMMISSIONS REFERRED TO IN ITEM
38(c).
(4) NOT APPLICABLE
(5) FORM OF POLICY AND RIDER
(A) FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
(B) ADDITIONAL PROTECTION BENEFIT RIDER
________________
** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF SUN LIFE OF
CANADA (U.S.) VARIABLE ACCOUNT F ON FORM N-4, FILE NO. 33-29852.
*** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF THE DEPOSITOR ON
FORM S-1, FILE NO. 33-29851.
II-3
<PAGE>
(6) (I) CERTIFICATE OF INCORPORATION OF SUN LIFE ASSURANCE
COMPANY OF CANADA (U.S.)***
(II) BY-LAWS OF SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.)***
(7) NOT APPLICABLE
(8) AGREEMENTS BETWEEN THE TRUST OR THE DEPOSITOR
CONCERNING THE TRUST WITH THE ISSUER, DEPOSITOR,
PRINCIPAL UNDERWRITER OR INVESTMENT ADVISER OF ANY
UNDERLYING INVESTMENT COMPANY OR ANY AFFILIATED PERSON
OF SUCH PERSONS.
(A) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND
(B) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND II
(C) FUND PARTICIPATION AGREEMENT WITH JPM SERIES
TRUST II
(D) PARTICIPATION AGREEMENT WITH MFS/SUN LIFE
INSURANCE TRUST
(E) FUND PARTICIPATION AGREEMENT WITH NEUBERGER &
BERMAN ADVISERS MANAGEMENT TRUST
(F) FUND PARTICIPATION AGREEMENT WITH TEMPLETON
VARIABLE PRODUCTS SERIES FUND
(9) NOT APPLICABLE
(10) FORM OF APPLICATION FOR FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY.
(11) MEMORANDUM DESCRIBING SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)'S ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR THE POLICIES.
2. OPINION AND CONSENT OF COUNSEL AS TO THE LEGALITY OF THE
SECURITIES BEING REGISTERED.
3. NONE.
4. NOT APPLICABLE.
5. NOT APPLICABLE.
6. ACTUARIAL OPINION AND CONSENT.
7. POWERS OF ATTORNEY.
8. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT.
________________
** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF SUN LIFE OF
CANADA (U.S.) VARIABLE ACCOUNT F ON FORM N-4, FILE NO. 33-29852.
*** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF THE DEPOSITOR ON
FORM S-1, FILE NO. 33-29851.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT, SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G HAS DULY CAUSED THIS
REGISTRATION STATEMENT ON FORM S-6 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED AND ITS SEAL TO BE HEREUNTO AFFIXED AND
ATTESTED, ALL IN THE TOWN OF WELLESLEY, AND COMMONWEALTH OF MASSACHUSETTS ON
THE 21ST DAY OF JANUARY, 1997.
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
(REGISTRANT)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(DEPOSITOR)
BY* /s/ John D. McNeil
------------------------------------
John D. McNeil, Chairman
Attest /s/ Margaret Sears Mead
--------------------------
Margaret Sears Mead, Assistant Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* /s/ John D. McNeil Chairman and Director
- ---------------------------- (Principal Executive
John D. McNeil Officer)
* /s/ Robert P. Vrolyk Vice President and
- ---------------------------- Actuary (Principal
Robert P. Vrolyk Financial & Accounting
Officer)
* /s/ A. Keith Brodkin Director
- ---------------------------
A. Keith Brodkin
_______________
* By Margaret Sears Mead pursuant to Power of Attorney filed with the
Registration Statement on Form S-6.
II-5
<PAGE>
* /s/ M. Colyer Crum Director
- ----------------------------
M. Colyer Crum
* /s/ Richard B. Bailey Director
- ----------------------------
Richard B. Bailey
* /s/ David D. Horn Senior Vice President and
- ---------------------------- General Manager and
David D. Horn Director
* /s/ John S. Lane Director
- ----------------------------
John S. Lane
* /s/ Angus A. MacNaughton Director
- ----------------------------
Angus A. MacNaughton
* /s/ Donald A. Stewart President and Director
- ----------------------------
Donald A. Stewart
__________________________
* By Margaret Sears Mead pursuant to Power of Attorney filed with the
Registration Statement on Form S-6.
II-6
<PAGE>
EXHIBIT INDEX
1.(3) DISTRIBUTING CONTRACTS:
(A) AGREEMENT BETWEEN TRUST OR DEPOSITOR AND PRINCIPAL
UNDERWRITER.
(B) SPECIMEN OF TYPICAL AGREEMENTS BETWEEN PRINCIPAL
UNDERWRITER AND DEALERS, MANAGERS, SALES
SUPERVISORS AND SALESMEN.
(C) SCHEDULE OF SALES COMMISSIONS REFERRED TO IN ITEM
38(c).
1.(5) FORM OF POLICY AND RIDER
(A) FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
(B) ADDITIONAL PROTECTION BENEFIT RIDER
1.(8) AGREEMENTS BETWEEN THE TRUST OR THE DEPOSITOR
CONCERNING THE TRUST WITH THE ISSUER, DEPOSITOR,
PRINCIPAL UNDERWRITER OR INVESTMENT ADVISER OF ANY
UNDERLYING INVESTMENT COMPANY OR ANY AFFILIATED PERSON
OF SUCH PERSONS.
(A) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND
(B) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND II
(C) FUND PARTICIPATION AGREEMENT WITH JPM SERIES
TRUST II
(D) PARTICIPATION AGREEMENT WITH MFS/SUN LIFE
INSURANCE TRUST
(E) FUND PARTICIPATION AGREEMENT WITH NEUBERGER &
BERMAN ADVISERS MANAGEMENT TRUST
(F) FUND PARTICIPATION AGREEMENT WITH TEMPLETON
VARIABLE PRODUCTS SERIES FUND
1.(10) FORM OF APPLICATION FOR FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY.
1.(11) MEMORANDUM DESCRIBING SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)'S ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR THE POLICIES.
2. OPINION AND CONSENT OF COUNSEL AS TO THE LEGALITY OF THE
SECURITIES BEING REGISTERED.
6. ACTUARIAL OPINION AND CONSENT.
7. POWERS OF ATTORNEY.
8. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT.
II-7
<PAGE>
MARKETING COORDINATION AND ADMINISTRATIVE
SERVICE AGREEMENT
THIS AGREEMENT entered into by and between Sun Life Assurance Company of
Canada (U.S.) ("Sun Life (U.S.)"), a Delaware corporation and Sun Investment
Services Company, a Delaware corporation ("Sun Investment").
WITNESSETH
WHEREAS Sun Life (U.S.) proposes to issue and offer for sale certain life
insurance products (the "Plans") which are deemed to be securities under the
Securities Act of 1933 ("33 Act"); and
WHEREAS Sun Investment is registered as a broker-dealer with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 ("34
Act") and is a member of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS Sun Investment proposes to coordinate the marketing of the Plans
and to perform certain administrative services in conjunction with the Plans.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
I
THE PLANS
A. TYPE OF PLANS
The Plans issued by Sun Life (U.S.) to which this Agreement applies are
listed in Exhibit A. Exhibit A may be amended from time to time as agreed upon
by Sun Life (U.S.) and Sun Investment.
B. SUSPENSION/RESTRICTION
Sun Life (U.S.) may, at its option and at its sole discretion, suspend or
restrict in any manner the sale or method of distribution of all or any of the
Plans, including sales by all or any individuals licensed to sell Sun Life
(U.S.)'s products. If any suspension or restriction is required by any
regulatory authority having jurisdiction, written notice shall be given to Sun
Investment immediately upon receipt by Sun Life (U.S.) of notice of such
required suspension or restriction. In all other cases, Sun Life (U.S.) will
provide thirty (30) days' prior written notice to Sun Investment of any such
suspension or restriction.
C. PLAN CHANGES
Sun Life (U.S.) may, at its option and at its sole discretion, amend, add
or delete features of all or any of the Plans. In the event of any such
amendment, addition or deletion, Sun Life
<PAGE>
2
(U.S.) will provide written notice of such change to Sun Investment. If the
change is required by any regulatory authority having jurisdiction, written
notice shall be given to Sun Investment immediately upon receipt by Sun Life
(U.S.) of notice of such required change. In all other cases, Sun Life (U.S.)
will provide written notice at least thirty (30) days' prior to the effective
date of such change.
II
MARKETING COORDINATION AND SALES ADMINISTRATION
A. GENERAL DISTRIBUTOR
Sun Investment is hereby appointed by Sun Life (U.S.) as the General
Distributor of the Plans. Sun Investment shall, at all times, when performing
its functions under this Agreement, be registered as a securities broker-dealer
with the SEC and the NASD and shall be licensed or registered as a securities
broker-dealer in those jurisdictions where the performance of the duties
contemplated by this Agreement would require such licensing or registration.
B. DISTRIBUTION AGREEMENTS
Sun Investment will distribute the plans pursuant to a Corporate Markets
Variable Life Insurance Sales Agreement (the "Distribution Agreement"),
substantially in the form attached as Exhibit B. No Commission Schedule
attached to any Distribution Agreement may provide for commission payments in
excess of specified maximums established by Sun Life (U.S.) from time to time.
Sun Investment shall retain copies of all executed Distribution Agreements and
all correspondence, memoranda and other documents relating to the Distribution
Agreements.
C. SALES REPRESENTATIVES/REGISTERED REPRESENTATIVES
1. APPOINTMENT AND TERMINATION
(a) Sun Life (U.S.) hereby designates Sun Investment as its agent to
appoint and dismiss individuals as sales representatives of Sun Life (U.S.)
in those jurisdictions in which Sun Life (U.S.) transacts an insurance
business. Sun Life (U.S.) reserves the right to terminate any and all such
designations and will provide written notice of any such termination to Sun
Investment concurrently with notice to the particular regulatory authority.
(b) Appointments and/or dismissals of individuals as sales
representatives of Sun Life (U.S.) shall be made on forms supplied by
regulatory authorities having jurisdiction or by Sun Life (U.S.), as the
case may be. All such appointments and dismissals shall be subject to all
applicable laws, rules and regulations and to such written instructions and
rules as Sun Life (U.S.) may establish from time to time. Sun Investment
shall retain copies of all completed forms appointing and/or dismissing
agents and all related correspondence, memoranda and other documents.
(c) Sun Investment shall maintain current lists of sales
representatives of Sun Life (U.S.) which it has appointed.
<PAGE>
3
(d) Sun Life (U.S.) shall pay all necessary appointment fees (initial
and renewal) and other expenses of any type incurred by Sun Investment with
respect to licensing and appointment of individuals as sales
representatives of Sun Life (U.S.).
(e) Sun Life (U.S.) shall be responsible for determining that any
individual soliciting applications for Plans is: (i) properly licensed with
state insurance regulatory authorities; (ii) appointed as a sales
representative of Sun Life (U.S.); (iii) properly licensed under all
applicable securities laws; (iv) associated as a registered representative
with a broker/dealer registered under the 34 Act and a NASD member and
which has executed a Distribution Agreement; and (v) covered by a fidelity
bond which provides for claim payments to be made to Sun Life (U.S.) and
Sun Investment, as their interests may appear.
2. TRAINING OF SALES REPRESENTATIVES/REGISTERED REPRESENTATIVES
Sun Investment shall train sales representatives of Sun Life (U.S.)
which it has appointed to properly solicit applications for the Plans.
3. SUPERVISION OF SALES REPRESENTATIVES/REGISTERED REPRESENTATIVES
Sun Investment shall coordinate the supervision of the sales
representatives of Sun Life (U.S.) associated with other broker-dealers in
connection with the offering and sale of the Plans. Sun Investment will
establish such rules and procedures as may be necessary to insure proper
supervision of the sales representatives/registered representatives.
4. SALES ASSISTANCE TO SALES REPRESENTATIVES/REGISTERED REPRESENTATIVES
Sun Investment shall provide sales assistance to sales representatives
of Sun Life (U.S.) which it has appointed. This sales assistance shall
include, but not be limited to, assistance from home office personnel
through its telecommunications systems. In addition, Sun Investment shall
provide broker/dealers and sales representatives with sufficient quantities
of sales promotional materials, prospectuses, sample Plans, applications
and any necessary service forms.
5. PAYMENT OF COMMISSIONS
All commission payments required to be made pursuant to the
Distribution Agreements shall be made by Sun Investment as agent for Sun
Life (U.S.) or by Sun Life (U.S.) directly. Sun Life (U.S.) will fund a
commission account to make these payments. Sun Life (U.S.) acknowledges
that this function may be delegated by Sun Investment, subject to the prior
approval of Sun Life (U.S.).
D. SALES MATERIAL AND OTHER DOCUMENTS
1. SUN INVESTMENT RESPONSIBILITIES
Sun Investment shall be responsible for:
(a) the approval of promotional material by the Securities and
Exchange Commission and the National Association of Securities
Dealers, Inc., where required.
<PAGE>
4
2. SUN LIFE (U.S.)'S RESPONSIBILITIES
Sun Life (U.S.) shall be responsible for:
(a) providing Sun Investment with sufficient quantities of
prospectuses regarding Plans and separate accounts, Plans (including
endorsements), applications and sample Plans for sales training
purposes.
(b) the design and printing of all promotional material for the
Plans.
(c) the approval of promotional material by state and other insurance
regulatory authorities.
E. ADVERTISING
Sun Investment shall not print, publish or distribute any advertisement,
circular or any document relating to the Plans or relating to Sun Life (U.S.)
unless such advertisement, circular or document shall have been approved in
writing by Sun Life (U.S.). Neither Sun Life (U.S.) nor any of its agents or
affiliates shall print, publish or distribute any advertisement, circular or any
document relating to the Plans or relating to Sun Investment unless such
advertisement, circular or document shall have been approved in writing by Sun
Investment. However, nothing herein shall prohibit any person from advertising
annuities in general or on a generic basis.
F. SALES RECORDS - PRODUCTION REPORTS
Sun Investment shall provide Sun Life (U.S.) with such reports and
materials relative to the marketing and distribution of Plans as may reasonably
be required by Sun Life (U.S.), in the furtherance of its insurance business.
G. BOOKS, RECORDS AND SUPERVISION
1. BOOKS AND RECORDS
Sun Investment may request that all or some of the books and records
required to be maintained by it as a registered broker/dealer in connection
with the offer and sale of the Plans be prepared and maintained by Sun Life
(U.S.). Sun Life (U.S.) agrees to prepare and maintain such books and
records at its cost upon request, and agrees that such books and records
are the property of Sun Investment, that they will be made and preserved in
accordance with Rules 17a-3 and 17a-4 under the 34 Act and that they will
be subject to examination by the SEC in accordance with Section 17(a) of
the 34 Act.
2. SUPERVISION
Sun Investment has and assumes full responsibility for the securities
activities of all persons associated with Sun Life (U.S.) who maintain
books and records on its behalf. Sun Life (U.S.) acknowledges that Sun
Investment has full responsibility for all such persons in connection with
their training, supervision and control as contemplated by the 34 Act.
H. ASSIGNMENT OF DUTIES
Sun Life (U.S.) acknowledges that Sun Investment may assign all or any
part of its duties under this Agreement subject to the prior consent of Sun
Life (U.S.). No other assignment of Sun Investment's duties under this
Agreement is permitted.
<PAGE>
5
III
COMPENSATION
A. GENERAL
For performing administrative and marketing coordination services under
this Agreement, Sun Investment will not be compensated by Sun Life (U.S.).
B. CHANGES IN COMPENSATION
Compensation payable under this Agreement may be increased to reflect any
change in administrative or marketing coordination responsibilities.
C. INDEBTEDNESS
Nothing in this Agreement shall be construed as giving Sun Investment the
right to incur any indebtedness on behalf of Sun Life (U.S.). However, Sun Life
(U.S.) may offset amounts owed it under this Agreement against amounts payable
under this Agreement for any reason; and Sun Investment may offset amounts owed
by Sun Life (U.S.) under this Agreement against any amounts payable to Sun Life
(U.S.) under this Agreement for any reason, provided that no such offset is
permitted in connection with Plan premiums or purchase payments and Plan
payments.
IV
OTHER PROVISIONS
A. PRODUCT DEVELOPMENT
Sun Investment shall assist Sun Life (U.S.) in the design and development
of life insurance and annuity products for distribution pursuant to the
Distribution Agreements. This assistance shall include conducting market
research studies as reasonably requested by Sun Life (U.S.), providing
consulting services with respect to product design, and assisting in the
development of sales training, sales promotional and advertising material
relating to new insurance and annuity products. All such studies and materials
are the property of Sun Life (U.S.).
B. OWNERSHIP OF BUSINESS RECORDS
Sun Life (U.S.) shall own all business records, including but not limited
to Plan records, tax records, payment records, plan descriptions, appointment
records, agents lists, files, memoranda and other records maintained by Sun
Investment either on paper or in machine-readable form pertaining to the duties
and responsibilities under this Agreement. Such records shall be delivered to
Sun Life (U.S.) promptly upon reasonable request. Sun Investment will maintain
all records and accounts in accordance with Sun Life (U.S.)'s standards or
requirements, or otherwise, with generally accepted procedures as they apply to
the accounting and insurance industry. At Sun Life (U.S.)'s request Sun
Investment will make any such records available to Sun Life (U.S.)'s auditors or
to any governmental authority having jurisdiction over Sun Life (U.S.).
<PAGE>
6
C. APPROVAL OF PRACTICES AND PROCEDURES
Sun Life (U.S.) shall have the right to review and approve the standards,
practices and procedures utilized by Sun Investment in fulfilling its
obligations under the Agreement. Sun Life (U.S.) reserves the rights, from time
to time, to prescribe rules and regulations respecting the conduct of the
business covered hereby.
D. COMPLAINTS
1. Sun Investment shall immediately forward to Sun Life (U.S.) any
information received by Sun Investment relating to any complaint relating
to Sun Life (U.S.) or the Plans.
2. In the case of complaints or inquiries relating to the Plans
distributed pursuant to the Distribution Agreements, Sun Life (U.S.) may,
at its option, request Sun Investment to investigate and/or respond to such
complaints or inquiries. In such instances, Sun Investment shall promptly
forward to Sun Life (U.S.) copies of all documents relating to such
investigations and/or responses.
E. LIMITATIONS ON AUTHORITY
Sun Investment shall have authority only as expressly granted in this
Agreement. No party to this Agreement shall enter into any proceeding in a
court of law or before a regulatory agency in the name of any other party,
without the express written consent of that party. Further, if any legal or
administrative proceedings are commenced against any party arising out of the
obligations, duties or services performed under this Agreement by any third
party or any federal, state or other governmental or regulatory authority, that
party, as the case may be, shall immediately notify the other parties of this
fact.
V
GENERAL PROVISIONS
A. 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.
B. BOND
Sun Investment will maintain whatever fidelity bond may be required by
Sun Life (U.S.), and such bond shall be of a type and amount and issued by
a reputable company, all as approved by Sun Life (U.S.).
<PAGE>
7
C. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of
the parties to it and their respective successors and assigns.
D. INDEMNIFICATION
Each party hereby agrees to release, indemnify and hold harmless the
other party, its officers, directors, employees, agents, servants,
predecessors or successors from any claims or liability to third parties
arising out of the breach of this Agreement or arising out of the acts or
omissions of a party to this Agreement not authorized by this Agreement.
E. NOTICES
All notices, requests, demands and other communication under this
Agreement shall be in writing, and shall be deemed to have been given on
the date of service if served personally on the party to whom notice is to
be given, or on the date of mailing, if sent by First Class Mail,
Registered or Certified, postage prepaid and properly addressed as follows:
TO SUN LIFE (U.S.)
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Secretary
TO SUN INVESTMENT
Sun Investment Services Co.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Secretary
F. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Massachusetts.
G. COMPLIANCE
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 business described herein is to be transacted.
<PAGE>
8
H. TERMINATION
This Agreement may be terminated by any of the parties upon two (2)
months' prior written notice to the other party.
Executed this day of January, 1997.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By ______________________________________________
Margaret Sears Mead, Secretary
SUN INVESTMENT SERVICES COMPANY
By ______________________________________________
Roy P. Creedon, Secretary
<PAGE>
EXHIBIT A
TYPES OF PLANS
- - Sun Life Corporate VUL-SM-
(flexible premium variable universal life insurance policy)
<PAGE>
EXHIBIT B
CORPORATE MARKETS VARIABLE LIFE INSURANCE
SALES AGREEMENT
AGREEMENT by and between SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
("the Company"), a Delaware corporation; Sun Investment Services Company
("Sun Investment"), a Delaware corporation, a broker-dealer registered with
the Securities and Exchange Commission under the Securities Exchange Act of
1934 (the "1934 Act") and a member of the National Association of Securities
Dealers, Inc. ("NASD");______________________________________________________
("Selling Broker-Dealer"), also a broker-dealer registered under the 1934 Act
and a member of the NASD; and________________________________________________
("Producer") an insurance agency affiliate of Selling Broker-Dealer.
W I T N E S S E T H:
WHEREAS, the Company issues certain life insurance contracts listed in
Schedule A (the "Contracts"), which are registered under the Securities Act
of 1933 (the "1933 Act"):
WHEREAS, the Company has authorized Sun Investment to act as the general
distributor and principal underwriter of the Contracts; and in that capacity
to enter into agreements, subject to the consent of the Company, with
Broker-Dealers and such Producers to act as Special COLI Producers for the
distribution of the Contracts:
WHEREAS, Sun Investment has agreed to assist in obtaining licenses,
registrations and appointments to enable the registered representatives and
sub-brokers of Producer to sell the Contracts, and participate at educational
meetings to familiarize them with the provisions and features of the
Contracts; and
WHEREAS, Selling Broker-Dealer and Producer have been selected by Sun
Investment to distribute the Contracts and Selling Broker-Dealer and
Producer, in an insurance brokerage capacity, wish to participate in the
distribution of the Contracts to their clients.
NOW THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
APPOINTMENT
Subject to the terms and conditions of this Agreement, the Company and
Sun Investment hereby appoint Selling Broker-Dealer and Producer to solicit
applications for the Contracts.
Selling Broker-Dealer and Producer jointly and severally accept such
appointment and each agrees to use its best efforts to find purchasers for
the Contracts acceptable to the Company.
<PAGE>
2
II.
AUTHORITY AND DUTIES OF PRODUCER
A. Licensing and Appointment of Sub-brokers
Producer is authorized to appoint sub-broker ("Sub-brokers") to solicit
sales of the Contracts. Producer agrees to fulfill all requirements set
forth in the General Letter of Recommendation attached as Schedule B hereto
in conjunction with its submission of licensing and appointment papers for
all Sub-brokers.
Producer warrants that it and all of its Sub-brokers appointed pursuant
to this Agreement shall not solicit nor aid, directly or indirectly, in the
solicitation of any application for any Contract until fully licensed by the
proper authorities under the applicable insurance laws within the applicable
jurisdictions where Producer proposes to offer the Contracts, where the
Company is authorized to conduct business and where the Contracts may be
lawfully sold.
Producer shall periodically provide the Company with a list of all
Sub-brokers appointed by Producer and the jurisdictions where such
Sub-brokers are licensed to solicit sales of the Contracts. The company
shall periodically provide Producer with a list which shows; (i) the
jurisdictions where the Company is authorized to do business; and (ii) any
limitations on the availability of the Contracts in any of such jurisdictions.
Producer shall prepare and transmit the appropriate appointment forms to
the Company. Producer shall pay all fees to state insurance regulatory
authorities in connection with obtaining necessary licenses and
authorizations for Sub-brokers to solicit and sell the Contracts. The
Company will pay appointment fees for Producer and resident appointment fees
for Sub-brokers. Non-resident appointment fees for Sub-brokers will be paid
by the Producer. The Company may refuse for any reason to apply for the
appointment of a Sub-broker and may cancel any existing appointment at any
time.
B. Rejection of Sub-broker
The Company or Sun Investment may refuse for any reason, by written
notice to Producer to permit any Sub-broker the right to solicit applications
for the sale of any of the Contracts. Upon receipt of such notice, Producer
immediately shall cause such Sub-broker to cease such solicitations of sales
and cancel the appointment of any Sub-broker under this agreement.
C. Supervision of Sub-broker
Producer, jointly with Selling Broker-Dealer, shall supervise all Sub-
brokers appointed pursuant to this Agreement to solicit sales of the Contracts
and bear responsibility for all acts and omissions of each Sub-broker. Producer
shall comply with and exercise all responsibilities required by applicable
federal and state law and regulations. Producer shall train and supervise
<PAGE>
3
its Sub-brokers to ensure that purchase of a Contract is recommended only to
applicants where there are reasonable grounds to believe the purchase of the
Contract is suitable for that applicant. While not limited to the following,
a determination of suitability shall be based on information furnished to a
Sub-broker after reasonable inquiry of such applicant concerning the
applicant's insurance and investment objectives, financial situation and
needs, and the likelihood that the applicant will continue to make any
premium payments contemplated by the Contracts and will keep the Contract in
force for a sufficient period of time so that the Company's acquisition costs
are amortized over a reasonable period of time.
Nothing contained in this Agreement or otherwise shall be deemed to make
any Sub-broker appointed by Producer an employee or agent of the Company or
Sun Investment. Neither the Company nor Sun Investment shall have any
responsibility for the training and supervision of any Sub-broker or any
employee of Producer. If the act or omission of a Sub-broker or any employee
of Producer is the proximate cause of claim, damage or liability (including
reasonable attorneys' fees) to the Company or Sun Investment, Producer and
Selling Broker-Dealer shall be responsible and liable, jointly and severally,
therefor.
III.
AUTHORITY AND DUTIES OF SELLING BROKER-DEALER
Selling Broker-Dealer agrees that it has the full legal responsibility
for the training and supervision of all persons, including Sub-brokers of
Producer, associated with Selling Broker-Dealer who are engaged directly or
indirectly in the offer or sale of Contracts. All such persons shall be
registered representatives of Selling Broker-Dealer and shall be subject to
the control and supervision of Selling Broker-Dealer with respect to their
securities regulated activities. Selling Broker-Dealer shall: (i) train and
supervise Sub-brokers, in their capacity as registered representatives, in
the sale of Contracts; (ii) use its best efforts to cause such Sub-brokers to
qualify under applicable federal and state laws to engage in the sale of
Contracts; (iii) provide the Company and Sun Investment to their satisfaction
with evidence of Sub-brokers' qualifications to sell Contracts; (iv) notify
the Company if any of such Sub-brokers ceases to be a registered
representative of Selling Broker-Dealer; and (v) train and supervise
Sub-brokers to ensure compliance with applicable federal and state securities
laws, rules, regulations, statements of policy thereunder and with NASD
rules. Selling Broker-Dealer, jointly with Producer, shall train and
supervise Sub-brokers to ensure that purchase of a Contract is recommended
only to applicants where there are reasonable grounds to believe the purchase
of the Contract is suitable for that applicant. While not limited to the
following, a determination of suitability shall be based on information
furnished to a Sub-broker after reasonable inquiry of such applicant
concerning the applicant's other security holdings, financial situation and
needs. Selling Broker-Dealer shall ensure that any offer of a Contract made
by a Sub-broker will be made by means of a currently effective prospectus.
The Company and Sun Investment shall not have any responsibility for the
supervision of any registered representative or any employee or affiliate of
Selling Broker-Dealer. If the act or
<PAGE>
4
omission of a registered representative or any employee or affiliate of
Selling Broker-Dealer is the proximate cause of any claim, damage or
liability (including reasonable attorney's fees) to the Company or Sun
Investment, Selling Broker-Dealer and Producer shall be responsible and
liable, jointly and severally, therefor.
Selling Broker-Dealer at all times shall be duly registered as a
broker-dealer under the 1934 Act, a member in good standing of the NASD and
duly licensed in all states and jurisdictions where required to perform
pursuant to this agreement. Selling Broker-Dealer shall fully comply with
the requirements of the 1934 Act and all other applicable federal or state
laws and with the rules of the NASD. Selling Broker-Dealer shall establish
such rules and procedures as may be necessary to cause diligent supervision
of the securities activities of the Sub-brokers including ensuring compliance
with the prospectus delivery requirements of the 1933 Act.
IV.
AUTHORITY AND DUTIES OF
PRODUCER AND SELLING BROKER-DEALER
A. Contracts
The Contracts issued by the Company to which this Agreement applies are
listed in Schedule A. This Schedule A may be amended from time to time by
the Company. The Company, in its sole discretion, with prior or concurrent
written notice to Selling Broker-Dealer and Producer, may suspend
distribution of any Contract. The Company also has the right to amend any
Contract at any time.
B. Securing Applications
Each application for a Contract shall be made on an application form
provided by the Company and all payments collected by Selling Broker-Dealer,
Producer or any registered representative and Sub-broker shall be remitted
promptly in full, together with such application form and any other required
documentation, directly to the Company at the address indicated on such
application or to such other address as may be designated by the Company.
All such payments and documents shall be the property of the Company.
Selling Broker-Dealer and Producer shall review all such applications for
completeness and for compliance with the conditions herein, including the
suitability and prospectus delivery requirements set forth herein. Check or
money order in payment of such Contracts should be made payable to the order
of "Sun Life Assurance Company of Canada (U.S.)." All applications are
subject to acceptance or rejection by the Company in its sole discretion.
C. Receipt of Money
All money payable in connection with any of the Contracts, whether as
premium, purchase payment or otherwise and whether paid by or on behalf of any
contract owner or
<PAGE>
5
anyone else having an interest in the Contracts, is the property of the
Company and shall be transmitted immediately in accordance with the
administrative procedures of the Company without any deduction or offset for
any reason including, but not limited to, any deduction or offset for
compensation claimed by Selling Broker-Dealer or Producer, unless there has
been a prior written arrangement for net wire transmissions between the
Company and Selling Broker-Dealer or Producer.
D. Notice of Sub-broker's Noncompliance
Selling Broker-Dealer shall immediately notify Sun Investment and
Producer in the event a Sub-broker fails or refuses to submit to the
supervision of Selling Broker-Dealer or Producer in accordance with this
Agreement or any related agreement between Selling Broker-Dealer, Producer
and Sub-broker or otherwise fails to meet the rules and standards imposed by
Selling Broker-Dealer or its registered representatives or Producer or its
Sub-brokers. Selling Broker-Dealer or Producer shall also immediately notify
such Sub-broker that he or she is no longer authorized to sell the Contracts,
and both Selling Broker-Dealer and Producer shall take whatever additional
action may be necessary to terminate the sales activities of such Sub-broker
relating to the Contracts.
E. Sales Promotion, Advertising and Prospectuses
No sales promotion materials, circulars, documents or any advertising
relating to any of the Contracts shall be used by Selling Broker-Dealer,
Producer or any Sub-brokers unless the specific item has been approved in
writing by Sun Investment and the Company prior to use. Selling
Broker-Dealer shall be provided, without any expense to Selling
Broker-Dealer, with prospectuses relating to Contracts. Selling
Broker-Dealer and Producer shall be provided with such other material as Sun
Investment determines necessary or desirable for use in connection with sales
of the Contracts. Nothing in these provisions shall prohibit Selling
Broker-Dealer or Producer from advertising life insurance and annuities on a
generic basis.
Selling Broker-Dealer, Producer and Sub-brokers shall make no material
representations relating to the Contracts, other than those contained in the
relevant registration statement, as may be amended, or in sales promotion or
other materials approved by the Company and Sun Investment as provided herein.
F. Confidentiality
The Company, Sun Investment, Selling Broker-Dealer and Producer shall
keep confidential all information obtained pursuant to this Agreement,
including, without limitation, names of the purchasers of the Contracts, and
shall disclose such information, only if authorized to make such disclosure
in writing, or if such disclosure is expressly required by applicable federal
or state regulatory authorities.
<PAGE>
6
G. Records
Selling Broker-Dealer and Producer shall have the responsibility for
maintaining the records of its Sub-brokers and representatives licensed,
registered and otherwise qualified to sell the Contracts. Selling
Broker-Dealer and Producer shall maintain such other records as are required
of them by applicable laws and regulations. The books, accounts and records
of Selling Broker-Dealer and Producer relating to the sale of the Contracts
shall be maintained so as to clearly and accurately disclose the nature and
details of the transactions. Selling Broker-Dealer and Producer each agree
to make the books and records relating to the sale of the Contracts available
to the Company or Sun Investment upon their written request.
H. Sub-Broker Agreements
Before a Sub-broker is permitted by Producer and Selling Broker-Dealer
to offer the Contracts, Sub-broker shall have entered into a written
agreement with Producer and Selling Broker-Dealer pursuant to which (i)
Sub-broker is appointed as a Sales representative of Producer and a
registered representative of Selling Broker-Dealer; (ii) Sub-broker agrees
that his or her selling activities relating to Contracts shall be under the
supervision and control of Selling Broker-Dealer and Producer, and (iii) that
Sub-brokers right to continue to sell such Contracts is subject to his or her
continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or Producer. At the request
of the Company, a copy of each such written agreement shall be mailed to the
Company.
V.
COMPENSATION
A. Commissions and Fees
Commissions and fees payable to Selling Broker-Dealer, Producer or any
Sub-broker in connection with the Contracts shall be paid by the Company
through Sun Investment, as paying agent for the Company to Producer, or
otherwise permitted by law or regulation. Producer shall pay Selling
Broker-Dealer and Sub-broker. Sun Investment will provide Selling
Broker-Dealer and Producer with a copy of its current Compensation
Schedule(s), attached hereto as Schedule C. Unless otherwise provided in
Schedule C. compensation will be paid as a percentage of premiums or purchase
payments (collectively, "Payments") received and accepted by the Company on
applications obtained by the various Sub-brokers appointed by Producer
hereunder. Upon termination of this Agreement, all compensation to Selling
Broker-Dealer and Producer hereunder shall cease. However, Producer shall be
entitled to receive compensation for all new and additional premium payments
which are in process at the time of termination, and shall continue to be
liable for any charge-backs pursuant to the provisions of said Schedule C, or
for any other amount advanced by or otherwise due the Company or Sun
Investment hereunder. The Company reserves the right not to pay compensation
on a Contract for which the premium is
<PAGE>
7
paid in whole or in part by the loan or surrender value of any other life
insurance policy or annuity contract issued by the Company or any direct or
indirect affiliated company.
Sun Investment, at the direction of the Company, shall deduct any charge
backs from compensation otherwise due Producer or Selling Broker-Dealer. If
any amount to be deducted exceeds compensation otherwise due, Producer and/or
Selling Broker-Dealer shall promptly pay back the amount of the excess
following a written demand by Sun Investment or the Company. Producer and
Selling Broker-Dealer are jointly and severally liable for such charge backs.
The Company recognizes the Contract Owners' right on issued Contracts to
terminate its agent of record status with Producer and/or change a Selling
Broker-Dealer, provided that the Contract Owner notifies Sun Investment in
writing. When a Contract Owner terminates its agent of record, no further
service fees nor compensation on any payments due or received on any
increases in face amount in the existing policy after termination, shall be
payable to Producer or Selling Broker-Dealer in accordance with Schedule C
after the notice of termination is received and accepted by Sun Investment.
However, when a Contract Owner designates a new Selling Broker-Dealer other
than those of record, compensation on any payments due or received on any
increases in face amount in the existing Contract after the change, shall be
payable to the new Selling Broker-Dealer in accordance with Schedule C in
effect at the time of issuance of the Contract.
A change of Selling Broker-Dealer request by a Contract Owner shall be
honored by the Company only if there exists a valid similar Corporate Markets
Variable Life Insurance Sales Agreement between the Company, Sun Investment
and the new Selling Broker-Dealer and (1) the Contract Owner(s) requests in
writing that the Sub-broker remains as representative of record, or (2) both
the former and future Selling Broker-Dealers direct the Company and Sun
Investment in a joint writing to transfer all policies and future
compensation to the new Selling Broker-Dealer, or (3) the NASD approves and
effects a bulk transfer of all representatives to a new Selling Broker-Dealer.
B. Time of Payment
Sun Investment will pay any commissions due Producer in accordance with
Schedule C of this Agreement, as it may be amended from time to time.
C. Amendment of Schedules
Sun Investment may amend Schedule C upon at least ten (10) days' prior
written notice to Selling Broker-Dealer and Producer. The submission of an
application for the Contracts by Selling Broker-Dealer or Producer after the
effective date of any such amendment shall constitute agreement to such
amendment. Any such amendment shall apply to compensation due on
applications received by the Company after the effective date of such notice.
<PAGE>
8
D. Prohibition Against Rebates
The Company or Sun Investment may terminate this Agreement if Selling
Broker-Dealer, Producer or any Sub-broker rebates, offers to rebate or
withholds any part of any Payment on the Contracts. If Selling
Broker-Dealer, Producer or any Sub-broker shall at any time induce or
endeavor to induce any Owner of any Contract issued hereunder to discontinue
payments or to relinquish any such Contract, except under circumstances where
there is reasonable grounds for believing the Contract is not suitable for
such person, any and all compensation due Producer hereunder shall cease and
terminate.
E. Indebtedness and Right of Set Off
Nothing contained in this Agreement shall be construed as giving Selling
Broker-Dealer or Producer the right to incur any indebtedness on behalf of
the Company or Sun Investment. Selling Broker-Dealer and Producer hereby
authorize Sun Investment and the Company to set off liabilities of Selling
Broker-Dealer and Producer to the Company and Sun Investment against any and
all amounts otherwise payable to Selling Broker-Dealer or Producer.
VI.
GENERAL PROVISIONS
A. 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 to be, or shall
constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver.
B. Limitations
The Selling Broker-Dealer and Producer are independent contractors with
respect to the Company and Sun Investment. No sub-broker is a party to this
Agreement nor is any sub-broker entitled to claim the status of a third party
beneficiary with respect to this Agreement. No party other than the Company
and or Sun Investment, as the case may be, shall have the authority to: (i)
make, alter or discharge any Contract issued by the Company; (ii) waive any
forfeiture or extend the time of making any payments; (iii) enter into any
proceeding in a court of law or before a regulatory agency in the name of or
on behalf of the Company or Sun Investment; (iv) contract for the expenditure
of funds of the Company or Sun Investment; (v) alter the forms which the
Company prescribes, or substitute other forms in place of those prescribed by
Sun Investment.
<PAGE>
9
C. Fidelity Bond and Other Liability Coverage
Selling Broker-Dealer and Producer each represent that all directors,
officers, agents, employees and brokers who are licensed pursuant to this
Agreement as brokers for the Company for state insurance law purposes or who
have access to funds of the Company, including but not limited to, funds
submitted with applications for the Contracts are and shall be covered by a
blanket fidelity bond, including coverage for larceny and embezzlement issued
by a reputable bonding company. This bond shall be maintained by Selling
Broker-Dealer or Producer at their expense and shall be, at a minimum, of the
form, type and amount required under NASD Rules endorsed to extend coverage
to transactions relating to the Contracts. The Company may require evidence
satisfactory to it, that such coverage is in force and Selling Broker-Dealer
or Producer, as the case may be, shall give prompt written notice to the
Company of any notice of cancellation of the bond or change of coverage.
Selling Broker-Dealer and Producer hereby assign any proceeds received
from a fidelity bonding company, error and omissions or other liability
coverage, to the Company or Sun Investment 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 amount, whether due to
a deductible or otherwise, Selling Broker-Dealer or Producer shall promptly
pay such amounts on demand. Selling Broker-Dealer and Producer hereby
indemnify and hold harmless the Company and Sun Investment from any such
deficiency and from the costs of collection thereof (including reasonable
attorneys' fees).
D. Binding Effect
This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns provided that
neither Selling Broker-Dealer nor Producer may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Company.
E. Regulations
All parties agree to observe and comply with the existing laws and rule
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.
F. Indemnification
The Company and Sun Investment agree to indemnify and hold harmless Selling
Broker-Dealer and Producer, their officers, directors, agents and employees,
against any and all losses, claims, damages or liabilities to which they may
become subject under the 1933 Act, the 1934 Act, or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based
<PAGE>
10
upon any untrue statement or alleged untrue statement of a material fact or
any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in the
registration statement for the Contracts filed pursuant to the 1933 Act, or
any prospectus included as a part thereof, as from time to time amended and
supplemented, or in any advertisement or sales literature approved in writing
by the Company and Sun Investment pursuant to this Agreement.
Selling Broker-Dealer and Producer agree to indemnify and hold harmless
the Company and Sun Investment, their officers, directors, agents and
employees, against any and all losses, claims, damages or liabilities to
which they may become subject under the 1933 Act, the 1934 Act, or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (a) any oral or written
misrepresentation by Selling Broker-Dealer or Producer or their officers,
directors, employees or agents unless such misrepresentation is contained in
the registration statement for the Contracts, any prospectus included as a
part thereof, as from time to time amended and supplemented, or any
advertisement or sales literature approved in writing by the Company and Sun
Investment pursuant to this Agreement, (b) the failure of Selling
Broker-Dealer or Producer or their officers, directors, employees or agents
to comply with any applicable provisions of this Agreement or (c) claims by
brokers or employees of Producer or Selling Broker-Dealer for payments of
compensation or remuneration of any type. Selling Broker-Dealer and Producer
will reimburse the Company or Sun Investment or any director, officer, agent
or employee of either entity for any legal or other expenses reasonable
incurred by the Company, Sun Investment, or such office, director, agent or
employee in connection with investigating or defending any such loss, claims,
damages, liability or action. This indemnity agreement will be in addition
to any liability which Broker-Dealer may otherwise have.
G. Notices
All notices or communications shall be sent to the following address for
the Company or Sun Investment, or to such other address as the Company or Sun
Investment may request by giving written notice to the other parties:
Sun Life Assurance Co. Of Canada (U.S.) Sun Investment Services Co.
One Sun Life Executive Park, SC2145 One Sun Life Executive Park, SC2135
Wellesley Hills, MA 02181 Wellesley Hills, MA 02181
All notices or communications to the Selling Broker-Dealer or Producer
shall be sent to the last address known to the Company for that party, or to
such other address as Selling Broker-Dealer or Producer may request by giving
written notice to the other parties.
<PAGE>
11
H. Governing Law
This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts.
I. Amendment of Agreement
Sun Investment may amend this Agreement upon at least ten (10) days'
prior written notice to Selling Broker-Dealer and Producer. The submission
of an application for the Contracts by Selling Broker-Dealer or Producer
after the effective date of any such amendment shall constitute agreement to
such amendment.
J. Producer as Broker-Dealer
Selling Broker-Dealer and Producer shall not have the other entity's
authority and shall not be responsible for the other entity's duties
hereunder unless Selling Broker-Dealer and Producer are the same entity,
subject to their acceptance of joint and several responsibility under this
Agreement. If Selling Broker-Dealer and Producer are the same person or
legal entity, such person or legal entity shall have the rights and
obligations hereunder of both Selling Broker-Dealer and Producer and this
Agreement shall be binding and enforceable by and against such person or
legal entity in both capacities.
K. Complaints and Investigations
The Company, Sun Investment, Selling Broker-Dealer and Producer agree to
cooperate fully in any insurance regulatory investigation or proceeding or
judicial proceeding arising in connection with the Contracts distributed
under this Agreement. The Company, Sun Investment, Selling Broker-Dealer and
Producer further agree to cooperate fully in any securities regulatory
investigation or proceeding with respect to the Company, Sun Investment,
Selling Broker-Dealer and Producer, their affiliates and their agents or
representatives to the extent that such investigation or proceeding is in
connection with the Contracts distributed under this Agreement. Without
limiting the foregoing:
(a) Selling Broker-Dealer or Producer will be notified promptly of any
customer complaint or notice of any regulatory investigation or proceeding
or judicial proceeding received by the Company or Sun Investment with
respect to Selling Broker-Dealer or Producer or any Sub-broker or which may
affect the Company's issuance of any contracts sold under this Agreement;
and
(b) Selling Broker-Dealer and Producer will promptly notify the Company
and Sun Investment of any customer complaint or notice of any regulatory
investigation or proceeding received by Selling Broker-Dealer, Producer or
their affiliates with respect to Selling Broker-Dealer, Producer or any
Sub-broker in connection with any Contracts distributed under this
Agreement or any activity in connection with any such policies.
<PAGE>
12
In the case of a substantive customer complaint, the Company, Sun
Investment, Selling Broker-Dealer and Producer will cooperate in
investigating such complaint and any response will be sent to the other party
to this Agreement 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 telegraph.
L. Termination
This Agreement may be terminated, without cause, by any party upon
thirty (30) days' prior written notice. This Agreement also may be
terminated immediately if Sun Investment or Selling Broker-Dealer shall cease
to be a registered Broker-Dealer under the 1934 Act or a member in good
standing of the NASD, or if there occurs the dissolution, bankruptcy or
insolvency of Selling Broker-Dealer or Producer. Sections V I, F and K shall
survive termination of this Agreement.
Upon termination of this Agreement, Selling Broker-Dealer and Producer
shall each use their best efforts to have all property of the Company and Sun
Investment in Selling Broker-Dealer, Producer or Sub-brokers' possession
promptly returned to the Company or Sun Investment, as the case may be. Such
property includes illustration software, prospectuses, applications and other
literature supplied by the Company or Sun Investment.
M. Exclusivity
Selling Broker-Dealer and Producer each agree that no territory is
assigned exclusively hereunder and that the Company and Sun Investment
reserve the right in their discretion to establish one or more agencies in
any jurisdiction in which Selling Broker-Dealer and Producer transact
business hereunder.
This Agreement shall be effective as of __________________________________.
Sun Life Assurance Company of Canada (U.S.) __________________________________
(Selling Broker-Dealer)
By:___________________________________ By:________________________________
(Signature) (Signature)
Title: _______________________________ Title:_____________________________
Date:_________________________________ Date:______________________________
<PAGE>
13
Sun Investment Services Co. ________________________________
(Producer)
By:___________________________________ By:________________________________
(Signature) (Signature)
Title:________________________________ Title:_____________________________
Date:_________________________________ Date: _____________________________
______________________________________ ___________________________________
(Producer) (Producer)
By:___________________________________ By:________________________________
(Signature) (Signature)
Title:________________________________ Title:_____________________________
Date:_________________________________ Date: _____________________________
<PAGE>
CORPORATE MARKETS VARIABLE LIFE INSURANCE
SALES AGREEMENT
AGREEMENT by and between SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
("the Company"), a Delaware corporation; Sun Investment Services Company
("Sun Investment"), a Delaware corporation, a broker-dealer registered with
the Securities and Exchange Commission under the Securities Exchange Act of
1934 (the "1934 Act") and a member of the National Association of Securities
Dealers, Inc. ("NASD");_____________________________________________________
("Selling Broker-Dealer"), also a broker-dealer registered under the 1934 Act
and a member of the NASD; and _______________________________________________
("Producer") an insurance agency affiliate of Selling Broker-Dealer.
W I T N E S S E T H:
WHEREAS, the Company issues certain life insurance contracts listed in
Schedule A (the "Contracts"), which are registered under the Securities Act
of 1933 (the "1933 Act"):
WHEREAS, the Company has authorized Sun Investment to act as the general
distributor and principal underwriter of the Contracts; and in that capacity
to enter into agreements, subject to the consent of the Company, with
Broker-Dealers and such Producers to act as Special COLI Producers for the
distribution of the Contracts:
WHEREAS, Sun Investment has agreed to assist in obtaining licenses,
registrations and appointments to enable the registered representatives and
sub-brokers of Producer to sell the Contracts, and participate at educational
meetings to familiarize them with the provisions and features of the
Contracts; and
WHEREAS, Selling Broker-Dealer and Producer have been selected by Sun
Investment to distribute the Contracts and Selling Broker-Dealer and
Producer, in an insurance brokerage capacity, wish to participate in the
distribution of the Contracts to their clients.
NOW THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
APPOINTMENT
Subject to the terms and conditions of this Agreement, the Company and
Sun Investment hereby appoint Selling Broker-Dealer and Producer to solicit
applications for the Contracts.
Selling Broker-Dealer and Producer jointly and severally accept such
appointment and each agrees to use its best efforts to find purchasers for
the Contracts acceptable to the Company.
<PAGE>
2
II.
AUTHORITY AND DUTIES OF PRODUCER
A. Licensing and Appointment of Sub-brokers
Producer is authorized to appoint sub-broker ("Sub-brokers") to solicit
sales of the Contracts. Producer agrees to fulfill all requirements set
forth in the General Letter of Recommendation attached as Schedule B hereto
in conjunction with its submission of licensing and appointment papers for
all Sub-brokers.
Producer warrants that it and all of its Sub-brokers appointed pursuant
to this Agreement shall not solicit nor aid, directly or indirectly, in the
solicitation of any application for any Contract until fully licensed by the
proper authorities under the applicable insurance laws within the applicable
jurisdictions where Producer proposes to offer the Contracts, where the
Company is authorized to conduct business and where the Contracts may be
lawfully sold.
Producer shall periodically provide the Company with a list of all
Sub-brokers appointed by Producer and the jurisdictions where such
Sub-brokers are licensed to solicit sales of the Contracts. The company
shall periodically provide Producer with a list which shows; (i) the
jurisdictions where the Company is authorized to do business; and (ii) any
limitations on the availability of the Contracts in any of such jurisdictions.
Producer shall prepare and transmit the appropriate appointment forms to
the Company. Producer shall pay all fees to state insurance regulatory
authorities in connection with obtaining necessary licenses and
authorizations for Sub-brokers to solicit and sell the Contracts. The
Company will pay appointment fees for Producer and resident appointment fees
for Sub-brokers. Non-resident appointment fees for Sub-brokers will be paid
by the Producer. The Company may refuse for any reason to apply for the
appointment of a Sub-broker and may cancel any existing appointment at any
time.
B. Rejection of Sub-broker
The Company or Sun Investment may refuse for any reason, by written
notice to Producer to permit any Sub-broker the right to solicit applications
for the sale of any of the Contracts. Upon receipt of such notice, Producer
immediately shall cause such Sub-broker to cease such solicitations of sales
and cancel the appointment of any Sub-broker under this agreement.
C. Supervision of Sub-broker
Producer, jointly with Selling Broker-Dealer, shall supervise all
Sub-brokers appointed pursuant to this Agreement to solicit sales of the
Contracts and bear responsibility for all acts and omissions of each
Sub-broker. Producer shall comply with and exercise all responsibilities
required by applicable federal and state law and regulations. Producer shall
train and supervise its Sub-brokers to ensure that purchase of a Contract is
recommended only to applicants where there are reasonable grounds to believe
the purchase of the Contract is suitable for that applicant.
<PAGE>
3
While not limited to the following, a determination of suitability shall be
based on information furnished to a Sub-broker after reasonable inquiry of
such applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and the likelihood that the
applicant will continue to make any premium payments contemplated by the
Contracts and will keep the Contract in force for a sufficient period of time
so that the Company's acquisition costs are amortized over a reasonable
period of time.
Nothing contained in this Agreement or otherwise shall be deemed to make
any Sub-broker appointed by Producer an employee or agent of the Company or
Sun Investment. Neither the Company nor Sun Investment shall have any
responsibility for the training and supervision of any Sub-broker or any
employee of Producer. If the act or omission of a Sub-broker or any employee
of Producer is the proximate cause of claim, damage or liability (including
reasonable attorneys' fees) to the Company or Sun Investment, Producer and
Selling Broker-Dealer shall be responsible and liable, jointly and severally,
therefor.
III.
AUTHORITY AND DUTIES OF SELLING BROKER-DEALER
Selling Broker-Dealer agrees that it has the full legal responsibility
for the training and supervision of all persons, including Sub-brokers of
Producer, associated with Selling Broker-Dealer who are engaged directly or
indirectly in the offer or sale of Contracts. All such persons shall be
registered representatives of Selling Broker-Dealer and shall be subject to
the control and supervision of Selling Broker-Dealer with respect to their
securities regulated activities. Selling Broker-Dealer shall: (i) train and
supervise Sub-brokers, in their capacity as registered representatives, in
the sale of Contracts; (ii) use its best efforts to cause such Sub-brokers to
qualify under applicable federal and state laws to engage in the sale of
Contracts; (iii) provide the Company and Sun Investment to their satisfaction
with evidence of Sub-brokers' qualifications to sell Contracts; (iv) notify
the Company if any of such Sub-brokers ceases to be a registered
representative of Selling Broker-Dealer; and (v) train and supervise
Sub-brokers to ensure compliance with applicable federal and state securities
laws, rules, regulations, statements of policy thereunder and with NASD
rules. Selling Broker-Dealer, jointly with Producer, shall train and
supervise Sub-brokers to ensure that purchase of a Contract is recommended
only to applicants where there are reasonable grounds to believe the purchase
of the Contract is suitable for that applicant. While not limited to the
following, a determination of suitability shall be based on information
furnished to a Sub-broker after reasonable inquiry of such applicant
concerning the applicant's other security holdings, financial situation and
needs. Selling Broker-Dealer shall ensure that any offer of a Contract made
by a Sub-broker will be made by means of a currently effective prospectus.
The Company and Sun Investment shall not have any responsibility for the
supervision of any registered representative or any employee or affiliate of
Selling Broker-Dealer. If the act or omission of a registered representative
or any employee or affiliate of Selling Broker-Dealer is the proximate cause
of any claim, damage or liability (including reasonable attorney's fees)
<PAGE>
4
to the Company or Sun Investment, Selling Broker-Dealer and Producer shall be
responsible and liable, jointly and severally, therefor.
Selling Broker-Dealer at all times shall be duly registered as a
broker-dealer under the 1934 Act, a member in good standing of the NASD and
duly licensed in all states and jurisdictions where required to perform
pursuant to this agreement. Selling Broker-Dealer shall fully comply with
the requirements of the 1934 Act and all other applicable federal or state
laws and with the rules of the NASD. Selling Broker-Dealer shall establish
such rules and procedures as may be necessary to cause diligent supervision
of the securities activities of the Sub-brokers including ensuring compliance
with the prospectus delivery requirements of the 1933 Act.
IV.
AUTHORITY AND DUTIES OF
PRODUCER AND SELLING BROKER-DEALER
A. Contracts
The Contracts issued by the Company to which this Agreement applies are
listed in Schedule A. This Schedule A may be amended from time to time by
the Company. The Company, in its sole discretion, with prior or concurrent
written notice to Selling Broker-Dealer and Producer, may suspend
distribution of any Contract. The Company also has the right to amend any
Contract at any time.
B. Securing Applications
Each application for a Contract shall be made on an application form
provided by the Company and all payments collected by Selling Broker-Dealer,
Producer or any registered representative and Sub-broker shall be remitted
promptly in full, together with such application form and any other required
documentation, directly to the Company at the address indicated on such
application or to such other address as may be designated by the Company.
All such payments and documents shall be the property of the Company.
Selling Broker-Dealer and Producer shall review all such applications for
completeness and for compliance with the conditions herein, including the
suitability and prospectus delivery requirements set forth herein. Check or
money order in payment of such Contracts should be made payable to the order
of "Sun Life Assurance Company of Canada (U.S.)." All applications are
subject to acceptance or rejection by the Company in its sole discretion.
C. Receipt of Money
All money payable in connection with any of the Contracts, whether as
premium, purchase payment or otherwise and whether paid by or on behalf of
any contract owner or anyone else having an interest in the Contracts, is the
property of the Company and shall be transmitted immediately in accordance
with the administrative procedures of the Company
<PAGE>
5
without any deduction or offset for any reason including, but not limited to,
any deduction or offset for compensation claimed by Selling Broker-Dealer or
Producer, unless there has been a prior written arrangement for net wire
transmissions between the Company and Selling Broker-Dealer or Producer.
D. Notice of Sub-broker's Noncompliance
Selling Broker-Dealer shall immediately notify Sun Investment and
Producer in the event a Sub-broker fails or refuses to submit to the
supervision of Selling Broker-Dealer or Producer in accordance with this
Agreement or any related agreement between Selling Broker-Dealer, Producer
and Sub-broker or otherwise fails to meet the rules and standards imposed by
Selling Broker-Dealer or its registered representatives or Producer or its
Sub-brokers. Selling Broker-Dealer or Producer shall also immediately notify
such Sub-broker that he or she is no longer authorized to sell the Contracts,
and both Selling Broker-Dealer and Producer shall take whatever additional
action may be necessary to terminate the sales activities of such Sub-broker
relating to the Contracts.
E. Sales Promotion, Advertising and Prospectuses
No sales promotion materials, circulars, documents or any advertising
relating to any of the Contracts shall be used by Selling Broker-Dealer,
Producer or any Sub-brokers unless the specific item has been approved in
writing by Sun Investment and the Company prior to use. Selling
Broker-Dealer shall be provided, without any expense to Selling
Broker-Dealer, with prospectuses relating to Contracts. Selling
Broker-Dealer and Producer shall be provided with such other material as Sun
Investment determines necessary or desirable for use in connection with sales
of the Contracts. Nothing in these provisions shall prohibit Selling
Broker-Dealer or Producer from advertising life insurance and annuities on a
generic basis.
Selling Broker-Dealer, Producer and Sub-brokers shall make no material
representations relating to the Contracts, other than those contained in the
relevant registration statement, as may be amended, or in sales promotion or
other materials approved by the Company and Sun Investment as provided herein.
F. Confidentiality
The Company, Sun Investment, Selling Broker-Dealer and Producer shall
keep confidential all information obtained pursuant to this Agreement,
including, without limitation, names of the purchasers of the Contracts, and
shall disclose such information, only if authorized to make such disclosure
in writing, or if such disclosure is expressly required by applicable federal
or state regulatory authorities.
<PAGE>
6
G. Records
Selling Broker-Dealer and Producer shall have the responsibility for
maintaining the records of its Sub-brokers and representatives licensed,
registered and otherwise qualified to sell the Contracts. Selling
Broker-Dealer and Producer shall maintain such other records as are required
of them by applicable laws and regulations. The books, accounts and records
of Selling Broker-Dealer and Producer relating to the sale of the Contracts
shall be maintained so as to clearly and accurately disclose the nature and
details of the transactions. Selling Broker-Dealer and Producer each agree
to make the books and records relating to the sale of the Contracts available
to the Company or Sun Investment upon their written request.
H. Sub-Broker Agreements
Before a Sub-broker is permitted by Producer and Selling Broker-Dealer
to offer the Contracts, Sub-broker shall have entered into a written
agreement with Producer and Selling Broker-Dealer pursuant to which (i)
Sub-broker is appointed as a Sales representative of Producer and a
registered representative of Selling Broker-Dealer; (ii) Sub-broker agrees
that his or her selling activities relating to Contracts shall be under the
supervision and control of Selling Broker-Dealer and Producer, and (iii) that
Sub-brokers right to continue to sell such Contracts is subject to his or her
continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or Producer. At the request
of the Company, a copy of each such written agreement shall be mailed to the
Company.
V.
COMPENSATION
A. Commissions and Fees
Commissions and fees payable to Selling Broker-Dealer, Producer or any
Sub-broker in connection with the Contracts shall be paid by the Company
through Sun Investment, as paying agent for the Company to Producer, or
otherwise permitted by law or regulation. Producer shall pay Selling
Broker-Dealer and Sub-broker. Sun Investment will provide Selling
Broker-Dealer and Producer with a copy of its current Compensation
Schedule(s), attached hereto as Schedule C. Unless otherwise provided in
Schedule C. compensation will be paid as a percentage of premiums or purchase
payments (collectively, "Payments") received and accepted by the Company on
applications obtained by the various Sub-brokers appointed by Producer
hereunder. Upon termination of this Agreement, all compensation to Selling
Broker-Dealer and Producer hereunder shall cease. However, Producer shall be
entitled to receive compensation for all new and additional premium payments
which are in process at the time of termination, and shall continue to be
liable for any charge-backs pursuant to the provisions of said Schedule C, or
for any other amount advanced by or otherwise due the Company or Sun
Investment hereunder. The Company reserves the right not to pay compensation
on a Contract for which the premium is paid in whole or in part by the loan
or surrender value of any other life insurance policy or annuity contract
issued by the Company or any direct or indirect affiliated company.
<PAGE>
7
Sun Investment, at the direction of the Company, shall deduct any charge
backs from compensation otherwise due Producer or Selling Broker-Dealer. If
any amount to be deducted exceeds compensation otherwise due, Producer and/or
Selling Broker-Dealer shall promptly pay back the amount of the excess
following a written demand by Sun Investment or the Company. Producer and
Selling Broker-Dealer are jointly and severally liable for such charge backs.
The Company recognizes the Contract Owners' right on issued Contracts to
terminate its agent of record status with Producer and/or change a Selling
Broker-Dealer, provided that the Contract Owner notifies Sun Investment in
writing. When a Contract Owner terminates its agent of record, no further
service fees nor compensation on any payments due or received on any
increases in face amount in the existing policy after termination, shall be
payable to Producer or Selling Broker-Dealer in accordance with Schedule C
after the notice of termination is received and accepted by Sun Investment.
However, when a Contract Owner designates a new Selling Broker-Dealer other
than those of record, compensation on any payments due or received on any
increases in face amount in the existing Contract after the change, shall be
payable to the new Selling Broker-Dealer in accordance with Schedule C in
effect at the time of issuance of the Contract.
A change of Selling Broker-Dealer request by a Contract Owner shall be
honored by the Company only if there exists a valid similar Corporate Markets
Variable Life Insurance Sales Agreement between the Company, Sun Investment
and the new Selling Broker-Dealer and (1) the Contract Owner(s) requests in
writing that the Sub-broker remains as representative of record, or (2) both
the former and future Selling Broker-Dealers direct the Company and Sun
Investment in a joint writing to transfer all policies and future
compensation to the new Selling Broker-Dealer, or (3) the NASD approves and
effects a bulk transfer of all representatives to a new Selling Broker-Dealer.
B. Time of Payment
Sun Investment will pay any commissions due Producer in accordance with
Schedule C of this Agreement, as it may be amended from time to time.
C. Amendment of Schedules
Sun Investment may amend Schedule C upon at least ten (10) days' prior
written notice to Selling Broker-Dealer and Producer. The submission of an
application for the Contracts by Selling Broker-Dealer or Producer after the
effective date of any such amendment shall constitute agreement to such
amendment. Any such amendment shall apply to compensation due on
applications received by the Company after the effective date of such notice.
<PAGE>
8
D. Prohibition Against Rebates
The Company or Sun Investment may terminate this Agreement if Selling
Broker-Dealer, Producer or any Sub-broker rebates, offers to rebate or
withholds any part of any Payment on the Contracts. If Selling
Broker-Dealer, Producer or any Sub-broker shall at any time induce or
endeavor to induce any Owner of any Contract issued hereunder to discontinue
payments or to relinquish any such Contract, except under circumstances where
there is reasonable grounds for believing the Contract is not suitable for
such person, any and all compensation due Producer hereunder shall cease and
terminate.
E. Indebtedness and Right of Set Off
Nothing contained in this Agreement shall be construed as giving Selling
Broker-Dealer or Producer the right to incur any indebtedness on behalf of
the Company or Sun Investment. Selling Broker-Dealer and Producer hereby
authorize Sun Investment and the Company to set off liabilities of Selling
Broker-Dealer and Producer to the Company and Sun Investment against any and
all amounts otherwise payable to Selling Broker-Dealer or Producer.
VI.
GENERAL PROVISIONS
A. 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 to be, or shall
constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver.
B. Limitations
The Selling Broker-Dealer and Producer are independent contractors with
respect to the Company and Sun Investment. No sub-broker is a party to this
Agreement nor is any sub-broker entitled to claim the status of a third party
beneficiary with respect to this Agreement. No party other than the Company
and or Sun Investment, as the case may be, shall have the authority to: (i)
make, alter or discharge any Contract issued by the Company; (ii) waive any
forfeiture or extend the time of making any payments; (iii) enter into any
proceeding in a court of law or before a regulatory agency in the name of or
on behalf of the Company or Sun Investment; (iv) contract for the expenditure
of funds of the Company or Sun Investment; (v) alter the forms which the
Company prescribes, or substitute other forms in place of those prescribed by
Sun Investment.
<PAGE>
9
C. Fidelity Bond and Other Liability Coverage
Selling Broker-Dealer and Producer each represent that all directors,
officers, agents, employees and brokers who are licensed pursuant to this
Agreement as brokers for the Company for state insurance law purposes or who
have access to funds of the Company, including but not limited to, funds
submitted with applications for the Contracts are and shall be covered by a
blanket fidelity bond, including coverage for larceny and embezzlement issued
by a reputable bonding company. This bond shall be maintained by Selling
Broker-Dealer or Producer at their expense and shall be, at a minimum, of the
form, type and amount required under NASD Rules endorsed to extend coverage
to transactions relating to the Contracts. The Company may require evidence
satisfactory to it, that such coverage is in force and Selling Broker-Dealer
or Producer, as the case may be, shall give prompt written notice to the
Company of any notice of cancellation of the bond or change of coverage.
Selling Broker-Dealer and Producer hereby assign any proceeds received
from a fidelity bonding company, error and omissions or other liability
coverage, to the Company or Sun Investment 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 amount, whether due to
a deductible or otherwise, Selling Broker-Dealer or Producer shall promptly
pay such amounts on demand. Selling Broker-Dealer and Producer hereby
indemnify and hold harmless the Company and Sun Investment from any such
deficiency and from the costs of collection thereof (including reasonable
attorneys' fees).
D. Binding Effect
This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns provided that
neither Selling Broker-Dealer nor Producer may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Company.
E. Regulations
All parties agree to observe and comply with the existing laws and rule
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.
F. Indemnification
The Company and Sun Investment agree to indemnify and hold harmless
Selling Broker-Dealer and Producer, their officers, directors, agents and
employees, against any and all losses, claims, damages or liabilities to
which they may become subject under the 1933 Act, the 1934 Act, or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based
<PAGE>
10
upon any untrue statement or alleged untrue statement of a material fact or
any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in the
registration statement for the Contracts filed pursuant to the 1933 Act, or
any prospectus included as a part thereof, as from time to time amended and
supplemented, or in any advertisement or sales literature approved in writing
by the Company and Sun Investment pursuant to this Agreement.
Selling Broker-Dealer and Producer agree to indemnify and hold harmless
the Company and Sun Investment, their officers, directors, agents and
employees, against any and all losses, claims, damages or liabilities to
which they may become subject under the 1933 Act, the 1934 Act, or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (a) any oral or written
misrepresentation by Selling Broker-Dealer or Producer or their officers,
directors, employees or agents unless such misrepresentation is contained in
the registration statement for the Contracts, any prospectus included as a
part thereof, as from time to time amended and supplemented, or any
advertisement or sales literature approved in writing by the Company and Sun
Investment pursuant to this Agreement, (b) the failure of Selling
Broker-Dealer or Producer or their officers, directors, employees or agents
to comply with any applicable provisions of this Agreement or (c) claims by
brokers or employees of Producer or Selling Broker-Dealer for payments of
compensation or remuneration of any type. Selling Broker-Dealer and Producer
will reimburse the Company or Sun Investment or any director, officer, agent
or employee of either entity for any legal or other expenses reasonable
incurred by the Company, Sun Investment, or such office, director, agent or
employee in connection with investigating or defending any such loss, claims,
damages, liability or action. This indemnity agreement will be in addition
to any liability which Broker-Dealer may otherwise have.
G. Notices
All notices or communications shall be sent to the following address for
the Company or Sun Investment, or to such other address as the Company or Sun
Investment may request by giving written notice to the other parties:
Sun Life Assurance Co. Of Canada (U.S.) Sun Investment Services Co.
One Sun Life Executive Park, SC2145 One Sun Life Executive Park, SC2135
Wellesley Hills, MA 02181 Wellesley Hills, MA 02181
All notices or communications to the Selling Broker-Dealer or Producer
shall be sent to the last address known to the Company for that party, or to
such other address as Selling Broker-Dealer or Producer may request by giving
written notice to the other parties.
<PAGE>
11
H. Governing Law
This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts.
I. Amendment of Agreement
Sun Investment may amend this Agreement upon at least ten (10) days'
prior written notice to Selling Broker-Dealer and Producer. The submission
of an application for the Contracts by Selling Broker-Dealer or Producer
after the effective date of any such amendment shall constitute agreement to
such amendment.
J. Producer as Broker-Dealer
Selling Broker-Dealer and Producer shall not have the other entity's
authority and shall not be responsible for the other entity's duties
hereunder unless Selling Broker-Dealer and Producer are the same entity,
subject to their acceptance of joint and several responsibility under this
Agreement. If Selling Broker-Dealer and Producer are the same person or
legal entity, such person or legal entity shall have the rights and
obligations hereunder of both Selling Broker-Dealer and Producer and this
Agreement shall be binding and enforceable by and against such person or
legal entity in both capacities.
K. Complaints and Investigations
The Company, Sun Investment, Selling Broker-Dealer and Producer agree to
cooperate fully in any insurance regulatory investigation or proceeding or
judicial proceeding arising in connection with the Contracts distributed
under this Agreement. The Company, Sun Investment, Selling Broker-Dealer and
Producer further agree to cooperate fully in any securities regulatory
investigation or proceeding with respect to the Company, Sun Investment,
Selling Broker-Dealer and Producer, their affiliates and their agents or
representatives to the extent that such investigation or proceeding is in
connection with the Contracts distributed under this Agreement. Without
limiting the foregoing:
(a) Selling Broker-Dealer or Producer will be notified promptly of any
customer complaint or notice of any regulatory investigation or proceeding
or judicial proceeding received by the Company or Sun Investment with
respect to Selling Broker-Dealer or Producer or any Sub-broker or which may
affect the Company's issuance of any contracts sold under this Agreement;
and
(b) Selling Broker-Dealer and Producer will promptly notify the Company
and Sun Investment of any customer complaint or notice of any regulatory
investigation or proceeding received by Selling Broker-Dealer, Producer or
their affiliates with respect to Selling Broker-Dealer, Producer or any
Sub-broker in connection with any Contracts distributed under this
Agreement or any activity in connection with any such policies.
<PAGE>
12
In the case of a substantive customer complaint, the Company, Sun
Investment, Selling Broker-Dealer and Producer will cooperate in
investigating such complaint and any response will be sent to the other party
to this Agreement 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 telegraph.
L. Termination
This Agreement may be terminated, without cause, by any party upon
thirty (30) days' prior written notice. This Agreement also may be
terminated immediately if Sun Investment or Selling Broker-Dealer shall cease
to be a registered Broker-Dealer under the 1934 Act or a member in good
standing of the NASD, or if there occurs the dissolution, bankruptcy or
insolvency of Selling Broker-Dealer or Producer. Sections V I, F and K shall
survive termination of this Agreement.
Upon termination of this Agreement, Selling Broker-Dealer and Producer
shall each use their best efforts to have all property of the Company and Sun
Investment in Selling Broker-Dealer, Producer or Sub-brokers' possession
promptly returned to the Company or Sun Investment, as the case may be. Such
property includes illustration software, prospectuses, applications and other
literature supplied by the Company or Sun Investment.
M. Exclusivity
Selling Broker-Dealer and Producer each agree that no territory is
assigned exclusively hereunder and that the Company and Sun Investment
reserve the right in their discretion to establish one or more agencies in
any jurisdiction in which Selling Broker-Dealer and Producer transact
business hereunder.
This Agreement shall be effective as of __________________________________.
Sun Life Assurance Company of Canada (U.S.) __________________________________
(Selling Broker-Dealer)
By:___________________________________ By:________________________________
(Signature) (Signature)
Title:________________________________ Title:_____________________________
Date:_________________________________ Date: _____________________________
<PAGE>
13
Sun Investment Services Co. ___________________________________
(Producer)
By:___________________________________ By:________________________________
(Signature) (Signature)
Title:________________________________ Title:_____________________________
Date:_________________________________ Date: _____________________________
______________________________________ ___________________________________
(Producer) (Producer)
By:___________________________________ By:________________________________
(Signature) (Signature)
Title:________________________________ Title:_____________________________
Date:_________________________________ Date: _____________________________
<PAGE>
SCHEDULE A
TYPES OF PLANS
* Sun Life Corporate VUL-SM-
(flexible premium variable universal life insurance policy)
<PAGE>
SCHEDULE B
General Letter of Recommendation
PRODUCER hereby certifies to Sun Life (U.S.) and Sun Investment that all
the following requirements will be fulfilled in conjunction with the
submission of licensing/appointment papers for all applicants as sub-brokers
submitted by PRODUCER. PRODUCER will, upon request, forward proof of
compliance with same to Sun Life (U.S.) in a timely manner.
1. We have made a thorough and diligent inquiry and investigation
relative to each applicant's identity, residence and business
reputation and declare that each applicant is personally known to us,
has been examined by us, is known to be of good moral character, has a
good business reputation, is reliable, is financially responsible and
is worthy of a license. Each individual is trustworthy, competent and
qualified to act as a sales representative for Sun Life (U.S.) to hold
himself out in good faith to the general public. We vouch for each
applicant.
2. We have on file a B-300, B-301, or U-4 form which was completed by
each applicant. We have fulfilled all the necessary investigative
requirements for the registration of each applicant as a registered
representative through our NASD member firm, and each applicant is
presently registered as an NASD registered representative with our
NASD member firm.
The above information in our files indicates no fact or condition
which would disqualify the applicant from receiving a license and all
the findings of all investigative information is favorable.
3. We certify that all educational requirements have been met for the
specific state each applicant is requesting a license in, and that,
all such persons have fulfilled the appropriate examination, education
and training requirements.
4. If the applicant is required to submit his picture, his signature, and
securities registration in the state in which he is applying for a
license, we certify that those items forwarded to Sun Life (U.S.) are
those of the applicant and the securities registration is a true copy
of the original.
5. We hereby warrant that the applicant is not applying for a license
with Sun Life (U.S.) in order to place insurance chiefly and solely on
his life or property, lives or property of his relatives, or property
or liability of his associates.
6. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or
all risks written by these applicants, to the end that the insurance
interest of the public will be properly protected.
<PAGE>
7. We will not permit any applicant to transact insurance until duly
licensed therefore. No applicants have been given a contract or
furnished supplies, nor have any applicants been permitted to write,
or solicit business in any capacity, and they will not be so permitted
until the certificate of authority or license applied for is received.
We acknowledge that the applicant, when licensed, shall be a broker
for Sun Life (U.S.) and not an agent or sub-agent of Sun Life (U.S.).
<PAGE>
SCHEDULE OF SALES COMMISSIONS
Specialty Brokers are compensated for sales of this Policy based on percent
of premium and percent of account value commission. Percent of premium
compensation is calculated as a percentage of premium paid up to the target
premium, plus a percentage of premium paid in excess of target premium. The
specialty broker can choose a heaped commission scale, a level commission
scale, or a blend of the two.
Heaped % of Premium Commission
Up to Target Target to Target-2 Excess
Policy Year 1 15% 2.5% 0%
Policy Years 2-7 7.5% 2.5% 2.5%
Policy Years 8+ 0% 0% 0%
Level % of Premium Commission
Up to Target Target to Target-2 Excess
Policy Year 1 9% 2.5% 0%
Policy Years 2-7 9% 2.5% 2.5%
Policy Years 8+ 0% 0% 0%
Asset Trail Commission (% of Account Value)
Non-Single Pay Single Pay
Policy Year 1-7 .10% .05%
Policy Years 8+ .20% .05%
<PAGE>
[LOGO] SUN LIFE ASSURANCE
COMPANY OF CANADA (U.S.)
A member of Sun Financial Group
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
<TABLE>
<S> <C>
Insured John Doe
Policy Number VL0000001
This Policy is a legal contract in which We, Sun Signed at Wellesley Hills, Massachusetts, on
Life Assurance Company of Canada (U.S.), the Issue Date.
promise to provide the kind of insurance
described below. Upon death of the Insured prior to
Maturity, We agree to pay the Beneficiary such
amounts as then become due and payable. Until
that time, We agree to provide You, as Owner, the Donald A. Stewart, President
other rights and benefits of the Policy. These
rights and benefits are subject to the provisions on
the pages which follow.
Margaret S. Mead, Secretary
</TABLE>
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY
INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF THE VARIABLE
ACCOUNT, AS DESCRIBED IN SECTION 8.
THE ACCOUNT VALUE IN EACH SUB-ACCOUNT OF THE VARIABLE ACCOUNT MAY INCREASE OR
DECREASE IN ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THAT SUB-ACCOUNT OF THE
VARIABLE ACCOUNT. THERE IS NO MINIMUM GUARANTEED ACCOUNT VALUE FOR AMOUNTS IN
THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT.
THE POLICY PROCEEDS ARE PAYABLE AT THE DEATH OF THE INSURED PRIOR TO MATURITY
AND WHILE THE POLICY IS IN FORCE. THE CASH SURRENDER VALUE, IF ANY, IS PAYABLE
ON THE DATE OF MATURITY.
THE POLICY DOES NOT PARTICIPATE IN DIVIDENDS.
FLEXIBLE PREMIUMS ARE PAYABLE DURING THE LIFETIME OF THE INSURED PRIOR TO
MATURITY.
RIGHT TO RETURN POLICY.
PLEASE READ YOUR POLICY CAREFULLY. IF YOU ARE NOT SATISFIED WITH IT, YOU MAY
RETURN IT BY DELIVERING OR MAILING IT TO US AT ONE SUN LIFE EXECUTIVE PARK,
ATTN: CORPORATE MARKETS, WELLESLEY HILLS, MASSACHUSETTS 02181, OR TO THE SALES
REPRESENTATIVE THROUGH WHOM YOU PURCHASED THE POLICY WITHIN 20 DAYS FROM THE
DATE OF RECEIPT OR WITHIN 45 DAYS AFTER THE APPLICATION IS SIGNED, WHICHEVER
PERIOD ENDS LATER (THE "FREE LOOK PERIOD"). THE POLICY WILL THEN BE DEEMED VOID
AS THOUGH IT HAD NEVER BEEN APPLIED FOR. YOU WILL RECEIVE A REFUND EQUAL TO THE
SUM OF (1) THE DIFFERENCE BETWEEN ANY PREMIUM PAYMENTS MADE, INCLUDING FEES AND
CHARGES, AND THE AMOUNTS ALLOCATED TO THE VARIABLE ACCOUNT, (2) THE VALUE OF THE
AMOUNTS ALLOCATED TO THE VARIABLE ACCOUNT ON THE DATE THE CANCELLATION REQUEST
IS RECEIVED BY THE COMPANY OR THE SALES REPRESENTATIVE THROUGH WHOM YOU
PURCHASED THE POLICY, AND (3) ANY FEES OR CHARGES IMPOSED ON AMOUNTS ALLOCATED
TO THE VARIABLE ACCOUNT.
TABLE OF CONTENTS
<PAGE>
1. POLICY SPECIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . Page 4a
2. TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK . . . . . . . . . . . . . . . . .Page 8
3. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Account Value. . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Anniversary. . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Application. . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Attained Age . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Cash Surrender Value . . . . . . . . . . . . . . . . . . . . . . .Page 9
Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Daily Risk Percentage. . . . . . . . . . . . . . . . . . . . . . .Page 9
Due Proof. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Effective Date of Coverage . . . . . . . . . . . . . . . . . . . .Page 9
Expense Charges Applied to Premium . . . . . . . . . . . . . . . .Page 9
Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
General Account. . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Insured. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Investment Start Date. . . . . . . . . . . . . . . . . . . . . . .Page 9
Issue Age. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
Issue Date . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Minimum Premium. . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Monthly Anniversary Day. . . . . . . . . . . . . . . . . . . . . Page 10
Monthly Cost of Insurance. . . . . . . . . . . . . . . . . . . . Page 10
Monthly Expense Charge . . . . . . . . . . . . . . . . . . . . . Page 10
Mortality and Expense Risk Percentage. . . . . . . . . . . . . . Page 10
Net Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Our Principal Office . . . . . . . . . . . . . . . . . . . . . . Page 10
Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Partial Surrender. . . . . . . . . . . . . . . . . . . . . . . . Page 10
Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Policy Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Policy Month . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Policy Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Policy Year. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Sales Load Refund at Surrender . . . . . . . . . . . . . . . . . Page 11
Service Center . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Specified Face Amount. . . . . . . . . . . . . . . . . . . . . . Page 11
Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Target Premium . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Valuation Period . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Variable Account . . . . . . . . . . . . . . . . . . . . . . . . Page 11
We, Our and Us . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
You and Your . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
4. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . Page 12
Entire Contract. . . . . . . . . . . . . . . . . . . . . . . . . Page 12
Alteration . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 12
Modification . . . . . . . . . . . . . . . . . . . . . . . . . . Page 12
TABLE OF CONTENTS (CONTINUED)
Page 2
<PAGE>
Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 12
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 12
Nonparticipating . . . . . . . . . . . . . . . . . . . . . . . . Page 12
Misstatement of Age or Sex (Non-Unisex Policy) . . . . . . . . . Page 12
Suicide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Report to Owner. . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Illustrations. . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
5. RIGHTS OF OWNERS AND BENEFICIARIES . . . . . . . . . . . . . . . . . Page 14
Rights of Owner. . . . . . . . . . . . . . . . . . . . . . . . . Page 14
Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 14
Rights of Beneficiary. . . . . . . . . . . . . . . . . . . . . . Page 14
6. THE VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . Page 15
Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . Page 15
Addition, Deletion or Substitution of Investments. . . . . . . . Page 15
Transfers Between Sub-Accounts . . . . . . . . . . . . . . . . . Page 15
7. PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 16
Planned Periodic Premiums. . . . . . . . . . . . . . . . . . . . Page 16
Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 16
Net Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . Page 16
Allocation of Net Premium. . . . . . . . . . . . . . . . . . . . Page 16
Modified Endowment Contract. . . . . . . . . . . . . . . . . . . Page 17
8. DEATH BENEFIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 17
Death Benefit Compliance Test. . . . . . . . . . . . . . . . . . Page 17
Death Benefit and Death Benefit Option . . . . . . . . . . . . . Page 17
Changes in Specified Face Amount . . . . . . . . . . . . . . . . Page 18
Decreases in Specified Face Amount . . . . . . . . . . . . . . . Page 18
Increases in Specified Face Amount . . . . . . . . . . . . . . . Page 18
Changes in the Death Benefit Option. . . . . . . . . . . . . . . Page 18
9. ACCOUNT VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 19
Account Value. . . . . . . . . . . . . . . . . . . . . . . . . . Page 19
Account Value in the Sub-Accounts. . . . . . . . . . . . . . . . Page 19
Net Investment Factor. . . . . . . . . . . . . . . . . . . . . . Page 20
Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . Page 21
Daily Risk Percentage. . . . . . . . . . . . . . . . . . . . . . Page 21
Monthly Expense Charge . . . . . . . . . . . . . . . . . . . . . Page 21
Monthly Cost of Insurance. . . . . . . . . . . . . . . . . . . . Page 21
Monthly Cost of Insurance Rates. . . . . . . . . . . . . . . . . Page 22
Basis of Computation . . . . . . . . . . . . . . . . . . . . . . Page 22
Insufficient Value . . . . . . . . . . . . . . . . . . . . . . . Page 22
Grace Period . . . . . . . . . . . . . . . . . . . . . . . . . . Page 22
Splitting Units. . . . . . . . . . . . . . . . . . . . . . . . . Page 22
10. POLICY BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
Benefits at Death. . . . . . . . . . . . . . . . . . . . . . . . Page 23
Cash Surrender Value . . . . . . . . . . . . . . . . . . . . . . Page 23
Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
Partial Surrender. . . . . . . . . . . . . . . . . . . . . . . . Page 23
Allocation of Partial Surrender. . . . . . . . . . . . . . . . . Page 23
Policy Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 23
Deferral of Payment. . . . . . . . . . . . . . . . . . . . . . . Page 24
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 24
RIDERS AND ENDORSEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPLICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page 3
<PAGE>
1. POLICY SPECIFICATIONS
Insured John Doe
Policy Number VL0000001
Office ABC Insurance Agency
Issue Age, Sex 35 Male
Class Preferred - Guaranteed Issue
<TABLE>
<S> <C>
Specified Face Amount $100,000
Additional Protection Benefit Rider Face Amount $50,000
---------
Total Face Amount $150,000
Minimum Total Face Amount $50,000
Minimum Specified Face Amount $5,000
Minimum Premium $990
Planned Periodic Premium $1,400
Billing Period Annual
Issue Date January 1, 1997
Maturity January 1, 2062
Currency United States Dollars
Owner XYZ Corporation
Beneficiary As stated in the Application
unless subsequently changed
Death Benefit Option Option A: Specified Face Amount
Death Benefit Compliance Test Guideline Premium
Variable Account
Name G
Securities & Exchange Commission
Registration Unit Investment Trust
</TABLE>
THE PLANNED PERIODIC PREMIUM SHOWN ABOVE MAY BE INSUFFICIENT TO CONTINUE
COVERAGE TO MATURITY. THE PERIOD FOR WHICH THE POLICY WILL REMAIN IN FORCE
DEPENDS ON THE AMOUNT AND TIMING OF PREMIUMS PAID, DEDUCTIONS FOR BENEFITS AND
RIDERS, CHANGES IN THE SPECIFIED FACE AMOUNT AND DEATH BENEFIT OPTION,
SUB-ACCOUNT PERFORMANCE, POLICY LOANS, PARTIAL SURRENDERS AND FEES.
Service Center: Andesa TPA, Inc., 1605 N. Cedar Crest Blvd., Suite 502,
Allentown, Pennsylvania 18104-2351
Page 4a
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
<TABLE>
<S> <C>
John Doe VL0000001
Expense Charges Applied to Premium
Premium Tax 4.0% in all
Policy years
DAC Tax 1.25% in all
Policy years
Sales Load
Policy Years 1 through 7
On Premium paid during the Policy Year up to and
including Target 8.75%
On Premium paid during the Policy Year in
excess of Target 2.25%
Policy Years 8 and after on all Premium 0%
Sales Load Refund at Surrender
Policy Years 1 through 3
On Premium paid during the Policy Year up to
and including Target 6%
On Premium paid during the Policy Year in
excess of Target 2.25%
Policy Years 4 and after on all Premium 0%
Target Premium $3,965
Monthly Expense Charge in All Months $13.75
Mortality and Expense Risk Percentage 0.90%
Daily Risk Percentage 0.0024548%
Policy Loan Interest Rate (payable in arrears) 5% annually during Policy
years 1-10 4.25% annually
in Policy years 11 and
after
Interest Credited on Loan Account 4% annually
- -------------------------------------------------------------------------------
</TABLE>
Supplemental Benefits and Changes
Type Effective Date of Coverage Face Amount
Additional Protection Benefit Rider January 1, 1997 $50,000
- -------------------------------------------------------------------------------
Page 4b
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
John Doe VL0000001
NET PREMIUM ALLOCATION PERCENTAGES (as of January 1, 1997)
MFS/Sun Life Series Trust
Sub-Account - Capital Appreciation Series 50%
------
Sub-Account - Emerging Growth Series %
------
Sub-Account - Government Securities Series 50 %
------
Sub-Account - Total Return Series %
------
Sub-Account - World Growth Series %
------
Fidelity Variable Insurance Products Fund
Fidelity Variable Insurance Products Fund II
Sub-Account - Contrafund Portfolio %
------
Sub-Account - Equity-Income Portfolio %
------
Sub-Account - Growth Portfolio %
------
Sub-Account - High-Income Portfolio %
------
Sub-Account - Index 500 Portfolio %
------
Sub-Account - Money Market Portfolio %
------
Neuberger & Berman Advisers Management Trust
Sub-Account - Limited Maturity Bond Portfolio %
------
Sub-Account - Partners Portfolio %
------
JPM Series Trust II
Sub-Account - Bond Portfolio %
------
Sub-Account - Equity Portfolio %
------
Sub-Account - Small Company Portfolio %
------
Templeton Variable Products Series Fund
Sub-Account - Stock Fund Portfolio %
------
Page 5
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
John Doe VL0000001
DESCRIPTION OF VARIABLE ACCOUNT G SUB-ACCOUNTS
Variable Account G is divided into 17 Sub-Accounts. Each Sub-Account invests in
a series, portfolio or fund of MFS/Sun Life Series Trust, Fidelity Variable
Insurance Products Fund, Fidelity Variable Insurance Products Fund II, Neuberger
& Berman Advisers Management Trust, JPM Series Trust II and Templeton Variable
Products Series Fund. The names and investment objectives of these series,
portfolios or funds follow:
MFS/SUN LIFE SERIES TRUST. MFS/Sun Life Series Trust (the "MFS Series Fund") is
an open-end investment management company registered under the Investment
Company Act of 1940 (a "mutual fund") organized as a Massachusetts business
trust. The MFS Series Fund is managed by Massachusetts Financial Services, Inc.
("MFS"), a subsidiary of the Company. In addition, the World Growth Series is
managed by the following sub-advisers: Oechsle International Advisors, L.P., an
independent international investment adviser, Foreign & Colonial Management
Limited ("FCM"), and Foreign & Colonial Emerging Markets Limited, a subsidiary
of FCM. The MFS Series Fund is composed of nineteen independent portfolios of
securities, five of which are currently available for investment by the Variable
Account.
CAPITAL APPRECIATION SERIES seeks capital appreciation by investing in
securities of all types, with major emphasis on common stocks.
EMERGING GROWTH SERIES seeks long term growth of capital by investing primarily
(I.E., at least 80% of its assets under normal circumstances) in common stocks
of emerging growth companies. Emerging growth companies include companies that
MFS believes are early in their life cycle but which have the potential to
become major enterprises. Dividend and interest income from portfolio
securities, if any, is incidental to its objective of long-term growth of
capital.
GOVERNMENT SECURITIES SERIES seeks current income and preservation of capital by
investing in U.S. Government and U.S. Government-related securities.
TOTAL RETURN SERIES seeks primarily to obtain above-average income (compared to
a portfolio entirely invested in equity securities) consistent with prudent
employment of capital; its secondary objective is to take advantage of
opportunities for growth of capital and income. Assets will be allocated and
reallocated from time to time between money market, fixed income and equity
securities. Under normal market conditions, at least 25% of the series' assets
will be invested in fixed income securities and at least 40% and no more than
75% of its assets will be invested in equity securities.
WORLD GROWTH SERIES seeks capital appreciation by investing in securities of
companies worldwide growing at rates expected to be well above the growth rate
of the overall U.S. economy.
FIDELITY VIP FUND AND VIP FUND II. Variable Insurance Products Fund ("VIP
Fund") and Variable Insurance Products Fund II ("VIP Fund II") are mutual funds
organized as Massachusetts business trusts. VIP Fund and VIP Fund II are both
managed by Fidelity Management & Research Company ("FMR"), located at 82
Devonshire Street, Boston, Massachusetts 02109. FMR is the management arm of
Fidelity Investments, which was established in 1946 and is one of the largest
investment management organizations in the United States. Various Fidelity
companies perform activities required for the operation of VIP Fund and VIP Fund
II, and affiliates of FMR may assist it in the choosing of investments for the
funds. Each of the VIP Fund and VIP Fund II is composed of five portfolios of
securities, for a total of 10 portfolios, of which six portfolios, in the
aggregate, are available for investment under the Policy.
VIP II CONTRAFUND PORTFOLIO seeks long-term capital appreciation. Portfolio
purchases will normally be common stock and securities convertible into common
stock of companies believed to be undervalued due to an overly pessimistic
appraisal by the public.
Page 6a
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
John Doe VL0000001
VIP EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in
income-producing equity securities. The portfolio seeks to achieve a yield in
excess of the composite yield of the Standard & Poor's 500 Composite Stock Index
("S&P 500"), a recognized measure of U.S. stock market performance. At least
65% of the portfolio's assets will be invested in income-producing common or
preferred stock, with the remainder normally invested in convertible and non-
convertible debt obligations.
VIP GROWTH PORTFOLIO seeks capital appreciation. Portfolio purchases normally
will be common stocks of both smaller, less-known companies and well-known,
established companies although the investments are not restricted to any one
type of security. Dividend income will only be considered if it might have an
effect on stock values.
VIP HIGH INCOME PORTFOLIO seeks a high level of current income by investing in
high income producing, lower-rated debt securities (sometimes called "junk
bonds"), preferred stocks including convertible securities and restricted
securities.
VIP II INDEX 500 PORTFOLIO seeks investment results that correspond to the total
return of common stocks publicly traded in the United States, as presented by
the S&P 500. The portfolio will primarily invest in equity securities of
companies that compose the S&P 500. The portfolio will also purchase short-term
debt securities for cash management purposes and use various investment
techniques, such as futures contracts, to adjust its exposure to the S&P 500.
VIP MONEY MARKET PORTFOLIO seeks to obtain as high a level of current income as
is consistent with preserving capital and providing liquidity. The Portfolio
will invest in high quality U.S. dollar-denominated money market instruments of
domestic and foreign issuers.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST. Neuberger & Berman Advisers
Management Trust ("AMT") is a mutual fund organized as a Delaware business
trust. AMT is composed of seven separate portfolios (each an "AMT Portfolio").
Each AMT Portfolio invests all of its net investable assets in its corresponding
series (each an "AMT Series") of Advisers Managers Trust, an open-end management
investment company. All AMT Series of Advisers Managers Trust are managed by
Neuberger & Berman Management Inc. Each AMT Series invests in accordance with
an investment objective, policies, and limitations identical to those of its
corresponding AMT Portfolio. The Policy provides for investment in shares of
the two AMT Portfolios described below.
LIMITED MATURITY BOND PORTFOLIO primarily seeks the highest current income and
total return consistent with low risk to principal and liquidity; and
secondarily, total return. AMT Limited Maturity Bond Portfolio invests in a
diversified portfolio of fixed and variable rate debt securities and seeks to
increase income and preserve or enhance total return by actively managing
average portfolio duration in light of market conditions and trends. This AMT
Series' dollar-weighted average portfolio duration may range up to four years.
PARTNERS PORTFOLIO seeks capital growth through an investment approach that is
designed to increase capital with reasonable risk. Its investment program seeks
securities believed to be undervalued based on strong fundamentals such as low
price-to-earning ratios, consistent cash flow, and support from asset values.
JPM SERIES TRUST II. The JPM Series Trust II ("JPM") is a mutual fund organized
as a Delaware business trust. JPM is composed of five separate portfolios of
securities, each of which has separate investment objectives and policies. The
Policy provides for investment in the three portfolios of JPM described below.
1. POLICY SPECIFICATIONS (CONTINUED)
John Doe VL0000001
Page 6b
<PAGE>
JPM BOND PORTFOLIO seeks to provide a high total return consistent with moderate
risk of capital and maintenance of liquidity by investing broadly in the fixed-
income markets.
JPM EQUITY PORTFOLIO seeks to provide a high total return by investing in
selected equity securities of large and mid-sized U.S. corporations with market
capitalizations above $1.5 billion.
JPM SMALL COMPANY PORTFOLIO seeks to provide a high total return by investing in
equity securities of companies primarily with market capitalizations of less
than $2 billion.
TEMPLETON VARIABLE PRODUCTS SERIES FUND. Templeton Variable Products Series
Fund ("TVPSF") is a mutual fund organized as a Massachusetts business trust.
TVPSF has contracted with Templeton Investment Counsel, Inc. to manage the
Templeton Stock Fund. TVPSF is composed of six separate series, each of which
has separate investment objectives and policies. The Policy provides for
investment in one of the series of TVPSF described below.
TEMPLETON STOCK FUND seeks capital growth through a policy of investing
primarily in common stocks issued by companies, large and small, throughout the
world. In pursuit of this objective, the fund will normally maintain at least
65% of its assets in common and preferred stocks.
There can be no assurance that the investment objectives of these series,
portfolios or funds, or any other funds that the Variable Account may offer,
will be achieved. The objectives of these series, portfolios or funds may be
changed in accordance with the requirements of the Investment Company Act of
1940.
Page 6c
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
TABLE OF DEATH BENEFIT PERCENTAGES
APPLICABLE APPLICABLE
AGE PERCENTAGE AGE PERCENTAGE
20 250% 60 130%
21 250% 61 128%
22 250% 62 126%
23 250% 63 124%
24 250% 64 122%
25 250% 65 120%
26 250% 66 119%
27 250% 67 118%
28 250% 68 117%
29 250% 69 116%
30 250% 70 115%
31 250% 71 113%
32 250% 72 111%
33 250% 73 109%
34 250% 74 107%
35 250% 75 105%
36 250% 76 105%
37 250% 77 105%
38 250% 78 105%
39 250% 79 105%
40 250% 80 105%
41 243% 81 105%
42 236% 82 105%
43 229% 83 105%
44 222% 84 105%
45 215% 85 105%
46 209% 86 105%
47 203% 87 105%
48 197% 88 105%
49 191% 89 105%
50 185% 90 105%
51 178% 91 104%
52 171% 92 103%
53 164% 93 102%
54 157% 94 101%
55 150% 95 100%
56 146% 96 100%
57 142% 97 100%
58 138% 98 100%
59 134% 99 100%
Page 7
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2. TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
MONTHLY RATES MONTHLY RATES
UNISEX UNISEX
AGE OR MALES FEMALES AGE OR MALES FEMALES
20 0.15836 0.08751 60 1.34180 0.78979
21 0.15919 0.08917 61 1.46381 0.84488
22 0.15752 0.09084 62 1.60173 0.91417
23 0.15502 0.09251 63 1.75809 1.00267
24 0.15169 0.09501 64 1.93206 1.10539
25 0.14752 0.09668 65 2.12283 1.21731
26 0.14419 0.09918 66 2.32623 1.33511
27 0.14252 0.10168 67 2.54312 1.45461
28 0.14169 0.10501 68 2.77350 1.57247
29 0.14252 0.10835 69 3.02328 1.69955
30 0.14419 0.11251 70 3.30338 1.84590
31 0.14836 0.11668 71 3.62140 2.02325
32 0.15252 0.12085 72 3.98666 2.24419
33 0.15919 0.12502 73 4.40599 2.51548
34 0.16669 0.13168 74 4.87280 2.83552
35 0.17586 0.13752 75 5.37793 3.19685
36 0.18670 0.14669 76 5.91225 3.59370
37 0.20004 0.15752 77 6.46824 4.01942
38 0.21505 0.17003 78 7.04089 4.47410
39 0.23255 0.18503 79 7.64551 4.97042
40 0.25173 0.20171 80 8.30507 5.52957
41 0.27424 0.22005 81 9.03761 6.17118
42 0.29675 0.23922 82 9.86724 6.91414
43 0.32260 0.25757 83 10.80381 7.77075
44 0.34929 0.27674 84 11.82571 8.72632
45 0.37931 0.29675 85 12.91039 9.76952
46 0.41017 0.31677 86 14.03509 10.89151
47 0.44353 0.33761 87 15.18978 12.08770
48 0.47856 0.36096 88 16.36948 13.35774
49 0.51777 0.38598 89 17.57781 14.70820
50 0.55948 0.41350 90 18.82881 16.15259
51 0.60870 0.44270 91 20.14619 17.71416
52 0.66377 0.47523 92 21.57655 19.43814
53 0.72636 0.51276 93 23.20196 21.40786
54 0.79730 0.55114 94 25.28174 23.83051
55 0.87326 0.59118 95 28.27411 27.16158
56 0.95591 0.63123 96 33.10677 32.32378
57 1.04192 0.66961 97 41.68475 41.21204
58 1.13378 0.70633 98 58.01259 57.81394
59 1.23235 0.74556 99 83.33333 83.33333
Page 8
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3. DEFINITIONS
ACCOUNT VALUE: The sum of the amounts in each Sub-Account of the Variable
Account with respect to the Policy, and the amount of the Loan Account.
ANNIVERSARY: The same day in each succeeding year as the day of the year
corresponding to the Issue Date.
APPLICATION: Your application for the Policy, a copy of which is attached
hereto and incorporated herein.
ATTAINED AGE: The Insured's Issue Age plus the number of completed Policy Years.
BENEFICIARY: The person or entity entitled to receive the Policy Proceeds as
they become due at death.
BUSINESS DAY: Any day that We are open for business.
CASH SURRENDER VALUE: The Account Value decreased by the balance of any
outstanding Policy Debt, increased by the Sales Load Refund at Surrender, if
any.
CLASS: The risk, underwriting and substandard table rating, if any,
classification of the Insured, as specified in Section 1.
COMPANY: Sun Life Assurance Company of Canada (U.S.).
DAILY RISK PERCENTAGE: The daily rate for deduction of the mortality and
expense risk charge as specified in Section 1.
DUE PROOF: Such evidence as We may reasonably require in order to establish
that Policy Proceeds are due and payable.
EFFECTIVE DATE OF COVERAGE: Initially, the Investment Start Date; with respect
to any increase in the Total Face Amount, the Monthly Anniversary Day that falls
on or next follows the date We approve the supplemental application for such
increase; with respect to any decrease in the Total Face Amount, the Monthly
Anniversary Day that falls on or next follows the date We receive Your request.
EXPENSE CHARGES APPLIED TO PREMIUM: The expense charges applied to Premium,
consisting of the charges for premium tax, the Federal deferred acquisition cost
("DAC") tax, and the sales load as specified in Section 1.
FUND: A mutual fund in which a Sub-Account invests.
GENERAL ACCOUNT: The assets held by Us, other than those allocated to the
Sub-Accounts of the Variable Account or any other separate account of the
Company.
INSURED: The person on whose life the Policy is issued.
INVESTMENT START DATE: The date the first Premium is applied, which will be the
later of the Issue Date, the Business Day We approve the application for a
Policy, or the Business Day We receive a Premium equal to or in excess of the
Minimum Premium.
ISSUE AGE: The Insured's age as of the Insured's birthday nearest the Issue
Date.
Page 9
<PAGE>
ISSUE DATE: The date specified as such in Section 1, from which Anniversaries,
Policy Years, and Policy Months are measured.
LOAN ACCOUNT: An account established for the Policy, the value of which is the
principal amount of any outstanding loan against the Policy, plus credited
interest thereon.
MATURITY: The Anniversary on which the Insured's Attained Age is 100. If the
Insured is living and the Policy is in force on this date, the Cash Surrender
Value is payable to You. It is possible that insurance coverage may not
continue to Maturity as described in the Insufficient Value Provision of Section
9, even if Planned Periodic Premiums are paid in a timely manner.
MINIMUM PREMIUM: The Premium amount specified as such in Section 1.
MONTHLY ANNIVERSARY DAY: The same day in each succeeding month as the day of
the month corresponding to the Issue Date.
MONTHLY COST OF INSURANCE: A deduction made on a monthly basis for the
insurance coverage provided by the Policy, as specified in Section 9.
MONTHLY EXPENSE CHARGE: A per Policy deduction made on a monthly basis for
administration and other expenses as specified in Section 1.
MORTALITY AND EXPENSE RISK PERCENTAGE: The annual percentage rate deducted from
the Account Value in the Sub-Accounts for the mortality and expense risk charge
as specified in Section 1. This annual rate is converted to a daily rate, the
Daily Risk Percentage, and deducted from the Account Value on a daily basis.
NET PREMIUM: The amount You pay as the Premium less the Expense Charges Applied
to Premium.
OUR PRINCIPAL OFFICE: Sun Life Assurance Company of Canada (U.S.) (Attn:
Corporate Markets), One Sun Life Executive Park, Wellesley Hills, Massachusetts,
02181, or such other address as We may hereafter specify to You by written
notice.
OWNER: The person, persons or entity entitled to the ownership rights stated in
the Policy while the Insured is alive.
PARTIAL SURRENDER: A surrender of a portion of the Account Value in exchange
for a payment to the Owner in accordance with the terms of Section 10.
POLICY: This life insurance contract, including the attached copy of the
Application and any attached copies of supplemental applications for increases
in the face amount.
POLICY DEBT: The principal amount of any outstanding loan against the Policy,
plus accrued but unpaid interest on such loan.
POLICY MONTH: A policy month is a one-month period commencing on the Issue Date
or any Monthly Anniversary Day and ending on the next Monthly Anniversary Day.
POLICY PROCEEDS: The amount determined in accordance with the terms of the
Policy which is payable at the death of the Insured prior to Maturity. This
amount is the Death Benefit as described in Section 8, decreased by the amount
of any outstanding Policy Debt, and increased by the amounts payable under any
supplemental benefits.
POLICY YEAR: A Policy Year is a one-year period commencing on the Issue Date or
any Anniversary and ending on the next Anniversary.
Page 10
<PAGE>
PREMIUM: An amount paid to Us by the Owner or on the Owner's behalf as
consideration for the benefits provided by the Policy.
SALES LOAD REFUND AT SURRENDER: The portion of any Premium paid in the Policy
Year of surrender which is refunded upon Surrender in the first three Policy
Years, determined in the manner specified in Section 1.
SERVICE CENTER: The office specified in Section 1 or such other service center
or address as We may hereafter specify to You by written notice.
SPECIFIED FACE AMOUNT: The amount of life insurance coverage You request as
specified in Section 1.
SUB-ACCOUNTS: Sub-accounts into which the assets of the Variable Account are
divided, each of which corresponds to an investment choice available to You.
TARGET PREMIUM: The amount of Premium specified as such in Section 1. The
sales load deduction and the Sales Load Refund at Surrender vary depending on
whether Premiums paid in the given Policy Year are below or above the Target
Premium.
UNIT: A unit of measurement that We use to calculate the value of each Sub-
Account.
UNIT VALUE: The value of each Unit of assets in a Sub-Account.
VALUATION DATE: Any day that benefits vary and on which the New York Stock
Exchange, We, and the relevant Fund are open for business. A Valuation Date
will also include any day that may be required by any applicable Securities and
Exchange Commission Rules and Regulations.
VALUATION PERIOD: The period of time from one determination of Unit Values to
the next, subsequent determination of Unit Values. We will determine Unit
Values for each Valuation Date as of the close of the New York Stock Exchange on
that Valuation Date.
VARIABLE ACCOUNT: Sun Life Assurance Company of Canada (U.S.) Variable Account
G, a separate account of the Company consisting of assets set aside by the
Company, the investment performance of which is kept separate from that of the
general assets of the Company (also referred to as "Variable Account G").
WE, OUR and US: We, Our and Us refer to Sun Life Assurance Company of Canada
(U.S.).
YOU and YOUR: In this Policy, You and Your refer to the Owner of the Policy.
In the Application, You and Your refer to the proposed Insured.
Page 11
<PAGE>
4. GENERAL PROVISIONS
ENTIRE CONTRACT. Your entire contract with Us consists of the Policy, including
the attached copy of the Application and any attached copies of supplemental
applications for increases in the face amount. Any illustrations prepared in
connection with the Policy do not form a part of Our contract with You and are
intended solely to provide information about possible future performance, based
solely upon data available at the time such illustrations are prepared.
ALTERATION. Sales Representatives do not have the authority to either alter or
modify the Policy or to waive any of its provisions. The only persons with this
authority are Our president, actuary, secretary, or one of Our vice presidents.
MODIFICATION. Upon notice to You, We may modify the Policy if such modification
(1) is necessary to make the Policy or the Variable Account comply with any law
or regulation issued by a governmental agency to which the Company or the
Variable Account is subject; or (2) is necessary to assure continued
qualification of the Policy under the Internal Revenue Code or other federal or
state laws as a life insurance policy; or (3) is necessary to reflect a change
in the operation of the Variable Account or the Sub-Accounts; or (4) adds,
deletes or otherwise changes Sub-Account options. We also reserve the right to
modify certain provisions of the Policy as stated in those provisions. In the
event of any such modification, We may make appropriate amendment to the Policy
to reflect such modification.
ASSIGNMENTS. During the lifetime of the Insured, You may assign all or some of
Your rights under the Policy. All Assignments must be filed at Our Service
Center and must be in written form satisfactory to Us. The Assignment will then
be effective as of the date You signed the form, subject to any action taken
before it was received by Us at Our Service Center. We are not responsible for
the validity or legal effect of any Assignment.
CONVERSION. You may convert the Policy into a flexible premium universal life
policy offered by Sun Life Assurance Company of Canada during the first 24
months after the Issue Date while the Policy is in force. Choice of a new
policy is subject to Our approval and will be restricted to those policies that
offer the same Class and rating as the Policy. The new policy will be issued
with the same Class and rating as the Policy without evidence of the Insured's
insurability. The conversion provision does not apply to any riders or
supplemental benefits that may be attached to the Policy. Riders or
supplemental benefits will terminate automatically when the Policy is converted.
NONPARTICIPATING. The Policy does not pay dividends.
MISSTATEMENT OF AGE OR SEX (NON-UNISEX POLICY). If the age or (in the case of a
Non-Unisex Policy) sex of the Insured is stated incorrectly in the Application,
the amounts payable by Us will be adjusted as follows:
- - Misstatement discovered at death: The Death Benefit will be recalculated to
that which would be purchased by the most recently charged Monthly Cost of
Insurance Rate for the correct age or (for a Non-Unisex Policy) Sex.
- - Misstatement discovered prior to death: The Account Value will be
recalculated from the Issue Date using the Monthly Cost of Insurance Rates
based on the correct age or (for a Non-Unisex Policy) Sex.
If Your Policy is Unisex, it is so indicated in Section 1.
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<PAGE>
SUICIDE. If the Insured, whether sane or insane, commits suicide within two
years after the Issue Date, We will not pay any part of the Policy Proceeds. We
will refund to You the Premiums paid, less the amount of any Policy Debt and any
Partial Surrenders.
INCONTESTABILITY. All statements made in the Application or in a supplemental
application are representations and not warranties. We relied and will rely on
these statements when approving the issuance, increase in face amount, increase
in Death Benefit over Premium paid, or change in Death Benefit Option of the
Policy. No statement can be used by Us in defense of a claim unless the
statement was made in the Application or in a supplemental application. In the
absence of fraud, after the Policy has been in force during the lifetime of the
Insured for a period of two years from its Issue Date, We cannot contest it
except for non-payment of Premiums in accordance with the Insufficient Value
provision of Section 9. However, any increase in the face amount which is
effective after the Issue Date will be incontestable only after such increase
has been in force during the lifetime of the Insured for two years from the
Effective Date of Coverage of such increase. Any increase in Death Benefit over
Premium paid or increase in Death Benefit due to a Death Benefit Option change
will be incontestable only after such increase has been in force during the
lifetime of the Insured for two years from the date of the increase.
REPORT TO OWNER. We will send You a report at least once each Policy Year. The
report will show current Policy values, Premiums paid, and deductions made since
the last report. It will also show the balance of any outstanding Policy loans
and accrued interest on such loans. There is no charge for this report.
ILLUSTRATIONS. Upon request, We will provide You with an illustration of future
Account Value and Death Benefits. This illustration will be furnished to You
for a nominal fee not to exceed $25.
Page 13
<PAGE>
5. RIGHTS OF OWNERS AND BENEFICIARIES
RIGHTS OF OWNER. While the Insured is alive, unless You have assigned any of
these rights, You may:
- - transfer ownership to a new Owner;
- - name a contingent Owner who will automatically become the Owner of the
Policy if You die before the Insured;
- - change or revoke a contingent Owner;
- - change or revoke a Beneficiary;
- - exercise all other rights in the Policy;
- - increase or decrease the Specified Face Amount, subject to the other
Provisions of the Policy;
- - change the Death Benefit Option, subject to the Changes in the Death
Benefit Option Provisions of Section 8 of the Policy.
When You transfer Your rights to a new Owner, You automatically revoke any prior
contingent Owner designation. When You want to change or revoke a prior
Beneficiary designation, You have to specify that action. You do not affect a
prior Beneficiary when You merely transfer ownership, or change or revoke a
contingent Owner designation.
PROCEDURE. You do not need the consent of a Beneficiary or a contingent Owner
in order to exercise any of Your rights. However, You must give Us written
notice of the requested action. The request must be filed at Our Service Center
and must be in written form satisfactory to Us. Your request will then, except
as otherwise specified herein, be effective as of the date You signed the form,
subject to any action taken before it was received by Us at Our Service Center.
RIGHTS OF BENEFICIARY. The Beneficiary has no rights in the Policy until the
death of the Insured. If a Beneficiary is alive at that time, the Beneficiary
will be entitled to payment of the Policy Proceeds as they become due.
Page 14
<PAGE>
6. THE VARIABLE ACCOUNT
The assets of the Variable Account shall be kept separate from Our other assets.
We have the right to transfer to the General Account any assets of the Variable
Account which are in excess of the reserves and other Policy liabilities of the
Variable Account. Although the assets maintained in the Variable Account will
not be charged with any liabilities arising out of any other business conducted
by Us, all obligations arising under the Policy, including the promise to make
all benefit payments, are Our general corporate obligations.
At Our election, and subject to any necessary vote by those having voting
rights, the Variable Account may be operated as a unit investment trust or a
management company under the Investment Company Act of 1940. It may be
registered under the Investment Company Act of 1940 or deregistered in the event
registration is no longer required. In the event of any change in the operation
of the Variable Account pursuant to this provision, We may make appropriate
amendment to the contract to reflect the change and take such other action as
may be necessary and appropriate to effect the change.
SUB-ACCOUNTS. The assets of the Variable Account are divided into Sub-Accounts.
Each Sub-Account corresponds to an investment choice described in Section 1.
Each Sub-Account invests exclusively in a different investment portfolio.
Income, gains and losses, whether or not realized, from the assets of each
Sub-Account are credited or charged against that Sub-Account without regard to
income, gains or losses in other Sub-Accounts of the Variable Account. All
amounts allocated to the Variable Account will be used to purchase shares of one
or more of the Funds, as You designate. Deductions and surrenders from the
Variable Account will, in effect, be made by redeeming the number of Fund shares
at net asset value equal in total value to the amount to be deducted. The
Variable Account will be fully invested in Fund shares at all times.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS. Shares of any or all of the
portfolios may not always be available for purchase by the Sub-Accounts of the
Variable Account, or We may decide that further investment in any such shares is
no longer appropriate. In either event, shares of other registered open-end
investment companies or unit investment trusts may be substituted both for
Portfolio shares already purchased by the Variable Account and/or as the
security to be purchased in the future, provided that these substitutions have
been approved by the Securities and Exchange Commission. In addition, the
investment policies of the Sub-Accounts will not be changed without the approval
of the Insurance Commissioner of the State of Delaware. We also reserve the
right to eliminate or combine existing Sub-Accounts or to transfer assets
between Sub-Accounts. In the event of any substitution or other act pursuant to
this provision, We may make appropriate amendment to the Policy to reflect the
substitution.
TRANSFERS BETWEEN SUB-ACCOUNTS. Subject to Our rules as they may exist from
time to time and to any limits that may be imposed by the Funds, including those
set forth in Section 1, You may at any time transfer to another Sub-Account all
or a portion of the Account Value allocated to a Sub-Account. We will make
transfers pursuant to an authorized written or telephone request to the Service
Center. Telephone requests will be honored only if We have a properly completed
telephone authorization form for You on file. We and Our agents and affiliates
will not be responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. We will use reasonable procedures to confirm
that instructions communicated by telephone are genuine. The procedures We
follow for transactions initiated by telephone include requirements that You
identify yourself by name and identify a personal identification number.
Transfers may be requested by indicating the transfer of either a specified
dollar amount or a specified percentage of the Sub-Account's value from which
the transfer will be made. If You request a transfer based on a specified
percentage of the Sub-Account's value, that percentage will be converted into a
request for the transfer of a specified dollar amount based on application of
the specified percentage to the Sub-Account's value at the time the request is
received.
Transfer privileges are subject to Our consent. We reserve the right to impose
limitations on transfers, including, but not limited to: (1) the minimum amount
that may be transferred; and (2) the minimum amount that may remain in a Sub-
Account following a transfer from that Sub-Account.
7. PREMIUMS
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All Premium payments are payable to Us, and should be mailed to Our Principal
Office.
PLANNED PERIODIC PREMIUMS. While You are not required to make subsequent
Premium payments according to a fixed schedule, You may select a planned
periodic Premium schedule and corresponding billing period, subject to Our
Premium limits. Except as otherwise provided herein, the billing period must be
annual or semi-annual. We will send You reminder notices for the planned
periodic Premium at each billing period as specified in Section 1 unless
reminder notices have been suspended as described below. However, You are not
required to pay the planned periodic Premium; You may increase or decrease the
planned periodic Premium subject to Our limits, and You may skip a planned
payment or make unscheduled payments. You may change Your planned payment
schedule or the billing period, subject to Our approval. Depending on the
investment performance of the Sub-Accounts You select, the planned periodic
Premium may not be sufficient to keep the Policy in force, and You may need to
change Your planned payment schedule or make additional payments in order to
prevent termination of Your Policy. We will suspend reminder notices at Your
written request, and We reserve the right to suspend reminder notices if
Premiums are not being paid (except for notices in connection with the grace
period). We will notify You prior to suspending reminder notices.
PREMIUM. We reserve the right to limit the number of Premium payments We accept
on an annual basis. No Premium payment may be less than $100 without Our
consent, although We will accept a smaller Premium payment if it is necessary to
keep Your Policy in force. We reserve the right not to accept a Premium payment
that causes the Death Benefit to increase by an amount that exceeds the Premium
received. Evidence of insurability satisfactory to Us may be required before We
accept such a Premium.
If the Death Benefit Compliance Test You have specified is the Guideline Premium
Test, We will not accept Premium payments that would, in Our opinion, cause the
Policy to fail to qualify as life insurance under that test. Maximum Premium
limits for each year (based on reasonable industry interpretations) will be
shown in Your annual report. If a Premium payment is made in excess of these
limits, We will accept only that portion of the Premium within those limits, and
will refund the remainder to You.
NET PREMIUMS. The Net Premium is the amount You pay as the Premium less the
Expense Charges Applied to Premium. The Expense Charges Applied to Premium are
the sum of (1), (2) and (3) where (1) equals the premium tax percentage applied
to all Premium, (2) equals the DAC tax percentage applied to all Premium, and
(3) equals the sales load percentages applied to the appropriate amount of
Premium paid during the Policy Year. The DAC tax and premium tax will be
determined by Us from time to time based on Our expectations of future federal,
state and local taxes. However, the DAC tax and premium tax will not be greater
than that specified in Section 1. The sales load percentages are specified in
Section 1.
ALLOCATION OF NET PREMIUM. Except as otherwise provided herein, Net Premium
will be allocated to the Sub-Accounts in accordance with the allocation
percentages specified by You. Your initial allocation percentages are shown in
Section 1. There are no limitations concerning the number of Sub-Accounts to
which Net Premium may be allocated, but the minimum allocation for any Sub-
Account to which You choose to allocate Account Value is 5% of Net Premium, and
percentages must be in whole numbers.
You may change the allocation percentages at any time pursuant to written or
telephone request to the Service Center. Telephone requests will be honored
only if We have a properly completed telephone authorization form for You on
file. We and Our agents and affiliates will not be responsible for losses
resulting from acting upon telephone requests reasonably believed to be genuine.
We will use reasonable procedures to confirm that instructions communicated by
telephone are genuine. The procedures We follow for transactions initiated by
telephone include requirements that You identify yourself by name and identify a
personal identification number.
An allocation change will be effective as of the date the Service Center
receives the request for that change.
MODIFIED ENDOWMENT CONTRACT. At the time a Premium is received that would, in
Our opinion, cause the Policy to become a modified endowment contract based on
reasonable industry interpretations of Section 7702A of the Internal Revenue
Code, We will so notify You and will not credit the Premium unless We have
received specific instructions from You to do so. If such instructions are not
received within 24 hours of the date we send You notification, the Premium will
be immediately returned to You.
Page 16
<PAGE>
8. DEATH BENEFIT
DEATH BENEFIT COMPLIANCE TEST. The Death Benefit Compliance Test, as specified
by You in the Application, is either The Cash Value Accumulation Test or The
Guideline Premium Test, as shown in Section 1. The choice You make determines
the Death Benefit Percentages as shown in Section 2. Once selected, this test
may not be changed to another test.
DEATH BENEFIT and DEATH BENEFIT OPTION. The Death Benefit depends upon the
Death Benefit Option in effect at that time. The Death Benefit Option in effect
on the Issue Date is specified in Section 1. The two options are:
Option A - Specified Face Amount. The Death Benefit is the greater of the
Specified Face Amount, or the Account Value multiplied by the applicable Death
Benefit Percentage.
Option B - Specified Face Amount plus Account Value. The Death Benefit is the
greater of the Specified Face Amount plus the Account Value, or the Account
Value multiplied by the applicable Death Benefit Percentage. Option B is not
available if the Death Benefit Compliance Test specified in Section 1 is The
Cash Value Accumulation Test.
At any time the Death Benefit is defined as the Account Value multiplied by the
applicable Death Benefit Percentage, and the Death Benefit less the Account
Value exceeds the Total Face Amount specified in Section 1, We reserve the right
to distribute Account Value to You as a Partial Surrender to the extent
necessary so that the Death Benefit less the Account Value equals the Total Face
Amount. You will not have the option of providing evidence of insurability to
maintain Your level of Death Benefit.
The Policy Proceeds will be paid as they become due upon the death of the
Insured prior to Maturity. We will make payment when We receive Due Proof of
that death. The Death Benefit used to determine Policy Proceeds is based on
the Specified Face Amount and Account Value in effect on the date of death.
Page 17
<PAGE>
CHANGES IN SPECIFIED FACE AMOUNT. After the end of the first Policy Year, You
may change the Specified Face Amount. You must send Your request for a change
to Our Service Center, in writing. Each such change will be effective on the
Effective Date of Coverage for change.
DECREASES IN SPECIFIED FACE AMOUNT. The Specified Face Amount may not decrease
to less than the Minimum Specified Face Amount specified in Section 1. A
decrease in Specified Face Amount may not decrease the Policy's Total Face
Amount to an amount less than the Minimum Total Face Amount specified in Section
1. A decrease in Specified Face Amount will be applied to the initial Specified
Face Amount and to each increase in Specified Face Amount in the following
order:
- - first, to the most recent increase;
- - second, to the next most recent increases, in reverse chronological
order; and
- - finally, to the initial Specified Face Amount.
INCREASES IN SPECIFIED FACE AMOUNT. An increase in the Specified Face Amount
is subject to Our underwriting rules in effect at the time of the increase. You
may be required to submit evidence of the Insured's insurability satisfactory to
Us.
CHANGES IN THE DEATH BENEFIT OPTION. You may change the Death Benefit Option if
the Death Benefit Compliance Test specified in Section 1 is the Guideline
Premium Test. You may not change the Death Benefit Option if the Death Benefit
Compliance Test specified in Section 1 is the Cash Value Accumulation Test.
Changes in the Death Benefit Option are subject to Our underwriting rules in
effect at the time of change. Requests for a change must be made in writing to
Our Service Center. The effective date of the change will be the Policy
Anniversary on or next following the date of receipt of Your request.
If the Death Benefit Option change is from Option B to Option A, the Specified
Face Amount will be increased by the Account Value. If the Death Benefit Option
change is from Option A to Option B, the Specified Face Amount will be reduced
by the Account Value. In either case, the amount of the Death Benefit at the
time of change will not be altered, but the change in Death Benefit Option will
affect the determination of the Death Benefit from that point on.
Page 18
<PAGE>
9. ACCOUNT VALUE
ACCOUNT VALUE. The Account Value is the sum of the amounts in each Sub-Account
of the Variable Account with respect to the Policy, plus the amount of the Loan
Account. The Account Value varies depending upon the Premiums paid, Expense
Charges Applied to Premium, Mortality and Expense Risk Percentage deductions,
Monthly Expense Charges, Monthly Cost of Insurance charges, Policy loans and
loan repayments, Partial Surrenders, fees, and the Net Investment Factor for the
Sub-Accounts to which Your Account Value is allocated.
We measure the amounts in the Sub-Accounts in terms of Units and Unit Values.
On any given date, the amount You have in a Sub-Account is equal to the Unit
Value multiplied by the number of Units credited to You in that Sub-Account.
Amounts allocated to a Sub-Account will be used to purchase Units of that Sub-
Account. Units are redeemed when You make Partial Surrenders, undertake Policy
loans or transfer amounts from a Sub-Account, and for payment of the mortality
and expense risk charge, the Monthly Expense Charge, and the Monthly Cost of
Insurance charge. The number of Units of each Sub-Account purchased or redeemed
is determined by dividing the dollar amount of the transaction by the Unit Value
for the Sub-Account. The Unit Value for each Sub-Account is established at
$10.00 for the first Valuation Date. The Unit Value for any subsequent
Valuation Date is equal to the Unit Value for the preceding Valuation Date
multiplied by the Net Investment Factor (determined as provided below). The
Unit Value of a Sub-Account for any Valuation Date is determined as of the close
of the Valuation Period ending on that Valuation Date.
Transactions are processed on the date We receive a Premium at Our Principal
Office or any acceptable written or telephonic request is received at the
Service Center. If Your Premium or request is received on a date that is not a
Valuation Date, or after the close of the New York Stock Exchange on a Valuation
Date, the transaction will be processed on the next subsequent Valuation Date.
ACCOUNT VALUE IN THE SUB-ACCOUNTS. The Account Value attributable to each
Sub-Account of the Variable Account on the Investment Start Date equals:
- - that portion of Net Premium received and allocated to the Sub-Account, less
- - the Monthly Expense Charges due on the Issue Date and subsequent Monthly
Anniversary Days through the Investment Start Date, less
- - the Monthly Cost of Insurance deductions due from the Issue Date through
the Investment Start Date.
Page 19
<PAGE>
The Account Value attributable to each Sub-Account of the Variable Account on
subsequent Valuation Dates is equal to:
- - the Account Value attributable to the Sub-Account on the preceding
Valuation Date multiplied by that Sub-Account's Net Investment Factor, less
the Daily Risk Percentage multiplied by the number of days in the Valuation
Period multiplied by the Account Value in the Sub-Account, plus
- - that portion of Net Premium received and allocated to the Sub-Account
during the current Valuation Period, plus
- - any amounts transferred by You to the Sub-Account from another Sub-Account
during the current Valuation Period, plus
- - that portion of any loan repayment allocated to the Sub-Account during the
current Valuation Period, plus
- - that portion of any interest credited on the Loan Account which is
allocated to the Sub-Account during the current Valuation Period, less
- - any amounts transferred by You from the Sub-Account to another Sub-Account
during the current Valuation Period, less
- - that portion of any Partial Surrenders deducted from the Sub-Account during
the current Valuation Period, less
- - that portion of any Policy loan transferred from the Sub-Account to the
Loan Account during the current Valuation Period, less
- - if a Monthly Anniversary Day occurs during the current Valuation Period,
that portion of the Monthly Expense Charge for the Policy Month just
beginning charged to the Sub-Account, less
- - if a Monthly Anniversary Day occurs during the current Valuation Period,
that portion of the Monthly Cost of Insurance for the Policy Month just
ending charged to the Sub-Account, less
- - if You Surrender during the current Valuation Period, that portion of the
pro-rata Monthly Cost of Insurance for the Policy Month charged to the
Sub-Account.
NET INVESTMENT FACTOR. The Net Investment Factor for each Sub-Account for any
Valuation Period is determined by dividing (1) by (2) where:
(1) is the net result of:
(I) the net asset value of a Fund share held in the Sub-Account
determined as of the end of the Valuation Period, plus
(II) the per share amount of any dividend or other distribution
declared on Fund shares held in the Sub-Account if the "ex-dividend"
date occurs during the Valuation Period, plus or minus
(III) a per share credit or charge with respect to any taxes reserved
for by the Company, or paid by the Company if not previously reserved
for, during the Valuation Period which are determined by the Company
to be attributable to the operation of the Sub-Account; and
(2) is the net asset value of a Fund share held in the Sub-Account
determined as of the end of the preceding Valuation Period.
LOAN ACCOUNT. The Loan Account is an account established for the Policy, the
value of which is the principal amount of any outstanding Policy loan against
the Policy, plus credited interest thereon.
Page 20
<PAGE>
The Account Value in the Loan Account is zero on the Investment Start Date.
The Account Value in the Loan Account on any day after the Investment Start Date
equals:
- - the Account Value in the Loan Account on the preceding day credited with
interest at the Interest Credited on Loan Account rate specified in Section
1, plus
- - any amount transferred from Sub-Accounts to the Loan Account for Policy
loans requested on that day, less
- - any loan repayments made on that day, less
- - if that day is a Policy Anniversary, any amount transferred to the
Sub-Accounts by which the Account Value in the Loan Account exceeds the
outstanding Policy loan.
DAILY RISK PERCENTAGE. The Daily Risk Percentage will be determined by Us from
time to time based on Our expectations of future interest, mortality experience,
persistency, expenses and taxes. However, the Daily Risk Percentage will not be
greater than that specified in Section 1.
MONTHLY EXPENSE CHARGE. The Monthly Expense Charge will be determined by Us
from time to time based on Our expectations of future expenses. However, the
Monthly Expense Charge will not be greater than that shown in Section 1. The
Monthly Expense Charge deduction will be allocated among Sub-Accounts in the
same proportion that the Account Value attributable to each Sub-Account bears to
the aggregate Account Value of all Sub-Accounts immediately prior to the
deduction.
MONTHLY COST OF INSURANCE. We deduct a Monthly Cost of Insurance charge from
Your Account Value to cover anticipated costs of providing insurance coverage.
This charge is made, in arrears, at the end of each Policy Month. If You
Surrender the Policy on any day other than a Monthly Anniversary Day, a pro-rata
charge will be made. The Monthly Cost of Insurance deduction will be allocated
among the Sub-Accounts in the same proportion that the Account Value in each
Sub-Account bears to the total Account Value less the Loan Account immediately
prior to the deduction.
The Monthly Cost of Insurance equals the sum of (1), (2) and (3) where
(1) is the Monthly Cost of Insurance Rate (described below) multiplied by
the Net Amount at Risk divided by 1,000; the Net Amount at Risk equals the
Death Benefit at the end of the Policy Month before the deduction of the
Monthly Cost of Insurance less the Account Value at the end of the Policy
Month before the deduction of the Monthly Cost of Insurance;
(2) is the monthly rider cost for any riders which are a part of the Policy
(with the monthly rider cost, if any riders are added, as described in the
rider itself); and
(3) is the Flat Extra specified in Section 1 of the Policy, times the Total
Face Amount divided by 1000, if applicable.
The Account Value deduction occurs first to the initial Total Face Amount and
second to successive increases.
Page 21
<PAGE>
MONTHLY COST OF INSURANCE RATES. The Monthly Cost of Insurance Rates are based
on the length of time the Policy has been in force and the Insured's Sex (in the
case of Non-Unisex Policies), Issue Age, Class and table rating, if any. The
Monthly Cost of Insurance Rates will be determined by Us from time to time based
on Our expectations of future experience with respect to mortality, persistency,
interest rates, expenses and taxes. However, the Monthly Cost of Insurance
Rates will not be greater than those shown in Section 2.
BASIS OF COMPUTATION. Guaranteed Maximum Monthly Cost of Insurance Rates are
based on the 1980 Commissioner's Standard Ordinary Mortality Table A for Male
and Unisex Policies and Table G for Female Non-Unisex Policies. We have filed a
detailed statement of Our methods for computing Account Value with the insurance
department in the jurisdiction where the Policy was delivered.
INSUFFICIENT VALUE. If on a Valuation Date the Account Value less the
outstanding Policy Debt is less than or equal to zero, then the Policy will
terminate for no value, subject to the Grace Period provision.
GRACE PERIOD. If, on a Valuation Date, the Policy will terminate by reason of
insufficient value, We will allow a grace period. This grace period will allow
61 days from that Valuation Date for the payment of a Premium sufficient to
cover the deductions from the Account Value. These deductions include the
Monthly Cost of Insurance and the Monthly Expense Charge. Notice of Premium due
will be mailed to Your last known address or the last known address of any
assignee of record. We will assume that Your last known address is the address
shown on the Application (or notice of assignment), unless We receive written
notice of a change in address in a form satisfactory to Us. If the Premium due
is not paid within 61 days after the beginning of the Grace Period, then the
Policy and all rights to benefits will terminate without value at the end of the
61 day period. The Policy will continue to remain in force during this Grace
Period. If the Policy Proceeds become payable by Us during the Grace Period,
then any overdue Monthly Cost of Insurance and Monthly Expense Charge will be
deducted from the amount payable by Us.
SPLITTING UNITS. We reserve the right to split or combine the value of Units.
In effecting any such change, strict equity will be preserved and no change will
have a material effect on the benefits or other provisions of the Policy.
Page 22
<PAGE>
10. POLICY BENEFITS
BENEFITS AT DEATH. The Policy Proceeds will be paid as they become due upon the
death of the Insured prior to Maturity, in accordance with Section 8.
CASH SURRENDER VALUE. The Cash Surrender Value is the Account Value decreased
by the balance of any outstanding Policy Debt, increased by the Sales Load
Refund at Surrender described in Section 1.
SURRENDER. You may Surrender the Policy for the Cash Surrender Value at any
time.
PARTIAL SURRENDER. You may make a Partial Surrender of the Policy once each
Policy Year after the first Policy Year by written request to Our Service
Center. The maximum amount of any Partial Surrender is the Account Value
decreased by the balance of any outstanding Policy Debt. Unless You provide
evidence satisfactory to Us that the Insured is still insurable, the Total Face
Amount will be reduced to the extent necessary so that (1) does not exceed (2)
where
(1) is the Death Benefit increased by the amounts payable under
supplemental benefits less the Account Value immediately after the
Partial Surrender; and
(2) is the Death Benefit increased by the amounts payable under
supplemental benefits less the Account Value immediately before the
Partial Surrender.
If You provide such evidence, You will have the option of keeping the Death
Benefit equal to what it was immediately prior to the Partial Surrender. The
Specified Face Amount remaining in force after the Partial Surrender must be no
lower than the Minimum Specified Face Amount shown in Section 1. A Partial
Surrender may not decrease the Policy's Total Face Amount shown in Section 1 to
an amount less than the Minimum Total Face Amount shown in Section 1.
ALLOCATION OF PARTIAL SURRENDER. You may allocate the Partial Surrender among
the Sub-Accounts of the Variable Account. If You do not specify the allocation,
then the Partial Surrender will be allocated among the Sub-Accounts in the same
proportion that the Account Value of each Sub-Account bears to the aggregate
Account Value of all Sub-Accounts on the date of the Partial Surrender.
POLICY LOAN. You may request a Policy loan of up to 90% of the Policy's Account
Value, decreased by the amount of any outstanding Policy Debt on the date the
Policy loan is made. Account Value equal to the Policy loan will be transferred
from the Sub-Accounts to the Loan Account on the date the Policy loan is made.
You may allocate the Policy loan among the Sub-Accounts. If You do not specify
the allocation, then the Policy loan shall be allocated among the Sub-Accounts
in the same proportion that the Account Value of each Sub-Account bears to the
aggregate Account Value of all Sub-Accounts immediately prior to the loan.
Interest on the Policy loan will accrue daily at the policy loan interest rate
specified in Section 1. This interest shall be due and payable to Us in arrears
on each Policy Anniversary. Any unpaid interest will be added to the principal
amount as an additional Policy loan and will bear interest at the same rate and
in the same manner as the prior Policy loan.
All funds We receive from You will be credited to Your Policy as Premium unless
We have received written notice, in form satisfactory to Us, that the funds are
for loan repayment. Loan repayments will first reduce the outstanding balance
of the Policy loan and then accrued but unpaid interest on such loans. We will
accept repayment of any Policy loan at any time before Maturity. The amount of
the loan repayment up to the outstanding balance of the Policy loan will be
transferred from the Loan Account to the Sub-Accounts. You may allocate the
loan repayment among the Sub-Accounts. If You do not specify the allocation,
then the loan repayment shall be allocated among the Sub-Accounts in the same
proportion that the Account Value of each Sub-Account bears to the total Account
Value less the Loan Account immediately prior to the loan repayment.
Page 23
<PAGE>
DEFERRAL OF PAYMENT. We will usually pay any amount due from the Variable
Account within seven days after the Valuation Date following Our receipt of
written notice giving rise to such payment or, in the case of death of the
Insured, Due Proof of such death. Any special conditions that apply to a
Sub-Account are specified in the description of the Sub-Account in Section 1.
Payment of any amount payable from the Variable Account on death, Surrender,
Partial Surrender, or Policy loan may be postponed whenever:
- - the New York Stock Exchange ("NYSE") is closed other than customary weekend
and holiday closing, or trading on the NYSE is otherwise restricted,
- - the Securities and Exchange Commission, by order, permits postponement for
the protection of Policy Owners, or
- - an emergency exists as determined by the Securities and Exchange
Commission, as a result of which disposal of securities is not reasonably
practicable, or it is not reasonably practicable to determine the value of
the assets of the Variable Account.
TERMINATION. The Policy terminates on the earlier of the date We receive Your
request to Surrender, the expiration date of the Grace Period due to
insufficient value, the date of death of the Insured, or the date of Maturity.
Page 24
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
ADDITIONAL PROTECTION BENEFIT RIDER (APB RIDER)
This rider is scheduled in Section 1 of this Policy as a supplemental benefit.
It is part of, and subject to the other terms and conditions of this Policy. If
this rider is added after this Policy is in force, its effective date will be
stated in the form which adds it to this Policy.
BENEFIT. If the death of the Insured occurs while this rider is in force, the
amount of added insurance provided by this rider (the APB Death Benefit) will be
due. We will make payment when We receive Due Proof of that death.
MONTHLY RIDER COST. The Monthly Rider Cost for this rider is part of the
Monthly Cost of Insurance described in the Account Value section of this Policy.
The Monthly Rider Cost of Insurance Rate is based on the Sex (Non-unisex
Policy), Issue Age, Class and table rating, if any, of the Insured and on the
length of time this Policy has been in force. The Monthly Rider Cost of
Insurance Rates will be determined by Us from time to time based on Our
expectations of future interest, mortality experience, persistency, expenses and
taxes. However, the Monthly Rider Cost of Insurance Rates will not be greater
than the rates shown in Section 2a of this Policy.
The Monthly Rider Cost equals the Monthly Rider Cost of Insurance Rate
multiplied by the amount of the APB Death Benefit divided by 1000.
APB DEATH BENEFIT. The APB Death Benefit for any Policy Year is the greater of
zero or the result of (a) minus (b) where
(a) is the APB Rider Face Amount for that Policy Year. The APB Rider Face
Amount is shown in Section 1 of this Policy, and
(b) is the excess, if any, of the Death Benefit as described in the Death
Benefit section of this Policy exclusive of any benefits provided by riders over
1. the Specified Face Amount if this Policy's Death Benefit Option is Option
A, or
2. the Specified Face Amount plus the Account Value if this Policy's Death
Benefit Option is Option B.
Subject to Our approval, and not more than once each Policy Year, You may change
the APB Rider Face Amount by written request to Our Service Center. We must
have satisfactory evidence of the Insured's insurability before an increase can
take effect. Unless You specify otherwise, a requested increase in this
Policy's Total Face Amount shown in Section 1 of this Policy will consist only
of an increase in the APB Rider Face Amount.
A decrease in the APB Rider Face Amount may not decrease this Policy's Total
Face Amount shown in Section 1 of this Policy to an amount less than the Minimum
Total Face Amount shown in Section 1 of this Policy. A decrease will be applied
to the original APB Rider Face Amount and to each increase in APB Rider Face
Amount in the following order:
1. first, the most recent increase,
2. second, the next most recent increases successively, and
3. finally, the original APB Rider Face Amount.
<PAGE>
Termination. This rider will terminate on the earliest of the following dates:
a. receipt of Your written request for termination,
b. lapse of this Policy because of Insufficient Value,
c. termination of this Policy.
Donald A. Stewart, President
<PAGE>
2a. TABLE OF GUARANTEED MAXIMUM MONTHLY RIDER COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
MONTHLY RATES MONTHLY RATES
UNISEX UNISEX
AGE OR MALES FEMALES AGE OR MALES FEMALES
20 0.19796 0.10939 60 1.67781 0.98743
21 0.19900 0.11147 61 1.83043 1.05632
22 0.19691 0.11355 62 2.00296 1.14297
23 0.19379 0.11564 63 2.19857 1.25365
24 0.18962 0.11876 64 2.41624 1.38212
25 0.18441 0.12085 65 2.65495 1.52210
26 0.18024 0.12397 66 2.90948 1.66945
27 0.17816 0.12710 67 3.18092 1.81893
28 0.17711 0.13127 68 3.46929 1.96636
29 0.17816 0.13544 69 3.78196 2.12534
30 0.18024 0.14064 70 4.13263 2.30844
31 0.18545 0.14585 71 4.53085 2.53034
32 0.19066 0.15106 72 4.98830 2.80681
33 0.19900 0.15627 73 5.51357 3.14633
34 0.20838 0.16461 74 6.09842 3.54691
35 0.21984 0.17190 75 6.73147 3.99926
36 0.23339 0.18337 76 7.40125 4.49617
37 0.25006 0.19691 77 8.09839 5.02933
38 0.26882 0.21255 78 8.81664 5.59888
39 0.29071 0.23130 79 9.57519 6.22075
40 0.31468 0.25215 80 10.40294 6.92154
41 0.34283 0.27508 81 11.32260 7.72590
42 0.37097 0.29905 82 12.36456 8.65764
43 0.40329 0.32198 83 13.54133 9.73235
44 0.43665 0.34595 84 14.82597 10.93175
45 0.47418 0.37097 85 16.19024 12.24180
46 0.51276 0.39599 86 17.60564 13.65156
47 0.55447 0.42205 87 19.05960 15.15542
48 0.59827 0.45125 88 20.54593 16.75313
49 0.64729 0.48252 89 22.06924 18.45310
50 0.69945 0.51693 90 23.64732 20.27260
51 0.76100 0.55343 91 25.31021 22.24120
52 0.82985 0.59410 92 27.11696 24.41632
53 0.90812 0.64104 93 29.17166 26.90381
54 0.99683 0.68902 94 31.80318 29.96667
55 1.09182 0.73909 95 35.59424 34.18409
56 1.19518 0.78916 96 41.72884 40.73389
57 1.30274 0.83716 97 52.65466 52.05134
58 1.41763 0.88307 98 73.58293 73.32726
59 1.54091 0.93212 99 83.33333 83.33333
Page 8a
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
THIS AGREEMENT, made and entered into as of the 1st day of December, 1996
by and among SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.), (hereinafter the
"Company"), a Delaware corporation, 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 such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts (hereinafter
the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies (collectively, the "Variable
Insurance Products") to be offered by insurance companies which have entered
into participation agreements with the Fund and the Underwriter (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets, any one or more of which may be made available
under this Agreement, as may be amended from time to time by mutual agreement of
the parties hereto (each such series hereinafter referred to as a "Portfolio");
and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated October 15, 1985 (File No. 812-6102), 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
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has established separate accounts to fund certain
variable life insurance, some of which may be registered under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing 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 variable life insurance
policies; and
WHEREAS, the Company may register one or more Accounts as unit investment
trusts under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("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 on behalf
of each Account to fund certain of the aforesaid variable life insurance
policies and the Underwriter is authorized to sell such shares to unit
investment trusts such as each 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
Fund which each 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 Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 11:00 a.m. Boston 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 Securities and Exchange Commission.
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1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable 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 Portfolio to any person, or suspend or terminate the offering of
shares of any 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 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 Portfolio will be sold to the general public.
1.4. 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, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund 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. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life policies with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement (a list
of
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such funds appearing on Schedule C to this Agreement); or (d) the Fund or
Underwriter consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, 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 Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the 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 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. Boston time)
and shall use its best efforts to make such net asset value per share available
by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or are exempt from registration; 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 each Account prior to any issuance or sale thereof as a
segregated asset account under Title 18, Section 2932 of the Delaware Insurance
Code and has registered or, prior to any issuance or sale of the Contracts,
will, except with respect to Accounts that are exempt from registration under
the 1940 Act, register each 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 Delaware and all
applicable federal and state securities
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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 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 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 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.
2.4. The Company represents that the Contracts are currently treated as
life insurance contracts (including modified endowment 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 that the Contracts have
ceased to be so treated or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations 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 Delaware and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Delaware to the extent required to perform this
Agreement.
2.7. 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 Delaware and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. 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.
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<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects 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
Delaware and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/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
minimal 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.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. 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.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many printed copies
of the Fund's current prospectus and Statement of Additional Information as the
Company may reasonably request. If requested by the Company in lieu thereof,
the Fund shall provide camera-ready film or computer diskettes containing the
Fund's prospectus and Statement of Additional Information, and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus and/or Statement of Additional Information
for the Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document, and to
have the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements of additional information. Except as provided in the following
three sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film or computer diskettes
in lieu of receiving printed copies of the Fund's prospectus, the Fund will
reimburse the Company in an amount equal to the product of A and B where A is
the number of such prospectuses distributed to owners of the Contracts, and B is
the Fund's per unit cost of typesetting and printing the Fund's prospectus.
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The same procedures shall be followed with respect to the Fund's Statement of
Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or the Company (or in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and Statements of Additional Information, which are covered in
Section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing 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
a particular separate account in the same proportion as Fund shares of
such portfolio for which instructions have been received in that
separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for registered variable contract owners. 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. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
3.5. 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 Securities and Exchange Commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
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<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 in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within seven
Business Days after receipt of such material.
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 for the
Fund shares, as such registration statement and prospectus 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 or its designee, each piece of sales literature
or other promotional material in which the Company and/or its separate
account(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
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, each
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus or other offering document for
the Contracts, as such registration statement, prospectus or offering documents
may be amended or supplemented from time to time, or in published reports for
each 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, Statements of Additional Information,
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, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, offering documents, Statements of
Additional Information, 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 each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities. For purposes of
Sections 4.5 and 4.6 the Fund and the Underwriter recognize that the Company
does not intend to file sales materials pertaining to unregistered products
issued through exempt separate accounts and nothing in this
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Agreement shall require anything to the contrary so long as the Company may
fairly continue to maintain this position under applicable law and regulations.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" 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, research
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, Statements of Additional Information, shareholder reports, and
proxy materials.
4.8 The Fund or its designee will use its best efforts to provide to the
Company performance information for each Portfolio in such format as may be
required by the NASD for performance advertising within five business days after
the end of each calendar month.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and 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. 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 distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
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ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will at all times comply with Section 817(h) of
the Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications 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 Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance with the grace period afforded by Regulation
1.817-5.
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 trustees, 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 trustees), 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
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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 Underwriter and 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 Underwriter and 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 Sections 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 Contracts 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 that 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 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,
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and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b)
Sections 3.4, 3.5, 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.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund 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, 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 other offering document(s) for the Contracts or
contained in the Contracts or sales literature 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 other offering document(s)
for the Contracts or in the Contracts or sales literature (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 of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct of the Company
or persons under its 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, or
sales literature 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
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made in reliance upon information furnished to the Fund by or on behalf of
the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms 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 incurred or assessed against an Indemnified Party as such may
arise from 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 or
duties under this Agreement or to the Fund, whichever is applicable.
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 the Indemnified Parties, 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. 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.
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<PAGE>
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter 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 8.2) 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,
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 sales literature 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 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, other offering document(s) or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of
the Fund, Adviser 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, other offering document(s) or sales literature
covering 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 failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure,
14
<PAGE>
whether unintentional or in good faith or otherwise, to comply
with the diversification 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 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
each 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 Parties, 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. 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 each 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, 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 become subject under any statute,
at common law or otherwise,
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<PAGE>
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross negligence, bad faith or
willful misconduct of the Board or any member thereof, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
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 incurred
or assessed against an Indemnified Party as such may arise from 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 each 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
defense thereof, with counsel satisfactory to the party named in the action.
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 proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
16
<PAGE>
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 Commonwealth of
Massachusetts.
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 Securities and
Exchange Commission may grant (including, but not limited to, the 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 by one hundred eighty
(180) days 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 Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
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 Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) 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 and/or its affiliated
companies has suffered a material adverse change
17
<PAGE>
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) 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 either 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;
or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.6(b) hereof and at the
time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(h)
shall be effective forty five (45) days after the notice
specified in Section 1.6(b) was given.
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, without limitation, the owners of the Existing
Contracts shall 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 terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII 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, or (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) as
permitted by an order of 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 30 days notice of its intention to do so.
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.
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<PAGE>
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park - SC 2145
Wellesley Hills, MA 02181
Attention: Douglas E. Macdonald
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into 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 until such time as it may come into
the public domain without the express written consent of the affected party.
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
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<PAGE>
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
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; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall 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:
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof, unless the sharing of such
material would subject the Company to the public disclosure of
confidential information.
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<PAGE>
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.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
/s/ Robert A. Bonner
By: _________________________
Robert A. Bonner
Name: _________________________
Vice President
Title: ________________________
VARIABLE INSURANCE PRODUCTS FUND
/s/ J. Gary Burkhead
By: ________________________
J. Gary Burkhead
Name: ________________________
Senior Vice President
Title: ________________________
FIDELITY DISTRIBUTORS CORPORATION
/s/ Neal Litvack
By: _______________________
Neal Litvack
Name: _______________________
President
Title: _______________________
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<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Names of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Separate Account G Sun Life Corporate VUL
(July, 1996)
22
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
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<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to Customers
by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but NOT including) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
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<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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<PAGE>
SCHEDULE C
Other non-Fidelity investment companies currently available under or variable
life insurance issued by the Company:
MFS Sun Life Series Trust
Government Securities
Total Return
Capital Appreciation
World Growth
Emerging Growth
JP Morgan JPM Series Trust
Bond
Equity
Small Company
Neuberger & Berman Advisors Management Trust
Limited Maturity
Partners
Templeton Variable Products Series Fund
Stock
26
<PAGE>
SUB-LICENSE AGREEMENT
Agreement effective as of this 17th of February, 1995, by and between
Fidelity Distributors Corporation (hereinafter called "Fidelity"), a corporation
organized and existing under the laws of the Commonwealth of Massachusetts, with
a principal place of business at 82 Devonshire Street, Boston, Massachusetts,
and SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) (hereinafter called "Company"),
a company organized and existing under the laws of the State of Delaware, with a
principal place of business at Wellesley Hills, Massachusetts.
WHEREAS, FMR Corp., a Massachusetts corporation, the parent company of
Fidelity, is the owner of the trademark and the tradename "FIDELITY INVESTMENTS"
and is the owner of a trademark in a pyramid design (hereinafter, collectively
the "Fidelity Trademarks"), a copy of each of which is attached hereto as
Exhibit "A"; and
WHEREAS, FMR Corp. has granted a license to Fidelity (the "Master License
Agreement") to sub-license the Fidelity Trademarks to third parties for their
use in connection with Promotional Materials as hereinafter defined; and
WHEREAS, Company is desirous of using the Fidelity Trademarks in connection
with distribution of "sales literature and other promotional material" with
information, including the Fidelity Trademarks, printed in said material (such
material hereinafter called the Promotional Material). For the purpose of this
Agreement, "sales literature and other promotional material" shall have the same
meaning as in the certain Participation Agreement dated as of the 17th day of
February, 1995, among Fidelity, Company and Variable Insurance Products Fund
(hereinafter "Participation Agreement"); and
WHEREAS, Fidelity is desirous of having the Fidelity Trademarks used in
connection with the Promotional Material.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy whereof is hereby acknowledged,
and of the mutual promises hereinafter set forth, the parties hereby agree as
follows:
1. Fidelity hereby grants to Company a non-exclusive, non-transferable
license to use the Fidelity Trademarks in connection with the promotional
distribution of the Promotional Material and Company accepts said license,
subject to the terms and conditions set forth herein.
2. Company acknowledges that FMR Corp. is the owner of all right, title
and interest in the Fidelity Trademarks and agrees that it will do nothing
inconsistent with the ownership of the Fidelity Trademarks by FMR Corp., and
that it will not, now or hereinafter, contest any registration or application
for registration of the Fidelity Trademarks by FMR Corp., nor will it, now or
hereafter, aid anyone in contesting any registration or application for
registration of the Fidelity Trademarks by FMR Corp.
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<PAGE>
3. Company agrees to use the Fidelity Trademarks only in the form and
manner approved by Fidelity and not to use any other trademark, service mark or
registered trademark in combination with any of the Fidelity Trademarks without
approval by Fidelity.
4. Company agrees that it will place all necessary and proper notices and
legends in order to protect the interests of FMR Corp. and Fidelity therein
pertaining to the Fidelity Trademarks on the Promotional Material including, but
not limited to, symbols indicating trademarks, service marks and registered
trademarks. Company will place such symbols and legends on the Promotional
Material as requested by Fidelity or FMR Corp. upon receipt of notice of same
from Fidelity or FMR Corp.
5. Company agrees that the nature and quality of all of the Promotional
Material distributed by Company bearing the Fidelity Trademarks shall conform to
standards set by, and be under the control of, Fidelity.
6. Company agrees to cooperate with Fidelity in facilitating Fidelity's
control of the use of the Fidelity Trademarks and of the quality of the
Promotional Material to permit reasonable inspection of samples of same by
Fidelity and to supply Fidelity with reasonable quantities of samples of the
Promotional Material upon request.
7. Company shall comply with all applicable laws and regulations and
obtain any and all licenses or other necessary permits pertaining to the
distribution of said Promotional Material.
8. Company agrees to notify Fidelity of any unauthorized use of the
Fidelity Trademarks by others promptly as it comes to the attention of Company.
Fidelity or FMR Corp. shall have the sole right and discretion to commence
actions or other proceedings for infringement, unfair competition or the like
involving the Fidelity Trademarks and Company shall cooperate in any such
proceedings if so requested by Fidelity or FMR Corp.
9. This agreement shall continue in force until terminated by Fidelity.
This agreement shall automatically terminate upon termination of the Master
License Agreement. In addition, Fidelity shall have the right to terminate this
agreement at any time upon notice to Company, with or without cause. Upon any
such termination, Company agrees to cease immediately all use of the Fidelity
Trademarks and shall destroy, at Company's expense, any and all materials in its
possession bearing the Fidelity Trademarks, and agrees that all rights in the
Fidelity Trademarks and in the goodwill connected therewith shall remain the
property of FMR Corp. Unless so terminated by Fidelity, or extended by written
agreement of the parties, this agreement shall expire on the termination of that
certain Participation Agreement.
10. Company shall indemnify Fidelity and FMR Corp. and hold each of them
harmless from and against any loss, damage, liability, cost or expense of any
nature whatsoever, including without limitation, reasonable attorneys' fees and
all court costs, arising out of use of the Fidelity Trademarks by Company.
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<PAGE>
11. In consideration for the promotion and advertising of Fidelity as a
result of the distribution by Company of the Promotional Material, Company shall
not pay any monies as a royalty to Fidelity for this license.
12. This agreement is not intended in any manner to modify the terms and
conditions of the Participation Agreement. In the event of any conflict between
the terms and conditions herein and thereof, the terms and conditions of the
Participation Agreement shall control.
13. This agreement shall be interpreted according to the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereunto set their hands and seals, and
hereby execute this agreement, as of the date first above written.
FIDELITY DISTRIBUTORS CORPORATION
By: _____________________
Name: _____________________
Title: _____________________
SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.)
By: _____________________
Name: _____________________
Title: _____________________
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EXHIBIT A
Int. Cl.: 36
Prior U.S. Cls.: 101 and 102
Reg. No. 1,481,040
United States Patent and Trademark Office Registered Mar. 15, 1988
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SERVICE MARK
PRINCIPAL REGISTER
[LOGO] FIDELITY
INVESTMENTS
FMR CORP. (MASSACHUSETTS FIRST USE 2-22-1984; IN COMMERCE
CORPORATION) 2-22-1984.
82 DEVONSHIRE STREET
BOSTON, MA 02109, ASSIGNEE OF NO CLAIM IS MADE TO THE EXCLUSIVE
FIDELITY DISTRIBUTORS CORPORATION RIGHT TO USE "INVESTMENTS", APART
(MASSACHUSETTS CORPORATION) FROM THE MARK AS SHOWN.
BOSTON, MA 02109
FOR: MUTUAL FUND AND STOCK SER. NO. 641,707, FILED 1-28-1987
BROKERAGE SERVICES, IN CLASS 36
(U.S. CLS. 101 AND 102) RUSS HERMAN, EXAMINING ATTORNEY
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<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
THIS AGREEMENT, made and entered into as of the 1st day of December, 1996
by and among SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.), (hereinafter the
"Company"), a Delaware corporation, 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 such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies (collectively, the "Variable
Insurance Products") to be offered by insurance companies which have entered
into participation agreements with the Fund and the Underwriter (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets, any one or more of which may be made available
under this Agreement, as may be amended from time to time by mutual agreement of
the parties hereto (each such series hereinafter referred to as a "Portfolio");
and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 17, 1986 (File No. 812-6422), 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
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<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has established separate accounts to fund certain
variable life insurance, some of which may be registered under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing 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 variable life insurance
policies; and
WHEREAS, the Company may register one or more Accounts as unit investment
trusts under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("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 on behalf
of each Account to fund certain of the aforesaid variable life insurance
policies and the Underwriter is authorized to sell such shares to unit
investment trusts such as each 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
Fund which each 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 Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 11:00 a.m. Boston 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 Securities and Exchange Commission.
2
<PAGE>
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable 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 Portfolio to any person, or suspend or terminate the offering of
shares of any 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 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 Portfolio will be sold to the general public.
1.4. 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, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund 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. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life policies with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement (a list
of
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<PAGE>
such funds appearing on Schedule C to this Agreement); or (d) the Fund or
Underwriter consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, 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 Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the 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 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. Boston time)
and shall use its best efforts to make such net asset value per share available
by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or are exempt from registration; 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 each Account prior to any issuance or sale thereof as a
segregated asset account under Title 18, Section 2932 of the Delaware Insurance
Code and has registered or, prior to any issuance or sale of the Contracts,
will, except with respect to Accounts that are exempt from registration under
the 1940 Act, register each 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 Delaware and all
applicable federal and state securities
4
<PAGE>
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 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 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 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.
2.4. The Company represents that the Contracts are currently treated as
life insurance contracts (including modified endowment 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 that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations 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 Delaware and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Delaware to the extent required to perform this
Agreement.
2.7. 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 Delaware and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. 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.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects 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
Delaware and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/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
minimal 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.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. 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.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many printed copies
of the Fund's current prospectus and Statement of Additional Information as the
Company may reasonably request. If requested by the Company in lieu thereof,
the Fund shall provide camera-ready film or computer diskettes containing the
Fund's prospectus and Statement of Additional Information, and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus and/or Statement of Additional Information
for the Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document, and to
have the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements of additional information. Except as provided in the following
three sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film or computer diskettes
in lieu of receiving printed copies of the Fund's prospectus, the Fund will
reimburse the Company in an amount equal to the product of A and B where A is
the number of such prospectuses distributed to owners of the Contracts, and B is
the Fund's per unit cost of typesetting and printing the Fund's prospectus.
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The same procedures shall be followed with respect to the Fund's Statement of
Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or the Company (or in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and Statements of Additional Information, which are covered in
Section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing 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 a
particular separate account in the same proportion as Fund shares of
such portfolio for which instructions have been received in that
separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for registered variable contract owners. 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. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
3.5. 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 Securities and Exchange Commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
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<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 in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within seven
Business Days after receipt of such material.
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 for the
Fund shares, as such registration statement and prospectus 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 or its designee, each piece of sales literature
or other promotional material in which the Company and/or its separate
account(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
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, each
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus or other offering document for
the Contracts, as such registration statement, prospectus or offering documents
may be amended or supplemented from time to time, or in published reports for
each 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, Statements of Additional Information,
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, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, offering documents, Statements of
Additional Information, 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 each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities. For purposes of
Sections 4.5 and 4.6 the Fund and the Underwriter recognize that the Company
does not intend to file sales materials pertaining to unregistered products
issued through exempt separate accounts and nothing in this
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Agreement shall require anything to the contrary so long as the Company may
fairly continue to maintain this position under applicable law and regulations.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" 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, research
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, Statements of Additional Information, shareholder reports, and
proxy materials.
4.8 The Fund or its designee will use its best efforts to provide to the
Company performance information for each Portfolio in such format as may be
required by the NASD for performance advertising within five business days after
the end of each calendar month.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and 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. 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 distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
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ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will at all times comply with Section 817(h) of
the Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications 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 Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance with the grace period afforded by Regulation
1.817-5.
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 trustees, 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 trustees), 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
10
<PAGE>
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 Underwriter and 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 Underwriter and 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 Sections 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 Contracts 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 that 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 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,
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<PAGE>
and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b)
Sections 3.4, 3.5, 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.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund 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, 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 other offering document(s) for the Contracts or
contained in the Contracts or sales literature 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 other offering document(s)
for the Contracts or in the Contracts or sales literature (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 of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct of the Company
or persons under its 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, or
sales literature 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
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<PAGE>
made in reliance upon information furnished to the Fund by or on behalf of
the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms 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 incurred or assessed against an Indemnified Party as such may
arise from 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 or
duties under this Agreement or to the Fund, whichever is applicable.
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 the Indemnified Parties, 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. 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.
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<PAGE>
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter 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 8.2) 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,
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 sales literature 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 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, other offering document(s) or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of
the Fund, Adviser 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, other offering document(s) or sales literature
covering 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 failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure,
14
<PAGE>
whether unintentional or in good faith or otherwise, to comply
with the diversification 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 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
each 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 Parties, 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. 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 each 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, 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 become subject under any statute,
at common law or otherwise,
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<PAGE>
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross negligence, bad faith or
willful misconduct of the Board or any member thereof, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
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 incurred
or assessed against an Indemnified Party as such may arise from 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 each 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
defense thereof, with counsel satisfactory to the party named in the action.
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 proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
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<PAGE>
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 Commonwealth of
Massachusetts.
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 Securities and
Exchange Commission may grant (including, but not limited to, the 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 by one hundred eighty
(180) days 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 Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
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 Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) 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 and/or its affiliated
companies has suffered a material adverse change
17
<PAGE>
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) 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 either 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; or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.6(b) hereof and at the
time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(h)
shall be effective forty five (45) days after the notice
specified in Section 1.6(b) was given.
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, without limitation, the owners of the Existing
Contracts shall 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 terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII 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, or (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) as
permitted by an order of 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 30 days notice of its intention to do so.
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.
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<PAGE>
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park - SC 2145
Wellesley Hills, MA 02181
Attention: Douglas E. Macdonald
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into 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 until such time as it may come into
the public domain without the express written consent of the affected party.
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
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<PAGE>
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
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; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall 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:
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof, unless the sharing of such
material would subject the Company to the public disclosure of
confidential information.
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<PAGE>
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.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
/s/ Robert A. Bonner
By: _________________________
Robert A. Bonner
Name: _________________________
Vice President
Title: ________________________
VARIABLE INSURANCE PRODUCTS FUND II
/s/ J. Gary Burkhead
By: ________________________
J. Gary Burkhead
Name: ________________________
Senior Vice President
Title: ________________________
FIDELITY DISTRIBUTORS CORPORATION
/s/ Neal Litvack
By: _______________________
Neal Litvack
Name: _______________________
President
Title: _______________________
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<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Names of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Separate Account G Sun Life Corporate VUL
(July, 1996)
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<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
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<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
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<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of SHARES.)
Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a.m.
Boston time. Fidelity Legal may request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
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SCHEDULE C
Other non-Fidelity investment companies currently available under or variable
life insurance issued by the Company:
MFS Sun Life Series Trust
Government Securities
Total Return
Capital Appreciation
World Growth
Emerging Growth
JP Morgan JPM Series Trust
Bond
Equity
Small Company
Neuberger & Berman Advisors Management Trust
Limited Maturity
Partners
Templeton Variable Products Series Fund
Stock
26
<PAGE>
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 31st day of December, 1996, between Sun
Life Assurance Company of Canada (U.S.) ("Insurance Company"), a life insurance
company organized under the laws of the State of Delaware, and JPM Series Trust
II ("Fund"), a business trust organized under the laws of Delaware, with respect
to the Fund's portfolio or portfolios set forth on Schedule I hereto, as such
Schedule may be revised from time to time (the "Series"; if there are more than
one Series to which this Agreement applies, the provisions herein shall apply
severally to each such Series).
ARTICLE I 1.
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Trustees of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the 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 life insurance contract that uses the
Fund 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.
1.7 "Disinterested Board Members" shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as defined
by the Act.
1.8 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an
agreement with the Fund for the purpose of making Fund shares
available to serve as the underlying investment medium for the
aforesaid Contracts.
1.9 "Plans" shall mean qualified pension and retirement benefit plans.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission,
with respect to the Series.
1.11 "Separate Account" shall mean Separate Account G, July 1996 a separate
account established by Insurance Company in accordance with the laws
of the State of Delaware.
1.12 "Software Program" shall mean the software program used by the Fund
for providing Fund and account balance information including net asset
value per share.
1.13 "Insurance Company's General Account(s)" shall mean the general
account(s) of Insurance Company and its affiliates which invest in the
Fund.
<PAGE>
ARTICLE II 2.
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 Delaware Insurance Code for the purpose of offering to the
public certain individual variable 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; (d) each Separate Account is eligible to invest in shares
of the Fund without such investment disqualifying the Fund as an
investment medium for insurance company separate accounts supporting
variable annuity contracts or variable life insurance contracts; and
(e) each Separate Account will comply with applicable legal
requirements.
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 inform the Fund promptly of any investment
restrictions imposed by state or local insurance law and applicable to
the Fund, and Fund shall use its best efforts to comply with such
identified restrictions.
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 Fund represents that the Fund 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 Fund to operate and offer
its shares as an underlying investment medium for Participating
Companies. The Fund has established five portfolios and may in the
future establish other portfolios.
2.5 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 the Fund and
its investment adviser 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.
2.7 Fund agrees that the Fund's 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 the Fund shall be permitted (subject to
the other terms of this Agreement) to make Series' shares available to
other Participating Companies and contractholders and to Plans.
2.9 Fund represents and warrants that any of its trustee, officers,
employees, investment advisers, and other individuals/entities who deal
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 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.
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<PAGE>
2.10 Insurance Company represents and warrants that all of its employees
and agents who deal 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 in an amount not less than the coverage
required to be maintained by the Fund. 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 the Fund's investment adviser 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 3.
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the Series' shares.
3.2 Fund agrees to make the shares of its Series 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, the Fund may refuse to sell
the shares of any Series to any person, or suspend or terminate the
offering of the shares of any Series 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 its
fiduciary duties under federal and any applicable state laws,
necessary and in the best interests of the shareholders of such
Series.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of
those Participating Companies and their affiliates and to Plans. No
shares of any Series will be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information for each Series available on a
per-share and Series 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 for the Series in question.
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
Separate Account unit values for the day. Using this unit value,
Insurance Company will process the day's Separate Account transactions
received by it by the close of trading on the floor of the New York
Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net
dollar amount of Series shares which will be purchased or redeemed at
the day's closing net asset value per share for such Series. The net
purchase or redemption orders will be transmitted to the 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 the relevant Series next calculated after receipt of the
order by the Fund or its Transfer Agent.
3.6 Fund appoints Insurance Company as its agent for the limited purpose
of accepting orders for the purchase and redemption of shares of each
Series for the Separate Account. Fund will execute orders for any
Series 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
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 Series shares, the conditions specified in Section 3.8, as
applicable, are satisfied. A redemption or purchase request for any
Series that does not satisfy the conditions specified above and in
Section 3.8, as applicable, will be effected at the net asset value
computed for such Series on the Business Day immediately preceding the
next following Business Day upon which such conditions have been
satisfied.
3.7 Insurance Company will make its best efforts to notify Fund in advance
of any unusually large purchase or redemption orders.
3
<PAGE>
3.8 If Insurance Company's order requests the purchase of Series shares,
Insurance Company will pay for such purchases by wiring Federal Funds
to Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall make all reasonable efforts to
transmit to the Fund payment in Federal Funds by 12:00 noon Eastern
Time on the Business Day the Fund receives the notice of the offer
pursuant to Section 3.5. 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 Fund receives payment in
Federal Funds by 12:00 midnight Eastern Time on the Business Day the
Fund receives the notice of the order pursuant to Section 3.5. If
payment in Federal Funds for any purchase is not received or is
received by the Fund after 12:00 noon Eastern Time on such Business
Day, Insurance 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 requests. If Insurance Company's
order requests the redemption of Series shares valued at or greater
than $1 million dollars, the Fund may wire such amount to Insurance
Company within seven days of the order.
3.9 Fund has the obligation to ensure that Series shares are registered
with applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Insurance
Company. Transfer of Series shares will be by book entry only. No
share certificates will be issued to Insurance Company. Insurance
Company will record shares ordered from Fund in an appropriate title
for the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of
shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Insurance
Company the amount of dividend and capital gain, if any, per share of
each Series. All dividends and capital gains of any Series shall be
automatically reinvested in additional shares of the relevant Series
at the applicable net asset value per share of such Series on the
payable date. Fund shall, on the day after the payable date or, if not
a Business Day, on the first Business Day thereafter, notify Insurance
Company of the number of shares so issued.
ARTICLE IV 4.
STATEMENTS AND REPORTS
4.1 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. Within five Business Days
following the end of each month, the Fund shall provide to Insurance
Company, with respect to each series in which the Separate Account
invests, performance figures indicating cumulative and annualized
performance for the following periods (in each case to the extent
applicable); year-to-date, one year, three years, five years, ten
years and since inception.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other
printed materials (which the Fund customarily provides to its
shareholders) in quantities as Insurance Company may reasonably
request for distribution to each Contractholder and Participant. The
Fund shall provide the Insurance Company with as many printed copies
of the Fund's current prospectus and Statement of Additional
Information as the Insurance Company may reasonably request. If
requested by the Insurance Company in lieu thereof, the Fund shall
provide camera-ready film or computer diskettes containing the Fund's
prospectus and Statement of Additional Information, and such other
assistance as is reasonably necessary in order for the Insurance
Company once each year (or more frequently if the prospectus and/or
Statement of Additional Information for the Fund is amended during the
year) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document, and to have the Statement
of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document.
Alternatively, the Insurance Company may print the Fund's prospectus
and/or its Statement of Additional Information separately, but provide
for it to be attached to other fund companies' prospectuses and
statements of additional information. Except as provided in the
following three sentences, all expenses of printing and distributing
Fund prospectuses and
4
<PAGE>
Statement of Additional Information shall be the expense of the
Insurance Company. For prospectuses and Statements of Additional
Information provided by the Insurance Company to its existing owners
of Contracts in order to update disclosure as required by the
Securities Act of 1933, as amended and/or the Act, the cost of
printing shall be borne by the Fund. If the Insurance Company chooses
to receive camera-ready film or computer diskettes in lieu of
receiving printed copies of the Fund's prospectus, the Fund will
reimburse the Insurance Company in an amount equal to the product of A
and B where A is the number of such prospectuses distributed to owners
of the Contracts, and B is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed
with respect to the Fund's Statement of Additional Information.
4.3 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 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 the 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 5.
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Series,
including but not limited to management fees, administrative expenses
and legal and regulatory costs, will be made in the determination of
the relevant Series' daily net asset value per share so as to
accumulate to an annual charge at the rate set forth in the Fund's
Prospectus. Excluded from the expense limitation described herein
shall be brokerage commissions and transaction fees and extraordinary
expenses.
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 the 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 Fund materials,
including the cost of printing the Fund's Prospectus, or
marketing materials for prospective Insurance Company
Contractholders and Participants as the Fund's investment
adviser and Insurance Company shall agree from time to time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders and
Participants.
c. Distribution expenses of Fund materials or marketing materials
for Insurance Company Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne
by Insurance Company.
5
<PAGE>
ARTICLE VI 6.
EXEMPTIVE APPLICATION
6.1 Insurance Company has reviewed a copy of the order dated December__,
1996 of the Securities and Exchange Commission under Section 6(c) of
the Act and, in particular, has reviewed the conditions to the relief
set forth in the related Notice. As set forth therein, Insurance
Company agrees to report any potential or existing conflicts promptly
to the Board, and in particular whenever contract voting instructions
are disregarded, and recognizes that it will be responsible for
assisting the 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 the Fund, the Board shall
give prompt notice to all Participating Companies. 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
Series and reinvesting such assets in a different investment
medium, or submitting the question of whether such segregation
should be implemented to a vote or all affected Contractholders;
and/or
b. Establishing a new registered management investment company.
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 the Fund,
Insurance Company may be required, at the Board's election, to withdraw
the Separate Account's investment in the 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
the 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 the 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.
ARTICLE VII 7.
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to
Insurance Company, of the 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 Series shares in accordance with instructions received
from Contractholders or Participants; and
(c) vote Series shares for which no instructions have been received
in the same proportion as Series shares for which instructions
have been received.
6
<PAGE>
Insurance Company agrees at all times to votes its General Account
shares in the same proportion as Series shares for which instructions
have been received from Contractholders or Participants. Insurance
Company further agrees to be responsible for assuring that voting
Series 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 the Fund and its investment adviser, solicit, induce or
encourage Contractholders to (a) change or supplement the Fund's
current investment adviser or (b) change, modify, substitute, add to
or delete the Fund from the current investment media for the
Contracts.
ARTICLE VIII 8.
MARKETING AND REPRESENTATIONS
8.1 The 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;
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 which
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
the Fund, each piece of sales literature or other promotional material
in which the 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 Fund 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. The Fund 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 the Fund or concerning the
Fund or any Series in connection with the sale of the Contracts other
than the information or representations contained in the registration
statement or Prospectus, as 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.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance
Company, each piece of the 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 Fund shall not, in connection with the sale of Series 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 which 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.
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<PAGE>
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 9.
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, its
investment adviser, any sub-investment adviser of a Series, and their
affiliates, and each of their directors, trustees, officers,
employees, agents and 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 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 Fund) of Insurance Company or its agents, with
respect to the sale and distribution of Contracts for which Series
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 Series 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 Fund
specifically for use therein. This indemnity agreement will be in
addition to any liability which Insurance Company may otherwise have.
9.2 The Fund 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 Fund; (2) arise out of or are based upon the
omission to state in the registration statement or Prospectus or sales
literature or advertisements of the 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 Fund; and the Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such director,
officer, employee, agent or
8
<PAGE>
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
the 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 Fund by
Insurance Company specifically for use therein; and provided, further,
that the Fund shall not be liable for special, consequential or
incidental damages. This indemnity agreement will be in addition to
any liability which the Fund may otherwise have.
9.3 The Fund 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 Fund's (1)
incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate of a Series; (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 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, and provided, further, that the Fund shall not be liable for
special, consequential or incidental damages.
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 reasonably 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 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 the 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.
9.5 Insurance Company shall indemnify and hold the Fund, its investment
adviser and any sub-investment adviser of a Series harmless against
any tax liability incurred by the 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 10.
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 as to one or more Series
at the option of the terminating party:
a. At the option of Insurance Company or the Fund at any time from
the date hereof upon 180 days' notice, unless a shorter time is
agreed to by the parties,
9
<PAGE>
b. At the option of Insurance Company, if shares of any Series 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 Fund makes available a sufficient number of shares to
meet the requirements of the Contracts within said ten-day
period;
c. At the option of Insurance Company, upon the institution of
formal proceedings against the 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 the Fund's ability to meet and perform the 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. At the option of the 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 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 the Fund with said
termination to be effective upon receipt of notice;
e. At the option of the Fund, if the 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 the Fund or its investment adviser, the
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 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. Upon termination of the Investment Advisory Agreement between the
Fund and its investment adviser or its successors unless
Insurance Company specifically approves the selection of a new
Fund investment adviser. The Fund shall promptly furnish notice
of such termination to Insurance Company;
g. In the event the 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 upon such occurrence
without notice;
h. At the option of the Fund upon a determination by the Board in
good faith that it is no longer advisable and in the best
interests of shareholders for the Fund to continue to operate
pursuant to this Agreement. Termination pursuant to this
Subsection (h) shall be effective upon notice by the Fund to
Insurance Company of such termination;
i. At the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable,
under the Code, or if the Fund reasonably believes that the
Contracts may fail to so qualify.
j. At the option of either party to this Agreement, upon another
party's breach of any material provision of this Agreement;
k. At the option of the 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 the non-assigning party.
10
<PAGE>
m. The Insurance Company shall not redeem shares atttributable to
the Contracts (as opposed to Fund shares attributable to the
Insurance 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"), (iii) as permitted by an order of the Commission
pursuant to Section 26(b) of the Act, or (iv) as consented to by
Insurance Company, which consent shall not be unreasonably
withheld. Upon request, the Insurance Company will promptly
furnish to the Fund and its advisers the written opinion of
counsel for the Insurance Company (which counsel shall be
reasonably satisfactory to the Fund and the Adviser) 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 Insurance Company
shall not prevent Contract Owners from allocating payments to a
Series that was otherwise available under the Contracts without
first giving the Fund or the Underwriter thirty (30) days notice
of its intention to do so.
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, the Fund and its investment adviser may, at the option of
the Fund, continue to make available additional Series shares for so
long as the 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 the
Fund so elects to make additional Series 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 the Series, redeem investments in the Fund and/or invest in the 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, the Fund, as promptly as is practicable under the
circumstances, shall notify Insurance Company whether the Fund will
continue to make Series shares available after such termination. If
Series shares continue to be made available after such termination, the
provisions of this Agreement shall remain in effect and thereafter
either the Fund or Insurance Company may terminate the Agreement, as
so continued pursuant to this Section 10.3, upon prior written notice
to the other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund, need not be for
more than six months.
ARTICLE XI 11.
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and Fund.
11
<PAGE>
ARTICLE XII 12.
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:
Sun Life Assurance Company of Canda (U.S)
1 Sun Life Executive Park, SC - 2145
Wellesley Hills, Massachusetts 02181
Attention: Douglas E. Macdonald
Fund:
JPM Series Trust II
c/o Morgan Guaranty Trust Company
522 Fifth Avenue
New York, New York 10036
Attention: Sharon J. Weinberg
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
ARTICLE XIII 13.
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the 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
Trustee, officer or shareholder of the Fund individually.
ARTICLE XIV 14.
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.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: /s/ Robert E. McGinness
---------------------------------------
Robert E. McGinness
Its: Vice President, Compliance
--------------------------------------
JPM SERIES TRUST II
By: /s/ George C. W. Gatch
---------------------------------------
Its: Vice President
--------------------------------------
12
<PAGE>
SCHEDULE 1
Name of Series
- --------------
JPM Bond Fund
JPM Equity Fund
JPM Small Company Fund
13
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS/SUN LIFE INSURANCE TRUST,
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 18th day of December 1996, by
and among MFS/SUN LIFE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.), a Delaware corporation
(the "Company"), on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, Sun Investment Services Company, the underwriter for the Policies,
is registered as a broker-dealer with the SEC under the 1934 Act and is a member
in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
<PAGE>
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such orders by 11:00 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Trust calculates its net asset value pursuant to the rules
of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares 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 its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of requests
for redemption from Policy owners and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of
such request for redemption by 11:00 a.m. New York time on the next
following Business Day. The Company will not resell the Shares except to
the Trust or its agents.
1.4. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.5 hereof.
1.5. In the event of net purchases, the Company shall pay for the Shares by
2:00 p.m. New York time on the next Business Day after an order to purchase
the Shares is made in accordance with the provisions of Section 1.1.
hereof. In the event of net redemptions, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.3. hereof. All such payments shall be in federal
funds transmitted by wire.
1.6. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.7. The Trust shall furnish same day notice (by wire or telephone followed
by written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions as are payable on a Portfolio's Shares
in additional Shares of that Portfolio. The Trust shall notify the Company
of the number of Shares so issued as payment of such dividends and
distributions.
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<PAGE>
1.8. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust
provides materially incorrect share net asset value information, the Trust
shall make an adjustment to the number of shares purchased or redeemed for
the Accounts to reflect the correct net asset value per share. Any
material error in the calculation or reporting of net asset value per
share, dividend or capital gains information shall be reported promptly
upon discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. 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 as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies, and
that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the
1933 Act for the Policies and the registration statements under the 1940
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment or
annuity contract under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that
they might not be so treated in the future.
2.3. The Company represents and warrants that Sun Investment Services
Company, the underwriter for the Policies, is a member in good standing of
the NASD and is a registered broker-dealer with the SEC. The Company
represents and warrants that the Company and Sun Investment Services
Company will sell and distribute the Policies in accordance in all material
respects with all applicable state and federal securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the 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 Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust
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 Trust shall register and qualify
the Shares for sale in accordance with the laws of the various states only
if and to the extent deemed necessary by the Trust.
-3-
<PAGE>
2.5. The Trust and MFS represent that the Trust will sell and distribute
the Shares in accordance in all material respects with all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.6. The Trust 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 and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of The
Commonwealth of Massachusetts.
2.8. The Trust or its designee shall provide the Company with each
Portfolio's investment performance (cumulative and year to date) within
seven (7) business days of the close of each month.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus for
the Trust as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by the Shares. The Trust
or its designee shall provide the Company, at the Company's expense, with
as many copies of the current prospectus for the Trust as the Company may
reasonably request for distribution to prospective purchasers of Policies.
If requested by the Company in lieu thereof, the Trust or its designee
shall provide such documentation (including a "camera ready" copy of the
new prospectus as set in type or, at the request of the Company, as a
diskette in the form sent to the financial printer) and other assistance as
is reasonably necessary in order for the parties hereto once each year (or
more frequently if the prospectus for the Trust is supplemented or amended)
to have the prospectus for the Policies and the prospectus for the Trust
printed together in one document; the expenses of such printing to be
apportioned between (a) the Company and (b) the Trust or its designee in
proportion to the number of pages of the Policy and Trust prospectuses,
taking account of other relevant factors affecting the expense of printing,
such as covers, columns, graphs and charts; the Trust or its designee to
bear the cost of printing the Trust's prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares and
the Company to bear the expenses of printing the portion of such document
relating to the Accounts; PROVIDED, however, that the Company shall bear
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. Alternatively, the Company may print the Trust's
prospectus in combination with other fund prospectuses in accordance with
the expense allocation provisions set forth in the immediately preceding
sentence (provided that the applicable fund will bear expenses with respect
to its prospectus). In the event that the Company requests that the Trust
or its designee provides the Trust's prospectus in a "camera ready" or
diskette format, the Trust shall be responsible for providing the
prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (E.G., typesetting expenses), and the Company shall bear the expense
of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Trust shall state that the statement of
additional information for the Trust is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of
-4-
<PAGE>
such statement suitable for duplication by the Company) for distribution
to a prospective purchaser who requests such statement or to an owner of
a Policy not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or
of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Trust's prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
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.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statement on behalf of the Trust, MFS, any other investment adviser to
the Trust, or any affiliate of MFS or concerning the Trust or any other
such entity in connection with the sale of the Policies other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Trust, as such
registration statement, prospectus and statement of additional information
may be amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional
material approved by the Trust, MFS or their respective designees, except
with the permission of the Trust, MFS or their respective designees. The
Trust, MFS or their respective designees each agrees to respond to any
request for approval on a prompt and timely basis. The Company shall adopt
and implement procedures reasonably designed to ensure that information
concerning the Trust, MFS or any of their affiliates which is intended for
use only by brokers or agents selling the Policies (I.E., information that
is not intended for distribution to Policy owners or prospective Policy
owners) is so used, and neither the Trust, MFS nor any of their affiliates
shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
-5-
<PAGE>
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give any information or make any
representations on behalf of the Company or concerning the Company, the
Accounts, or the Policies in connection with the sale of the Policies other
than the information or representations contained in a registration
statement, prospectus, or statement of additional information for the
Policies, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or
in reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to respond
to any request for approval on a prompt and timely basis. The parties
hereto agree that this Section 4.4. is neither intended to designate nor
otherwise imply that MFS is an underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, 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
Policies, or to the Trust or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Trust shall also each promptly inform the other of the
results of any examination by the SEC (or other regulatory authorities)
that relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS
will cooperate with the Company so as to enable the Company to solicit
proxies from Policy owners or to make changes to its prospectus, statement
of additional information or registration statement, in an orderly manner.
The Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
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), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to
the Company or to the underwriter for the Policies if and in amounts agreed
to by the Trust in writing. Each party, however, shall, in accordance with
the allocation of expenses specified
-6-
<PAGE>
in Articles III and V hereof, reimburse other parties for expenses
initially paid by one party but allocated to another party. In addition,
nothing herein shall prevent the parties hereto from otherwise agreeing to
perform, and arranging for appropriate compensation for, other services
relating to the Trust and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's shareholder reports to Policy owners. The
Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional information;
and the cost of preparing, printing and distributing annual individual
account statements for Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1) of
the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts,
as they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections), as if those requirements
applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for promptly reporting
any potential or existing conflicts of which it is aware to the Board
including, but not limited to, an obligation by the Company to
-7-
<PAGE>
inform the Board whenever contract owner voting instructions are
disregarded. The Company also agrees that, if a material irreconcilable
conflict arises, it will at its own cost remedy such conflict up to and
including (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting to a vote of all affected contract
owners whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate group
of contract owners that votes in favor of such segregation, or offering to
any of the affected contract owners the option of segregating the assets
attributable to their contracts or policies, and (b) establishing a new
registered management investment company and segregating the assets
underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of
the Accounts designated by the disinterested trustees 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 to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or 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 expenses (including reasonable counsel
fees) to which any Indemnified Party may become subject under any statute,
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 Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(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 reasonable
reliance upon and in conformity with information furnished to the
Company or its designee by or on behalf of the Trust or MFS for
use in the registration statement, prospectus or statement of
additional information for the Policies or in the Policies or
sales literature or other promotional material (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
-8-
<PAGE>
information or sales literature or other promotional material of
the Trust not supplied by the Company or its designee, or persons
under its control and on which the Company has reasonably relied)
or wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, 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 Trust by or on behalf
of the Company; or
(d) 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; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust 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, and any agents or
employees of the foregoing (each an "Indemnified Party," or 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 Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party may become subject
under any statute, 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 Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust (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 statement 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 reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS or their respective designees by or on behalf of the
Company for use in the registration statement, prospectus or
statement of additional information for the Trust or in sales
literature or other promotional material for the Trust (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS or any of their
respective designees or persons under their respective control
and on which any such entity has reasonably relied) or wrongful
conduct of the
-9-
<PAGE>
Trust or persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Accounts or
relating to the Policies, 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 Trust or MFS; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this Agreement
by the Trust; or
(e) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; wazzu or
(f) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, 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.
8.4. Promptly after receipt by an Indemnified Party under this Section 8.4.
of notice of commencement of any action, such Indemnified Party will, if a
claim in respect thereof is to be made against the indemnifying party under
this section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any Indemnified Party otherwise
than under this section. 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. After notice
from the indemnifying party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional
counsel obtained by it, and the indemnifying party shall not be liable to
such Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.5. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.6. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
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<PAGE>
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 Commonwealth of
Massachusetts.
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 and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements
of the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other
requirements referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and an
explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or
related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of
the Policies for which those Portfolio Shares had been selected
to serve as the underlying investment media. The Company will
give thirty (30) days' prior written notice to the Trust of the
date of any proposed vote or other action taken to replace the
Shares; or
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<PAGE>
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS 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
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified the Trust of
its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and conditions of
this Agreement, for all Policies in effect on the effective date of
termination of this Agreement (the "Existing Policies"), except as
otherwise provided under Article VII of this Agreement. Specifically,
without limitation, the owners of the Existing Policies shall be permitted
to transfer or reallocate investment under the Policies, redeem investments
in any Portfolio and/or invest in the Trust upon the making of additional
purchase payments under the Existing Policies.
11.6 The Company shall not redeem Shares attributable to the Policies (as
opposed to Shares attributable to the Company's assets held in the Account)
except (i) as necessary to implement Policy owner initiated or approved
transactions, or (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) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 act.
Upon request, the Company will promptly furnish to the Trust and MFS the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and MFS) 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
Policies, the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policy
without first giving the Trust or MFS thirty (30) days notice of its
intention to do so.
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<PAGE>
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile 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 Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
1 Sun Life Executive Park, SC-2145
Wellesley Hills, Massachusetts 02181
Facsimile No.:(617) 237-0568
Attn: Douglas E. Macdonald
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement or as otherwise required by applicable law
or regulation, 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 it may come into the
public domain.
13.2. 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.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. 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.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
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<PAGE>
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. 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.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations of
each Portfolio hereunder shall be several and not joint, in accordance with
its proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
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<PAGE>
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 above.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By its authorized officer,
By: Robert A. Bonner
--------------------------------
Title: Vice President
-----------------------------
MFS/SUN LIFE SERIES TRUST, ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not individually,
By: A. Keith Brodkin
--------------------------------
Title: Chairman
-----------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: Arnold D. Scott
-----------------------------------
Title: Senior Executive Vice President
--------------------------------
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<PAGE>
As of December __, 1996
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES SERIES
SEPARATE ACCOUNT G SUN LIFE CORPORATE VUL TOTAL RETURN SERIES
(JULY 1996) CAPITAL APPRECIATION SERIES
WORLD GROWTH SERIES
EMERGING GROWTH SERIES
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 5th day of December, 1996, by and between
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("TRUST"), a Delaware business trust,
ADVISERS MANAGERS TRUST ("MANAGERS TRUST"), a New York common law trust,
NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"), a New York
corporation, and SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) ("LIFE COMPANY"), a
life insurance company organized under the laws of the State of Delaware.
WHEREAS, TRUST and MANAGERS TRUST are registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended
("40 Act") as open-end, diversified management investment companies; and
WHEREAS, TRUST is organized as a series fund comprised of several
portfolios ("Portfolios"), the currently available of which are listed on
Appendix A hereto; and
WHEREAS, MANAGERS TRUST is organized as a series fund, comprised of several
portfolios ("Series"), the currently operational of which are listed on Appendix
A hereto; and
WHEREAS, each Portfolio of TRUST will invest all of its net investable
assets in a corresponding Series of MANAGERS TRUST; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts of such life
insurance companies ("Participating Insurance Companies") and also offers its
shares to certain qualified pension and retirement plans; and
WHEREAS, TRUST has received an order from the SEC, dated May 5, 1995 (File
No. 812-9164), granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the '40 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Portfolios of the TRUST to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having TRUST as one of the underlying funding vehicles for such
Variable Contracts; and
WHEREAS, N&B MANAGEMENT is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and
<PAGE>
as a broker-dealer under the Securities Exchange Act of 1934, as amended; and
WHEREAS, N&B MANAGEMENT is the administrator and distributor of the shares
of each Portfolio of TRUST and investment manager of the corresponding Series of
MANAGERS TRUST; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, MANAGERS TRUST and N&B MANAGEMENT agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Portfolios as listed on Appendix B for investment
of purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in TRUST's Prospectus.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section
1.2, LIFE COMPANY shall be the designee of TRUST for receipt of such orders from
LIFE COMPANY and receipt by such designee shall constitute receipt by TRUST;
provided that TRUST receives notice of such order by 9:30 a.m. New York 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 TRUST calculates its
net asset value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem for cash, on LIFE COMPANY's request, any full
or fractional shares of TRUST held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by TRUST or its
designee of the request for redemption. For purposes of this Section 1.3, LIFE
COMPANY shall be the designee of TRUST for receipt of requests for redemption
from LIFE COMPANY and receipt by such designee shall constitute receipt by
TRUST; provided that TRUST receives notice of such request for redemption by
9:30 a.m. New York time on the next following Business Day.
1.4 TRUST shall furnish, on or before the ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain
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distributions payable on the shares of any Portfolio of TRUST. LIFE COMPANY
hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of the
Portfolio. TRUST shall notify LIFE COMPANY of the number of shares so issued as
payment of such dividends and distributions.
1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any
material error in the calculation of net asset value per share, dividend or
capital gain information shall be reported promptly upon discovery to LIFE
COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of TRUST shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined
shall be transmitted to TRUST by LIFE COMPANY by 9:30 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption
proceeds to LIFE COMPANY by the next Business Day, unless doing so would require
TRUST to dispose of portfolio securities or otherwise incur additional costs,
but in such event, proceeds shall be wired to LIFE COMPANY within seven days and
TRUST shall notify the person designated in writing by LIFE COMPANY as the
recipient for such notice of such delay by 3:00 p.m. New York Time the same
Business Day that LIFE COMPANY transmits the redemption order to TRUST. If LIFE
COMPANY's order requests the application of redemption proceeds from the
redemption of shares to the purchase of shares of another fund administered or
distributed by N&B MANAGEMENT, TRUST
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shall so apply such proceeds the same Business Day that LIFE COMPANY transmits
such order to TRUST.
1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold
only to Participating Insurance Companies which have agreed to participate in
TRUST to fund their Separate Accounts and/or to certain qualified pension and
other retirement plans, all in accordance with the requirements of Section
817(h) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury
Regulation 1.817-5. Shares of the Portfolios of TRUST will not be sold directly
to the general public.
1.9 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Board of Trustees of TRUST, acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
deemed necessary and in the best interests of the shareholders of such
Portfolios.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company
duly organized and in good standing under the laws of Delaware and that it has
legally and validly established each Separate Account as a segregated asset
account under such laws, and that Sun Investment Services Company, the principal
underwriter for the Variable Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934.
2.2 LIFE COMPANY represents and warrants that it has registered or, prior
to any issuance or sale of the Variable Contracts, will register each Separate
Account as a unit investment trust ("UIT") in accordance with the provisions of
the '40 Act and cause each Separate Account to remain so registered to serve as
a segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will
be registered under the Securities Act of 1933 (the "`33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts and that the Variable Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and further that the sale of the Variable Contracts shall comply in all material
respects with state insurance law suitability requirements.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated
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as life insurance, endowment or annuity contracts under applicable provisions of
the Code, that it will maintain such treatment and that it will notify TRUST
immediately upon having a reasonable basis for believing that the Variable
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5 LIFE COMPANY represents and warrants that it shall deliver such
prospectuses, statements of additional information, proxy statements and
periodic reports of the Trust as required to be delivered under applicable
federal or state law and interpretations of federal and state securities
regulators thereunder in connection with the offer, sale or acquisition of the
Variable Contracts.
2.6 TRUST represents and warrants that the Portfolio shares offered and
sold pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and TRUST shall be
registered under the '40 Act prior to and at the time of any issuance or sale of
such shares. TRUST shall amend its registration statement under the '33 Act and
the '40 Act from time to time as required in order to effect the continuous
offering of its shares. TRUST shall register and qualify its shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by TRUST.
2.7 TRUST represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the
rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
2.8 TRUST represents and warrants that each Portfolio invested in by the
Separate Account is currently qualified as a "regulated investment company"
under Subchapter M of the Code, that it will make every effort to maintain such
qualification and will notify LIFE COMPANY immediately upon having a reasonable
basis for believing it has ceased to so qualify or might not so qualify in the
future.
Article III. PROSPECTUS; PROXY STATEMENTS; REPORTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
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Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes to which an issuer is subject on the issuance and transfer of its
shares.
3.2 TRUST will bear the printing costs (or duplicating costs with respect
to the statement of additional information) and mailing costs associated with
the delivery of the following TRUST (or individual Portfolio) documents, and any
supplements thereto, to existing Variable Contract owners of LIFE COMPANY:
(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
LIFE COMPANY will submit any bills for printing, duplicating and/or
mailing costs, relating to the TRUST documents described above, to TRUST for
reimbursement by TRUST. LIFE COMPANY shall monitor such costs and shall use its
best efforts to control these costs. LIFE COMPANY will provide TRUST on a semi-
annual basis, or more frequently as reasonably requested by TRUST, with a
current tabulation of the number of existing Variable Contract owners of LIFE
COMPANY whose Variable Contract values are invested in TRUST. This tabulation
will be sent to TRUST in the form of a letter signed by a duly authorized
officer of LIFE COMPANY attesting to the accuracy of the information contained
in the letter. If requested by LIFE COMPANY, the TRUST shall provide such
documentation (including a final copy of the TRUST's prospectus as set in type
or in camera-ready copy) and other assistance as is reasonably necessary in
order for LIFE COMPANY to print together in one document the current prospectus
for the Variable Contracts issued by LIFE COMPANY and the current prospectus for
the TRUST. Should LIFE COMPANY wish to print any of these documents in a format
different from that provided by TRUST, LIFE COMPANY shall provide Trust with
sixty (60) days' prior written notice and LIFE COMPANY shall bear the cost
associated with any format change.
3.3 TRUST will provide, at its expense, LIFE COMPANY with the following
TRUST (or individual Portfolio) documents, and any supplements thereto, with
respect to prospective Variable Contract owners of LIFE COMPANY:
(i) camera-ready copy of the current prospectus for printing by
the LIFE COMPANY;
(ii) a copy of the statement of additional information suitable
for duplication;
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(iii) camera-ready copy of proxy material suitable for printing;
and
(iv) camera-ready copy of the annual and semi-annual reports for
printing by the LIFE COMPANY.
3.4 TRUST will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. LIFE
COMPANY will provide TRUST with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account promptly after the filing of each
such document with the SEC or other regulatory authority.
3.5 TRUST, no later than five (5) business days after the close of each
month, will provide LIFE COMPANY with cumulative and annualized performance
figures, to include, as applicable, year-to-date, one year, three year, five
year, ten year, and since inception data, with respect to each of the Portfolios
listed in Appendix B.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and
N&B MANAGEMENT, each piece of sales literature or other promotional material in
which TRUST, MANAGERS TRUST or N&B MANAGEMENT is named, at least fifteen (15)
Business Days prior to its intended use. No such material will be used if
TRUST, MANAGERS TRUST or N&B MANAGEMENT objects to its use in writing within
five (5) Business Days after receipt of such material.
4.2 TRUST and N&B MANAGEMENT will furnish, or will cause to be furnished,
to LIFE COMPANY, each piece of sales literature or other promotional material in
which LIFE COMPANY or its Separate Accounts are named, at least fifteen (15)
Business Days prior to its intended use. No such material will be used if LIFE
COMPANY objects to its use in writing within five (5) Business Days after
receipt of such material.
4.3 TRUST and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other
than the information or representations contained in a registration statement or
prospectus for such Variable Contracts, as such registration statement and
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prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for TRUST, as such registration statement and prospectus
may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by TRUST or its designee, except with the
written permission of TRUST.
4.5 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
'40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The Board of Trustees of TRUST and MANAGERS TRUST (the "Boards") will
monitor TRUST and MANAGERS TRUST, respectively, (collectively the "Funds"), for
the existence of any material irreconcilable conflict between the interests of
the Variable Contract owners of Participating Insurance Company Separate
Accounts investing in the Funds. A material irreconcilable conflict may arise
for a variety of reasons, including: (a) state insurance regulatory authority
action; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling, 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 the Funds are being managed; (e) a difference
in voting instructions given by variable annuity
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and variable life insurance contract owners or by contract owners of different
Participating Insurance Companies; or (f) a decision by a Participating
Insurance Company to disregard voting instructions of Variable Contract owners.
5.2 LIFE COMPANY will report any potential or existing conflicts to the
Boards. LIFE COMPANY will be responsible for assisting each appropriate Board
in carrying out its responsibilities under the Conditions set forth in the
notice issued by the SEC for the Funds on April 12, 1995 (the "Notice")
(Investment Company Act Release No. 21003), which LIFE COMPANY has reviewed, by
providing each appropriate Board with all information reasonably necessary for
it to consider any issues raised. This responsibility includes, but is not
limited to, an obligation by LIFE COMPANY to inform each appropriate Board
whenever Variable Contract owner voting instructions are disregarded by LIFE
COMPANY. These responsibilities will be carried out with a view only to the
interests of the Variable Contract owners.
5.3 If a majority of the Board of a Fund or a majority of its
disinterested trustees or directors, determines that a material irreconcilable
conflict exists, affecting the LIFE COMPANY, LIFE COMPANY, at its expense and to
the extent reasonably practicable (as determined by a majority of disinterested
trustees or directors), will take any steps necessary to remedy or eliminate the
irreconcilable material conflict, including: (a) withdrawing the assets
allocable to some or all of the Separate Accounts from the Funds or any series
thereof and reinvesting those assets in a different investment medium, which may
include another series of TRUST or MANAGERS TRUST, or another investment company
or submitting the question as to whether such segregation should be implemented
to a vote of all affected Variable Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., Variable Contract owners
of one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Variable Contract owners the option of
making such a change; and (b) establishing a new registered management
investment company or managed separate account. If a material irreconcilable
conflict arises because of LIFE COMPANY's decision to disregard Variable
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, LIFE COMPANY may be required, at the
election of the relevant Fund, to withdraw its Separate Account's investment in
such Fund, and no charge or penalty will be imposed as a result of such
withdrawal. The responsibility to take such remedial action shall be carried
out with a view only to the interests of the Variable Contract owners.
For the purposes of this Section 5.3, a majority of the disinterested
members of the applicable Board shall determine whether or not any proposed
action adequately remedies any
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irreconcilable material conflict, but in no event will the relevant Fund or N&B
MANAGEMENT (or any other investment adviser of the Funds) be required to
establish a new funding medium for any Variable Contract. Further, LIFE COMPANY
shall not be required by this Section 5.3 to establish a new funding medium for
any Variable Contract if any offer to do so has been declined by a vote of a
majority of Variable Contract owners materially affected by the irreconcilable
material conflict.
5.4 Any Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.5 No less than annually, LIFE COMPANY shall submit to the Boards such
reports, materials or data as such Boards may reasonably request so that the
Boards may fully carry out the obligations imposed upon them by these
Conditions. Such reports, materials, and data shall be submitted more
frequently if deemed appropriate by the applicable Boards.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the '40 Act
as requiring pass-through voting privileges for Variable Contract owners. This
condition will apply to UIT-Separate Accounts investing in TRUST and to managed
separate accounts investing in MANAGERS TRUST to the extent a vote is required
with respect to matters relating to MANAGERS TRUST. Accordingly, LIFE COMPANY,
where applicable, will vote shares of a Fund held in its Separate Accounts in a
manner consistent with voting instructions timely received from its Variable
Contract owners. LIFE COMPANY will be responsible for assuring that each of its
Separate Accounts that participates in any Fund calculates voting privileges in
a manner consistent with other participants as defined in the Conditions set
forth in the Notice ("Participants"). The obligation to calculate voting
privileges in a manner consistent with all other Separate Accounts investing in
a Fund will be a contractual obligation of all Participants under the agreements
governing participation in the Funds. Each Participant will vote shares for
which it has not received timely voting instructions, as well as shares it owns,
in the same proportion as its votes those shares for which it has received
voting instructions.
6.2 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 '40 Act
or the rules thereunder with respect to mixed and shared funding on terms and
conditions materially different from any exemptions granted in the Order, then
TRUST, MANAGERS TRUST and/or the Participants, as appropriate, shall take
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such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.
Article VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY LIFE COMPANY. LIFE COMPANY agrees to indemnify and
hold harmless TRUST, MANAGERS TRUST, N&B MANAGEMENT and each of their Trustees,
directors, officers, employees and agents and each person, if any, who controls
TRUST or MANAGERS TRUST or N&B MANAGEMENT within the meaning of Section 15 of
the '33 Act (collectively, the "Indemnified Parties" for purposes of this
Article VII) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of LIFE COMPANY, which
consent shall not be unreasonably withheld) or litigation (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, 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 offer, sale or acquisition of TRUST's shares or the Variable
Contracts and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
Registration Statement or prospectus for the Variable Contracts
or contained in the Variable 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 LIFE COMPANY by or on behalf of TRUST
for use in the registration statement or prospectus for the
Variable Contracts or in the Variable Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Variable Contracts or TRUST
shares; or
(b) 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 of TRUST
not supplied by LIFE COMPANY, or persons under its control) or
wrongful conduct of LIFE COMPANY or persons under its control,
with respect to the sale
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or distribution of the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, or sales literature of TRUST 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
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to TRUST by or on behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to substantially
provide the services and furnish the materials under the terms of
this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from 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 or duties under this Agreement or to TRUST,
whichever is applicable.
7.3 LIFE 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 LIFE 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 LIFE COMPANY of any
such claim shall not relieve LIFE 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, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After
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notice from LIFE COMPANY to such party of LIFE 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 LIFE 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.
7.4 INDEMNIFICATION BY N&B MANAGEMENT. N&B MANAGEMENT agrees to indemnify
and hold harmless LIFE COMPANY and each of its directors, officers, employees,
and agents and each person, if any, who controls LIFE COMPANY within the meaning
of Section 15 of the '33 Act (collectively, the "Indemnified Parties" for the
purposes of this Article VII) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
N&B MANAGEMENT which consent shall not be unreasonably withheld) 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 offer, sale or acquisition of TRUST's
shares or the Variable Contracts and:
(a) 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 of TRUST
(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 N&B MANAGEMENT or
TRUST by or on behalf of LIFE COMPANY for use in the registration
statement or prospectus for TRUST or in sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Variable Contracts or TRUST shares; or
(b) 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 for the
Variable Contracts not supplied by N&B MANAGEMENT or persons
under its control) or wrongful conduct of TRUST or N&B MANAGEMENT
or persons under their
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control, with respect to the sale or distribution of the Variable
Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable 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 statements therein not
misleading, if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to LIFE COMPANY for inclusion therein
by or on behalf of TRUST; or
(d) arise as a result of (i) a failure by TRUST to substantially
provide the services and furnish the materials under the terms
of this Agreement; or (ii) a failure by a Portfolio(s) invested
in by the Separate Account to comply with the diversification
requirements of Section 817(h) of the Code; or (iii) a failure by
a Portfolio(s) invested in by the Separate Account to qualify as
a "regulated investment company" under Subchapter M of the Code;
or
(e) arise out of or result from any material breach of any
representation and/or warranty made by N&B MANAGEMENT in this
Agreement or arise out of or result from any other material
breach of this Agreement by N&B MANAGEMENT.
7.5 N&B MANAGEMENT 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
LIFE COMPANY.
7.6 N&B MANAGEMENT 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 N&B MANAGEMENT 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 N&B
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MANAGEMENT of any such claim shall not relieve N&B MANAGEMENT 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, N&B MANAGEMENT shall be
entitled to participate at its own expense in the defense thereof. N&B
MANAGEMENT also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from N&B MANAGEMENT
to such party of N&B MANAGEMENT's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and N&B MANAGEMENT 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.
ARTICLE VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY or TRUST at any time from the date
hereof upon 180 days' notice, unless a shorter time is agreed to
by the parties;
(b) At the option of LIFE COMPANY, if TRUST shares are not reasonably
available to meet the requirements of the Variable Contracts as
determined by LIFE COMPANY. Prompt notice of election to
terminate shall be furnished by LIFE COMPANY, said termination to
be effective ten days after receipt of notice unless TRUST makes
available a sufficient number of shares to reasonably meet the
requirements of the Variable Contracts within said ten-day
period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against TRUST by the SEC, or any other regulatory
body, the expected or anticipated ruling, judgment or outcome of
which would, in LIFE COMPANY's reasonable judgment, materially
impair TRUST's ability to meet and perform Trust's obligations
and duties hereunder. Prompt notice of election to terminate
shall be furnished by LIFE COMPANY with said termination to be
effective upon receipt of notice;
15
<PAGE>
(d) At the option of TRUST, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the National
Association of Securities Dealers, Inc., or any other regulatory
body, the expected or anticipated ruling, judgment or outcome of
which would, in TRUST's reasonable judgment, materially impair
LIFE COMPANY's ability to meet and perform its obligations and
duties hereunder. Prompt notice of election to terminate shall
be furnished by TRUST with said termination to be effective upon
receipt of notice;
(e) In the event TRUST's shares are not registered, issued or sold in
accordance with applicable state or federal law, or such law
precludes the use of such shares as the underlying investment
medium of Variable Contracts issued or to be issued by LIFE
COMPANY. Termination shall be effective upon such occurrence
without notice;
(f) At the option of TRUST if the Variable Contracts cease to qualify
as annuity contracts or life insurance contracts, as applicable,
under the Code, or if TRUST reasonably believes that the Variable
Contracts may fail to so qualify. Termination shall be effective
upon receipt of notice by LIFE COMPANY;
(g) At the option of LIFE COMPANY, upon TRUST's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of LIFE COMPANY within ten days after
written notice of such breach is delivered to TRUST;
(h) At the option of TRUST, upon LIFE COMPANY's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of TRUST within ten days after written
notice of such breach is delivered to LIFE COMPANY;
(i) At the option of TRUST, if the Variable Contracts are not
registered, issued or sold in accordance with applicable federal
and/or state law. Termination shall be effective immediately
upon such occurrence without notice;
(j) In the event this Agreement is assigned without the prior written
consent of LIFE COMPANY, TRUST, MANAGERS TRUST and N&B
MANAGEMENT, termination shall be effective immediately upon such
occurrence without notice.
16
<PAGE>
8.3 Notwithstanding any termination of this Agreement pursuant to Section
8.2 hereof, TRUST at its option may elect to continue to make available
additional TRUST shares, as provided below, for so long as TRUST desires
pursuant to the terms and conditions of this Agreement, for all Variable
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if TRUST so elects to make additional TRUST shares available, the
owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in TRUST,
redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. In the event of a termination
of this Agreement pursuant to Section 8.2 hereof, TRUST and N&B MANAGEMENT,
as promptly as is practicable under the circumstances, shall notify LIFE COMPANY
whether TRUST elects to continue to make TRUST shares available after such
termination. If TRUST shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts, until thirty (30) days after the LIFE COMPANY shall have
notified TRUST of its intention to do so.
ARTICLE IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return
receipt requested 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 TRUST, MANAGERS TRUST or N&B MANAGEMENT:
Neuberger&Berman Management Incorporated
605 Third Avenue
New York, NY 10158-0006
Attention: Ellen Metzger, General Counsel
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If to LIFE COMPANY:
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park - SC 2145
Wellesley Hills, MA 02181
Attention: Douglas E. Macdonald
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
ARTICLE X. MISCELLANEOUS
10.1 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.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 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.
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of such orders.
10.5 The parties agree that the assets and liabilities of each Series are
separate and distinct from the assets and liabilities of each other Series. No
Series shall be liable or shall be charged for any debt, obligation or liability
of any other Series. No Trustee, officer or agent shall be personally liable
for such debt, obligation or liability of any Series or Portfolio and no
Portfolio or other investor, other than the Portfolio or other investors
investing in the Series which incurs a debt, obligation or liability, shall be
liable therefor.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the National
Association of Securities Dealers, Inc. 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.
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<PAGE>
10.7 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.
10.8 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
MANAGERS TRUST, N&B MANAGEMENT and the LIFE COMPANY.
19
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
NEUBERGER&BERMAN
ADVISERS MANAGEMENT TRUST
By: /s/ (signature)
---------------------------------
Name:
Title:
ADVISERS MANAGERS TRUST
By: /s/ (signature)
--------------------------------
Name:
Title:
NEUBERGER&BERMAN
MANAGEMENT INCORPORATED
By: /s/ (signature)
--------------------------------
Name:
Title:
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: /s/ Robert A. Bonner
--------------------------------
Name: Robert A. Bonner
Title: Vice President
20
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
Neuberger&Berman Advisers Corresponding Series of
Management Trust and its Series (Portfolios) Advisers Managers Trust (Series)
- -------------------------------------------- ---------------------------------
<S> <C>
Balanced Portfolio AMT Balanced Investments
Government Income Portfolio AMT Government Income Investments
Growth Portfolio AMT Growth Investments
Limited Maturity Bond Portfolio AMT Limited Maturity Bond Investments
Liquid Asset Portfolio AMT Liquid Asset Investments
Partners Portfolio AMT Partners Investments
</TABLE>
21
<PAGE>
APPENDIX B
<TABLE>
<CAPTION>
Separate Accounts and Policies Funded by Portfolios Applicable
Date Established Separate Account to Policies
- ---------------- ---------------- -----------
<S> <C> <C>
Separate Account G, July Sun Life Corporate VUL Limited Maturity Bond
1996 Portfolio; Partners
Portfolio
</TABLE>
22
<PAGE>
FUND PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS and
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
THIS AGREEMENT made this 13th day of December, 1996, among Templeton
Variable Products Series Fund (the "Trust"), an open-end management investment
company organized as a business trust under Massachusetts law, Sun Life
Assurance Company of Canada (U.S.), a life insurance company organized as a
corporation under Delaware law (the "Company"), on its own behalf and on behalf
of each segregated asset account of the Company set forth in Schedule A, as may
be amended from time to time (the "Accounts"), and Franklin Templeton
Distributors, Inc., a California corporation ("Underwriter"), the Trust's
principal underwriter.
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable life insurance contracts contracts to be
offered by life insurance companies which have entered into fund
participation agreements with the Trust (the "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the Commission, dated
November 16, 1993 (File No. 812-8546), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of 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 Trust
to be sold to and held by variable life insurance contracts and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies and certain qualified pension and retirement plans (the "Shared
Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies under which the Portfolios are to be
made available as investment vehicles (the "Contracts");
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<PAGE>
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless an exemption from registration under
the 1940 Act is available and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, an the date shown for such account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life insurance policies;
and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, Templeton Investment Counsel, Inc, (the "Adviser") is duly
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended ("Advisers Act") and any applicable state securities laws;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life insurance
policies and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE 1.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article 1, the Company shall be the Trust's agent
for receipt of purchase orders and requests for redemption relating to each
Portfolio from each Account, provided that the Company notifies the Trust of
such purchase orders and requests for redemption by 11:00 a.m. Eastern time on
the next following Business Day, as defined in Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to the
Accounts for purchase at the net asset value per share next computed after
receipt of a purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust
describing Portfolio purchase procedures on those days on which the Trust
calculates its net asset value pursuant to rules of the Commission, and the
Trust shall use reasonable efforts to calculate such net asset value on each day
on which the New York Stock Exchange is open for trading. The Company will
transmit orders from time to time to the Trust for the purchase of shares of the
Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having
2
<PAGE>
jurisdiction or if, in the sole discretion of the Trustees acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, such action is deemed in the best interests of the shareholders of such
Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust. Upon receipt by the
Trust of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Trust
for this purpose. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the Commission.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of
the then current prospectus of the Trust describing Portfolio redemption
procedures. The Trust shall make payment for such shares in the manner
established from time to time by the Trust. Redemption with respect to a
Portfolio will normally be paid to the Company for an Account in federal
funds transmitted by wire to the Company before the close of business on the
next Business Day after the receipt of the request for redemption. Such
payment may be delayed if, for example, the Portfolio's cash position so
requires or if extraordinary market conditions exist, but in no event shall
payment be delayed for a greater period than is permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Account. Portfolio Shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
1.7 The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions payable on the
shares of any Portfolio of the Trust. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or its
designated agent on a daily basis as soon as reasonably practical after the
net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
3
<PAGE>
and shall use its best efforts to make such net asset value per share available
by 7.00 p.m. Eastern time each Business Day.
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Funding Exemptive Order. No shares of any Portfolio will be sold directly to
the general public. The Company agrees that it will use Trust shares only for
the purposes of funding the Contracts through the Accounts listed in Schedule A,
as amended from time to time.
1.10 The Company agrees that all net amounts available under the variable
life insurance policies with the form number(s) which are listed on Schedule C
attached hereto and incorporated herein by this reference, as such Schedule C
may be amended from time to time hereafter by mutual written agreement of all
the parties hereto (the "Contracts"), shall be invested in the Trust, in such
other Funds advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, or in the Company's general account, provided that such
amounts may also be invested in an investment company other than the Trust if:
(a) such other investment company, or series thereof, has investment objectives
or policies that are substantially different from the investment objectives and
policies of the Portfolios; or (b) the Company gives the Trust and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company is available as a funding vehicle for the
Contracts at the date of this Agreement and the Company so informs the Trust and
the Underwriter prior to their signing this Agreement (a list of such funds
appearing on Schedule D to this Agreement); or (d) the Trust or Underwriter
consents to the use of such other investment company.
1.11 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.10 and Article IV of
this Agreement.
4
<PAGE>
ARTICLE II.
OBLIGATIONS OF THE PARTIES; FEES AND EXPENSES
2.1 The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all shareholder
reports, notices, proxy materials (or similar materials such as voting
instruction solicitation materials), prospectuses and statements of additional
information of the Trust. The Trust shall bear the costs of registration and
qualification of its shares of the Portfolios, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 The Trust shall provide the Company with as many printed copies of
portions of the Trust's current prospectus pertaining specifically to the
Portfolios (hereinafter referred to as "the Prospectus") and Statement of
Additional Information as the Company may reasonable request. If requested by
the Company in lieu thereof, the Trust shall provide camera-ready film or
computer diskettes containing the Funds' Prospectus and Statement of Additional
Information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
Statement of Additional Information for the Trust is amended during the year) to
have the prospectus for the Contracts and the Funds' Prospectus printed together
in one document, and to have the Statement of Additional Information for the
Trust and the Statement of Additional Information for the Contracts printed
together in one document. Alternatively, the Company may print the Funds'
Prospectus and/or its Statement of Additional Information in combination with
other funds companies' prospectuses and statements of additional information.
Except as provided in the following three sentences, all expenses of printing
and distributing the Funds' Prospectuses and Statements of Additional
Information shall be the expense of the Company. For Funds' Prospectuses and
Statements of Additional Information provided by the Company to its existing
owners of Contracts in order to update disclosure as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Funds. If the
Company chooses to receive camera-ready film or computer diskettes in lieu of
receiving printed copies of the Funds' Prospectus, the Fund will reimburse the
Company in an amount equal to the product of A and B where A is the number of
such prospectuses distributed to owners of the Contracts, and B is the Fund's
per unit costs of typesetting and priming the Funds' Prospectus. The same
procedures shall be followed with respect to the Trust's Statement of Additional
Information.
2.3 The Trust (at its expense) shall provide the Company with copies of any
Trust-sponsored proxy materials in such quantity as the Company shall
reasonably require for distribution to Contract owners. The Company shall bear
the costs of distributing proxy materials (or similar materials such as voting
solicitation instructions), prospectuses and statements of additional
information to Contract owners. The Company assumes sole responsibility for
ensuring that such materials are delivered to Contract owners in accordance with
applicable federal and state securities laws.
5
<PAGE>
2.4 If and to the extent required by law, the Company shall: (i) solicit
voting instructions from Contract owners; (ii) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares for which no instructions have been received in the same proportion
as Trust shares of such Portfolio for which instructions have been received; so
long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Trust shares hold in any segregated asset
account in its own right, to the extent permitted by law.
2.5 The Company agrees and acknowledges that the Adviser (or its
affiliates) is the sole owner of the name and mark "Franklin Templeton" and that
all use of any designation comprised in whole or part of such name or mark under
this Agreement shall inure to the benefit of the Adviser. Except as provided in
Section 2.6, the Company shall not use any such name or mark an its own behalf
or on behalf of the Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating to the Accounts or
Contracts without the prior written consent of the Adviser. Upon termination of
this Agreement for any reason, the Company shall cease all use of any such name
or mark as soon as reasonably practicable.
2.6 The Company shall furnish, or cause to be furnished to the Trust or
its designee, at least one complete copy of each Contract registration
statement, prospectus or statement of additional information, report,
solicitation for voting instructions sales, literature and other promotional
materials, applications for exemption, requests for no action letters and all
amendments to any of the above that relate to the Contracts or the Accounts
contemporaneously with the filing of such document with the Commission or other
regulatory agency. The Company shall furnish, or shall cause to be furnished,
to the Trust or its designee each piece of sales literature or other promotional
material in which the Trust or the Adviser is named, at least 15 Business Days
prior to its use. No such material shall be used if the Trust or its designee
reasonably objects to such use within five Business Days after receipt of such
material. For purposes of this paragraph, "sales literature or other
promotional material" includes, but is not limited to, portions of the
following that refer to the Trust or affiliates of the Trust: 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, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
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, Statements of Additional Information, shareholder reports and
proxy materials.
2.7 The Company and its agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or the Adviser in connection with the sale of the Contracts
other than information or representations contained in and accurately derived
from the registration statement or
6
<PAGE>
prospectus for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to time), annual and semi-annual
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
2.8 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and the
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of registration
statements, prospectuses and annual and semi-annual reports pertaining to the
Contracts. The Trust shall use its best efforts to provide to the Company,
within 10 days after the close of each calendar month, the Trust's performance
information (cumulative and annualized), for the periods of one, three, five and
ten years, since inception and year-to-date, as applicable.
2.9 The Trust shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, the Accounts
or the Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Contracts (as such registration statement and prospectus may be amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
as required by legal process or regulatory authorities or with the written
permission of the Company.
2.10 So long as, and to the extent that, the Commission interprets, the
1940 Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners whose
Contract values are invested, through the registered Accounts, in shares of one
or more Portfolios of the Trust. The Trust shall require all Participating
Insurance Companies to calculate voting privileges in the same manner and the
Company shall be responsible for assuring that the Accounts calculate voting
privileges in the manner established by the Trust. With respect to each
registered Account, the Company will vote shares of each Portfolio of the Trust
held by a registered Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares held by that
registered Account for which voting instructions are received. The Company and
its agents will in no way recommend or oppose or interfere with the solicitation
of proxies for Portfolio shares held to fund the Contracts without the prior
written consent of the Trust, which consent may be withheld in the Trust's sole
discretion.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Connecticut
and that it has legally and validly established each Account as a segregated
asset account under such law as of the date set forth in Schedule A.
7
<PAGE>
3.2 The Company represents and warrants that it has registered or, prior
to any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated asset account for the Contracts, unless an exemption from
registration is available.
3.3 The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is available
prior to any issuance or sale of the Contracts; the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Massachusetts and that it does
and will comply in all material respects with the 1940 Act and the rules and
regulations thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its registration
statement 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 Trust shall
register and qualify its shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable life
insurance contracts, endowment or life insurance contracts required by
applicable federal, state or local authority, including those set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended ("Code"), and
the rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify the Company immediately upon having a
reasonable basis for believing any Portfolio has; ceased to comply or might not
so comply and will in that event immediately take all reasonable steps to
adequately diversify the Portfolio to achieve compliance within the grace period
afforded by Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will make
every effort to maintain such qualification and will notify the Company
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so quality in the future.
3.8 The Trust represents and warrants that should it ever desire to make
any payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act, the Trustees, including a majority who are not "interested persons" of
the Trust under the 1940 Act ("disinterested Trustees"), will formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
8
<PAGE>
3.9 The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less that the minimum
coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such
bond shall include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. 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 Trust and the Underwriter in the event that such coverage
no longer applies.
3.11 The Underwriter represents that the Adviser is duly organized and
validly existing under the laws of the State of Florida and that it is
registered and will during the term of this Agreement remain registered as an
investment adviser under the Advisers Act.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1 The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. 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 life insurance contracts contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trust shall promptly inform the Company of
any determination by the Trustees that an irreconcilable material conflict
exists and of the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all
9
<PAGE>
information reasonably necessary for the Trustees to consider any issues raised
including, but not limited to, information as to a decision by the Company to
disregard Contract owner voting instructions. All communications from the
Company to the Trustees may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists that
effects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its own expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not 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 policy 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 (b) establishing a new registered management
investment company or managed separate account.
4.4 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 Trust's election, to withdraw the affected Account's
investment in the Trust 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 Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform 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 Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but on no event will
the Trust be required to establish a new
10
<PAGE>
funding medium for the Contracts. In the event that the Trustees determine that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Trust
and terminate this Agreement within six (6) months after the Trustees inform 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 Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8 If and to the extent that 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 the Trust 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.
ARTICLE V.
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the Trust and
each of its Trustees, officers, employees and agents and each person, if
any, who controls the Trust within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposed of this Article
V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company, which
consent shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common
law or otherwise, insofar as such Losses are related to the sale or
acquisition of Trust 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 a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales
11
<PAGE>
literature generated or approved by the Company on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Article V), 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 indemnity 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 was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or result from statements or
representations (other than statements or representations contained in
and accurately derived from Trust Documents as defined in Section
5.2(a)(i)) or wrongful conduct of the Company or persons under its
control, with respect to the sale or acquisition of the Contracts or
Trust shares; or
(iii) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a)(i) 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 statement or omission was made in reliance upon and accurately
derived from written information furnished to the Trust by or on
behalf of the Company; or
(iv) arise out of or result from any failure by the Company
to provide the services or furnish the materials required under the
terms 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.
(b) 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 the Indemnified Parties, the
Company shall
12
<PAGE>
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. 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.
(c) 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 Trust shares or the Contracts or the
operation of the Trust.
5.2 INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter agrees to indemnify and hold harmless the Company, the
underwriter of the Contracts 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
5.2) 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, 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 Trust's SHARES or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statements of any material fact contained in the Registration
Statement, prospectus or sales literature of the Trust (or any amendment or
supplement to any of the foregoing) (collectively, the "Trust Documents")
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 of such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter or Trust by
or on behalf of the Company for use in the Registration Statement or
prospectus for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Trust 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 for the Contracts not supplied by
the Underwriter or persons
13
<PAGE>
under its control) or wrongful conduct of the Trust, Adviser or Underwriter
or persons under their control, with respect to the sale or distribution of
the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus, or sales
literature covering 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 Trust; or
(iv) arise as a result of any failure by the Trust 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 representation specified in Section 3.7 of
this Agreement and the diversification requirements specified in Section
3.6 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 5-2(b) and 5.2(c) hereof.
(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 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
each Company or the Account, whichever is applicable.
(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 Parties, 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. 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 paid expenses of any additional counsel retained by
14
<PAGE>
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.
(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 each Account.
5.3 INDEMNIFICATION BY THE TRUST
(a) The Trust 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 5.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Trust, and arise out of or result from any
material breach of any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Trust; as limited by and in accordance with the provisions of
Section 5.3(b) and 5.3(c) hereof. It is understood and expressly stipulated
that neither the holders of shares of the Trust nor any Trustee, officer, agent
or employee of the Trust shall be personally liable hereunder, nor shall any
resort to be had to other private property for the satisfaction of any claim or
obligation hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
ASSESSED against any Indemnified Party as such may arise from 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 Trust, the Underwriter or each Account, whichever is applicable.
(c) The Trust 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 Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims 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 Trust of any such claim shall not
relieve the Trust 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 Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also
15
<PAGE>
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such party of the
Trust'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 Trust
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.
(d) The Company and the Underwriter agree promptly to notify the Trust of
the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either the Account,
or the sale or acquisition of share of the Trust.
16
<PAGE>
ARTICLE VI.
TERMINATION
6.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios or any reason by one hundred eighty (180)
days advance written notice delivered to the other parties, and shall terminate
immediately in the event of its assignment, as that term is used in the 1940
Act.
6.2 Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares of any
Portfolio and redeem shares of any Portfolio pursuant to the terms and
conditions of this Agreement for all Contracts in effect on the effective date
of termination of this Agreement.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.10 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
6.4 This Agreement may be terminated immediately by either the Trust or
the Underwriter upon written notice to the Company if :
(a) either one or both of the Trust 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
(b) if the Company gives the Trust and the Underwriter the written
notice specified in Section 1.10 hereof and at the same time such notice
was given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, that any termination under
this Section 6.4(b) shall be effective forty-five (45) DAYS after the
notice specified in Section 1.10 was given.
6.5 This Agreement may be terminated immediately by the Company upon
written notice to the Trust and the Underwriter, if the Company shall determine,
in its sole judgment exercised in good faith, that either the Trust or the
Underwriter has suffered a material adverse change in its business, operations,
financial conditions or prospects since the date of this Agreement or is the
subject of material adverse publicity.
6.6 The Company shall not redeem Trust shares attributable to the Contracts
(as opposed to Trust 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) as
permitted by an order of the Commission pursuant to Section 26(b) of the 1940
Act. Upon request, the Company will promptly furnish to the Trust and the
Underwriter the opinion of counsel for the Company
17
<PAGE>
(which counsel shall be reasonably satisfactory to the Trust 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 Trust or the Underwriter 30 days notice of
its intention to do so.
ARTICLE VII.
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.
It to the Fund or the Underwriter:
Templeton Variable Products Series Fund
or
Franklin Templeton Distributors, Inc.
500 E. Broward Blvd., Suite 2100
Ft. Lauderdale, FL 33394
Attention: Barbara J. Green, Secretary
Templeton Variable Products Series Fund
If to the Company:
Sun Life Assurance Company of Canada (U.S.)
1 Sun Life Executive Park, SC 2145
Wellesley Hills, Massachusetts 02181
Attention: Douglas E. Macdonald
18
<PAGE>
ARTICLE VIII.
MISCELLANEOUS
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 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.
8.4 This Agreement shall be construed and the provisions hereof interpreted
and in accordance with the laws of the State of Connecticut. It shall also be
subject to the provisions of the federal securities laws and the rules and
regulations thereunder and to any orders of the Commission granting exemptive
relief therefrom and the conditions of such orders. Copies of any such ordors
shall be promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission, the
National Association of Securities Dealers, Inc. 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.
8.7 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.
8.8. The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in Section
1.10.
19
<PAGE>
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
The Company:
Sun Life Assurance Company of Canada (U.S.)
---------------------------------------------
By its authorized officer
By: Robert A. Bonner
------------------------------------------
Name: Robert A. Bonner
Title: Vice President
The Trust:
Templeton Variable Products Series Fund
---------------------------------------------
By its authorized officer
By: Karen L. Skidmore
--------------------------------------------
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
-----------------------------------------------
By its authorized officer
By: Deborah R. Gatzek
--------------------------------------------
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant Secretary
20
<PAGE>
SCHEDULE A
ACCOUNTS
NAME OF SEPARATE ACCOUNT AND DATE
ESTABLISHED BY THE BOARD OF DIRECTORS
Separate Account G
July 1996
<PAGE>
SCHEDULE B
THE PORTFOLIOS OF THE TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Stock Fund
<PAGE>
SCHEDULE C
POLICIES FUNDED BY SEPARATE ACCOUNT
Sun Life Corporate VUL
Form#: VUL-COLI-97
<PAGE>
SCHEDULE D
OTHER INVESTMENT COMPANY PORTFOLIOS
MFS/Sun Life Capital Appreciation Series
MFS/Sun Life Emerging Growth Series
MFS/Sun Life Government Securities Series
MFS/Sun Life Total Return Series
MFS/Sun Life World Growth Series
Fidelity VIP Fund II Contrafund Portfolio
Fidelity VIP Fund Equity Income Portfolio
Fidelity VIP Fund Growth Portfolio
Fidelity VIP Fund High Income Portfolio
Fidelity VIP Fund II Index 500 Portfolio
Fidelity VIP Fund Money Market Portfolio
Advisors Management Trust Limited Maturity Bond Portfolio
Advisors Management Trust Partners Portfolio
JPM Bond Portfolio
JPM Equity Portfolio
JPM Small Company Portfolio
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
WELLESLEY HILLS, MA 02181
CORPORATE MARKETS LIFE INSURANCE APPLICATION
PART I
PLAN INFORMATION
<TABLE>
<S><C>
1. Application for Life Insurance to:
A. Sun Life Assurance Company of Canada
/ / SUN LIFE CORPORATE UL / / Other ___________________________
(Flexible Premium Adjustable Life Insurance)
Sun Life Assurance Company of Canada (U.S.)
/ / SUN LIFE CORPORATE VUL / / Other __________________________
(Flexible Premium Variable Universal Life Insurance)
B. Specified Face Amount:
---------------------------------------------
Additional Protection Rider (APB) Face Amount:
----------------------
C. Death Benefit Option: Option A / / (Specified Face Amount)
Option B / / (Specified Face Amount plus Account Value)
2. Definition of Life Insurance Test to be used: Cash Value / / Guideline Premium / /
3. Planned Periodic Premium: 4. Premium Mode: Annual / / Semi-Annual / /
------------------------
5. Issue Date requested: 6. Prepayment Amount: (complete Temporary Agreement Form)
---------- ---------------
7. Will any existing life insurance or annuity with this or any other company be replaced, changed,
or used as a source of premium payment for the insurance applied for? / / Yes / / No
IF YES, PROVIDE DETAILS.
------------------------------------------------------------
8. If a replacement is involved, is it intended as an IRC Section 1035 exchange? / / Yes / / No
Corrections and Amendments (FOR HOME OFFICE USE ONLY):
----------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
COLI 45/11 SLPC2571
<PAGE>
PROPOSED INSURED INFORMATION
9. Name: 10. D.O.B: - - 11. Birth Place
------------------------------------------- ---- ---- ---- --------------------
12. Social Security No. - - 13. Sex 14. Driver's License # & State
----- ----- ----- ---- -------------------------------
15. Home Address: 16. Mailing Address (if different):
----------------------------------------------- --------------------------------------------------------------
----------------------------------------------- --------------------------------------------------------------
17. Owner or Trust Name (if other than insured): 18. Owner S.S.# or Tax I.D.#:
---------------------------------
- ------------------------------------------------- 19. Name of Employer:
-----------------------------------------
- ------------------------------------------------- Address of Employer:
--------------------------------------
Address
----------------------------------------- --------------------------------------------------------------
- ------------------------------------------------- --------------------------------------------------------------
Date of Trust (if applicable): - - 20. Occupation:
----------------------------------------------
----- ----- -----
21. Primary Beneficiary: Relationship:
--------------------------------------------------------- --------------------
Contingent Beneficiary: Relationship:
------------------------------------------------------ --------------------
22. Has any application for insurance on your life been declined or offered on a basis other than applied for? / / Yes / / No
IF YES, PROVIDE DETAILS.
-------------------------------------------------------------------------------------------
23. a. If an additional or optional policy is being applied for in a separate application, with us or any other insurance
company, please state plan and amount:
-------------------------------------------------------------------------
b. Total amount of coverage to be placed currently with all carriers $
--------------------------------------------
24. Have you used tobacco (cigarettes, cigars, chewing tobacco, pipe, etc.) or any other substance containing
nicotine, including Nicorette gum, within the past twelve months? / / Yes / / No
IF YES, PROVIDE DETAILS
--------------------------------------------------------------------
25. Have you within the past two years:
a. Flown as a pilot or co-pilot in any type of aircraft? IF YES, COMPLETE AVIATION QUESTIONNAIRE. / / Yes / / No
b. Participated in scuba diving, parachuting, hang gliding, motorized racing or any other hazardous sport?
IF YES, COMPLETE APPROPRIATE QUESTIONNAIRE. / / Yes / / No
26. Have you within the past 3 years while operating a motor vehicle, boat or aircraft:
a. Been charged with any moving violations? / / Yes / / No
b. Had your operator's license restricted, suspended or revoked? / / Yes / / No
c. Been charged with operating while under the influence of alcohol or drugs? / / Yes / / No
IF YES ANSWER TO A-C, PROVIDE DETAILS
-------------------------------------------------------
27. Do you plan to travel or reside outside of the United States in the next 2 years? / / Yes / / No
IF YES, PROVIDE DETAILS
-------------------------------------------------------------------
<PAGE>
STATEMENT OF HEALTH OF PROPOSED INSURED
TO BE COMPLETED ONLY IF MEDICAL OR PARAMEDICAL EXAM NOT REQUIRED.
28. a. Height ___________ b. Weight ____________ c. Any weight change in the past year? / / Yes / / No
(IF YES, PLEASE PROVIDE DETAILS) ______________________
29. Are you being treated for any illness with diet, drugs or other means? / / Yes / / No
IF YES, PROVIDE DETAILS: ____________________________________________________________________________
30. Name and address of personal physician: Date last seen and reason for visit:
__________________________________________ __________________________________________________
__________________________________________ __________________________________________________
__________________________________________ __________________________________________________
__________________________________________ __________________________________________________
31. In the past 25 years, have you ever been diagnosed as having or treated for:
a. High blood pressure, stroke, or disease of heart, blood or circulatory system? / / Yes / / No
b. Cancer, tumor, diabetes or disorder of lymph glands? / / Yes / / No
c. Disease or disorder of: digestive or urinary system, kidneys, stomach, liver, lungs? / / Yes / / No
d. Any mental or nervous disorder, epilepsy, any muscular or skeletal disorder,
or any paralysis or deformity? / / Yes / / No
32. In the past 25 years, have you received treatment for alcoholism or drug dependency, been advised to
reduce the use of alcohol or drugs, or ever used drugs other than as prescribed by a member
of the medical profession? / / Yes / / No
33. Have you ever been diagnosed or treated by a member of the medical profession for
Acquired Immune Deficiency Syndrome (AIDS) or AIDS-related complex (ARC)? / / Yes / / No
For all "yes" responses to questions 31-33, please include diagnosis, dates, durations, names and addresses of attending physicians
and medical facilities below:
Details:
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
OWNER'S CERTIFICATION: THE INTERNAL REVENUE SERVICE (IRS) DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT, OTHER
THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING. Under penalties of perjury, I certify that:
(1) The number shown in Part I item 12 (or item 18 if the owner is not the proposed insured) of this form is my correct taxpayer
identification number, AND (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have
not been notified by the IRS that I am subject to backup withholding as a result of failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup withholding
_____________________________________________________________________________ _________________________________________
Signature of Owner/Taxpayer Date
COLI 45/11 SLPC2571
</TABLE>
<PAGE>
SIGNATURE SECTION
DECLARATIONS:
By signing this application I/we understand and agree that:
a) all statements and answers in this application (both Part I, and Part II
Medical, if required) are true and complete to my/our best knowledge and
belief and will be used by the Insurer to which this application is submitted
(the "Company") to form the basis of any life insurance policy to be issued;
b) except as provided in a Temporary Insurance Agreement having the same date
and number as this application, no insurance requested in this application will
be effective until a policy is issued during the lifetime of the insured and
until the Company has received the first full premium due on the application
requested and the statements made in this application are still complete and
true as of the date the policy is delivered;
c) no licensed sales representative or any other person, except the Company
President, Secretary or a Vice President, has the authority to make or modify
any life insurance policy; to make a binding promise or decision about coverage
or benefits; to change or waive any terms or requirements of any application or
life insurance policy;
d) in accepting any life insurance policy which may be issued; I/we also accept
all corrections and amendments which may be made by the Company, as recorded in
the correction and amendment section of this application;
e) the owner shall have the right, without the consent of the Insured being
required, to make written requests, from time to time, to change the amount of
life insurance coverage;
f) any illustration prepared in connection with this application does not form a
part of any life insurance policy which may be issued. The actual performance
of any such policy, including account values, cash surrender values, death
benefit and duration of coverage, will be different from what may be illustrated
because the hypothetical assumptions used in an illustration may not be
indicative of actual future performance. I/we acknowledge that any credited
rates of interest or investment experience of any separate account shown in an
illustration are not estimates or guarantees of actual future performance.
Future performance will depend on investment, mortality, expense and other
experience of the Company and will be affected by any future changes in the
credited rate of interest, cost of insurance rates or other expense charges for
the life insurance policy. I/we acknowledge that any such future changes may be
made at the Company's sole discretion.
g) all the policy features, including the availability of the APB rider and the
financial impact of the base policy/APB rider mix selected, have been reviewed
with me by the Sales Representative whose name is listed below;
h) in connection therewith, it is expressly acknowledged that the policy, as
applied for is suitable for the insurance needs and anticipated financial
objectives of the undersigned;
i) I understand that any person who knowingly and with intent to defraud any
insurance company or other person files an application for insurance or
statement of claim containing any materially false information or conceals for
the purpose of misleading, information concerning any fact material thereto
commits a fraudulent insurance act, which is a crime as determined by a court of
competent jurisdiction, depending upon state law, and subjects such person to
criminal and civil penalties.
SUITABILITY (FOR FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE APPLICATIONS ONLY):
I/we also hereby understand and agree that all values and benefits provided by
the life insurance policy applied for are based on the investment experience of
a separate account and are not guaranteed, such that
- -- THE DEATH BENEFIT AMOUNT MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT
EXPERIENCE OF THE VARIOUS SUB-ACCOUNTS WHICH COMPRISE THE COMPANY'S
VARIABLE LIFE INSURANCE SEPARATE ACCOUNT.
- -- THE DURATION OF COVERAGE MAY ALSO INCREASE OR DECREASE, DUE TO THE
INVESTMENT EXPERIENCE OF THESE VARIOUS SUB-ACCOUNTS.
- -- THE ACCOUNT VALUE AND CASH SURRENDER VALUE MAY INCREASE OR DECREASE TO
REFLECT THE INVESTMENT EXPERIENCE OF THESE VARIOUS SUB-ACCOUNTS.
- -- THERE IS NO GUARANTEED MINIMUM POLICY VALUE NOR ARE ANY POLICY VALUES
GUARANTEED AS TO DOLLAR AMOUNT.
I/we also acknowledge receipt of a current prospectus from the Company for a
flexible premium variable universal life product and also for each of the
underlying investment companies of the various sub-accounts.
AUTHORIZATION: I authorize any physician, hospital or other medically related
facility, insurance company, the Medical Information Bureau, Inc. (M.I.B.) or
other organization or person that has any records or knowledge of me or my
health to give such information this Company or its reinsurers. This information
may be used to determine eligibility for insurance. I acknowledge receipt of
copies of the prenotifications relating to investigative consumer reports and
the MIB. This authorization is valid for thirty (30) months from its date. A
photocopy of this authorization shall be as valid as the original.
<TABLE>
<S><C>
SIGNATURES: Signed at ___________________________________________ on _________________________________________
___________________________________________________ _________________________________________________________________
Signature of Proposed Insured Signature of Applicant/Owner ( if not the Proposed Insured)
___________________________________________________ _________________________________________________________________
Signature of Witness/Sales Representative Sales Representative's License Number
COLI 45/11 SLPC2571
</TABLE>
<PAGE>
TEMPORARY LIFE INSURANCE APPLICATION
1. Within the last three years, have you consulted a physician
for or received treatment for cancer, stroke, pneumonia, heart
attack or any disease of the heart? / / Yes / / No
2. Have you within the last 60 days had or been advised to have
any diagnostic test, treatment or surgery not yet performed? / / Yes / / No
3. Do you have health symptoms or complaints for which a physician
has not been consulted or treatment received? / / Yes / / No
IF ANY OF THE PREVIOUS QUESTIONS HAS A YES ANSWER, NO PAYMENT WILL BE ACCEPTED.
I have read and understand the conditions of the temporary life insurance
agreement and agree that the above statements are complete and accurate to the
best of my knowledge.
<TABLE>
<S><C>
__________________________________________________ ____________________________
Signature of proposed Insured Date
</TABLE>
TEMPORARY LIFE INSURANCE AGREEMENT AND PREPAYMENT RECEIPT
If an advance payment has been made, the Insurer to which the application has
been made, will provide temporary life insurance coverage on the person proposed
for insurance, who signed this agreement, and completed Part I of the
application, subject to the following:
PERSONS COVERED - Coverage will be provided on the proposed Insured.
START OF COVERAGE - Coverage begins on the date you sign this application,
agreement and receipt.
LIMITATION OF COVERAGE - No coverage will be provided if: (a) any question
material to our assessment of the risk in
Part I and/or Part II of this application is not answered completely and
truthfully, (b) a proposed Insured, whether sane or insane, commits suicide, or
(c) any question in the temporary life insurance application form is answered
"yes".
AMOUNT AND LIMITATION ON AMOUNT - Amount of coverage will be the amount you
request in this application subject to limitations. Coverage on any person
under this and all other temporary life insurance agreements with the Insurer
will be limited to the total coverage provided by such agreements or to
$1,000,000, whichever is less. If more than one application is pending on any
person and the total amount of insurance applied for exceeds $1,000,000 then the
coverage under this agreement will be reduced to that proportion of $1,000,000,
which the amount applied for under this application bears to the total amount
applied for under all such applications providing temporary life insurance
coverage.
TERMINATION OF COVERAGE - Coverage will terminate: (a) on written notice from
the Insurer, or (b) on the date a policy is issued and the Insurer has received
the balance of any premium owed, or (c) on the refund of any advance payment
made with this application, or (d) on the date of your request, or (e) on the
ninetieth (90th) day following the Part I signing date.
The Insurer acknowledges receipt of $ __________________ paid in connection with
application for life insurance on the life of ________________________________
dated this ________ day of ________________________________________.
<TABLE>
<S><C>
_________________________________________________ ______________________________________________________
Name of Sales Representative (Print) Signature of Sales Representative
</TABLE>
PREMIUM CHECKS MUST BE PAYABLE TO:
SUN LIFE ASSURANCE COMPANY OF CANADA - FOR SUN CORPORATE UL
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) - FOR SUN CORPORATE VUL
DO NOT MAKE CHECK PAYABLE TO THE AGENT OR LEAVE THE PAYEE BLANK
APPLICANT'S COPY
COLI 45/11 SLPC2571
<PAGE>
TEMPORARY LIFE INSURANCE APPLICATION
1. Within the last three years, have you consulted a physician for or
received treatment for cancer, stroke, pneumonia, heart attack or any
disease of the heart? / / Yes / / No
2. Have you within the last 60 days had or been advised to have
any diagnostic test, treatment or surgery not yet performed? / / Yes / / No
3. Do you have health symptoms or complaints for which a
physician has not been consulted or treatment received? / / Yes / / No
IF ANY OF THE PREVIOUS QUESTIONS HAS A YES ANSWER, NO PAYMENT WILL BE ACCEPTED.
I have read and understand the conditions of the temporary life insurance
agreement and agree that the above statements are complete and accurate to the
best of my knowledge.
___________________________________ _______________________________
Signature of proposed Insured Date
TEMPORARY LIFE INSURANCE AGREEMENT AND PREPAYMENT RECEIPT
If an advance payment has been made, the Insurer to which the application has
been made, will provide temporary life insurance coverage on the person proposed
for insurance, who signed this agreement, and completed Part I of the
application, subject to the following:
PERSONS COVERED - Coverage will be provided on the proposed Insured.
START OF COVERAGE - Coverage begins on the date you sign this application,
agreement and receipt.
LIMITATION OF COVERAGE - No coverage will be provided if: (a) any question
material to our assessment of the risk in
Part I and/or Part II of this application is not answered completely and
truthfully, (b) a proposed Insured, whether sane or insane, commits suicide, or
(c) any question in the temporary life insurance application form is answered
"yes".
AMOUNT AND LIMITATION ON AMOUNT - Amount of coverage will be the amount you
request in this application subject to limitations. Coverage on any person
under this and all other temporary life insurance agreements with the Insurer
will be limited to the total coverage provided by such agreements or to
$1,000,000, whichever is less. If more than one application is pending on any
person and the total amount of insurance applied for exceeds $1,000,000 then the
coverage under this agreement will be reduced to that proportion of $1,000,000,
which the amount applied for under this application bears to the total amount
applied for under all such applications providing temporary life insurance
coverage.
TERMINATION OF COVERAGE - Coverage will terminate: (a) on written notice from
the Insurer, or (b) on the date a policy is issued and the Insurer has received
the balance of any premium owed, or (c) on the refund of any advance payment
made with this application, or (d) on the date of your request, or (e) on the
ninetieth (90th) day following the Part I signing date.
The Insurer acknowledges receipt of $ __________________ paid in connection
with application for life insurance on the life of ___________________________
dated this ________ day of ________________________________________.
<TABLE>
<S><C>
_________________________________________________ ______________________________________________________
Name of Sales Representative (Print) Signature of Sales Representative
</TABLE>
PREMIUM CHECKS MUST BE PAYABLE TO:
SUN LIFE ASSURANCE COMPANY OF CANADA - FOR SUN CORPORATE UL
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) - FOR SUN CORPORATE VUL
DO NOT MAKE CHECK PAYABLE TO THE AGENT OR LEAVE THE PAYEE BLANK
COLI 45/11 SLPC2571
<PAGE>
NOTICE OF INFORMATION PRACTICE
Thank you for selecting us for your insurance needs. Your application will be
reviewed as quickly as possible. In order to accurately evaluate and underwrite
the coverage you have applied for, we must gather a certain amount of personal
information. This notice will explain our information practice.
INVESTIGATIVE CONSUMER REPORT
As part of our normal procedure, an investigative consumer report may be
prepared concerning your character, general reputation, personal characteristics
and mode of living. This information will be obtained through personal
interview with your friends, neighbors and associates. A complete and accurate
disclosure of the nature and scope of the investigative consumer report, if one
is prepared, will be provided upon request to the Insured to which this
application has been made.
MEDICAL INFORMATION BUREAU, INC. (MIB)
Information which you provide in your application will be treated as
confidential. The Insurer or its reinsurers may, however, make a brief report on
the information received in some applications, including yours, to the MIB, a
non-profit membership organization of life insurance companies which operates an
information exchange on behalf of its members. Upon request by another member
insurance company to which you have applied for life or health insurance
coverage, or to which a claim is submitted, the MIB will supply such company
with whatever information it may have in its files, which may include
information provided by the Insurer.
Upon receipt of a request from you, the MIB will arrange disclosure of any
information it may have in your file. If you question the accuracy of any
information in your file, you may contact the MIB and seek a correction in
accordance with the procedures set forth in the Federal Fair Credit Reporting
Act.
The address of the Medical Information Bureau, Inc. information office is:
P.O.Box 105
Essex Station
Boston, Massachusetts 02112
Telephone number (617) 426-3660.
The Insurer to which this application has been made or its reinsurers may also
release information in its file to other life insurance companies to whom you
may apply for life or health insurance or to whom your claim for benefits may be
submitted, if you have given a written authorization to release this information
to the particular company.
COLI 45/11 SLPC2571
<PAGE>
LICENSED SALES REPRESENTATIVE'S REPORT
1. In connection with the policy applied for, does the Owner intend
to replace, borrow against, surrender or discontinue existing
insurance or annuities (including group) in force this or any other
insurer? / / Yes / / No
IF YES, PROVIDE DETAILS AND ANY NECESSARY FORMS.________________________________
2. Based on your reasonable inquiry about the applicant's financial situation,
insurance objectives and needs, do you believe that the policy, including the
base/APB rider mix, as applied for is suitable for the insurance needs, the
services to be provided and anticipated financial objectives of the proposed
Owner? / / Yes / / No
3. To whom shall premium notices and correspondence be sent (if other than the
Insured):
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
4. Licensed Sales Representatives who will share commissions:
<TABLE>
<S><C>
Name License Number Share %
____________________________________________ ______________________ _________
____________________________________________ ______________________ _________
____________________________________________ ______________________ _________
____________________________________________ ______________________ _________
</TABLE>
I , ___________________________________________, certify:
Print name
1. (a) That the questions contained in this application were asked of the
proposed Insured and applicant and correctly recorded: (b) That this
application, report and any accompanying information are complete and true
to the best of my knowledge and belief; (c) That I have given the applicant
the notice of information practice; and (d) that the provisions of the
temporary life insurance agreement, including the limitations and
exclusions have been explained to the applicant and proposed Insured.
2. That I have reviewed with the applicant all the policy features, including
the availability of the APB rider and financial impact of the base policy/APB
rider mix selected.
3. That a current prospectus has been given to the applicant, if applying for a
flexible premium variable universal life contract, and for each of the
underlying investment companies of the various sub-accounts.
4. That all answers made by me in the above Licensed Sales Representative's
Report are complete and true to the best of my knowledge and belief.
_________________________________________________ ______________
Signature of Licensed Sales Representative Date
COLI 45/11 SLPC2571
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
DESCRIPTION OF ISSUANCE, TRANSFER
AND REDEMPTION PROCEDURES FOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
Pursuant to Rule *6e-3(T) (b) (12) (iii)
This document sets forth the administrative procedures that will be followed by
Sun Life Assurance Company of Canada (U.S.), ("Sun Life" or the "Company"), in
connection with the issuance of a Flexible Premium Variable Life Insurance
Policy, (the "Policy"), the transfer of assets held thereunder, and the
redemption by Owners of their interests in such Policy.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF POLICIES
A. Application, Underwriting and Initial Premium Processing
To purchase a Policy, an application must be submitted to our Principal Office
so that we may follow certain underwriting procedures designed to determine the
insurability of the proposed Insured. We offer the Policy on a regular
(medical) underwriting, simplified underwriting, and guaranteed issue basis
(each such basis is referred to as an underwriting Class). The proposed Insured
generally must be less than 81 years old for medical issue, 76 years old for
simplified issue, and 71 years old for guaranteed issue underwriting classes.
Medical and simplified issue policies may require medical exams and further
information before the proposed application is approved. Availability of
guaranteed issue policies must be pre-approved based on information the Owner
provides on a master application along with specific requirements which must be
met by all members of the group of proposed Insureds. Proposed Insureds must be
acceptable risks based on our underwriting limits and standards. A policy
cannot be issued until the underwriting process has been completed to our
satisfaction and we reserve the right to reject an application that does not
meet our underwriting requirements or to "rate" an insured as a substandard
risk, which will result in the charging of increased Monthly Cost of Insurance
charges and/or flat extra charges.
The applicant must specify certain information in the application including the
Specified Face Amount, the APB Rider Face Amount, the death benefit compliance
test and the death benefit option.
The Specified Face Amount must not be below the Minimum Specified Face Amount
which is generally $5,000. The Policy can be issued with an APB Rider, which
provides additional life insurance coverage, annually renewable to Attained Age
100, on the life of the Insured. The sum of the Specified Face Amount and the
APB Rider Face Amount, the Total Face Amount, must not be below the Minimum
Total Face Amount which is generally $50,000.
The Policy must satisfy either of two death benefit compliance tests in order to
qualify as life insurance under Section 7702 of the Internal Revenue Code: the
Cash Value Accumulation Test or the Guideline Premium Test. Each test
effectively requires that the Policy's Death Benefit must always be equal to or
greater than the Account Value multiplied by a certain percentage (the "Death
Benefit Percentage"). Thus, the Policy has been structured so that the Base
Death Benefit may increase above the Specified Face Amount in order to comply
with the applicable test. The death benefit compliance test may not be changed.
The Policy provides the following two death benefit options for determining the
Base Death Benefit:
Option A - Specified Face Amount. The Base Death Benefit is the greater of the
Specified Face Amount, or the Account Value multiplied by the applicable Death
Benefit Percentage.
Option B - Specified Face Amount Plus Account Value. The Base Death Benefit is
the greater of the Specified Face Amount plus the Account Value, or the Account
Value multiplied by the applicable Death Benefit
<PAGE>
Percentage. Option B is not available if the death benefit compliance test is
the Cash Value Accumulation Test.
Pending approval of the application, any initial Premium will be held in our
General Account. Upon approval of the application, the Policy on the life of
the Insured will be issued to the Owner. The Minimum Premium is due and payable
as of the Issue Date. The Effective Date of Coverage for the Policy, which
initially is the Investment Start Date, will be the later of the Issue Date, the
date we approve the application for the Policy, or the date a premium is paid
equal to or in excess of the Minimum Premium. If an application is not
approved, any Premium payment will be returned promptly.
During the Free Look Period, the Company will allocate net premiums received to
the sub-account of the Sun Life Assurance Company of Canada (U.S.) Variable
Account G (the "Separate Account") that invests in the Money Market Fund of
Fidelity. Upon expiration of this period, the account value in that sub-account
will be transferred to the sub-accounts of the Separate Account in accordance
with the Owner's allocation instructions. Where state law does not require a
refund of premiums paid when a Policy is returned under the right to examine
Policy, initial net premiums received under the Policy will be allocated in
accordance with the allocation specified by the Owner.
B. Premium Payments
Premiums for the Policies will not be the same for all owners of Policies. An
initial premium, together with a completed application satisfactory to the
Company, must be received by the Company before a Policy will be issued. The
Company requires that the initial premium for a Policy must be at least equal to
the Minimum Premium for the Policy. The Minimum Premium is the amount
specified for each Policy based on the requested Total Face Amount, issue age,
sex and class of the Policy.
All Premium payments are payable to us, and should be mailed to our Principal
Office. The Owner is not required to make Premium payments according to a fixed
schedule, but he or she may select a planned periodic Premium schedule and
corresponding billing period, subject to our Premium limits. In general, the
billing period must be annual or semi-annual. We will send reminder notices for
the planned periodic Premium at the beginning of each billing period. However,
the Owner is not required to pay the planned periodic Premium; he or she may
increase or decrease Premium payments, subject to our limits, and may skip a
planned payment or make unscheduled payments. The Owner may change the planned
payment schedule or the billing period, subject to our approval. Depending on
the investment performance of the Sub-Accounts selected, the planned periodic
Premium may not be sufficient to keep the Policy in force, and the Owner may
need to change the planned payment schedule or make additional payments in order
to prevent termination of the Policy.
The Company reserves the right to limit the number of Premium payments we accept
on an annual basis. No Premium payment may be less than $100 without our
consent, although we will accept a smaller Premium payment if it is necessary to
keep a Policy in force. We reserve the right not to accept a Premium payment
that causes the Base Death Benefit to increase by an amount that exceeds the
Premium received. Evidence of insurability satisfactory to us may be required
before we accept such a Premium.
If the death benefit compliance test specified is the Guideline Premium Test,
we will not accept Premium payments that would cause the Policy to fail to
qualify as life insurance under that test. The maximum Premium limit for each
year is the largest Premium that can be paid such that the sum of all Premiums
paid will not exceed the limitations referred to in Section 7702 of the Internal
Revenue Code, or any successor provision. Maximum Premium limits for each year
will be shown in an annual report. If a Premium payment is made in excess of
these limits, we will accept only that portion of the Premium within those
limits, and will refund the remainder. No such maximum Premium limitations
apply under the Cash Value Accumulation Test.
-2-
<PAGE>
At the time a Premium is received that would cause the Policy to become a
Modified Endowment Contract, the Company will so notify the Owner and will not
credit the Premium unless it has received specific instructions from the Owner
to do so. If such instructions are not received within 24 hours of notification
to the Owner, the Premium will be immediately returned.
A Policy will remain in force so long as the account value less Policy Debt is
sufficient to pay the Policy deductions. Thus, the amount of a premium, if
any, that must be paid to keep the Policy in force depends upon the account
value of the Policy, which in turn depends on such factors as the investment
experience and the monthly cost of insurance, the monthly expense charge, and
the daily risk percentage deduction. The cost of insurance rate utilized in
computing the cost of insurance will not be the same for each insured. The
chief reason is that the principle of pooling and distribution of mortality
risks is based on the assumption that each insured incurs an insurance rate
commensurate with his or her mortality risk which is actuarially determined
based on such factors as attained age, sex (except under unisex policies), and
class. Accordingly, while not all insureds will be subject to the same cost of
insurance rate, there will be a single rate for all insureds in a given
actuarial category.
Current cost of insurance rates will be determined by the Company based upon
expectations of future experience with respect to mortality, persistency,
interest rates, expenses and taxes. The cost of insurance rates are guaranteed
not to exceed rates set based on the 1980 CSO Mortality Tables. The Policies
will be offered and sold pursuant to established mortality structure and
underwriting standards and in accordance with state insurance laws.
II. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
Set forth below is a summary of the principal Policy provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, a redemption transaction. The summary shows that because of the
insurance nature of the policies, the procedures involved necessarily differ in
certain significant respects from the redemption procedures for mutual funds and
contractual plans.
A. Surrenders and Partial Surrenders
The Owner may surrender this Policy for the Cash Surrender Value at any time by
sending a written request to the Company. The amount available for surrender is
the Cash Surrender Value at the end of the valuation period during which the
surrender request is received. The Cash Surrender Value is the Account Value,
decreased by the balance of any outstanding Policy Debt, increased by the Sales
Load Refund at Surrender, if any. Coverage under a Policy will terminate as of
the date of surrender.
The Owner may make a Partial Surrender of this Policy once each Policy Year
after the first Policy Year by written request to the Service Center. The
maximum amount of any Partial Surrender is the Account Value decreased by the
balance of any outstanding Policy Debt. Unless the Owner provides evidence
satisfactory to the Company that the Insured is still an acceptable risk based
on our underwriting limits and standards, the Total Face Amount will be reduced
to the extent necessary so that the Death Benefit less the Account Value
immediately after the Partial Surrender, does not exceed the Death Benefit less
the Account Value immediately before the Partial Surrender.
If the Owner provides such evidence, then he or she will have the option of
keeping the Death Benefit equal to what it was immediately prior to the Partial
Surrender. The Specified Face Amount remaining in force after the Partial
Surrender must be no lower than the minimum Specified Face Amount which is
generally $5000. A Partial Surrender may not decrease the Policy's Total Face
Amount to an amount less than the minimum Total Face Amount which is generally
$50,000.
-3-
<PAGE>
The Owner may allocate the Partial Surrender among the Sub-Accounts of the
Variable Account. If the allocation is not specified, then the Partial
Surrender will be allocated among the Sub-Accounts in the same proportion that
the Account Value of each Sub-Account bears to the aggregate Account Value of
all Sub-Accounts on the date of Partial Surrender.
Amounts payable from the Separate Account upon surrender or partial surrender
will ordinarily be paid within seven days of receipt of the written request.
B. Changes in Face Amount
After the end of the first Policy Year, the Owner may change the Specified Face
Amount and, if it is part of the Policy, the APB Rider Face Amount. Unless
otherwise specified, a change in the Policy's Total Face Amount will first be
applied, to the extent possible, to the APB Rider Face Amount. The Owner must
send a request for a change to our Service Center, in writing. The Effective
Date of Coverage for changes is:
- for any increase in coverage, the Monthly Anniversary Day that falls
on or next follows the date we approve the supplemental application
for such increase, and
- for any decrease in coverage, the Monthly Anniversary Day that falls
on or next follows the date we receive your request.
The Specified Face Amount may not decrease to less than the minimum Specified
Face Amount. A decrease in Specified Face Amount or APB Rider Face Amount may
not decrease the Policy's Total Face Amount to an amount less than the minimum
Total Face Amount. A decrease in face amount will be applied to the initial
face amount and to each increase in face amount in the following order:
- first, to the most recent increase;
- second, to the next most recent increases in reverse chronological
order; and
- finally, to the initial face amount.
An increase in the face amount is subject to our underwriting rules in effect at
the time of the increase. The Owner may be required to submit evidence of the
Insured's insurability satisfactory to us.
C. Change in Death Benefit Option
If the death benefit compliance test chosen is the Guideline Premium Test, then
the death benefit option may be changed either from Option A to Option B, or
from Option B to Option A. If the death benefit compliance test chosen is the
Cash Value Accumulation Test, only Option A is available, and the death benefit
option may not be changed. Changes in the death benefit option are subject to
our underwriting rules in effect at the time of change. Requests for a change
must be made in writing to our Service Center. The effective date of the change
will be the Policy Anniversary on or next following the date of receipt of the
request.
If the death benefit option change is from Option B to Option A, the Specified
Face Amount will be increased by the Account Value. If the death benefit option
change is from Option A to Option B, the Specified Face Amount will be reduced
by the Account Value. In either case, the amount of the Base Death Benefit at
the time of change will not be altered, but the change in death benefit option
will affect the determination of the Base Death Benefit from that point on.
-4-
<PAGE>
D. Benefit Claims
While the Policy remains in force, the Company will pay a death benefit to the
named beneficiary in accordance with the designated death benefit option within
seven days after receipt in its home office of due proof of death of the
insured. Payment of death benefits may be postponed under certain
circumstances, such as the New York Stock Exchange being closed for reasons
other than customary weekend and holiday closings.
The amount of the death benefit is determined at the end of the valuation period
during which the insured dies. The amount of the death benefit will never be
less than the Total Face Amount of the Policy. The amount paid, the Policy
Proceeds, equals the amount of the Base Death Benefit decreased by the amount of
any outstanding Policy Debt, and increased by the amounts payable under any APB
Rider Death Benefit and any other supplemental benefits.
The amount of coverage under the APB Rider, the APB Rider Death Benefit, is
initially the APB Rider Face Amount that is specified in the application.
Subsequently, the amount of the APB Rider Death Benefit is adjusted
automatically by the Company; if the Base Death Benefit under the Policy exceeds
the Specified Face Amount (or for death benefit Option B, the Specified Face
Amount plus Account Value) as a result of an increase in Account Value, the APB
Rider Death Benefit will be reduced by an equivalent amount, under the formula
set forth below.
The APB Rider Death Benefit is the greater of zero or the result of (a) less (b)
where:
(a) is the APB Rider Face Amount, and
(b) is the excess, if any, of the Base Death Benefit over
- the Specified Face Amount for death benefit Option A
policies, or
- the Specified Face Amount plus the Account Value for death
benefit Option B policies.
If the insured is living on the date of maturity (the Policy Anniversary on
which the insured reaches attained age 100), the Company will pay in a lump sum
the cash surrender value of the Policy.
E. Policy Loans
The Owner may request a Policy loan of up to 90% of the Account Value, decreased
by the balance of any outstanding Policy Debt on the date the Policy loan is
made. Any amount due to an Owner under a loan ordinarily will be paid within
seven days after the Company receives a loan request at its home office,
although payments may be postponed under certain circumstances.
Account Value equal to the amount of the Policy loan will be transferred from
the Sub-Accounts to the Loan Account as security for the loan on the date the
Policy loan is made. The Owner may allocate the Policy loan among the
Sub-Accounts for this transfer. If the allocation is not specified, then the
Policy loan will be allocated among the Sub-Accounts in the same proportion that
the Account Value of each Sub-Account bears to the aggregate Account Value of
all Sub-Accounts immediately prior to the loan. Account value transferred to
the loan account will earn interest at an annual rate of 4%.
Interest on the Policy loan will accrue daily at the Policy loan interest rate
of 5% in Policy Years one through ten and 4.25% thereafter. This interest shall
be due and payable to us in arrears on each Policy Anniversary. Any unpaid
interest will be added to the principal amount as an additional Policy loan and
will bear interest at the same rate and in the same manner as the prior Policy
loan.
-5-
<PAGE>
All funds we receive from the Owner will be credited to the Policy as Premium
unless we have received written notice, in form satisfactory to us, that the
funds are for loan repayment. Loan repayments will first reduce the outstanding
balance of the Policy loan and then accrued but unpaid interest on such loans.
We will accept repayment of any Policy loan at any time before Maturity. The
amount of the loan repayment up to the outstanding balance of the Policy loan
will be transferred from the Loan Account to the Sub-Accounts. The Owner may
allocate the loan repayment among the Sub-Accounts. If the allocation is not
specified, then the loan repayment will be allocated among the Sub-Accounts in
the same proportion that the Account Value of each Sub-Account bears to the
total Account Value less the Loan Account immediately prior to the loan
repayment.
III. TRANSFERS
Subject to the Company's rules as they may exist from time to time and to any
limits that may be imposed by the Funds, including those set forth in the
Policy, the Owner may at any time transfer to another Sub-Account all or a
portion of the Account Value allocated to a Sub-Account.
All requests for transfers must be made to the Service Center. The Company will
make transfers pursuant to a valid written or telephone request received by the
Service Center. Telephone requests will be honored only if the Company has a
properly completed telephone authorization form for the Owner on file. The
Company and its agents and affiliates will not be responsible for losses
resulting from acting upon telephone requests reasonably believed to be genuine.
The Company will use reasonable procedures to confirm that instructions
communicated by telephone are genuine. The procedures followed for
transactions initiated by telephone include requirements that the Owner identify
himself or herself by name and identify a personal identification number. For
additional protection, all changes in allocation percentages by telephone may be
recorded.
Transfers may be requested by indicating the transfer of either a specified
dollar amount or a specified percentage of the Sub-Account's value from which
the transfer will be made. If a transfer is based on a specified percentage of
the Sub-Account's value, that percentage will be converted into a request for
the transfer of a specified dollar amount based on application of the specified
percentage to the Sub-Account's value at the time the request is received.
These transfer privileges are subject to the Company's consent. The Company
reserves the right to impose limitations on transfers, including, but not
limited to: (1) the minimum amount that may be transferred; and (2) the minimum
amount that may remain in a Sub-Account following a transfer from that Sub-
Account. In addition, transfer privileges are subject to any restrictions that
may be imposed by the Funds.
IV. REFUNDS
A. Free Look Period
The Policy has a "Right to Return" provision, which gives certain cancellation
rights. If the Owner is not satisfied with the Policy, it may be returned by
delivering or mailing it to our Principal Office or to the agent from whom the
Policy was purchased within 20 days from the date of receipt (unless a different
period is applicable under state law) or within 45 days after the application is
signed, whichever period ends later (the "Free Look Period").
A Policy returned under this provision will be deemed void from the beginning.
The Owner will receive a refund equal to the sum of (1) the difference between
any Premium payments made, including fees and charges, and the amounts allocated
to the Variable Account, (2) the value of the amounts allocated to the
-6-
<PAGE>
Variable Account on the date the cancellation request is received by the Company
or its agent from whom the Policy was purchased, and (3) any fees or charges
imposed on amounts allocated to the Variable Account.
However, certain states provide for a full refund of premiums. If the Policy
provides for a full refund under its "Right to Return" provision, the Owner will
receive a refund of all Premium payments made, with no adjustment for investment
experience.
B. Conversion Privilege
The Owner may convert the Policy into a flexible premium universal life policy
offered by Sun Life Assurance Company of Canada during the first 24 months after
the Issue Date while the Policy is in force. Choice of a new policy is subject
to the Company's approval and will be restricted to those policies that offer
the same Class and rating as the Policy. The new policy will be issued without
evidence with the same Class and rating as the Policy. The conversion provision
does not apply to the APB Rider, if any, or to any supplemental benefits that
may be attached to the Policy.
C. Suicide
In most states, if the Insured, whether sane or insane, commits suicide within
two years after the Issue Date, the Company will not pay any part of the Policy
Proceeds. The Company will refund the Premiums paid, less the amount of any
Policy Debt and any Partial Surrenders.
D. Incontestability Clause
All statements made in the Application or in a supplemental application are
representations and not warranties. The Company relied on these statements
when approving the issuance, increase in face amount, increase in Base Death
Benefit over Premium paid, or change in death benefit option of the Policy. No
statement can be used by the Company in defense of a claim unless the statement
was made in the application or in a supplemental application. In the absence of
fraud, after the Policy has been in force during the lifetime of the Insured for
a period of two years from its Issue Date, the Company cannot contest it except
for non-payment of Premiums in accordance with the Insufficient Value provision.
However, any increase in the Total Face Amount which is effective after the
Issue Date will be incontestable only after such increase has been in force
during the lifetime of the Insured for two years from the effective date of such
increase. Any increase in Base Death Benefit over Premium paid or increase in
Base Death Benefit due to a death benefit option change will be incontestable
only after such increase has been in force during the lifetime of the Insured
for two years from the date of the increase.
E. Misstatement of Age or Sex
If the age or (in the case of a Non-Unisex Policy) sex of the Insured is stated
incorrectly in the Application, the amounts payable by the Company will be
adjusted as follows:
- Misstatement discovered at death: The Death Benefit will be that which
would be purchased by the most recently charged Monthly Cost of
Insurance rate for the correct age or (for a Non-Unisex Policy) sex.
- Misstatement discovered prior to death: The Account Value will be
recalculated from the Issue Date using the Monthly Cost of Insurance
rates based on the correct age or (for a Non-Unisex Policy) sex.
-7-
<PAGE>
[SUNLIFE LETTERHEAD]
January 7, 1997
Board of Directors
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Re: Variable Account G; established July 25, 1996
Dear Sirs:
Reference is made to Pre-Effective Amendment No. 1 to the Registration
Statement ("Registration Statement") filed with the Securities and Exchange
Commission with respect to the proposed sale of an indefinite principal
amount of flexible premium variable universal life insurance policies
("Contracts") to be issued in connection with Sun Life of Canada (U.S.)
Variable Account G ("Account"), a separate account of Sun Life Assurance
Company of Canada (U.S.) ("Sun Life (U.S.)"), a Delaware corporation. I wish
to advise you that I have reviewed the corporate records of Sun Life (U.S.)
in establishing the Account, and have examined the Registration Statement,
with exhibits and Amendments thereto, and such other documents as I deem
necessary for the purposes of this opinion.
Based upon the foregoing, I am of the opinion that:
(1) Sun Life (U.S.) is duly organized and in good standing under the laws
of the State of Delaware and has the authority to issue the Contracts
in all jurisdictions where it is authorized to do a variable life
insurance business and the Contracts have been approved by the
appropriate regulatory authorities;
(2) The Account is duly established and validly existing separate account
of Sun Life (U.S.) under the laws of the State of Delaware;
(3) The Contracts, as and when issued pursuant to the terms, provisions
and conditions as set forth in the Registration Statement and
Amendments thereto, will be validly issued and will be legal and
binding obligations of Sun Life (U.S.) in accordance with their
terms; and
(4) The assets held in the Account are not chargeable with liabilities
arising out of any other business Sun Life (U.S.) may conduct.
<PAGE>
Board of Directors
January 7, 1997
Page Two
This opinion is limited to the above matters and I have not addressed
the question of taxation of the Contracts. I hereby consent to the
filing of this opinion as an exhibit to the Registration Statement and
to the use of my name under the caption "Legal Matters" in the
Prospectus contained in the Registration Statement.
Very truly yours,
/s/ Robert E. McGinness
Vice President and Counsel
REM:sh
<PAGE>
January 1, 1997
Gentlemen:
In my capacity as Product Officer for Sun Life Assurance Company of Canada, I
have provided actuarial advice concerning: (a) the preparation of a
registration statement for Sun Life of Canada (U.S.) Variable Account G filed
on Form S-6 with the Securities Exchange Commission under the Securities Act
of 1933 (the "Registration Statement") regarding the offer and sale of
flexible premium variable universal life insurance policies (the "Policies");
and (b) the preparation of policy forms for the Policies described in the
Registration Statement.
It is my professional opinion that:
The illustrations of cash surrender values, account values, death benefits
and accumulated premiums in the Appendix to the prospectus contained in the
Registration Statement, are based on the assumptions stated in the
illustrations, and are consistent with the provisions of the Policies. The
rate structure of the Policies has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear to be more favorable to prospective purchasers of Policies aged 45 in
the rate classes illustrated than to prospective purchasers of Policies, for
male or females, at other ages.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the heading "Experts"
in the prospectus.
Very truly yours,
/s/ John E. Coleman
John E. Coleman, FSA, MAAA
Product Officer
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John D. McNeil, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ John D. McNeil July 25, 1996
- --------------------------------- --------------------
John D. McNeil Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Robert P. Vrolyk, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ Robert P. Vrolyk July 25, 1996
- --------------------------------- --------------------
Robert P. Vrolyk Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that A Keith Brodkin, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ A. Keith Brodkin July 25, 1996
- --------------------------------- --------------------
A. Keith Brodkin Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that M. Colyer Crum, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ M. Colyer Crum July 25, 1996
- --------------------------------- --------------------
M. Colyer Crum Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Richard B. Bailey, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ Richard B. Bailey July 25, 1996
- --------------------------------- --------------------
Richard B. Bailey Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that David D. Horn, whose signature
appears below, constitutes and appoints Bonnie S. Angus, Margaret Sears Mead
and David N. Brown, and each of them, his attorneys-in-fact, each with the
power of substitution, for him in any and all capacities, to sign Registration
Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable
Account G, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, hereby ratifying and confirming all that each of
said attorneys-in-fact or his substitute or substitutes, may do or cause
to be done by virtue hereof.
/s/ David D. Horn July 23, 1996
- --------------------------------- --------------------
David D. Horn Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John S. Lane, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ John S. Lane July 25, 1996
- --------------------------------- --------------------
John S. Lane Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Angus A. MacNaughton, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ Angus A. MacNaughton July 25, 1996
- --------------------------------- --------------------
Angus A. MacNaughton Date
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Donald A. Stewart, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ Donald A. Stewart January 20, 1997
- --------------------------------- --------------------
Donald A. Stewart Date
<PAGE>
We consent to the use in this Registration Statement No. 333-13087 of Sun
Life of Canada (U.S.) Variable Account G on Form S-6 of our report dated
January 10,1997 accompanying the financial statement of Sun Life of Canada
(U.S.) Variable Account G and to the use of our report dated February 7, 1996
accompanying the financial statements of Sun Life Assurance Company of Canada
(U.S.) appearing in the Prospectus, which is a part of such Registration
Statement, and to the incorporation by reference of our reports dated
February 7, 1996 appearing in the Annual Report on Form 10-K of Sun Life
Assurance Company of Canada (U.S.) for the year ended December 31, 1995.
We also consent to the references to us under the heading "Accountants" in
such Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 10, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
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<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-23-1996
<PERIOD-END> DEC-23-1996
<INVESTMENTS-AT-COST> 100000
<INVESTMENTS-AT-VALUE> 100000
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 10000
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<OVERDISTRIBUTION-NII> 0
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<DIVIDEND-INCOME> 0
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
