<PAGE>
Registration No. 333-68601
As Filed with the Securities and Exchange Commission on April 27, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
A. Exact name of trust: Sun Life of Canada (U.S.) Variable Account I
B. Name of depositor: Sun Life Assurance Company of Canada (U.S.)
C. Complete address of depositor's principal executive offices:
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
D. Name and complete address of agent for service:
Ellen B. King
Secretary
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
Copies to:
Michael Berenson, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
Suite 400 East
1025 Thomas Jefferson St. N.W.
Washington, D.C. 20007-0805
E. Title and amount of securities being registered:
Flexible Premium Combination Fixed and Variable Life Insurance
Policies.
F. Approximate date of proposed public offering:
As soon as practicable after the effective date of this
Registration Statement.
The Registrant hereby amends this Registration Statement on such dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
1. Cover page
2. Cover page
3. Not applicable
4. Distribution of Policy
5. The Variable Account
6. The Variable Account
7. Not applicable
8. Other Information -- Financial Statements
9. Other Information -- Legal Proceedings
10. Summary of Policy; The Variable Account; The Funds;
About the Policy; Voting Rights; Federal Income Tax
Considerations
11. Summary of Policy; The Variable Account; The Funds
12. Summary of Policy; The Funds
13. Summary of Policy; Expenses of the Funds; About the
Policy -- Charges and Deductions; Distribution of
Policy; Federal Income Tax
Considerations
14. About the Policy -- Policy Application, Issuance and
Initial Premium
15. About the Policy -- Policy Application, Issuance and
Initial Premium, -- Right of Return Period, -- Premium
Payments, -- Account Value, -- Transfer Privileges
16. The Funds; About the Policy -- Premium Payments,
-- Account Value, -- Transfer Privileges,
-- Surrenders and Surrender Charges, -- Partial
Surrenders, -- Policy Loans
17. Summary of Policy; About the Policy -- Account Value,
-- Surrenders and Surrender Charges, -- Right of
Return Period
18. The Variable Account; About the Policy -- Account
Value
19. About the Policy -- Other Policy Provisions -- Reports
to Owner
20. Not applicable
I-2
<PAGE>
21. About the Policy -- Policy Loans, -- Death Benefit,
-- Account Value
22. Not applicable
23. Our Directors and Executive Officers
24. Not applicable
25. Sun Life Assurance Company of Canada (U.S.)
26. Not applicable
27. Sun Life Assurance Company of Canada (U.S.)
28. Sun Life Assurance Company of Canada (U.S.); Our
Directors and Executive Officers
29. Sun Life Assurance Company of Canada (U.S.)
30. Not applicable
31. Not applicable
32. Not applicable
33. Not applicable
34. Not applicable
35. Distribution of Policy
36. Not applicable
37. Not applicable
38. Distribution of Policy
39. Sun Life Assurance Company of Canada (U.S.);
Distribution of Policy
40. Not applicable
41. Sun Life Assurance Company of Canada (U.S.);
Distribution of Policy
42. Not applicable
43. Not applicable
44. About the Policy -- Application, Issuance and
Initial Premium, -- Right of Return Period, -- Premium
Payments, -- Account Value, -- Transfer Privileges,
-- Charges and Deductions
45. Not applicable
46. About the Policy -- Application, Issuance and
Initial Premium, -- Right of Return Period, -- Premium
Payments, -- Account Value, -- Transfer Privileges
I-3
<PAGE>
47. The Funds
48. Cover page; Sun Life Assurance Company of Canada
(U.S.); The Variable Account
49. Not applicable
50. The Variable Account
51. Summary of Policy; Sun Life Assurance Company of Canada
(U.S.); About the Policy
52. The Funds; The Variable Account; About the Policy
-- Other Policy Provisions -- Addition, Deletion or
Substitution of Investments, -- Modification
53. Federal Income Tax Considerations
54. Not applicable
55. Not applicable
56. Not applicable
57. Not applicable
58. Not applicable
59. Not applicable
I-4
<PAGE>
PART I
<PAGE>
[LOGO]
PROSPECTUS
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
(800) 700-6554
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
A FLEXIBLE PREMIUM COMBINATION FIXED AND VARIABLE UNIVERSAL LIFE INSURANCE
POLICY
This prospectus describes the variable portions of a combination fixed and
variable universal life insurance policy (the "POLICY") issued by Sun Life
Assurance Company of Canada (U.S.) ("WE" or "US"). The Policy allows "YOU," the
policyowner, within certain limits, to:
- choose the type and amount of insurance coverage you need and
increase or decrease that coverage as your insurance needs
change;
- choose the amount and timing of premium payments;
- allocate premium payments among 29 investment options
(including 28 variable investment options and one fixed
account investment option) and transfer Account Value among
available investment options as your investment objectives
change; and
- access your Policy's Account Value through loans and partial
or total surrenders.
This prospectus contains important information you should understand before
purchasing a Policy. We use certain special terms which are defined in Appendix
A. You should read this prospectus carefully and keep it for future reference.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 10, 1999
<PAGE>
VARIABLE SUB-ACCOUNT INVESTMENT OPTIONS
The assets of Sun Life of Canada (U.S.) Variable Account I (the "Variable
Account") are divided into 28 variable Sub-Accounts. Each Sub-Account uses its
assets to purchase, at their net asset value, shares of the following mutual
funds or series thereof (the "Funds").
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. MFS/SUN LIFE SERIES TRUST
AIM V.I. Capital Appreciation Fund Capital Appreciation Series
AIM V.I. Growth Fund Emerging Growth Series
AIM V.I. Growth and Income Fund Government Securities Series
AIM V.I. International Equity Fund High Yield Series
Massachusetts Investors Growth Stock
Series
Massachusetts Investors Trust Series
New Discovery Series
Total Return Series
Utilities Series
THE ALGER AMERICAN FUND OCC ACCUMULATION TRUST
Alger American Growth Portfolio Equity Portfolio
Alger American Income and Growth Portfolio Managed Portfolio
Alger American Small Capitalization Portfolio Mid Cap Portfolio
Small Cap Portfolio
GOLDMAN SACHS VARIABLE INSURANCE TRUST SUN CAPITAL ADVISERS TRUST
Goldman Sachs VIT CORE Large Cap Growth Fund Sun Capital Investment Grade Bond Fund
Goldman Sachs VIT CORE Small Cap Equity Fund Sun Capital Money Market Fund
Goldman Sachs VIT CORE U.S. Equity Fund Sun Capital Real Estate Fund
Goldman Sachs VIT Growth and Income Fund
Goldman Sachs VIT International Equity Fund
</TABLE>
FIXED ACCOUNT OPTION
We periodically credit interest on amounts allocated to the fixed account
option at an effective annual rate guaranteed to be at least 3%.
II FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
------------------------------------------------------------ ----
<S> <C>
Summary of Policy........................................... 1
Sun Life Assurance Company of Canada (U.S.)................. 7
The Variable Account........................................ 7
The Funds................................................... 8
Fees and Expenses of the Funds.............................. 13
Our General Account......................................... 13
About the Policy............................................ 14
Policy Application, Issuance and Initial Premium.......... 14
Right of Return Period.................................... 15
Premium Payments.......................................... 15
Premium................................................. 16
Net Premiums............................................ 16
Allocation of Net Premium............................... 16
Planned Periodic Premiums............................... 16
Death Benefit............................................. 17
Changes in Specified Face Amount.......................... 18
Minimum Changes......................................... 18
Increases............................................... 18
Decreases............................................... 18
Surrenders and Surrender Charges.......................... 19
Partial Surrenders........................................ 21
Policy Loans.............................................. 21
Investment Programs....................................... 22
Dollar Cost Averaging................................... 22
Asset Rebalancing....................................... 22
Asset Allocation........................................ 23
Transfer Privileges....................................... 23
Account Value............................................. 24
Variable Account Value.................................. 24
Net Investment Factor................................... 26
Fixed Account Value..................................... 26
Insufficient Value...................................... 28
Minimum Premium Test (No-Lapse Guarantee)............... 28
Grace Period............................................ 28
Splitting Units......................................... 29
Charges and Deductions.................................... 29
Expense Charges Applied to Premium...................... 29
Mortality and Expense Risk Charge....................... 29
Monthly Expense Charge.................................. 29
</TABLE>
III FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
<TABLE>
<CAPTION>
TOPIC PAGE
------------------------------------------------------------ ----
<S> <C>
Monthly Cost of Insurance............................... 29
Monthly Cost of Insurance Rates......................... 30
Basis of Computation.................................... 30
Waivers; Reduced Charges; Credits; Bonus Guaranteed
Interest Rates.......................................... 31
Maturity Date Extension................................... 31
Supplemental Benefits..................................... 32
Accelerated Benefits Rider.............................. 32
Accidental Death Benefit Rider.......................... 32
Waiver of Monthly Deductions Rider...................... 33
Payment of Stipulated Amount Rider...................... 34
Termination of Policy..................................... 36
Reinstatement............................................. 36
Deferral of Payment....................................... 37
Rights of Owner........................................... 37
Rights of Beneficiary..................................... 38
Other Policy Provisions................................... 38
Addition, Deletion or Substitution of Investments....... 38
Entire Contract......................................... 39
Alteration.............................................. 39
Modification............................................ 39
Assignments............................................. 39
Nonparticipating........................................ 39
Misstatement of Age or Sex (Non-Unisex Policy).......... 40
Suicide................................................. 40
Incontestability........................................ 40
Report to Owner......................................... 40
Illustrations........................................... 41
Performance Information..................................... 41
Portfolio Performance..................................... 41
Adjusted Portfolio Performance............................ 41
Other Information......................................... 42
Federal Income Tax Considerations........................... 43
Tax Status of the Policy.................................. 43
Diversification of Investments............................ 43
Tax Treatment of Policy Benefits.......................... 44
Life Insurance Death Benefit Proceeds................... 44
Tax Deferred Accumulation............................... 44
Distributions........................................... 44
Modified Endowment Contracts............................ 45
Distributions under Modified Endowment Contracts........ 45
Distributions under a Policy That Is Not a MEC.......... 46
</TABLE>
IV FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
<TABLE>
<CAPTION>
TOPIC PAGE
------------------------------------------------------------ ----
<S> <C>
Policy Loan Interest.................................... 46
Multiple Policies....................................... 46
Federal Income Tax Withholding.......................... 47
Our Taxes................................................. 47
Distribution of Policy...................................... 47
Voting Rights............................................... 48
Our Directors and Executive Officers........................ 49
Other Information........................................... 53
State Regulation.......................................... 53
Legal Proceedings......................................... 54
Experts................................................... 54
Accountants............................................... 54
Registration Statements................................... 54
Year 2000 Compliance...................................... 54
Financial Statements...................................... 56
Appendix A--Glossary of Policy Terms........................ A-1
Appendix B--Table of Death Benefit Percentages.............. B-1
Appendix C--Sample Hypothetical Illustrations............... C-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN
ANY JURISDICTION WHERE THE OFFERING WOULD NOT BE LAWFUL.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS OR IN THE PROSPECTUS OR STATEMENT OF
ADDITIONAL INFORMATION OF THE FUNDS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT.
V FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUMMARY OF POLICY
RIGHT OF RETURN PERIOD
You may return your Policy to us for any reason and
receive a refund within the later of 45 days after you
sign the Policy Application or the 10-day period, or such
longer period as required by applicable state law,
beginning when you receive your Policy.
PREMIUM PAYMENTS
- You must make a minimum initial premium payment, the
amount of which will vary based on various factors,
including your age and the death benefit you select.
- Thereafter, you choose the amount and timing of
premium payments, within certain limits.
- You may allocate your net premium payments among the
Policy's available investment options.
DEATH BENEFIT
- You have a choice of two death benefit options--
SPECIFIED FACE - the SPECIFIED FACE AMOUNT; or
AMOUNT is the - the sum of the Specified Face Amount and the
minimum amount of Account Value of your Policy.
life insurance in - For each option, the death benefit may be greater if
your Policy. necessary to satisfy federal tax laws.
- After the first Policy Year, you may:
- change your death benefit option;
- increase the Specified Face Amount,
subject to satisfactory evidence of
insurability; or
- decrease the Specified Face Amount,
provided that the Specified Face
Amount after the decrease is not less
than an amount we specify in your
Policy.
THE VARIABLE ACCOUNT
- We have established a variable separate account to
fund the variable benefits under the Policy.
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- The assets of the variable separate account are
insulated from the claims of our general creditors.
INVESTMENT OPTIONS
- You may allocate your net premium payments among the
28 variable Sub-Accounts and the fixed account option
listed on the front cover of this prospectus.
- Each Sub-Account invests exclusively in shares of a
mutual fund portfolio.
- You may transfer amounts from one Sub-Account to
another or to the Fixed Account Value, subject to any
limits that may be imposed by the Funds.
- You may transfer amounts from the fixed account
option, subject to our rules as they may exist from
time to time.
SUPPLEMENTAL BENEFITS
- The following riders are available--
- accelerated benefits;
- accidental death benefit;
- waiver of monthly deductions; and
- payment of stipulated amount.
- We will deduct the cost, if any, of the rider(s) from
your Policy's Account Value on a monthly basis.
ACCESSING YOUR POLICY'S ACCOUNT VALUE
CASH SURRENDER VALUE -
is Account Value You may borrow from us using your Account Value as
minus any surrender collateral. Loans may be taxable events if your Policy
charges and the is a "modified endowment contract" for federal income
amount of any Policy tax purposes and the value of your Policy exceeds its
Debt. cost.
The SURRENDER CHARGE - You may surrender your Policy for its CASH SURRENDER
PERIOD ends 10 years VALUE. If you surrender your Policy during the
after you purchase SURRENDER CHARGE PERIOD, you will incur any applicable
or increase the surrender charges.
Specified Face - You may make a partial surrender of some of your
Amount of your Policy's Cash Surrender Value after the Policy has
Policy. been in force for one year. A partial surrender will
cause a decrease in the Specified Face Amount of your
Policy if your death benefit option is the Specified
Face Amount.
2 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
ACCOUNT VALUE
ACCOUNT VALUE is the -
sum of the amounts Your Policy's ACCOUNT VALUE will reflect--
in each Sub- Account - the premiums you pay;
and the Fixed - the investment performance of the Sub-Accounts
Account Value with you select, and/or the interest credited in the
respect to your fixed account option;
Policy. - any loans or partial surrenders;
- the charges we deduct under the Policy.
POLICY CHARGES AND DEDUCTIONS
- EXPENSE CHARGES APPLIED TO PREMIUMS--We will deduct a
charge from your premium payments not to exceed 7.25%
for sales load and our federal, state and local tax
obligations. The current charge is 5.25%.
- MORTALITY AND EXPENSE RISK CHARGE--We deduct a daily
charge from your Variable Account Value for the
mortality and expense risks we assume with respect to
the Policy. The guaranteed maximum daily rate is
equivalent to an annual rate of 0.90% of assets. Our
current daily rates are equivalent to annual rates
of--
- 0.80% for Policy Years 1 through 10;
and
- 0.50% thereafter.
- MONTHLY COST OF INSURANCE CHARGE--We will deduct a
monthly charge from your Account Value for the cost
of insurance. For standard risks, our guaranteed
monthly cost of insurance rates are based on the 1980
Commissioner's Standard Ordinary Smoker and Nonsmoker
Mortality Tables. The applicable charge will vary
based on the amount of insurance coverage you request
and other factors, including the insured's age, sex
and health.
- MONTHLY COST OF SUPPLEMENTAL BENEFITS--We will deduct
a monthly charge from your Account Value for the
cost, if any, of any supplemental benefit riders
issued with your Policy. The applicable charge will
vary based on various factors which may include,
among others, the amount of coverage and the
insured's age, sex and health.
- MONTHLY EXPENSE CHARGE--We deduct a monthly charge of
$8.00 from your Account Value for the administration
of your Policy.
3 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- SURRENDER CHARGES--Within the first 10 Policy Years
or the 10 Policy Years following an increase in
Specified Face Amount, we will deduct a surrender
charge if you surrender your Policy or request a
decrease in the Specified Face Amount. The charge
will be 100% of the base surrender charge in the
first five Policy Years, or the first five Policy
Years after an increase in Specified Face Amount,
scaling down to zero after 10 Policy Years. The base
surrender charge will be an amount based on certain
factors, including the Specified Face Amount and the
insured's age, sex and rating class. The following
are examples of surrender charges at representative
Issue Ages.
FIRST YEAR SURRENDER CHARGES
PER $1,000 OF SPECIFIED FACE AMOUNT
(Non-tobacco Male)
<TABLE>
<CAPTION>
ISSUE AGE 25 ISSUE AGE 35 ISSUE AGE 45
- ------------- ------------- -------------
<S> <C> <C>
$ 4.63 $ 5.77 $ 7.74
<CAPTION>
ISSUE AGE 55 ISSUE AGE 65 ISSUE AGE 75
- ------------- ------------- -------------
<S> <C> <C>
$ 11.25 $ 22.38 $ 31.38
</TABLE>
- INTEREST ON POLICY LOANS--Policy loans accrue
interest daily at 4% annually during Policy Years 1
through 10 and 3.25% annually thereafter.
FEES AND EXPENSES OF THE FUNDS
You should read the You will indirectly bear the costs of investment
Funds' prospectuses management fees and other expenses paid from the assets
before investing. of the Funds you select. The following table shows the
fees and expenses paid by the Funds as a percentage of
average net assets based on information for the year
ended December 31, 1998. This information was provided
by the Funds and we have not independently verified it.
The Funds' fees and expenses are more fully described in
the current prospectuses for the Funds. You should read
them before investing.
ANNUAL FUND EXPENSES
(as a percentage of Fund average net assets)
<TABLE>
<CAPTION>
TOTAL ANNUAL
FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ------------
<S> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC.
(after expense reimbursement or waiver) (1)
- --------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62 0.05 0.67
AIM V.I. Growth Fund 0.64 0.08 0.72
AIM V.I. Growth and Income Fund 0.61 0.04 0.65
AIM V.I. International Equity Fund 0.75 0.16 0.91
</TABLE>
4 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
<TABLE>
<CAPTION>
TOTAL ANNUAL
FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ------------
<S> <C> <C> <C>
THE ALGER AMERICAN FUND
- --------------------------------------------
Alger American Growth Portfolio 0.75 0.04 0.79
Alger American Income and Growth Portfolio 0.62 0.12 0.74
Alger American Small Capitalization
Portfolio 0.85 0.04 0.89
GOLDMAN SACHS VARIABLE INSURANCE TRUST
(after expense reimbursement or waiver) (2)
- --------------------------------------------
Goldman Sachs VIT CORE Large Cap Growth
Fund 0.70 0.10 0.80
Goldman Sachs VIT CORE Small Cap Equity
Fund 0.75 0.15 0.90
Goldman Sachs VIT CORE U.S. Equity Fund 0.70 0.10 0.80
Goldman Sachs VIT Growth and Income Fund 0.75 0.15 0.90
Goldman Sachs VIT International Equity
Fund 1.00 0.25 1.25
MFS/SUN LIFE SERIES TRUST
- --------------------------------------------
Capital Appreciation Series 0.73 0.04 0.77
Emerging Growth Series 0.72 0.06 0.78
Government Securities Series 0.55 0.07 0.62
High Yield Series 0.75 0.07 0.82
Massachusetts Investors Growth Stock
Series 0.75 0.22 0.97
Massachusetts Investor Trust Series 0.55 0.04 0.59
New Discovery Series 0.90 0.35 1.25
(after expense reimbursement or waiver)
(2)
Total Return Series 0.65 0.05 0.70
Utilities Series 0.75 0.11 0.86
OCC ACCUMULATION TRUST
- --------------------------------------------
Equity Portfolio 0.80 0.14 0.94
Managed Portfolio 0.78 0.04 0.82
Mid Cap Portfolio 0.80 0.25 1.05
(after expense reimbursement or waiver)
(2)
Small Cap Portfolio 0.80 0.08 0.88
SUN CAPITAL ADVISERS TRUST
(after expense reimbursement or waiver) (2)
- --------------------------------------------
Sun Capital Investment Grade Bond Fund 0.60 0.15 0.75
Sun Capital Money Market Fund 0.50 0.15 0.65
Sun Capital Real Estate Fund 0.95 0.30 1.25
NOTES
- ------------------------
</TABLE>
(1) AIM Advisors, Inc. may from time to time voluntarily waive or reduce
its respective fees. The indicated Funds reimburse the investment
adviser in an amount up to 0.25% of the average net asset value of each
Fund for expenses incurred in providing, or assuring that participating
insurance companies provide, certain administrative services.
(2) "Other Expenses" are based on actual expenses for the last fiscal year
ended December 31, 1998, including any applicable expense reimbursement
or waiver. The investment advisers for the indicated Funds have
voluntarily agreed to waive or reimburse a portion of the management
fees and/or operating expenses resulting in a reduction of the total
operating expenses. Absent any such waiver or reimbursement,
"Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" were --
0.70%, 2.17% and 2.87% for the Goldman Sachs VIT CORE Large Cap Growth
Fund;
0.75%, 3.17% and 3.92% for the Goldman Sachs VIT CORE Small Cap
Equity Fund;
0.70%, 2.13% and 2.83% for the Goldman Sachs VIT CORE U.S. Equity
Fund;
5 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
0.75%, 1.94% and 2.69% for the Goldman Sachs VIT CORE Growth and Income
Fund;
1.00%, 1.97% and 2.97% for the Goldman Sachs VIT International
Equity Fund;
0.90%, 0.70% and 1.60% for the MFS/Sun Life New Discovery Series;
0.80%, 3.48% and 4.28% for the OCC Mid Cap Portfolio;
0.80%, 3.50% and 4.10% for the Sun Capital Investment Grade Bond
Fund;
0.50%, 11.79% and 12.29% for the Sun Capital Money Market Fund;
and
0.95%, 6.49% and 7.44% for the Sun Capital Real Estate Fund.
To the extent that the expense ratio of any Fund of Sun Capital Advisers
Trust falls below the Fund's expenses limit, the Fund's investment
adviser reserves the right to be reimbursed for management fees waived
and Fund expenses paid by it during the prior two years.
WHAT IF CHARGES AND DEDUCTIONS EXCEED CASH SURRENDER
VALUE?
- Your Policy will terminate if your Cash Surrender
Value at the beginning of any Policy Month is less
than the charges and deductions then due.
- We will send you notice and allow you a 61 day Grace
Period.
- If, within the Grace Period, you do not make a
premium payment sufficient to cover all accrued and
unpaid charges and deductions, your Policy will
terminate at the end of the Grace Period without
further notice.
MINIMUM PREMIUM TEST (NO-LAPSE GUARANTEE)
Your insurance coverage will remain in force during
the first five Policy Years even if your Policy's Cash
Surrender Value is insufficient to keep the Policy in
force, provided that your Policy meets certain
requirements.
REINSTATEMENT
If your Policy terminates due to insufficient value,
we will reinstate it within five years at your request,
subject to certain conditions.
MATURITY
Your Policy will terminate when the insured reaches
Attained Age 100. If the insured is living and your
Policy is in force on the Maturity date, your Policy's
Cash Surrender Value will be payable to you.
6 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
MATURITY EXTENSION
The Maturity date may be extended at your request.
The death benefit will be your Account Value on the date
of the insured's death.
FEDERAL TAX CONSIDERATIONS
Your purchase of, and transactions under, your Policy
may have tax consequences that you should consider before
purchasing a Policy. You may wish to consult a tax
adviser. In general, the beneficiary will receive Policy
Proceeds without there being taxable income. Increases in
Account Value will not be taxable as earned, although
there may be income tax due on a full or partial
surrender of your Policy or on policy loans.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
We are an indirect Sun Life Assurance Company of Canada (US) is a
wholly- owned stock life insurance company incorporated under the laws
subsidiary of Sun of Delaware on January 12, 1970. We are authorized to do
Life Assurance business in forty-eight states, the District of Columbia
Company of Canada, a and Puerto Rico, and anticipate that we will eventually
Canadian mutual life be authorized to do business in all states except New
insurance company. York. We issue individual and group life insurance
policies and annuity contracts.
We are an indirect, wholly-owned subsidiary of Sun
Life Assurance Company of Canada, a Canadian mutual life
insurance company located at 150 King Street West,
Toronto, Ontario, Canada.
THE VARIABLE ACCOUNT
We established Sun Life of Canada (U.S.) Variable
Account I in accordance with Delaware law on December 1,
1998. The Variable Account may also be used to fund
benefits payable under other life insurance policies
issued by us.
We own the assets of the Variable Account. The
income, gains or losses, realized or unrealized, from
assets allocated to the Variable Account are credited to
or charged against the Variable Account without regard to
our other income, gains or losses.
The assets of the We will at all times maintain assets in the
Variable Account are Variable Account with a total market value at least
insulated from our equal to the reserves and other liabilities relating to
general liabilities. the variable benefits under all policies participating
in the Variable Account. Those assets may not be charged
with our liabilities from our other business. Our
obligations under those policies are, however, our
general corporate obligations.
7 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
The Variable Account The Variable Account is registered with the
is registered with Securities and Exchange Commission (the "SEC") under the
the SEC. Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. Registration under the 1940 Act does
not involve any supervision by the SEC of the management
or investment practices or policies of the Variable
Account.
The Variable Account The Variable Account is divided into 28
has 28 Sub-Accounts. Sub-Accounts. Each Sub- Account invests exclusively in
Each Sub- Account shares of a corresponding investment portfolio of a
invests exclusively registered investment company (commonly known as a
in shares of a mutual fund). We may in the future add new or delete
single mutual fund existing Sub-Accounts. The income, gains or losses,
portfolio. realized or unrealized, from assets allocated to each
Sub-Account are credited to or charged against that
Sub-Account without regard to the other income, gains or
losses of the other Sub-Accounts. All amounts allocated
to a Sub-Account will be used to purchase shares of the
corresponding mutual fund. The Sub-Accounts will at all
times be fully invested in mutual fund shares.
THE FUNDS
The Fund The Policy offers a number of Fund options,
Prospectuses have which are briefly discussed below. Each Fund is a mutual
more information fund registered under the 1940 Act, or a separate series
about the Funds, and of shares of such a mutual fund. More comprehensive
may be obtained from information, including a discussion of potential risks,
us without charge. is found in the current prospectuses for the Funds (the
"Fund Prospectuses"). The Fund Prospectuses should be
read in connection with this prospectus. A copy of each
Fund Prospectus may be obtained without charge by
calling (800) 700-6554, or writing to Sun Life Assurance
Company of Canada (U.S.), One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
The Funds currently available are:
AIM VARIABLE INSURANCE FUNDS, INC. (advised by AIM
Advisors, Inc.)
AIM V.I. CAPITAL APPRECIATION FUND seeks to provide
capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller
emerging growth companies.
AIM V.I. GROWTH FUND seeks to provide growth of
capital through investments primarily in common stocks of
seasoned and better capitalized U.S. companies considered
by AIM to have strong earnings momentum.
AIM V.I. GROWTH AND INCOME FUND seeks to provide
growth of capital, with current income as a secondary
objective by investing primarily in dividend paying
common stocks which have prospects for both growth of
capital and dividend income.
8 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
AIM V.I. INTERNATIONAL EQUITY FUND seeks to provide
long-term growth of capital by investing in diversified
international equity securities, the issuers of which are
considered by AIM to have strong earnings momentum.
THE ALGER AMERICAN FUND (advised by Fred Alger
Management, Inc.)
ALGER AMERICAN GROWTH PORTFOLIO seeks long-term
capital appreciation by investing primarily in equity
securities of companies with market capitalizations of $1
billion or more.
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO seeks
primarily to provide a high level of dividend income by
investing in dividend paying equity securities. Capital
appreciation is a secondary objective.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
long-term capital appreciation by investing primarily in
equity securities of companies with market
capitalizations within the range of the Russell 2000
Growth Index or the S&P SmallCap 600 Index.
GOLDMAN SACHS VARIABLE INSURANCE TRUST (advised by
Goldman Sachs Asset Management, a separate operating
division of Goldman, Sachs & Co., except for Goldman
Sachs International Equity Fund, which is advised by
Goldman Sachs Asset Management International, an
affiliate of Goldman, Sachs & Co.)
GOLDMAN SACHS VIT CORE LARGE CAP GROWTH FUND seeks
long-term growth of capital through a broadly diversified
portfolio of equity securities of large cap U.S. issuers
that are expected to have better prospects for earnings
growth than the growth rate of the general domestic
economy. Dividend income is a secondary consideration.
GOLDMAN SACHS VIT CORE SMALL CAP EQUITY FUND seeks
long-term growth of capital through a broadly diversified
portfolio of equity securities of U.S. issuers which are
included in the Russell 2000 Index at the time of
investment.
GOLDMAN SACHS VIT CORE U.S. EQUITY FUND seeks
long-term growth of capital and dividend income through a
broadly diversified portfolio of large cap and blue chip
equity securities representing all major sectors of the
U.S. economy.
GOLDMAN SACHS VIT GROWTH AND INCOME FUND seeks
long-term growth of capital and growth of income through
investments in equity securities that
9 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
are considered to have favorable prospects for capital
appreciation and/or dividend paying ability.
GOLDMAN SACHS VIT INTERNATIONAL EQUITY FUND seeks
long-term capital appreciation through investments in
equity securities of companies that are organized outside
the U.S. or whose securities are principally traded
outside the U.S.
MFS/SUN LIFE SERIES TRUST (advised by our affiliate
Massachusetts Financial Services Company)
CAPITAL APPRECIATION SERIES seeks capital
appreciation by investing in securities of all types,
with a major emphasis on common stocks.
EMERGING GROWTH SERIES seeks to provide long-term
growth of capital by investing primarily (i.e. at least
80% of all its assets under normal circumstances) in
common stocks of emerging growth companies, including
companies that the series' investment adviser 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.
HIGH YIELD SERIES seeks high current income and
capital appreciation by investing primarily in fixed
income securities of U.S. and foreign issuers which may
be in the lower rated categories or unrated (commonly
known as "junk bonds") and which may include equity
features. The series may invest up to 100% of its net
assets in these securities, which generally involve
greater risks, including volatility of price, risk of
principal and income, default risks and less liquidity,
than securities in the higher rated categories.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES seeks to
provide long-term growth of capital and future income
rather than current income. The series invests, under
normal market conditions, at least 80% of its total
assets in common stocks and related securites, such as
preferred stocks, convertible securities and depositary
receipts for those securities, of companies which the
series' adviser believes offer better than average
prospects for long-term growth.
MASSACHUSETTS INVESTORS TRUST SERIES seeks long-term
growth of capital and future income while providing more
current dividend income than is normally obtainable from
a portfolio of only growth stocks. The series invests,
10 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
under normal market conditions, at least 65% of its total
assets in common stock and related securities, such as
preferred stocks, convertible securities and depositary
receipts for those securities. While the series may
invest in companies of any size, the series generally
focuses on companies with larger market capitalizations
that the series' adviser believes have sustainable growth
prospects and attractive valuations based on current and
expected earnings of cash flow. This series was formerly
known as the Conservative Growth Series.
NEW DISCOVERY SERIES seeks capital appreciation. The
series invests, under normal market conditions, at least
65% of its total assets in common stocks and related
securities, such as preferred stocks, convertible
securities and depositary receipts for those securities,
of emerging growth companies. These companies are
companies that the series' adviser believes are either
early in their life cycle but have the potential to
become major enterprises or are major enterprises whose
rates of earnings growth are expected to accelerate.
TOTAL RETURN SERIES seeks 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 since many
securities offering a better than average yield may also
possess growth potential. The series is a "balanced
fund," and invests in a combination of equity and fixed
income securities. Under normal market conditions, the
series invests (i) at least 40%, but not more than 75%,
of its net assets in common stocks and related
securities, such as preferred stocks, bonds, warrants or
rights convertible into stock, and depositary receipts
for those securities; and (ii) at least 25% of its net
assets in non-convertible fixed income securities.
UTILITIES SERIES seeks capital growth and current
income (income above that available from a portfolio
invested entirely in equity securities) by investing
under normal market conditions, at least 65% of its
assets in equity and debt securities issued by both
domestic and foreign utility companies.
OCC ACCUMULATION TRUST (advised by OpCap Advisors)
EQUITY PORTFOLIO seeks long-term capital appreciation
through investment in a diversified portfolio of equity
securities selected on the basis of a value oriented
approach to investing.
MANAGED PORTFOLIO seeks to achieve growth of capital
over time through investment in a portfolio consisting of
common stocks, bonds and cash equivalents, the
percentages of which will vary based on the portfolio
manager's assessments of the relative outlook for such
investments.
11 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
MID CAP PORTFOLIO seeks long-term capital
appreciation through investment in a diversified
portfolio of equity securities. The portfolio will invest
primarily in companies with market capitalizations of
between $500 million and $5 billion.
SMALL CAP PORTFOLIO seeks capital appreciation
through investment in a diversified portfolio of equity
securities of companies with market capitalizations of
under $1 billion.
SUN CAPITAL ADVISERS TRUST (advised by our affiliate Sun
Capital Advisers, Inc.)
SUN CAPITAL INVESTMENT GRADE BOND FUND seeks high
current income consistent with relative stability of
principal by investing primarily in investment grade
bonds, including those issued by U.S. and foreign
companies (including companies in emerging market
countries), the U.S. Government and its agencies and
instrumentalities (including those which issue
mortgage-backed securities), foreign governments
(including those of emerging market countries), and
multinational organizations such as the World Bank.
SUN CAPITAL MONEY MARKET FUND seeks to maximize
current income, consistent with maintaining liquidity and
preserving capital, by investing exclusively in high
quality U.S. dollar-denominated money market securities,
including those issued by U.S. and foreign banks
corporate issuers, the U.S. Government and its agencies
and instrumentalities, foreign governments and
multinational organizations such as the World Bank. The
fund may invest in all types of money market securities,
including commercial paper, certificates of deposit,
bankers' acceptances, mortgage-backed and asset-backed
securities, repurchase agreements and other short-term
debt securities.
SUN CAPITAL REAL ESTATE FUND primarily seeks
long-term capital growth and, secondarily, seeks current
income and growth of income. The fund invests at least
80% of its assets in securities of real estate trusts and
other real estate companies. The fund generally focuses
its investments in equity REITs, which invest most of
their assets directly in U.S. or foreign real property,
receive most of their income from rents and may also
realize gains by selling appreciated properties.
Although the investment objectives and policies of
the Funds may be similar to those of other mutual funds
managed by the Funds' investment advisers, the investment
results of the Funds can differ significantly from those
of such other mutual funds.
The Funds may also be available to separate accounts
offering variable annuity and variable life products of
other affiliated and unaffiliated insurance
12 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
companies, as well as our other separate accounts.
Although we do not anticipate any disadvantages in this,
there is a possibility that a material conflict may arise
between the interests of the Variable Account and one or
more of the other separate accounts participating in the
Funds. A conflict may occur due to a change in law
affecting the operations of variable life and variable
annuity separate accounts, differences in the voting
instructions of policyowners and those of other
companies, or some other reason. In the event of
conflict, we will take any steps necessary to protect
policyowners, including withdrawal of the Variable
Account from participation in the Funds which are
involved in the conflict or substitution of shares of
other Funds.
FEES AND EXPENSES OF THE FUNDS
Fund shares are purchased at net asset value, which
reflects the deduction of investment management fees and
certain other expenses. The management fees are charged
by each Fund's investment adviser for managing the Fund
and selecting its portfolio of securities. Other Fund
expenses can include such items as interest expense on
loans and contracts with transfer agents, custodians, and
other companies that provide services to the Fund.
The Fund expenses are assessed at the Fund level and
are not direct charges against Variable Account assets or
reductions from Cash Values. These expenses are taken
into consideration in computing each Fund's net asset
value, which is the share price used to calculate the
Unit Values of the Variable Account. The table contained
in the front part of this prospectus shows annual
expenses paid by the Funds as a percentage of average net
assets.
The management fees and other expenses of the Funds
are more fully described in the Fund Prospectuses. The
information relating to the Fund expenses was provided by
the Fund and was not independently verified by us.
OUR GENERAL ACCOUNT
Our general account consists of all of our assets
other than those in our variable separate accounts.
Subject to applicable law, we have sole discretion over
the investment of our general account assets.
Fixed account Interests in our general account offered through
investments are not the fixed account investment option have not been
securities and we registered under the Securities Act of 1933 and our
are not an general account has not been registered as an investment
investment company. company under the 1940 Act.
You may allocate net premiums to the fixed account
investment option and may transfer any portion of your
investments in the Sub-Accounts to the fixed
13 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
account. You may also transfer a portion of your
investment in the fixed account to any of the variable
Sub-Accounts. Transfers may be subject to certain
restrictions.
Fixed account An investment in the fixed account option does
investments earn at not entitle you to share in the investment experience of
least 3% interest. our general account. Instead, we guarantee that your
fixed account investment will accrue interest daily at
an effective annual rate of at least 3%, without regard
to the actual investment experience of our general
account. We may, at our sole discretion, credit a higher
rate of interest, but are not obligated to do so.
ABOUT THE POLICY
POLICY APPLICATION, ISSUANCE AND INITIAL PREMIUM
To purchase a Policy, you must first submit an
application to our Principal Office. We may then follow
certain underwriting procedures designed to determine the
insurability of the proposed insured. We offer the Policy
on a regular (medical) underwriting basis and may require
medical examinations and further information before the
proposed application is approved. 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. 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 increased Monthly Cost of
Insurance charges.
You must specify certain information in the
application, including the Specified Face Amount, the
death benefit option and supplemental benefits, if any.
The Specified Face Amount generally may not be decreased
below $100,000-- the "Minimum Specified Face Amount."
While your application is being reviewed, we may make
available to you temporary life insurance coverage if you
have signed a Policy Application and, at that same time,
submitted a separate signed application for temporary
coverage and made an advance payment. The temporary
coverage, if available, begins on the date that separate
application for it is signed, has a maximum amount and is
subject to other conditions.
Pending approval of your application, any advance
payments will be held in our general account. Upon
approval of the application, we will issue to you a
Policy on the life of the insured. A specified initial
premium is due and payable as of the date of issue for
the Policy. The Effective Date of Coverage for your
Policy will be the later of--
14 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
The ISSUE DATE is - the ISSUE DATE, OR
the date we produce - the date a premium is paid equal to or in excess
your Policy on our of the specified initial premium.
system and is
specified in your
Policy.
If an application is not approved, we will promptly
return all advance payments to you.
RIGHT OF RETURN PERIOD
If you are not satisfied with your Policy, it may be
returned by delivering or mailing it to our Principal
Office or to the representative from whom the Policy was
purchased within 10 days from the date of receipt (unless
a longer period is required under applicable state
insurance law) or within 45 days after the application is
signed, whichever period ends later (the "Right of Return
Period").
A Policy returned under this provision will be deemed
void. You will receive a refund equal to the sum of all
premium payments made, if required by applicable state
insurance law; otherwise, your refund will equal the sum
of--
- the differences between any premium
payments made, including fees and
charges, and the amounts allocated to
the Variable Account;
- the value of the amounts allocated to
the Variable Account on the date the
cancellation request is received by us
at our Principal Office; and
- any fees or charges imposed on amounts
allocated to the Variable Account.
Unless you are entitled under applicable law to
receive a full refund of premiums paid, you bear all of
the investment risks with respect to the amount of any
net premiums allocated to the Variable Account during the
Right of Return Period.
During the Right of Return Period, we will allocate
the net premium payments to the Sub-Account of the
Variable Account that invests in the Sun Capital Money
Market Fund. Upon expiration of the Right of Return
Period, the Account Value in that Sub-Account will be
transferred to the Sub-Accounts of the Variable Account
and to the Fixed Account in accordance with your
allocation instructions.
PREMIUM PAYMENTS
All premium payments must be made payable to Sun Life
Assurance Company of Canada (U.S.) and mailed to our
Principal Office. An initial premium
15 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
will be due and payable as of your Policy's Issue Date.
Additional premium payments may be paid to us subject to
the limitations described below.
PREMIUM. We reserve the right to limit the number of
premium payments we accept in a year. No premium payment
may be less than $50 without our consent, although we
will accept a smaller premium payment if 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 any such premium.
We will not accept premium payments that would, in
our opinion, cause your Policy to fail to qualify as life
insurance under applicable federal tax law. 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.
ALLOCATION OF NET PREMIUM. Except as otherwise
described herein, net premium will be allocated in
accordance with your allocation percentages. You must
allocate at least 5% of net premium to any Sub-Account
you choose. Percentages must be in whole numbers. We
reserve the right to limit the number of Sub-Accounts to
which you may allocate your Account Value to not more
than 20 Sub-Accounts.
Premiums received prior to the end of the Right of
Return Period will be credited to the Sun Capital Money
Market Fund Sub-Account. Your initial allocation
percentages will take effect at the end of the Right of
Return Period.
You may change your allocation percentages at any
time by telephone or written request to our Principal
Office. Telephone requests will be honored only if we
have a properly completed telephone authorization form
for you on file. We, our affiliates and the
representative from whom you purchased your Policy 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. You
will be required to identify yourself by name and a
personal identification number for transactions initiated
by telephone. An allocation change will be effective as
of the date we receive the request for that change.
PLANNED PERIODIC PREMIUMS. While you are not
required to make additional premium payments according to
a fixed schedule, you may select a
16 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
planned periodic premium schedule and corresponding
billing period, subject to our limits. We will send you
reminder notices for the planned periodic premium at each
billing period as specified in your Policy, unless
reminder notices have been suspended as described below.
You are not required, however, 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 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). We will notify you prior to suspending
reminder notices.
DEATH BENEFIT
If your Policy is in force at the time of the
insured's death, we will pay the beneficiary an amount
based on the death benefit option you select once we have
received due proof of the insured's death. The amount
payable will be:
- the amount of the selected death
benefit option, PLUS
- any amounts payable under any
supplemental benefits added to your
Policy, LESS
- the value of any Policy Debt on the
date of the insured's death, LESS
- any Unpaid Policy Charges.
We will pay this amount to the beneficiary in one
lump sum, unless we and the beneficiary agree on another
form of settlement.
You may select The policy has two death benefit options. You
between two death may change the death benefit option after the first
benefit options. Policy Year.
OPTION A. Under this option, the death benefit is--
- the Policy's Specified Face Amount on
the date of the insured's death; OR,
IF GREATER,
- the Policy's Account Value on the date
of death multiplied by the applicable
percentage shown in the table set
forth in Appendix B.
17 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
This death benefit option should be selected if you
want to minimize your cost of insurance.
OPTION B. Under this option, the death benefit is--
- the sum of the Specified Face Amount
and Account Value of the Policy on the
date of the insured's death; OR, IF
GREATER,
- the Policy's Account Value on the date
of death multiplied by the applicable
percentage shown in the table set
forth in Appendix B.
This death benefit option should be selected if you
want your death benefit to increase with your Policy's
Account Value.
CHANGES IN SPECIFIED FACE AMOUNT
You may increase or You may increase or decrease the Specified Face
decrease the Amount of your Policy after the first Policy Year within
Specified Face certain limits.
Amount within MINIMUM CHANGES. Each increase in the Specified Face
certain limits. Amount must be at least $20,000. We reserve the right to
change the minimum amount by which you may change the
Specified Face Amount.
INCREASES. To request an increase, you must provide
satisfactory evidence of the insured's insurability. Once
requested, an increase will become effective at the next
policy anniversary following our approval of your
request. The Policy does not allow for an increase if the
insured's Attained Age is greater than 80 on the
effective date of the increase.
DECREASES. A decrease will become effective at the
beginning of the next Policy Month following our approval
of your request. The Specified Face Amount after the
decrease must be at least $100,000. Surrender charges
will apply to decreases in the Specified Face Amount
during the surrender charge
period except for decreases in the Specified Face Amount
resulting from a change in the death benefit option or a
partial surrender.
For purposes of determining surrender charges and
later cost of insurance charges, we will apply a decrease
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
18 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- finally, to the initial Specified Face
Amount.
SURRENDERS AND SURRENDER CHARGES
If you surrender You may surrender your Policy for its Cash
your Policy and Surrender Value at any time while the insured is living.
receive its Cash If you do, the insurance coverage and all other benefits
Surrender Value, you under the Policy will terminate. Also, surrender charges
may incur surrender will be deducted if you surrender your Policy during the
charges, taxes, and surrender charge period.
tax penalties. CASH SURRENDER VALUE is your Policy's Account
Value less the sum of--
- the outstanding balance of any Policy
Debt; and
- any surrender charges
We will determine your Cash Surrender Value at the
next close of business on the New York Stock Exchange
after we receive your written request for surrender at
our Principal Office.
If you surrender your Policy, we will apply a
surrender charge to the initial Specified Face Amount and
to each increase in the Specified Face Amount other than
an increase resulting from a change in the death benefit
option. The surrender charge will be calculated
separately for the initial Specified Face Amount and each
increase in the Specified Face Amount. The base surrender
charge will be an amount based on certain factors,
including the Policy's Specified Face Amount and the
insured's age, sex and rating class. The following are
examples of surrender charges at representative Issue
Ages.
FIRST YEAR SURRENDER CHARGES
PER $1,000 OF SPECIFIED FACE AMOUNT
(Non-tobacco Male)
<TABLE>
<CAPTION>
ISSUE AGE 25 ISSUE AGE 35 ISSUE AGE 45
- ------------- ------------- -------------
<S> <C> <C>
$ 4.63 $ 5.77 $ 7.74
<CAPTION>
ISSUE AGE 55 ISSUE AGE 65 ISSUE AGE 75
- ------------- ------------- -------------
<S> <C> <C>
$ 11.25 $ 22.38 $ 31.38
</TABLE>
19 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
The surrender charge will be calculated based on the
surrender charge percentages for the initial Specified
Face Amount and each increase in the Specified Face
Amount as shown in the table below.
<TABLE>
<CAPTION>
SURRENDER CHARGE
(AS A PERCENTAGE OF
THE
FIRST YEAR
YEAR SURRENDER CHARGE)
- ------------------------------------------------------------------------- ---------------------
<S> <C>
1 100.000
2 100.000
3 100.000
4 100.000
5 100.000
6 83.333
7 66.667
8 50.000
9 33.333
10 16.667
11 and thereafter 0.000
</TABLE>
A surrender charge will be applied for each decrease
in the Specified Face Amount except for decreases in
Specified Face Amount resulting from a change in death
benefit option or partial surrender. These surrender
charges will be applied in the following order:
- first, to the most recent increase;
- second, to the next most recent
increases, in reverse chronological
order; and
- third, to the initial Specified Face
Amount.
On a decrease in the initial Specified Face Amount,
you will pay a proportion of the full surrender charge
based on the ratio of the Face Amount decrease to the
Initial Face Amount. The surrender charge you pay on a
decrease that is less than the full amount of an increase
in Specified Face Amount will be calculated on the same
basis. Future surrender charges will be reduced by any
applicable surrender charges for a decrease in the
Specified Face Amount.
You may allocate any surrender charges resulting from
a decrease in the Specified Face Amount among the
Sub-Accounts and the Fixed Account Value. If you do not
specify the allocation, then the surrender charges will
be allocated proportionally among the Sub-Accounts and
the Fixed Account Value in excess of any Policy Debt.
20 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
PARTIAL SURRENDERS
If the applicable You may make a partial surrender of your Policy
death benefit option once each Policy Year after the first Policy Year by
is Option A and you written request to us. Each partial surrender must be
make a partial for at least $200, and no partial surrender may be
surrender of your made--
Policy, the - during the first ten Policy Years for more than 20
Specified Face percent of your Cash Surrender Value at the end of the
Amount will be first Valuation Date after we receive your request or
decreased. - thereafter for more than your Cash Surrender Value.
A partial surrender If the applicable death benefit option is Option
may result in taxes A, the Specified Face Amount will be decreased by the
and tax penalties. amount of the partial surrender. We will apply the
decrease 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.
We will not accept requests for a partial surrender
if the Specified Face Amount remaining in force after the
partial surrender would be less than the Minimum
Specified Face Amount. We will effect a partial surrender
at the next close of business on the New York Stock
Exchange after we receive your written request for
surrender.
POLICY LOANS
You may borrow from You may request a policy loan of up to 90% of
us using your Policy your Policy's Cash Value, decreased by the amount of any
as collateral. outstanding Policy Debt on the date the policy loan is
made. You may allocate the policy loan among the Sub-
Accounts and the Fixed Account Value. If you do not
specify the allocation, then the policy loan will be
allocated proportionally among the Sub-Accounts and the
Fixed Account Value in excess of any Policy Debt. Loan
amounts allocated to the Sub-Accounts will be
transferred to the Fixed Account Value. Your Policy will
terminate for no value subject to a Grace Period if the
Policy Debt exceeds the Cash Value. During the first
five Policy Years, however, your Policy will not
terminate if it satisfies the minimum premium test.
Interest on the policy loan will accrue daily at 4%
annually during Policy Years 1 through 10 and 3.25%
annually thereafter. This interest will 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
21 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
at the same rate and will be assessed 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.
A policy loan, whether or not repaid, will affect the
Policy Proceeds payable upon the insured's death and the
Account Value because the investment results of the
Sub-Accounts or the Fixed Account Value will apply only
to the non-loaned portion of the Account Value. The
longer a loan is outstanding, the greater the effect is
likely to be and, depending on the investment results of
the Sub-Accounts or the Fixed Account Value while the
loan is outstanding, the effect could be favorable or
unfavorable.
INVESTMENT PROGRAMS
DOLLAR COST AVERAGING. You may select, at no extra
charge, a dollar cost averaging program by allocating a
minimum of $5,000 to a Sub-Account designated by us. Each
month or quarter, a level amount will be transferred
automatically, at no cost, to one or more Sub-Accounts
chosen by you, up to a maximum of twelve. The program
continues until your Account Value allocated to the
program is depleted or you elect to stop the program.
The main objective of a dollar cost averaging program
is to minimize the impact of short-term price
fluctuations. Since the same dollar amount is transferred
to other available investment options at set intervals,
dollar cost averaging allows you to purchase more Units
(and, indirectly, more Fund shares) when prices are low
and fewer Units (and, indirectly, fewer Fund shares) when
prices are high. Therefore, a lower average cost per Unit
may be achieved over the long-term. A dollar cost
averaging program allows you to take advantage of market
fluctuations. However, it is important to understand that
a dollar cost averaging program does not assure a profit
or protect against loss in a declining market.
ASSET REBALANCING. Once your money has been
allocated among the investment options, the earnings may
cause the percentage invested in each investment option
to differ from your allocation instructions. You can
direct us to automatically rebalance your contract to
return to your allocation percentages
22 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
by selecting our asset rebalancing program. Rebalancing
will be on a calendar quarter basis and will occur on the
last business day of the quarter. The minimum amount of
each rebalancing is $1,000.
There is no charge for asset rebalancing. In
addition, rebalancing will not be counted against any
limit we may place on your number of transfers in a
Policy Year. You may not select dollar cost averaging and
asset rebalancing at the same time. We reserve the right
to modify, suspend or terminate this program at anytime.
We also reserve the right to waive the $1,000 minimum
amount for asset rebalancing.
ASSET ALLOCATION. One or more asset allocation
investment programs may be made available in connection
with your Policy, at no extra charge. An asset allocation
program provides for the allocation of your Account Value
among the available investment options. These programs
will be fully described in a separate brochure. You may
elect to enter into an asset allocation investment
program under the terms and conditions described in the
brochure.
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,
you may at any time transfer to another Sub-Account all
or a portion of the Account Value allocated to a
Sub-Account or to the Fixed Account Value. We will make
transfers pursuant to an authorized written or telephone
request to us. Telephone requests will be honored only if
we have a properly completed telephone authorization form
for you on file. We, our affiliates and the
representative from whom you purchased your Policy 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. For
transactions initiated by telephone, you will be required
to identify yourself by name and a personal
identification number.
Transfers may be requested by indicating the transfer
of either a specified dollar amount or a specified
percentage of the Fixed Account Value or the Sub-
Account's value from which the transfer will be made. If
you request a transfer based on a specified percentage of
the Fixed Account Value or 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 Fixed
Account Value or the Sub-Account's value at the time the
request is received. We reserve the right to limit the
number of Sub-Accounts to which you may allocate your
Account Value to not more than 20 Sub-Accounts.
23 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
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.
We reserve the right to restrict amounts transferred
to the Variable Account from the Fixed Account Value to
20% of that portion of the Account Value attributable to
the Fixed Account Value as of the end of the previous
Policy Year.
We reserve the right to restrict amounts transferred
to the Fixed Account Value from the Variable Account to
20% of that portion of the Account Value attributable to
the Variable Account as of the end of the previous Policy
Year. We further reserve the right to restrict amounts
transferred to the Fixed Account Value from the Variable
Account in the event the portion of the Account Value
attributable to the Fixed Account Value would exceed 30%
of the Account Value.
ACCOUNT VALUE
Your 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 Fixed Account Value. The
Account Value varies depending upon the Premiums paid,
Expense Charges Applied to Premium, Mortality and Expense
Risk Percentage charges, Monthly Expense Charges, Monthly
Cost of Insurance charges, partial surrenders, fees,
policy loans and the net investment factor (described
below) for the Sub-Accounts to which your Account Value
is allocated.
A VALUATION DATE is VARIABLE ACCOUNT VALUE. We measure the amounts
any day on which we, in the Sub- Accounts in terms of Units and Unit Values.
the applicable Fund, On any given date, the amount you have in a Sub-Account
and the NYSE are is equal to the Unit Value multiplied by the number of
open for business. Units credited to you in that Sub-Account. Amounts
THE VALUATION PERIOD allocated to a Sub-Account will be used to purchase
is the period of Units of that Sub-Account. Units are redeemed when you
time from one make partial surrenders, undertake policy loans or
determination of transfer amounts from a Sub-Account, and for the payment
Unit Values to the of Monthly Expense Charges, and Monthly Cost of
next. Insurance charges and other fees. 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 of the Sub- Account. 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.
24 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Transactions are processed on the date we receive a
premium at our Principal Office or any acceptable written
or telephonic request is received at our Principal
Office. 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 Valuation Date.
The INVESTMENT START The Account Value attributable to each
DATE is the date we Sub-Account of the Variable Account on the INVESTMENT
apply your first START DATE equals:
premium payment, - that portion of net premium received and allocated to
which will be the the Sub- Account, LESS
later of the Issue - that portion of the Monthly Expense Charges due on the
Date, the Policy policy date and subsequent Monthly Anniversary Days
Date or the through the Investment Start Date charged to the
Valuation Date we Sub-Account, LESS
receive a premium
equal to or in
excess of the
initial premium.
- that portion of the Monthly Cost of
Insurance deductions due from the
policy date through the Investment
Start Date charged to the Sub-Account.
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, 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
or from the Fixed Account Value during
the current Valuation Period, LESS
- any amounts transferred by you from
the Sub-Account to another Sub-Account
or to the Fixed Account Value 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 Fixed Account Value during the
current Valuation Period, LESS
- that portion of any surrender charges
associated with a decrease in the
Specified Face Amount charged to the
Sub-Account during the current
Valuation Period, LESS
- if a Monthly Anniversary Day occurs
during the current Valuation Period,
that portion of the Monthly Expense
25 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
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.
NET INVESTMENT FACTOR. The NET INVESTMENT FACTOR for
each Sub-Account for any Valuation Period is determined
by deducting the Mortality and Expense Risk Charge for
each day in the Valuation Period from the quotient of (1)
and (2) where:
(1) is the net result of --
- the net asset value of a Fund share
held in the Sub-Account determined as
of the end of the Valuation Period,
PLUS
- 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
- a per share credit or charge with
respect to any taxes reserved for by
us, or paid by us if not previously
reserved for, during the Valuation
Period which are determined by us 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.
The Mortality and Expense Risk Charge for the
Valuation Period is the Daily Risk Charge times the
number of days in the Valuation Period.
The net investment factor may be greater or less than
one.
FIXED ACCOUNT VALUE. The Fixed Account Value on the
Investment Start Date equals:
- that portion of net premium received
and allocated to the Fixed Account
Value accrued at interest, LESS
- that portion of the Monthly Expense
Charges due on the policy date and
subsequent Monthly Anniversary Days
through the Investment Start Date
charged to the Fixed Account Value
accrued at interest, LESS
26 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- that portion of the Monthly Cost of
Insurance deductions due from the
policy date through the Investment
Start Date charged to the Fixed
Account Value accrued at interest.
The Fixed Account Value on subsequent Valuation Dates
is equal to:
- the Fixed Account Value on the
preceding Valuation Date accrued at
interest, PLUS
- that portion of net premium received
and allocated to the Fixed Account
Value during the current Valuation
Period accrued at interest, PLUS
- any amounts transferred by you to the
Fixed Account Value from the Variable
Account during the current Valuation
Period accrued at interest, LESS
- any amounts transferred by you from
the Fixed Account Value to the
Variable Account during the current
Valuation Period accrued at interest,
LESS
- that portion of any partial surrenders
deducted from the Fixed Account Value
during the current Valuation Period
accrued at interest, PLUS
- any policy loan transferred from the
Variable Account to the Fixed Account
Value during the current Valuation
Period accrued at interest, LESS
- that portion of any surrender charges
associated with a decrease in the
Specified Face Amount charged to the
Fixed Account Value 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 Fixed Account
Value accrued at interest, 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 Fixed Account
Value accrued at interest.
The minimum guaranteed interest rate applicable to
the Fixed Account Value is 3% annually. Interest in
excess of the guaranteed rate may be applied in the
calculation of the Fixed Account Value at such increased
rates and in such manner as we may determine, based on
our expectations of future interest, mortality costs,
persistency, expenses and taxes. Interest credited will
be computed on a compound interest basis.
27 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
INSUFFICIENT VALUE. Your Policy will terminate for
no value, subject to a Grace Period described below if,
on a Valuation Date, a Monthly Anniversary Day occurred
during the Valuation Period and--
- your Policy's Cash Surrender Value is
equal to or less than zero or
- the Policy Debt exceeds the Cash
Value.
During the first five Policy Years, a policy will not
terminate by reason of insufficient value if it satisfies
the "minimum premium test," described below.
If on a Valuation Date a Monthly Anniversary Day
occurred during the Valuation Period and the Monthly
Expense Charge plus the Monthly Cost of Insurance plus
the Policy Debt exceed your Account Value, any Unpaid
Policy Charges will be increased by the amount in excess
of your Account Value. Any Unpaid Policy Charges will
accumulate interest at an annual rate of 3%.
MINIMUM PREMIUM TEST (NO-LAPSE GUARANTEE). A Policy
satisfies the minimum premium test if the premiums paid
less any partial surrenders less any Policy Debt exceed
the sum of the "Minimum Monthly Premiums" which applied
to the Policy in each Policy Month from the policy date
to the Valuation Date.
The applicable Minimum Monthly Premiums are specified
in your Policy. We will revise the Minimum Monthly
Premiums as a result of any of the following changes to a
Policy:
- an increase in the Specified Face
Amount;
- an increase in the cost of any rider;
- when requested by you, the addition of
any rider.
The revised Minimum Monthly Premiums will be
effective as of the effective date of the change to the
Policy and will remain in effect until again revised by
any of the above changes.
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
days from that Valuation Date for the payment of a
premium sufficient to keep the Policy in force. 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 your Policy 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
28 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
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
Unpaid Policy Charges 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
your Policy.
CHARGES AND DEDUCTIONS
EXPENSE CHARGES APPLIED TO PREMIUM. We will deduct a
charge from each premium payment as a sales load and for
our federal, state and local tax obligations, which we
will determine from time to time. The current charge is
5.25%. The maximum charge is guaranteed not to exceed
7.25%.
MORTALITY AND EXPENSE RISK CHARGE. This charge is
for the mortality and expense risks we assume with
respect to the Policy. It is based on an annual rate that
we apply against the Variable Account on a daily basis.
The Mortality and Expense Risk Charge will be determined
by us from time to time based on our expectations of
future interest, mortality costs, persistency, expenses
and taxes, but will not exceed 0.90% annually. Currently,
the charge is 0.80% for Policy Years 1 through 10 and
0.50% thereafter.
The mortality risk we assume is that the group of
lives insured under the Policies may, on average, live
for shorter periods of time than we estimated. The
expense risk we assume is that our costs of issuing and
administering Policies may be more than we estimated.
MONTHLY EXPENSE CHARGE. We will deduct a charge of
$8.00 from your Policy's Account Value each Policy Month
to cover our administrative costs. The Monthly Expense
Charge will be deducted proportionally from the Sub-
Accounts and the Fixed Account Value in excess of any
Policy Debt.
MONTHLY COST OF INSURANCE. We deduct a Monthly Cost
of Insurance charge from your Account Value to cover
anticipated costs of providing insurance coverage. The
Monthly Cost of Insurance deduction will be charged
proportionally to the amounts in the Sub-Accounts and the
Fixed Account Value in excess of any Policy Debt.
The Monthly Cost of Insurance equals the sum of (1),
(2) and (3) where:
29 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
(1) is the cost of insurance charge equal to the Monthly
Cost of Insurance rate (described below) multiplied
by the net amount at risk divided by 1,000;
(2) is the monthly rider cost for any riders which are a
part of your Policy (with the monthly rider cost, if
any riders are added, as described in the rider
itself); and
(3) is any additional insurance charge calculated as
specified in your Policy, for, among other reasons,
occupational or avocational risks.
The NET AMOUNT AT RISK equals:
- the death benefit divided by 1.00247;
LESS
- your Account Value on the Valuation
Date prior to assessing the monthly
expense charge and the cost of
insurance charges.
If there are increases in the Specified Face Amount
other than increases caused by changes in the death
benefit option, the cost of insurance charge described
above is determined separately for the initial Specified
Face Amount and each increase in the Specified Face
Amount. In calculating the net amount at risk, your
Account Value will first be allocated to the initial
death benefit and then to each increase in the Specified
Face Amount in the order in which the increases were
made.
MONTHLY COST OF INSURANCE RATES. The Monthly Cost of
Insurance rates (except for any such rate applicable to
an increase in the Specified Face Amount) are based on
the length of time your Policy has been in force and the
insured's sex (in the case of non-unisex Policies), Issue
Age, Class and underwriting rating, if any. The Monthly
Cost of Insurance rates applicable to each increase in
the Specified Face Amount are based on the length of time
the increase has been in force and the insured's sex (in
the case of non-unisex Policies), Issue Age, Class and
underwriting 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 costs, persistency, interest rates,
expenses and taxes, but will not exceed the Guaranteed
Maximum Monthly Cost of Insurance Rates based on the 1980
Commissioner's Standard Ordinary Smoker and Nonsmoker
Mortality Tables.
BASIS OF COMPUTATION. Guaranteed Maximum Monthly
Cost of Insurance Rates are based on the 1980
Commissioner's Standard Ordinary Smoker and Nonsmoker
Mortality Tables. The Guaranteed Maximum Monthly Cost of
Insurance Rates reflect any underwriting rating
applicable to the Policy. We have filed a detailed
statement of our methods for computing Cash Values with
the
30 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
insurance department in each jurisdiction where the
Policy was delivered. These values equal or exceed the
minimum required by law.
WAIVERS; REDUCED CHARGES; CREDITS; BONUS GUARANTEED
INTEREST RATES
We may reduce or waive the sales load or surrender
charge, credit additional amounts, or grant bonus
interest rates in situations where selling and/or
maintenance costs associated with the Policies are
reduced, sales of large Policies, and certain group or
sponsored arrangements. In addition, we may waive
charges, credit additional amounts, or grant bonus
interest rates in connection with Policies sold to our or
our affiliates' officers, directors and employees.
MATURITY DATE EXTENSION
The Maturity date of your Policy will be extended
beyond the original Maturity date shown in your Policy,
if you so request in writing at our Principal Office
prior to the original Maturity date and the Policy has a
Cash Value on the original Maturity date. The new
Maturity date will be the one you request.
After the original Maturity date (if you have
requested a new Maturity date):
- We will not accept any more premium
payments for your Policy.
- No more deductions for the Monthly
Expense Charges or for Monthly Cost of
Insurance charges will be made from
your Account Value.
- The death benefit will be your Account
Value on the date of the insured's
death.
- Your Policy's reinstatement provisions
will not apply.
Except as provided above, an extension of the
Maturity date does not alter your Policy.
If the Maturity date is extended, your Policy may not
qualify as life insurance beyond the original Maturity
date and may be subject to tax consequences. We recommend
that you receive counsel from your tax adviser. We will
not be responsible for any adverse tax consequences
resulting from the extension of the Maturity date of your
Policy.
31 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUPPLEMENTAL BENEFITS
The following supplemental benefit riders are
available, subject to certain limitations described
below. There is no charge for the accelerated benefits
rider. An additional cost of insurance will be charged
for each of the other riders which is in force as a part
of the Monthly Cost of Insurance charge.
ACCELERATED BENEFITS RIDER. Under this rider, we
will pay you, at your written request in a form
satisfactory to us, an "accelerated benefit" if the
insured is terminally ill. An insured is considered
"terminally ill" if the insured has a life expectancy of
12 months or less due to illness or physical condition.
We will require proof, satisfactory to us, of the
insured's terminal illness, including, but not limited
to, certification by an independent physician. No
accelerated benefit is payable, however, unless your
Policy has been in force for at least two years following
its Issue Date or the date of its last reinstatement.
The accelerated benefit payment will be equal to that
portion of your Policy's death benefit requested by you,
not to exceed the lesser of (a) 75% of the amount of the
death benefit or (b) $250,000 (the "Accelerated Amount"),
subject to the following adjustments:
- We will discount the Accelerated
Amount based on an annual interest
rate, not to exceed the greater of:
(a) the yield on 90-day Treasury bills
on the day we receive your request; or
(b) the statutory maximum policy loan
interest rate.
- If you have an outstanding policy loan
on the date we approve your request,
we will reduce the Accelerated Amount
in partial payment of the policy loan
by an amount equal to the amount of
the policy loan multiplied by the
ratio of the Accelerated Amount to the
amount of your Policy's death benefit
(the "Eligible Amount").
- We will reduce the Accelerated Amount
by the amount of any administrative
fee, not to exceed $150, in effect at
the time we receive your request.
You may request only one accelerated benefit payment.
This rider will terminate upon payment of an accelerated
benefit, and the Specified Face Amount and Account Value
of your Policy will be reduced by the ratio of the
Accelerated Amount to the Eligible Amount.
ACCIDENTAL DEATH BENEFIT RIDER. Under this rider, we
will pay the accidental death benefit specified in your
Policy when we receive due proof of the insured's
accidental death and that death occurred while this rider
was in
32 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
force, on or after the insured's first birthday and
within ninety days after the date of the accident.
"Accidental death" means that the insured died as a
direct result, independent of all other causes, (a) from
an injury sustained solely by external or violent
accident, or (b) by an accidental drowning, excluding
death caused by certain specified risks. If you change
your Policy's Specified Face Amount, the accidental death
benefit will not change unless you specifically request
such a change. This rider will terminate on the earliest
of (a) the nearest policy anniversary to the insured's
70th birthday or (b) when the Policy lapses because of
insufficient Cash Value.
MONTHLY RIDER COST. The cost of this rider will be
part of the Monthly Cost of Insurance charge described in
this prospectus. The total monthly rider cost will equal
a rate which varies by the insured's issue age, sex and
rating class multiplied by the amount of the accidental
death benefit.
WAIVER OF MONTHLY DEDUCTIONS RIDER. Under this
rider, we will waive the monthly deductions under your
Policy retroactive to the date of total disability when
the insured suffers a total disability, if the insured's
total disability commences while this rider is in force
and continues for six months. We will continue to waive
the monthly deduction for as long as the disability
continues. We must receive written notice and due proof
before we will waive the monthly deductions. We may
require from time to time additional proof that the
disability is continuing, but not more frequently than
once per year after the disability has continued for two
years. We will not waive the monthly deductions--
- for any month before the insured's
fifth birthday;
- for any month which is more than one
year before we receive a notice of the
total disability; or
- if the total disability is caused by
or results from certain specified
risks.
A "total disability" is any incapacity resulting from
bodily injury or disease which--
- during the first 24 months of the
incapacity prevents the insured from
performing substantially all of the
major duties of the insured's
occupation; and
- if the incapacity continues beyond 24
months, prevents the insured from
doing any work for which the insured
is reasonably qualified to perform by
reason of training, education or
experience.
Even if the insured can work, the following
constitutes a total disability:
- total and permanent loss of sight of
both eyes or total and permanent loss
of hearing in both ears;
33 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- severance of both hands, both feet, or
one hand and one foot.
While the insured's total disability is continuing,
you cannot change your Policy's--
- Specified Face Amount, unless
otherwise permitted under the
provisions of another rider to your
policy; or
- your death benefit option.
This rider will terminate on the earliest of:
- the nearest policy anniversary to the
insured's 65th birthday, unless the
insured's total disability is
continuing, and if the total
disability commences before the policy
anniversary nearest to the insured's
60th birthday; or
- the nearest policy anniversary to the
insured's 65th birthday, if the total
disability commenced on or after the
policy anniversary nearest to the
insured's 60th birthday; or
- the date that the Policy terminates in
accordance with its Grace Period
provision.
If this rider terminates because your Policy lapses,
we will reinstate the rider if certain specified
conditions are met.
MONTHLY RIDER COST. The cost of this rider will be
part of the Monthly Cost of Insurance charge described in
this prospectus. The total monthly rider cost will equal
a rate based on the insured's issue age, sex and rating
class multiplied by the net amount at risk.
PAYMENT OF STIPULATED AMOUNT RIDER. Under this
rider, we will make a monthly payment of the "stipulated
amount" when the insured suffers a total disability, if
the insured's total disability commences while this rider
is in force and continues for six months. We will
continue to make a payment of that amount for as long as
the disability continues. We must receive written notice
and due proof before we will make a payment. We may
require from time to time additional proof that the
disability is continuing, but not more frequently than
once per year after the disability has continued for five
years. We will not make payments under this rider if the
total disability is caused by or results from certain
specified risks. This rider will not apply to any Monthly
Anniversary Day that occurs before the insured's fifth
birthday or that was due more than one year before we
first received notice of the insured's total disability.
34 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
A "total disability" is any incapacity resulting from
bodily injury or disease which--
- during the first 60 months of the
incapacity prevents the insured from
performing substantially all of the
major duties of the insured's
occupation; and
- if the incapacity continues beyond 60
months, prevents the insured from
doing any work for which the insured
is reasonably qualified to perform by
reason of training, education or
experience.
Even if the insured can work, the following
constitutes a total disability:
- total and permanent loss of sight of
both eyes or total and permanent loss
of hearing in both ears;
- severance of both hands, both feet, or
one hand and one foot.
You may change the stipulated amount by written
request to our Principal Office. An increase in the
stipulated amount is subject to our underwriting and
administrative rules in effect at the time. If we make a
change to this Policy at your request and if that change
results in a reduction of the amount of premium you may
pay for this Policy under applicable tax law, we will
reduce the stipulated amount to conform to that
reduction. We will reduce the cost of insurance for this
rider appropriately. We will inform you in writing of
these reductions.
You may not change the frequency of premium payment
for your Policy or increase the stipulated amount while
the insured's total disability is continuing.
This rider will terminate on the earliest of:
- The policy anniversary nearest to the
insured's 65th birthday. However, if
the insured's total disability
commenced before that policy
anniversary, the benefit provided by
this rider will continue until the end
of the benefit period specified in
your policy. No total disability of
the insured's that commences on or
after the policy anniversary nearest
to the insured's 65th birthday is
covered under this rider.
- The date your Policy lapses because of
insufficient value.
- The date your Policy is surrendered
for its Cash Surrender Value.
- The date of death of the insured.
35 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- The date we receive your written
request that it be terminated.
MONTHLY RIDER COST. The monthly cost for this rider
is equal to the stipulated amount times a rate which
varies by factors including the insured's Issue Age, sex,
and rating class.
TERMINATION OF POLICY
Your Policy will terminate 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 Maturity date.
REINSTATEMENT
Before the insured's death, we will reinstate your
Policy prior to its Maturity date, provided that the
Policy has not been surrendered and you--
- make a request for reinstatement
within five years from the date of
termination;
- submit satisfactory evidence of
insurability to us; and
- pay an amount sufficient to put your
Policy in force.
To put your Policy in Force, you must pay an amount
of at least--
- the Unpaid Policy Charges at the end
of the Grace Period; plus
- any excess of the Policy Debt over the
Cash Value at the end of the Grace
Period; plus
- three times the Monthly Cost of
Insurance charges applicable at the
date of reinstatement; plus
- three times the Monthly Expense
Charge.
During the first five Policy Years, an amount is
sufficient to put your Policy in force if it meets the
minimum premium test.
A reinstated Policy's Specified Face Amount may not
exceed the Specified Face Amount at the time of
termination. Your Account Value on the reinstatement date
will reflect:
- the Account Value at the time of
termination; PLUS
- net premiums attributable to premiums
paid to reinstate the Policy; LESS
36 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- the Monthly Expense Charge; LESS
- the Monthly Cost of Insurance charge
applicable on the date of
reinstatement.
The effective date of reinstatement will be the
Monthly Anniversary Day that falls on or next follows the
date we approve your request.
Any Policy Debt at the time of termination must be
repaid upon the reinstatement of the Policy or carried
over to the reinstated Policy.
If your Policy was subject to surrender charges when
it lapsed, the reinstated Policy will be subject to
surrender charges as if it had not terminated.
The incontestability provision of the Policy will
apply to the Policy after reinstatement as regards
statements made in the application for reinstatement. The
suicide provision of the Policy will apply to the policy
after reinstatement. In those provisions of a reinstated
Policy, "Issue Date" means the effective date of
reinstatement.
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 satisfactory to
us giving rise to such payment 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 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
policyowners; 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.
RIGHTS OF OWNER
While the insured is alive, unless you have assigned
any of these rights, you may:
37 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- 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 other 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.
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 satisfactory to
us of the requested action. 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 we received it.
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.
OTHER POLICY PROVISIONS
ADDITION, DELETION OR SUBSTITUTION OF
INVESTMENTS. We may decide to add new Sub-Accounts at
any time. Also, shares of any or all of the Funds 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 Fund 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,
to the extent necessary. In addition, the investment
policies of the Sub-Accounts will not be changed without
38 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
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 described in this paragraph, we may make
appropriate amendments to the Policy to reflect the
substitution.
ENTIRE CONTRACT. Your entire contract with us
consists solely of the Policy, including the attached
copy of your Policy Application and any attached copies
of supplemental applications for increases in the
Specified Face Amount.
ALTERATION. Sales representatives do not have any
authority to either alter or modify your 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 a modification--
- is necessary to make the Policy or the
Variable Account comply with any law
or regulation issued by a governmental
agency to which we are or the Variable
Account is subject;
- 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;
- 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 amendments 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 Principal Office 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 we
received it. We are not responsible for the validity or
legal effect of any assignment.
NONPARTICIPATING. The Policy does not pay dividends.
The Policy does not share in our profits or surplus
earnings.
39 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
MISSTATEMENT OF AGE OR SEX (NON-UNISEX POLICY). If
the age or sex (in the case of a non-unisex Policy) of
the insured is stated incorrectly, 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 sex (for a
non-unisex Policy).
Misstatement discovered prior to death--Your Account
Value will be recalculated from the policy date using
the Monthly Cost of Insurance Rates based on the
correct age or sex (for a non-unisex Policy).
SUICIDE. If the insured, whether sane or insane,
commits suicide within two years after your Policy's
Issue Date, we will not pay any part of the Policy
Proceeds. We will refund the premiums paid, less the
amount of any Policy Debt and any partial surrenders.
If the insured, whether sane or insane, commits
suicide within two years after the effective date of an
increase in the Specified Face Amount, then our liability
as to that increase will be the cost of insurance for
that increase.
INCONTESTABILITY. All statements made in the
application or in a supplemental application are
representations and not warranties. We relied and will
rely on those 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. 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.
40 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
ILLUSTRATIONS. After the first Policy Year, we will
provide you with an illustration of future Account Values
and death benefits upon request. We may charge a nominal
fee not to exceed $25 per illustration.
PERFORMANCE INFORMATION
We may present We may sometimes publish performance information
mutual fund related to the Fund, the Variable Account or the Policy
portfolio in advertising, sales literature and other promotional
performance and materials. This information is based on past investment
hypothetical Policy results and is not an indication of future performance.
illustrations in
sales literature.
PORTFOLIO PERFORMANCE
We may publish a mutual fund portfolio's TOTAL RETURN
or AVERAGE ANNUAL TOTAL RETURN. Total return is the
change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains.
Average annual total return is a hypothetical rate of
return that, if achieved annually, would have produced
the same total return over a stated period if performance
had been constant over the entire period. Average annual
total returns smooth variations in performance, and are
not the same as actual year-by-year results.
We may also publish a mutual fund portfolio's YIELD.
Yield refers to the income generated by an investment in
a portfolio over a given period of time, expressed as an
annual percentage rate. When a yield assumes that income
earned is reinvested, it is called an EFFECTIVE YIELD.
SEVEN-DAY YIELD illustrates the income earned by an
investment in a money market fund over a recent seven-day
period.
TOTAL RETURNS AND YIELDS QUOTED FOR A MUTUAL FUND
PORTFOLIO INCLUDE THE INVESTMENT MANAGEMENT FEES AND
OTHER EXPENSES OF THE PORTFOLIO, BUT DO NOT INCLUDE
CHARGES AND DEDUCTIONS ATTRIBUTABLE TO YOUR POLICY. These
expenses would reduce the performance quoted.
ADJUSTED PORTFOLIO PERFORMANCE
We may publish a mutual fund portfolio's total return
and yields adjusted for charges against the assets of the
Variable Account.
We may publish total return and yield quotations
based on the period of time that a mutual fund portfolio
has been in existence. The results for any period prior
to any Policy being offered will be calculated as if the
Policy had been offered during that period of time, with
all charges assumed to be those applicable to the Policy.
41 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
OTHER INFORMATION
Performance information may be compared, in reports
and promotional literature, to:
- 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;
- other groups of variable life variable
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
- 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 expenses.
We may provide policy information on various topics
of interest to you and other prospective policyowners.
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 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 a Policy and the
characteristics of, and market for,
such financial instruments.
42 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
We do not make any The following summary provides a general
guarantees about the description of the federal income tax considerations
Policy's tax status. associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is
NOT intended as tax advice. You should consult counsel
or other competent tax advisers for more complete
information. This discussion is based upon our
understanding of the present federal income tax laws as
they are currently interpreted by the Internal Revenue
Service (the "IRS"). We make no representation as to the
likelihood of continuation of the present federal income
tax laws or of the current interpretations by the IRS.
WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF
ANY POLICY OR ANY TRANSACTION REGARDING THE POLICY.
The Policy may be used in various arrangements,
including non-qualified deferred compensation or salary
continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of
each individual arrangement. Therefore, if the use of the
Policy in any such arrangement is contemplated, you
should consult a qualified tax adviser for advice on the
tax attributes of the particular arrangement.
TAX STATUS OF THE POLICY
We believe the A Policy has certain tax advantages when treated
Policy will be as a life insurance contract within the meaning of
treated as a life Section 7702 of the Internal Revenue Code of 1986, as
insurance contract amended (the "Code"). We believe that the Policy meets
under federal tax the Section 7702 definition of a life insurance contract
laws. and will take whatever steps are appropriate and
reasonable to attempt to cause the Policy to comply with
Section 7702.
DIVERSIFICATION OF INVESTMENTS
Section 817(h) of the Code requires that the Variable
Account's investments be "adequately diversified" in
accordance with certain Treasury regulations. We believe
that the Variable Account will be adequately diversified.
In certain circumstances, the owner of a variable
life insurance policy may be considered, for federal
income tax purposes, the owner of the assets of the
variable account used to support the policy. In those
circumstances, income and gains from the variable account
assets would be includible in the variable policyowner's
gross income. We do not know what standards will be
established, if any, in the regulations or rulings which
the Treasury has stated it expects to issue on this
question. We therefore reserve the right to modify the
Policy as
43 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
necessary to attempt to prevent a policyowner from being
considered the owner of a pro-rata share of the assets of
the Variable Account.
The following discussion assumes that your Policy
will qualify as a life insurance contract for federal
income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
Death benefits do LIFE INSURANCE DEATH BENEFIT PROCEEDS. In
not incur federal general, the amount of the death benefit payable under
income tax. your Policy is excludible from your gross income under
the Code.
Investment gains are TAX DEFERRED ACCUMULATION. Any increase in your
normally not taxed Account Value is generally not taxable to you unless you
unless distributed receive or are deemed to receive amounts from the Policy
to you before the before the insured dies.
insured dies. DISTRIBUTIONS. If you surrender your Policy,
the amount you will receive as a result will be subject
to tax as ordinary income to the extent that amount
exceeds the "investment in the contract," which is
generally the total of premiums and other consideration
paid for the Policy, less all amounts previously
received under the Policy to the extent those amounts
were excludible from gross income.
Depending on the circumstances, any of the following
transactions may have federal income tax consequences:
- the exchange of a Policy for a life
insurance, endowment or annuity
contract;
- a change in the death benefit option;
- a policy loan;
- a partial surrender;
- a surrender;
- a change in the ownership of a Policy;
- the addition of an accelerated death
benefit rider; or
- an assignment of a Policy.
In addition, federal, state and local transfer and
other tax consequences of ownership or receipt of Policy
Proceeds will depend on your circumstances and those of
the named beneficiary. Whether partial surrenders (or
other amounts deemed to be distributed) constitute income
subject to federal income tax depends, in part, upon
whether your Policy is considered a "modified endowment
contract."
44 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
If you pay more MODIFIED ENDOWMENT CONTRACTS. Section 7702A of
premiums than the Code treats certain life insurance contracts as
permitted under the "modified endowment contracts" ("MECs"). The Code
seven-pay test, your defines MECs as those Policies issued or materially
Policy will be a changed after June 21, 1988 on which the total premiums
MEC. paid during the first seven years exceed the amount that
would have been paid if the Policy provided for paid-up
benefits for seven annual premiums ("seven-pay test").
We will monitor the Policy to determine whether
additional premium payments would cause the Policy to
become a MEC and will take certain steps in an attempt to
avoid this result.
Further, if a transaction occurs which decreases the
face amount of your Policy during the first seven years,
we will retest your Policy, as of the date of its
purchase, based on the lower face amount to determine
compliance with the seven-pay test. Also, if a decrease
in face amount occurs within seven years of a "material
change," we will retest your Policy for compliance as of
the date of the "material change." Failure to comply in
either case would result in the Policy's classification
as a MEC regardless of our efforts to provide a payment
schedule that would not otherwise violate the seven-pay
test.
The rules relating to whether a Policy will be
treated as a MEC are complex and cannot be fully
described in the limited confines of this summary.
Therefore, you should consult with a competent tax
adviser to determine whether a particular transaction
will cause your Policy to be treated as a MEC.
If your Policy DISTRIBUTIONS UNDER MODIFIED ENDOWMENT
becomes a MEC, CONTRACTS. If treated as a MEC, your Policy will be
partial surrenders, subject to the following tax rules:
loans and surrenders - First, partial surrenders are treated as ordinary
may incur taxes and income subject to tax up to the amount equal to the
tax penalties. excess (if any) of your Account Value immediately
before the distribution over the "investment in the
contract" at the time of the distribution.
- Second, policy loans and loans secured by a Policy
are treated as partial surrenders and taxed
accordingly. Any past-due loan interest that is added
to the amount of the loan is treated as a loan.
- Third, a 10 percent additional income tax is imposed
on that portion of any distribution (including
distributions upon surrender), policy loan, or loan
secured by a Policy, that is included in income,
except where the distribution or loan is:
- made when you are age 59 1/2 or older;
- attributable to your becoming
disabled; or
45 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- is part of a series of substantially
equal periodic payments for the
duration of your life (or life
expectancy) or for the duration of the
longer of your or the beneficiary's
life (or life expectancies).
DISTRIBUTIONS UNDER A POLICY THAT IS NOT A MEC. If
your Policy is not a MEC, a distribution is generally
treated first as a tax-free recovery of the "investment
in the contract," and then as a distribution of taxable
income to the extent the distribution exceeds the
"investment in the contract." An exception is made for
cash distributions that occur in the first 15 Policy
Years as a result of a decrease in the death benefit or
other change which reduces benefits under the Policy
which are made for purposes of maintaining compliance
with Section 7702. Such distributions are taxed in whole
or part as ordinary income (to the extent of any gain in
the Policy) under rules prescribed in Section 7702.
If your Policy is not a MEC, policy loans and loans
secured by the Policy are generally not treated as
distributions. Such loans are instead treated as your
indebtedness.
Finally, if your Policy is not a MEC, distributions
(including distributions upon surrender), policy loans
and loans secured by the Policy are not subject to the 10
percent additional tax.
POLICY LOAN INTEREST. Generally, no tax deduction is
allowed for interest paid or accrued on any indebtedness
under a Policy. In addition, if the policyowner is not a
natural person, or is a direct or indirect beneficiary
under the Policy, Section 264(f) of the Code disallows a
pro-rata portion of the taxpayer's otherwise allowable
interest expense deduction. This rule may not, however,
apply if you are such a policyowner engaged in a trade
business and the Policy covers an officer, director,
employee, or 20 percent owner of your business, within
the meaning of Section 264(f)(4). You should consult your
tax adviser for further guidance on these issues.
MULTIPLE POLICIES. All modified endowment contracts
issued by us (or our affiliates) to you during any
calendar year will be treated as a single MEC for
purposes of determining the amount of a policy
distribution which is taxable to you.
46 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
We may be required FEDERAL INCOME TAX WITHHOLDING. We will
to withhold taxes withhold and remit to the federal government the amount
from certain dis- of any tax due on that portion of a policy distribution
tributions to you. which is taxable if we do not have a valid social
security number for you, unless you direct us otherwise
in writing at or before the time of the distribution. As
the policyowner, however, you will be responsible for
the payment of any taxes and early distribution
penalties that may be due on policy distributions,
regardless of whether those amounts are subject to
withholding.
OUR TAXES
As a result of the Omnibus Budget Reconciliation Act
of 1990, we are currently and are generally required to
capitalize and amortize certain policy acquisition
expenses over a 10-year period rather than currently
deducting such expenses. This so-called "deferred
acquisition cost" tax ("DAC tax") applies to the deferred
acquisition expenses of a Policy and results in a
significantly higher corporate income tax liability for
us.
At present, we do not assess any charge against the
assets of the Variable Account for any federal, state or
local taxes that we incur which may be attributable to
the Variable Account or any Policy. We, however, reserve
the right in the future to assess a charge against the
assets of the Variable Account for any such taxes or
other economic burdens resulting from the application of
any tax laws that we determine to be properly
attributable to the Variable Account or any Policy.
DISTRIBUTION OF POLICY
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. and who have entered into
distribution agreements with us and our general
distributor, Clarendon Insurance Agency, Inc.
("Clarendon"), One Sun Life Executive Park, Wellesley
Hills, Massachusetts 02481. Clarendon is our wholly-owned
subsidiary and is registered with the Securities and
Exchange Commission under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Clarendon also
acts as the general distributor of certain variable
annuity contracts and other variable life insurance
contracts we issue.
Gross first year commissions plus any expense
allowance payments we pay on the sale of the Policy may
vary with the sales agreement with broker-dealers
depending on the particular circumstances, but is not
expected to exceed 90% of the target premium, which will
vary based on the insured's age, sex and
47 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
rating Class, plus 3% of any excess premium payments.
Gross renewal commissions in Policy Years 2 through 10
will not exceed 3% of actual premium payment, and will
not exceed 1% in Policy Years 11 and thereafter. In
addition, we may also pay override payments, expense
allowances, bonuses, wholesaler fees, and training
allowances. In Policy Year 3 and thereafter, 0.10% of the
Account Value per annum will be paid to broker-dealers.
VOTING RIGHTS
We are the legal owner of all shares of the Funds
held in the Sub-Accounts of the Variable Account, and as
such have the right to vote upon matters that are
required by the 1940 Act to be approved or ratified by
the shareholders of the Funds and to vote upon any other
matters that may be voted upon at a shareholders'
meeting. We will, however, vote shares held in the
Sub-Accounts in accordance with instructions received
from policyowners who have an interest in the respective
Sub-Accounts.
We will vote shares held in each Sub-Account for
which no timely instructions from policyowners are
received, together with shares not attributable to a
Policy, in the same proportion as those shares in that
Sub-Account for which instructions are received. Should
the applicable federal securities laws change so as to
permit us to vote shares held in the Variable Account in
our own right, we may elect to do so.
The number of shares in each Sub-Account for which a
policyowner may give instructions is determined by
dividing the portion of the Account Value derived from
participation in that Sub-Account, if any, by the value
of one share of the corresponding Fund. We will determine
the number as of a date we choose, but not more than 90
days before the shareholders' meeting. Fractional votes
are counted. Voting instructions will be solicited in
writing at least 14 days prior to the shareholders'
meeting.
We may, if required by state insurance regulators,
disregard voting instructions if those instructions would
require shares to be voted so as to cause a change in the
sub-classification or investment policies of one or more
of the Funds, or to approve or disapprove an investment
management contract. In addition, we may disregard voting
instructions that would require changes in the investment
policies or investment adviser, provided that we
reasonably disapprove of those changes in accordance with
applicable federal regulations. If we disregard voting
instructions, we will advise you of that action and our
reasons for it in our next communication to policyowners.
48 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
OUR DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers 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, those
directors and officers 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. The asterisks below denote the year
that the indicated director was elected to our board of
directors.
DONALD A. STEWART, 52, Chairman and Director (1996*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Chairman, Chief Executive Officer and a
Director of Sun Life Assurance Company of Canada;
Chairman and a Director of Sun Life Insurance and Annuity
Company of New York; and a Director of Massachusetts
Financial Services Company, Sun Life Financial Services
Limited, Spectrum United Holdings, Inc. and Sun Life of
Canada UK Holdings, plc.
C. JAMES PRIEUR, 47, President and Director (1998*)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is President of Sun Life Assurance Company of
Canada; President and a Director of Sun Life Insurance
and Annuity Company of New York; Chairman and a Director
of Sun Life of Canada (U.S.) Distributors, Inc. and Sun
Capital Advisers, Inc.; Chairman of the Board and
Executive Vice President, Sun Capital Advisers Trust,
President and a Director of Sun Life of Canada (U.S.)
Holdings, Inc., Sun Life Assurance Company of
Canada--U.S. Operations Holdings, Inc., Sun Life of
Canada (U.S.) Financial Services Holdings, Inc., Sun
Canada Financial Co., Sun Life of Canada (U.S.) SPE 97-1,
Inc., and Sun Benefit Services Company; and a Director of
Clarendon Insurance Agency, Inc., Sun Life Financial
Services, Ltd and Sun Life Information Services Ireland
Limited.
JOHN D. MCNEIL, 65, Director (1982*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is a Director of Sun Life Assurance Company of
Canada; a Director of Massachusetts Financial Services
Company and Sun Life Insurance and Annuity Company of New
York; a Trustee of MFS/Sun Life Series Trust; Chairman
and
49 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
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, Canadian Pacific, Ltd. and Canadian Pacific
Securities (Ontario) Limited.
DAVID D. HORN, 57, Director (1985*)
Strong Road
New Vineyard, ME 04956
He was formerly Senior Vice President and General
Manager for the United States of Sun Life Assurance
Company of Canada, retiring in December, 1997. He is a
Director of Sun Life Insurance and Annuity Company of New
York; a Trustee of MFS/Sun Life Series Trust; 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.
ANGUS A. MACNAUGHTON, 67, 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., Varian Associates, Inc., Diversified
Collection Services, Inc., the San Francisco Opera,
Genstar Investment LLC and Genstar Capital Corporation;
and Vice Chairman and a Director of Barrick Gold
Corporation.
JOHN S. LANE, 64, 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 Life
Insurance and Annuity Company of New York.
50 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
RICHARD B. BAILEY, 72, Director (1983*)
63 Atlantic Ave
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.
M. COLYER CRUM, 66, Director (1986*)
104 Westcliff Street
Weston, Massachusetts 02193
He is Professor Emeritus of the Harvard Business
School; Chairman and a Director of Phaeton International
N.V.; a Director of Sun Life Assurance Company of Canada,
Sun Life Insurance and Annuity Company of New York,
Cambridge Bancorp, Cambridge Trust Company, Merrill Lynch
Ready Assets Trust, Merrill Lynch Basic Value Fund, Inc.,
Merrill Lynch Global Growth Fund, Inc., Merrill Lynch
U.S. Treasury Money Fund, Merrill Lynch Special Value
Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill
Lynch U.S.A. Government Reserves, MuniVest Florida Fund,
MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey
Fund, Inc., MuniYield Michigan Insured Fund, Inc., and
MuniYield New Jersey Insured Fund, Inc.; and a Trustee of
Merrill Lynch Global Resources Trust, Merrill Lynch Ready
Assets Trust, MuniYield Florida Insured Fund, and
MuniYield Pennsylvania Fund. Prior to July, 1996, he was
a Professor at the Harvard Business School.
S. CAESAR RABOY, 62, Director (1996*)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is a former Senior Vice President and Deputy
General Manager for the United States of Sun Life
Assurance Company of Canada; a Director of Sun Life
Insurance and Annuity Company of New York; Vice President
and a Director of Sun Life Financial Services Limited;
and a Director of Sun Life of Canada (U.S.) Distributors,
Inc. and Clarendon Insurance Agency, Inc.
JAMES M.A. ANDERSON, 49, Vice President, Investments
(1998)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Investments of Sun Life
Assurance Company of Canada and Sun Life Insurance and
Annuity Company of New York; President and Chief
Executive Officer of Sun Capital Advisers Trust;
President and a Director of Sun Capital Advisers, Inc.;
Vice President and a Director of Sun Life of Canada
(U.S.) Holdings, Inc., Sun Life of Canada (U.S.)
Financial
51 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Services Holdings, Inc. and Sun Life Assurance Company of
Canada--U.S. Operations Holdings, Inc.; Vice President of
Sun Life of Canada (U.S.) Distributors, Inc. and Sun
Canada Financial Co.; and a Director of Clarendon
Insurance Agency, Inc. and Sun Benefit Services Company
Inc.
L. BROCK THOMSON, 57, 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 Life of Canada (U.S.)
Distributors, Inc., Sun Benefit Services Company, Inc.,
Sun Life Insurance and Annuity Company of New York, and
Clarendon Insurance Agency, Inc.
ROBERT P. VROLYK, 45, Vice President, Finance and Actuary
(1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Finance of Sun Life Assurance
Company of Canada; Vice President, Actuary and Controller
of Sun Life Insurance and Annuity Company of New York;
Vice President and a Director of Sun Life of Canada
(U.S.) Holdings, Inc., Sun Life of Canada (U.S.)
Financial Services Holdings, Inc., Sun Life Assurance
Company of Canada--U.S. Operations Holdings, Inc., Sun
Life of Canada (U.S.) Distributors, Inc. and Sun Canada
Financial Co.; Vice President, Treasurer and a Director
of Sun Capital Advisers, Inc.; Treasurer and a Director
of Sun Life of Canada (U.S.) SPE 97-1, Inc.; and a
Director of Clarendon Insurance Agency, Inc., Sun Benefit
Services Company, Inc. and Sun Life Information Services
Ireland, Ltd.
PETER F. DEMUTH, 41, Vice President, Chief Counsel and
Assistant Secretary (1998)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He is Vice President and Chief Counsel of U.S.
Operations for Sun Life Assurance Company of Canada; Vice
President and Chief Counsel for Sun Life Insurance and
Annuity Company of New York; a Director of Sun Life of
Canada (U.S.) Holdings, Inc., Sun Life of Canada (U.S.)
Financial Services Holdings, Inc. and Sun Life Assurance
Company of Canada--U.S. Operations Holdings, Inc. Prior
to February, 1998, he was a partner at the firm of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
52 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
ELLEN B. KING, 42, Assistant Counsel and Secretary (1998)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
She is Assistant Counsel and Secretary of Sun Life
Assurance Company of Canada and Secretary of Sun Life
Insurance and Annuity Company of New York.
ROBERT K. LEACH, 43, Vice President, Finance and Product
(1996)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He has been affiliated with Sun Life Assurance
Company of Canada since January, 1987 in various
management positions. In July, 1996 he was appointed Vice
President, Annuities. Prior to 1987 he was a 2nd Vice
President at New England Life Insurance Company.
EDWARD J. RONAN, 45, Vice President, Retirement Products
and Services (1997)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He has been affiliated with Sun Life Assurance
Company of Canada since August, 1997. From June, 1987 to
July, 1997 he was Vice President, Division Manager at
First Data Investor Services Group.
Our directors, officers and employees are covered
under a commercial blanket bond and a liability policy.
The directors, officers and employees of Clarendon
Insurance Agency, Inc. are covered under a fidelity bond.
OTHER INFORMATION
STATE REGULATION
We are subject to the laws of Delaware governing life
insurance companies and to regulation by Delaware's
Commissioner of Insurance, whose agents periodically
conduct an examination of our financial condition and
business operations. We are also subject to the insurance
laws and regulations of the jurisdictions in which we are
authorized to do business.
We are required to file an annual statement with the
insurance regulatory authority of those jurisdictions
where we are authorized to do business relating to our
business operations and financial condition as of
December 31st of the preceding year.
53 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
LEGAL PROCEEDINGS
There are no pending legal proceedings which would
have a material adverse effect on the Variable Account.
We are engaged in various kinds of routine litigation
which, in our judgment, is not material to the Variable
Account.
EXPERTS
Actuarial matters concerning the policy have been
examined by Georges C. Rouhart, FSA, MAAA, Product
Officer.
ACCOUNTANTS
Deloitte & Touche LLP have audited our financial
statements included in this prospectus. There are no
financial statements for the Variable Account because it
had not commenced operations as of the date of this
prospectus.
REGISTRATION STATEMENTS
This prospectus is part of a registration statement
that has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 with respect
to the Policy. It does not contain all of the information
set forth in the registration statement and the exhibits
filed as part of the registration statement. You should
refer to the registration statement for further
information concerning the Variable Account, Sun Life of
Canada (U.S.), the mutual fund investment options, and
the Policy.
YEAR 2000 COMPLIANCE
During the fourth quarter of 1996, we began a
comprehensive analysis of our information technology (IT)
and non-IT systems, including our hardware, software,
data, data feed products, and internal and external
supporting services, to address the ability of these
systems to process date calculations through the year
2000 and beyond correctly. We created a full-time year
2000 project team in early 1997 to manage this endeavor
across the company. This team, which works with dedicated
personnel from all business units and with the legal and
audit departments, reports directly to the our senior
management on a monthly basis. In addition, our year 2000
project is periodically reviewed by internal and external
auditors.
To date, relevant systems have been identified and
their components inventoried, needed resolutions have
been documented, timelines and project plans have been
developed, and remediation and testing are in process.
Over 90% of
54 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
the components have been remediated and tested and are
certified as year 2000 compliant. The majority of the
remaining components are in the testing phase and are
expected to be certified over the course of this year.
In mid-1997, the project team contacted all key
vendors to obtain either their certification for the
products and services provided or their plan to make
those products and services compliant. Approximately 95%
of these vendors have responded and the project team has
reviewed the responses and conducted test with the
vendors where appropriate. In addition, the project
continues to work with critical business partners, such
as third-party administrators, investment property
managers, investment mortgage correspondents and others,
with the goal that these partners will continue to be
able to support our objective of assuring year 2000
compliance.
Non-IT applications, including building security,
HVAC systems, and other such systems, will be tested.
Compliant client server and mainframe environments have
been built which allow for testing of critical dates such
as December 31, 1999, January 1, 2000, February 28, 2000,
February 29, 2000 and March 1, 2000 without impact to
current production.
Although we expect all critical systems to be year
2000 compliant before the end of 1999, there can be no
assurance that this result will be completely achieved.
Factors giving rise to this uncertainty include possible
loss of technical resources to perform the work, failure
to identify all susceptible systems, non-compliance by
third-parties whose systems and operations affect our
operations, and other similar uncertainties. A possible
worst-case scenario might include one or more of our
significant systems being non-compliant. Such a scenario
could result in material disruption to our operations.
Consequences of such disruptions could include, among
other possibilities, the inability to update customers'
accounts; process payments and other financial
transactions; and report accurate data to management,
customers, regulators and others. Consequences could also
include business interruptions or shutdowns, harm to our
reputation, increased regulatory scrutiny by regulators,
and litigation related to year 2000 issues. Such
potential consequences, depending on their nature and
duration, could have material impact on our results of
operations and financial position.
In order to mitigate our risks of material adverse
operational or financial impacts from failure to achieve
planned year 2000 compliance, we have established
contingency planning at the business unit and corporate
levels. Each business unit has ranked its applications as
being of high, medium or low business risk to ensure that
the most critical are addressed first. The business units
also have developed alternate plans of action where
possible and established dates for them to be enacted. On
the corporate level, we are in the process of enhancing
our business continuation plan, by identifying minimum
requirements
55 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
for facilities, computing, staffing, and other factors,
and we are developing a plan to support those
requirements.
Statements contained in this prospectus regarding our
year 2000 compliance that are not historical fact are
forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Those
statements are subject to risks and uncertainties that
could cause actual results to differ materially from
those anticipated at the time those statement were made,
including, without limitation, uncertainties relating to
our ability to identify and address year 2000 issues
successfully and in a timely manner and at costs that are
reasonably in line with our estimates, and the ability of
our vendors, suppliers, other service providers, and
customers to identify and address successfully their own
year 2000 issues in a timely manner.
FINANCIAL STATEMENTS
Our financial statements, which are included in this
prospectus, should be considered only as bearing on our
ability to meet our obligations with respect to the death
benefit and our assumption of the mortality and expense
risks. They should not be considered as bearing on the
investment performance of the Fund shares held in the
Variable Account.
56 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND
CAPITAL STOCK AND SURPLUS
DECEMBER 31, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
ADMITTED ASSETS
Bonds $ 1,763,468 $ 1,910,699
Common stocks 128,445 117,229
Mortgage loans on real estate 535,003 684,035
Properties acquired in satisfaction of debt 17,207 22,475
Investment real estate 78,021 78,426
Policy loans 41,944 40,348
Cash and short-term investments 265,226 544,418
Other invested assets 64,177 55,716
Life insurance premiums and annuity considerations due and uncollected -- 9,203
Investment income due and accrued 35,706 39,279
Federal income tax recoverable and interest thereon 1,110 --
Receivable from parent, subsidiaries and affiliates -- 27,136
Funds withheld on reinsurance assumed -- 982,653
Other assets 1,928 1,842
------------- -------------
General account assets 2,932,235 4,513,459
Separate account assets:
Unitized 11,774,745 9,068,021
Non-unitized 2,195,641 2,343,877
------------- -------------
Total Admitted Assets $ 16,902,621 $ 15,925,357
------------- -------------
------------- -------------
LIABILITIES
Aggregate reserve for life policies and contracts $ 1,216,107 $ 2,188,243
Supplementary contracts 1,885 2,247
Policy and contract claims 369 2,460
Provision for policyholders' dividends and coupons payable -- 32,500
Liability for premium and other deposit funds 1,000,875 1,450,705
Surrender values on cancelled policies 5 215
Interest maintenance reserve 40,490 33,830
Commissions to agents due or accrued 2,615 2,826
General expenses due or accrued 5,932 6,238
Transfers from Separate Accounts due or accrued (361,863) (284,078)
Taxes, licenses and fees due or accrued, excluding FIT 401 105
Federal income taxes due or accrued 25,019 56,384
Unearned investment income 23 34
Amounts withheld or retained by company as agent or trustee 529 47
Remittances and items not allocated 5,176 1,363
Borrowed money -- 110,142
Asset valuation reserve 44,392 47,605
Payable to parent, subsidiaries, and affiliates 30,381 --
Payable for securities 428 27,104
Other liabilities 9,770 2,924
------------- -------------
General account liabilities 2,022,534 3,680,894
Separate account liabilities:
Unitized 11,774,522 9,067,891
Non-unitized 2,195,641 2,343,877
------------- -------------
Total liabilities 15,992,697 15,092,662
------------- -------------
CAPITAL STOCK AND SURPLUS
Common capital stock 5,900 5,900
------------- -------------
Surplus notes 565,000 565,000
Gross paid in and contributed surplus 199,355 199,355
Unassigned funds 139,669 62,440
------------- -------------
Surplus 904,024 826,795
------------- -------------
Total common capital stock and surplus 909,924 832,695
------------- -------------
Total Liabilities, Capital Stock and Surplus $ 16,902,621 $ 15,925,357
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
57 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN 000'S)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
INCOME:
Premiums and annuity considerations $ 210,198 $ 254,066 $ 266,942
Deposit-type funds 2,140,604 2,155,297 1,775,230
Considerations for supplementary
contracts without life
contingencies and dividend
accumulations 2,086 1,615 2,340
Net investment income 184,532 270,249 303,753
Amortization of interest maintenance
reserve 2,282 1,166 1,557
Income from fees associated with
investment management and
administration and contract
guarantees from Separate Account 141,211 109,757 83,278
Net gain from operations from
Separate Account -- 5 --
Other income 87,364 102,889 87,532
---------- ---------- ----------
Total 2,768,277 2,895,044 2,520,632
---------- ---------- ----------
BENEFITS AND EXPENSES:
Death benefits 15,335 17,284 12,394
Annuity benefits 153,636 148,135 146,654
Disability benefits and benefits
under accident and health policies 104 132 105
Surrender benefits and other fund
withdrawals 1,933,833 1,854,004 1,507,263
Interest on policy or contract funds (140) 699 2,205
Payments on supplementary contracts
without life contingencies and
dividend accumulations 2,528 1,687 2,120
Increase (decrease) in aggregate
reserves for life and accident and
health policies and contracts (972,135) 127,278 162,678
Decrease in liability for premium
and other deposit funds (449,831) (447,603) (392,348)
Increase (decrease) in reserve for
supplementary contracts without
life contingencies and for
dividend and coupon accumulations (362) 42 327
---------- ---------- ----------
Total 682,968 1,701,658 1,441,398
Commissions on premiums and annuity
considerations (direct business
only) 137,718 132,700 109,894
Commissions and expense allowances
on reinsurance assumed 13,032 17,951 18,910
General insurance expenses 58,132 46,624 37,206
Insurance taxes, licenses and fees,
excluding federal income taxes 7,388 8,267 8,431
Increase (decrease) in loading on
and cost of collection in excess
of loading on deferred and
uncollected premiums (1,663) 523 901
Net transfers to Separate Accounts 722,851 844,130 761,941
Reserve and fund adjustments on
reinsurance terminated 1,017,112 -- --
---------- ---------- ----------
Total 2,637,538 2,751,853 2,378,681
---------- ---------- ----------
Net gain from operations before
dividends to policyholders and
Federal Income Taxes 130,739 143,191 141,951
Dividends to policyholders (5,981) 33,316 29,189
---------- ---------- ----------
Net gain from operations after
dividends to policyholders and
before Federal Income Taxes 136,720 109,875 112,762
Federal income tax expense
(benefit), (excluding tax on
capital gains) 11,713 7,339 (5,400)
---------- ---------- ----------
Net gain from operations after
dividends to policyholders and
federal income taxes and before
realized capital gains 125,007 102,536 118,162
Net realized capital gains less
capital gains tax and transferred
to the IMR 394 26,706 4,862
---------- ---------- ----------
NET INCOME $ 125,401 $ 129,242 $ 123,024
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
58 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN 000'S)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
Capital and surplus, Beginning of year $ 832,695 $ 567,143 $ 792,452
---------- ----------- -----------
Net income 125,401 129,242 123,024
Change in net unrealized capital gains (losses) (384) 1,152 (1,715)
Change in non-admitted assets and related items (1,086) (463) 67
Change in reserve on account of change in valuation basis -- 39,016 --
Change in asset valuation reserve 3,213 6,307 (11,812)
Surplus (contributed to) withdrawn from Separate Accounts
during period 82 -- 100
Other changes in surplus in Separate Accounts Statements 10 -- --
Change in surplus notes -- 250,000 (335,000)
Dividends to stockholders (50,000) (159,722) --
Aggregate write-ins for gains and losses in surplus (7) 20 27
---------- ----------- -----------
Net change in capital and surplus for the year 77,229 265,552 (225,309)
---------- ----------- -----------
Capital and surplus, End of year $ 909,924 $ 832,695 $ 567,143
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
59 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash Provided by Operations:
Premiums, annuity considerations and
deposit funds received $ 2,361,669 $ 2,410,919 $ 2,059,577
Considerations for supplementary
contracts and dividend accumulations
received 2,086 1,615 2,340
Net investment income received 236,944 345,279 324,914
Other income received 253,147 208,223 88,295
----------- ----------- -----------
Total receipts 2,853,846 2,966,036 2,475,126
----------- ----------- -----------
Benefits paid (other than dividends) 2,107,736 2,020,747 1,671,483
Insurance expenses and taxes paid (other
than federal income and capital gains
taxes) 217,023 203,650 172,015
Net cash transferred to Separate
Accounts 800,636 895,465 755,605
Dividends paid to policyholders 26,519 28,316 22,689
Federal income tax payments
(recoveries),(excluding tax on capital
gains) 46,965 1,397 (15,363)
Other--net (138) 698 2,205
----------- ----------- -----------
Total payments 3,198,741 3,150,273 2,608,634
----------- ----------- -----------
Net cash used in operations (344,895) (184,237) (133,508)
----------- ----------- -----------
Proceeds from long-term investments
sold, matured or repaid (after
deducting taxes on capital gains of
$2,038 for 1998, $750 for 1997 and
$1,555 for 1996) 1,261,396 1,343,803 1,768,147
Issuance (repayment) of surplus notes -- 250,000 (335,000)
Other cash provided (used) (40,529) 71,095 147,956
----------- ----------- -----------
Total cash provided 1,220,867 1,664,898 1,581,103
----------- ----------- -----------
Cash Applied:
Cost of long-term investments acquired (967,901) (773,783) (1,318,880)
Other cash applied (187,263) (310,519) (177,982)
----------- ----------- -----------
Total cash applied (1,155,164) (1,084,302) (1,496,862)
Net change in cash and short-term
investments (279,192) 396,359 (49,267)
Cash and short-term investments:
Beginning of year 544,418 148,059 197,326
----------- ----------- -----------
End of year $ 265,226 $ 544,418 $ 148,059
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
60 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. DESCRIPTION OF BUSINESS AND 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
variable life insurance, individual fixed and variable annuities, group fixed
and variable annuities and group pension contracts.
Effective May 1, 1997, the Company became a wholly-owned subsidiary of the newly
established Sun Life of Canada (U.S.) Holdings, Inc. ("Life Holdco"). On
December 18, 1997, Life Holdco became a wholly-owned subsidiary of the Sun Life
Assurance Company of Canada - U.S. Operations Holdings, Inc. ("US Holdco"). US
Holdco is a wholly-owned subsidiary of Sun Life Assurance Company of Canada
("SLOC"). Prior to December 18, 1997, Life Holdco was a direct wholly-owned
subsidiary of SLOC.
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. Prescribed accounting
practices include practices described in 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.
Prior to 1996, statutory accounting practices were recognized by the insurance
industry and the accounting profession as generally accepted accounting
principles for mutual life insurance companies and stock life insurance
companies wholly-owned by mutual life insurance companies. In April 1993, the
Financial Accounting Standards Board ("FASB") issued an interpretation (the
"Interpretation"), that became effective in 1996, which changed the previous
practice of mutual life insurance companies (and stock life insurance companies
that are wholly-owned subsidiaries of mutual life insurance companies) with
respect to utilizing statutory basis financial statements for general purposes,
in that it will no longer allow such financial statements to be described as
having been prepared in conformity with generally accepted accounting principles
("GAAP"). Consequently, these financial statements prepared in conformity with
statutory accounting practices, as described above, vary from and are not
intended to present the Company's financial position, results of operations or
cash flow in conformity with generally accepted accounting principles. (See Note
20 for further discussion relative to the Company's basis of financial statement
presentation.) The effects on the financial statements of the variances between
the statutory basis of accounting and GAAP, although not reasonably
determinable, are presumed to be material.
INVESTED ASSETS
Bonds are carried at cost, adjusted for amortization of premium or accrual of
discount. Investments in non-insurance subsidiaries are carried on the equity
basis. Investments in mortgage backed securities are generally carried at
amortized cost. Changes in prepayment assumptions and resulting cash flows are
evaluated periodically. The adjusted yield is used to calculate investment
income in future periods. If current book value exceeds future undiscounted cash
flows, a realized capital loss is recorded and amortized through IMR.
61 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
Investments in insurance subsidiaries are carried at their statutory surplus
values. Mortgage loans acquired at a premium or discount are carried at
amortized values and other mortgage loans are carried at the amounts of the
unpaid balances. Real estate investments are carried at the lower of cost,
adjusted for accumulated depreciation or appraised value, less encumbrances.
Short-term investments are carried at amortized cost, which approximates fair
value. Depreciation of buildings and improvements is calculated using the
straight-line method over the estimated useful life of the property, generally
40 to 50 years.
POLICY AND CONTRACT RESERVES
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.
INCOME AND EXPENSES
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.
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 value as determined
by quoted market prices of the underlying investments.
The Company has also 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.
Gains (losses) from mortality experience and investment experience of the
separate accounts, not applicable to contract owners, are transferred to (from)
the general account. Accumulated gains (losses) that have not been transferred
are recorded as a payable (receivable) to (from) the general account. Amounts
payable to the general account of the Company were $361,863,000 in 1998 and
$284,078,000 in 1997.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING
As described more fully in Note 10, during 1997 the Company changed certain
assumptions used in determining actuarial reserves.
62 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
In March 1998, the National Association of Insurance Commissioners adopted the
Codification of Statutory Accounting Principles ("Codification"). The
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January 1,
2001. However, statutory accounting principles will continue to be established
by individual state laws and permitted practices and it is uncertain when, or
if, the state of Delaware will require adoption of Codification for the
preparation of statutory financial statements. The Company has not finalized the
quantification of the effects of Codification on its statutory financial
statements.
OTHER
Preparation of the financial statements requires management to make estimates
and assumptions that affect reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to amounts as
presented in the current year.
2. INVESTMENTS IN SUBSIDIARIES
The Company owns all of the outstanding shares of Sun Life Insurance and Annuity
Company of New York ("Sun Life (N.Y.)"), Massachusetts Casualty Insurance
Company ("MCIC"), Sun Life of Canada (U.S.) Distributors, Inc. (formerly Sun
Investment Services Company) ("Sundisco"), New London Trust, F.S.B. ("NLT"), Sun
Life Financial Services Limited ("SLFSL"), Sun Benefit Services Company, Inc.
("Sunbesco"), Sun Capital Advisers, Inc. ("Sun Capital"), Sun Life Finance
Corporation ("Sunfinco"), Sun Life of Canada (U.S.) SPE 97-1, Inc. ("SPE 97-1"),
Clarendon Insurance Agency, Inc. ("Clarendon") and Sun Life Information Services
Ireland Ltd. ("SLISL").
On February 5, 1999, the Company finalized the sale of MCIC, a disability
insurance company which issues primarily individual disability income policies,
to Centre Solutions (U.S.) Limited, a wholly-owned subsidiary of Centre
Reinsurance Holdings Limited for approximately $34 million. The impact of this
sale to the ongoing operations of the Company is not expected to be material.
On September 28, 1998, the Company formed SLISL as an offshore technology center
for the purpose of completing systems projects for affiliates.
On October 30, 1997, the Company established a wholly-owned special purpose
corporation, SPE 97-1, for the purpose of engaging in activities incidental to
securitizing mortgage loans.
On December 31, 1997, the Company purchased from Massachusetts Financial
Services ("MFS") all of the outstanding shares of Clarendon, a registered
broker-dealer that acts as the general distributor of certain annuity and life
insurance contracts issued by the Company and its affiliates.
Prior to December 24, 1997, the Company owned 93.6% of the outstanding shares of
MFS. On December 24, 1997, the Company transferred all of its shares of MFS to
Life Holdco in the form of a dividend valued at
63 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2. INVESTMENTS IN SUBSIDIARIES (CONTINUED):
$159,722,000. As a result of this transaction, the Company realized a gain of
$21,195,000 of undistributed earnings.
MFS, a registered investment adviser, serves as investment adviser to the mutual
funds in the MFS family of funds as well as certain mutual funds and separate
accounts established by the Company. The MFS Asset Management Group provides
investment advice to substantial private clients.
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 of New
York.
Sundisco is a registered investment adviser and broker-dealer.
NLT is a federally chartered savings bank.
SLFSL serves as the marketing administrator for the distribution of the offshore
products of Sun Life Assurance Company of Canada (Bermuda), an affiliate.
Sun Capital is a registered investment adviser.
Sunfinco and Sunbesco are currently inactive.
On September 28, 1998 a $500,000 note was issued by SLISL to the Company at a
rate of 6.0%, maturing on September 28, 2002.
A $110,000,000 note was issued to the Company by MFS on February 11, 1998 at an
interest rate of 6.0% due February 11, 1999. Another $110,000,000 note was
issued to the Company by MFS on December 22, 1998 at an interest rate of 5.55%
due February 11, 1999.
On December 23, 1997, the Company issued a $110,000,000 note to US Holdco at an
interest rate of 5.80%, which was repaid on March 1, 1998. A $110,000,000 note
was also issued to the Company by MFS on December 23, 1997 at an interest rate
of 5.85% and was repaid on February 11, 1998.
On December 31, 1996, the Company issued a $58,000,000 note to SLOC at an
interest rate of 5.70% which was repaid on February 10, 1997. Also on December
31, 1996, the Company was issued a $58,000,000 note by MFS at an interest rate
of 5.76%. This note was repaid to the Company on February 10, 1997. On December
31, 1998, 1997 and 1996, the Company had an additional $20,000,000 in notes
issued by MFS, scheduled to mature in 2000.
64 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2. INVESTMENTS IN SUBSIDIARIES (CONTINUED):
During 1998, 1997, and 1996, the Company contributed capital in the following
amounts to its subsidiaries:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
MCIC -- $ 2,000 $ 10,000
SLFSL $ 750 1,000 1,500
SPE 97-1 -- 20,377 --
Sundisco 10,000 -- --
Sun Capital 500 -- --
Clarendon 10 -- --
SLISL 502 -- --
</TABLE>
Summarized combined financial information of the Company's subsidiaries as of
December 31, 1998, 1997 and 1996 and for the years then ended, follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Intangible assets $ -- $ -- $ 9,646
Other assets 1,315,317 1,190,951 1,376,014
Liabilities (1,186,872) (1,073,966) (1,241,617)
------------- ------------- -------------
Total net assets $ 128,445 $ 116,985 $ 144,043
------------- ------------- -------------
------------- ------------- -------------
Total revenues $ 222,853 $ 750,364 $ 717,280
Operating expenses (221,933) (646,896) (624,199)
Income tax expense (1,222) (43,987) (42,820)
------------- ------------- -------------
Net income (loss) $ (302) $ 59,481 $ 50,261
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
On December 24, 1997, the Company transferred all of its shares of MFS to its
parent, Life Holdco.
65 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3. BONDS
Investments in debt securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
------------ ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and government agencies and
authorities $ 140,417 $ 7,635 $ (177) $ 147,875
States, provinces and political subdivisions 16,632 2,219 -- 18,851
Public utilities 397,670 38,740 (238) 436,172
Transportation 197,207 22,481 (18) 219,670
Finance 144,958 12,542 (494) 157,006
All other corporate bonds 866,584 50,814 (6,419) 910,979
------------ ----------- ----------- ------------
Total long-term bonds 1,763,468 134,431 (7,346) 1,890,553
------------ ----------- ----------- ------------
Short-term bonds:
U.S. Treasury Bills, bankers acceptances and commercial
paper 43,400 -- -- 43,400
Affiliates 220,000 -- -- 220,000
------------ ----------- ----------- ------------
Total short-term bonds 263,400 -- -- 263,400
------------ ----------- ----------- ------------
Total bonds $ 2,026,868 $ 134,431 $ (7,346) $ 2,153,953
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
66 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3. BONDS (CONTINUED):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
------------ ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and government agencies and
authorities $ 126,923 $ 5,529 $ -- $ 132,452
States, provinces and political subdivisions 22,361 2,095 -- 24,456
Public utilities 398,939 35,338 (91) 434,186
Transportation 214,130 22,000 (390) 235,740
Finance 157,891 5,885 (120) 163,656
All other corporate bonds 990,455 52,678 (5,456) 1,037,677
------------ ----------- ----------- ------------
Total long-term bonds 1,910,699 123,525 (6,057) 2,028,167
------------ ----------- ----------- ------------
Short-term bonds:
U.S. Treasury Bills, bankers acceptances and commercial
paper 431,032 -- -- 431,032
Affiliates 110,000 -- -- 110,000
------------ ----------- ----------- ------------
Total short-term bonds 541,032 -- -- 541,032
------------ ----------- ----------- ------------
Total bonds $ 2,451,731 $ 123,525 $ (6,057) $ 2,569,199
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The amortized cost and estimated fair value of bonds at December 31, 1998 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 and/or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Maturities:
Due in one year or less $ 459,631 $ 460,787
Due after one year through five years 329,625 336,516
Due after five years through ten years 264,372 283,840
Due after ten years 703,341 781,253
------------ ------------
1,756,969 1,862,396
Mortgage-backed securities 269,899 291,557
------------ ------------
Total bonds $ 2,026,868 $ 2,153,953
------------ ------------
------------ ------------
</TABLE>
67 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3. BONDS (CONTINUED):
Proceeds from sales and maturities of investments in debt securities during
1998, 1997, and 1996 were $1,016,811,000, $980,264,000, and $1,554,016,000,
gross gains were $17,025,000, $10,732,000, and $16,975,000 and gross losses were
$866,000, $2,446,000, and $10,885,000, respectively.
Bonds included above with an amortized cost of approximately $2,572,000,
$2,578,000 and $2,060,000 at December 31, 1998, 1997 and 1996, respectively,
were on deposit with governmental authorities as required by law.
Excluding investments in U.S. government and agencies securities, the Company is
not exposed to significant concentration of credit risk in its portfolio.
4. SECURITIES LENDING
The Company has a securities lending program operated on its behalf by the
Company's primary custodian, Chase Manhattan Bank of New York. The custodian has
indemnified the Company against losses arising from this program. There were no
securities out on loan as of December 31, 1998 and 1997. Income resulting from
this program was $94,000, $200,000 and $137,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
5. 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
allowances for losses have been made. In those cases where, in management's
judgment, the mortgage loans' values are impaired, appropriate losses are
recorded.
The following table shows the geographical distribution of the mortgage loan
portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
California $ 82,397 $ 119,122
Massachusetts 53,528 58,981
Michigan 34,357 42,912
New York 21,190 45,696
Ohio 36,171 51,862
Pennsylvania 93,587 97,949
Washington 36,548 54,948
All other 177,225 212,565
---------- ----------
$ 535,003 $ 684,035
---------- ----------
---------- ----------
</TABLE>
The Company has restructured mortgage loans totaling $30,743,000 and $26,284,000
at December 31, 1998 and 1997, respectively, against which there are allowances
for losses of $2,120,000 and $3,026,000, respectively.
68 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
5. MORTGAGE LOANS (CONTINUED):
The Company has made commitments of mortgage loans on real estate into the
future.The outstanding commitments for these mortgages amount to $18,005,000 and
$12,300,000 at December 31, 1998 and 1997, respectively.
6. INVESTMENT GAINS AND LOSSES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net realized gains (losses):
Bonds $ 5,659 $ 2,882 $ 5,631
Common stock of affiliates -- 21,195 --
Common stocks 48
Mortgage loans 2,374 3,837 763
Real estate 955 2,912 599
Other invested assets (3,827) (717) 567
---------- ---------- ---------
Subtotal 5,209 30,109 7,560
Capital gains tax expense 4,815 3,403 2,698
---------- ---------- ---------
Total $ 394 $ 26,706 $ 4,862
---------- ---------- ---------
---------- ---------- ---------
Changes in unrealized gains (losses):
Common stock of affiliates $ (302) $ (2,894) $ (5,739)
Mortgage loans (1,312) 1,524 (600)
Real estate 403 3,377 4,624
Other invested assets 827 (855) --
---------- ---------- ---------
Total $ (384) $ 1,152 $ (1,715)
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
Realized capital gains and losses on bonds and mortgages and interest rate swaps
which relate to changes in levels of interest rates are charged or credited to
an interest maintenance reserve ("IMR") and amortized into income over the
remaining contractual life of the security sold. The net realized capital gains
credited to the interest maintenance reserve were $8,943,000 in 1998, $6,321,000
in 1997, and $7,710,000 in 1996. All gains and losses are transferred net of
applicable income taxes.
69 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
7. NET INVESTMENT INCOME
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income from bonds $ 167,436 $ 188,924 $ 178,695
Income from investment in common stock of affiliates 3,675 41,181 50,408
Interest income from mortgage loans 53,269 76,073 92,591
Real estate investment income 15,932 17,161 16,249
Interest income from policy loans 2,881 3,582 2,790
Other investment income (loss) (641) (193) 1,710
---------- ---------- ----------
Gross investment income 242,552 326,728 342,443
---------- ---------- ----------
Interest on surplus notes and notes payable (44,903) (42,481) (23,061)
Investment expenses (13,117) (13,998) (15,629)
---------- ---------- ----------
Net investment income $ 184,532 $ 270,249 $ 303,753
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
8. DERIVATIVES
The Company uses derivative instruments for interest rate 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, where it is impractical to allocate gains or losses to specific hedged
assets or liabilities, gains or losses are deferred in IMR and amortized over
the remaining life of the hedged assets. At December 31, 1998 and 1997 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 the IMR and amortized over the shorter of the remaining life of
the hedged asset sold 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.
70 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
8. DERIVATIVES (CONTINUED):
Options are used to hedge the stock market interest exposure in the mortality
and expense risk charges and guaranteed minimum death benefit features of the
Company's variable annuities. The Company's open positions are as follows:
<TABLE>
<CAPTION>
SWAPS OUTSTANDING
AT DECEMBER 31, 1998
---------------------------------
NOTIONAL MARKET VALUE
PRINCIPAL AMOUNTS OF POSITIONS
------------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Conventional interest rate swaps $ 45,000 $ 508
Foreign currency swap 1,178 263
</TABLE>
<TABLE>
<CAPTION>
SWAPS OUTSTANDING
AT DECEMBER 31, 1997
---------------------------------
NOTIONAL MARKET VALUE
PRINCIPAL AMOUNTS OF POSITIONS
------------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Conventional interest rate swaps $ 80,000 $ (2,891)
Foreign currency swap 1,700 208
Forward spread lock swaps 50,000 274
Asian Put Option S & P 500 75,000 693
</TABLE>
The market value of swaps is the estimated amount that the Company would receive
or pay on termination or sale, taking into account current interest rates and
the current credit worthiness of the counterparties. The Company is exposed to
potential credit loss in the event of nonperformance by counterparties. The
counterparties are major financial institutions and management believes that the
risk of incurring losses related to credit risk is remote.
9. 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, collateralized 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.
71 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
9. LEVERAGED LEASES (CONTINUED):
The Company's net investment in leveraged leases is composed of the following
elements:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Lease contracts receivable $ 78,937 $ 92,605
Less non-recourse debt (78,920) (92,589)
---------- ----------
17 16
Estimated residual value of leased assets 41,150 41,150
Less unearned and deferred income (8,932) (10,324)
---------- ----------
Investment in leveraged leases 32,235 30,842
Less fees (138) (163)
---------- ----------
Net investment in leveraged leases $ 32,097 $ 30,679
---------- ----------
---------- ----------
</TABLE>
The net investment is included in "other invested assets" on the balance sheet.
10. REINSURANCE
The Company has agreements with SLOC which provide that SLOC 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 $2,128,000, $1,381,000 and $1,603,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
Effective January 1, 1991, the Company entered into an agreement with SLOC under
which certain individual life insurance contracts issued by SLOC were reinsured
by the Company on a 90% coinsurance basis. During 1997 SLOC changed certain
assumptions used in determining the gross and the ceded reserve balance. The
Company reflected the effect of the changes in assumptions to its assumed
reserves as a direct credit to surplus. The effect of the change was a
$39,016,000 decrease in reserves. Also, the agreement required SLOC to reinsure
the mortality risks in excess of $500,000 per policy for the individual life
insurance contracts assumed by the Company. Such death benefits are reinsured on
a yearly renewable term basis. The life reinsurance assumed agreement required
the reinsurer to withhold funds in amounts equal to the reserves assumed. These
agreements had the effect of increasing income from operations by approximately
$24,579,000, $37,050,000 and $35,161,000 for the years ended December 31, 1998,
1997 and 1996, respectively. The Company terminated this agreement effective
October 1, 1998, resulting in an increase in income from operations of
$65,679,000 which included a cash settlement.
72 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
10. REINSURANCE (CONTINUED):
The following are summarized pro-forma results of operations of the Company for
the years ended December 31, 1998, 1997 and 1996 before the effect of
reinsurance transactions with SLOC:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other revenues $ 2,377,364 $ 2,340,733 $ 1,941,423
Net investment income and realized gains 187,208 298,120 310,172
------------ ------------ ------------
Subtotal 2,564,572 2,638,853 2,251,595
------------ ------------ ------------
Benefits and Expenses:
Policyholder benefits 2,312,247 2,350,354 2,011,998
Other expenses 203,238 187,591 155,531
------------ ------------ ------------
Subtotal 2,515,485 2,537,945 2,167,529
------------ ------------ ------------
Income from operations $ 49,087 $ 100,908 $ 84,066
------------ ------------ ------------
------------ ------------ ------------
</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 increasing income from operations by $3,008,000 in 1998, and
decreasing income from operations by $2,658,000 in 1997 and $46,000 in 1996.
73 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
11. WITHDRAWAL CHARACTERISTICS OF ANNUITY ACTUARIAL RESERVES AND DEPOSIT
LIABILITIES
The withdrawal characteristics of general account and separate account annuity
reserves and deposits are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------
AMOUNT % OF TOTAL
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Subject to discretionary withdrawal-with adjustment:
With market value adjustment $ 2,896,529 19
At book value less surrender charges (surrender charge >5%) 10,227,212 66
At book value (minimal or no charge or adjustment) 1,264,453 8
Not subject to discretionary withdrawal provision 1,106,197 7
------------- ---
Total annuity actuarial reserves and deposit liabilities $ 15,494,391 100
------------- ---
------------- ---
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------
AMOUNT % OF TOTAL
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Subject to discretionary withdrawal-with adjustment:
With market value adjustment $ 3,415,394 25
At book value less surrender charges (surrender charge >5%) 7,672,211 57
At book value (minimal or no charge or adjustment) 1,259,698 9
Not subject to discretionary withdrawal provision 1,164,651 9
------------- ---
Total annuity actuarial reserves and deposit liabilities $ 13,511,954 100
------------- ---
------------- ---
</TABLE>
12. SEGMENT INFORMATION
The Company offers financial products and services such as fixed and variable
annuities, retirement plan services and life insurance on an individual basis.
Within these areas, the Company conducts business principally in two operating
segments and maintains a corporate segment to provide for the capital needs of
the various operating segments and to engage in other financing related
activities.
The Individual Insurance segment markets and administers a variety of life
insurance products sold to individuals and corporate owners of individual life
insurance. The products include whole life, universal life and variable life
products.
The Retirement Products and Services ("RPS") segment markets and administers
individual and group variable annuity products, individual and group fixed
annuity products which include market value adjusted annuities, and other
retirement benefit products.
74 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
12. SEGMENT INFORMATION (CONTINUED):
The following amounts pertain to the various business segments:
<TABLE>
<CAPTION>
FEDERAL
TOTAL TOTAL PRETAX INCOME TOTAL
(IN THOUSANDS) REVENUES EXPENDITURES INCOME TAXES ASSETS
- ----------------------------------------------------- ------------ ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1998
Individual Insurance $ 229,710 $ 144,800 $ 84,910 $ (4,148) $ 199,683
RPS 2,527,608 2,483,715 43,893 12,486 16,123,905
Corporate 10,959 3,042 7,917 3,375 579,033
------------ ------------- ---------- ---------- -------------
Total $ 2,768,277 $ 2,631,557 $ 136,720 $ 11,713 $ 16,902,621
------------ ------------- ---------- ---------- -------------
1997
Individual Insurance 304,141 272,333 31,808 13,825 1,143,697
RPS 2,533,006 2,507,591 25,414 10,667 14,043,221
Corporate 57,897 5,244 52,653 (17,153) 738,439
------------ ------------- ---------- ---------- -------------
Total $ 2,895,044 $ 2,785,169 $ 109,875 $ 7,339 $ 15,925,357
------------ ------------- ---------- ---------- -------------
1996
Individual Insurance 281,309 255,846 25,463 13,931 817,115
RPS 2,174,602 2,151,126 23,476 1,203 12,057,572
Corporate 64,721 898 63,823 (20,534) 689,266
------------ ------------- ---------- ---------- -------------
Total $ 2,520,632 $ 2,407,870 $ 112,762 $ (5,400) $ 13,563,953
------------ ------------- ---------- ---------- -------------
</TABLE>
- ------------------------
* Total expenditures include dividends to policyholders of $(5,981) for 1998,
$33,316 for 1997 and $29,189 for 1996.
13. RETIREMENT PLANS
The Company participates with SLOC in a noncontributory defined benefit pension
plan covering essentially all employees. The benefits are based on years of
service and compensation.
The funding policy for the pension plan is to contribute an amount which at
least satisfies the minimum amount required by ERISA; currently, the plan is
fully funded. The Company is charged for its share of the pension cost based
upon its covered participants. Pension plan assets consist principally of
separate accounts of SLOC.
The Company's share of the group's accrued pension cost was $1,178,000 and
$593,000 at December 31, 1998 and 1997, respectively. The Company's share of net
periodic pension cost was $586,000, $146,000 and $27,000, for 1998, 1997 and
1996, respectively.
The Company also participates with SLOC 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. Company
contributions were $231,000, $259,000 and $233,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
75 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
13. RETIREMENT PLANS (CONTINUED):
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, "Employer's Accounting for Postretirement Benefits
Other Than Pensions." SFAS No. 106 requires an accrual of 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 obligation of approximately $455,000 is recognized 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 $95,000, $117,000, and
$8,000 for the years ended December 31, 1998, 1997, and 1996, respectively. The
Company's post retirement health, dental and life insurance benefits currently
are not funded.
76 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
13. RETIREMENT PLANS (CONTINUED):
OTHER POST-RETIREMENT BENEFIT PLANS CONTINUED
The following table sets forth the change in the pension and other
postretirement benefit plans' benefit obligations and assets as well as the
plans' funded status reconciled with the amount shown in the Company's financial
statements at December 31:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1998 1997 1998 1997
---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 79,684 $ 70,848 $ 9,845 $ 9,899
Service cost 4,506 4,251 240 306
Interest cost 6,452 5,266 673 725
Amendments -- 1,000 -- --
Actuarial loss (gain) 21,975 -- 308 (801)
Benefits paid (1,825) (1,681) (647) (284)
---------- ---------- ---------- ---------
Benefit obligation at end of year $ 110,792 $ 79,684 $ 10,419 $ 9,845
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
The Company's share:
Benefit obligation at beginning of year $ 5,094 $ 4,529 $ 385 $ 384
Benefit obligation at end of year $ 9,125 $ 5,094 $ 416 $ 385
Change in plan assets:
Fair value of plan assets at beginning of year $ 136,610 $ 122,807 $ -- $ --
Actual return on plan assets 16,790 15,484 -- --
Employer contribution -- -- 647 284
Benefits paid (1,825) (1,681) (647) (284)
---------- ---------- ---------- ---------
Fair value of plan assets at end of year $ 151,575 $ 136,610 $ -- $ --
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Funded status $ 40,783 $ 56,926 $ (10,419) $ (9,845)
Unrecognized net actuarial gain (loss) (2,113) (18,147) 586 257
Unrecognized transition obligation (asset) (24,674) (26,730) 185 230
Unrecognized prior service cost 7,661 8,241 -- --
---------- ---------- ---------- ---------
Prepaid (accrued) benefit cost $ 21,657 $ 20,290 $ (9,648) $ (9,358)
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
The Company's share of accrued benefit cost $ (1,178) $ (593) $ (195) $ (102)
Weighted-average assumptions as of December 31:
Discount rate 6.75% 7.50% 6.75% 7.50%
Expected return on plan assets 8.00% 7.50% N/A N/A
Rate of compensation increase 4.50% 4.50% N/A N/A
</TABLE>
77 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
13. RETIREMENT PLANS (CONTINUED):
For measurement purposes, a 10.1% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1998 (5.7% for dental benefits).
The rates were assumed to decrease gradually to 5% for 2005 and remain at that
level thereafter.
<TABLE>
<CAPTION>
1998 1997 1998 1997
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 4,506 $ 4,251 $ 240 $ 306
Interest cost 6,452 5,266 673 725
Expected return on plan assets (10,172) (9,163) -- --
Amortization of transition obligation (asset) (2,056) (2,056) 45 45
Amortization of prior service cost 580 517 -- --
Recognized net actuarial (gain) loss (677) (789) (20) 71
---------- --------- --------- ---------
Net periodic benefit cost $ (1,367) $ (1,974) $ 938 $ 1,147
---------- --------- --------- ---------
---------- --------- --------- ---------
The Company's share of net periodic benefit cost $ 586 $ 146 $ 95 $ 117
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Effect on total of service and interest cost components $ 210 $ (170)
Effect on postretirement benefit obligation 2,026 (1,697)
</TABLE>
78 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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, 1998 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------
CARRYING AMOUNT ESTIMATED FAIR VALUE
----------------- --------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS:
Bonds $ 2,026,868 $ 2,153,953
Mortgages 535,003 556,143
Derivatives -- 771
LIABILITIES:
Insurance reserves $ 121,100 $ 121,100
Individual annuities 274,448 271,849
Pension products 1,104,489 1,145,351
<CAPTION>
DECEMBER 31, 1997
---------------------------------------
CARRYING AMOUNT ESTIMATED FAIR VALUE
----------------- --------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS:
Bonds $ 2,451,731 $ 2,569,199
Mortgages 684,035 706,975
LIABILITIES:
Insurance reserves $ 123,128 $ 123,128
Individual annuities 307,668 302,165
Pension products 1,527,433 1,561,108
Derivatives -- (1,716)
</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
by taking into account prices for publicly traded bonds of similar credit risk
and maturity and repayment and liquidity characteristics.
The fair values of the Company's general account insurance 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.
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.
The fair values of derivative financial instruments are estimated using the
process described in Note 8.
79 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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 rates are charged or credited to an interest maintenance
reserve ("IMR") and amortized into income over the remaining contractual life of
the security sold.
The table shown below presents changes in the major elements of the AVR and IMR.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1997
-------------------- --------------------
AVR IMR AVR IMR
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance, beginning of year $ 47,605 $ 33,830 $ 53,911 $ 28,675
Net realized investment gains, net of tax 256 8,942 17,400 6,321
Amortization of net investment gains -- (2,282) -- (1,166)
Unrealized investment losses (6,550) -- (2,340) --
Required by formula 3,081 -- (21,366) --
--------- --------- --------- ---------
Balance, end of year $ 44,392 $ 40,490 $ 47,605 $ 33,830
--------- --------- --------- ---------
--------- --------- --------- ---------
</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 $48,144,000, $31,000,000 and
$19,264,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
The Company is currently undergoing an audit by the Internal Revenue Service.
The Company believes that there will be no material audit adjustments for the
periods under examination.
17. SURPLUS NOTES AND NOTES RECEIVABLE (PAYABLE)
On December 22, 1997, the Company issued a $250,000,000 surplus note to Life
Holdco. This note has an interest rate of 8.625% and is due on or after November
6, 2027.
On May 9, 1997, the Company issued a short-term note of $600,000,000 to Life
Holdco at an interest rate of 5.10%, which was extended at various interest
rates. This note was repaid on December 22, 1997.
On December 19, 1995, the Company issued surplus notes totaling $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
semiannually.
80 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
17. SURPLUS NOTES AND NOTES RECEIVABLE (PAYABLE) (CONTINUED):
Principal and interest on surplus notes are payable only to the extent that the
Company meets specified requirements regarding free surplus exclusive of the
principal amount and accrued interest, if any, on these notes and with the
consent of the Delaware Insurance Commissioner.
The Company accrued $4,259,000 and $ 964,000 for interest on surplus notes for
the years ended December 31, 1998 and 1997, respectively.
The Company accrued $4,259,000 and $964,000 for interest on surplus notes for
the years ended December 31, 1998 and 1997, respectively.
The Company expensed $44,903,000, $42,481,000 and $23,061,000 for interest on
surplus notes and notes payable for the years ended December 31, 1998, 1997 and
1996, respectively.
18. TRANSACTIONS WITH AFFILIATES
The Company has an agreement with SLOC which provides that SLOC will furnish, as
requested, personnel as well as certain services and facilities on a
cost-reimbursement basis. Expenses under this agreement amounted to
approximately $16,344,000 in 1998, $15,997,000 in 1997, and $20,192,000 in 1996.
The Company leases office space to SLOC under lease agreements with terms
expiring in September, 1999 and options to extend the terms for each of thirteen
successive five-year terms at fair market rental not to exceed 125% of the fixed
rent for the term which is ending. Rent received by the Company under the leases
for 1998 amounted to approximately $6,856,000.
19. 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 at December 31,
1998, 1997 and 1996.
20. ACCOUNTING POLICIES AND PRINCIPLES
The financial statements of the Company have been prepared on the basis of
statutory accounting practices which, prior to 1996, were considered by the
insurance industry and the accounting profession to be in accordance with GAAP
for mutual life insurance companies. The primary differences between statutory
accounting practices and GAAP are described as follows. Under statutory
accounting practices, financial statements are not consolidated and investments
in subsidiaries are shown at net equity value. Accordingly, the assets,
liabilities and results of operations of the Company's subsidiaries are not
consolidated with the assets, liabilities and results of operations,
respectively, of the Company. Changes in net equity value of the common stock of
the Company's United States life insurance subsidiaries are directly reflected
in the Company's surplus. Changes in the net equity value of the
81 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
20. ACCOUNTING POLICIES AND PRINCIPLES (CONTINUED):
common stock of all other subsidiaries are directly reflected in the Company's
Asset Valuation Reserve. Dividends paid by subsidiaries to the Company are
included in the Company's net investment income.
Other differences between statutory accounting practices and GAAP include the
following: statutory accounting practices do not recognize the following assets
or liabilities which are reflected under GAAP: deferred policy acquisition
costs, deferred federal income taxes and statutory nonadmitted assets. Asset
Valuation Reserves and Interest Maintenance Reserves are established under
statutory accounting practices but not under GAAP. Methods for calculating real
estate depreciation and investment valuation allowances differ under statutory
accounting practices and GAAP. Actuarial assumptions and reserving methods
differ under statutory accounting practices and GAAP. Premiums for universal
life and investment-type products are recognized as income for statutory
purposes and as deposits to policyholders' accounts for GAAP.
Because the Company's management uses financial information prepared in
conformity with accounting principles generally accepted in Canada in the normal
course of business, the management of Sun Life Assurance Company of Canada
(U.S.) has determined that the cost of complying with Statement No. 120,
"Accounting and Reporting by Mutual Insurance Enterprises and by Insurance
Enterprises for Certain Long Duration Participating Contracts", exceeds the
benefits that the Company, or the users of its financial statements, would
experience. Consequently, the Company has elected not to apply such standards in
the preparation of these financial statements.
82 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
We have audited the accompanying statutory statements of admitted assets,
liabilities and capital stock and surplus of Sun Life Assurance Company of
Canada (U.S.) (the "Company") as of December 31, 1998 and 1997, and the related
statutory statements of operations, changes in capital stock and surplus, and
cash flow for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Notes 1 and 20 to the financial statements, the
Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware,
which is a comprehensive basis of accounting other than generally accepted
accounting principles. The effects on the financial statements of the
differences between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable, are presumed to be
material.
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities, and capital
stock and surplus of Sun Life Assurance Company of Canada (U.S.) as of December
31, 1998 and 1997, and the results of its operations and its cash flow for each
of the three years in the period ended December 31, 1998 on the basis of
accounting described in Notes 1 and 20.
However, because of the differences between the two bases of accounting referred
to in the second preceding paragraph, in our opinion, the statutory financial
statements referred to above do not present fairly, in conformity with generally
accepted accounting principles, the financial position of Sun Life Assurance
Company of Canada (U.S.) as of December 31, 1998 and 1997 or the results of its
operations or its cash flow for each of the three years in the period ended
December 31, 1998.
As management has stated in Note 20, because the Company's management uses
financial information prepared in accordance with accounting principles
generally accepted in Canada in the normal course of business, the management of
Sun Life Assurance Company of Canada (U.S.) has determined that the cost of
complying with Statement No. 120, ACCOUNTING AND REPORTING BY MUTUAL LIFE
INSURANCE ENTERPRISES AND BY INSURANCE ENTERPRISES FOR CERTAIN LONG-DURATION
PARTICIPATING CONTRACTS, would exceed the benefits that the Company, or the
users of its financial statements, would experience. Consequently, the Company
has elected not to apply such standards in the preparation of these financial
statements.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 5, 1999
83 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
APPENDIX A
GLOSSARY OF POLICY TERMS
ACCOUNT VALUE--The sum of the amounts in each Sub-Account of the Variable
Account and the Fixed Account Value with respect to a Policy.
ANNIVERSARY--The same day in each succeeding year as the day of the year
corresponding to the policy date.
ATTAINED AGE--The insured's Issue Age plus the number of completed Policy
Years.
BUSINESS DAY--Any day that we are open for business.
CASH VALUE--Account Value less any surrender charges.
CASH SURRENDER VALUE--The Cash Value decreased by the balance of any
outstanding Policy Debt.
CLASS--The risk and underwriting classification of the insured.
DAILY RISK PERCENTAGE--The daily rate for deduction of the Mortality and
Expense Risk Charge.
DUE PROOF--Such evidence as we may reasonably require in order to establish
that a benefit is due and payable.
EFFECTIVE DATE OF COVERAGE--Initially, the Investment Start Date; with
respect to any increase in the Specified Face Amount, the Anniversary that falls
on or next follows the date we approve the supplemental application for that
increase; with respect to any decrease in the Specified Face Amount, the Monthly
Anniversary Day that falls on or next follows the date we receive your request.
EXPENSE CHARGES APPLIED TO PREMIUM--A percentage charge deducted from each
premium payment.
FIXED ACCOUNT VALUE--The portion of the Account Value funded by the assets
of our general account.
FUND--A mutual fund portfolio in which a Sub-Account invests.
INITIAL PREMIUM--The initial premium amount specified in a Policy.
INSURED--The person on whose life a Policy is issued.
INVESTMENT START DATE--The date the first premium is applied, which will be
the later of the Issue Date, the Policy Date or the Valuation Date we receive a
premium equal to or in excess of the initial premium.
ISSUE AGE--The insured's age as of the insured's birthday nearest the policy
date.
ISSUE DATE--The date we produce a Policy from our system as specified in the
Policy.
MATURITY--The Anniversary on which the insured's Attained Age is 100.
MONTHLY ANNIVERSARY DAY--The same day in each succeeding month as the day of
the month corresponding to the policy 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.
<PAGE>
MORTALITY AND EXPENSE RISK CHARGE--The annual rate deducted from the Account
Value in the Sub-Accounts for the mortality and expense risk we assume by
issuing the Policy. This annual rate is converted to a daily rate, the Daily
Risk Percentage, and deducted from the Unit Values of the Sub-Accounts on a
daily basis.
POLICY APPLICATION--The application for a Policy, a copy of which is
attached to and incorporated in the Policy.
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 policy
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 the Policy Maturity
date. This amount is the death benefit, decreased by the amount of any
outstanding Policy Debt and any Unpaid Policy Charges, and increased by the
amounts payable under any supplemental benefits.
POLICY YEAR--A Policy Year is a one-year period commencing on the policy
date or any Anniversary and ending on the next Anniversary.
PRINCIPAL OFFICE--Sun Life Assurance Company of Canada (U.S.), One Sun Life
Executive Park, Wellesley Hills, Massachusetts, 02481, or such other 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 your Policy.
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.
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.
UNPAID POLICY CHARGES--The amounts by which the Monthly Expense Charges plus
the Monthly Costs of Insurance plus the Policy Debt exceed the Account Value.
VALUATION DATE--Any day that benefits vary and on which we, the applicable
Fund, and the New York Stock Exchange are open for business and any other day as
may be required by the applicable rules and regulations of the Securities and
Exchange Commission.
VALUATION PERIOD--The period of time from one determination of Unit Values
to the next following 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 I.
A-2
<PAGE>
APPENDIX B
TABLE OF DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
AGE PERCENTAGE AGE PERCENTAGE
--- ----------- --- -----------
<S> <C> <C> <C>
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%
</TABLE>
<PAGE>
APPENDIX C
SAMPLE HYPOTHETICAL ILLUSTRATIONS
HYPOTHETICAL ILLUSTRATIONS OF CASH SURRENDER VALUES,
ACCOUNT VALUES AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how
values under the Policy change with investment performance. The illustrations 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 Funds (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.
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, if the actual rates of
return averaged 0%, 6% or 12%, but the rates of each Fund 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 below. These include the Expense Charges
Applied to Premium, the Daily Risk Percentage charged against the Variable
Account for mortality and expense risks, the Monthly Expense Charge and the
Monthly Cost of Insurance. The Expense Charges Applied to Premium are equal to a
5.25% charge as a sales load and for our federal, state and local tax
obligations and are guaranteed not to exceed 7.25%. The Daily Risk Percentage
charge is an annual effective rate of 0.80% for the first 10 Policy Years and
0.50% thereafter and is guaranteed not to exceed an annual effective rate of
.90%. The Monthly Expense Charge is $8.00 per month for all Policy Years.
The amounts shown in the tables also take into account the Funds' advisory
fees and operating expenses, which are assumed to be at an annual rate of 0.85%
of the average daily net assets of each Fund. This is based upon a simple
average of the advisory fees and expenses of all the Funds for the most recent
fiscal year taking into account any applicable expense caps or expense
reimbursement arrangements. Actual fees and expenses of the Funds may be more or
less than 0.85%, will vary from year to year, and will depend upon how Account
Value is allocated among the Sub-Accounts. See the Fund Prospectuses for more
information on Fund expenses. The gross annual rates of investment return of 0%,
6% and 12% correspond to net annual rates of -1.65%, 4.35% and 10.35%,
respectively, during the first 10 Policy Years; -1.35%, 4.65% and 10.65%,
respectively, thereafter taking into account the current Daily Risk Percentage
charge and the assumed 0.85% charge for the Funds' advisory fees and operating
expenses; and -1.75%, 4.25% and 10.25%, respectively, taking into account the
guaranteed Daily Risk Percentage charge.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Variable 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.
<PAGE>
TABLE 1
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
MALE, PREFERRED, AGE 45, NON TOBACCO
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM $3,500.00
DEATH BENEFIT OPTION A
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.65% NET 4.35% NET 10.35%
PAID PLUS ----------------------------------- ------------------------------ ---------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------ --------- --------- --------- --------- --------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,675 609 2,544 250,000 784 2,719 250,000 961 2,896 250,000
2 7,534 3,054 4,989 250,000 3,564 5,499 250,000 4,097 6,032 250,000
3 11,585 5,396 7,331 250,000 6,402 8,337 250,000 7,495 9,430 250,000
4 15,840 7,654 9,589 250,000 9,319 11,254 250,000 11,200 13,135 250,000
5 20,307 9,833 11,768 250,000 12,321 14,256 250,000 15,252 17,187 250,000
6 24,997 12,260 13,872 250,000 15,741 17,354 250,000 20,012 21,625 250,000
7 29,922 14,615 15,905 250,000 19,263 20,553 250,000 25,205 26,495 250,000
8 35,093 16,895 17,862 250,000 22,886 23,854 250,000 30,873 31,841 250,000
9 40,523 19,091 19,736 250,000 26,608 27,253 250,000 37,060 37,705 250,000
10 46,224 21,192 21,515 250,000 30,422 30,744 250,000 43,812 44,134 250,000
11 52,210 23,226 23,226 250,000 34,388 34,388 250,000 51,292 51,292 250,000
12 58,495 24,779 24,779 250,000 38,080 38,080 250,000 59,120 59,120 250,000
13 65,095 26,145 26,145 250,000 41,798 41,798 250,000 67,679 67,679 250,000
14 72,025 27,315 27,315 250,000 45,536 45,536 250,000 77,055 77,055 250,000
15 79,301 28,278 28,278 250,000 49,291 49,291 250,000 87,347 87,347 250,000
16 86,941 28,962 28,962 250,000 52,998 52,998 250,000 98,625 98,625 250,000
17 94,963 29,462 29,462 250,000 56,751 56,751 250,000 111,100 111,100 250,000
18 103,387 29,763 29,763 250,000 60,542 60,542 250,000 124,922 124,922 250,000
19 112,231 29,848 29,848 250,000 64,367 64,367 250,000 140,272 140,272 250,000
20 121,517 29,696 29,696 250,000 68,215 68,215 250,000 157,353 157,353 250,000
Age 60 79,301 28,278 28,278 250,000 49,291 49,291 250,000 87,347 87,347 250,000
Age 65 121,517 29,696 29,696 250,000 68,215 68,215 250,000 157,353 157,353 250,000
Age 70 175,397 24,341 24,341 250,000 87,377 87,377 250,000 276,997 276,997 321,317
Age 75 244,163 7,178 7,178 250,000 104,813 104,813 250,000 474,763 474,763 507,997
</TABLE>
(1) Assumes a $3,500.00 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 partial
surrenders 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.
C-2
<PAGE>
TABLE 2
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
MALE, PREFERRED, AGE 55, NON TOBACCO
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM $5,675.00
DEATH BENEFIT OPTION A
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.65% NET 4.35% NET 10.35%
PAID PLUS ----------------------------------- ------------------------------ ---------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------ --------- --------- --------- --------- --------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,959 1,195 4,008 250,000 1,477 4,289 250,000 1,759 4,571 250,000
2 12,215 5,053 7,866 250,000 5,868 8,681 250,000 6,719 9,532 250,000
3 18,785 8,762 11,574 250,000 10,367 13,179 250,000 12,110 14,923 250,000
4 25,683 12,308 15,120 250,000 14,962 17,775 250,000 17,966 20,778 250,000
5 32,926 15,687 18,499 250,000 19,655 22,468 250,000 24,333 27,146 250,000
6 40,531 19,370 21,713 250,000 24,922 27,265 250,000 31,744 34,086 250,000
7 48,516 22,866 24,741 250,000 30,276 32,151 250,000 39,772 41,647 250,000
8 56,901 26,168 27,575 250,000 35,717 37,125 250,000 48,487 49,895 250,000
9 65,705 29,262 30,199 250,000 41,239 42,176 250,000 57,963 58,900 250,000
10 74,949 32,099 32,569 250,000 46,801 47,271 250,000 68,252 68,722 250,000
11 84,655 34,733 34,733 250,000 52,510 52,510 250,000 79,637 79,637 250,000
12 94,846 36,679 36,679 250,000 57,860 57,860 250,000 91,690 91,690 250,000
13 105,547 38,351 38,351 250,000 63,282 63,282 250,000 104,997 104,997 250,000
14 116,783 39,708 39,708 250,000 68,755 68,755 250,000 119,720 119,720 250,000
15 128,581 40,696 40,696 250,000 74,251 74,251 250,000 136,047 136,047 250,000
16 140,969 40,660 40,660 250,000 79,227 79,227 250,000 153,894 153,894 250,000
17 153,976 40,174 40,174 250,000 84,186 84,186 250,000 173,907 173,907 250,000
18 167,634 39,197 39,197 250,000 89,118 89,118 250,000 196,459 196,459 250,000
19 181,974 37,673 37,673 250,000 94,014 94,014 250,000 222,001 222,001 250,000
20 197,032 35,531 35,531 250,000 98,854 98,854 250,000 250,892 250,892 268,454
Age 60 128,581 15,687 18,499 250,000 19,655 22,468 250,000 24,333 27,146 250,000
Age 65 197,032 32,092 32,569 250,000 46,793 47,271 250,000 68,245 68,722 250,000
Age 70 284,394 40,696 40,696 250,000 74,251 74,251 250,000 136,047 136,047 250,000
Age 75 395,892 35,531 35,531 250,000 98,854 98,854 250,000 250,892 250,892 268,454
</TABLE>
(1) Assumes a $5,675.00 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 partial
surrenders 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.
C-3
<PAGE>
TABLE 3
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE, NON TOBACCO
MALE, PREFERRED, AGE 45
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $3,500.00
DEATH BENEFIT OPTION A
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.75% NET 4.25% NET 10.25%
PAID PLUS ----------------------------------- ------------------------------ ---------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------ --------- --------- --------- --------- --------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,675 348 2,283 250,000 514 2,449 250,000 680 2,615 250,000
2 7,534 2,534 4,469 250,000 3,008 4,943 250,000 3,503 5,438 250,000
3 11,585 4,619 6,554 250,000 5,545 7,480 250,000 6,553 8,488 250,000
4 15,840 6,602 8,537 250,000 8,125 10,060 250,000 9,850 11,785 250,000
5 20,307 8,476 10,411 250,000 10,741 12,676 250,000 13,415 15,350 250,000
6 24,997 10,561 12,173 250,000 13,715 15,327 250,000 17,594 19,207 250,000
7 29,922 12,521 13,811 250,000 16,710 18,000 250,000 22,085 23,375 250,000
8 35,093 14,343 15,310 250,000 19,715 20,682 250,000 26,908 27,875 250,000
9 40,523 16,016 16,661 250,000 22,718 23,363 250,000 32,090 32,735 250,000
10 46,224 17,523 17,846 250,000 25,701 26,024 250,000 37,657 37,979 250,000
11 52,210 18,849 18,849 250,000 28,651 28,651 250,000 43,639 43,639 250,000
12 58,495 19,659 19,659 250,000 31,230 31,230 250,000 49,756 49,756 250,000
13 65,095 20,267 20,267 250,000 33,752 33,752 250,000 56,381 56,381 250,000
14 72,025 20,659 20,659 250,000 36,202 36,202 250,000 63,570 63,570 250,000
15 79,301 20,812 20,812 250,000 38,557 38,557 250,000 71,378 71,378 250,000
16 86,941 20,700 20,700 250,000 40,790 40,790 250,000 79,871 79,871 250,000
17 94,963 20,291 20,291 250,000 42,870 42,870 250,000 89,126 89,126 250,000
18 103,387 19,549 19,549 250,000 44,758 44,758 250,000 99,232 99,232 250,000
19 112,231 18,422 18,422 250,000 46,405 46,405 250,000 110,289 110,289 250,000
20 121,517 16,856 16,856 250,000 47,755 47,755 250,000 122,420 122,420 250,000
Age 60 79,301 20,812 20,812 250,000 38,557 38,557 250,000 71,378 71,378 250,000
Age 65 121,517 16,856 16,856 250,000 47,755 47,755 250,000 122,420 122,420 250,000
Age 70 175,397 510 510 250,000 48,038 48,038 250,000 206,177 206,177 250,000
Age 75 244,163 - - 250,000 27,232 27,232 250,000 349,326 349,326 373,778
</TABLE>
(1) Assumes a $3,500.00 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 partial
surrenders 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.
C-4
<PAGE>
TABLE 4
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
MALE, PREFERRED, AGE 55, NON TOBACCO
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $5,675.00
DEATH BENEFIT OPTION A
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.75% NET 4.25% NET 10.25%
PAID PLUS ----------------------------------- ------------------------------ ---------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------ --------- --------- --------- --------- --------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,959 363 3,176 250,000 615 3,427 250,000 868 3,680 250,000
2 12,215 3,313 6,125 250,000 4,015 6,827 250,000 4,750 7,562 250,000
3 18,785 6,031 8,844 250,000 7,380 10,192 250,000 8,852 11,664 250,000
4 25,683 8,509 11,322 250,000 10,697 13,510 250,000 13,187 16,000 250,000
5 32,926 10,724 13,537 250,000 13,942 16,754 250,000 17,763 20,576 250,000
6 40,531 13,125 15,468 250,000 17,559 19,901 250,000 23,059 25,402 250,000
7 48,516 15,214 17,089 250,000 21,045 22,920 250,000 28,611 30,486 250,000
8 56,901 16,958 18,366 250,000 24,365 25,772 250,000 34,426 35,834 250,000
9 65,705 18,319 19,256 250,000 27,473 28,410 250,000 40,511 41,448 250,000
10 74,949 19,241 19,711 250,000 30,308 30,778 250,000 46,862 47,332 250,000
11 84,655 19,686 19,686 250,000 32,824 32,824 250,000 53,501 53,501 250,000
12 94,846 19,143 19,143 250,000 34,501 34,501 250,000 59,985 59,985 250,000
13 105,547 18,033 18,033 250,000 35,751 35,751 250,000 66,820 66,820 250,000
14 116,783 16,305 16,305 250,000 36,511 36,511 250,000 74,055 74,055 250,000
15 128,581 13,887 13,887 250,000 36,698 36,698 250,000 81,740 81,740 250,000
16 140,969 10,667 10,667 250,000 36,186 36,186 250,000 89,919 89,919 250,000
17 153,976 6,360 6,360 250,000 34,688 34,688 250,000 98,549 98,549 250,000
18 167,634 1,062 1,062 250,000 32,252 32,252 250,000 107,875 107,875 250,000
19 181,974 - - 250,000 28,493 28,493 250,000 117,894 117,894 250,000
20 197,032 - - 250,000 23,111 23,111 250,000 128,742 128,742 250,000
Age 60 128,581 10,724 13,537 250,000 13,942 16,754 250,000 17,763 20,576 250,000
Age 65 197,032 19,234 19,711 250,000 30,300 30,778 250,000 46,855 47,332 250,000
Age 70 284,394 13,887 13,887 250,000 36,698 36,698 250,000 81,740 81,740 250,000
Age 75 395,892 - - 250,000 23,111 23,111 250,000 128,742 128,742 250,000
</TABLE>
(1) Assumes a $5,675.00 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 partial
surrenders 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.
C-5
<PAGE>
You can review and copy the complete registration statement which contains
additional information about us, the Policy and the Variable Account at the
SEC's Public Reference Room in Washington, D.C. To find out more about this
public service, call the SEC at 1-800-SEC-0330. Reports and other information
about the Policy and its mutual fund investment options are also available on
the SEC's website (www.sec.gov), or you can receive copies of this information,
for a fee, by writing the Public Reference Section, Securities and Exchange
Commission, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-9137
<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.
REPRESENTATION OF REASONABLENESS OF FEES
Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)")
hereby represents that the aggregate fees and charges under the Policy are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Sun Life of Canada (U.S.).
UNDERTAKING ON 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, bylaws, 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.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectuses consisting of 97 pages.
The undertaking to file reports.
Representation of reasonableness of fees.
The Rule 484 undertaking.
The signatures.
Written consents of the following persons:
Roy P. Creedon, Esq. (Exhibit 2)
Georges C. Rouhart, FSA, MAAA (Exhibit 6)
Deloitte & Touche LLP (Exhibit 7)
The following exhibits:
1. Copies of all exhibits required by paragraph A of instructions for Exhibits
to Form N-8B-2:
(1)(a) Resolutions of the Board of Directors of Sun Life Assurance
Company of Canada (U.S.), dated October 29, 1998, authorizing
the establishment of one or more separate accounts*
(1)(b) Record of Action, dated December 1, 1998, authorizing the
establishment of Sun Life of Canada (U.S.) Variable Account I*
(1)(c) Record of Action, dated March 30, 1999, relating to the
establishment of Sun Life of Canada (U.S.) Variable Account I
(2) Not applicable
(3)(a) Form of Marketing Coordination Agreement
(3)(b) Specimen Sales Operations and General Agent Agreement
(3)(c) Schedule of Sales Commissions
(4) Not applicable
(5)(a) Form of Flexible Premium Combination Fixed and Variable Life
Insurance Policy
(5)(b) Form of Accelerated Benefits Rider
(5)(c) Form of Accidental Death Benefit Rider
(5)(d) Form of Payment of Stipulated Amount Rider
II-2
<PAGE>
(5)(e) Form of Waiver of Monthly Deductions Rider
(6)(a) Certificate of Incorporation of Sun Life of Canada (U.S.)**
(6)(b) Bylaws of Sun Life of Canada (U.S.)**
(7) Not applicable
(8)(a)(i) Form of Participation Agreement by and among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., Sun Life Assurance
Company of Canada (U.S.), and Clarendon Insurance Agency, Inc.
(8)(a)(ii) Amendment No. 1 to Participation Agreement by and among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc., Sun Life
Assurance Company of Canada (U.S.), and Clarendon Insurance
Agency, Inc.
(8)(a)(iii) Amendment No. 2 to Participation Agreement by and among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc., Sun Life
Assurance Company of Canada (U.S.), and Clarendon Insurance
Agency, Inc.
(8)(b) Form of Participation Agreement by and among The Alger American
Fund, Sun Life Assurance Company of Canada (U.S.), and Fred Alger
and Company, Incorporated
(8)(c) Form of Participation Agreement by and among Goldman Sachs
Variable Insurance Trust, Goldman, Sachs & Co., and Sun Life
Assurance Company of Canada (U.S.)
(8)(d) Form of Participation Agreement by and among MFS/Sun Life Series
Trust, Sun Life Assurance Company of Canada (U.S.), and
Massachusetts Financial Services Company
(8)(e) Form of Participation Agreement by and among Sun Life Assurance
Company of Canada (U.S.), OCC Accumulation Trust, and OCC
Distributors
(8)(f) Form of Participation Agreement by and among Sun Life Assurance
Company of Canada (U.S.), Sun Capital Advisers Trust, and Sun
Capital Advisers, Inc
(9) Not applicable
(10) Form of Application for Flexible Premium Combination Fixed and
Variable Life Insurance Policy
(11) Memorandum describing Sun Life of Canada (U.S.)'s Issuance,
Transfer and Redemption Procedures
2. Opinion and Consent of Counsel as to the Legality of the Securities Being
Registered
3. None
4. Not applicable
5. Not applicable
6. Opinion and Consent of Georges C. Rouhart, FSA, MAAA
7. Consent of Deloitte & Touche LLP, Independent Public Accountants
8. Powers of Attorney*
__________
* Incorporated herein by reference to the Registration Statement of Sun
Life of Canada (U.S.) Variable Account I on Form S-6, File
No. 333-68601, filed with the Securities and Exchange Commission on
December 9, 1998
** Incorporated by reference to the Registration Statement of Sun Life of
Canada (U.S.) Variable Account F on Form N-4, File No. 333-37907, filed
with the Securities and Exchange Commission on October 14, 1997
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned thereunto duly authorized, and attested, all in the
city of Wellesley Hills, and the Commonwealth of Massachusetts, on the 31st
day of March, 1999.
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
(Registrant)
By: SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)
(Depositor)
By: /s/ C. James Prieur
---------------------------
C. James Prieur, President
Attest: /s/ Ellen B. King
-------------------------
Ellen B. King, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons and in the
capacities and on the dates indicated.
/s/ C. James Prieur President and Director
------------------------- (Principal Executive Officer)
C. James Prieur
/s/ Robert P. Vrolyk Vice President and Actuary
------------------------- (Principal Financial &
Robert P. Vrolyk Accounting Officer)
*/s/ Donald A. Stewart Chairman and Director
-------------------------
Donald A. Stewart
*/s/ John D. McNeil Director
-------------------------
John D. McNeil
*/s/ M. Colyer Crum Director
-------------------------
M. Colyer Crum
*/s/ Richard B. Bailey Director
-------------------------
Richard B. Bailey
*/s/ David D. Horn Director
-------------------------
David D. Horn
*/s/ John S. Lane Director
-------------------------
John S. Lane
*/s/ Angus A. MacNaughton Director
-------------------------
Angus A. MacNaughton
*/s/ S. Caesar Raboy Senior Vice President and
------------------------- Deputy General Manager and
S. Caesar Raboy Director
By: /s/ Ellen B. King March 31, 1999
------------------------------
Ellen B. King, Attorney-In-Fact
* By Ellen B. King pursuant to Powers of Attorney filed with the
Registration Statement of Sun Life of Canada (U.S.) Variable Account I
on Form S-6, File No. 333-68601.
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO.
1.A(1)(a) Resolution of the Board of Directors of Sun Life Assurance
Company of Canada (U.S.), dated October 29, 1998, authorizing
the establishment of one or more separate accounts*
1.A(1)(b) Record of Action, dated December 1, 1998, authorizing the
establishment of Sun Life of Canada (U.S.) Variable Account I*
1.A(1)(c) Record of Action, dated March 30, 1999, relating to the
establishment of Sun Life of Canada (U.S.) Variable Account I
1.A(3)(a) Form of Marketing Coordination Agreement
1.A(3)(b) Specimen Sales Operations and General Agent Agreement
1.A(3)(c) Schedule of Sales Commissions
1.A(5)(a) Form of Flexible Premium Combination Fixed and Variable Life
Insurance Policy
1.A(5)(b) Form of Accelerated Benefits Rider
1.A(5)(c) Form of Accidental Death Benefit Rider
1.A(5)(d) Form of Payment of Stipulated Amount Rider
1.A(5)(e) Form of Waiver of Monthly Deductions Rider
1.A(6)(a) Certificate of Incorporation of Sun Life Assurance Company of
Canada (U.S.)*
1.A(6)(b) Bylaws of Sun Life Assurance Company of Canada (U.S.)*
1.A(8)(a)(i) Form of Participation Agreement by and among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., Sun Life
Assurance Company of Canada (U.S.), and Clarendon Insurance
Agency, Inc.
1.A(8)(a)(ii) Amendment No. 1 to Participation Agreement by and among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc., Sun
Life Assurance Company of Canada (U.S.), and Clarendon
Insurance Agency, Inc.
1.A(8)(a)(iii) Amendment No. 2 to Participation Agreement by and among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc., Sun
Life Assurance Company of Canada (U.S.), and Clarendon
Insurance Agency, Inc.
1.A(8)(b) Form of Participation Agreement by and among The Alger American
Fund, Sun Life Assurance Company of Canada (U.S.), and Fred Alger
and Company, Incorporated
1.A(8)(c) Form of Participation Agreement by and among Goldman Sachs
Variable Insurance Trust, Goldman, Sachs & Co., and Sun Life
Assurance Company of Canada (U.S.)
1.A(8)(d) Form of Participation Agreement by and among MFS/Sun Life Series
Trust, Sun Life Assurance Company of Canada (U.S.), and
Massachusetts Financial Services Company
1.A(8)(e) Form of Participation Agreement by and among Sun Life Assurance
Company of Canada (U.S.), OCC Accumulation Trust, and OCC
Distributors
1.A(8)(f) Form of Participation Agreement by and among Sun Life Assurance
Company of Canada (U.S.), Sun Capital Advisers Trust, and Sun
Capital Advisers, Inc.
1.A(10) Form of Application for Flexible Premium Combination Fixed and
Variable Life Insurance Policy
1.A(11) Memorandum describing Sun Life Assurance Company of Canada
(U.S.)'s Issuance, Transfer and Redemption Procedures
>
2. Opinion and Consent of Counsel as to the Legality of the
Securities Being Registered
6. Opinion and Consent of Georges Rouhart, FSA, MAAA
7. Consent of Deloitte & Touche LLP, Independent Public Accountants
8. Powers of Attorney*
- --------------
* Incorporated herein by reference.
<PAGE>
RECORD OF ACTION
In accordance with the authority granted by a resolution of the Board of
Directors of Sun Life Assurance Company of Canada (U.S.) ("Company") on
October 29, 1998, which resolution continues in force and effect, the
undersigned President and Vice President and Actuary of the Company hereby take
the following actions and hereby confirm:
1. The undersigned confirm the establishment of a separate account for
the purpose of issuing flexible premium variable life insurance
contracts ("Contracts"); this separate account, known as Sun Life of
Canada (U.S.) Variable Account I (Separate Account"), has been
established as of the 1st day of December 1998:
(a) The Separate Account shall be divided initially into separate
sub-accounts (the "Sub-Accounts"), the assets of each of which
shall be invested exclusively in shares of a corresponding
open-end management investment company registered with the
Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, or series thereof (each an "Underlying
Fund"). Each Sub-Account now or hereafter added may be
designated in any manner which identifies the applicable
Sub-account with its corresponding Underlying Fund.
(b) In accordance with Section 2932 of the Delaware Insurance Code,
the income, gains and losses, realized or unrealized, from assets
allocated to the Separate Account shall be credited to or charged
against the Separate Account, without regard to other income,
gains or losses of the Company; and further, the income, gains
and losses realized or unrealized, from assets allocated to any
Sub-Account shall be credited to or charged against that
Sub-Account, without regard to other income, gains or losses of
the Company or any other Sub-Account. All Contracts shall
contain appropriate language to this effect.
2. The Standards of Suitability established by the Company in accordance
with a resolution adopted on July 30, 1986 by the Board of Directors
of the Company, which resolution continues in force and effect, (as
set forth herein), shall apply to all such Contracts:
<PAGE>
"no recommendation shall be made by an agent of the Company to an
applicant to purchase a variable life insurance policy and no variable
life insurance policy shall be issued by the company in the absence of
reasonable grounds to believe that the purchase of such policy is not
unsuitable for such applicant on the basis of information furnished
after reasonable inquiry of such applicant concerning the applicant's
insurance and investment objectives, financial situation and needs and
any other information known to the company or to the agent making the
recommendation."
Dated: March 30, 1999
-----------------------
SUN LIFE ASSURANCE
COMPANY OF CANADA (U.S.)
By: /s/ C. James Prieur
------------------------------
James Prieur, President
By: /s/ Robert P. Vrolyk
------------------------------
Robert P. Vrolyk,
Vice President and Actuary
<PAGE>
MARKETING COORDINATION AGREEMENT
THIS MARKETING COORDINATION AGREEMENT is entered into as of the 1st day of
January 1998 by and among Sun Life Assurance Company of Canada (U.S.) ("Sun Life
(U.S.)"), a Delaware corporation; Clarendon Insurance Agency Inc. ("Clarendon"),
a Massachusetts corporation; and Sun Life of Canada (U.S.) Distributors, Inc.
("SDC"), a Delaware corporation.
WITNESSETH
WHEREAS, Sun Life (U.S.) proposes to issue and offer for sale certain
Insurance and Annuity Contracts (the "Plans"), some of which are and others of
which are not deemed to be securities under the Securities Act of 1933, as
amended; and
WHEREAS, Clarendon is registered as a broker-dealer with the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, Clarendon agrees to serve as general distributor with respect to
the Plans in accordance with the terms and conditions of this Agreement; and
WHEREAS, SDC is registered as a broker-dealer with the SEC under the 1934
Act and is a member of the NASD; and
WHEREAS, SDC proposes to assist Clarendon by coordinating the marketing of
the Plans.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged by all parties, 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 may be agreed
upon by Sun Life (U.S.), Clarendon and SDC. All such amendments shall be
reflected in a revised Exhibit A and, to the extent relevant, a revised Exhibit
F (as relates to the applicable Distribution Allowance).
B. SUSPENSION/RESTRICTION
Sun Life (U.S.) may, 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
<PAGE>
authority having appropriate jurisdiction, written notice shall be given to
Clarendon and SDC 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 at least thirty (30) days' prior written notice to Clarendon and SDC of
any such suspension or restriction, except in the case of any breach of this
agreement by a party, which is addressed by Article VI, Para H (Termination).
C. PLAN CHANGES
Sun life (U.S.) may, at its sole discretion, amend, add or delete features
of any or all of the Plans. In the event of any such amendment, addition or
deletion, Sun Life (U.S.) will provide written notice of such change to
Clarendon and SDC. If the change is required by any regulatory authority having
appropriate jurisdiction, written notice shall be given to Clarendon. In any
other cases, written notice shall be given to Clarendon and SDC at least thirty
(30) days prior to the effective date of such change.
II. MARKETING COORDINATION AND SALES ADMINISTRATION
A. DISTRIBUTION AGREEMENTS
Clarendon will distribute the Plans pursuant to one of four different
standard types of agreements with financial intermediaries (collectively
referred to as "Distribution Agreements"). Copies of the Distribution Agreements
are attached as Exhibits B, C, D and E, respectively. Clarendon, or SDC on its
behalf, shall negotiate all Distribution Agreements, subject to approval by Sun
Life (U.S.); provided that all such Distribution Agreements shall be
substantially in the form of the Distribution Agreements attached as Exhibits B,
C, D and E, respectively unless otherwise agreed by Sun Life (U.S.). No
Commission Schedule attached to any Distribution Agreement may provide for
commission payments in excess of specified maximums established from time to
time by Sun Life (U.S.). Clarendon shall retain copies of all executed
Distribution Agreements and all correspondence, memoranda and other documents
relating to the Distribution Agreements.
B. REPRESENTATIVES
2. APPOINTMENT AND TERMINATION OF REPRESENTATIVES
(a) The Distribution Agreements shall provide for the appointment, as
insurance agent, by Sun Life (U.S.) of the financial intermediaries and
their individual representatives. Sun Life (U.S.) reserves the right to
terminate any and all such designations by and will provide written notice
of any such termination to Clarendon and SDC concurrently with notice to
the particular regulatory authority.
(b) Appointments and/or dismissals of individuals as representatives of Sun
Life (U.S.) shall be made on forms supplied by regulatory authorities
having jurisdiction or otherwise as supplied 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
<PAGE>
instructions and rules as Sun Life (U.S.) may establish from time to time
and provide to Clarendon. If requested by Sun Life (U.S.), Clarendon shall
retain copies of all completed forms appointing and/or dismissing agents
and all related correspondence, memoranda and other documents.
(c) Sun Life (U.S.) shall document its licensing and appointment
procedures, which will set forth the then current requirements for
licensing and appointment of representatives in those jurisdictions where
Sun Life (U.S.) transacts an insurance business. Sun Life (U.S.) shall and
also prepare periodic updates of these procedures, which shall be available
to Clarendon at its request.
(d) Clarendon shall have current lists of representatives appointed by Sun
Life (U.S.).
(e) Sun Life (U.S.) shall pay all necessary licensing and appointment fees
(initial and renewal) and other expenses of any type incurred by Clarendon
with respect to Clarendon's licensing and appointment of individuals as
representatives of Sun Life (U.S.), including persons appointed as General
Agents pursuant to the Distribution Agreements.
(f) Clarendon shall be responsible for determining that any individual
soliciting applications for any of Plans is: (i) properly licensed with
state insurance regulatory authorities; (ii) appointed as a representative
of Sun Life (U.S.); (iii) properly licensed, to the extent necessary, under
all applicable securities laws; (iv) associated as a registered
representative with a broker-dealer registered under the 1934 Act who is
also an NASD member and which has executed a Distribution Agreement (in the
case of Plans which are deemed to be securities under the 1934 Act); and
(v) covered by a satisfactory fidelity bond.
2. TRAINING OF REPRESENTATIVES
SDC shall assist Clarendon in training representatives of Sun Life (U.S.)
which have been appointed to solicit applications for the Plans.
3. SUPERVISION OF REPRESENTATIVES
Clarendon shall coordinate the supervision of representatives appointed on
behalf of Sun Life (U.S.) who are associated with broker-dealers in
connection with the offering and sale of the Plans. Clarendon will
establish such rules and procedures as may be necessary to insure proper
supervision of the agents/registered representatives.
4. SALES ASSISTANCE TO REPRESENTATIVES
SDC shall provide sales assistance to representatives appointed on behalf
of Sun Life (U.S.) appointed pursuant to this agreement. This sales
assistance shall include, without limitation, assistance from SDC's field
representatives as well as from SDC's home office
<PAGE>
personnel. SDC shall also prepare sales promotional programs for the Plans
and assist the agents in utilizing such programs. In addition, SDC shall
provide such representatives with sufficient quantities of sales
promotional materials, sample Plans, applications and any necessary service
forms.
5. PAYMENT OF COMMISSIONS TO AGENTS/REGISTERED REPRESENTATIVES
Unless otherwise agreed, all commission payments required to be made
pursuant to the Distribution Agreements shall be made by Sun Life (U.S.)
directly to the parties entitled thereto. In the case of Plans which are
securities, such payments shall be made to Clarendon (or as directed by
it), which, in turn, shall pay the entitled party. Sun Life (U.S.) will
fund a commission account which Clarendon may draw upon to make these
payments.
C. SALES MATERIAL AND OTHER DOCUMENTS
1. SDC'S RESPONSIBILITIES
SDC shall be responsible for the design, preparation, printing and use of
all promotional material to be used in the distribution of the Plans; and
for filing all promotional material with the NASD, when applicable. SDC
shall furnish copies of NASD review letters, when requested.
2. SUN LIFE (U.S.)'S RESPONSIBILITIES
(a) Sun Life (U.S.) shall provide Clarendon and SDC with applications and
sample Plans for sales training purposes, all in sufficient quantities for
use by representatives.
(b) Sun Life (U.S.) shall be responsible for the approval of promotional
material if required by state and other local insurance regulatory
authorities.
3. SUN LIFE (U.S.)'S RIGHT TO APPROVE
Sun Life (U.S.) shall have the right to review and approve or disapprove
sales promotional material proposed for use by SDC and reserves the right
to require modification of any such material or forms to comply with
applicable laws, rules and regulations.
D. ADVERTISING
Neither Clarendon nor SDC shall print, publish or distribute any
advertisements, circulars or other documents relating to the Plans or 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 other document relating to the Plans unless a copy of such
advertisement, circular or document has
<PAGE>
been provided to SDC. However, nothing herein shall prohibit any person from
advertising annuities in general or on a generic basis.
E. SALES RECORDS; PRODUCTION REPORTS
Clarendon, or Sun Life (U.S.) on behalf of Clarendon, shall prepare and
maintain sales records, production data and production reports and such other
reports and materials relative to the marketing and distribution of Plans as may
be necessary or appropriate in the furtherance of Sun Life (U.S.)'s insurance
business.
III. ADMINISTRATION OF THE PLANS
A. APPOINTMENT AND DUTIES OF MARKETING ADMINISTRATOR
Clarendon is hereby appointed by Sun Life (U.S.) as Marketing Administrator
with respect to the sale and post-issue servicing of Plans. Clarendon shall be
responsible as Marketing Administrator for the timely and proper performance of
such administrative functions as may be delegated to it from time to time by Sun
Life (U.S.). Clarendon shall perform all such functions in accordance with such
administrative standards, practices and procedures as may be established from
time to time by Sun Life (U.S.). At its sole discretion, Clarendon may delegate
some or all of its Marketing Administration duties to Sun Life (U.S.) or to SDC.
B. PLAN FORMS AND APPLICATIONS
Sun Life (U.S.) shall be responsible for the design, preparation and
printing of the policy forms and related documents which are used with the Plans
in sufficient quantities for issuance to Plan owners.
C. SERVICE FORMS
Sun Life (U.S.) shall be responsible for the design, printing and approval
of service forms not included under Para. B above, which the parties jointly
determine to be necessary in conjunction with the sale or servicing of the
Plans. Sun Life (U.S.) agrees to provide Clarendon with copies of all service
forms prior to their initial use, and to amend or chance any such form if
requested by Clarendon.
IV. COMPENSATION
A. AMOUNT AND TIME OF PAYMENT
For performing the marketing coordination services set forth in this
Agreement, Sun Life (U.S.) will pay the compensation as set forth in the
attached Exhibit F - Schedule of Fees to the parties entitled thereto. Sun Life
(U.S.) will pay all compensation due hereunder on a weekly basis, in accordance
with such Schedule of Fees.
<PAGE>
B. CHANGES IN COMPENSATION
Compensation payable under this Agreement may be increased or decreased to
reflect any changes in the marketing coordination responsibilities of Clarendon
or SDC. The Schedule of Fees may be amended or changed only upon mutual
agreement of the parties as to amount and effective date.
C. INDEBTEDNESS
Nothing in this Agreement shall be construed as giving Clarendon or SDC the
right to incur any indebtedness on behalf of Sun Life (U.S.). However, Sun Life
(U.S.) may offset amounts owed it by SDC or Clarendon under this Agreement
against amounts payable to SDC or Clarendon as applicable, for any reason.
V. OTHER PROVISIONS
A. PRODUCT DEVELOPMENT
SDC and Clarendon 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: market research
studies and such other related activity as may be reasonably requested by Sun
Life (U.S.); consulting services with respect to product design; assisting in
the development of sales training, sales promotional and advertising material
relating to new insurance and annuity products. SDC and Clarendon acknowledge
that they have no proprietary rights in such studies and materials and, as among
the parties, all such studies and materials are the exclusive property of Sun
Life (U.S.) and shall constitute proprietary and confidential matter, whether or
not identified as such.
B. OWNERSHIP OF BUSINESS RECORDS
Sun Life (U.S.) shall own all Plan records, tax records, payments records,
Plan descriptions, appointment records, representative's lists and other similar
Plan records maintained by Clarendon or SDC, either on paper or in
machine-readable form, pertaining to the duties and responsibilities of
Clarendon and SDC under or otherwise created in connection with this Agreement.
Such records shall be delivered to Sun Life (U.S.) promptly after its reasonable
request therefor. Clarendon and SDC will maintain all records and accounts in
accordance with Sun Life (U.S.)'s standards or requirements, as communicated
from time to time by Sun Life (U.S.), or otherwise in accordance with generally
accepted industry procedures. At Sun Life (U.S.)'s reasonable request, Clarendon
and SDC 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.); but all
such records shall, otherwise, be the sole and exclusive property of Sun Life
(U.S.) and shall constitute proprietary and confidential matter, whether or not
identified as such.
Notwithstanding the foregoing, Sun Life (U.S.), as agent for Clarendon,
shall confirm to each applicant for, and purchaser of, an SEC-registered Plan,
in accordance with Rule 10b-10
<PAGE>
under the 1934 Act acceptance of premiums and such other transactions as are
required by Rule 10b-10 administrative interpretations thereunder. Sun Life
(U.S.) shall maintain and preserve books and records with respect to such
confirmations in conformity with the requirements of Rules 17a-3 and 17a-4 under
the 1934 Act to the extent such requirements apply. The books, accounts and
records of Sun Life (U.S.), Clarendon, SDC, the SEC-registered Plans and as to
all transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions. Sun Life (U.S.) shall
maintain, as agent for Clarandon and SDC, such books and records of Clarendon
SDC pertaining to the distribution and servicing of the Plans and required by
the 1934 Act as may be mutually agreed upon by them, including but not limited
to maintaining a record of selling firms and of the payment of commissions and
other payments or service fees to selling firms. In addition, Sun Life (U.S.),
as agent for Clarendon and SDC, shall maintain and preserve such additional
accounts, books and other record as are required of Clarendon and SDC by the
1934 Act. Sun Life (U.S.) shall maintain all such books and records and hold
such books and records on behalf of and as agent for Clarendon and SDC whose
property they are and shall remain, and acknowledges that such books and records
are at all times subject to inspection by the SEC in accordance with Section
17(a) of the 1934 Act, NASD, and all other regulatory bodies having
jurisdiction.
C. APPROVAL OF PRACTICES AND PROCEDURES
Sun Life (U.S.) shall have the right to review and suggest revisions to the
standards, practices and procedures utilized by Clarendon and SDC in fulfilling
their respective obligations under this Agreement. Sun Life (U.S.) reserves the
right, from time to time, to prescribe reasonable rules and regulations
respecting the conduct of the business covered hereby, as relates to the Plans.
D. COMPLAINTS
1. After recording a customer complaint received by either Clarendon or SDC
in the appropriate customer complaint file, Clarendon and SDC shall immediately
forward to Sun Life (U.S.) any complaints received by them relating to the
Plans, including any notice or complaint which alleges activity or omission by a
representative, broker-dealer, or other person appointed on behalf of Sun Life
(U.S.) under this Agreement. All such complaints shall be reflected, as
appropriate in records and reports filed with the NASD by Clarendon and SDC.
2. In the case of complaints or inquiries relating to the Plans distributed
pursuant to the distribution Agreements, Sun Life (U.S.) shall consult with
Clarendon and DSC, as applicable, before responding and thereafter may respond
directly or request Clarendon or SDC to investigate and/or respond to such
complaints or inquiries. In such instances, Clarendon or SDC, as appropriate,
shall promptly forward to Sun Life (U.S.) copies of all documents and other
material relating to such investigations and/or responses. Whichever party to
this Agreement responds, it is expressly acknowledged and agreed that the
complaint resolution process shall confirm to the "fair dealing" standards
established by the NASD.
<PAGE>
E. LIMITATIONS AND AUTHORITY
SDC and Clarendon 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. 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.
VI. GENERAL PROVISIONS
A. WAIVER
Failure of any party to insist upon strict compliance with any of the
conditions or provisions of this Agreement shall not be construed as a waiver of
any of such conditions or provision; and this Agreement 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. FIDELITY BOND
Clarendon and SDC will maintain whatever fidelity bond as may be required
by Sun Life (U.S.), and such bond shall be of a type and amount and issued by a
reputable company, satisfactory to Sun Life (U.S.).
C. BINDING EFFECT; ENTIRE AGREEMENT
This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns; but no party may
assign its interest herein, directly or indirectly, without the prior written
consent of the other parties hereto, failing which this Agreement shall be
deemed to terminate automatically as to such party. This Agreement, including
all Exhibits and Schedules hereto, constitutes the sole and entire understanding
of the parties with respect to the marketing coordination services to be
provided with respect to the Plans and supersedes all prior oral or written
agreements between or among the parties with respect to the services
contemplated by this Agreement.
<PAGE>
D. 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 as
of the date of mailing, if sent by First Class Mail, Registered or Certified,
postage prepaid and promptly addressed follows:
TO SUN LIFE (U.S.):
Sun Life Assurance Company of Canada (U.S.)
One Copley Place
Boston, Massachusetts 02116
Attention: Robert Leach
TO SDC:
Sun Life of Canada (U.S.) Distributors, Inc.
Retirement Products & Services
One Copley Place
Boston, Massachusetts 02116
Attention: Jane Puliafico-Mancini
TO CLARENDON:
Clarendon Insurance Agency Inc.
c/o Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Attention: Margaret S. Mead
E. GOVERNING LAW
This Agreement shall be governed by a construed in accordance with the laws
of the Commonwealth of Massachusetts.
F. COMPLIANCE
All parties agree to observe and comply with all applicable federal, state
and local laws, rules and regulations.
G. TERMINATION
This Agreement may be terminated by any of the parties upon sixty (60) days
prior written notice to the other parties or upon immediate written notice to
the other parties in the event of a breach of any provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned parties has executed this Agreement,
by its duly authorized officers, as of the date first set forth above.
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)
By:
Name: Margaret S. Mead
Title: Assistant vice President and
Secretary
By:
Name: Robert K. Leach
Title: Vice President
CLARENDON INSURANCE AGENCY, INC.
By:
Name: Margaret S. Mead
Title: Secretary
By:
Name: Roy P. Creedon
Title: Secretary
SUN LIFE OF CANADA (U.S.) DISTRIBUTORS, INC.
By:
Name: Margaret S. Mead
Title: Secretary
By:
Name: Jane M. Mancini
Title: President
<PAGE>
EXHIBIT A
LIST OF PLANS ISSUED BY SUN LIFE (U.S.)
Futurity Flexible Payment Deferred Annuity
(variable and fixed)
Futurity Variable Universal Life
As of
(Date)
<PAGE>
EXHIBIT B
DISTRIBUTION AGREEMENT
<PAGE>
EXHIBIT C
DISTRIBUTION AGREEMENT
<PAGE>
EXHIBIT D
DISTRIBUTION AGREEMENT
<PAGE>
EXHIBIT E
DISTRIBUTION AGREEMENT
<PAGE>
EXHIBIT F
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
For performing the marketing coordination services set forth in this
agreement, Sun Life (U.S.) will pay compensation to Sun Life of Canada
(U.S.) Distributors, Inc. in an amount not to exceed 105% of first
year premium paid.
In the event that a contract for which a commission has been paid is
surrendered by the contract owner, is lapsed or returned pursuant to
the so-called "ten day free look" provision of the contract, the
following percentage of commissions will be due to Sun Life of Canada
(U.S.)
CHARGEBACK SCHEDULE
Month Percentage
1-6 100
7-12 50
As of
(Date)
<PAGE>
One signed and authorized copy Sun Life Annuity Service Center
of this agreement, plus a fully P.O. Box 1024
completed commission schedule Boston, MA 02103
should be returned to:
- --------------------------------------------------------------------------------
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A Wholly-Owned Subsidiary of Sun Life Assurance Company of Canada
<TABLE>
<CAPTION>
<S> <C> <C>
EXECUTIVE OFFICE: HOME OFFICE: RETIREMENT PRODUCTS AND SERVICES:
One Sun Life Executive Park Wilmington, Delaware Sun Life Annuity
Wellesley Hills, Massachusetts 02181 Service Center
P.O. Box 1024
Boston, Massachusetts 02103
</TABLE>
- --------------------------------------------------------------------------------
SALES OPERATIONS AND GENERAL AGENT AGREEMENT
- --------------------------------------------------------------------------------
AGREEMENT by and between Sun Life Assurance Company of Canada (U.S.)
(hereinafter referred to as Sun Life of Canada (U.S.), a Delaware Corporation;
Clarendon Insurance Agency, Inc. (hereinafter referred to as Clarendon), a
registered broker-dealer with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers Inc.; and
____________________________ (hereinafter referred to as Broker-dealer), also a
registered broker-dealer with the Securities and Exchange Commission under the
Securities Act of 1934 and a member of the National Association of Securities
Dealers Inc.; and
____________________________ (hereinafter referred to as the General Agent), as
follows:
- --------------------------------------------------------------------------------
I WITNESSETH
- --------------------------------------------------------------------------------
WHEREAS, Sun Life of Canada (U.S.) has agreed with General Agent to have
General Agent's insurance agents (hereinafter referred to as sub-agents)
solicit and sell those certain Insurance and Annuity Plans, more particularly
described in this Agreement; and, because certain of said Plans may be deemed to
be securities under the Securities Act of 1933 and applicable state laws, Sun
Life of Canada (U.S.) desires that the sub-agents be associated with
Broker-dealer and Broker-dealer hereby covenants that each such sub-agent is
registered as its registered representative with the National Association of
Securities Dealers Inc. (hereinafter referred to as NASD) and may engage in the
offer or sale of such of the Plans which constitute a security under federal or
state law; and
WHEREAS, Sun Life of Canada (U.S.) has agreed with Clarendon that Clarendon
shall be responsible for the training and supervision of such sub-agents, with
respect to the solicitation and offer or sale of any of said Plans which
constitute a security under federal and state law, and also for the training and
supervision of any other "persons associated" with Broker-dealer who are engaged
directly or indirectly therewith; and Clarendon wishes to, and hereby does,
delegate, to the extent legally permitted, said supervisory duties to
Broker-dealer, who hereby agrees to accept such delegation; and
WHEREAS, Sun Life of Canada (U.S.) has agreed with General Agent that
General Agent will limit solicitations to those jurisdictions where it has been
duly licensed to solicit sales of life insurance policies, fixed annuity, and
variable annuity contracts and General Agent agrees to provide Sun Life of
Canada (U.S.) with a list of such jurisdictions and agrees further to notify Sun
Life of Canada (U.S) of any change to such list; and General Agent hereby
agrees that General Agent shall be responsible for the training and supervision
of such sub-agents with respect to the solicitation and sale of any of said
Plans which are regulated by the jurisdiction's insurance department or similar
regulatory agency; and
WHEREAS, Sun Life of Canada (U.S.) has established life insurance and
annuity plans for use with groups and for individuals and Sun Life of Canada
(U.S.) agrees to furnish to General Agent and to keep current a list of the
types of plans, (hereinafter referred to as the "Plans") which Sun Life of
Canada (U.S.) has available for offering by the General Agent.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
- --------------------------------------------------------------------------------
II APPOINTMENT OF GENERAL AGENT FOR INSURANCE AND ANNUITY PLANS
- --------------------------------------------------------------------------------
A. APPOINTMENT
Sun Life of Canada (U.S.) hereby appoints General Agent as a general agent
of Sun Life of Canada (U.S.) for the solicitation of sales of the Plans.
<PAGE>
- --------------------------------------------------------------------------------
III AUTHORITY OF GENERAL AGENT
- --------------------------------------------------------------------------------
A. DISTRIBUTION AUTHORITY
General Agent is authorized to procure, through the sub-agents appointed by
it, applications for the Plans. Sun Life of Canada (U.S.), in its sole
discretion and without notice to General Agent, may suspend sales of any Plans
hereunder or may amend any policies or contracts evidencing such plans.
B. APPOINTMENT OF SUB-AGENTS
General Agent is authorized to appoint sub-agents to solicit sales of the
Plans hereunder. All sub-agents appointed by General Agent pursuant to this
Agreement shall be duly licensed under the applicable insurance laws to sell the
said Plans by the proper authorities within the applicable jurisdictions where
General Agent proposes to offer the Plans and where Sun Life of Canada (U.S.) is
duly authorized to conduct business. Sun Life of Canada (U.S.) will provide
General Agent with a list which shows: (1) the jurisdictions where Sun Life of
Canada (U.S.) is authorized to do business; and (2) any limitations on the
availability of the Plans in any of such jurisdictions. General Agent agrees to
fulfill all requirements set forth in the General Letter of Recommendation
attached as Exhibit A in conjunction with the submission of
licensing/appointment papers for all applicants as sub-agents submitted by
General Agent.
C. SECURING APPLICATIONS
All applications for the Plans covered hereby shall be made on application
forms supplied by Sun Life of Canada (U.S.), and all payments collected by
General Agent or any sub-agent of General Agent shall be remitted promptly in
full, together with such application forms and any other required documentation,
directly to Sun Life of Canada (U.S.) at the address indicated on such
application or to such other address as Sun Life of Canada (U.S.) may, from time
to time designate in writing. Checks or money orders in payment on any such
Plan shall be drawn to the order of "Sun Life Assurance Company of Canada
(U.S.)". All applications are subject to acceptance or rejection by Sun Life of
Canada (U.S.) at its sole discretion.
D. SUPERVISION OF SUB-AGENTS
1. General Agent shall supervise any sub-agents appointed by it to solicit
sales of the Plans hereunder and General Agent shall be responsible, without
regard to any technical distinction between this relationship and that which
exists in law between principal and agent, for all acts and omissions of each
sub-agent within the scope of his agency appointment at all times. General
Agent shall exercise all responsibilities required by the applicable federal and
state law and regulations other than those responsibilities which under
applicable Securities laws are the responsibilities of Broker-dealer;
provided however, Broker-dealer shall continue to have full responsibility under
applicable securities laws for such sub-agents in their capacity as registered
representatives including by example, but without limitation, training and
supervisory duties over such sub-agents. Nothing contained in this Agreement or
otherwise shall be deemed to make any sub-agents appointed by General Agent an
employee or agent of Sun Life of Canada (U.S.). Sun Life of Canada (U.S.) shall
not have any responsibility for the supervision of any sub-agents of General
Agent and if the act or omission of a sub-agent or any other employee of General
Agent is the proximate cause of any claim, damage or liability to Sun Life of
Canada (U.S.)(including reasonable attorneys' fees). General Agent shall be
responsible and liable therefore.
2. Sun Life of Canada (U.S.) may, by written notice to General Agent,
refuse to permit any sub-agent to solicit applications for the sale of any of
the Plans hereunder and may, by such notice, require General Agent to cause any
such sub-agent to cease any such solicitation or sales, and, Sun Life of Canada
(U.S.) may require General Agent to cancel the appointment of any sub-agent.
3. General Agent is responsible for the selection or appointment of
sub-agents for the sales of the Plans hereunder. General Agent is responsible
for preparation and transmission of the proper appointment and licensing forms
and to insure that all sales personnel are appropriately licensed.
4. General Agent will pay all fees to state insurance regulatory
authorities in connection with obtaining necessary licenses and appointments for
sub-agents appointed hereunder. All fees payable to such regulatory authorities
in connection with the initial appointment of sub-agents who already possess
necessary licenses will be paid by Sun Life of Canada (U.S.). Any renewal
license fees due after the initial appointment of a sub-agent hereunder will be
paid by General Agent.
5. Before a sub-agent is permitted to sell the Plans, General Agent,
Broker-dealer and the sub-agent shall have entered into an agreement pursuant to
which the sub-agent will be appointed a sub-agent of General Agent and a
registered representative of Broker-dealer and in which the sub-agent will agree
that his selling activities relating to the securities-regulated Plans will be
under the supervision and control of Broker-dealer and his selling activities
relating to the insurance-regulated Plans will be under the supervision and
control of General Agent; and that the sub-agent's right to continue to sell
such Plans is subject to his continued compliance with such agreement.
E. MONEY RECEIVED BY GENERAL AGENT
All money payable in connection with any of the Plans, whether as premium,
purchase payment or other-
<PAGE>
wise and whether paid by or on behalf of any policyholder, contract owner or
certificateholder or anyone else having an interest in the Plans is the
property of Sun Life of Canada (U.S.), and shall be transmitted immediately in
accordance with the administrative procedures of Sun Life of Canada (U.S.)
without any deduction or offset for any reason, including by example but not
limitation, any deduction or offset for compensation claimed by General Agent.
- --------------------------------------------------------------------------------
IV COMPENSATION
- --------------------------------------------------------------------------------
A. COMMISSIONS
Commissions payable to General Agent or any sub-agent in connection with
the Plans shall be paid by Sun Life of Canada (U.S.) to the person(s) entitled
thereto through General Agent or as otherwise required by law. Sun Life of
Canada (U.S.) will provide General Agent with a copy of its current Commission
Schedule. Commissions will be paid as a percentage of premiums or purchase
payments (Premiums and Purchase Payments are hereinafter referred to
collectively as "Payments") received in cash or other legal tender and accepted
by Sun Life of Canada (U.S.) on applications obtained by the various sub-agents
appointed by General Agent hereunder. Upon termination of this Agreement, all
compensation to the General Agent hereunder shall cease, however, General Agent
shall continue to be liable for any chargebacks pursuant to the provisions of
said Commission Schedule or for any other amounts advanced by or otherwise due
SUN LIFE OF CANADA (U.S.) hereunder.
B. TIME OF PAYMENT
Sun Life of Canada (U.S.) will pay any compensation due General Agent
thereunder within fifteen (15) days after the end of the calendar month in which
Payments upon which such compensation is based are accepted by Sun Life of
Canada (U.S.).
C. AMENDMENT OF SCHEDULES
Sun Life of Canada (U.S.) may, upon at least ten (10) days prior written
notice to General Agent change the commission schedule. Any such change
shall be by written amendment of the commission schedule and shall apply to
compensation due on applications received by Sun Life of Canada (U.S.) after
the effective date of such notice.
D. PROHIBITION AGAINST REBATES
If General Agent or any sub-agent of General Agent shall rebate or offer to
rebate all or any part of a Payment on a policy or contract or certificate
issued hereunder, or if General Agent or any sub-agent of General Agent shall
withhold any Payment on any policy or contract or certificate issued hereunder,
the same may be grounds for termination of this Agreement by Sun Life of Canada
(U.S.). If General Agent or any sub-agent of General Agent shall at any time
induce or endeavor to induce any owner or any policy or contract issued
hereunder or any certificate holder to discontinue Payments or to relinquish any
such policy or contract or certificate except under circumstances where there is
reasonable grounds for believing the policy, contract or certificate is not
suitable for such person, any and all compensation due General Agent hereunder
shall cease and terminate.
E. INDEBTEDNESS
Nothing in this Agreement shall be construed as giving General Agent the
right to incur any indebtedness on behalf of Sun Life of Canada (U.S.).
General Agent hereby authorizes Sun Life of Canada (U.S.) to set off liabilities
of General Agent to Sun Life of Canada (U.S.) against any and all amounts
otherwise payable to General Agent by Sun Life of Canada (U.S.).
- --------------------------------------------------------------------------------
V DUTIES OF BROKER DEALER
- --------------------------------------------------------------------------------
A. SUPERVISION OF REGISTERED REPRESENTATIVES
Broker-dealer agrees that it has full responsibility for the training and
supervision of all persons, including sub-agents of General Agent, associated
with Broker-dealer who are engaged directly or indirectly in the offer or sale
of such of the Plans as are subject to the federal securities laws and that all
such persons shall be subject to the control of Broker-dealer with respect to
such persons' securities-regulated activities in connection with such Plans.
Broker-dealer will cause the sub-agents, in their capacity as registered
representatives to be trained in the sale of such of the Plans as are subject to
the federal securities laws; will use its best efforts to cause such sub-agents
to qualify under applicable federal and state laws to engage in the sale of such
policies and/or contracts; and will cause such sub-agents to be registered
representatives of Broker-dealer before such sub-agents engage in the
solicitation of any of such policies and/or contracts. Broker-dealer shall
cause such sub-agent's qualifications to be certified to the satisfaction of
Clarendon; and shall notify Clarendon if any of said sub-agents cease to be a
registered representative of Broker-dealer.
B. REGISTERED REPRESENTATIVES AGREEMENT
Broker-dealer agrees that it shall train and supervise the General Agent's
sub-agents in connection with such of the Plans as are subject to the federal
securities law
<PAGE>
and agrees that, before a sub-agent shall be permitted to sell such Plans,
such sub-agent will be appointed a registered representative of Broker-dealer
and, along with Broker-dealer and General Agent, such sub-agent will have
entered into the agreement more particularly described in Section III,
Paragraph D5.
C. COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES LAW
Broker-dealer will fully comply with the requirements of the National
Association of Securities Dealers, Inc. and of the Securities Exchange Act of
1934 and all other applicable federal or state laws and will establish such
rules and procedures as may be necessary to cause diligent supervision of the
securities activities of the sub-agents. Upon request by Clarendon,
Broker-dealer shall furnish such appropriate records as may be necessary to
establish such diligent supervision.
D. NOTICE OF SUB-AGENT NONCOMPLIANCE
In the event a sub-agent fails or refuses to submit to supervision of
Broker-dealer in accordance with this Agreement, or otherwise fails to meet
the rules and standards imposed by Broker-dealer on its registered
representatives, Broker-dealer shall certify such fact to Sun Life of Canada
(U.S) and General Agent and shall immediately notify such sub-agent that he
is no longer authorized to sell the Plans, and Broker-dealer and General
Agent shall take whatever additional action may be necessary to terminate the
sales activities of such sub-agent relating to the Plans.
E. PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING
Broker-dealer shall be provided, without any expense to Broker-dealer,
with prospectuses relating to those of the Plans which are subject to federal
securities laws and such other material as Clarendon determines to be
necessary or desirable for use in connection with sales of those Plans. No
sales promotion materials or any advertising relating to any of the
securities-regulated Plans shall be used by Broker-dealer unless the specific
item has been approved in writing by Clarendon.
- --------------------------------------------------------------------------------
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, or shall constitute
a waiver of any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.
B. INDEPENDENT CONTRACTORS
Both Sun Life of Canada (U.S.) and Clarendon are independent contractors
with respect both to Broker-dealer and to General Agent.
C. LIMITATIONS
No party other than Sun Life of Canada (U.S.) shall have the authority on
behalf of Sun Life of Canada (U.S.) to make, alter, or discharge any policy or
contract or certificate issued by Sun Life of Canada (U.S), to waive any
forfeiture or to grant, permit, nor to extend the time of making any Payments,
nor to guarantee dividends, nor to alter the forms which Sun Life of Canada
(U.S) may prescribe or substitute other forms in place of those prescribed by
Sun Life of Canada (U.S.); nor to enter into any proceeding in a court of law or
before a regulatory agency in the name of or on behalf of Sun Life of Canada
(U.S.).
D. FIDELITY BOND
General Agent represents that all directors, officers, employees and
sub-agents of General Agent who are licensed pursuant to this agreement as
Sun Life of Canada (U.S) agents for state insurance law purposes or who have
access to funds of Sun Life of Canada (U.S), including but not limited to
funds submitted with applications for the Plans or funds being returned to
owners or certificate holders, 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 General Agent at General
Agent's expense. Such bond shall be, at least, of the form, type, and amount
required under the NASD Rules of Fair Practice, endorsed to extend coverage
to General Agent's life insurance and fixed annuity transactions. Sun Life
of Canada (U.S) may require evidence, satisfactory to it, that such coverage
is in force and General Agent shall give prompt written notice to Sun Life of
Canada (U.S) of any notice of cancellation or change of coverage.
General Agent assigns any proceeds received from the fidelity bonding
company to Sun Life of Canada (U.S) to the extent of Sun Life of Canada
(U.S)'s loss due to activities covered by the bond. If there is any
deficiency amount, whether due to a deductible or otherwise, General Agent
shall promptly pay Sun Life of Canada (U.S) such amount on demand and General
Agent hereby indemnifies and holds harm-less Sun Life of Canada (U.S) from
any such deficiency and from the costs of collection thereof (including
reasonable attorneys' fees).
E. BINDING EFFECT
This Agreement shall be binding on and shall inure the benefit of the
parties to it and their respective suc-
<PAGE>
cessors and assign provided that neither Broker-dealer nor General Agent may
assign this Agreement or any rights or obligations hereunder without the
prior written consent of Sun Life of Canada (U.S).
F. REGULATIONS
All parties agree to observe and comply with the existing laws and rules or
regulations of applicable local, state, or federal regulatory authorities and
with those which may be enacted or adopted during the term of this Agreement
regulating the business contemplated hereby in any jurisdiction in which the
business described herein is to be transacted.
G. NOTICES
All notices or communications shall be sent to the address shown in sub
paragraph VI M of this Agreement or to such other address as the party may
request by giving written notice to the other parties.
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 Life of Canada (U.S) reserves the right to amend this Agreement at
any time and the General Agent's submission of an application after notice of
any such amendment has been sent to the other parties shall constitute the
other parties' agreement to any such amendment.
J. SALES PROMOTION MATERIALS AND ADVERTISING
Neither Broker-dealer, General Agent nor any of its sub-agents shall
print, publish or distribute any advertisement, circular or any document
relating to the Plans distributed pursuant to this Agreement or relating to
Sun Life of Canada (U.S) unless such advertisement, circular or document
shall have been approved in writing by Sun Life of Canada (U.S) or by
Clarendon, and in the case of items within the scope of Section V, Paragraph
E approved in writing by Claredon. Provided, however, that nothing herein
shall prohibit Broker-dealer, General Agent or any sub-agent from advertising
life insurance and annuities in general or on a generic basis.
K. GENERAL AGENT AS BROKER DEALER
If Broker-dealer and General Agent are the same person or legal entity,
such person or legal entity shall have the rights and obligations hereunder
of both Broker-dealer and General Agent and this Agreement shall be binding
and enforceable by and against such person or legal entity in both capacities.
L. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty
(30) days prior written notice; and may be terminated, for cause, by any
party immediately; and shall be terminated if Clarendon or Broker-dealer
shall cease to be a registered Broker-dealer under the Securities Exchange
Act of 1934 and a member of the NASD.
- --------------------------------------------------------------------------------
M. ADDRESS FOR NOTICES
GENERAL AGENT
- ----------------------------------------------------
Licensed General Agent or Agency Name:
Address:
--------------------------------------------
- ----------------------------------------------------
Tax ID No.:
-----------------------------------------
- ----------------------------------------------------
Print Name and Title of Authorized Officer
By
--------------------------------------------------
Signature and Title of Authorized Officer Date
- --------------------------------------------------------------------------------
NASD BROKER/DEALER
Registered Name:
------------------------------------
Home/Office Address:
--------------------------------
- ----------------------------------------------------
Tax ID No.:
-----------------------------------------
- ----------------------------------------------------
Print Name and Title of Authorized Officer
By
--------------------------------------------------
Signature and Title of Authorized Officer Date
Clarendon Insurance Agency, Inc.
Attn:
CLARENDON INSURANCE AGENCY, INC.
By:
-------------------------------------------------
Sun Life of Canada (U.S.)
Attn:
One Sun Life Executive Park
Wellesley Hills, MA 02181
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By:
-------------------------------------------------
<PAGE>
EXHIBIT A
GENERAL LETTER OF RECOMMENDATION
GENERAL AGENT hereby certifies to Sun Life of Canada (U.S.) that all the
following requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as agents of Sun Life of Canada
(U.S.) submitted by GENERAL AGENT. GENERAL AGENT will, upon request, forward
proof of compliance with same to Sun Life of Canada (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 an agent for
Sun Life of Canada (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.
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 of Canada (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 of Canada (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.
7. We will not permit any applicant to transact insurance as an agent until
duly licensed therefore. No applicants have been given a contract or
furnished supplies, nor have any applicants been permitted to write, solicit
business, or act as an agent in any capacity, and they will not be so
permitted until the certificate of authority or license applied for is
received.
<PAGE>
Variable Life Insurance Supplement And
Commission Schedule
This Variable Life Insurance Supplement ("Supplement") and the attached
Commission Schedule, form a part of that certain Sales Operation and General
Agent Agreement ("Distribution Agreement") entered into by and between the
parties listed herein. All capitalized terms used in this Supplement shall carry
the meaning assigned in the Distribution Agreement. The specific purpose of this
Supplement is to add the variable life insurance product(s) offered by Sun Life
of Canada (U.S.), as listed on the attached Commission Schedule (which may be
amended, from time to time, by Sun Life of Canada (U.S.) as set forth in the
Distribution Agreement). In conjunction with the availability of such products,
the parties hereby confirm that "suitability" requirements, whether arising from
federal securities law (including NASD) or state insurance law, shall be,
respectively, the compliance responsibility of Broker-dealer and General Agent
within their respective supervisory responsibilities as more particularly set
forth in the Distribution Agreement; and, in connection therewith, Broker-dealer
and General Agent hereby represent to Sun Life of Canada (U.S.) and Clarendon
that no recommendation shall be made by them (or any sub-agent under their
supervision) to any applicant to purchase a variable life insurance policy in
the absence of reasonable grounds to believe that the purchase of such policy is
not unsuitable for that applicant, after reasonable inquiry of the applicant
concerning such relevant matters as the applicant's insurance and investment
objectives, financial situation and needs, together with such other relevant
information as may be required under applicable law or by Sun Life of Canada
(U.S.) from time to time.
This Supplement shall be effective when signed by all the following parties to
be effective as of _________________________.
GENERAL AGENT
<TABLE>
<S><C>
__________________________________________________ Clarendon Insurance Agency, Inc.
Licensed General Agent of Agency Name: Attn: Roy P. Creedon
Address: ________________________________________ One Sun Life Executive Park
__________________________________________________ Wellesley Hills, MA 02181
Tax ID No.:_______________________________________ CLARENDON INSURANCE AGENCY, INC.
- --------------------------------------------------
Print Name and Title of Authorized Officer
By________________________________________________ By_____________________________
Signature and Title of Authorized Officer Date Roy P. Creedon, Secretary
- --------------------------------------------------
NASD BROKER/DEALER
Registered Name: _____________________ Sun Life Assurance Company of Canada (U.S.)
Home/Office Address: _____________________ Attn: Ellen B. King
- -------------------------------------------------- One Sun Life Executive Park
Wellesley Hills, MA 02181
Tax ID: No.: _____________________________________ SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)
- -------------------------------------------------- By __________________________________
Print Name and Title of Authorized Officer Ellen B. King, Secretary
By _______________________________________________
Signature and Title of Authorized Officer Date
</TABLE>
<PAGE>
SALES OPERATIONS AND GENERAL AGENT AGREEMENT
COMMISSIONS SCHEDULE A
This Schedule A is to be attached to and made a part of the Sales Operations and
General Agent Agreement between Sun Life Assurance Company of Canada (U.S.) [Sun
Life of Canada (U.S.)], Clarendon Insurance Agency, Inc. (Clarendon), Selling
Broker-Dealer and General Agent.
This Commission Schedule is not intended to replace any Commission Schedule,
whether currently in effect or subsequently issued, between General Agent and
Sun Life of Canada (U.S.) covering the sale of products issued by Sun Life of
Canada (U.S.) other than those listed below. This Commission Schedule shall
remain in effect until such time as Sun Life of Canada (U.S.) notifies General
Agent in writing that a new Commission Schedule shall take effect with respect
to the Plan(s) listed below.
Commissions will be paid to the General Agent (or to Broker-Dealer if required
by law) in the percentages shown below.
<TABLE>
<CAPTION>
First Year Excess Renewal
Plan Premium Premium Premium
- ---- ------- ------- -------
yrs. 2- 10
<S> <C> <C> <C>
Futurity Variable
Universal Life Insurance 75% 1.5 1.5
</TABLE>
Trail Commission: Trail Commissions will be computed at an annual rate of .10%
of the average account value for the previous policy year and paid annually
beginning when the policy has been in effect for 25 months.
Trail Commissions will be paid only if the contract is in force on the date the
commission is payable.
Commission Chargeback: In the event that a contract for which a commission has
been paid is surrendered by the contract owner, is lapsed or returned pursuant
to the so-called "right of return period" provision of the contract, the
following percentage of commission will be due to Sun Life of Canada (U.S.) from
all entities which received commissions.
<TABLE>
<CAPTION>
Chargeback Schedule
Month Percentage
<S> <C>
1-6 100
7-12 50
</TABLE>
<PAGE>
SUN LIFE ASSURANCE
COMPANY OF CANADA (U.S.)
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 Life Assurance Company Signed at
of Canada (U.S.), promise to provide the Wellesley Hills
kind of insurance described below. Upon Massachusetts, on
death of the Insured prior to Maturity, the Issue Date.
We agree to pay the Beneficiary such
amounts as then become due and payable. Donald A. Stewart, President
Until that time, We agree to provide
You, as Owner, the other rights and
benefits of the Policy. These rights Ellen B. King
and benefits are subject to the Secretary
provisions on the pages which follow.
</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,
WELLESLEY HILLS, MASSACHUSETTS 02481, OR TO THE SALES REPRESENTATIVE THROUGH
WHOM YOU PURCHASED THE POLICY WITHIN 10 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. POLICY SPECIFICATIONS...........................................................................Page 4
2. TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1,000 OF NET AMOUNT AT RISK....Page 5
3. DEFINITIONS.....................................................................................Page 6
Account Value..................................................................................Page 6
Anniversary....................................................................................Page 6
Application....................................................................................Page 6
Attained Age...................................................................................Page 6
Beneficiary....................................................................................Page 6
Business Day...................................................................................Page 6
Cash Value.....................................................................................Page 6
Cash Surrender Value...........................................................................Page 6
Class..........................................................................................Page 6
Company........................................................................................Page 6
Daily Risk Percentage..........................................................................Page 6
Due Proof......................................................................................Page 6
Effective Date of Coverage.....................................................................Page 6
Expense Charge Applied to Premium..............................................................Page 6
Fixed Account Value............................................................................Page 6
Fund...........................................................................................Page 6
General Account................................................................................Page 6
Initial Premium................................................................................Page 6
Insured........................................................................................Page 6
Investment Start Date..........................................................................Page 6
Issue Age......................................................................................Page 6
Issue Date.....................................................................................Page 6
Maturity.......................................................................................Page 6
Minimum Monthly Premium........................................................................Page 7
Monthly Anniversary Day........................................................................Page 7
Monthly Cost of Insurance......................................................................Page 7
Monthly Expense Charge.........................................................................Page 7
Mortality and Expense Risk Percentage..........................................................Page 7
Net Premium....................................................................................Page 7
Our Principal Office...........................................................................Page 7
Owner..........................................................................................Page 7
Partial Surrender..............................................................................Page 7
Policy.........................................................................................Page 7
Policy Debt....................................................................................Page 7
Policy Month...................................................................................Page 7
Policy Proceeds................................................................................Page 7
Policy Year....................................................................................Page 7
Premium........................................................................................Page 7
Specified Face Amount..........................................................................Page 7
Sub-Accounts...................................................................................Page 7
Unit...........................................................................................Page 7
Unit Value.....................................................................................Page 7
Valuation Date.................................................................................Page 8
Valuation Period...............................................................................Page 8
Variable Account...............................................................................Page 8
We, Our and Us................................................................................Page 8
You , Your and Yourself........................................................................Page 8
4. GENERAL PROVISIONS..............................................................................Page 9
Entire Contract................................................................................Page 9
Alteration.....................................................................................Page 9
Modification...................................................................................Page 9
TABLE OF CONTENTS (CONTINUED)
<CAPTION>
Assignments.........................................................................................Page 9
Nonparticipating....................................................................................Page 9
Misstatement of Age or Sex (Non-Unisex Policy)......................................................Page 9
Suicide.............................................................................................Page 9
Incontestability...................................................................................Page 10
Report to Owner....................................................................................Page 10
Illustrations......................................................................................Page 10
Maturity Date Extension............................................................................Page 10
5. RIGHTS OF OWNERS AND BENEFICIARIES..............................................................Page 11
Rights of Owner...............................................................................Page 11
Procedure.....................................................................................Page 11
Rights of Beneficiary.........................................................................Page 11
6. THE VARIABLE ACCOUNT...........................................................................Page 12
Sub-Accounts..................................................................................Page 12
Addition, Deletion or Substitution of Investments.............................................Page 12
Transfers Between Sub-Accounts................................................................Page 12
7. PREMIUMS.......................................................................................Page 13
Premium.......................................................................................Page 13
Net Premiums..................................................................................Page 13
Allocation of Net Premium.....................................................................Page 13
Planned Periodic Premiums.....................................................................Page 14
8. DEATH BENEFIT..................................................................................Page 14
Death Benefit and Death Benefit Option........................................................Page 14
Changes in Specified Face Amount..............................................................Page 14
Decreases in Specified Face Amount............................................................Page 14
Increases in Specified Face Amount............................................................Page 14
Changes in the Death Benefit Option...........................................................Page 14
9. ACCOUNT VALUE..................................................................................Page 15
Account Value.................................................................................Page 15
Variable Account Value........................................................................Page 15
Variable Account Value in the Sub-Accounts....................................................Page 15
Net Investment Factor.........................................................................Page 16
Mortality and Expense Risk Charge.............................................................Page 16
Fixed Account Value...........................................................................Page 17
Monthly Expense Charge........................................................................Page 17
Monthly Cost of Insurance.....................................................................Page 18
Monthly Cost of Insurance Rates...............................................................Page 18
Basis of Computation..........................................................................Page 18
Insufficient Value............................................................................Page 18
Minimum Premium Test..........................................................................Page 19
Grace Period..................................................................................Page 19
Splitting Units...............................................................................Page 19
10. POLICY BENEFITS...............................................................................Page 19
Benefits at Death.............................................................................Page 19
Cash Surrender Value..........................................................................Page 19
Surrender Charges.............................................................................Page 19
Surrender Charge on Decrease in Specified Face Amount.........................................Page 20
Partial Surrender.............................................................................Page 20
Allocation of Partial Surrender...............................................................Page 20
Policy Loan...................................................................................Page 21
Deferral of Payment...........................................................................Page 21
Termination...................................................................................Page 21
Reinstatement.................................................................................Page 22
<PAGE>
<CAPTION>
RIDERS AND ENDORSEMENTS...................................................................................
APPLICATION...............................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1. POLICY SPECIFICATIONS
<S> <C>
Insured John Doe
Policy Number VL0000001
Office ABC Insurance Agency
Issue Age, Sex 35 Male
Class Non Tobacco Preferred
Specified Face Amount $250,000
Minimum Specified Face Amount $100,000
Initial Premium $ 360
Planned Periodic Premium $1,500
Billing Period Annual
Issue Date January 1, 1999
Policy Date January 1, 1999
Maturity January 1, 2054
Protected Period 60 Months
Minimum Monthly Premium $ 120
Currency United States Dollars
Owner John Doe
Beneficiary As stated in the Application unless
subsequently changed
Death Benefit Option Option A: Specified Face Amount
Variable Account
Name Sun Life of Canada (U.S.) Variable Account I
Securities & Exchange Commission Registration Unit Investment Trust
Allocation of premiums during Free Look Period Sun Capital Money Market Fund
Expense Charge Applied to Premium
Current Charge 5.25%
Guaranteed Maximum Charge 7.25%
Monthly Expense Charge in All Months $8.00
Mortality and Expense Risk Percentage
Current percentage .80% (annual effective rate) during Policy Years 1-10
Current percentage .50% (annual effective rate) during Policy Years 11 and after
Maximum guaranteed percentage .90% (annual effective rate)
Daily Risk Percentage
Current percentage .0021831% (daily effective rate) during Policy Years 1-10
Current percentage .0013665% (daily effective rate) during Policy Years 11 and after
Maximum guaranteed percentage .0024548% (daily effective rate)
</TABLE>
Policy Loan Interest Rate (payable in arrears) 4.00% annually during Policy
years 1-10 3.25% annually in Policy years 11 and after Interest Credited
on Fixed Account 3.00% annually
- -------------------------------------------------------------------------------
Supplemental Benefits and Changes
- -------------------------------------------------------------------------------
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.
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
John Doe VL0000001
SURRENDER CHARGE ON THE SPECIFIED FACE AMOUNT ON THE POLICY DATE
SURRENDER
POLICY YEAR CHARGE
1 1,442.50
2 1,442.50
3 1,442.50
4 1,442.50
5 1,442.50
6 1,202.08
7 961.67
8 721.25
9 480.83
10 240.42
11 and after none
NET PREMIUM ALLOCATION PERCENTAGE
<TABLE>
SUB- ACCOUNTS
<S> <C>
MFS/Sun Life Series Trust
____% MFS/Sun Life Capital Appreciation Series
AIM Variable Insurance Funds, Inc. ____% MFS/Sun Life Conservative Growth Series
____% AIM V.I. Capital Appreciation Fund ____% MFS/Sun Life Emerging Growth Series
____% AIM V.I. Growth Fund ____% MFS/Sun Life Government Securities Series
____% AIM V.I. Growth and Income Fund ____% MFS/Sun Life High Yield Series
____% AIM V.I. International Equity Fund ____% MFS/Sun Life Investors Growth Stock Series
____% MFS/Sun Life New Discovery Series
The Alger American Fund ____% MFS/Sun Life Total Return Series
____% OCC Accumulation Trust Equity Portfolio ____% MFS/Sun Life Utilities Series
____% OCC Accumulation Trust Mid Cap Portfolio
____% OCC Accumulation Trust Small Cap Portfolio
____% OCC Accumulation Trust Managed Portfolio OOC Accumulation Trust
____% Alger American Growth Portfolio
____% Alger American Income and Growth Portfolio
____% Alger American Small Capitalization Portfolio
Goldman Sachs Variable Insurance Trust
____% Goldman Sachs V.I.T. CORE Large Cap Growth Fund Sun Capital Advisers Trust, Inc.
____% Goldman Sachs V.I.T. CORE Small Cap Equity Fund ____% Sun Capital Money Market Fund
____% Goldman Sachs V.I.T. CORE U.S. Equity Fund ____% Sun Capital Investment Grade Bond Fund
____% Goldman Sachs V.I.T. Growth and Income Fund ____% Sun Capital Real Estate Fund
____% Goldman Sachs V.I.T. International Equity Fund
SUN LIFE OF CANADA (U.S.) FIXED ACCOUNT GUARANTEE
OPTION
____% One-Year Fixed
</TABLE>
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
John Doe VL0000001
DESCRIPTION OF VARIABLE ACCOUNT I SUB-ACCOUNTS
Variable Account I is divided into 24 Sub-Accounts. Each Sub-Account invests in
a series, portfolio or fund of AIM Variable Insurance Funds, Inc., The Alger
American Fund, Goldman Sachs Variable Insurance Trust, MFS/Sun Life Series
Trust, OCC Accumulation Trust, Sun Capital Advisers Trust, Inc. The names and
investment objectives of these series, portfolios or funds follow:
AIM VARIABLE INSURANCE FUNDS, INC. (advised by AIM Advisors, Inc.) (AIM) is a
wholly owned subsidiary of AIM Management. Established in 1976, AIM Management
Group, Inc. (AIM Management) is headquartered in Houston , Texas. AIM Management
is an indirect wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its
subsidiary are an independent investment management group engaged in
institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific Region. AIM and its subsidiaries act as
manager or advisor of 55 investment company portfolios.
AIM V.I. CAPITAL APPRECIATION FUND seeks to provide capital
appreciation through investments in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
AIM V.I. GROWTH FUND seeks to provide growth of capital through
investments primarily in common stocks of seasoned and better
capitalized U.S. companies considered by AIM to have strong earnings
momentum.
AIM V.I. GROWTH AND INCOME FUND seeks to provide growth of capital,
with current income as a secondary objective by investing primarily in
dividend paying common stocks which have prospects for both growth of
capital and dividend income.
AIM V.I. INTERNATIONAL EQUITY FUND seeks to provide long-term growth of
capital by investing in diversified international equity securities,
the issuers of which are considered by AIM to have strong earnings
momentum.
THE ALGER AMERICAN FUND (advised by Fred Alger Management, Inc.) Founded in
1964, Fred Alger Management is committed to investing in America's fastest
growing companies. Alger believes in bottom-up research and gives its large and
talented team of research analysts a key role in making investment decisions.
The firm strives for superior long-term performance, and feels that the
self-reliance and decision-making capabilities of its research analysts will
help it achieve that goal.
ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital appreciation
by investing primarily in equity securities of companies with market
capitalizations of $1 billion or more.
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO seeks primarily to provide a
high level of dividend income by investing in dividend paying equity
securities. Capital appreciation is a secondary objective.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks long-term capital
appreciation by investing primarily in equity securities of companies
with market capitalizations within the range of the Russell 2000 Growth
Index or the S&P SmallCap 600 Index
GOLDMAN SACHS VARIABLE INSURANCE TRUST (advised by Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., except for
Goldman Sachs International Equity Fund, which is advised by Goldman Sachs Asset
Management International, an affiliate of Goldman, Sachs & Co.). Since its
founding in 1869, Goldman Sachs has served many of the world's largest
corporations and governments, as well as numerous high net worth individuals.
Its investment management arm utilizes the worldwide resources, fundamental
research and sophisticated risk management capabilities of one of the world's
premier global financial services firms to meet the investment and wealth
management needs of its clients.
GOLDMAN SACHS V.I.T. CORE LARGE CAP GROWTH FUND seeks long-term growth
of capital through a broadly diversified portfolio of equity
securities of large cap U.S. issuers that are expected to have better
prospects for earnings growth than the growth rate of the general
domestic economy. Dividend income is a secondary consideration.
GOLDMAN SACHS V.I.T. CORE SMALL CAP EQUITY FUND seeks long-term growth
of capital through a broadly diversified portfolio of equity
securities of U.S. issuers which are included in the Russell 2000
Index at the time of investment.
GOLDMAN SACHS V.I.T. CORE U.S. EQUITY FUND seeks long-term growth
of capital and dividend income through a broadly diversified portfolio
of large cap and blue chip equity securities representing all major
sectors of the U.S. economy.
GOLDMAN SACHS V.I.T. GROWTH AND INCOME FUND seeks long-term growth of
capital and growth of income through investments in equity securities
that are considered to have favorable prospects for capital
appreciation and/or dividend paying ability.
GOLDMAN SACHS V.I.T. INTERNATIONAL EQUITY FUND seeks long-term capital
appreciation through investments in equity securities of companies
that are organized outside the U.S. or whose securities are principally
traded outside the U.S.
MFS/SUN LIFE SERIES TRUST (advised by our affiliate Massachusetts Financial
Services Company) . MFS is an indirect subsidiary of Sun Life Assurance Company
of Canada, the parent company of Sun Life of Canada (U.S.), and has been in the
Sun Life of Canada family since 1982. MFS has a long history of money management
dating back to 1924 - when it established the nation's first mutual fund - and
is the oldest fund company in the United States. This Boston-based firm
emphasizes research and site visits in its securities selections.
MFS/SUN LIFE CAPITAL APPRECIATION SERIES seeks capital appreciation by
investing in securities of all types, with a major emphasis on common
stocks.
MFS/SUN LIFE EMERGING GROWTH SERIES seeks to provide long-term growth
of capital by investing primarily (i.e. at least 80% of all its assets
under normal circumstances) in common stocks of emerging growth
companies, including companies that the series' investment adviser
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.
MFS/SUN LIFE GOVERNMENT SECURITIES SERIES seeks current income and
preservation of capital by investing in U.S. Government and U.S.
Government-related Securities.
MFS/SUN LIFE HIGH YIELD SERIES seeks high current income and capital
appreciation by investing primarily in fixed income securities of U.S.
and foreign issuers which may be in the lower rated categories or
unrated (commonly known as "junk bonds") and which may include equity
features. The series may invest up to 100% of its net assets in these
securities, which generally involve greater risks, including volatility
of price, risk of principal and income, default risks and less
liquidity, than securities in the higher rated categories.
MFS/SUN LIFE UTILITIES SERIES seeks capital growth and current income
(income above that available from a portfolio invested entirely in
equity securities) by investing under normal market conditions, at
least 65% of its assets in equity and debt securities issued by both
domestic and foreign utility companies.
OCC ACCUMULATION TRUST (advised by OpCap Advisors). OpCap Advisors is a
subsidiary of Oppenheimer Capital. All investment management services performed
by OpCap Advisors are performed by employees of Oppenheimer Capital. OpCap
Advisors is a well-known value investor employing a disciplined philosophy which
seeks to achieve both superior long-term performance and capital preservation.
OpCap Advisors employs a bottom-up style which it uses across market
capitalizations. It focuses on individual companies rather than particular
industries or sectors, and seeks to invest in companies that are
shareholder-oriented, generate high returns on assets, and have excess free cash
flows.
OCC ACCUMULATION TRUST EQUITY PORTFOLIO seeks long-term capital
appreciation through investment in a diversified portfolio of equity
securities selected on the basis of a value oriented approach to
investing.
OCC ACCUMULATION TRUST MID CAP PORTFOLIO seeks long-term capital
appreciation through investment in a diversified portfolio of equity
securities. The portfolio will invest primarily in companies with
market capitalizations of between $500 million and $5 billion.
OCC ACCUMULATION SMALL CAP PORTFOLIO seeks capital appreciation through
investment in a diversified portfolio of equity securities of companies
with market capitalizations of under $1 billion.
OCC ACCUMULATION TRUST MANAGED PORTFOLIO seeks to achieve growth of
capital over time through investment in a portfolio consisting of
common stocks, bonds and cash equivalents, the percentages of which
will vary based on the portfolio manager's assessments of the relative
outlook for such investments.
SUN CAPITAL ADVISERS TRUST, INC. (advised by our affiliate Sun Capital Advisers,
Inc.) Drawing on over 70 years of combined investment management experience,
the five portfolio managers of Sun Capital Advisers, Inc. provide investment
research and portfolio management for the Sun Capital Funds. Sun Capital
Advisers, Inc. is an indirect wholly owned subsidiary of Sun Life of Canada,
which is a diversified financial services organization with total assets under
management of $144 billion as of September 30, 1998. Sun Life provides a broad
range of financial products and services to individuals and groups located in
the United States, Canada, the United Kingdom and the Asia Pacific Region.
SUN CAPITAL MONEY MARKET FUND seeks to maximize current income,
consistent with maintaining liquidity and preserving capital, by
investing exclusively in high quality U.S. dollar-denominated money
market securities, including those issued by U.S. and foreign banks
corporate issuers, the U.S. Government and its agencies and
instrumentalities, foreign governments and multinational organizations
such as the World Bank. The fund may invest in all types of money
market securities, including commercial paper, certificates of deposit,
bankers' acceptances, mortgage-backed and asset-backed securities,
repurchase agreements and other short-term debt securities.
SUN CAPITAL INVESTMENT GRADE BOND FUND seeks high current income
consistent with relative stability of principal by investing primarily
in investment grade bonds, including those issued by U.S. and foreign
companies (including companies in emerging market countries), the U.S.
Government and its agencies and instrumentalities (including those
which issue mortgage-backed securities), foreign governments (including
those of emerging market countries), and multinational organizations
such as the World Bank.
SUN CAPITAL REAL ESTATE FUND primarily seeks long-term capital growth
and, secondarily, seeks current income and growth of income. The Fund
invests at least 80% of its assets in securities of real estate trusts
and other real estate companies. The Fund generally focuses its
investments in equity REITs, which invest most of their assets directly
in U.S. or foreign real property, receive most of their income from
rents and may also realize gains by selling appreciated properties.
<PAGE>
1. POLICY SPECIFICATIONS (CONTINUED)
TABLE OF DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION> <S> <C> <C> <C>
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%
</TABLE>
2. TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1,000 OF
NET AMOUNT AT RISK.
<TABLE>
<CAPTION>
Guaranteed Bi Monthly Rates per $1,000 NAR
POLICY MONTHLY POLICY MONTHLY
Year Rate Year Rate
<S> <C> <C> <C>
1 0.14083 36 2.89417
2 0.14750 37 3.25333
3 0.15667 38 3.55917
4 0.16667 39 3.96917
5 0.17833 40 4.42917
6 0.19083 41 4.92417
7 0.20583 42 5.45083
8 0.22083 43 6.00583
9 0.23833 44 6.58250
10 0.25583 45 7.19500
11 0.27667 46 7.86750
12 0.29917 47 8.61667
13 0.32333 48 9.46583
14 0.34917 49 10.42333
15 0.37833 50 11.47250
16 0.40917 51 12.59000
17 0.44583 52 13.75333
18 0.48833 53 14.95250
19 0.53583 54 16.16500
20 0.59083 55 17.40500
21 0.65250 56 18.69250
22 0.72000 57 20.04750
23 0.79167 58 21.51583
24 0.86917 59 23.16000
25 0.95667 60 25.26000
26 1.05417 61 28.27417
27 1.16333 62 33.10667
28 1.28667 63 41.68500
29 1.42750 64 58.01250
30 1.58750 65 83.33333
31 1.76417
32 1.95417
33 2.16000
34 2.38083
35 2.62167
</TABLE>
<PAGE>
3. DEFINITIONS
ACCOUNT VALUE: The sum of the amounts in each Sub-Account of the Variable
Account with respect to the Policy plus the amount of the Fixed Account Value.
ANNIVERSARY: The same day in each succeeding year as the day of the year
corresponding to the policy date shown in section 1.
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 VALUE: The Account Value less any Surrender Charges.
CASH SURRENDER VALUE: The Cash Value decreased by the balance of any
outstanding Policy Debt.
CLASS: The risk and underwriting 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 or any other benefits are due and payable.
EFFECTIVE DATE OF COVERAGE: Initially, the Investment Start Date; with respect
to any increase in the Specified Face Amount, the Anniversary that falls on or
next follows the date We approve the supplemental application for such increase;
with respect to any decrease in the Specified Face Amount, the Monthly
Anniversary Day that falls on or next follows the date We receive Your request.
EXPENSE CHARGE APPLIED TO PREMIUM: The expense charge applied to Premium
specified in Section 1.
FIXED ACCOUNT VALUE: The portion of the Account Value funded by the assets
of the General Account.
FUND: A mutual fund portfolio 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.
INITIAL PREMIUM: The Premium amount specified as such in Section 1.
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 Policy Date or the Valuation Date We receive
a Premium equal to or in excess of the Initial Premium.
ISSUE AGE: The Insured's age as of the Insured's birthday nearest the policy
date shown in Section 1.
ISSUE DATE: The date We produce this policy from our systems and specified
as such in Section 1,
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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 MONTHLY 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 policy date shown in Section 1.
MONTHLY COST OF INSURANCE: An amount deducted from the Account Value on a
monthly basis for the insurance coverage provided by the Policy, as specified
in Section 9.
MONTHLY EXPENSE CHARGE: An amount deducted from the Account Value on a
monthly basis for administration and other expenses, as specified in Section
1.
MORTALITY AND EXPENSE RISK CHARGE : An amount deducted from the Account Value
in the Sub-Accounts for the mortality and expense risk charge annual rate
specified in Section 1. This annual rate is converted to a daily rate, the
Daily Risk Percentage, and deducted from the Unit Values of the Sub Accounts
on a daily basis.
NET PREMIUM: A Premium less the Expense Charge Applied to Premium.
OUR PRINCIPAL OFFICE: Sun Life Assurance Company of Canada (U.S.) One Sun
Life Executive Park, Wellesley Hills, Massachusetts, 02481, 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 DATE: The date specified as such in Section 1.
POLICY DEBT: The principal amount of any outstanding loan against the
Policy, plus accrued but unpaid interest on such loan.
POLICY MONTH: A one-month period commencing on the policy 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 one-year period commencing on the policy 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.
PROTECTED PERIOD: The period during which the Policy will not terminate
without value as long as it satisfies the minimum premium test described in
Section 9. The Protected Period begins on the Policy Date
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shown in Section 1.
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.
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.
UNPAID POLICY CHARGES: The amounts by which the Monthly Expense Charges plus
the Monthly Costs of Insurance plus the Policy Debt exceed the Account Value.
VALUATION DATE: Any day 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 I , 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 I").
WE, OUR and US: We, Our and Us refer to Sun Life Assurance Company of
Canada (U.S.).
YOU, YOUR and YOURSELF: In this Policy, You, Your and Yourself refer to the
Owner of the Policy.
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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.
ALTERATION. Sales Representatives do not have the authority either to 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. We may make appropriate amendment to
the Policy to reflect any 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
Principal Office 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. We are not
responsible for the validity or legal effect of any Assignment.
NONPARTICIPATING. The Policy does not pay dividends.
MISSTATEMENT OF AGE OR SEX (NON-UNISEX POLICY). If the age or sex (in the
case of a non-unisex Policy) of the Insured is stated incorrectly, 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 sex (for a non-unisex Policy).
- - Misstatement discovered prior to death: The Account Value will be
recalculated from the Policy Date using the Monthly Cost of Insurance Rates
based on the correct age or sex (for a non-unisex Policy).
If Your Policy is unisex, it is so indicated in Section 1.
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.
If the Insured, whether sane or insane, commits suicide within two years
after the effective date of an increase in the specified amount, then our
liability as to that increase will be the cost of insurance for that
increase.
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.
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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, after the first Policy Year, We will provide
You with an illustration of future Account Value and Death Benefits. We may
charge a nominal fee (not to exceed $25) for this illustration.
MATURITY DATE EXTENSION. The maturity date of this policy will be extended
beyond the maturity date shown in section 1 (the original maturity date), if
you so request and this policy has a Cash Value on the original maturity
date. The new maturity date will be the one you request.
After the original maturity date (if you have requested a new maturity date):
1. We will not accept any more premium payments for this policy.
2. No more deductions for the Monthly Expense Charge or for the Monthly Cost
of Insurance will be made from the Account Value.
3. The Death Benefit will be the Account Value on the Date of Death.
4. The Reinstatement provision will not apply.
Except as provided in this Maturity Date Extension provision, an extension of
the maturity date does not alter this policy.
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<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:
1. transfer ownership to a new Owner;
2. name a contingent Owner who will automatically become the Owner of the
Policy if You die before the Insured;
3. change or revoke a contingent Owner;
4. change or revoke a Beneficiary;
5. exercise all other rights in the Policy;
6. increase or decrease the Specified Face Amount, subject to the other
Provisions of the Policy;
7. 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 satisfactory to Us of the requested action. Your request will then,
except as otherwise specified, be effective as of the date You signed the
form, subject to any action taken before We received it.
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.
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<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. The income, gains and losses, realized
or unrealized, from assets allocated to the Variable Account shall be
credited to or charged against the Variable Account without regard to any
other income, gains or losses. Also, the income gains and losses, realized or
unrealized, from assets allocated to any Sub-Account shall be credited to or
charged against that Sub-Account, without regard to other income, gains or
losses of Us or of any other Sub-Account. The portion of the assets of the
Variable Account equal to the reserves and other Policy liabilities with
respect to the Variable Account will not be chargeable with liabilities
arising out of any other business the Company may conduct. 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 de-registered 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 unit 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. We may decide to add
Sub-Accounts at any time. Also, 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 to the extent necessary
these substitutions have been approved by the Securities and Exchange
Commission. 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 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 Us. Telephone requests will be honored only if We have a properly
completed telephone authorization form for You on file. We, our affiliates
and the representative from whom You purchased Your Policy 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
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<PAGE>
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. We reserve the right to limit the
number of Sub Accounts to which you may allocate your Account Value to not
more than 20 Sub Accounts.
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.
We reserve the right to restrict amounts transferred to the Variable Account
from the Fixed Account to 20% of that portion of the Account Value
attributable to the Fixed Account Value as of the end of the previous Policy
Year.
We reserve the right to restrict amounts transferred to the Fixed Account
Value from the Variable Account to 20% of that portion of the Account Value
attributable to the Variable Account as of the end of the previous Policy
Year. We further reserve the right to restrict amounts transferred to the
Fixed Account Value from the Variable Account in the event the portion of the
Account Value attributable to the Fixed Account Value would exceed 30% of the
Account Value.
7. PREMIUMS
All Premium payments are payable to Us, and should be mailed to Our Principal
Office. The Initial Premium is due and payable as of the Issue date of the
Policy. Subsequent premiums may be paid to Us subject to the limitations
described below. All premiums are to be paid to us at Our Principal Office.
PREMIUM. We reserve the right to limit the number of Premium payments We
accept during a year . No Premium payment may be less than $50 without Our
consent, although We will accept any 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.
We will not accept Premium payments that would, in Our opinion, cause the
Policy to fail to qualify as life insurance under applicable tax law. 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 paid as the Premium less the
Expense Charge Applied to Premium. The Expense Charge Applied to Premium will
be determined by Us from time to time based on Our expectations of future
expenses and taxes. However, the Expense Charge Applied to Premium will not
be greater than that 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. 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. We reserve the right to limit the number of Sub Accounts to
which you may allocate your Account Value to not more than 20 Sub Accounts.
Net Premiums will first be applied to reduce any Unpaid Policy Charges.
Premiums received prior to the end of the Right to Return Policy Period will
be credited to the sub-account shown in Section 1 for allocation of Premiums
during the Free Look Period. Your initial allocation percentages will take
effect at the end of the Right to Return Policy Period.
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<PAGE>
You may change the allocation percentages at any time pursuant to written or
telephone request to Our Principal Office. Telephone requests will be honored
only if We have a properly completed telephone authorization form for You on
file. We, our affiliates and the representative from whom You purchased Your
Policy 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 We receive the request
for that change.
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
limits. 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.
8. DEATH BENEFIT
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:
1) the Specified Face Amount; or 2) the Account Value multiplied by the
applicable death benefit percentage shown in Section 1.
Option B - Specified Face Amount plus Account Value. The death benefit is
the greater of: 1) the Specified Face Amount plus the Account Value; or 2)
the Account Value multiplied by the applicable death benefit percentage
shown in Section 1.
The death benefit will be determined based on the Account Value on the date
of death. The actual Policy Proceeds payable on the death of the Insured
will be the death benefit described above less any Policy Debt and less any
Unpaid Policy Charges. Under certain circumstances the Policy Proceeds may
be adjusted (see "Incontestability", "Misstatement of Age or Sex" and
"Suicide" in Section 4).
CHANGES IN SPECIFIED FACE AMOUNT. After the end of the first Policy Year,
You may request a change in the Specified Face Amount. You must send Your
request for a change to Our Principal Office in writing. Each such change
will be effective on the Effective Date of Coverage for the change.
DECREASES IN SPECIFIED FACE AMOUNT. The Specified Face Amount may not be
decreased to less than the Minimum Specified 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:
1. first, to the most recent increase;
2. second, to the next most recent increases, in reverse chronological
order; and
3. 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
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<PAGE>
Insured's insurability satisfactory to Us. We will not accept a request for
an increase if the age of the Insured is greater than 80 at the next
Anniversary following the request.
CHANGES IN THE DEATH BENEFIT OPTION. After the end of the first Policy Year
You may request a change in the death benefit option. 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 Us. The effective
date of the change will be the Anniversary on or next following the date We
receive Your request.
If the death benefit option change is from option A to option B, the
Specified Face Amount will be reduced by the Account Value. The Specified
Face Amount after a reduction may not be less than the Minimum Specified Face
Amount shown in section 1. If the death benefit option change is from option
B to option A, the Specified Face Amount will be increased by the Account
Value. In any 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.
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 Fixed Account Value. The Account Value varies depending upon
the Premiums paid, Expense Charge Applied to Premium, Mortality and Expense
Risk Percentage deductions, Monthly Expense Charges, Monthly Cost of
Insurance charges, Partial Surrenders, fees, policy loans and the Net
Investment Factor for the Sub-Accounts to which Your Account Value is
allocated.
VARIABLE ACCOUNT VALUE. 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 the deductions of the Monthly Expense Charge, fees 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 of the
Sub-Account. 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 Our
Principal Office. 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.
VARIABLE ACCOUNT VALUE IN THE SUB-ACCOUNTS. The Variable Account Value
attributable to each Sub-Account of the Variable Account on the Investment
Start Date equals:
1. that portion of Net Premium received and allocated to the Sub-Account,
less
2. that portion of the Monthly Expense Charges due on the policy date and
subsequent Monthly Anniversary Days through the Investment Start Date
charged to the Sub-Account, less
3. that portion of the Monthly Cost of Insurance deductions due from the
policy date through the Investment Start Date charged to the Sub-Account.
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The Account Value attributable to each Sub-Account of the Variable Account on
subsequent Valuation Dates is equal to:
1. the Account Value attributable to the Sub-Account on the preceding
Valuation Date multiplied by that Sub-Account's Net Investment Factor,
plus
2. that portion of Net Premium received and allocated to the Sub-Account
during the current Valuation Period, plus
3. any amounts transferred by You to the Sub-Account from another Sub-
Account or from the Fixed Account Value during the current Valuation
Period, less
4. any amounts transferred by You from the Sub-Account to another
Sub-Account or to the Fixed Account Value during the current Valuation
Period, less
5. that portion of any Partial Surrenders deducted from the Sub-Account
during the current Valuation Period, less
6. that portion of any Policy loan transferred from the Sub-Account to the
Fixed Account Value during the current Valuation Period, less
7. that portion of any surrender charges associated with a decrease in the
Specified Face Amount charged to the Sub-Account during the current
Valuation Period, less
8. 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
9. 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.
NET INVESTMENT FACTOR. The Net Investment Factor for each Sub-Account for any
Valuation Period is determined by deducting the Mortality and Expense Risk
Charge for each day in the Valuation Period from the quotient of (1) divided
by (2) where:
(1) is the net result of:
(a) the net asset value of a Fund share held in the Sub-Account
determined as of the end of the Valuation Period, plus
(b) 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
(c) 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.
The Mortality and Expense Risk Charge for the Valuation Period is the Daily
Risk Charge times the number of days in the Valuation Period.
The Net Investment Factor may be greater or less than one.
MORTALITY AND EXPENSE RISK CHARGE. The Mortality and Expense Risk Charge will
be determined by Us from time to time based on Our expectations of future
interest, mortality costs, persistency, expenses and taxes. However, the
Mortality and Expense Risk Charge will not be greater than that specified in
Section 1.
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<PAGE>
FIXED ACCOUNT VALUE. The Fixed Account Value on the Investment Start Date
equals:
1. that portion of Net Premium received and allocated to the Fixed Account
Value and accrued at interest, less
2. that portion of the Monthly Expense Charges due on the policy date and
subsequent Monthly Anniversary Days through the Investment Start Date
charged to the Fixed Account Value and accrued at interest, less
3. that portion of the Monthly Cost of Insurance deductions due from the
policy date through the Investment Start Date charged to the Fixed Account
Value and accrued at interest.
The Fixed Account Value on subsequent Valuation Dates is equal to:
1. the Fixed Account Value on the preceding Valuation Date accrued at
interest, plus
2. that portion of Net Premium received and allocated to the Fixed Account
Value during the current Valuation Period and accrued at interest, plus
3. any amounts transferred by You to the Fixed Account Value from the
Variable Account during the current Valuation Period and accrued at
interest, less
4. any amounts transferred by You from the Fixed Account Value to the
Variable Account during the current Valuation Period and accrued at
interest, less
5. that portion of any Partial Surrenders deducted from the Fixed Account
Value during the current Valuation Period and accrued at interest, plus
6. any Policy loan transferred from the Variable Account to the Fixed
Account Value during the current Valuation Period and accrued at
interest, less
7. that portion of any surrender charges associated with a decrease in the
Specified Face Amount charged to the Fixed Account Value during the
current Valuation Period, less
8. 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 Fixed Account Value and accrued at interest, less
9. 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 Fixed Account Value and accrued at interest.
The guaranteed effective annual interest rate applicable to the Fixed Account
Value is specified in section 1. Interest in excess of the guaranteed rate
may be applied in the calculation of the Fixed Account Value at such increased
rates and in such manner as we may determine, based on our expectations of
future interest, mortality costs, persistency, expenses and taxes. Interest
credited will be computed on a compound interest basis.
MONTHLY EXPENSE CHARGE. The Monthly Expense Charge is shown in Section 1. The
Monthly Expense Charge deduction will be charged proportionally to the
amounts in the Sub-Accounts and the amount of the Fixed Account Value in
excess of the Policy Debt.
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<PAGE>
MONTHLY COST OF INSURANCE. We deduct a Monthly Cost of Insurance charge from
Your Account Value to cover anticipated costs of providing insurance coverage.
the Monthly Cost of Insurance deduction will be charged proportionally to the
amounts in the Sub-Accounts and of the Fixed Account Value in excess of the
Policy Debt .
The Monthly Cost of Insurance equals the sum of (1), (2) and (3) where
(1) is the Cost of Insurance Charges equal to the Monthly Cost of
Insurance Rate (described below) multiplied by the Net Amount at Risk
divided by 1,000;
(2) is the monthly rider cost (as described in the riders) for any
riders which are a part of the Policy; and
(3) is the Flat Extra specified in Section 1, if applicable, multiplied
by the Net Amount at Risk divided by 1,000.
The Net Amount at Risk equals:
(1) the Death Benefit divided by 1.00247 ; less
(2) the Account Value on the Valuation Date prior to assessing the
Monthly Expense Charge and the Monthly Cost of Insurance Charges.
If there are increases in the Specified Face Amount other than increases
caused by changes in the Death Benefit Option, the Cost of Insurance Charges
described above are determined separately for the initial Specified Face
Amount and each increase in the Specified Face Amount. In calculating the Net
Amount at Risk the Account Value will first be allocated to the initial
Specified Face Amount and then to each increase in the Specified Face Amount
in the order in which the increases were made.
MONTHLY COST OF INSURANCE RATES. The Monthly Cost of Insurance Rates (except
for any such rate applicable to an increase in the Specified Face Amount) are
based on the length of time the Policy has been in force and the Insured's
sex (in the case of a non-unisex Policy), 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 costs, persistency, interest rates, expenses and taxes. However,
the Monthly Cost of Insurance Rates will not be greater than those shown in
Section 2.
The Monthly Cost of Insurance Rates applicable to each increase in the
Specified Face Amount are based on the length of time the increase has been
in force and the Insured's sex (in the case of a non-unisex Policy), 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 costs, persistency, interest rates,
expenses and taxes. However, the Monthly Cost of Insurance Rates will not be
greater than the maximum cost of insurance rates provided by Us in Section 2
for each increase.
BASIS OF COMPUTATION. Guaranteed Maximum Monthly Cost of Insurance Rates are
based on the 1980 Commissioner's Standard Ordinary Smoker and Nonsmoker
Mortality Table (Table B applies if the Policy is issued on a unisex basis).
The Guaranteed Maximum Monthly Cost of Insurance Rates reflect any table
rating shown in Section 1. We have filed a detailed statement of Our methods
for computing Cash Values with the insurance department in the jurisdiction
where the Policy was delivered. These values are equal or exceed the minimum
required by law.
INSUFFICIENT VALUE. If on a Valuation Date a Monthly Anniversary Day occurred
during the Valuation Period and the Cash Surrender Value is equal to or less
than zero, then the Policy will terminate for no value, subject to the Grace
Period provision. During the Protected Period shown in Section 1 the Policy
will not terminate by reason of insufficient value if the Policy satisfies
the minimum premium test as described below. The Protected Period begins on
the policy date shown in Section 1.
If on a Valuation Date a Monthly Anniversary Day occurred during the
Valuation Period and the Monthly Expense Charge plus the Monthly Cost of
Insurance plus the Policy Debt exceed the Account Value then the Unpaid
Policy Charges will be increased by the excess of these amounts over the
Account Value. Any
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<PAGE>
Unpaid Policy Charges will accumulate at interest at the Fixed Account
interest rate.
MINIMUM PREMIUM TEST. The Policy satisfies the minimum premium test if the
Premiums paid less any Partial Surrenders and less any Policy Debt exceed the
sum of the minimum monthly premiums which applied to the Policy in each
Policy Month from the policy date to the Valuation Date on which the test is
applied.
The minimum monthly premium applicable to the Policy is shown in Section 1.
The minimum monthly premium will be revised as a result of any of the
following changes to the Policy:
1. an increase in the Specified Face Amount;
2. an increase in supplemental benefits ;
3. when requested by You, the addition of any supplemental benefits.
The revised minimum monthly premium will be effective as of the effective
date of the change to the Policy and will remain in effect until again
revised by any of the above changes.
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 keep the policy in force. Notice of Premium due will be mailed
toYour 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 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.
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. We
will make payment when we receive Due Proof of that death.
CASH SURRENDER VALUE. You may surrender the Policy for its Cash Surrender
Value at any time. The Cash Surrender Value is the Account Value decreased by
any surrender charges and by the balance of any Policy Debt. We will
determine the Cash Surrender Value at the end of the first Valuation Date
after we receive Your written request for surrender.
SURRENDER CHARGES. If this policy is surrendered for its Cash Surrender
Value, a surrender charge will be applied to the initial Specified Face
Amount and to each increase in the Specified Face Amount, except that a
surrender charge will not be applied to an increase in the Specified Face
Amount resulting from a change in the death benefit option. The surrender
charge will be calculated separately for the initial Specified Face Amount
and each increase in the Specified Face Amount. The surrender charges for the
initial Specified Face Amount and each increase in the Specified Face Amount
are shown in the current Section 1. We will send You a current table of
revised surrender charges resulting from an increase in the Specified Face
Amount that affects the surrender charges.
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<PAGE>
SURRENDER CHARGE ON DECREASE IN SPECIFIED FACE AMOUNT. A surrender charge
will be deducted from the Account Value for each decrease in the Specified
Face Amount, except for a decrease in the Specified Face Amount resulting
from a change of death benefit option or from a Partial Surrender. A
surrender charge will be determined for the initial Specified Face Amount and
for each increase in the Specified Face Amount . These surrender charges will
be applied in the following order:
1. first, to the most recent increase;
2. second, to the next most recent increases, in reverse chronological
order; and
3. finally, to the initial Specified Face Amount.
The amounts of the surrender charges applied will be equal to the surrender
charges shown in the current section 1, revised for any increases in the
Specified Face Amount, for the Policy Year in which the decrease is made
multiplied by (a) over (b), where: (a) is the decrease in the initial
Specified Face Amount or any subsequent increase in the Specified Face
Amount; and (b) is the Initial Specified Face Amount or any subsequent
increase in the Specified Face Amount immediately prior to the decrease.
Future surrender charges for the initial Specified Face Amount and any
increase in the Specified Face Amount will be reduced by the surrender
charges applied because of the decrease in the initial Specified Face Amount
or any subsequent increases in the Specified Face Amount. We will send You a
current table of revised surrender charges reflecting the decrease in the
initial Specified Face Amount or any subsequent increases in the Specified
Face Amount.
The surrender charge will be deducted from the Account Value. You may
allocate the surrender charges applied among the Sub-Accounts and the Fixed
Account Value pursuant to written or telephone request to Our Principal
Office. Telephone requests will be honored only if We have a properly
completed telephone authorization form for You on file. We, our affiliates
and the representative from whom You purchased Your Policy 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. If You do not specify the allocation, then the
surrender charge will be allocated among the Sub-Accounts in the proportion
the amounts in the Sub-Account and the Fixed Account Value in excess of the
Policy Debt bear to the Account Value in excess of the Policy Debt .
PARTIAL SURRENDER. You may make a Partial Surrender of the Policy once each
Policy Year after the first Policy Year by written request to Us. The amount
of any Partial Surrender must be at least $200. During the first ten Policy
Years the maximum amount of each Partial Surrender is 20% of the Cash
Surrender Value at the end of the first Valuation Date after We receive Your
request. After the first ten Policy years, the maximum amount of any Partial
Surrender is the Cash Surrender Value. If the policy's death benefit option
is option A, the Specified Face Amount will be decreased by the amount of the
Partial Surrender. The 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:
1. first, to the most recent increase;
2. second, to the next most recent increases, in reverse chronological
order; and
3. finally, to the initial Specified Face Amount.
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.
We will effect a Partial Surrender at the end of the first Business Day after
we receive Your written request for surrender.
ALLOCATION OF PARTIAL SURRENDER. You may allocate the Partial Surrender among
the Sub-Accounts of the Variable Account and the Fixed Account Value. If You
do not specify the allocation, then the Partial Surrender will be allocated
among the Sub-Accounts in the proportion the amounts in the Sub-Account and
the Fixed Account Value in excess of the Policy Debt bear to the Account
Value in excess of the Policy Debt.
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<PAGE>
POLICY LOAN. You may request a Policy loan of up to 90% of the Policy's Cash
Value, decreased by the amount of any outstanding Policy Debt on the date the
Policy loan is made. You may allocate the Policy loan among the Sub-Accounts
and the Fixed Account Value. If You do not specify the allocation, then the
Policy loan will be allocated among the Sub-Accounts in the proportion the
amounts in the Sub-Account and the Fixed Account Value in excess of the
Policy loan bear to the Account Value in excess of the Policy loan. Loan
amounts allocated to the Sub-Accounts will be transferred to the Fixed
Account Value. A grace period will begin on any Monthly Anniversary Day on
which the Policy Debt exceeds the Cash Value. After the end of the protected
period shown in Section 1, the Policy will terminate without value upon the
expiration of the grace period.
Interest on the Policy Debt 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 of the 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.
DEFERRAL OF PAYMENT. We will usually pay any amount due within seven days
after the Valuation Date following Our receipt of written notice in a form
satisfactory to us 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:
1. the New York Stock Exchange ("NYSE") is closed other than customary
weekend and holiday closing, or trading on the NYSE is otherwise
restricted,
2. the Securities and Exchange Commission, by order, permits postponement
for the protection of Policy Owners, or
3. 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.
We reserve the right to defer payment of any portion of the Cash Surrender
Value, Policy loan or Partial Surrender payable from the Fixed Account Value
for a period not exceeding six months from the date We receive Your request.
We will not defer payment of a Policy loan if the loan is to be used to pay
any premium to Us.
TERMINATION. The Policy terminates on the earlier of the date We receive Your
request to surrender it for the Cash Surrender Value, the expiration date of
the Grace Period due to insufficient value, the date of death of the Insured,
or the date of Maturity.
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<PAGE>
12. REINSTATEMENT
Prior to the death of the Insured, the Policy may be reinstated prior to the
Maturity Date, provided the Policy has not been surrendered for the Cash
Surrender Value, and provided that:
1. You make Your reinstatement request within five years from the
Policy termination date;
2. You submit satisfactory evidence of the Insured's insurability to Us;
3. You pay an amount sufficient to put the Policy in force;
An amount sufficient to put the Policy in force is not less than:
1. the Unpaid Policy Charges at the end of the grace period; plus
2. any excess of the Policy Debt over the Cash Value at the end of the
grace period; plus
3. three times the Monthly Cost of Insurance charges applicable at the
date of reinstatement; plus
4. three times the Monthly Expense Charge.
During the protected period shown in Section 1 an amount is sufficient to put
the Policy in force if it meets the minimum premium test.
The Specified Face Amount of the reinstated Policy cannot exceed the
Specified Face Amount at the time of termination. The Account Value on the
Policy reinstatement date will reflect:
1. the Account Value at the time of termination; plus
2. Net Premiums attributable to Premiums paid to reinstate the Policy;
less
3. the Monthly Expense Charge; less
4. the Monthly Cost of Insurance charge applicable on the date of
reinstatement.
The effective date of reinstatement will be the Monthly Anniversary Day that
falls on or next follows the date We approve Your request.
Any Policy Debt at the time of termination must be repaid upon the
reinstatement of the Policy or carried over to the reinstated policy.
If the Policy was subject to surrender charges when it lapsed, the reinstated
Policy will be subject to surrender charges as if the Policy had not
terminated.
The Incontestability provision of the Policy will apply to the Policy after
reinstatement as regards statements made in the application for
reinstatement. The Suicide provision of the Policy will apply to the Policy
after reinstatement. In those provisions in the reinstated Policy, "Issue
Date" means the effective date of reinstatement.
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RIDERS AND ENDORSEMENTS
APPLICATION
Page 23
<PAGE>
SUN LIFE ASSURANCE
COMPANY OF CANADA (U.S.)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) U.S HEADQUARTERS OFFICE:
One Sun Life Executive Park
Wellesley Hills, MA 02481
HEAD OFFICE:
Toronto, Canada
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
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.
Page 24
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
ACCELERATED BENEFITS RIDER
THIS RIDER IS A PART OF, AND SUBJECT TO THE OTHER TERMS
AND CONDITIONS OF, THE POLICY.
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BENEFITS AS SPECIFIED UNDER THE POLICY WILL BE REDUCED UPON RECEIPT OF AN
ACCELERATED BENEFIT PAYMENT. RECEIPT OF ACCELERATED BENEFIT PAYMENTS MAY BE
TAXABLE. YOU SHOULD CONTACT YOUR PERSONAL TAX ADVISOR FOR SPECIFIC ADVICE.
NEITHER THE COMPANY NOR ANY REPRESENTATIVE CAN PROVIDE TAX ADVICE.
- -------------------------------------------------------------------------------
DEFINITIONS
ACCELERATED BENEFIT PAYMENT: The amount of benefit payable to You.
ELIGIBLE AMOUNT: If Death Benefit Option A has been elected - The Specified
Face Amount of the Policy.
If Death Benefit Option B has been elected - The Specified Face Amount plus the
Account Value of the Policy.
ACCELERATED AMOUNT: The portion of the Eligible Amount requested by You, not to
exceed the lesser of:
i) 75% of the Eligible Amount; or
ii) $250,000.
PHYSICIAN: A licensed, medical practitioner performing within the scope of that
practitioner's license. A Physician must not be You; the Insured; or the
brother, sister, parent, spouse or child of either You or the Insured.
TERMINALLY ILL: A life expectancy of 12 months or less due to illness or
physical condition. We will require proof, satisfactory to Us that the Insured
is Terminally Ill. This proof will include, but is not limited to,
certification by a Physician.
BENEFIT
We will pay an accelerated benefit if the Insured is Terminally Ill, subject to
the provisions of this rider. The Eligible Amount available under the Policy
will be determined as of the date We receive Your written request to accelerate
benefits.
The Accelerated Amount will be subject to the following adjustments:
<PAGE>
a) 12 month discount to the Accelerated Amount will be calculated. It will
be based on an annual interest rate that will not exceed the greater of:
1) the yield on 90-day Treasury bills on the day We receive Your request
for an acceleration of benefits; or
2) the statutory maximum Policy loan interest rate.
b) If on the date We approve Your request, there is an outstanding Policy
loan, We will deduct a portion from the Accelerated Amount as partial
payment of the Policy loan. That portion is determined by dividing the
Accelerated Amount by the Eligible Amount, and then multiplying that
percentage by the amount of the Policy loan.
c) A deduction will be made for any administrative fee that is in effect at
the time We receive your request to accelerate the benefits under this
Policy. It will not exceed $150.
The Accelerated Benefit Payment will be equal to the Accelerated Amount minus
a), minus b), and minus c) above. We will pay this amount as a lump sum.
ADJUSTMENTS TO POLICY VALUES
Upon payment of the Accelerated Benefit Payment, the Policy will remain in
force. The Specified Face Amount and the Account Value will be reduced by the
ratio of the Accelerated Amount to the Eligible Amount.
Any outstanding Policy loan will be reduced by the portion of the Policy loan
repaid as determined under the Benefit provision of this rider.
New Policy Specifications reflecting the Accelerated Benefit Payment will be
mailed to you and become part of the Policy.
CONDITIONS
Payment of an accelerated benefit is subject to the following conditions:
1. The Policy must be in force for at least two years from the later of the
following:
a. The Issue Date of the Policy.
b. The date of last Reinstatement.
2. Your written request, in a form satisfactory to Us, must be submitted with
this Policy to Our Principal Office. Upon receipt of Your request, we will
mail a claim form, for completion by the Insured, to Your address of record
within 10 working days.
<PAGE>
3. Written consent, in a form satisfactory to Us, by any spouse and/or
irrevocable beneficiaries, if any, having an interest in this Policy, based
on Our records.
4. The Policy must not be assigned to any person except to Us.
5. The total Accelerated Amounts under all policies issued by Sun Life
Assurance Company of Canada (U.S.) or any affiliated company on the life of
the Insured will not exceed $250,000.
6. We reserve the right to obtain a second medical certification, at Our
expense, from a Physician We select.
7. This rider provides for the accelerated payment of Policy Proceeds and is
not intended to allow third parties to cause You to involuntarily invade
Policy Proceeds ultimately payable to the named Beneficiary. Therefore, an
Accelerated Benefit Payment will be made available to You on a voluntary
basis only. No accelerated Benefit Payment will be processed if You are
required to request it by any third party, including any creditor,
governmental agency, trustee in bankruptcy or any other person or as the
result of a court order.
TERMINATION
This rider will terminate on the earliest of:
a. the date the Accelerated Benefit Payment is paid; or
b. the date that the Policy lapses because of insufficient value; or
c. the date We receive Your written request to cancel this rider; or
d. Maturity of the Policy.
MISCELLANEOUS
Except as modified by this rider, the Definitions and the General Provisions
Sections of the Policy also apply to this rider.
- - - - - - - -
- - - -
- - - - - - - -
- - - - -
President
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
ACCIDENTAL DEATH BENEFIT RIDER
(ADDITIONAL BENEFIT PAYABLE ONLY IN THE EVENT OF DEATH BY ACCIDENT)
- --------------------------------------------------------------------------------
THIS RIDER IS EFFECTIVE IF IT IS SHOWN 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 ISSUED,
ITS EFFECTIVE DATE WILL BE SHOWN ON THE FORM THAT ADDS IT TO THIS POLICY. IF
THIS RIDER IS ADDED AT THE SAME TIME THIS POLICY IS ISSUED, IT WILL TAKE EFFECT
AT THE SAME TIME THIS POLICY TAKES EFFECT.
- --------------------------------------------------------------------------------
ACCIDENTAL DEATH
"Accidental Death" is the death of the Insured as the direct result, independent
of all other causes:
a. of an injury sustained solely by external or violent accident; or
b. of an accidental drowning.
BENEFIT
We will pay the Accidental Death benefit shown in Section 1 of this Policy when
we receive Due Proof that the Accidental Death occurred:
a. while this rider was in force; and
b. on or after the Insured's first birthday; and
c. within ninety days after the date of the accident.
The amount of the benefit shown for this rider in Section 1 of this Policy will
not change if the Specified Face Amount is changed, unless You request a change.
EXCLUDED RISKS
We will not pay an Accidental Death benefit if the death of the Insured is
caused by or is the result of any of the following:
a. suicide, whether the Insured is sane or insane;
b. any gas, poison, drug or medicine, whether injected, inhaled, absorbed or
otherwise taken voluntarily (other than as the result of an occupational
accident, or unless taken as prescribed by a duly licensed physician);
c. any bodily or mental infirmity, disease or infection (unless the
infection occurs at the same time as and is the result of any accidental
cut or wound);
d. committing or attempting to commit an assault, felony or other illegal
act;
e. participating in a riot, civil commotion, insurrection, war or the
hostile action of the armed forces of any country;
<PAGE>
f. participation in the training or operations of any armed forces during a
state of war or armed conflict;
g. riding in, descending from or being exposed to any hazard incident to any
kind of aircraft if the Insured: was receiving any form of aeronautical
instruction; was being flown for a parachute descent; was a member of any
armed forces (and the aircraft was under the control or charter of such
force); or had any duties to perform in connection with the aircraft.
MONTHLY RIDER COST
The monthly cost of this rider is shown in Section 1 of this Policy. This cost
is part of the Monthly Cost of Insurance described in the Account Value section
of this Policy.
TERMINATION
This rider will terminate on the earliest of:
a the Anniversary nearest to the Insured's 70th birthday; or
b. the date that this Policy terminates in accordance with its Grace Period
provision.
/s/ Donald A. Stewart
President
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
PAYMENT OF STIPULATED AMOUNT RIDER
(Payment of Stipulated Amount in the Event of Total Disability)
- --------------------------------------------------------------------------------
THIS RIDER IS EFFECTIVE IF IT IS SHOWN IN SECTION 1 OF THIS POLICY AS A
SUPPLEMENTAL BENEFIT. IT IS A PART OF THIS POLICY AND IS SUBJECT TO THE OTHER
TERMS AND CONDITIONS OF THIS POLICY. IF THIS RIDER IS ADDED AFTER THIS POLICY IS
ISSUED, ITS EFFECTIVE DATE WILL BE STATED IN THE FORM WHICH ADDS IT TO THIS
POLICY.
- --------------------------------------------------------------------------------
TOTAL DISABILITY
"Total Disability" is any incapacity of the Insured which results from bodily
injury or disease. During the first 60 months of such an incapacity, it must
prevent the Insured from performing substantially all of the major duties of his
or her occupation. If the incapacity continues beyond 60 months, it must prevent
the Insured from doing any work for which he or she is reasonably qualified by
reason of training, education or experience.
Even if the Insured can work, the following will constitute Total Disability:
total and permanent loss of sight of both eyes; severance of both hands, both
feet, or one hand and one foot; total and permanent loss of hearing in both
ears.
BENEFIT
If the Insured's Total Disability commences while this rider is in force and
continues for six months, We will then make a monthly payment on Your behalf
equal to the Stipulated Amount shown in Section 1 of this Policy. We will
continue to make such payments for as long as that Total Disability continues,
but not beyond the end of the benefit period shown for this rider in Section 1
of this Policy. The amounts We pay will be applied to this Policy as Premium
payments in accordance with the terms of this Policy. If applying any amount
payable under this rider as a Premium payment would cause this Policy to fail to
qualify as life insurance under applicable tax law, We will pay that amount to
You instead of applying it as a Premium payment.
The payments described in the preceding paragraph are subject to the following
conditions and to the other provisions of this rider:
1. Except as provided in item 2 of this Benefit provision, payments made under
this rider will be made on Monthly Anniversary Days, beginning with the
first Monthly Anniversary Day that occurs after We first receive Due Proof
of Total Disability in accordance with this rider's Notice and Proof
provision.
2. For purposes of this item 2, We will calculate a total Stipulated Amount by
multiplying the Stipulated Amount shown in Section 1 of this Policy by the
number of Monthly Anniversary Days that occurs in the period that begins on
the date that
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Total Disability commences and ends on the date We first
receive Due Proof of Total Disability in accordance with this rider's
Notice and Proof provision.
Any amount We pay under this rider in accordance with this item 2 will be
paid as of the first Monthly Anniversary Day that occurs after We first
receive Due Proof of Total Disability in accordance with this rider's
Notice and Proof provision.
3. This rider will not apply to any Monthly Anniversary Day that occurs: 1)
before the Insured's fifth birthday; or 2) more than one year before We
first receive notice of the Insured's Total Disability in accordance with
this rider's Notice and Proof provision.
Payment of amounts under this rider does not guarantee that the Account Value of
this Policy will be sufficient to keep this Policy in force.
RISKS EXCLUDED
We will not make payments under this rider if the Insured's Total Disability is
caused by or results from any of the following:
a. bodily injury sustained or disease first manifested while this rider is
not in force (unless disclosed in the Application);
b. intentionally self-inflicted injury;
c. participation in a riot, civil commotion, insurrection, war or the hostile
action of the armed forces of any country; or
d. participation in the training or operations of any armed forces during a
state of war or armed conflict.
NOTICE AND PROOF
We must receive written notice and Due Proof of the Insured's Total Disability
before We make any payment under this rider. We must receive notice at Our
Principal Office while the Insured is alive and the Total Disability is
continuing. We must receive Due Proof at Our Principal Office within six months
after We receive notice of the disability. The earliest date on which We will
consider Due Proof to have been first received is the date on which Total
Disability has continued for six months. We will not refuse to make payments
under this rider because of a failure to provide notice or Due Proof within
these time limits if You show Us that it was not reasonably possible to meet
these time limits and that the notice or Due Proof was given to Us as soon as
reasonably possible. However, if We do not receive Due Proof within six months
after We receive notice of the disability, the notice of the disability will be
deemed to have been received by Us six months prior to the date We finally
receive Due Proof.
Thereafter, We may require from time to time additional Due Proof that the
disability is continuing. However, after the disability has continued for five
years, We will not
2
<PAGE>
require such additional Due Proof more than once a year. We may also require the
Insured to be examined, at Our expense, by a medical examiner of Our choice. If
such Due Proof is not submitted, We will stop making payments under this rider.
MONTHLY RIDER COST
The monthly cost for this rider is shown in Section 1 of this Policy. This cost
is part of the Monthly Cost of Insurance described in the Account Value section
of this Policy.
CHANGE IN STIPULATED AMOUNT
You may change the Stipulated Amount by written request to Our Principal Office.
An increase in the Stipulated Amount is subject to Our underwriting and
administrative rules in effect at the time.
If We make a change to this Policy at Your request and if that change results in
a reduction of the amount of annual Premium You may pay for this Policy under
applicable tax law, We will reduce the Stipulated Amount to conform to that
reduction. We will reduce the monthly cost for this rider appropriately. We will
inform You in writing of these reductions.
TERMINATION
This rider will terminate on the earliest of:
a. the Anniversary nearest to the Insured's 65th birthday. However, if the
Insured's Total Disability commenced before that Anniversary, We will
continue monthly payments until the earlier of: 1) the date that Total
Disability ceases; or 2) the end of the benefit period shown for this rider
in Section 1 of this Policy. No Total Disability of the Insured that
commences on or after the Anniversary nearest to the Insured's 65th
birthday is covered under this rider;
b. the date this Policy terminates in accordance with its Grace Period
provision;.
c. the date this Policy is surrendered for its Cash Surrender Value.
d. the date of death of the Insured;
e. the date We receive Your written request that it be terminated.
/s/ Donald A. Stewart
President
3
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
WAIVER OF MONTHLY DEDUCTIONS RIDER
(Waiver of Monthly Deductions in the Event of Total Disability)
- --------------------------------------------------------------------------------
THIS RIDER IS EFFECTIVE IF IT IS SHOWN IN SECTION 1 OF THIS POLICY AS A
SUPPLEMENTAL BENEFIT. IT IS A PART OF AND SUBJECT TO THE OTHER TERMS AND
CONDITIONS OF THIS POLICY. IF THIS RIDER IS ADDED AFTER THIS POLICY IS ISSUED,
ITS EFFECTIVE DATE WILL BE STATED IN THE FORM THAT ADDS IT TO THIS POLICY. IF
THIS RIDER IS ADDED AT THE SAME TIME THIS POLICY IS ISSUED, IT WILL TAKE EFFECT
AT THE SAME TIME THIS POLICY TAKES EFFECT.
- --------------------------------------------------------------------------------
TOTAL DISABILITY
"Total Disability" is any incapacity which results from bodily injury or
disease. During the first 24 months of such incapacity, it must prevent the
Insured from performing substantially all of the major duties of his or her
occupation. If the incapacity continues beyond 24 months, it must prevent the
Insured from doing any work for which he or she is reasonably qualified to
perform by reason of training, education or experience.
Even if the Insured can work, the following will constitute Total Disability:
total and permanent loss of sight of both eyes; severance of both hands, both
feet, or one hand and one foot; total and permanent loss of hearing in both
ears.
BENEFIT
If the Insured's Total Disability commences while this rider is in force and
continues for six months, then, beginning on the first Monthly Anniversary Day
following Our receipt of Due Proof of the Insured's Total Disability, We will
waive the monthly deductions for as long as that Total Disability continues. We
will also waive the monthly deductions retroactive to the date the Total
Disability commenced. However, We will not waive the monthly deductions for any
month which occurred: 1) before the Insured's fifth birthday; or 2) more than
one year before We received notice of the Total Disability.
The monthly deductions that We waive will be the Monthly Cost of Insurance and
Monthly Expense Charge. The Account Value will continue to be determined in
accordance with the Account Value section of this Policy, except that the
monthly deductions will not be deducted from the Account Value. While the
Insured's Total Disability is continuing, You may not change the Specified Face
Amount or the death benefit option of this Policy.
RISKS EXCLUDED
We will not waive the monthly deductions if the Insured's Total Disability is
caused by or results from any of the following:
a. bodily injury sustained or disease first manifested while this rider is
not in force (unless disclosed in the Application and not otherwise
excluded);
1
<PAGE>
b. intentionally self-inflicted injury;
c. participation in a riot, civil commotion, insurrection, war or the hostile
action of the armed forces of any country; or
d. participation in the training or operations of any armed forces during a
state of war or armed conflict.
NOTICE AND PROOF
We must receive written notice and Due Proof of the Insured's Total Disability
before We waive the monthly deductions. We must receive notice at Our Principal
Office while the Insured is alive and the Total Disability is continuing. We
must receive Due Proof at Our Principal Office within six months after We
receive notice of the disability. We will not refuse to waive the monthly
deductions because of a failure to provide notice or Due Proof within these time
limits if You show Us that it was not reasonably possible to meet these time
limits and that the notice or proof was given to Us as soon as reasonably
possible. However, if We do not receive Due Proof within six months after We
receive notice of the disability, the notice of the disability will be deemed to
have been received by Us six months prior to the date We actually receive Due
Proof.
We may require from time to time additional proof that the disability is
continuing. However, after the disability has continued for two years, We will
not require such additional proof more than once a year. We may also require the
Insured to be examined, at Our expense, by a medical examiner of Our choice. If
such proof is not submitted, We will cease to waive the monthly deductions, and
they will be deducted from the Account Value.
MONTHLY RIDER COST
The monthly cost of this rider is equal to the monthly rider cost rate shown for
this rider in Section 1 of this Policy times the Net Amount at Risk of this
Policy. This cost is part of the Monthly Cost of Insurance described in the
Account Value section of this Policy. The monthly rider cost rate is based on
the Insured's age at his or her birthday nearest to the effective date of this
rider.
TERMINATION
This rider will terminate on the earliest of:
a. the Policy Anniversary nearest to the Insured's 65th birthday, unless the
Insured's Total Disability is continuing, and commenced before the Policy
Anniversary nearest to the Insured's 60th birthday; or
2
<PAGE>
b. the Policy Anniversary nearest to the Insured's 65th birthday, if the Total
Disability commenced on or after the Policy Anniversary nearest to the
Insured's 60th birthday; or
c. the date that this Policy terminates in accordance with its Grace Period
provision..
REINSTATEMENT
If the Insured is totally disabled on the date this Policy terminates in
accordance with its Grace Period provision, We will reinstate this Policy if:
a. Your written request for reinstatement is made within twelve months
after the termination date; and
b. You provide us with Due Proof of the Insured's Total Disability; and:
c. We would, except for this policy's termination, have been waiving the
monthly deductions at the time You request reinstatement.
If this Policy is reinstated, this rider is also reinstated.
/s/ Donald A. Stewart
President
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
CLARENDON INSURANCE AGENCY, INC.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
- ----------- ----
Section 1. Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 Availability.. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Addition, Deletion or Modification of Funds. . . . . . . . . . . . .2
1.3 No Sales to the General Public.. . . . . . . . . . . . . . . . . . .2
Section 2. Processing Transactions . . . . . . . . . . . . . . . . . . . . . .2
2.1 Timely Pricing and Orders. . . . . . . . . . . . . . . . . . . . . .2
2.2 Timely Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.3 Applicable Price.. . . . . . . . . . . . . . . . . . . . . . . . . .3
2.4 Dividends and Distributions. . . . . . . . . . . . . . . . . . . . .4
2.5 Book Entry.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 3. Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . .4
3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.2 Parties to Cooperate.. . . . . . . . . . . . . . . . . . . . . . . .4
Section 4. Legal Compliance. . . . . . . . . . . . . . . . . . . . . . . . . .4
4.1 Tax Laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4.2 Insurance and Certain Other Laws.. . . . . . . . . . . . . . . . . .7
4.3 Securities Laws. . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.4 Notice of Certain Proceedings and Other Circumstances. . . . . . . .9
4.5 Sun Life to Provide Documents; Information about AVIF. . . . . . . .9
4.6 AVIF to Provide Documents; Information about Sun Life. . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . 11
5.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Disinterested Directors. . . . . . . . . . . . . . . . . . . . . . 12
5.3 Monitoring for Material Irreconcilable Conflicts.. . . . . . . . . 12
5.4 Conflict Remedies. . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Notice to Sun Life.. . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors. . . . . . . . . . . . 14
5.7 Compliance with SEC Rules. . . . . . . . . . . . . . . . . . . . . 14
5.8 Other Requirements.. . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Events of Termination. . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Notice Requirement for Termination.. . . . . . . . . . . . . . . . 16
6.3 Funds to Remain Available. . . . . . . . . . . . . . . . . . . . . 17
6.4 Survival of Warranties and Indemnifications. . . . . . . . . . . . 17
6.5 Continuance of Agreement for Certain Purposes. . . . . . . . . . . 17
Section 7. Parties to Cooperate Respecting Termination . . . . . . . . . . . 17
Section 8. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10. Voting Procedures. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. Foreign Tax Credits. . . . . . . . . . . . . . . . . . . . . . . 19
Section 12. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 19
12.1 Of AVIF and Aim by Sun Life and Clarendon. . . . . . . . . . . . . 19
12.2 Of Sun Life and Clarendon by AVIF and AIM. . . . . . . . . . . . . 21
12.3 Effect of Notice.. . . . . . . . . . . . . . . . . . . . . . . . . 24
12.4 Successors.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 14. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . 24
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16. Rights Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 25
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 18. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . 26
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . 27
Section 21. Access to Information by Sun Life. . . . . . . . . . . . . . . . 27
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 17th day of February, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM");
Sun Life Assurance Company of Canada (U.S.), a Delaware life insurance company
("Sun Life"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and Clarendon Insurance
Agency, Inc. ("Clarendon"), a Massachusetts corporation, a subsidiary of Sun
Life and the principal underwriter of the Contracts (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts
and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, Sun Life will be the issuer of certain variable annuity contracts
and variable life insurance contracts ("Contracts") as set forth on Schedule A
hereto, as the Parties hereto may amend from time to time, which Contracts
(hereinafter collectively, the "Contracts"), if required by applicable law, will
be registered under the 1933 Act; and
WHEREAS, Sun Life will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, Sun Life will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Sun Life intends to purchase Shares of one or more of the Funds on
behalf of the Accounts to fund
<PAGE>
the Contracts; and
WHEREAS, Clarendon is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to Sun Life for purchase and
redemption at net asset value and with no sales charges, subject to the terms
and conditions of this Agreement. The Board of Directors of AVIF may refuse to
sell Shares of any Fund to any person, or suspend or terminate the offering of
Shares of any Fund if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Directors
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 Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide Sun
Life with the net asset value per Share for each Fund by 5:30 p.m. Central Time
on each Business Day. As used herein, "Business Day" shall mean any day on which
(i) the New York Stock Exchange is open for regular trading, (ii) AVIF
calculates the Fund's net asset value, and (iii) Sun Life is open for business.
(b) Sun Life will use the data provided by AVIF each Business Day pursuant
to paragraph (a) immediately above to calculate Account unit values and to
process transactions that receive that same Business Day's Account unit values.
Sun Life will perform such Account processing the same Business Day, and will
place corresponding orders to purchase or redeem Shares with AVIF by 9:00 a.m.
Central Time the following Business Day; provided, however, that AVIF shall
provide additional time to Sun Life in the event that AVIF is unable to meet the
5:30 p.m. Central Time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to Sun Life.
<PAGE>
(c) With respect to payment of the purchase price by Sun Life and of
redemption proceeds by AVIF, Sun Life and AVIF shall net purchase and redemption
orders with respect to each Fund and shall transmit one net payment per Fund in
accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), Sun Life shall be entitled to
an adjustment to the number of Shares purchased or redeemed 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 gain information
shall be reported promptly upon discovery to Sun Life.
2.2 TIMELY PAYMENTS.
Sun Life will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by Sun Life by 1:00 p.m. Central Time on
the same day as the Order is placed, to the extent practicable, but in any event
within five (5) calendar days after the date the order is placed in order to
enable Sun Life to pay redemption proceeds within the time specified in Section
22(e) of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that Sun Life receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), Sun Life shall be the designated agent of AVIF
for receipt of orders relating to Contract transactions on each Business Day and
receipt by such designated agent shall constitute receipt by AVIF; provided that
AVIF receives notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance with Section
2.1(b) hereof. AVIF will acknowledge and verify receipt of such orders by 12:00
p.m. Central Time on each business day on which orders are received.
(b) All other Share purchases and redemptions by Sun Life will be effected
at the net asset values of the appropriate Funds next computed after receipt by
AVIF or its designated agent of the order therefor, and such orders will be
irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to Sun Life of any income
dividends or capital gain distributions payable on the Shares of any Fund. Sun
Life hereby elects to reinvest all dividends and capital gains distributions in
additional Shares of the corresponding Fund at the ex-dividend date net asset
values until Sun Life otherwise notifies AVIF in writing, it being agreed by the
Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. Sun Life reserves the
right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to Sun Life. Shares ordered from AVIF will be
recorded in an appropriate title for Sun Life, on behalf of its Account, as
directed by Sun Life.
SECTION 3. COSTS AND EXPENSES
<PAGE>
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts. Except as otherwise
specifically provided herein, each Party will bear all expenses incident to its
performance under this Agreement.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will
qualify and maintain qualification of each Fund as a RIC. AVIF will notify Sun
Life immediately upon having a reasonable basis for believing that a Fund has
ceased to so qualify or that it might not so qualify in the future.
(b) AVIF represents that it will comply and maintain each Fund's
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will
notify Sun Life immediately upon having a reasonable basis for believing that a
Fund has ceased to so comply or that a Fund might not so comply in the future.
In the event of a breach of this Section 4.1(b) by AVIF, it will take all
reasonable steps to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Section 1.817-5 of the regulations under the
Code.
(c) Notwithstanding Section 12.2 of this Agreement, Sun Life agrees that
if the Internal Revenue Service ("IRS") asserts in writing in connection with
any governmental audit or review of Sun Life or, to Sun Life's knowledge, of any
Participant, that any Fund has failed to comply with the diversification
requirements of Subchapter M or Section 817(h) of the Code or Sun Life otherwise
becomes aware of any facts that could give rise to any claim against AVIF or its
affiliates as a result of such a failure or alleged failure:
(i) Sun Life shall promptly notify AVIF of such assertion or
potential claim (subject to the confidentiality provisions of
Section 18 as to any Participant);
(ii) Sun Life shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii) Sun Life shall, in good faith and to the extent not inconsistent
with its fiduciary duties to its Contract owners, use its best
efforts to minimize any liability of AVIF or its affiliates
resulting from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the IRS that such failure
was inadvertent;
<PAGE>
(iv) Sun Life shall permit AVIF, its affiliates and their legal and
accounting advisors to participate, at their sole expense, in any
conferences, settlement discussions or other administrative or
judicial proceeding or contests (including judicial appeals
thereof) with the IRS, any Participant or any other claimant
regarding any claims that could give rise to liability to AVIF or
its affiliates as a result of such a failure or alleged failure;
provided, however, that Sun Life will retain control of the
conduct of such conferences discussions, proceedings, contests or
appeals;
(v) any written materials to be submitted by Sun Life to the IRS, any
Participant or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation,
any such materials to be submitted to the IRS pursuant to
Treasury Regulations Section 1.817-5(a)(2)), (a) shall be
provided by Sun Life to AVIF (together with any supporting
information or analysis); subject to the confidentiality
provisions of Section 18, at least ten (10) business days or such
shorter period to which the Parties hereto agree prior to the day
on which such proposed materials are to be submitted, and (b)
shall not be submitted by Sun Life to any such person without the
express written consent of AVIF which shall not be unreasonably
withheld; provided, that in any event, each Party shall use its
best efforts to make, as promptly as possible, the submissions to
the Commissioner of the IRS contemplated by paragraph (c)(iii)
above;
(vi) Sun Life shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF shall
reasonably request (including, without limitation, by permitting
AVIF and its accounting and legal advisors to review the relevant
books and records of Sun Life) in order to facilitate review by
AVIF or its advisors of any written submissions provided to it
pursuant to the preceding clause or its assessment of the
validity or amount of any claim against its arising from such a
failure or alleged failure;
(vii) Sun Life shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against AVIF or its
affiliates (a) compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable administrative
or judicial appeals, without the express written consent of AVIF
or its affiliates, which shall not be unreasonably withheld,
provided, that after exhausting all administrative remedies, in
the event of an adverse judicial decision, Sun Life shall either
(a) appeal such decision, provided, that to the extent requested
by Sun Life, AVIF or its affiliates provides an opinion of
independent counsel to the effect that a reasonable basis exists
for taking such appeal, in which case the costs of such appeal
shall be borne equally by the Parties hereto, or (b) permit AVIF
and its affiliates to act in the name of Sun Life and to
<PAGE>
control the conduct of such appeal pursuant to the last paragraph
of this Section 4.1(c), in which case the costs of such appeal
shall be borne by AVIF or its affiliates pursuant to that
paragraph; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if Sun Life fails to comply with
any of the foregoing clauses (i) through (vii), and such failure
could be shown to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, Sun Life may,
in its discretion, authorize AVIF or its affiliates to act in the name of Sun
Life in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall Sun Life have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure to comply with the requirements of Subchapter M or
Section 817(h) of the Code caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) AVIF agrees to cooperate with Sun Life with respect to the matters
described in paragraphs (c)(i) through (vii) above. AVIF further agrees that it
shall provide or cause to be provided to Sun Life, on a quarterly basis, written
confirmation of each Fund's compliance with the diversification requirements of
Subchapter M and Section 817(h) of the Code.
(e) Sun Life represents and warrants that the Contracts currently are and
will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will maintain such treatment; Sun
Life will notify AVIF immediately upon having a reasonable basis for believing
that any of the Contracts have ceased to be so treated or that they might not be
so treated in the future.
(f) Sun Life represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817 of the Code and the regulations
thereunder. Sun Life will continue to meet such definitional requirements, and
it will notify AVIF immediately upon having a reasonable basis for believing
that such requirements have ceased to be met or that they might not be met in
the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested by Sun Life,
including, the furnishing of information not otherwise available to Sun Life
which is required by state insurance law to enable Sun Life to obtain the
authority needed to issue the Contracts in any applicable state.
(b) Sun Life represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate
<PAGE>
power, authority and legal right to execute, deliver and perform its duties and
comply with its obligations under this Agreement, (ii) it has legally and
validly established and maintains each Account as a segregated asset account
under Delaware law and the regulations thereunder, and (iii) the Contracts
comply in all material respects with all other applicable federal and state laws
and regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) Sun Life represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the extent
required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Delaware law, (iii) each Account is and will remain registered under the 1940
Act, to the extent required by the 1940 Act, (iv) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) Sun Life will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF 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 reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of
<PAGE>
the Fund are and 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
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify Sun Life of (i) the issuance by any court
or regulatory body of any stop order, cease and desist order, or other similar
order with respect to AVIF's registration statement under the 1933 Act or AVIF
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or AVIF Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of AVIF's Shares, or (iv) any
other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by Sun Life. AVIF will
make every reasonable effort to prevent the issuance, with respect to any Fund,
of any such stop order, cease and desist order or similar order and, if any such
order is issued, to obtain the lifting thereof at the earliest possible time.
(b) Sun Life will immediately notify AVIF of (i) the issuance by any court
or regulatory body of any stop order, cease and desist order, or other similar
order with respect to each Account's registration statement under the 1933 Act
relating to the Contracts or each Account Prospectus, (ii) any request by the
SEC for any amendment to such registration statement or Account Prospectus that
may affect the offering of Shares of AVIF, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. Sun Life will make every reasonable effort to prevent the issuance
of any such stop order, cease and desist order or similar order and, if any such
order is issued, to obtain the lifting thereof at the earliest possible time.
4.5 SUN LIFE TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) Sun Life will provide to AVIF or its designated agent at least one (1)
complete copy of all SEC registration statements, Account Prospectuses, reports,
any preliminary and final voting instruction solicitation material, applications
for exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to each Account or the Contracts, contemporaneously with the
filing of such document with the SEC or other regulatory authorities.
(b) Sun Life will provide to AVIF or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which AVIF or any of its affiliates is named, at least ten (10) Business Days
prior to its use or such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if AVIF or its designated agent
objects to such use within ten (10) Business Days after receipt of such material
or such shorter period as the Parties hereto may, from time to time, agree upon.
AVIF hereby designates AIM as the entity to receive such sales literature, until
such time as AVIF appoints another designated agent by giving notice to Sun Life
in the manner required by Section 9 hereof.
(c) Neither Sun Life nor any of its affiliates, will give any information
or make any representations or statements on behalf of or concerning AVIF or its
affiliates in connection with the sale of the Contracts other than (i) the
information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and
<PAGE>
AVIF Prospectus may be amended from time to time; or (ii) in reports or proxy
materials for AVIF; or (iii) in published reports for AVIF that are in the
public domain and approved by AVIF for distribution; or (iv) in sales literature
or other promotional material approved by AVIF, except with the express written
permission of AVIF.
(d) Sun Life shall adopt and implement procedures reasonably designed to
ensure that information concerning AVIF and its affiliates that is intended for
use only by brokers or agents selling the Contracts (i.e., information that is
not intended for distribution to Participants) ("broker only materials") is so
used, and neither AVIF nor any of its affiliates shall be liable for any losses,
damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), 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, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT SUN LIFE.
(a) AVIF will provide to Sun Life at least one (1) complete copy of all
SEC registration statements, AVIF Prospectuses, statements of additional
information reports, any preliminary and final proxy material, applications for
exemptions, exemptive orders, requests for no-action letters, and all amendments
to any of the above, that relate to AVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) AVIF will provide to Sun Life or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which Sun Life, or any of its respective affiliates is named, or that refers to
the Contracts, at least ten (10) Business Days prior to its use or such shorter
period as the Parties hereto may, from time to time, agree upon. No such
material shall be used if Sun Life or its designated agent objects to such use
within ten (10) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. Sun Life shall
receive all such sales literature until such time as it appoints a designated
agent by giving notice to AVIF in the manner required by Section 9 hereof.
(c) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning Sun Life, each
Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by Sun Life for distribution; or (iii) in sales literature or other
promotional material approved by Sun Life or its affiliates, except with the
express written permission of Sun Life.
(d) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning Sun Life,
and its respective affiliates that is intended for use only by brokers or agents
selling the Contracts (i.e., information that is
<PAGE>
not intended for distribution to Participants) ("broker only materials") is so
used, and neither Sun Life, nor any of its respective affiliates shall be liable
for any losses, damages or expenses relating to the improper use of such broker
only materials.
(e) For purposes of this Section 4.6, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), 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, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with Sun Life,
and trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies Sun
Life that, in the event that AVIF implements Mixed and Shared Funding, it may be
appropriate to include in the prospectus pursuant to which a Contract is offered
disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). Sun Life agrees to inform
<PAGE>
the Board of Directors of AVIF of the existence of or any potential for any such
material irreconcilable conflict of which it is aware. The concept of a
"material irreconcilable conflict" is not defined by the 1940 Act or the rules
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other 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 Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, Sun Life will assist the Board of
Directors in carrying out its responsibilities by providing the Board of
Directors with all information reasonably necessary for the Board of Directors
to consider any issue raised, including information as to a decision by Sun Life
to disregard voting instructions of Participants. Sun Life's responsibilities in
connection with the foregoing shall be carried out with a view only to the
interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Sun Life will, if it is a Participating
Insurance Company for which a material irreconcilable conflict is relevant, at
its own expense and to the extent reasonably practicable (as determined by a
majority of the Disinterested Directors), take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict, which steps may
include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate,
segregating the assets of any particular group (e.g., annuity
Participants, life insurance Participants or all Participants)
that votes in favor of such segregation, or offering to the
affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of Sun Life's
decision to disregard Participant voting instructions and that decision
represents a minority position or
<PAGE>
would preclude a majority vote, Sun Life may be required, at AVIF's election, to
withdraw each Account's investment in AVIF or any Fund. No charge or penalty
will be imposed as a result of such withdrawal. Any such withdrawal must take
place within six (6) months after AVIF gives notice to Sun Life that this
provision is being implemented, and until such withdrawal AVIF shall continue to
accept and implement orders by Sun Life for the purchase and redemption of
Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Sun Life conflicts with the
majority of other state regulators, then Sun Life will withdraw each Account's
investment in AVIF within six (6) months after AVIF's Board of Directors informs
Sun Life that it has determined that such decision has created a material
irreconcilable conflict, and until such withdrawal AVIF shall continue to accept
and implement orders by Sun Life for the purchase and redemption of Shares of
AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) Sun Life agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. Sun
Life will not be required by the terms hereof to establish a new funding medium
for any Contracts if an offer to do so has been declined by vote of a majority
of Participants materially adversely affected by the material irreconcilable
conflict.
5.5 NOTICE TO SUN LIFE.
AVIF will promptly make known in writing to Sun Life the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Sun Life and AVIF (or its investment adviser) will at least annually submit
to the Board of Directors of AVIF such reports, materials or data as the Board
of Directors may reasonably request so that the Board of Directors may fully
carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms
<PAGE>
and conditions thereof and that the terms of this Section 5 shall be deemed
modified if and only to the extent required in order also to comply with the
terms and conditions of such exemptive relief that is afforded by any of said
rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the
Fund, upon one (1) year's advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
Sun Life or its affiliates by the NASD, the SEC, any state insurance regulator
or any other regulatory body regarding Sun Life's obligations under this
Agreement or related to the sale of the Contracts, the operation of each
Account, or the purchase of Shares, if, in each case, AVIF reasonably determines
that such proceedings, or the facts on which such proceedings would be based,
have a material likelihood of imposing material adverse consequences on the Fund
with respect to which the Agreement is to be terminated; or
(c) at the option of Sun Life upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, Sun Life
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Sun Life, or the Subaccount corresponding to the Fund
with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by Sun Life; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of Sun Life if the Fund ceases to qualify as a RIC under
Subchapter M of the Code or under successor or similar provisions, or if Sun
Life reasonably believes that the Fund may fail to so qualify; or
(g) at the option of Sun Life if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if Sun Life
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by Sun Life cease to
qualify as annuity contracts or life insurance contracts under the Code (other
than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M
of the Code) or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
<PAGE>
(i) upon another Party's material breach of any provision of this
Agreement; or
(j) at the option of Sun Life or AVIF upon receipt of any necessary
regulatory approvals and/or the vote of the Contract owners having an interest
in the account (or any Subaccount) to substitute the shares of another
investment for the corresponding AVIF Shares in accordance with the terms of the
Contracts for which those Shares had been selected to serve as the underlying
investment media. Sun Life will give thirty (30) days' prior written notice to
AVIF of the date of any proposed vote or other action taken to replace the AVIF
Shares; or
(k) at the option of Sun Life, if Sun Life determines in its sole judgment
exercised in good faith, that either AVIF or AVIF's investment adviser has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of Sun Life; or
(l) at the option of AVIF, if AVIF determines in its sole judgment
exercised in good faith, that Sun Life has suffered a material adverse change in
its business, operations or financial condition since the date of this Agreement
or is the subject of material adverse publicity which is likely to have a
material adverse impact upon the business and operations of AVIF.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the option
of Sun Life, 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 will be permitted to reallocate investments in the Fund (as
in effect on such date), 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 6.3 will not apply to any
terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
<PAGE>
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that Sun Life may, by written notice shorten said six (6) month period in the
case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
CLARENDON INSURANCE AGENCY, INC.
One Copley Place, Suite 200
Boston, Massachusetts 02116
Facsimile: (617) 348-1586
Attn: Margaret Hankard, Esq.
<PAGE>
Senior Associate Counsel
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Sun Life will distribute all proxy material furnished by AVIF to Participants to
whom pass-through voting privileges are required to be extended and will solicit
voting instructions from Participants. Sun Life will vote Shares in accordance
with timely instructions received from Participants. Sun Life will vote Shares
that are (a) not attributable to Participants to whom pass-through voting
privileges are extended, or (b) attributable to Participants, but for which no
timely instructions have been received, in the same proportion as Shares for
which said instructions have been received from Participants, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require pass
through voting privileges for Participants. Neither Sun Life nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. Sun Life reserves the right to vote shares held in any Account in
its own right, to the extent permitted by law. Sun Life shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies in
the manner required by the Mixed and Shared Funding exemptive order obtained by
AVIF. AVIF will notify Sun Life of any changes of interpretations or amendments
to Mixed and Shared Funding exemptive order it has obtained. AVIF will comply
with all provisions of the 1940 Act requiring voting by shareholders, and in
particular, AVIF either will provide for annual meetings (except insofar as the
SEC may interpret Section 16 of the 1940 Act not to require such meetings) or
will comply with Section 16(c) of the 1940 Act (although AVIF 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, AVIF will act in accordance with
the SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Sun Life concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY SUN LIFE AND CLARENDON.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
Sun Life and Clarendon agree to indemnify and hold harmless AVIF, its
affiliates, and each person, if any, who controls AVIF or its affiliates within
the meaning of Section 15 of the 1933 Act and each of their respective directors
and officers, (collectively, the "Indemnified Parties" for purposes of this
Section 12.1) against any and all losses, costs, expenses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
Sun Life and Clarendon) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses, costs,
expenses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out
<PAGE>
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 Sun Life or Clarendon by
or on behalf of AVIF or AIM for use in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or
sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any amendment
or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of Sun Life, Clarendon or their
respective affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of Sun
Life, Clarendon or their respective affiliates or persons under
their control (including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph (m) of
Article I of the NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF or its affiliates by or on behalf
of Sun Life, Clarendon or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment or supplement
to any of the foregoing; or
(iv) arise as a result of any failure by Sun Life or Clarendon to
perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or
any material breach of any representation and/or warranty made by
Sun Life or Clarendon in this Agreement or arise out of or result
from any other material breach of this Agreement by Sun Life or
Clarendon; or
(v) arise as a result of failure by the Contracts issued by Sun Life
to qualify as annuity contracts or life insurance contracts under
the Code, otherwise than by reason of any Fund's failure to
comply with Subchapter M or Section 817(h) of the Code.
<PAGE>
(b) Neither Sun Life nor Clarendon shall be liable under this Section 12.1
with respect to any losses, costs, expenses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither Sun Life nor Clarendon shall be liable under this Section 12.1
with respect to any action against an Indemnified Party unless AVIF or AIM shall
have notified Sun Life and Clarendon in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action 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 Sun Life and Clarendon of any such action shall
not relieve Sun Life and Clarendon from any liability which they may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this Section 12.1. Except as otherwise provided herein, in case any such
action is brought against an Indemnified Party, Sun Life and Clarendon shall be
entitled to participate, at their own expense, in the defense of such action and
also shall be entitled to assume the defense thereof, with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from Sun Life or Clarendon to such
Indemnified Party of Sun Life's or Clarendon's election to assume the defense
thereof, the Indemnified Party will cooperate fully with Sun Life and Clarendon
and shall bear the fees and expenses of any additional counsel retained by it,
and neither Sun Life nor Clarendon will be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.2 OF SUN LIFE AND CLARENDON BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless Sun Life,
Clarendon, their respective affiliates, and each person, if any, who controls
Sun Life, Clarendon or their respective affiliates within the meaning of Section
15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, costs, expenses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of AVIF and/or
AIM ) or actions in respect thereof (including, to the extent reasonable, legal
and other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law, or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, costs, expenses, claims, damages,
liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus or sales literature or advertising
of AVIF (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 AVIF or its affiliates by
or on behalf of Sun Life, Clarendon or their respective affiliates for use
in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales
literature or advertising or otherwise for use in connection with the sale
of Contracts or Shares (or any amendment or supplement to any of the
foregoing); or
<PAGE>
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF
or AIM or their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF or AIM or their affiliates or persons under its
control (including, without limitation, their employees and
"Associated Persons" as that term is defined in Section (n) of
Article I of the NASD By-Laws), in connection with the sale or
distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, 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 in conformity with information furnished to Sun Life,
Clarendon or their respective affiliates by or on behalf of AVIF
or AIM for use in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising covering
the Contracts, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any material
breach of any representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other material
breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF
and/or AIM) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related interest
and penalties, rescission charges, liability under state law to Participants
asserting liability against Sun Life pursuant to the Contracts, the costs of any
ruling and closing agreement or other settlement with the IRS, and the cost of
any substitution by Sun Life of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that Sun Life reasonably deems necessary or appropriate as a result of
the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, costs, expenses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement, or
(ii) to Sun Life, Clarendon, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or
<PAGE>
AIM in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the action 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 AVIF or
AIM of any such action shall not relieve AVIF or AIM from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this Section 12.2. Except as otherwise provided herein, in
case any such action is brought against an Indemnified Party, AVIF and/or AIM
will be entitled to participate, at its own expense, in the defense of such
action and also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the IRS), with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF and/or AIM to such Indemnified
Party of AVIF's or AIM's election to assume the defense thereof, the Indemnified
Party will cooperate fully with AVIF and AIM and shall bear the fees and
expenses of any additional counsel retained by it, and AVIF will not be liable
to such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
(e) In no event shall either AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any individual or
entity, including, without limitation, Sun Life, Clarendon or any other
Participating Insurance Company or any Participant, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result from (i) a
breach of any representation, warranty, and/or covenant made by Sun Life or
Clarendon hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and covenants; (ii)
the failure by Sun Life or any Participating Insurance Company to maintain its
segregated asset account (which invests in any Fund) as a legally and validly
established segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the 1940 Act (unless
exempt therefrom); or (iii) the failure by Sun Life or any Participating
Insurance Company to maintain its variable annuity or life insurance contracts
(with respect to which any Fund serves as an underlying funding vehicle) as
annuity contracts or life insurance contracts under applicable provisions of the
Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
<PAGE>
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of Sun Life or
any of its affiliates (collectively, the "Sun Life Protected Parties" for
purposes of this Section 18), information maintained regarding those
customers, and all computer programs and procedures or other information
developed by the Sun Life Protected Parties or any of their employees or
agents in connection with Sun Life's performance of its duties under this
Agreement are the valuable property of the Sun Life Protected Parties. AVIF
agrees that if it comes into possession of any list or compilation of the
identities of or other information about the Sun Life Protected Parties'
customers, or any other information or property of the Sun Life Protected
Parties, other than such information as may be independently developed or
compiled by AVIF from information supplied to it by the Sun Life Protected
Parties' customers who also maintain accounts directly with AVIF, AVIF will
hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property except:
(a) with Sun Life's prior written consent; or (b) as required by law or
judicial process. Sun Life acknowledges that the identities of the customers
of AVIF or any of its affiliates (collectively, the "AVIF Protected Parties"
for purposes of this Section 18), information maintained regarding those
customers, and all computer programs and procedures or other information
developed by the AVIF Protected Parties or any of their employees or agents
in connection with AVIF's performance of its duties under this Agreement are
the valuable property of the AVIF Protected Parties. Sun Life agrees that if
it comes into possession of any list or compilation of the identities of or
other information about the AVIF Protected Parties' customers or any other
information or property of the AVIF Protected Parties, other than such
information as may be independently developed or compiled by Sun Life from
information supplied to it by the AVIF Protected Parties' customers who also
maintain accounts directly with Sun Life, Sun Life will hold such information
or property in confidence and refrain from using, disclosing or distributing
any of such information or other
<PAGE>
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to Sun Life (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
Sun Life and its affiliates are hereby granted a non-exclusive license to use
the AIM licensed marks in connection with Sun Life's performance of the services
contemplated under this Agreement, subject to the terms and conditions set forth
in this Section 19.
(b) The grant of license to Sun Life and its affiliates ( the "licensee")
shall terminate automatically upon termination of this Agreement. Upon automatic
termination, the licensee shall cease to use the licensor's licensed marks,
except that Sun Life shall have the right to continue to service any outstanding
Contracts bearing any of the AIM licensed marks. Upon AIM's elective termination
of this license, Sun Life and its affiliates shall immediately cease to issue
any new annuity or life insurance contracts bearing any of the AIM licensed
marks and shall likewise cease any activity which suggests that it has any right
under any of the AIM licensed marks or that it has any association with AIM,
except that Sun Life shall have the right to continue to service outstanding
Contracts bearing any of the AIM licensed marks and to use AIM licensed marks in
such materials as may be necessary for filing with any regulatory authority
where required by law or regulation or to enable Sun Life to quote performance
to existing Contract owners.
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld and
may be obtained in connection with approval of sales materials as provided in
Section 4.5(b) hereof (i.e., approvals obtained under Section 4.5 hereof shall
be deemed approval pursuant to this Section 19).
(d) During the term of this grant of license, a licensor may request that
a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials, upon receiving notice
of such failure by the licensor. The licensor's approval shall not be
unreasonably withheld, and the licensor, when requesting reconsideration of a
prior approval, shall assume the reasonable expenses of withdrawing and
replacing such disapproved materials. The licensee shall obtain the prior
written approval of the licensor for the use of any new materials developed to
replace the disapproved materials, in the manner set forth above.
<PAGE>
(e) The licensee hereunder: (i) acknowledges and stipulates, based upon
the representations of the licensor set forth herein and without making any
independent inquiry thereof, that, to the best of the knowledge of the licensee,
the licensor's licensed marks are valid and enforceable trademarks and/or
service marks; (ii) acknowledges and stipulates that such licensee does not own
the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (iii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iv) acknowledges and agrees that the
use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 21. ACCESS TO INFORMATION BY SUN LIFE
During ordinary business hours, AVIF shall afford Sun Life, directly or
through its authorized representatives, reasonable access to all files, books,
records and other materials of AVIF (except for confidential or proprietary
materials) which directly relate to transactions arising in connection with this
Agreement and to make available appropriate personnel familiar with such items
for the purpose of explaining the form and content of such items. This Section
21 shall survive the termination of this Agreement.
-----------------------------------------
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
-------------------- --------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
------------------- -------------------
Nancy L. Martin Name: Michael J. Cemo
Assistant Secretary Title: Vice President
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
on behalf of itself and its separate accounts
Attest: /s/ Margaret Sears Mead By: /s/ Robert K. Leach
----------------------- -------------------
Name: Margaret Sears Mead Name: Robert K. Leach
Title: Assistant Vice President Title: Vice President
and Secretary
CLARENDON INSURANCE AGENCY, INC.
Attest: /s/ Roy P. Creedon By: /s/ Jane Mancini
------------------ ----------------
Name: Roy P. Creedon Name: Jane Mancini
Title: Secretary Title: President
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International
SEPARATE ACCOUNTS UTILIZING THE FUNDS
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
FUTURITY VARIABLE ANNUITY CONTRACT
<PAGE>
SCHEDULE B
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International
AIM and Design
[AIM LOGO]
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
- --------------------------------------------------------------------------------
SUN LIFE AVIF/AIM
- --------------------------------------------------------------------------------
preparing and filing the Account's preparing and filing the Fund's
registration registration statement statement
- --------------------------------------------------------------------------------
text composition for Account text composition for Fund prospectuses
prospectuses and supplements and supplements
- --------------------------------------------------------------------------------
text alterations of prospectuses text alterations of prospectuses
(Account) and supplements (Fund) and supplements (Fund)
- --------------------------------------------------------------------------------
printing Account and Fund prospectuses a camera ready Fund prospectuses
and supplements
- --------------------------------------------------------------------------------
text composition and printing Account text composition and printing Fund
SAIs (if any) SAIs
- --------------------------------------------------------------------------------
mailing and distributing Account SAIs mailing and distributing Fund SAIs to
(if any) to policy owners upon request policy owners upon request by policy
by policy owners owners
- --------------------------------------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by or appropriate
under the Federal Securities Laws and
to prospective purchasers
- --------------------------------------------------------------------------------
text composition (Account), printing, text composition and printing of
mailing, and distributing annual and annual and semi-annual reports (Fund)
semi-annual reports for Account
- --------------------------------------------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction statements and voting instruction
solicitation materials to policy solicitation materials to policy
owners with respect to proxies related owners with respect to proxies related
to the Account to the Fund
- --------------------------------------------------------------------------------
preparation, printing and distributing
sales material and advertising
relating to the Funds, insofar as such
materials relate to the Contracts and
filing such materials with and
obtaining approval from, the SEC, the
NASD, any state insurance regulatory
authority, and any other appropriate
regulatory authority, to the extent
required
- --------------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated February 17, 1998, by
and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, Sun Life Assurance Company of Canada
(U.S.), a Delaware life insurance company and Clarendon Insurance Agency, Inc. a
Massachusetts corporation, is hereby amended as follows:
Section 5 of the Agreement is hereby deleted in its entirety and replaced
with the following:
SECTION 9. NOTICES.
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
CLARENDON INSURANCE AGENCY, INC.
One Sun Life Executive Park
Wellesley Hills, MA 02481
Facsimile: (781) 237-0707
Attention Maura A. Murphy, Esq.
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attention: Nancy L. Martin, Esq.
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE
POLICIES UTILIZING THE FUNDS ACCOUNTS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY VARIABLE ANNUITY CONTRACT
AIM V.I. Growth Fund Variable Account F - FUTURITY II VARIABLE ANNUITY CONTRACT
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date:
-----------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
---------------------------------- ----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
<PAGE>
A I M DISTRIBUTORS, INC.
Attest: By:
--------------------------- ----------------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
Attest: By:
--------------------------- ----------------------------------------
Name: Name:
--------------------------- ----------------------------------------
Title: Title:
--------------------------- ----------------------------------------
(SEAL)
CLARENDON INSURANCE AGENCY, INC.
Attest: By:
--------------------------- ----------------------------------------
Name: Name:
--------------------------- ----------------------------------------
Title: Title:
--------------------------- ----------------------------------------
(SEAL)
<PAGE>
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated February 17, 1998, by
and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, Sun Life Assurance Company of Canada
(U.S.), a Delaware life insurance company and Clarendon Insurance Agency, Inc. a
Massachusetts corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE
POLICIES UTILIZING THE FUNDS ACCOUNTS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY VARIABLE ANNUITY CONTRACT
AIM V.I. Growth Fund Variable Account F - FUTURITY II VARIABLE ANNUITY CONTRACT
AIM V.I. Growth and Income Fund - FUTURITY FOCUS VARIABLE ANNUITY CONTRACT
AIM V.I. International Equity Fund
- ----------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) FUTURITY VARIABLE UNIVERSAL LIFE
AIM V.I. Growth Fund Variable Account I INSURANCE POLICIES
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
- ----------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) SUN LIFE CORPORATE
AIM V.I. Value Fund Variable Account G VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: March 15, 1999
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
--------------------------- ----------------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: By:
--------------------------- ----------------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
Attest: By:
--------------------------- ----------------------------------------
Name: Maura A. Murphy Name: Robert K. Leach
Title: Secretary Title: Vice President, Retirement Products
and Services Division
(SEAL)
CLARENDON INSURANCE AGENCY, INC.
Attest: By:
--------------------------- ----------------------------------------
Name: Maura A. Murphy Name: Jane M. Mancini
Title: Secretary Title: President
(SEAL)
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 17th day of February, 1998, by and among The
Alger American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, Sun Life Assurance Company of
Canada (U.S.), a life insurance company organized as a corporation under the
laws of the State of Delaware, (the "Company"), on its own behalf and on behalf
of each segregated asset account of the Company set forth in Schedule B, as may
be amended from time to time (the "Accounts"), and Fred Alger and Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
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 Distributor desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annually contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into the
following series which are available for purchase by the Company for the
Accounts and set forth on Schedule A: Alger American Small Capitalization
Portfolio, Alger American Growth Portfolio, and Alger American Income and Growth
Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17,1989 (File No. 812-7076), 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 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
(the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and/or variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
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
<PAGE>
1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of the Portfolios indicated on
Schedule A as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio,
provided that the Company notifies the Trust of such purchase orders and
requests for redemption by 9:30 a.m. Eastern time on the next following
Business Day, as defined in Section 1.3. The Trust shall confirm receipt
of the daily purchase orders and requests for redemption by 11:00 a.m.
the same day it is received.
1.2. The Trust shall make shares of the Portfolios available to the Accounts
at the net asset value 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. The Company will transmit orders from
time to time to the Trust for the purchase and redemption 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 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 pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to the
Trust, with the reasonable expectation of receipt by the Trust by 2:00
p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. 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
<PAGE>
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. Proceeds of 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 by order of
the Trust with the reasonable expectation of receipt by the Company by
2:00 p.m. Eastern time on the next Business Day after the receipt by the
Trust (or its agent) 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. The
Trust reserves the right to suspend the right of redemption, consistent
with Section 22(e) of the 1940 Act and any rules thereunder.
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 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
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
Accounts. 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
may elect to either: receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio or in cash. Such election will be provided in
sufficient time for the Trust to process income dividends and capital
gain distributions accordingly. 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 and shall use its best
efforts to make such net asset value per share available to the Company
by 6:30 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 segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative
<PAGE>
interpretations thereof. 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 finding the Contracts through the
Accounts listed in Schedule A, as amended from time to time.
1.10 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE 11.
OBLIGATIONS OF THE PARTIES
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 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 Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law. The prospectus distribution shall be at the Company's expense, and
the proxy statement and periodic report distribution shall be at the
Trust's expense.
2.3. The Trust shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Contract owners, and the
Company shall bear the expense of printing copies of the Trust's
prospectus that are used in connection with offering the Contracts
issued by the Company to prospective Contract owners. If the Company so
requests, the Trust shall provide such documentation in camera-ready or
diskette format.
2.4. The Trust shall bear the expense of printing copies of its current
statement of additional information ("SAI") and of distributing to any
Contract owner who requests such SAI, and the Company shall bear the
expense of printing and of distributing copies of the Trust's SAI that
are used in connection with offering the Contracts issued by the Company
to any prospective Contract owner. If the Company so requests, the Trust
shall provide such documentation in camera-ready or diskette format.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other
communications to
<PAGE>
shareholders in such quantity as the Company shall reasonably require
for purposes of distributing to Contract owners. The Trust, at the
Company's expense, shall provide the Company with copies of its periodic
reports to shareholders and other communications to shareholders in such
quantity as the Company may, in its discretion, reasonably request for
use in connection with offering the Contracts issued by the Company. If
requested by the Company in lieu thereof, the Trust shall provide such
documentation (including a final copy of the Trust's proxy materials,
periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other
assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to Contract owners. The
proxy statement and periodic report mailing, printing and solicitation
for current Contract owners shall be at the Trust's expense.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" 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 Distributor. Except as provided in
Section 2.5, the Company shall not use any such name or mark on 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
Distributor, unless required to do so by law. 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.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or its
designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to Contract
owners, proxy statement, application for exemption or request for
no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or should 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 Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from
the registration statement or 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 prior
<PAGE>
written permission of the Trust, the Distributor or their respective
designees. The Trust and the Distributor agree to respond to any request
for approval within five (5) business days. The Company shall adopt and
implement or shall cause broker-dealers distributing the Contracts to
adopt and implement procedures reasonably designed to ensure that
"broker only" materials including information therein about the Trust or
the Distributor are not distributed to existing or prospective Contract
owners.
2.9. 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
Distributor, 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.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall 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 prior written permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
2.11. 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 cash 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 for which voting
instructions are received. The Company and its agents will assist in
processing the solicitation of proxies for Portfolio shares held to fund
the Contacts. The Company reserves the right, to the extent permitted by
law, to vote shares held in any Account in its sole discretion.
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto,
<PAGE>
provided, however, that nothing contained in this section 2.12 shall be
construed to require the Company to provide any such information to the
extent such information does not relate to the Trust or the Trust to
provide any such information to the extent such information does not
relate to the issuance of Trust shares in connection with the Contracts.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified expense
reimbursements). However, nothing herein shall prevent the parties
hereto from otherwise agreeing to perform, and arranging for appropriate
compensation for other services relating to the Trust, the Accounts or
both.
ARTICLE 111.
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 Delaware
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 B, and that Clarendon Insurance Agency, Inc. the principal
underwriter for the Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc.
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
and cause each Account to remain so registered 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 law suitability
requirements.
3.4. The Trust represents and warrants that it is duly 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 the
rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be authorized
for issuance, registered under the 1933 Act and sold in accordance with
all applicable federal
<PAGE>
and state laws, 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 required by law or
regulation.
3.6. The Trust represents and warrants that the investments of each Portfolio
will comply with the diversification requirements for variable annuity,
endowment or life insurance contracts set forth in Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "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 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 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 qualify in the future.
3.8. 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 than
the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
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. A material
irreconcilable conflict may arise for a variety of reasons,
<PAGE>
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 rating,
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 Trust shall promptly
inform the Company of any determination by the Trustees that a material
irreconcilable conflict exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company shall assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all information
reasonably necessary for and requested by 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 affects the interests of contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract
owners are also affected, each at its own expense, respectively, and to
the extent reasonably practicable (as determined by the Trustees) take
whatever steps are necessary to remedy or eliminate the material
irreconcilable 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 contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract
owners the option of making such a change; and (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 Accounts investment in the Trust and terminate this
Agreement with respect to such Account; provided,
<PAGE>
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 raises 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 Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that the Trust has determined
that such decision has created a material irreconcilable 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 Section 4.3 through 4.6 of this Agreement, a majority of
the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict, but in no
event will the Trust be required to establish a new funding medium for
any Contract. The Company shall not be required 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 material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the
Account's investment in the Trust and terminate the 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-3(T) is 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
<PAGE>
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
Rule 6e-3(T), its amended, or Rule 6e-3, as adopted, to the extent such
rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold
harmless the Distributor, 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 purposes of this Section 5.1) against any and
all losses, costs, expenses, 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,
costs, 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 the Contracts or Trust shares and:
(a) 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
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
(b) arise out of or result from statements or representations (other than
statements or representations contained in and derived in conformity
with
<PAGE>
Trust Documents as defined in Section 5.2(a)) 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
(c) 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) 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 derived in conformity with written information
furnished to the Trust by or on behalf of the Company; or
(d) 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
(e) 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
(f) arise out of or result from the provision by the Company to the Trust of
insufficient or incorrect information regarding the purchase or sale of
shares of any Portfolio, or the failure of the Company to provide such
information on a timely basis.
5.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify
and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for the purposes of this Section 5.2) against any
and all losses, costs, expenses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Distributor,
which consent shall not be unreasonably withheld) or expenses (including
the reasonable costs of investigating or defending any alleged loss,
costs, 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 the Contracts or Trust shares and:
(a) raise out of or are based upon any untrue statements or alleged untrue
<PAGE>
statements of any material fact contained in the registration statement
or prospectus for the Trust (or any amendment or supplement thereto)
(collectively, "Trust 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 Distributor or the Trust by or on behalf of the Company for use in
Trust Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares and; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and derived in conformity
with Company Documents) or wrongful conduct of the Distributor or
persons under its control, with respect to the sale or acquisition of
the Contracts or Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents 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 Company by
or on behalf of the Trust or the Distributor; or
(d) arise out of or result from any failure by the Distributor or the Trust
to provide the services or furnish the materials required under the
terms of this Agreement, including, without limitation, any failure by
the Trust to inform the Company of the correct net asset value per share
for each Portfolio on a timely basis sufficient to permit the timely
execution of all purchase and redemption orders at the correct net asset
value per share; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Distributor or the Trust in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Distributor or the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any Losses incurred or assessed against an Indemnified
Party that 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.
<PAGE>
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification Provisions of Sections 5.1 or 5.2, as applicable,
with respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within
a reasonable time after the summons, or other first notification, giving
information of the nature of the claim shall have been served upon or
otherwise received by such Indemnified Party (or after such Indemnified
Party shall have received notice of service upon or other notification
to any designated agent), but failure to notify the party against whom
indemnification is sought of any such claim shall not relieve that party
from any liability which it may have to the Indemnified Party in the
absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own expense,
in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably
satisfactory to the party named in the action. After notice from the
indemnifying party to the Indemnified Party of an election to assume
such defense, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the indemnifying party will
not be liable to the Indemnified 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 VI.
TERMINATION
6.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year's advance written
notice to the other parties, unless a shorter time is agreed to by
the parties;
(b) at the option of any party upon thirty (30) days' advance written
notice due to a material breach of this Agreement by the other
party, unless such breach is cured within such (30) day period; or
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or life
insurance contracts, as applicable, under the Code or if the
Contracts are not registered, issued or sold in accordance with
applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority of
the Trustees of the Trust, or a majority of its disinterested
Trustees, that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal proceedings
<PAGE>
against the Trust or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory
body regarding the Trust's or the Distributor's duties under this
Agreement or related to the sale of Trust shares or the operation
of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails to
meet diversification requirements specified in Section 3.6 hereof;
or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Contracts
issued by the Company, as determined by the Company, and upon
prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of the
Portfolio 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
(h) at the option of the Company, if the Portfolio fails to qualify as
a Regulated Investment Company under Subchapter M of the Code; or
(i) at the option of the Distributor if it shall determine in its sole
judgment exercised in good faith, that the Company and/or its
affiliated companies 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
(j) at the option of the Company if it shall determine in its sole
judgment exercised in good faith, that the Distributor and/or its
affiliated companies 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.
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 2.9 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.
<PAGE>
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.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Sun Life Assurance Company of Canada (U.S.)
Retirement Products & Services Division
One Copley Place
Suite 100
Boston, MA 02116
Attn: Margaret Hankard
Sr. Associate Counsel
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 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
under and in accordance with the laws of the State of New York, without
regard to its conflict of law provisions. 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
<PAGE>
orders. Copies of any such orders shall be promptly forwarded by the
Trust to the Company.
8.5. 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 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. This Agreement shall not be exclusive in any respect.
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.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, 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
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
8.12 During ordinary business hours, the Trust and Distributor shall afford
the Company, directly or through its authorized representatives,
reasonable access to all files, books, records and other materials of
the Trust or Distributor, as applicable, which relate directly or
indirectly to transactions arising in connection with this Agreement and
to make available appropriate personnel familiar with such items for the
purpose of explaining the form and content of such items.
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
Fred Alger and Company, Incorporated
By: /s/Gregory S. Duch
------------------------------
Name: Gregory S. Duch
Title: Executive Vice President
The Alger American Fund
By: /s/Gregory S. Duch
------------------------------
Name: Gregory S. Duch
Title: Treasurer
Sun Life Assurance Company of Canada (U.S.)
By: /s/Robert K. Leach
------------------------------
Name: Robert K. Leach
Title: Vice President, Retirement Products and
Services Division
<PAGE>
SCHEDULE A
The Alger American Fund:
Alger American Growth Portfolio
Alger American Income and Growth Portfolio
Alger American Small Capitalization Portfolio
<PAGE>
SCHEDULE B
NAME OF ACCOUNTS:
Sun Life Of Canada (U.S.) Variable Account F (Inception: July 13, 1989)
NAME OF CONTRACTS
Futurity Variable and Fixed Annuity Contracts
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this 17th day of February, 1998 by
and between GOLDMAN SACHS VARIABLE INSURANCE TRUST, an unincorporated business
trust formed under the laws of Delaware (the "Trust"), GOLDMAN, SACHS & CO., a
New York limited partnership (the "Distributor"), and SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.), a Delaware life insurance company (the "Company"), on its own
behalf and on behalf of each separate account of the Company identified herein.
WHEREAS, the Trust is a series-type mutual fund offering shares of
beneficial interest (the "Trust shares") consisting of one or more separate
series ("Series") of shares, each such Series representing an interest in a
particular investment portfolio of securities and other assets (a "Fund"), and
which Series may be subdivided into various classes ("Classes") with each such
Class supporting a distinct charge and expense arrangement; and
WHEREAS, the Trust was established for the purpose of serving as an
investment vehicle for insurance company separate accounts supporting variable
annuity contracts and variable life insurance policies to be offered by
insurance companies and may also be utilized by qualified retirement plans; and
WHEREAS, the Distributor has the exclusive right to distribute Trust shares
to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment vehicle
for a certain separate account(s) of the Company and the Distributor desires to
sell shares of certain Series and/or Class(es) to such separate account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust, the
Distributor and the Company agree as follows:
ARTICLE I
ADDITIONAL DEFINITIONS
1.1. "Account" -- the separate account of the Company described more
specifically in Schedule 1 to this Agreement. If more than one separate account
is described on Schedule 1, the term shall refer to each separate account so
described.
1.2. "Business Day" -- each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any
successor thereto.
1.4. "Contracts" -- the class or classes of variable annuity contracts
and/or variable life insurance policies issued by the Company and described more
specifically on Schedule 2 to this Agreement.
1.5. "Contract Owners" -- the owners of the Contracts, as distinguished
from all Product Owners.
1.6. "Participating Account" -- a separate account investing all or a
portion of its assets in the Trust, including the Account.
1.7. "Participating Insurance Company" -- any insurance company investing
in the Trust on its
<PAGE>
behalf or on behalf of a Participating Account, including the Company.
1.8. "Participating Plan" -- any qualified retirement plan investing in
the Trust.
1.9. "Participating Investor" -- any Participating Account, Participating
Insurance Company or Participating Plan, including the Account and the Company.
1.10. "Products" -- variable annuity contracts and variable life insurance
policies supported by Participating Accounts, including the Contracts.
1.11. "Product Owners"-- owners of Products, including Contract Owners.
1.12. "Trust Board" -- the board of trustees of the Trust.
1.13. "Registration Statement" -- with respect to the Trust shares or a
class of Contracts, the registration statement filed with the SEC to register
such securities under the 1933 Act, or the most recently filed amendment
thereto, in either case in the form in which it was declared or became
effective. The Contracts' Registration Statement for each class of Contracts is
described more specifically on Schedule 2 to this Agreement. The Trust's
Registration Statement is filed on Form N-1A (File No. 333-35883).
1.14. "1940 Act Registration Statement" -- with respect to the Trust or
the Account, the registration statement filed with the SEC to register such
person as an investment company under the 1940 Act, or the most recently filed
amendment thereto. The Account's 1940 Act Registration Statement is described
more specifically on Schedule 2 to this Agreement. The Trust's 1940 Act
Registration Statement is filed on Form N-1A (File No. 811-08361).
1.15. "Prospectus" -- with respect to shares of a Series (or Class) of the
Trust or a class of Contracts, each version of the definitive prospectus or
supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act.
With respect to any provision of this Agreement requiring a party to take action
in accordance with a Prospectus, such reference thereto shall be deemed to be
the version for the applicable Series, Class or Contracts last so filed prior to
the taking of such action. For purposes of Article IX, the term "Prospectus"
shall include any statement of additional information incorporated therein.
1.16. "Statement of Additional Information" -- with respect to the shares
of the Trust or a class of Contracts, each version of the definitive statement
of additional information or supplement thereto filed with the SEC pursuant to
Rule 497 under the 1933 Act. With respect to any provision of this Agreement
requiring a party to take action in accordance with a Statement of Additional
Information, such reference thereto shall be deemed to be the last version so
filed prior to the taking of such action.
1.17. "SEC" -- the Securities and Exchange Commission.
1.18. "NASD" -- the National Association of Securities Dealers, Inc.
1.19. "1933 Act" -- the Securities Exchange Act of 1933, as amended.
1.20. "1940 Act" -- the Investment Company Act of 1940, as amended.
ARTICLE II
SALE OF TRUST SHARES
2.1. AVAILABILITY OF SHARES
(a) The Trust has granted to the Distributor exclusive authority to
distribute the Trust
<PAGE>
shares and to select which Series or Classes of Trust shares shall be made
available to Participating Investors. Pursuant to such authority, and
subject to Article X hereof, the Distributor shall make available to the
Company for purchase on behalf of the Account, shares of the Series and
Classes listed on Schedule 3 to this Agreement, such purchases to be
effected at net asset value in accordance with Section 2.3 of this
Agreement. Such Series and Classes shall be made available to the Company
in accordance with the terms and provisions of this Agreement until this
Agreement is terminated pursuant to Article X or the Distributor suspends
or terminates the offering of shares of such Series or Classes in the
circumstances described in Article X.
(b) Notwithstanding clause (a) of this Section 2.1, Series or
Classes of Trust shares in existence now or that may be established in the
future will be made available to the Company only as the Distributor may so
provide, subject to the Distributor's right, set forth in Article X to
suspend or terminate the offering of shares of any Series or Class or to
terminate this Agreement.
(c) The parties acknowledge and agree that: (i) the Trust may
revoke the Distributor's authority pursuant to the terms and conditions of
its distribution agreement with the Distributor; and (ii) the Trust
reserves the right in its sole discretion to refuse to accept a request for
the purchase of Trust shares.
2.2. REDEMPTIONS. The Trust shall redeem, at the Company's request, any
full or fractional Trust shares held by the Company on behalf of the Account,
such redemptions to be effected at net asset value in accordance with Section
2.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not
redeem Trust shares attributable to Contract Owners except in the circumstances
permitted in Article X of this Agreement, and (ii) the Trust may delay
redemption of Trust shares of any Series or Class to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the Prospectus for
such Series or Class.
2.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Trust hereby appoints the Company as an agent of the Trust
for the limited purpose of receiving purchase and redemption requests on
behalf of the Account (but not with respect to any Trust shares that may be
held in the general account of the Company) for shares of those Series or
Classes made available hereunder, based on allocations of amounts to the
Account or subaccounts thereof under the Contracts, other transactions
relating to the Contracts or the Account and customary processing of the
Contracts. Receipt of any such requests (or effectuation of such
transaction or processing) on any Business Day by the Company as such
limited agent of the Trust prior to the Trust's close of business as
defined from time to time in the applicable Prospectus for such Series or
Class (which as of the date of execution of this Agreement is defined as
the close of regular trading on the New York Stock Exchange (normally 4:00
p.m. New York Time)) shall constitute receipt by the Trust on that same
Business Day, provided that the Company uses its best efforts to provide
actual and sufficient notice of such request to the Trust by 8:00 a.m. New
York Time on the next following Business Day and the Trust receives such
notice no later than 9:00 a.m. New York Time on such Business Day. Such
notice may be communicated by telephone to the office or person designated
for such notice by the Trust, and shall be confirmed by facsimile.
(b) The Company shall pay for shares of each Series or Class on the
same day that it provides actual notice to the Trust of a purchase request
for such shares. Payment for Series or Class shares shall be made in
Federal funds transmitted to the Trust by wire to be received by the Trust
by 12:00 noon New York Time on the day the Trust receives actual notice of
the purchase request for Series or Class shares (unless the Trust
determines and so advises the Company that sufficient proceeds are
available from redemption of shares of other Series or Classes effected
pursuant to redemption requests tendered by the Company on behalf of the
Account). In no event may proceeds from the redemption of shares requested
pursuant to an order received by the Company after the
<PAGE>
Trust's close of business on any Business Day be applied to the payment for
shares for which a purchase order was received prior to the Trust's close
of business on such day. If the issuance of shares is canceled because
Federal funds are not timely received, the Company shall indemnify the
respective Fund and Distributor with respect to all costs, expenses and
losses relating thereto. Upon the Trust's receipt of Federal funds so
wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Trust. If Federal funds are not
received on time, such funds will be invested, and Series or Class shares
purchased thereby will be issued, as soon as practicable after actual
receipt of such funds but in any event not on the same day that the
purchase order was received.
(c) Payment for Series or Class shares redeemed by the Account or
the Company shall be made in Federal funds transmitted by wire to the
Company or any other person properly designated in writing by the Company,
such funds normally to be transmitted by 6:00 p.m. New York Time on the
next Business Day after the Trust receives actual notice of the redemption
order for Series or Class shares (unless redemption proceeds are to be
applied to the purchase of Trust shares of other Series or Classes in
accordance with Section 2.3(b) of this Agreement), except that the Trust
reserves the right to redeem Series or Class shares in assets other than
cash and to delay of redemption proceeds to the extent permitted by the
1940 Act, any rules or regulations or orders thereunder, or the applicable
Prospectus. The Trust shall not bear any responsibility whatsoever for the
proper disbursement or crediting of redemption proceeds by the Company; the
Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Series or Class shares
held or to be held in the Company's general account shall be effected at
the net asset value per share next determined after the Trust's actual
receipt of such request, provided that, in the case of a purchase request,
payment for Trust shares so requested is received by the Trust in Federal
funds prior to close of business for determination of such value, as
defined from time to time in the Prospectus for such Series or Class.
(e) Prior to the first purchase of any Trust shares hereunder, the
Company and the Trust shall provide each other with all information
necessary to effect wire transmissions of Federal funds to the other party
and all other designated persons pursuant to such protocols and security
procedures as the parties may agree upon. Should such information change
thereafter, the Trust and the Company, as applicable, shall notify the
other in writing of such changes, observing the same protocols and security
procedures, at least three Business Days in advance of when such change is
to take effect. The Company and the Trust shall observe customary
procedures to protect the confidentiality and security of such information,
but neither party shall be liable to the other party for any breach of
security.
(f) The procedures set forth herein are subject to any additional
terms set forth in the applicable Prospectus for the Series or Class or by
the requirements of applicable law.
2.4. NET ASSET VALUE. The Trust shall inform the Company of the net asset
value per share for each Series or Class available to the Company as soon as
reasonably practicable after the net asset value per share for such Series or
Class is calculated. The Trust shall calculate such net asset value in
accordance with the Prospectus for such Series or Class.
2.5. DIVIDENDS AND DISTRIBUTIONS. The Trust shall furnish notice to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Account, hereby elects to receive all such dividends
and distributions as are payable on any Series or Class shares in the form of
additional shares of that Series or Class. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends and capital gain distributions in cash; to be effective, such
revocation must be made in writing and received by the Trust at least ten
Business Days prior to a dividend or distribution date. The Trust shall notify
the Company of the number of Series or Class shares so issued as payment of such
<PAGE>
dividends and distributions.
2.6. BOOK ENTRY. Issuance and transfer of Trust shares shall be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Trust shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
2.7. PRICING ERRORS. Any material errors in the calculation of net asset
value, dividends or capital gain information shall be reported immediately upon
discovery to the Company. An error shall be deemed "material" based on the
Trust's reasonable interpretation of the SEC's position and policy with regard
to materiality, as it may be modified from time to time. Neither the Trust, any
Fund, the Distributor, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which information
is based on incorrect information supplied by or on behalf of the Company to the
Trust or the Distributor.
2.8. LIMITS ON PURCHASERS. The Distributor and the Treat shall sell Trust
shares only to insurance companies and their separate accounts and to persons or
plans ("Qualified Persons") that qualify to purchase shares of the Trust under
Section 817(h) of the Code and the regulations thereunder without impairing the
ability of the Account to consider the portfolio investments of the Trust as
constituting investments of the Account for the purpose of satisfying the
diversification requirements of Section 817(h). The Distributor and the Trust
shall not sell Trust shares to any insurance company or separate account unless
an agreement complying with Article VIII of this Agreement is in effect to
govern such sales. The Company hereby represents and warrants that it and the
Account are Qualified Persons.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. COMPANY. The Company represents and warrants that: (i) the Company
is an insurance company duly organized and in good standing under Delaware
insurance law; (ii) the Account is a validly existing separate account, duly
established and maintained in accordance with applicable law; (iii) the
Account's 1940 Act Registration Statement has been or will be filed with the SEC
in accordance with the provisions of the 1940 Act and the Account is duly
registered as a unit investment trust thereunder; (iv) the Contracts'
Registration Statement has been declared effective by the SEC; (v) the Contracts
will be issued in compliance in all material respects with all applicable
Federal and state laws; (vi) the Contracts have been filed, qualified and/or
approved for sale, as applicable, under the insurance laws and regulations of
the states in which the Contracts will be offered; (vii) the Account will
maintain its registration under the 1940 Act and will comply in all material
respects with the 1940 Act; (viii) the Contracts currently are, and at the time
of issuance and for so long m they are outstanding will be, treated as annuity
contracts or life insurance policies, whichever is appropriate, under applicable
provisions of the Code; and (ix) the Company's entering into and performing its
obligations under this Agreement does not and will not violate its charter
documents or by-laws, rules or regulations, or any agreement to which it is a
party. The Company will notify the Trust promptly if for any reason it is unable
to perform its obligations under this Agreement.
3.2. TRUST. The Trust represents and warrants that: (i) the Trust is an
unincorporated business trust duly formed and validly existing under the
Delaware law; (ii) the Trust's 1940 Act Registration Statement has been filed
with the SEC in accordance with the provisions of the 1940 Act and the Trust is
duly registered as an open-end management investment thereunder; (iii) the
Trust's Registration Statement has been declared effective by the SEC; (iv) the
Trust shares will be issued in compliance in all material respects with all
applicable federal and state securities laws; (v) the Trust will remain
registered under and will comply in all material respects with the 1940 Act
during the term of this Agreement; (vi) each Fund of the Trust intends to
qualify as a "regulated investment company" under Subchapter M of the Code and
to comply with the diversification standards prescribed in Section 817(h) of the
Code and the regulations thereunder; and (vii) the investment policies of each
Fund comply in all material respects with any investment restrictions set forth
on Schedule 4 to this Agreement. The Trust, however, makes no representation as
to whether any aspect of its
<PAGE>
operations (including, but not limited to, fees and expenses and investment
policies) otherwise complies with the insurance laws or regulations of any
state.
3.3. DISTRIBUTOR. The Distributor represents and warrants that: (i) the
Distributor is a limited partnership duly organized and in good standing under
New York law; (ii) the Distributor is registered as a broker-dealer under
federal and applicable state securities laws and is a member of the NASD; and
(iii) the Distributor is registered as an investment adviser under federal
securities laws.
3.4. LEGAL AUTHORITY. Each party represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate, partnership or trust action, as applicable, by such party, and, when
so executed and delivered, this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
3.5. BONDING REQUIREMENT. Each party represents and warrants that all of
its directors, officers, partners and employees dealing with the money and/or
securities of the Trust are and shall continue to 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 the amount required by the applicable rules of the NASD and
the federal securities laws. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company. All
parties shall make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, shall provide evidence thereof
promptly to any other party upon written request therefor, and shall notify the
other parties promptly in the event that such coverage no longer applies.
ARTICLE IV
REGULATORY REQUIREMENTS
4.1. TRUST FILINGS. The Trust shall amend the Trust's Registration
Statement and the Trust's 1940 Act Registration Statement from time to time as
required in order to effect the continuous offering of Trust shares in
compliance with applicable law and to maintain the Trust's registration under
the 1940 Act for so long as Trust shares are sold.
4.2. CONTRACTS FILINGS. The Company shall amend the Contracts'
Registration Statement and the Account's 1940 Act Registration Statement from
time to time as required in order to effect the continuous offering of the
Contracts in compliance with applicable law or as may otherwise be required by
applicable law, but in any event shall maintain a current effective Contracts'
Registration Statement and the Account's registration under the 1940 Act for so
long as the Contracts are outstanding unless the Company has supplied the Trust
with an SEC no-action letter or opinion of counsel satisfactory to the Trust's
counsel to the effect that maintaining such Registration Statement on a
concurrent basis is no longer required. The Company shall be responsible for
filing all such Contract forms, applications, marketing materials and other
documents relating to the Contracts and/or the Account with state insurance
commissions, as required or customary, and shall use its best efforts: (i) to
obtain any and all approval thereof, under applicable state insurance law, of
each state or other jurisdiction in which Contracts are or may be offered for
sale; and (ii) to keep such approvals in effect for so long as the Contracts are
outstanding.
4.3. VOTING OF TRUST SHARES. With respect to any matter put to vote by
the holders of Trust shares ("Voting Shares"), the Company will provide
"pass-through" voting privileges to owners of Contracts registered with the SEC
as long as the 1940 Act requires such privileges in such cases. In cases in
which "pass-through" privileges apply, the Company will (i) solicit voting
instructions from Contract Owners of SEC-registered Contracts; (ii) vote Voting
Shares attributable to Contract Owners in accordance with instructions or
proxies timely received from such Contract Owners; and (iii) vote Voting Shares
held by it that are not attributable to reserves for SEC-registered Contracts or
for which it has not received timely voting instructions in the same proportion
as instructions received in a timely fashion from Owners of SEC-registered
Contracts. The Company shall be responsible for ensuring that it calculates
"pass-through" votes for the
<PAGE>
Account in a manner consistent with the provisions set forth above, the
Prospectuses for the Contracts and the Trust, and with other Participating
Insurance Companies. The Trust and the Distributor undertake to require every
other Participating Insurance Company to vote Shares held by it in accordance
with this Section 4.3. The Distributor and the Trust will inform the Company if
it learns that any Participating Insurance Company is calculating votes in a
manner different than set forth in this Section 4.3. Neither the Company nor any
of its affiliates will in any way recommend action in connection with, or oppose
or interfere with, the solicitation of proxies for the Trust shares held for
such Contract Owners, except with respect to matters as to which the Company has
the right under Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote Voting Shares
without regard to voting instructions from Contract Owners.
4.4. STATE INSURANCE RESTRICTIONS. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness of
such determination. Schedule 4 sets forth the investment restrictions that the
Company and/or other Participating Insurance Companies have determined are
applicable to any Fund and with which the Trust has agreed to comply of the date
of this Agreement. The Company shall inform the Trust of any investment
restrictions imposed by state insurance law that the Company determines may
become applicable to the Trust or a Fund from time to time as a result of the
Account's investment therein, other than those set forth on Schedule 4 to this
Agreement. Upon receipt of any such information from the Company or any other
Participating Insurance Company, the Trust shall determine whether it is in the
best interests of shareholders to comply with any such restrictions. The Trust
shall inform the Company of any investment restrictions brought to its attention
by any other Participating Insurance Company. If the Trust determines that it is
not in the best interests of shareholders (it being understood that
"shareholders" for this purpose shall mean Product Owners) to comply with a
restriction determined to be applicable by the Company or another Participating
Insurance Company, the Trust shall so inform the Company, and the Trust and the
Company shall discuss alternative accommodations in the circumstances. If the
Trust determines that it is in the best interests of shareholders to comply with
such restrictions, the Trust and the Company shall amend Schedule 4 to this
Agreement to reflect such restrictions, subject to obtaining any required
shareholder approval thereof.
4.5. DRAFTS OF FILINGS. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, prepared by or on behalf of either of them
and that mentions the other party by name. Such drafts shall be provided to the
other party at least 5 business days in advance of filing such materials with
regulatory authorities in order to allow such other party a reasonable
opportunity to review the materials.
4.6. COPIES OF FILINGS. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statement, solicitations of voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to the Trust, the Contracts or
the Account, as the case may be, promptly after the filing by or on behalf of
each such party of such document with the SEC or other regulatory authorities
(it being understood that this provision is not intended to require the Trust to
provide to the Company copies of any such documents prepared, filed or used by
Participating Investors other than the Company and the Account).
4.7. REGULATORY RESPONSES. Each party shall promptly provide to all other
parties copies of responses to no-action requests, notices, orders and other
rulings received by such party with respect to any filing covered by Section 4.6
of this Agreement.
4.8. COMPLAINTS AND PROCEEDINGS
<PAGE>
(a) The Trust and/or the Distributor shall immediately notify the
Company of: (i) the issuance by any court or regulatory body of any stop
order, cease and desist order, or other similar order (but not including an
order of a regulatory body exempting or approving a proposed transaction or
arrangement) with respect to the Trust's Registration Statement or the
Prospectus of any Series or Class; (ii) any request by the SEC for any
amendment to the Trust's Registration Statement or the Prospectus of any
Series or Class; (iii) the initiation of any proceedings for that purpose
or for any other purposes relating to the registration or offering of the
Trust shares; or (iv) any other action or circumstances that may prevent
the lawful offer or sale of Trust shares or any Class or Series in any
state or jurisdiction, including, without limitation, any circumstance in
which (A) such shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or (B)
such law precludes the use of such shares as an underlying investment
medium for the Contracts. The Trust will make every reasonable effort to
prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting
thereof at the earliest possible time.
(b) The Company shall immediately notify the Trust and the
Distributor of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a proposed
transaction or arrangement) with respect to the Contracts' Registration
Statement or the Contracts' Prospectus; (ii) any request by the SEC for any
amendment to the Contracts' Registration Statement or Prospectus; (iii) the
initiation of any proceedings for that purpose or for any other purposes
relating to the registration or offering of the Contracts; or (iv) any
other action or circumstances that may prevent the offer or sale of the
Contracts or any class of Contracts in any state jurisdiction, including,
without limitation, any circumstance in which such Contracts are not
registered, qualified and approved, and, in all material respects, issued
and sold in accordance with applicable state and federal laws. The Company
will make every reasonable effort to prevent the issuance of any such stop
order, cease and desist order or similar order and, if any such order is
issued, to obtain the lifting thereof at the earliest possible time.
(c) Each party shall immediately notify the other parties when it
receives notice, or otherwise becomes aware of, the commencement of any
litigation or proceeding against such party or a person affiliated
therewith in connection with the issuance or sale of Trust shares or the
Contracts.
(d) The Company shall provide to the Trust and the Distributor any
complaints it has received from Contract Owners pertaining to the Trust or
a Fund, and the Trust and Distributor shall each provide to the Company any
complaints it has received from Contract Owners relating to the Contracts.
4.9. COOPERATION. Each party hereto shall cooperate with the other
parties and all appropriate government authorities (including without limitation
the SEC, the NASD and state securities and insurance regulators) and shall
permit such authorities reasonable access to its books and records in connection
with any investigation or inquiry by any such authority relating, to this
Agreement or the transactions contemplated hereby. However, such access shall
not extend to attorney-client privileged information.
4.10. DISTRIBUTOR. During the term of this agreement, the Distributor (i)
will be duly organized and in good standing under the laws of the state of its
organization; (ii) will be registered as a broker dealer under federal and
applicable state securities laws and will be a member of the NASD, or its
successor; and will be registered as an investment adviser under the federal
securities laws.
ARTICLE V
SALE, ADMINISTRATION AND SERVICING OF THE CONTRACTS
<PAGE>
5.1. SALE OF THE CONTRACTS. The Company shall be fully responsible for
the sale and marketing of the Contracts. The Company shall provide Contracts,
the Contracts' and Trust's Prospectuses, Contracts' and Trust's Statements of
Additional Information, and all amendments or supplements to any of the
foregoing to Contract Owners and prospective Contract Owners, all in accordance
with federal and state laws. The Company shall ensure that all persons offering
the Contracts are duly licensed and registered under applicable insurance and
securities laws. The Company shall use all reasonable efforts to cause each sale
of a Contract to satisfy applicable suitability requirements under insurance and
securities laws and regulations, including without limitation the rules of the
NASD. The Company shall adopt and implement procedures reasonably designed to
ensure that information concerning the Trust and the Distributor that is
intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Contract Owners or
prospective Contract Owners) is so used.
5.2. ADMINISTRATION AND SERVICING OF THE CONTRACTS. The Company shall be
fully responsible for the underwriting, issuance, service and administration of
the Contracts and for the administration of the Account, including, without
limitation, the calculation of performance information for the Contracts, the
timely payment of Contract Owner redemption requests and processing of Contract
transactions, and the servicing of the Contracts, such functions to be performed
in all respects at a level of service commensurate with those standards
prevailing in the variable insurance industry. The Company shall provide to
Contract Owners all Trust reports, solicitations for voting instructions
including any related Trust proxy solicitation materials, and updated Trust
Prospectuses as required under the federal securities laws.
5.3. CUSTOMER COMPLAINTS. The Company, with such assistance as may be
required from the Trust, shall promptly address all customer complaints and
resolve such complaints consistent with high ethical standards and principles of
ethical conduct.
5.4. TRUST PROSPECTUSES AND REPORTS. In order to enable the Company to
fulfill its obligations under this Agreement and the federal securities laws,
the Trust shall provide the Company with a copy, in camera-ready to form or form
otherwise suitable for printing or duplication, or printed copies, as the
parties may agree, of: (i) the Trust's Prospectus for the Series and Classes
listed on Schedule 3 and any supplement thereto; (ii) each Statement of
Additional Information and any supplement thereto; (iii) any Trust proxy
solicitation material for such Series or Classes; and (iv) any Trust periodic
shareholder reports. The Trust and the Company may agree upon alternate
arrangements, but in all cases, the Trust reserves the right to approve the
printing of any such material. The Trust shall provide the Company at least 10
days advance written notice when any such material shall become available,
provided, however, that in the case of a supplement, the Trust shall provide the
Company notice reasonable in the circumstances, it being understood that
circumstances surrounding such supplement may not allow for advance notice and,
in such case, the Company will use its best efforts to distribute such
supplement to its Contract Owners, as required by law, as soon as reasonably
practicable after such supplement becomes available. The Company may not alter
any material so provided by the Trust or the Distributor (including without
limitation presenting or delivering such material in a different medium, e.g.,
electronic or Internet) without the prior written consent of the Distributor.
5.5. TRUST ADVERTISING MATERIAL. No piece of advertising or sales
literature or other promotional material in which the Trust or the Distributor
is named (including, without limitation, material for prospective and/or
existing Contract Owners, brokers, rating or ranking agencies, or the press,
whether in print, radio, television, video, Internet, or other electronic
medium) shall be used by the Company or any person directly or indirectly
authorized by the Company, including without limitation, underwriters,
distributors, and sellers of the Contracts, except with the prior written
consent of the Trust or the Distributor, as applicable, as to the form, content
and medium of such material, which consent may not be unreasonably withheld. Any
such piece shall be furnished to the Trust for such consent at least 10 Business
Days prior to its use. The Trust or the Distributor shall respond to any request
for written consent within 7 Business Days after receipt of such material, but
failure to respond shall not relieve the Company of the obligation to obtain the
prior written consent of the Trust or the Distributor. After receiving the
Trust's or Distributor's consent to the use of any such material, no further
material changes or changes relating to information concerning the Trust may be
<PAGE>
made without obtaining the Trust's or Distributor's consent to such changes. The
Trust or Distributor may at any time in its sole discretion revoke such written
consent for reasonable cause, and upon notification of such revocation in
writing, the Company shall promptly discontinue its use of the material subject
to such revocation. Until further notice to the Company, the Trust has delegated
its rights and responsibilities under this provision to the Distributor.
5.6. CONTRACTS ADVERTISING MATERIAL. No piece of advertising or sales
literature or other promotional material in which the Company is named shall be
used by the Trust or the Distributor, except with the prior written consent of
the Company, which consent may not be unreasonably withheld. Any such piece
shall be furnished to the Company for such consent at least 10 Business Days
prior to its use. The Company shall respond to any request for written consent
within 7 Business Days after receipt of such material, but failure to respond
shall not relieve the Trust or the Distributor of the obligation to obtain the
prior written consent of the Company. The Company may at any time in its sole
discretion revoke any written consent for reasonable cause, and upon
notification of such revocation in writing, the Trust and the Distributor shall
promptly discontinue their use of the material subject to such revocation.
5.7. TRADE NAMES. No party shall use any other party's names, logos,
trademarks or service marks, whether registered or unregistered, without the
prior written consent of such other party, or after written consent therefor has
been revoked. The Company shall not use in advertising, publicity or otherwise
the name of the Trust, Distributor, or any of their affiliates nor any trade
name, trademark, trade device, service mark, symbol or any abbreviation,
contraction, or simulation thereof of the Trust, Distributor, or their
affiliates without the prior written consent of the Trust or the Distributor in
each instance, unless required to do so by applicable law or regulation.
5.8. REPRESENTATIONS BY COMPANY. Except with the prior written consent of
the Trust, the Company shall not give any information or make any
representations or statements about the Trust or the Funds nor shall it
authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved in writing by the Trust or its
designee in accordance with this Article V, or in published reports or
statements of the Trust in the public domain.
5.9. REPRESENTATIONS BY TRUST AND DISTRIBUTOR. Except with the prior
written consent of the Company, neither the Trust nor the Distributor shall give
any information or make any representation on behalf of the Company or
concerning the Company, the Account or the Contracts other than the information
or representations contained in the Contracts' Registration Statement or
Contracts' Prospectus or in published reports of the Account which are in the
public domain or in sales literature or other promotional material approved in
writing by the Company in accordance with this Article V.
5.10. ADVERTISING. For purposes of this Article V, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
material constituting sales literature or advertising under the NASD rules, the
1940 Act or the 1933 Act.
ARTICLE VI
COMPLIANCE WITH CODE
6.1. SECTION 817(h). Each Fund of the Trust shall comply with Section
817(h) of the Code and the regulations issued thereunder to the extent
applicable to the Fund as an investment company underlying the Account, and the
Trust shall notify the Company immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
6.2. SUBCHAPTER M. Each Fund of the Trust shall maintain the
qualification of the Fund as a registered investment company (under Subchapter M
or any successor or similar provision), and the Trust shall notify the Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to so
<PAGE>
qualify or that it might not so qualify in the future.
6.3. CONTRACTS. The Company shall ensure the continued treatment of the
Contracts as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code and shall notify the Trust
and the Distributor 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.
ARTICLE VII
EXPENSES
7.1. EXPENSES. All expenses incident to each party's performance under
this Agreement (including expenses expressly assumed by such party pursuant to
this Agreement) shall be paid by such party to the extent permitted by law.
7.2. TRUST EXPENSES. Expenses incident to the Trust's performance of its
duties and obligations under this Agreement include, but are not limited to, the
costs of:
(a) registration and qualification of the Trust shares under the
federal securities laws;
(b) preparation and filing with the SEC of the Trust's
Prospectuses, Trust's Statement of Additional information, Trust's's
Registration Statement, Trust proxy materials and shareholder reports;
(c) preparation of all statements and notices required by any
Federal or state securities law;
(d) printing, distribution and solicitation of voting instructions
with respect to all proxy materials required to be distributed to existing
Contract Owners to the extent the content is initiated by the Trust;
printing and mailing of all other materials and reports (other than those
specified as being paid for by the Company below) required to be provided
by the Trust to existing Contract Owners;
(e) all taxes on the issuance or transfer of Trust shares;
(f) payment of all applicable fees relating to the Trust,
including, without limitation, all fees due under Rule 24f-2 in connection
with sales of Trust shares to qualified retirement plans, custodial,
auditing, transfer agent and advisory fees, fees for insurance coverage and
Trustees' fees;
(g) 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;
(h) printing of the Trust's Prospectuses for distribution by the
Company to existing Contract Owners. If the Trust's Prospectuses are
printed by the Company in one document with the prospectus for the
Contracts and/or the prospectuses for other funds available under the
Contracts, then the expenses of such printing will be apportioned between
the Company and the Trust in proportion to the number of pages of the
Contract's prospectus, other fund prospectuses and the Trust's
Prospectuses, taking account of other relevant factors affecting the
expense of printing, such as covers, columns, graphs and charts; the Trust
to bear the cost of printing the Trust's portion of such document (relating
to the Trust's Prospectuses) for distribution only to owners of existing
Contracts and the Company to bear the expense of printing the portion of
such documents relating to the Account; provided, however, the Company
shall bear all printing of such combined documents where used for
distribution to prospective purchasers; and
(i) printing of all supplements to the Trust's Prospectuses, the
content of which is
<PAGE>
initiated by the Trust, and distribution of such supplements to existing
Contract Owners to the extent such distribution does not coincide with a
scheduled mailing and printing of annual and semi-annual reports of the
Trust for distribution by the Company to existing Contract Owners or of any
other required documents, including, but not limited to, mailing of
periodic account reports or Contract Owner statements.
7.3. COMPANY EXPENSES. Expenses incident to the Company's performance of
its duties and obligations under this Agreement include, but are not limited to,
the costs of:
(a) registration and qualification of the Contracts under the
federal securities laws;
(b) preparation and filing with the SEC of the Contracts'
Prospectus and Contracts' Registration Statement;
(c) the sale, marketing and distribution of the Contracts,
including printing and dissemination of Contract Prospectuses and printing
of the Trust's Prospectuses intended for distribution to prospective
Contract Owners and for other marketing purposes, and compensation for
Contract sales;
(d) printing, distribution and solicitation of voting instructions
with respect to all proxy materials required to be distributed to existing
Contract Owners to the extent the content is initiated by the Company;
(e) payment of all applicable fees relating to the Contracts,
including, without limitation, all fees due under Rule 24f-2;
(f) preparation, printing and dissemination of all statements,
materials and notices to Contract Owners required by any Federal or state
insurance law other than those paid for by the Trust; and
(g) preparation, printing and dissemination of all marketing
materials for the Contracts and Trust (to the extent it relates to the
Contracts) except where other arrangements are made in advance.
7.4. 12B-1 PAYMENTS. The Trust shall pay no fee or other compensation to
the Company under this Agreement, except that if the Trust or any Series or
Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then payments may be made to the Company in
accordance with such plan. The Trust Currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or in contravention of such rule, although it may make payments pursuant to
the Rule 12b-1 in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 and such formulation is required by
the 1940 Act or any rules or order thereunder, the Trust undertakes to have a
Board of Trustees, a majority of whom are not interested persons of the Trust,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
ARTICLE VIII
POTENTIAL CONFLICTS
8.1. EXEMPTIVE ORDER. The parties to this Agreement acknowledge that
the Trust has filed an application with the SEC to request an order (the
"Exemptive Order") granting relief from various provisions of the 1940 Act
and the rules thereunder to the extent necessary to permit Trust shares to be
sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance
Companies and other Qualified Persons (as defined in Section 2.8 hereof). It
is anticipated that the Exemptive Order, when and if issued, shall require
the Trust and each Participating
<PAGE>
Insurance Company to comply with conditions and undertakings substantially as
provided in this Article VIII. The Trust will not enter into a participation
agreement with any other Participating Insurance Company unless it imposes
the same conditions and undertakings on that company as are imposed on the
Company pursuant to this Article VIII.
8.2. COMPANY MONITORING REQUIREMENTS. To the extent reasonably
practicable, the company will monitor its operations and those of the Trust for
the purpose of identifying any material irreconcilable conflicts or potential
material irreconcilable conflicts between or among the interests of
Participating Plans, Product Owners of variable life insurance policies and
Product Owners of variable annuity contracts.
8.3. COMPANY REPORTING REQUIREMENTS. The Company shall report any
conflicts or potential conflicts to the Trust Board and will provide the Trust
Board, at least annually, with all information reasonably necessary for the
Trust Board to consider any issues raised by such existing or potential
conflicts or by the conditions and undertakings required by the Exemptive Order.
The Company also shall assist the Trust Board in carrying out its obligations
including, but not limited to: (a) informing the Trust Board whenever it
disregards Contract Owner voting instructions with respect to variable life or
variable annuity insurance policies, and (b) providing such other information
and reports as the Trust Board may reasonably request. The Company will carry
out these obligations with a view only to the interests of Contract Owners.
8.4. TRUST BOARD MONITORING AND DETERMINATION. The Trust Board shall
monitor the Trust for the existence of any material irreconcilable conflicts
between or among the interests of Participating Plans, Product Owners of
variable life policies and Product Owners of variable annuity contracts and
determine what action, if any, should be taken in response to those conflicts. A
majority vote of Trustees who are not interested persons of the Trust as defined
in the 1940 Act (the "disinterested trustees") shall represent a conclusive
determination as to the existence of a material irreconcilable conflict between
or among the interests of Product Owners and Participating Plans and as to
whether any proposed action adequately remedies any material irreconcilable
conflict. The Trust Board shall give prompt written notice to the Company and
Participating Plan of any such determination.
8.5. UNDERTAKING TO RESOLVE CONFLICT. In the event that a material
irreconcilable conflict of interest arises between Product Owners of variable
life insurance policies or Product Owners of variable annuity contracts and
Participating Plans, the Company will, at its own expense, take whatever action
is necessary to remedy such conflict as it adversely affects Contract Owners up
to and including (1) establishing a new registered management investment
company, and (2) withdrawing assets from the Trust attributable to reserves for
the Contracts subject to the conflict and reinvesting such assets in a different
investment medium (including another Fund of the Trust) or submitting the
question of whether such withdrawal should be implemented to a vote of all
affected Contract Owners, and, as appropriate, segregating the assets supporting
the Contracts of any group of such owners that votes in favor of such
withdrawal, or, offering to such owners the option of making such a change. The
Company will carry out the responsibility to take the foregoing action with a
view only to the interests of Contract Owners.
8.6. WITHDRAWAL. If a material irreconcilable conflict arises because of
the Company's decision to disregard the voting instructions of Contract Owners
of variable life insurance policies and that decision represents a minority
position or would preclude a majority vote at any Fund shareholder meeting,
then, at the request of the Trust Board, the Company will redeem the shares of
the Trust to which the disregarded voting instructions relate. No charge or
penalty, however, will be imposed in connection with such a redemption.
8.7. EXPENSES ASSOCIATED WITH REMEDIAL ACTION. In no event shall the
Trust be required to bear the expense of establishing a new funding medium for
any Contract. The 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 Contract Owners materially adversely affected by the
irreconcilable material conflict.
8.8. SUCCESSOR RULES. If and to the extent that Rule 6e-2 and Rule
6e-3(T) are amended, or Rule
<PAGE>
6e-3 is adopted, to provide exemptive relief from any provisions of the 1940
Act or the rules promulgated thereunder with respect to mixed and shared
funding on terms and conditions materially different from those contained in
the Exemptive Order, then (i) the Trust and/or the Company, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and
6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the extent
such rules are applicable, and (ii) Sections 8.2 through 8.5 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 IX
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to, and
shall, indemnify and hold harmless the Trust, the Distributor and each person
who controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any Participating
Insurance Companies or Qualified Persons) and any officer, trustee, partner,
director, employee or agent of the foregoing, against any and all losses,
claims, damages, expenses, costs or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they or any of them may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, expenses, costs or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Contracts Registration Statement, Contracts
Prospectus, sales literature or other promotional material for the
Contracts or the Contracts themselves (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances in
which they were made; provided that this obligation to indemnify shall not
apply if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by the
Trust or the Distributor for use in the Contracts Registration Statement,
Contracts Prospectus or in the Contracts or sales literature or promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Trust Registration Statement, any Prospectus for Series or Classes
or sales literature or other promotional material of the Trust (or any
amendment or supplement to any of the foregoing), or the omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission was made in reliance
upon and in conformity with information furnished to the Trust or
Distributor in writing by or on behalf of the Company; or
(c) arise out of or are based upon any wrongful conduct of, or
violation of federal or state law by, the Company or persons under its
control or subject to its authorization, including without limitation, any
broker-dealers or agents authorized to sell the Contracts, with respect to
the sale, marketing or distribution of the Contracts or Trust shares,
including, without limitation, any impermissible use of broker-only
material, unsuitable or improper sales of the Contracts or unauthorized
representations about the Contracts or the Trust; or
(d) arise as a result of any failure by the Company or persons
under its control (or subject to its authorization) to provide services,
furnish materials or make payments as required under this Agreement; or
(e) arise out of any material breach by the Company or persons
under its control (or
<PAGE>
subject to its authorization) of this Agreement; or
(f) any breach of any warranties of the Company contained in
Article III hereof, any failure by the Company to transmit a request for
redemption or purchase of Trust shares or payment therefor on a timely
basis in accordance with the procedures set forth in Article II, or any
unauthorized use by the Company of the names or trade names of the Trust or
the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage, expense, cost or liability is
caused by the wilful misfeasance, bad faith, gross negligence or reckless
disregard of duty by the party seeking indemnification.
9.2. INDEMNIFICATION BY THE TRUST. The Trust hereby agrees to, and shall,
indemnify and hold harmless the Company and each person who controls or is
affiliated with the Company within the meaning of such terms under the 1933 Act
or 1940 Act and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages, expenses, costs or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they or any of
them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust Registration Statement, any Prospectus
for Series or Classes or sales literature of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission was made in
reliance upon and in conformity with information furnished in writing by
the Company to the Trust or the Distributor for use in the Trust
Registration Statement, Trust Prospectus or sales literature or promotional
material for the Trust (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus or sales
literature or other promotional material for the Contracts (or any
amendment or supplement to any of the foregoing), or the omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission was made in reliance
upon information furnished in writing by the Trust to the Company; or
(c) arise out of or are based upon wrongful conduct of the Trust or
its Trustees or officers with respect to the sale of Trust shares; or
(d) arise as a result of any failure by the Trust to provide
services, furnish materials or make payments as required under the terms of
this Agreement; or
(e) arise out of any material breach by the Trust of this Agreement
(including any breach of Section 6.1 of this Agreement and any warranties
contained in Article III hereof);
it being understood that in no way shall the Trust be liable to the Company with
respect to any violation of insurance law, compliance with which is a
responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Trust in accordance with Section 4.4 hereof.
This indemnification is in addition to any liability that the Trust may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage, expense, cost or liability is
caused by the
<PAGE>
wilful misfeasance, bad faith, gross negligence or reckless disregard of duty by
the party seeking indemnification.
9.3. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor hereby agrees
to, and shall, indemnify and hold harmless the Company and each person who
controls or is affiliated with the Company within the meaning of such terms
under the 1933 Act or 1940 Act and any officer, director, employee or agent of
the foregoing, against any and all losses, claims, expenses, costs, damages or
liabilities, joint or several (including any investigative, legal and other
expense reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages, expenses,
costs or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust's Registration Statement, any
Prospectus for Series or Classes or sales literature or other promotional
material of the Trust (or any amendment of supplement to any of the
foregoing), or arise out of or are based upon the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which
they were made; provided that this obligation to indemnify shall not apply,
if such statement or omission was made in reliance upon and in conformity
with information furnished in writing by the Company to the Trust or
Distributor for use in the Trust Registration Statement, Trust Prospectus
or sales literature or promotional material for the Trust (or any amendment
or supplement to any of the foregoing) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus or sales
literature or other promotional material for the Contracts (or any
amendment or supplement to any of the foregoing), or the omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission was made in reliance
upon information furnished in writing by the Distributor or the Trust to
the Company; or
(c) arise out of or are based upon wrongful conduct of the
Distributor or the Trust or persons under their respective control with
respect to the sale of Trust shares; or
(d) arise as a result of any failure by the Trust, the Distributor
or persons under their respective control to provide services, furnish
materials or make payments as required under the terms of this Agreement,
including, without limitation, any failure of the Trust, under
circumstances within its or its investment adviser's or custodian's
control, to inform the Company of the current net asset value per share for
each Series or Class available to the Company on a timely basis sufficient
to ensure the timely execution of all purchase and redemption orders at the
correct net asset value per share; or
(e) arise out of any material breach by the Trust, Distributor or
persons under their respective control of this Agreement (including any
breach of Section 6.1 of this Agreement) at and any warranties contained in
Article III hereof);
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law, compliance with which is
a responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Distributor in accordance with Section 4.4
hereof. This indemnification is in addition to any liability that the
Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is caused
by the wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
9.4. RULE OF CONSTRUCTION. It is the parties' intention that, in the
event of an occurrence for which
<PAGE>
the Trust has agreed to indemnify the Company, the Company shall seek
indemnification from the Trust only in circumstances in which the Trust is
entitled to seek indemnification from a third party with respect to the same
event or cause thereof.
9.5. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article IX of notice of the
commencement of any action, if a claim in respect thereof is made by the
indemnified party against any person obligated to provide indemnification under
this Article IX ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it 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. The indemnifying party, upon the request of the indemnified
party shall retain counsel reasonably satisfactory to the indemnified party and
any others the indemnifying party may designate in such proceeding and shall pay
the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and 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
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX. The
indemnification qualification provisions contained in this Article IX shall
survive any termination of this Agreement.
ARTICLE X
RELATIONSHIP OF THE PARTIES; TERMINATION
10.1. RELATIONSHIP OF PARTIES. The Company is to be an independent
contractor vis-a-vis the Trust, the Distributor, or any of their affiliates for
all purposes hereunder and will have no authority to act for or represent any of
them (except to the limited extent the Company acts as agent of the Trust
pursuant to Section 2.3(a) of this Agreement). In addition, no officer or
employee of the Company will be deemed to be an employee or agent of the Trust,
Distributor, or any of their affiliates. The Company will not act as an
"underwriter" or "distributor" of the Trust, as those terms variously are used
in the 1940 Act, the 1933 Act, and rules and regulations promulgated thereunder.
10.2. NON-EXCLUSIVITY AND NON-INTERFERENCE. The parties hereto acknowledge
that the arrangement contemplated by this Agreement is not exclusive; the Trust
shares may be sold to other insurance companies and investors (subject to
Section 2.8 hereof) and the cash value of the Contracts may be invested in other
investment companies, provided, however, that until this Agreement is terminated
pursuant to this Article X:
(a) the Company shall, for so long as it intends to use the Trust's
shares as underlying investment vehicles under the Contracts, promote the
Trust and the Funds made available hereunder on the same basis as other
funding vehicles available under the Contracts;
(b) the Company shall not, without prior notice to the Distributor
(unless otherwise required by applicable law), take any action to operate
the Account as a management investment company under the 1940 Act;
<PAGE>
(c) the Company shall not, without cause, solicit, induce or
encourage Contract Owners to change or modify the Trust to change the
Trust's distributor or investment adviser, to transfer or withdraw Contract
values allocated to a Fund, or to exchange their Contracts for contracts
not allowing for investment in the Trust; except with 30 days prior written
notice to the Distributor under circumstances where the Company has
determined, in its sole discretion exercised in good faith, that such
solicitation, inducement or encouragement may be in the best interests of
Contract Owners (unless otherwise required by applicable law).
(d) the Company shall not, without the consent of the Distributor,
substitute another investment company for one or more Funds without
providing written notice to the Distributor at least 60 days in advance of
effecting any such substitution, unless required to do so by applicable law
or regulation; and
(e) the Company shall not withdraw the Account's investment in the
Trust or a Fund of the Trust except as necessary to facilitate Contract
Owner requests and routine Contract processing.
10.3. TERMINATION OF AGREEMENT. This Agreement shall not terminate until
(i) the Trust is dissolved, liquidated, or merged into another entity, or (ii)
as to any Fund that has been made available hereunder, the Account no longer
invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends to
invest in such Fund. However, certain obligations of, or restrictions on, the
parties to this Agreement may terminate as provided in Sections 10.4 through
10.6 and the Company may be required to redeem Trust shares pursuant to Section
10.7 or in the circumstances contemplated by Article VIII. Article IX and
Sections 5.7, 10.8 and 10.9 shall survive any termination of this Agreement.
10.4. TERMINATION OF OFFERING OF TRUST SHARES. The obligation of the Trust
and the Distributor to make Trust shares available to the Company for purchase
pursuant to Article II of this Agreement shall terminate at the option of the
Distributor upon written notice to the Company as provided below:
(a) upon institution of formal proceedings against the Company, or
the Distributor's reasonable determination that institution of such
proceedings is being considered by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, the administration of the
Contracts or the purchase of Trust shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Distributor's reasonable
judgment exercised in good faith, materially impair the Company's or
Trust's ability to meet and perform the Company's or Trust's obligations
and duties hereunder, such termination effective upon 15 days prior written
notice;
(b) in the event any of the Contracts are not registered, issued or
sold in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written notice;
(c) if the Distributor shall determine, in its sole judgment
exercised in good faith, that either (1) the Company shall have suffered a
material adverse change in its business or financial condition or (2) the
Company shall have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and operations
of either the Trust or the Distributor, such termination effective upon 30
days prior written notice;
(d) if the Distributor suspends or terminates the offering of Trust
shares of any Series or Class to all Participating Investors or only
designated Participating Investors, if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of
the Distributor acting in good faith, suspension or termination is
necessary in the best interests of the shareholders of any Series or Class
(it being understood that "shareholders" for this purpose shall mean
Product
<PAGE>
Owners), such notice effective immediately upon receipt of written notice,
it being understood that a lack of Participating Investor interest in a
Series or Class may be grounds for a suspension or termination as to such
Series or Class and that a suspension or termination shall apply only to
the specified Series or Class;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the Account to another
insurance company pursuant to an assumption reinsurance agreement) unless
the Trust consents thereto, such termination effective upon 30 days prior
written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction of the Trust
within 15 days after written notice of such breach has been delivered to
the Company, such termination effective upon expiration of such 15-day
period; or
(g) upon the determination of the Trust's Board to dissolve,
liquidate or merge the Trust as contemplated by Section 10.3(i), upon
termination of the Agreement pursuant to Section 10.3(ii), or upon notice
from the Company pursuant to Section 10.5 or 10.6, such termination
pursuant hereto to be effective upon 15 days prior written notice; or
(h) at any time more than one year after the date of this
Agreement, upon six months prior written notice; provided the foregoing
shall not apply in the event that all or a portion of the Account assets
invested in the Trust are transferred to another investment company advised
or sub-advised by the Trust's investment adviser unless the parties
otherwise agree.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to new Contracts and the Distributor shall
continue to make Trust shares available to the extent necessary to permit owners
of Contracts in effect on the effective date of such termination (hereinafter
referred to as "Existing Contracts") to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts.
10.5. TERMINATION OF INVESTMENT IN A FUND. The Company may elect to cease
investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment or the Account's investment in a Fund,
subject to compliance with applicable law:
(a) immediately at the option of the Company, if the Trust informs
the Company pursuant to Section 4.4 that it will not cause such Fund to
comply with investment restrictions as requested by the Company and the
Trust and the Company are unable to agree upon any reasonable alternative
accommodations;
(b) upon 15 days written notice, if shares in such Fund are not
reasonably available to meet the requirements of the Contracts as
determined by the Company (including, any non-availability as a result of
notice given by the Distributor pursuant to Section 10.4(d)), and the
Distributor, after receiving written notice from the Company of such
non-availability, fails to make available, within 10 days after receipt of
such notice, a sufficient number of shares in such Fund or an alternate
Fund to meet the requirements of the Contracts;
(c) immediately at the option of the Company, if such Fund fails to
meet the diversification requirements specified in Section 817(h) of the
Code and any regulations thereunder and the Trust, upon written request,
fails to provide reasonable assurance that it will take action to cure or
correct such failure; or
(d) immediately at the option of the Company, if such Fund ceases
to qualify as a
<PAGE>
regulated investment company under Subchapter M of the Code, as defined
therein, or any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify, and the Fund,
upon written request, fails to provide reasonable assurance that it will
take action to cure or correct such failure within 15 days.
Such termination shall apply only as to the affected Fund and shall not apply to
any other Fund in which the Company or the Account invests.
10.6. TERMINATION OF INVESTMENT BY THE COMPANY. The Company may elect to
cease investing in all Series or Classes of the Trust made available hereunder,
promoting the Trust as an investment option under the Contracts, or withdraw its
investment or the Account's investment in the Trust, subject to compliance with
applicable law, upon written notice to the Trust within 15 days of the
occurrence of any of the following events (unless provided otherwise below):
(a) upon institution of formal proceedings against the Trust or the
Distributor, or the Company's reasonable determination that institution of
such proceedings is being considered by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the Trust's
or the Distributor's duties under this Agreement, the sale of Trust shares,
or an expected or anticipated ruling, judgment or outcome which would, in
the Company's reasonable judgment exercised in good faith, materially
impair the Distributor's or Trust's ability to meet and perform the
Distributor's or Trust's obligations and duties hereunder, such termination
effective upon 15 days prior written notice;
(b) if, with respect to the Trust or a Fund, the Trust or the Fund
ceases to qualify as a regulated investment company under Subchapter M of
the Code, as defined therein, or any successor or similar provision, or if
the Company reasonably believes that the Trust may fail to so qualify, and
the Trust, upon written request, fails to provide reasonable assurance that
it will take action to cure or correct such failure within 15 days; or
(c) if the Trust or Distributor is in material breach of a
provision of this Agreement, which breach has not been cured to the
satisfaction of the Company within 15 days after written notice of such
breach has been delivered to the Trust or the Distributor, as the case may
be; or
(d) in the event any of the Trust's shares are not registered,
issued or sold in material compliance with applicable federal and/or state
law, such termination effective immediately upon receipt of written notice;
or
(e) at any time more than one year after the date of this
Agreement, upon six months prior written notice; provided the foregoing
shall not apply in the event that all or a portion of the Account assets
invested in the Trust are transferred to another investment company advised
or sub-advised by the Trust's investment adviser unless the parties
otherwise agree; or
(f) if the Company shall determine, in its sole judgment exercised
in good faith, that either (1) the Distributor or the Trust's investment
adviser shall have suffered a material adverse change in its business or
financial condition or (2) the Distributor, the Trust's investment adviser
or the Trust shall have been the subject of material adverse publicity
(excluding with respect to the Trust, market events impacting the Trust's
performance) which is likely to have a material adverse impact upon the
business and operations of either the Trust, its investment adviser, or the
Distributor, such termination effective upon 30 days prior written notice.
(g) upon the assignment of this Agreement by the Distributor unless
the Company consents thereto, such termination effective upon 30 days prior
written notice.
<PAGE>
10.7. COMPANY REQUIRED TO REDEEM. The parties understand and acknowledge
that it is essential for compliance with Section 817(h) of the Code that the
Contracts qualify as annuity contracts or life insurance policies, as
applicable, under the Code. Accordingly, if any of the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Trust reasonably believes that any such Contracts may fail
to so qualify, the Trust shall have the right to require the Company to redeem
Trust shares attributable to such Contracts upon notice to the Company and the
Company shall so redeem such Trust shares in order to ensure that the Trust
complies with the provisions of Section 817(h) of the Code applicable to
ownership of Trust Shares. Notice to the Company shall specify the period of
time the Company has to redeem the Trust shares or to make other arrangements
satisfactory to the Trust and its counsel, such period of time to be determined
with reference to the requirements of Section 817(h) of the Code. In addition,
the Company may be required to redeem Trust shares pursuant to action taken or
request made by the Trust Board in accordance with the Exemptive Order described
in Article VIII or any conditions or undertakings set forth or referenced
therein, or other SEC rule, regulation or order that may be adopted after the
date hereof. The Company agrees to redeem shares in the circumstances described
herein and to comply with applicable terms and provisions. Also, in the event
that the Distributor suspends or terminates the offering of a Series or Class
pursuant to Section 10.4(d) of this Agreement, the Company, upon request by the
Distributor, will cooperate in taking appropriate action to withdraw the
Account's investment in the respective Fund.
10.8. CONFIDENTIALITY. The Company will keep confidential any information
acquired as a result of this Agreement regarding the business and affairs of the
Trust, the Distributor, and their affiliates.
ARTICLE XI
APPLICABILITY TO NEW ACCOUNTS AND NEW CONTRACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company, and separate accounts therefor investing in the Trust.
Such amendments may be made effective by executing the form of amendment
included on each schedule attached hereto. The provisions of this Agreement
shall be equally applicable to each such class of Contracts, Series, Class or
separate account, as applicable, effective as of the date of amendment of such
Schedule, unless the context otherwise requires. The parties to this Agreement
may amend this Agreement from time to time by written agreement signed by all of
the parties.
ARTICLE XII
NOTICE, REQUEST OR CONSENT
Any notice, request or consent to be provided pursuant to this Agreement is
to be made in writing and shall be given:
If to the Trust:
Douglas C. Grip
President
Goldman Sachs Variable Insurance Trust
One New York Plaza
New York, NY 10004
If to the Distributor:
Douglas C. Grip
Vice President
Goldman Sachs & Co.
One New York Plaza
New York, NY 10004
<PAGE>
If to the Company:
Margaret Hankard
Senior Associate Counsel
Sun Life Assurance Company of Canada (U.S.)
Retirement Products and Services Division
1 Copley Place Suite 100
Boston, MA 02116
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier, and shall be
effective upon receipt. Notices pursuant to the provisions of Article II may be
sent by facsimile to the person designated in writing for such notices.
ARTICLE XIII
MISCELLANEOUS
13.1. INTERPRETATION. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the state of
Delaware, without giving effect to the principles of conflicts of laws, subject
to the following rules:
(a) This Agreement shall be subject to the provisions of the 1933
Act, 1940 Act and Securities Exchange Act of 1934, as amended, and the
rules, regulations and rulings thereunder, including such exemptions from
those statutes, rules, and regulations as the SEC may grant, and the terms
hereof shall be limited, interpreted and construed in accordance therewith.
(b) 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.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rate or otherwise, the remainder of
the Agreement shall not be affected thereby.
(d) 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.
13.2. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which together shall constitute one and the same
instrument.
13.3. NO ASSIGNMENT. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or the
Trust without the prior written consent of the other parties.
13.4. DECLARATION OF TRUST. A copy of the Declaration of Trust of the
Trust is on file with the Secretary of State of the state of Delaware, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as trustees, and is not binding upon any of the Trustees,
officers or shareholders of the Trust individually, but binding only upon the
assets and property of the Trust. No Series of the Trust shall be liable for the
obligations of any other Series of the Trust.
13.5. ACCESS TO INFORMATION BY COMPANY. During ordinary business hours,
the Trust and the Distributor shall afford the Company, directly or through its
authorized representatives, reasonable access to all files, books, records and
other materials of the Trust or the Distributor, as applicable, which relate,
directly or indirectly, to transactions arising in connection with the Agreement
and to make available appropriate personnel familiar with such items for the
purpose of explaining the form and content of such items. This
<PAGE>
Section 13.5 shall survive the termination of this Agreement, but only to the
extent necessary to wind up termination of investment of the Accounts in the
Trust pursuant to the terms of this Agreement or to the extent required by
appropriate regulatory agencies.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
GOLDMAN SACHS VARIABLE INSURANCE TRUST
(Trust)
Date: By: /s/ Michael J. Richman
-----------------------
Name: Michael J. Richman
Title: Secretary
GOLDMAN, SACHS & CO.
(Distributor)
Date: By: /s/ Howard Surloff
------------------
Name: Howard Surloff
Title: Vice President
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Company)
Date: February 17, 1998 By: /s/ Robert K. Leach
Name: Robert K. Leach --------------------
Title: Vice President, Retirement Products
And Services Division
<PAGE>
SCHEDULE 1
Accounts of the Company
Investing in the Trust
Effective as of the date the Agreement was executed, the following separate
accounts of the Company are subject to the Agreement:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product
Subaccounts the Company Registration Number Supported by Account
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sun Life of Canada U.S. July 13, 1989 811-5846 Combination
Variable Account F Fixed/Variable Annuity
- --------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
[Form of Amendment to Schedule 1]
Effective as of ______, the following separate accounts of the Company are
hereby added to this Schedule 1 and made subject to the Agreement:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Date Established by
Name of Account and Board of Directors SEC 1940 Act Type of Product
Subaccounts of the Company Registration Number Supported by Account
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 1 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust Sun Life Assurance Company of
Canada (U.S.)
Goldman, Sachs & Co.
<PAGE>
SCHEDULE 2
Classes of Contracts
Supported by Separate Accounts
Listed on Schedule 1
Effective as of the date of the Agreement was executed, the following classes of
Contracts are subject to the Agreement:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
SEC 1933 Act
Policy Marketing Name Registration Number Contract Form Number Annuity or Life
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Futurity 333-37907 FY-MVA-CONT-1 Annuity
- ----------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
[Form of Amendment to Schedule 2]
Effective as of _____, the following classes of Contracts are hereby added to
this Schedule 2 and made subject to the Agreement:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
SEC 1933 Act
Policy Marketing Name Registration Number Contract Form Number Annuity of Life
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 2 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust Sun Life Assurance Company of
Canada (U.S.)
Goldman, Sachs & Co.
<PAGE>
SCHEDULE 3
Trust Classes and Series
Available Under
Each Class of Contracts
Effective as of the date the Agreement was executed, the following Trust Classes
and Series are available under the Contracts:
- ---------------------------------------------------------------
Contract Marketing Name Trust Classes and Series
- ---------------------------------------------------------------
Futurity Growth and Income Fund
CORE Large Cap Growth Fund
CORE U.S. Equity Fund
CORE Small Cap Equity Fund
International Equity Fund
- ---------------------------------------------------------------
- ------------------------------------------------------------------------------
[Form of Amendment to Schedule 3]
Effective as of _____________, this Schedule 3 is hereby amended to reflect the
following changes in Trust Classes and Series:
- -------------------------------------------------------------------------------
Contracts Marketing Name Trust Classes and Series
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 3 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust Sun Life Assurance Company of
Canada (U.S.)
Goldman, Sachs & Co.
<PAGE>
SCHEDULE 4
Investment Restrictions
Applicable to the Trust
Effective as of the date the Agreement was executed, the following investment
restrictions are applicable to the Trust:
- --------------------------------------------------------------------------------
[Form of Amendment to Schedule 4]
Effective as of ______________, this Schedule 4 is hereby amended to reflect the
following changes:
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 4 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust Sun Life Assurance Company of
Canada (U.S.)
Goldman, Sachs & Co.
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS/SUN LIFE SERIES TRUST,
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into as of this 17th day of February 1998,
by and among MFS/SUN LIFE SERIES 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, are 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, Clarendon Insurance Agency, Inc. ("Clarendon"), the underwriter
for the Policies, is registered as a broker-dealer with the Securities and
Exchange Commission ("SEC") under the 1934 Act and is a member in good standing
of the National Association of Securities Dealers, Inc. ("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:
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
<PAGE>
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 9:00 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
1.3, 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 9:00 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 Company
reserves the right to revoke this election and to receive all such
dividends and distributions in cash. The Trust shall notify the Company
of the number of Shares so issued as payment of such dividends and
distributions.
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.
<PAGE>
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 contracts 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 Clarendon, 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 it will, and will cause Clarendon to, 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.
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.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. The Trust or its designee shall provide the Company, free of
charge, with as many copies of the current prospectus for the Trust and
any supplements thereto as the Company may reasonably request for
distribution to existing Policy owners. 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 and any supplements
<PAGE>
thereto 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 prospectus as set in type or, at
the request of the Company, as a diskette containing the prospectus) 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 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.
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. The Trust or its designee, at the
Company's expense, shall print and provide such statement to the Company
(or a master of such statement suitable for duplication by the Company)
for distribution to a prospective purchaser who requests such statement.
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 such 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.
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.
<PAGE>
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 cause to be adopted
and implemented 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.
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 in 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 my 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 opinions 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.
<PAGE>
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 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, any supplements thereto 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 printing and distributing
the Trust's 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, if any; and the cost of preparing, printing and
distributing annual individual account statements for Policy owners as
required by state insurance laws.
5.4. MFS will monthly reimburse the Company certain of the
administrative costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership by Policy owners of
shares of the Portfolios of the Trust, equal to 0.25% per annum of the
aggregate net assets of the Trust attributable to variable life or
variable annuity contracts offered by the Company or its affiliates. In
no event shall such fee be paid by the Trust, its shareholders or by the
Policy holders.
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, and they shall
immediately notify the Company upon having a reasonable basis for
believing that a Portfolio has ceased to qualify or that it might not so
qualify in the future.
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), and they shall immediately notify
the Company upon having a reasonable basis for believing that a Portfolio
has ceased to qualify or that it might not so qualify in the future.
<PAGE>
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 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, without limitation, 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
<PAGE>
(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 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
supplemented 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, without limitation, 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 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 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
<PAGE>
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; 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 of 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.
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
may 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
<PAGE>
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 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 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 other 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
(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
after providing the breaching party thirty (30) days written
notice and an opportunity to cure the breach during the
notice period; 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
<PAGE>
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 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 and MFS shall
continue to reimburse the Company pursuant to Section 5.4 of this
Agreement.
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.)
Retirement Products and Services
One Copley Place, Suite 200
Boston, Massachusetts 02116
Facsimile No.:(617) 348-1586
Attn: Margaret Hankard, Esq.
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: tephen 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 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
<PAGE>
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.
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.
<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: /s/ Robert K. Leach
--------------------
Robert K. Leach
Vice President, Finance and Product
MFS/SUN LIFE SERIES TRUST, on behalf of the portfolios
By its authorized officer and not individually,
By: /s/ James R. Bordewick, Jr.
------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Jeffery L. Shames
-------------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
<PAGE>
As of February 17, 1998
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
- -------------------------------------------------------------------------------
Name of Separate Policies Funded Portfolios
Account and Date by Separate Account Applicable to Policies
Established by Board of
Directors
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Sun Life of Canada (U.S.) Futurity Variable Capital Appreciation Series
Variable Account F Annuity Emerging Growth Series
(est. July 13, 1989) Government Security Series
High Yield Series
Money Market Series
Utilities Series
- -------------------------------------------------------------------------------
<PAGE>
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 17 day of February 1998 by and
among Sun Life Assurance Company of Canada (U.S.), a Delaware corporation
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time (each account referred to as the "Account"), OCC ACCUMULATION
TRUST, an open-end diversified management investment company organized under the
laws of the State of Massachusetts (hereinafter the "Fund") and OCC
DISTRIBUTORS, a Delaware general partnership (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, beneficial interests in the Fund are divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"), dated
February 22,
<PAGE>
1995 (File No. 812-9290), granting Participating Insurance Companies and
variable annuity separate accounts and variable life insurance separate accounts
relief 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 separate
accounts and variable life insurance separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and qualified pension and
retirement plans (hereinafter the "Mixed and Shared Funding Exemptive Order");
and
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, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the State of Delaware, to set aside and invest
assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit investment trust
under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2, as it may be amended from time to time, on behalf of the Account to
fund the Contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
<PAGE>
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Account, executing such orders on
a daily basis at the net asset value next computed after receipt and acceptance
by the Fund or its agent 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
10:00 a.m. Eastern Time on the next following Business Day. The Underwriter
shall confirm to the Company the receipt of such notice by 11:30 a.m. on such
next following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day after
it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Trustees of the Fund (hereinafter the "Directors") 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 Directors,
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 any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations
<PAGE>
promulgated thereunder, the sale to which will not impair the tax treatment
currently afforded the Contracts. No shares of any Portfolio will be sold to the
general public.
1.5. 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, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating Insurance Companies and
(ii) a copy of the Participation Agreement executed by any other Participating
Insurance Company.
1.6. The Fund agrees to redeem for cash upon 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 and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, 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 the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment shall be in federal funds transmitted by wire to the Company's account
as designated by the Company in writing from time to time, on the same Business
Day the Fund receives notice of the redemption order from the Company except
that the Fund reserves the right to delay payment of redemption proceeds, but in
no event may such payment be delayed longer than the period permitted under
Section 22(e) of the 1940 Act. Neither the Fund nor the Underwriter shall bear
any responsibility whatsoever for the proper disbursement or crediting of
redemption proceeds; the Company alone shall be responsible for such action. If
notification of redemption is received after 10:00 a.m. Eastern Time, payment
for redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus.
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.
Purchase and redemption
<PAGE>
orders for Fund shares will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9. The Fund shall furnish notice as soon as reasonably practicable 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 dividends and
distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this election
and to receive all such dividends and 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 and shall use its best efforts to
make such net asset value per share available by 5:30 p.m., Eastern Time, each
business day.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold in
compliance with all applicable federal and state laws. 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 as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by applicable law. The Company shall register and qualify the Contracts for sale
in accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
<PAGE>
2.2. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts under applicable
provisions of the Internal Revenue Code and that it will 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.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. 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.
2.4. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will 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.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. 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 and regulations of any state. The
Company alone shall be responsible for informing the Fund of any insurance
restrictions imposed by state insurance laws which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the aforementioned state insurance laws
upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt
<PAGE>
of such notice to make any such adjustment.
2.6. 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. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have its 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.
2.7. The Underwriter represents and warrants that it is, and will continue
to be, a member in good standing of the National Association of Securities
Dealers, Inc., ("NASD") and is, and will continue to be, registered as a
broker-dealer with the SEC. The Underwriter further represents that it will sell
and distribute the Fund shares in accordance with all applicable federal and
state 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 Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser,
OpCap Advisors, is and shall remain duty registered under all applicable federal
and state securities laws and that the Adviser will perform its obligations to
the Fund in accordance with the laws of Massachusetts 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 having access to the funds and/or securities of the Fund
are and will 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-(l) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
<PAGE>
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Underwriter's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective contractowners and applicants. The
Underwriter shall print, at the Fund's or Underwriter's expense, as many copies
of said prospectus and any supplements thereto, as necessary for distribution to
existing contract owners or participants. If requested by the Company in lieu
thereof, the Fund shall provide such documentation including a final copy of a
current prospectus set in type at the Fund's expense and other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the new
prospectus for the Contracts and the Fund's new prospectus printed together in
one document. In such case the Fund shall bear its share of expenses as
described above.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or alternatively from
the Company (or, in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund), and the Underwriter (or the Fund) shall
provide such Statement, at its expense, to the Company and to any owner of or
participant under a Contract who requests such Statement or, at the Company's
expense, to any prospective contractowner and applicant who requests such
statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or
participants;
(ii) vote the Fund shares held in the Account in accordance with
instructions received from contractowners or participants;
and
(iii) vote Fund shares held in the Account for which no timely
instructions have been received, in the same proportion as
Fund
<PAGE>
shares of such Portfolio for which instructions have been
received from the Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. 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. The Company shall be responsible
for assuring that each of its separate accounts participating in the Fund
calculates voting privileges in a manner consistent with this section.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular as required, the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Fund's 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 the Underwriter reasonably objects in writing to such use within ten
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 by
the Underwriter, or in shareholder reports of the Fund except with the
permission of the Fund or the Underwriter. The Fund and the Underwriter agree to
respond to any request for approval within ten Business Days
<PAGE>
of receipt of such request.
4.3. The Fund or the Underwriter 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 or its separate account is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing to such use within ten
business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any infomation 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 or prospectus for the Contracts, as such
registration statement and prospectus 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 contractowners or participants,
or in sales literature or other promotional material approved by the Company,
except with the permission of the Company. The Company agrees to respond to any
request for approval within ten Business Days of receipt of such request.
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 SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, 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.
4.7. For purposes of this Article IV, the phrase "sales literature or
other
<PAGE>
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), 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, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under NASD
rules, the 1940 Act or the 1933 Act.
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, subject to obtaining any required exemptive orders or other
regulatory approvals, 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. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. All Fund shares will
be duly authorized for issuance and registered in accordance with applicable
federal law and to the extent deemed advisable by the Fund, in accordance with
applicable state law, prior to 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, Fund proxy materials
and reports, setting in type, printing and distributing the prospectuses, the
proxy materials and reports to existing shareholders and contractowners, the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares, and any
<PAGE>
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
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 Internal Revenue Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Internal Revenue 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 the Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Treasury Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners 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
Participating Insurance Companies or by variable annuity contract and variable
life insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "
<PAGE>
interested' persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities under the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information reasonably necessary for
the Fund Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Fund Board whenever contractowner
voting instructions are disregarded. The Fund Board shall record in its minutes
or other appropriate records, all reports received by it and all action with
regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a majority of
its disinterested Directors, that an irreconcilable material 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 Directors), 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 contractowners and, as appropriate, segregating the assets of
any appropriate group (I.E., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could conflict with
the majority of contractowner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement
<PAGE>
with respect to such Account. Any such withdrawal and termination must take
place within 60 days after the Fund gives written notice to the Company that
this provision is being implemented. Until the end of such 60 day 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 particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company will withdraw the Account's investment in the Fund and
terminate this Agreement with respect to such Account. Any such withdrawal and
termination must take place within 60 days after the Fund gives written notice
to the Company that this provision is being implemented. Until the end of such
60 day 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 Fund Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund or OpCap Advisors 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 contractowners materially adversely
affected by the irreconcilable material conflict.
7.7. The Company shall at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so that the
Fund Board may fully carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said reports, materials and data
shall be submitted more frequently if deemed appropriate by the Fund Board.
7.8. 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 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those
<PAGE>
contained in the Mixed and Shared Funding Exemptive Order, (a) the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rules 6e-2 and 6e-3 (T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.4,
3.5, 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
(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls or is an "associated
person' of the Fund or the Underwriter within the meaning of such terms under
the federal securities laws (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 reasonable 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:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Contracts or contained in the
Contracts or sales literature or other promotional material
for the Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; 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 statement of additional information for the
Contracts or in the Contracts or sales literature or other
promotional material for the Contracts (or any amendment or
<PAGE>
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
by or on behalf of the Company (other than statements or
representations contained in the Fund registration
statement, Fund prospectus, Fund statement of additional
information or sales literature or other promotional
material of the Fund not supplied by the Company or persons
under its control) or wrongful conduct of the Company or
persons under its 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 the Fund
registration statement, Fund prospectus, statement of
additional information or sales literature or other
promotional material of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading
in light of the circumstances in which they were made, if
such a statement or omission was made in reliance upon and
in conformity with information furnished to the Fund by or
on behalf of the Company or persons under its control; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any
payments under the terms of this Agreement; or
(v) arise out of 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 by the
Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(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 Fund shares or the Contracts or the operation
of the Fund.
<PAGE>
8.2. INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter, on its own behalf and on behalf of the Fund,
agrees to indemnify and hold harmless the Company and each of its directors,
officers, employees or agents and each person, if any, who controls or is an
"associated person" of the Company within the meaning of such terms under the
federal securities laws (collectively, the "indemnified parties" for purposes of
this Section 8.2) against any and all losses, costs, expenses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Underwriter) or litigation (including reasonable 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, costs, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements:
(i) 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 Fund or sales literature or other promotional
material of the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
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, prospectus or statement of additional information for
the Fund or in sales literature or other promotional material of
the Fund (or any amendment or supplement thereto) 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 Contracts or in the Contract registration
statement, the Contract prospectus, statement of additional
information, or sales literature or other promotional material
for the Contracts or of the Fund not supplied by the Underwriter
or the Fund or persons under the control of the Underwriter or
the Fund respectively) or wrongful conduct of the Underwriter or
the Fund or persons under the control of the Underwriter or the
Fund respectively, with respect to the sale or distribution of
the Contracts or Fund shares; or
<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, statement of additional information or sales
literature or other promotional material 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 in light of the circumstances
in which they were made, if such statement or omission was made
in reliance upon and in conformity with information furnished to
the Company by or on behalf of the Underwriter or the Fund or
persons under the control of the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund or the Underwriter
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 (i) comply with the
diversification requirements and procedures related thereto
specified in Article VI of this Agreement except if such failure
is a result of the Company's failure to comply with the
notification procedures specified in Article VI; and (ii) to
inform the Company of the correct net asset value per share of
each Portfolio on a timely basis sufficient to ensure the timely
execution of all purchase and redemption orders at the correct
net asset value per share); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter or the
Fund in this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Underwriter of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
<PAGE>
Any person obligated to provide indemnification under this Article VIII
("indemnifying party" for the purpose of this Section 8.3) shall not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("indemnified party" for the purpose of this Section 8.3) unless such
indemnified party shall have notified the indemnifying party 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 party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
indemnifying party to the indemnified party of the indemnifying party'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 indemnifying party
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, 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 but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
<PAGE>
agrees to indemnify the indemnified party from and against any loss or liability
by reason of such settlement or judgment.
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.
8.4. CONTRIBUTION
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Article VIII is due in accordance
with its terms but for any reason is held to be unenforceable with respect to a
party entitled to indemnification ("indemnified party" for purposes of this
Section 8.4) pursuant to the terms of this Article VIII, then each party
obligated to indemnify pursuant to the terms of this Article VIII shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and litigations in such proportion
as is appropriate to reflect the relative benefits received by the parties to
this Agreement in connection with the offering of Fund shares to the Account and
the acquisition, holding or sale of Fund shares by the Account, or if such
allocation is not permitted by applicable law, in such proportions as are
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those
statutes, rules and regulations as the SEC may grant (including, but not limited
to the Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in
<PAGE>
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written notice
to the other parties unless otherwise agreed in a separate written agreement
among the parties; or
(b) at the option of the Company if shares of the Portfolios
delineated in Schedule 2 are not reasonably available to meet the requirements
of the Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the insurance commission of any state
or any other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the administration of the Contracts,
the operation of the Account, or the purchase of the Fund shares, which would
have a material adverse effect on the Company's ability to perform its
obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body, which
would have a material adverse effect on the Fund's or the Underwriter's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
30 days prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an
<PAGE>
irreconcilable material conflict exists among the interests of (i) all
contractowners of variable insurance products of all separate accounts or (ii)
the interests of the Participating Insurance Companies investing in the Fund as
delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines 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 or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company; or
(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or Underwriter; or
(l) at the option of the Fund in the event any of the Contracts are
not issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without notice.
10.2. NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based upon
the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
<PAGE>
(b) In the event that any termination of this Agreement is based upon
the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written notice
of the election to terminate this Agreement for cause shall be furnished by the
party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the non-terminating
parties.
(c) In the event that any termination of this Agreement is based upon
the provisions of Sections 10.1(j) or 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-terminating parties. Such prior written
notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, and subject to Section 1.3 of this Agreement,
the Company may require the Fund and the Underwriter to, continue to make
available additional shares of the Fund for so long after the termination of
this Agreement as the Company desires pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, 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 10.4 shall not apply to any terminations under Article VII and
the effect of such Article II terminations shall be governed by Article VII of
this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to
<PAGE>
the other party, such notice to be for a period that is reasonable under the
circumstances but, if given by the Fund or Underwriter, need not be for more
than 90 days.
10.5. Except as necessary to implement contractowner initiated or
approved transactions, or as required by state insurance laws or regulations,
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)
and the Company shall not prevent contractowners from allocating payments to a
Portfolio that was otherwise available under the Contracts, in each case until
90 days (or such shorter period of time as the parties hereto may agree upon)
after the Company shall have notified the Fund or Underwriter of its intention
to do so.
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt or by 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. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Margaret Hankard
Senior Associate Counsel
Sun Life Assurance Company of Canada (U.S.)
Copley Place, Suite 200
Boston, MA 02117
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
<PAGE>
200 Liberty Street
New York, NY 10281
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 Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as it may come into the public domain without the express prior
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. This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. 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 each other and 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.
12.8. Each party represents that the execution and delivery of this
Agreement and
<PAGE>
the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate or trust action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.
12.10. During ordinary business hours, the Fund and the Underwriter
shall afford the Company, directly or through its authorized representatives,
reasonable access to all files, books, records and other materials of the Fund
or the Underwriter, as applicable, which relate, directly or indirectly, to
transactions arising in connection with this Agreement and to make available
appropriate personnel familiar with such items for the purpose of explaining the
form and content of such items. This Section 12.10 shall survive the termination
of this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative as of
the date and year first written above.
COMPANY:
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)
SEAL By: /s/ Robert K. Leach
----------------------
Robert K. Leach, Vice President,
Retirement Products and Services Division
FUND:
OCC ACCUMULATION TRUST
SEAL By /s/ Bernard H. Garil
----------------------
UNDERWRITER:
OCC DISTRIBUTORS
By: /s/ Thomas E. Duggan
----------------------
<PAGE>
SCHEDULE 1
Participation Agreement
Among
OCC Accumulation Trust, Sun Life Assurance Company of Canada (U.S.)
and
OCC Distributors
The following separate accounts of Sun Life Assurance Company of Canada
(U.S.) are permitted in accordance with the provisions of this Agreement to
invest in Portfolios of the Fund shown in Schedule 2:
Sun Life of Canada (U.S.)Variable Account F
February 17, 1998
<PAGE>
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, Sun Life Assurance Company of Canada (U.S.)
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Mid Cap Portfolio
Equity Portfolio
Small Cap Portfolio
February ___, 1998
<PAGE>
PARTICIPATION AGREEMENT
Among
SUN CAPITAL ADVISERS TRUST,
SUN CAPITAL ADVISERS, INC.
and
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
THIS AGREEMENT, made and entered into this ___ day of _________ 19___ by
and among SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) (hereinafter the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the ("Account"), SUN CAPITAL
ADVISERS TRUST, a Delaware business trust (hereinafter the "Fund"), and SUN
CAPITAL ADVISERS, INC. (hereinafter the "Adviser"), a ___________ corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for certain
qualified pension or retirement plans ("Qualified Plans") and (ii) the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively, the "Variable Insurance
Products") to be offered by insurance companies which have entered into
participation agreements with the Fund and the Adviser (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interests in the Fund are divided into several
series of shares (each designated a "Portfolio"), each representing the interest
in a particular managed portfolio of securities and other asset; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated ________, _____ (File No. _________, 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(l)(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 and to Qualified Plans (hereinafter the
"Mixed and Shared Funding Exemptive Order"); and
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
<PAGE>
WHEREAS, the Adviser is duly registered as an Investment Adviser under the
Investment Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
insurance and variable annuity contracts ("Contracts") 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 one or more variable life insurance or
variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; 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 Contracts,
NOW, THEREFORE, in consideration of their mutual promises the Company, the
Fund and the Adviser agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Fund 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 [9:00 a.m. Eastern 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 (the
"Commission").
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 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 interest of the shareholders of such Portfolio.
1.3. The Fund and the Adviser agree that shares of the Fund will be sold
only to
<PAGE>
Participating Insurance Companies and their separate accounts and certain
Qualified Plans, in accordance with the terms of the Mixed and Shared Funding
Exemptive Order. No shares of any Portfolio will be sold to the general public.
1.4. The Fund 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, and VII 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 by [9:00 a.m. Eastern time] on the next following
Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus.
1.7. The Company shall pay for Fund shares by 11:00 a.m. Eastern time 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.
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 practicable
after the net asset value per share is calculated (normally 6:30 p.m. Eastern
time) and shall use its best efforts to make such net asset value per share
available by 7:00 p.m. Eastern 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; that the Contracts will be issued and sold in
compliance in all material
<PAGE>
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 Section 2932 of the Delaware
Insurance Code and 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 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 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 if and to the extent deemed advisable by the Fund or the
Adviser.
2.3. The Fund represents that it intends to qualify 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 in the future.
2.4. The Company represents that each Account is properly treated as a
"segregated asset account" for purposes of Treasury Regulation
Section 1.817-5(f), that the Contracts are currently treated as endowment,
annuity or life insurance contacts under applicable provisions of the Code and
that it will maintain such treatment and that it will notify the Fund and the
Adviser immediately upon having a reasonable basis for believing that any
Account or Contract has ceased to be so treated or might not be so treated in
the future.
2.5. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
polices) complies with the insurance laws or regulations of the various states
except that the Fund and the Adviser represent that their respective operations
are and shall at all times remain in material compliance with applicable laws of
the State of Delaware to the extent required to perform this Agreement.
2.6. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.7. The Adviser represents and warrants that the Adviser is and shall
remain duly
<PAGE>
registered as an investment adviser 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
applicable state and federal securities laws.
2.8. The Fund and Adviser 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.
2.9. 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 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 entities subject to the requirements of 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.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Adviser shall provide the Company (at the Company's expense) with
as many copies of the Fund's current prospectus as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final "camera ready" or diskette copy of the new
prospectus as set in type at the Fund's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is amended) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Adviser (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Adviser (or the Fund), at its expense, shall provide a copy of
such Statement free of charge to the Company and to any owner of a Contract or
prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
<PAGE>
(i) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such 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 owners of Variable Insurance
Products. 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 this Section and with each other.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund, the Adviser or one of their respective affiliates is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee objects to such use within fifteen 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 Adviser, except with the permission of the Fund or the
Adviser or the designee of either.
4.3. The Fund and the Adviser, 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 object to such use
within fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser 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 or prospectus for the Contracts, as such
registration statement and prospectus 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
<PAGE>
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 Commission or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, 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
Commission or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as materials published, or designed for use in, 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.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Adviser shall pay no fee or other compensation to the
Company under this Agreement, except that: (a) if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Adviser may make payments to the Company for the Contracts if
and in amounts agreed to by the Adviser in writing; and (b) the Adviser may make
payments out of existing fees otherwise payable to the Adviser, past profits of
the Adviser or other resources available to the Adviser, to the extent permitted
by law.
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
<PAGE>
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including, if so elected, the costs of printing a prospectus
that constitutes an annual report), and the preparation of all statements and
notices required by any federal or state law.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. DIVERSIFICATION
6.1. Each Portfolio of the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation Section 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts, to the extent such requirements apply to the Portfolio's investments
pursuant to Treasury Regulation Section 1.817-5(f), and any amendments or other
modifications to such Section or Regulations.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict among the interests of the contract owners of all
separate accounts investing in the Fund and determine what action is to be
taken. 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
interpretive 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 owners, variable life insurance contract owners and Plan
trustees; (f) a decision by an insurer to disregard the voting instructions of
contract owners; or (g) if applicable, a decision by a Qualified Plan to
disregard the voting instructions of Plan participants. 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 and the Adviser will assist the Board in
carrying out its responsibilities under the Mixed and 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
<PAGE>
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 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 series
thereof 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. No charge
or penalty will be imposed as a result of the withdrawal. 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 (6) month period the Adviser 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 (6) 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 (6) month period, the Adviser
and Fund shall continue to accept and implement orders by the Company for file
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 (a)
<PAGE>
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict or (b) pursuant to governing Qualified
Plan documents and applicable law, the Qualified Plan makes the decision without
a vote of its participants. 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.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund and each
of its directors and officers and each person, if any, who controls the Fund or
the Adviser 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 or prospectus for the Contract 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 or prospectus 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
<PAGE>
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 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
<PAGE>
Shares or the Contracts or the operations of the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser 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 Adviser) 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 Adviser or Fund by or on behalf of the Company
specifically for use in the Registration Statement or prospectus for the
Fund or in sales literature (or any amendment or supplement) or otherwise
specifically 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 for the Contracts not supplied by
the Adviser or persons under its control) or wrongful conduct of the Fund
or Adviser 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 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 and in conformity with information
furnished to the Company by or on behalf of the Fund specifically for
inclusion therein, 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 of any
<PAGE>
Portfolio, whether unintentional or in good faith or otherwise, to
invest in a manner that complies 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 Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Adviser; as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Adviser 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 Account, whichever, is applicable.
8.2(c). The Adviser 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 Adviser 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 Adviser of any
such claim shall not relieve the Adviser 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 Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser'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 Adviser 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 Adviser 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.
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
<PAGE>
statutes, rules and regulations as the Commission may grant (including, but
not limited to, the Mixed and Shared Funding Exemptive Order) and the terms
hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written notice
to the other parties unless otherwise agreed in a separate written agreement
among the parties; or
(b) at the option of the Company if shares of the Portfolios
delineated in Schedule B are not reasonably available to meet the requirements
of the Contracts as determined by the Company within ten (10) days of notice by
Company to Fund of such fact; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the Commission, the insurance or securities
commission or division of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the Contracts,
the administration of the Contracts, the operation of the Account, or the
purchase of the Fund shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the Commission, or any state
securities or insurance department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contract owners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will
give 30 days' prior written notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists from the Company's
continued investment in the Fund; or
(g) at the option of the Company if any Portfolio of the Fund ceases
to qualify as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code, or under any successor or similar provision, or if the Company
reasonably believes that the Portfolio may fail to so qualify; or
(h) at the option of the Company if any Portfolio of the Fund fails
to meet the diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
<PAGE>
(j) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund or the Adviser has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company; or
(k) at the option of the Fund or Adviser, if the Fund or Adviser
respectively, shall determine in its sole judgment exercised in good faith, that
the Company has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Fund or Adviser; or
(l) at the option of the Fund or Adviser in the event any of the
Contracts are not issued or sold in accordance with applicable federal and/or
state law or if any Account or Contract ceased to qualify as annuity contracts
or life insurance contracts, as applicable, under the Code or if the Fund or
Adviser reasonably believes the Account or Contract may fail to so qualify.
10.2 NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based upon
the provisions of Article VII such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
(b) In the event that any termination of this Agreement is based upon
the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written notice
of the election to terminate this Agreement for cause shall be furnished by the
party terminating the Agreement to the non-terminating parties, with said
termination to be effective: (x) upon receipt of such notice by the
non-terminating parties in the case of terminations based on Sections 10.1(b) -
(d); or (y) in the event of terminations based on Sections 10.1(g) - (i) if the
breaching party has not cured such breach.
(c) In the event that any termination of this Agreement is based upon
the provisions of Sections 10.10) or 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-terminating parties. Such prior written
notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
(d) In the event that any termination of this Agreement is based upon
the provisions of Section 10.1(1), termination shall be effective immediately
upon such occurrence without notice.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
<PAGE>
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 of this Agreement, the Fund may, at its option, or in the event
of termination of this Agreement by the Fund or the Adviser pursuant to Section
10.1(a) of this Agreement, the Company may require the Fund and the Adviser to,
continue to make available additional shares of the Fund for so long after the
termination of this Agreement as the Fund or the Company, if the Company is so
requiring, desires pursuant to the terms and conditions of this Agreement as
provided in paragraph (b) 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
available additional shares of the Fund, pursuant to instructions from the
owners of the Existing Contracts, the Company shall be permitted to reallocate
investments in the Fund, redeem investments in the Fund and/or invest in the
Fund upon the making by such owners of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 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.
(b) In the event of a termination of this agreement pursuant to
Section 10.1 of this Agreement, the Fund shall promptly notify the Company
whether the Fund will continue to make available shares of the Fund after such
termination, except that, with respect to a termination by the Fund or the
Adviser pursuant to Section 10.1(a) of this Agreement, the Company shall
promptly notify the Fund whether it wishes the Fund to continue to make
available additional shares of the Fund. If shares of the Fund continue to be
made available after such termination, the provisions of this Agreement shall
remain in effect except for Section 10.1(a) and thereafter the Fund or the
Company may terminate the Agreement, as so continued pursuant to this Section
10.4 upon written notice to the other party, such notice to be for a period that
is reasonable under the circumstances.
10.5. Except as necessary to implement contract owner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets), and the Company
shall not prevent contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts, until 90 days after the Company
shall have notified the Fund or Adviser 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.
If to the Fund:
<PAGE>
Sun Capital Advisers Trust
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
Attn: President
If to the Company:
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
Attn: __________
If to the Adviser:
Sun Capital Advisers, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
Attn: President
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund, or in the case of a claim relating to a Portfolio, the
assets of that Portfolio 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. No Portfolio
shall be subject to liability for the allegations of any other Portfolio.
12.2. Except as otherwise required by law, 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 provision hereof or
otherwise affect their construction or effect.
12.4. This Agreement maybe 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
Commission, the NASD and state
<PAGE>
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.
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.
REMAINDER OF PAGE INTENTIONALLY BLANK
<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.
Company:
By its authorized officer
By:
Title:
Date:
Fund:
SUN CAPITAL ADVISERS TRUST:
By its authorized officer
By:
Title:
Date:
Adviser:
SUN CAPITAL ADVISERS, INC.
By its authorized officer
By:
Title:
Date:
<PAGE>
SCHEDULE A
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
on behalf of its segregated accounts
ACCOUNT DATE OF ORGANIZATION
<PAGE>
SCHEDULE B
SUN CAPITAL ADVISERS TRUST
Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Real Estate Fund
<PAGE>
FUTURITY VARIABLE UNIVERSAL LIFE
UND 14/XXX
A. PROPOSED INSURED
Name
- --------------------------------------------------------------------------------
- -----------------------------------
Address
- --------------------------------------------------------------------------------
- -----------------------------------
City State
--------------------------------------------------------
Zip
- ----------------------------------- ----------------------
Social Security Number - - or Tax Identification Number
-------- --------- --------
- -----------------------------------
Driver's License Number Driver's License State of Issue
--------------------------
- -----------------------------------
Date of Birth / / Place of Birth
------ ----- ------
- -----------------------------------
Sex o Male o Female
Permanent U.S. Resident? o Yes o No
U.S. Citizen? o Yes o No
Occupation Employer
---------------------------------------
- -----------------------------------
Employer's Address
- --------------------------------------------------------------------------------
- -----------------------------------
City State
---------------------------------------------
Zip
- ----------------------------------- -----------
B. OWNER INFORMATION
Name
---------------------------------------------
Address
------------------------------------------
City
---------------------------------------------
State Zip
------------------------------ -----------
Relationship to Insured
--------------------------
Social Security or Tax Identification No.
--------
Date of Birth / /
------ ----- -------
Trust Date / /
-------- ----- -------
State Trust Established In
-----------------------
Permanent U.S. Resident? o Yes o No
U.S. Citizen? o Yes o No
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
1 Sun Life Executive Park
Wellesley Hills, MA 02481 1-800-700-6554
C. CONTINGENT OWNER
Name
---------------------------------------------
Address
------------------------------------------
City
---------------------------------------------
State Zip
------------------------------ -----------
Relationship to Insured
--------------------------
Social Security OR Tax Identification No.
--------
Date of Birth / /
------ ------ ------
Permanent U.S. Resident? o Yes o No
U.S. Citizen? o Yes o No
PLEASE CONTINUE ON NEXT PAGE Policy #:
-----------
<PAGE>
PART ONE of APPLICATION FOR FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE
D. BENEFICIARY INFORMATION
Name/Relationship to Insured/Social Security Number
n Primary / /
- -------------------------- ---------------------------- ----------------------
- --------------
o Primary o Contingent / /
- -------------------------- ---------------------------- ----------------------
- --------------
o Primary o Contingent / /
- -------------------------- ---------------------------- ----------------------
Unless otherwise specified, the proceeds will be divided equally among all
primary Beneficiaries who survive the Insured. If no primary Beneficiary
survives the Insured, then the proceeds will be divided equally among all
contingent Beneficiaries. If no Beneficiary (primary or contingent) is living,
then the proceeds will be paid to the Insured's estate.
E. FACE AMOUNT
Specified Face Amount (excluding Supplemental Benefits)
$
-------------------------------------------------------------------------------
F. DEATH BENEFIT
o Option A (Specified Face Amount) o Option B (Specified Face Amount plus
Account Value)
G. SUPPLEMENTAL
o Payment of Stipulated Amount Rider $
------------------------------------------
o to age 65 o to age 70
o Accidental Death Benefit Rider, Face Amount $
---------------------------------
o Waiver of Monthly Deductions Rider
H. PREMIUM/ADVANCE PAYMENT
Planned Periodic Premium Amount $ (subject to Sun Life
(U.S.) limitations) ---------------------------
Frequency: o Monthly o Quarterly o Semi-Annually o Annually
If monthly, o Pre-Authorized Check (Pre-Authorized Checking Plan Form must be
completed).
o Amount paid with application $ (Refer to Temporary Life
Insurance Agreement.) ------------------------
I. CORRECTIONS OR AMENDMENTS (for Sun Life (U.S.) use only)
- --------------------------------------------------------------------------------
- ----------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------
J. OTHER INSURANCE
Does the Proposed Insured have insurance in force and/or pending with any
company including Sun Life (U.S.) and its affiliates?
o Yes o No
If yes, complete the following information:
Company/Business or Personal/Issue year or Pending/Total Amount
/ / /
- ------------------------------ -------------------- ------------------- --------
- -------
/ / /
- ------------------------------ -------------------- ------------------- --------
- -------
/ / /
- ------------------------------ -------------------- ------------------- --------
- -------
/ / /
- ------------------------------ -------------------- ------------------- --------
- -------
<PAGE>
Has an application for insurance on the Proposed Insured's life been declined or
offered on a basis other than applied for?
o Yes o No
If yes, provide details:
- --------------------------------------------------------------------------------
- -----------------------------------
- --------------------------------------------------------------------------------
- -----------------------------------
UND 14/XXX
K. REPLACEMENT INFORMATION
Will any existing life insurance or annuity with this or any other insurance
company be replaced, changed or used as a source of premium
payment for the insurance applied for? If "yes" provide details and necessary
forms o Yes o No
- --------------------------------------------------------------------------------
- -----------------------------------
- --------------------------------------------------------------------------------
- -----------------------------------
If a replacement is involved, is it intended as an IRC Section 1035 exchange?
o Yes o No
L. LIFESTYLE INFORMATION ON PROPOSED INSURED
1. Have you, the Proposed Insured, used tobacco (cigarettes, cigars, chewing
tobacco, etc.) or nicotine-containing products (nicorette gum, nicotine patch,
etc.) within the past 12 months? o Yes o No
If yes, provide details:
----------------------------------------------------
2. Have you, the Proposed Insured, previously used tobacco or nicotine products
but have o Yes o No
since stopped?
If yes, date stopped:
------------------------------------------------------
3. Do you, the Proposed Insured, plan to travel or reside outside of the U.S. in
the next two years? o Yes o No
If yes, provide details:
----------------------------------------------------
4. Have you, the Proposed Insured, within the past two years flown as a pilot or
co-pilot in any o Yes o No
type of aircraft?
If yes, an Aviation Questionnaire is required on the Proposed Insured.
5. Have you, the Proposed Insured, within the past two years participated in
scuba diving, parachuting, hang gliding, motorized racing or any hazardous
sport? o Yes o No
If yes, additional information may be required.
6. Have you, the Proposed Insured, in the last three years while operating a
motor vehicle, boat or aircraft:
A. been charged with any moving violations? o Yes o No
B. had an operator's license restricted, suspended or revoked? o Yes o No
C. been charged with operating under the influence of alcohol and/or drugs?
o Yes o No
If yes, provide details:
---------------------------------------------------
UND 14/XXX
M. FAMILY HISTORY OF THE PROPOSED INSURED
Age if Living/Age at Death/State of Health or Cause of death
Father / /
- -------------------- --------------------- -------------------------------------
- ---------------
Mother / /
- -------------------- --------------------- -------------------------------------
- ---------------
Brother(s) / /
- -------------------- --------------------- -------------------------------------
- ---------------
<PAGE>
Sister(s) / /
- -------------------- --------------------- -------------------------------------
- ---------------
2. Has any of the Proposed Insured's parents, brothers, or sisters had diabetes,
heart disease, or high blood pressure? o Yes o No
If yes, provide details:
---------------------------------------------------
N. HEALTH INFORMATION
For all yes responses to questions 1-8 give diagnosis, dates, duration, names
and addresses of attending physicians and medical
facilities in the space provided at the end of this section.
1. Proposed Insured's height: Proposed Insured's
----------------
weight:
-------------------
2. Have you, the Proposed Insured, had a change of weight of more than 10 pounds
within the past 12 months? o Yes o No
3. Are you, the Proposed Insured, being treated by diet, drugs or other means?
o Yes o No
4. Name and address of primary physician or health care provider of the Proposed
Insured:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Date last seen:
---------------------------------------------------------
Reason for visit:
--------------------------------------------------------
5. Have you, the Proposed Insured, EVER been diagnosed with or been treated by a
physician for:
A. high blood pressure, chest discomfort, stroke, circulatory or heart disorder?
o Yes o No
B. diabetes, sugar in the urine, thyroid, or other glandular (endocrine)
disorder? o Yes o No
C. kidney, bladder, urinary, reproductive organ or prostate disorder? o Yes o No
D. protein (albumin), blood or pus in the urine, sexually transmitted disease or
venereal disease? o Yes o No
E. cancer, tumor, polyp, or disorder of the skin or breast? o Yes o No
F. asthma, pneumonia, emphysema, or any other respiratory or lung disorder? o
Yes o No
G.seizure, convulsion, fainting, loss of consciousness, tremor, paralysis, or
other disorder of the nervous system? o Yes o No
H.anxiety, depression, stress, or any other psychological or emotional condition
or disorder? o Yes o No
I. colitis, hepatitis, ulcers, or other disorders of the stomach, liver or
digestive system? o Yes o No
J. arthritis, gout, back or joint pain, bone fracture, or muscle disorder?
o Yes o No
K. anemia, bleeding, or blood disorder? o Yes o No
6. Have you, the Proposed Insured:
A.regularly used amphetamines, marijuana, cocaine, hallucinogens, heroin or
other drugs except as prescribed by a physician? o Yes o No
B.been treated or counseled for alcoholism or drug abuse? o Yes o No
C.been advised to reduce consumption of alcohol? o Yes o No
7. Do you, the Proposed Insured, have any health symptoms for which a physician
has not been consulted or treatment received? For example, persistent fever,
unexplained weight loss, loss of appetite, pain or swelling? o Yes o No
UND 14/XXX
DETAILS
QUESTION DATE DURATION DIAGNOSIS NAME AND ADDRESSES OF ATTENDING
NUMBER PHYSICIANS AND MEDICAL FACILITIES
8. Other than previously stated, have you, the Proposed Insured, within the past
five years:
<PAGE>
A. had a checkup, consultation, illness, surgery or been hospitalized? o Yes o
No
B. had an electrocardiogram, stress or exercise test, x-ray, blood test or other
diagnostic test? o Yes o No
C. been advised to have, or scheduled, any diagnostic test, hospitalization or
surgery which was not completed? o Yes o No
UND 14/XXX
O. PLAN USE/SUITABILITY
This policy is intended to be used primarily for (check one):
o Income Replacement o Supplemental Retirement Income o Estate Plan o Charitable
Gift
o Split Dollar o Bonus Plan o Key Person o Deferred Compensation Plan
o Business Continuity o Other
-------------------------------------------
1. Has it been explained that the values and benefits provided by this policy
are based on the investment experience of a separate account and may increase or
decrease depending upon the investment experience? o Yes o No
2. Has it been acknowledged that the policy, as applied for, is in accord with
the insurance and financial objectives which have been expressed? o Yes o No
P. SIGNATURE SECTION
DECLARATIONS
I/We understand and agree that:
1. The information provided in this Application (Part I and Part II Medical, if
required) is the basis for and becomes part of the insurance issued as a result
of this Application.
2. No registered representative or medical examiner has the authority to make or
modify a Sun Life (U.S.) policy, to decide whether anyone proposed for an
insurance policy is an acceptable risk or to waive any of Sun Life (U.S.)'s
rights or requirements.
3. In accepting a policy, I/we also accept any corrections and amendments made
by Sun Life (U.S.). No change in plan, amount, benefits, age at issue or
classification can be made without my/our written consent; however Sun Life
(U.S.) may change any non-guaranteed elements to the policy at its sole
discretion.
4. Except as provided in a Temporary Life Insurance Agreement having the same
number and date as the Application, no insurance requested in this Application
will be effective (a) until a policy is issued during the lifetime of the
insured and (b) until Sun Life (U.S.) has received the initial premium due on
the policy requested, and (c) the statements made in this Application are still
complete and true as of the date the policy is delivered.
5. Sales illustrations are used to assist in understanding how the policy could
perform over time, under a number of assumptions.
I/we acknowledge that rates of return assumed in sales illustrations are
hypothetical only and are not estimates or guarantees. 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 also understand that any sales illustration used
is not a contract and will not become part of any policy issued by Sun Life
(U.S.).
6. In connection herewith, it is expressly acknowledged that the policy, as
applied for, is suitable for the insurance needs and financial objectives of the
undersigned.
I/we declare that the statements and answers in this Application are complete
and true to the best of my/our knowledge and believe
<PAGE>
that they are correctly recorded. I/we 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
and subjects that person to criminal and civil penalties.
I/we also hereby understand and agree that 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 THAT COMPANY'S VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT.
- -THE DURATION OF COVERAGE MAY ALSO INCREASE OR DECREASE, DUE TO THE INVESTMENT
EXPERIENCE OF
THESE VARIABLE SUB-ACCOUNTS.
- -THE ACCOUNT VALUE AND CASH SURRENDER VALUE MAY INCREASE OR DECREASE TO REFLECT
THE INVESTMENT
EXPERIENCE OF THESE VARIABLE SUB-ACCOUNTS.
- -WITH RESPECT TO THE VARIABLE 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 Sun Life (U.S.) for a
Futurity Flexible Premium Variable Universal Life product and also from each of
the underlying investment companies for the various Sub-Accounts.
AUTHORIZATION:
I, the Proposed Insured authorize any physician, hospital or other medically
related facility, insurance company, the Medical Information Bureau or other
organization or person that has any records or knowledge of me or my health to
give such information to Sun Life Assurance Company of Canada (U.S.) or its
reinsurers. The information collected may be disclosed to other insurance
companies to which I have applied or may apply, reinsurance companies, the
Medical Information Bureau, Inc., or other persons or organizations performing
business, professional or insurance functions for Sun Life Assurance Company of
Canada (U.S.), or as otherwise legally allowed. I acknowledge receipt of copies
of the pre-notification relating to investigative consumer reports and the MIB,
Inc. (Medical Information Bureau). This authorization is valid for thirty (30)
months from its date. A photocopy of this authorization shall be as valid as the
original.
Signed at on this day of
-------------------- -------------
- ---------------------
city/state month year
X
------------------------------------------------
X
------------------------------------------------
Signature of Proposed Insured (not required if under age 15) Proposed Insured's
Daytime Telephone Number
X
------------------------------------------------
X
------------------------------------------------
Signature of Owner (if other than Proposed Insured) Owner's Daytime Telephone
Number
X
------------------------------------------------
Signature of Co-Owner
X
------------------------------------------------
X
------------------------------------------------
<PAGE>
Signature of witness/registered representative Registered Representative State
Insurance License Number
UND 14/XXX
Q. REQUEST FOR TAXPAYER IDENTIFICATION
The INTERNAL REVENUE SERVICE does not require your consent to any provision of
this document, other than the certification required to avoid backup
withholding.
ITEM 1 OWNER'S TAXPAYER IDENTIFICATION (TIN)
Enter your TIN in the appropriate box. For individuals, this is your social
security number (SSN). For sole proprietors, this is the owner's SSN. For other
entities, it is your employer identification number (EIN).
Social Security Number - -
----------- ------------ -----------
OR
Employer Identification Number -
------- ----------------------
ITEM 2 FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
- -------------------------------------------------------
Requestor's Name (Optional)
-----------------------------------------------------
- ----------------
Address
-------------------------------------------------------------------------
- ----------------
City State
---------------------------------------------------
Zip
- ------------------------ ------------
CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
1. The number shown on this form is my correct taxpayer identification number
(or, I am waiting for a number to be issued to me), 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 Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out Item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax returns. For real estate
transactions, Item 2 does not apply. For mortgage interest paid, the acquisition
or abandonment of secured property, contributions to an individual retirement
arrangement (IRA), and generally payments other than interest and dividends, you
are not required to sign the Certification, but you must provide your correct
TIN. If you are an individual, you should use the name shown on your social
security card unless you have changed your name, in which case you should enter
the full name on the card plus your new last name. If you are a sole proprietor,
you must enter your individual name as shown on your social security card. You
may also enter your business name as it was used when you applied for your EIN.
- ----------------------------------------------------------
- --------------------------------------------
Owner/Taxpayer Signature Date
UND 14/XXX
Information which you provide in your application will be treated as
confidential. Sun Life (U.S.) or its reinsurers may, however, make
<PAGE>
a brief report on the information received in some applications, including
yours, to the MIB, Inc. (Medical Information Bureau), 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, Inc., will supply such company with whatever
information it may have in its files, which may include information provided by
Sun Life (U.S.). Upon receipt of a request from you, the MIB, Inc. 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, Inc. and seek
a correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address of the MIB, Inc. information office is P.O.
Box 105, Essex Station, Boston, Massachusetts 02112.
Telephone number: 617-426-3660. Sun Life (U.S.) 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 written authorization to release this information to
the particular company.
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
interviews 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 Sun Life (U.S.).
R. FOR REGISTERED REPRESENTATIVE USE ONLY
1. If the Application was taken on a non-medical basis, were answers from the
Proposed Insured obtained personally and in your presence? o Yes o No
2. Does the Proposed Insured appear to be in good health? o Yes o No
3. Are you aware of anything about the Proposed Insured's lifestyle, habits or
driving record that would have an adverse affect on insurability? o Yes o No
If yes, provide details.
-----------------------------------------------------
4. Previous address if moved within the last two years:
- --------------------------------------------------------------------------------
- --------------------
- --------------------------------------------------------------------------------
- --------------------
5. 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? If "yes", provide details and necessary forms. o Yes o No
- --------------------------------------------------------------------------------
- --------------------
6. Based on your reasonable inquiry about the Owner's financial situation,
insurance objectives and needs, do you believe that the policy as applied for is
suitable for the insurance needs and anticipated financial objectives of the
Owner? o Yes o No
7. Proposed Insured's Marital Status: o Single o Married o Divorced o Separated
o Other
8. Proposed Insured's Annual Household Income:
o $50,000 or less o $75,001-$100,000 o $150,001-$200,000
<PAGE>
o $50,001-$75,000 o $100,001-$150,000 o $200,001 or more
9. Source of prospect:
o Existing Client o Referral o Cold Call o Orphan o Orphan Referral o Direct
mail o Client's request
10. Registered Representatives who will share commission:
REGISTERED REPRESENTATIVE/STATE INSURANCE LICENSE NO./SHARE %/SERVICING REP?
LICENSE NUMBER (SELECT ONE)
- --------------------------------------------------------------------------------
o Yes o No
- ---------------------
- --------------------------------------------------------------------------------
o Yes o No
- ---------------------
11. Broker/Dealer Address
- --------------------------------------------------------------------------------
City State
------------------------------------------------------
Zip
- ---------------------------- ---------------------------
Phone Fax
-----------------------------------------------------
Broker/Dealer Account
-------------------------------------
CERTIFICATION:
I, certify:
----------------------------------------------------------
Print Registered Representative's Name
1. (a) that the questions contained in this Application were asked of the
Proposed Insured and Owner 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 Proposed Insured the Medical
Information Bureau, Inc. (MIB, Inc.) and Consumer Report Notices; and (d) that
the provisions of the Temporary Life Insurance Agreement, including limitations
and exclusions, have been explained to the Owner.
2. that I have reviewed with the Owner all the policy features and have given a
current prospectus for the Futurity Variable Universal Life product and also
from each of the underlying investment companies for the various Sub-Accounts.
3. that evidence as to the identities of the Proposed Insured and the Owner and
source of funds has been obtained and recorded under procedures maintained by
the institution from which payments will be made.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date/State Insurance License No./Signature of Registered Representative
UND 14/XXX
<PAGE>
ROUTING/TRANSIT NUMBER
ACCOUNT NUMBER
FUTURITY VARIABLE UNIVERSAL LIFE
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
1 Sun Life Executive Park
Wellesley Hills, MA 02481 1-800-700-6554
Sun Life (U.S.) Client Name Sun Life (U.S.) Client Number
----------------------
- ------------------------------
Account Name Name of Bank
-------------------------------------
- ------------------------------
Address
- --------------------------------------------------------------------------------
- ------------------------------
City State
---------------------------------------------
Zip
- ------------------------------ -----------------
Bank Telephone Number
----------------------------
ATTACH A VOIDED CHECK TO THIS FORM. PLEASE NOTE THAT THIS FORM CAN ONLY BE USED
FOR THE APPLICATION TO WHICH IT IS ATTACHED.
I/we authorize (a) Sun Life (U.S.) to initiate debit entries, electronically, by
paper means or by any other commercially accepted method, to my (our) checking
account designated above, and (b) my (our) bank designated above (BANK) to debit
my (our) account for such amount. This authorization is to remain in effect
until Sun Life (U.S.) and the BANK have each received written notification from
me (or either of us) of its termination in such time and manner as to afford Sun
Life (U.S.) and the BANK a reasonable opportunity to act on it. I/we agree that
Sun Life (U.S.) shall be fully protected in initiating such a debit entry, and
that the BANK shall be fully protected from any liability in the event such a
debit entry is dishonored for any reason. Sun Life (U.S.) is instructed to
forward this authorization to the BANK.
- --------------------------------------------------
- --------------------------------------------------
Signature Date
- --------------------------------------------------
- --------------------------------------------------
Joint Signature Date
PRE-AUTHORIZED CHECKING PLAN FORM
<PAGE>
FUTURITY VARIABLE UNIVERSAL LIFE
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
1 Sun Life Executive Park
Wellesley Hills, MA 02481 1-800-700-6554
INVESTMENT DESIGNATION AND OPTIONAL PROGRAM SELECTION
Please indicate how you would like your premium payments allocated and use whole
percentages with a 5% minimum in any Sub-Account and/or Fixed Account Option.
Your allocation should total 100%. This allocation will be used for future
premium payments, unless otherwise specified. Make check payable to: SUN LIFE
ASSURANCE COMPANY OF CANADA (U.S.).
SUB-ACCOUNTS
AIM Variable Insurance Funds, Inc.
% AIM V.I. Capital Appreciation Fund
- ----
% AIM V.I. Growth Fund
- ----
% AIM V.I. Growth and Income Fund
- ----
% AIM V.I. International Equity Fund
- ----
The Alger American Fund
% Alger American Growth Portfolio
- ----
% Alger American Income and Growth Portfolio
- ----
% Alger American Small Capitalization Portfolio
- ----
Goldman Sachs Variable Insurance Trust
% Goldman Sachs V.I.T. CORE Large Cap Growth Fund
- ----
% Goldman Sachs V.I.T. CORE Small Cap Equity Fund
- ----
% Goldman Sachs V.I.T. CORE U.S. Equity Fund
- ----
% Goldman Sachs V.I.T. Growth and Income Fund
- ----
% Goldman Sachs V.I.T. International Equity Fund
- ----
MFS/Sun Life Series Trust
% MFS/Sun Life Capital Appreciation Series
- ----
% MFS/Sun Life Emerging Growth Series
- ----
% MFS/Sun Life Government Securities Series
- ----
% MFS/Sun Life High Yield Series
- ----
% MFS/Sun Life Utilities Series
- ----
OCC Accumulation Trust
% OCC Accumulation Trust Equity Portfolio
- ----
% OCC Accumulation Trust Mid Cap Portfolio
- ----
% OCC Accumulation Trust Small Cap Portfolio
- ----
% OCC Accumulation Trust Managed Portfolio
- ----
Sun Capital Advisers, Inc.
% Sun Capital Money Market Fund
- ----
% Sun Capital Investment Grade Bond Fund
- ----
% Sun Capital Real Estate Fund
- ----
SUN LIFE OF CANADA (U.S.) FIXED ACCOUNT GUARANTEE OPTION
% One-Year Fixed
- ----
INVESTMENT DESIGNATION
OPTIONAL PROGRAMS ON REVERSE SIDE
TELEPHONE TRANSFER PRIVILEGE
To authorize the Company to make transfers among the various Sub-Accounts and/or
to effect changes in your Premium Payment Allocation based upon telephone
instructions, initial the box below. By this you acknowledge that you understand
and agree (i) neither the Company nor any person acting on its behalf shall be
subject to any claim, loss, liability, cost, or expense if acting in good faith
upon a telephone instruction reliant on this authorization; (ii) transfer will
be made in accordance with procedures established in advance by the Company
(details will be sent with contract); and (iii) this authorization shall
continue in force until and unless the earlier of (a)
<PAGE>
written revocation of it is received by the Company or (b) the Company
discontinues the privilege.
INITIALS
UND 14/XXX
In the future, we may deliver prospectus updates and annual reports to
consenting Policyowners electronically by:
o (1) mailing a diskette or CD-ROM containing the document; o (2) e-mailing the
document; or
o (3) e-mailing a notice identifying an Internet site where the document can be
viewed.
Whichever option you choose, we will supply the documents in a format compatible
with: o Microsoft Windows o Macintosh
PLEASE INDICATE YOUR CONSENT BY CHECKING THE APPROPRIATE BOXES.
You may incur online charges to receive a document under option 2 or 3. If you
would like to receive these documents in electronic format when available,
please check the box and fill in your e-mail address here
(______________________________). This consent will be in effect until you
revoke it in writing to us. You may revoke it at any time. If you consent to
electronic delivery, at any time you also may request that we send you a paper
copy.
Policy #: ___________
-----------
D. DOLLAR COST AVERAGING PROGRAM ("DCA")
A $5000 minimum Sun Capital Money Market Fund balance is required to begin a
Dollar Cost Averaging Program.
1. Select frequency: o Monthly Day of Month: _________________
-----------------
(Choose from 1 to 28)
o Quarterly
NOTE: If you do not make a frequency election your Dollar Cost Averaging Program
will default to monthly.
2. Indicate the DOLLAR AMOUNT each Sub-Account is to receive. The minimum
transfer amount is $100 per Sub-Account. Transfers from the Sun Capital Money
Market Fund will continue until the Owner elects to terminate the program or
until the account value in the designated Sub-Account is depleted.
OPTIONAL PROGRAM SELECTION
$
AIM V.I. Capital Appreciation Fund
- --------
AIM V.I. Growth Fund
- --------
AIM V.I. Growth and Income Fund
- --------
AIM V.I. International Equity Fund
- --------
Alger American Growth Portfolio
- --------
Alger American Income and Growth Portfolio
- --------
Alger American Small Capitalization Portfolio
- --------
Goldman Sachs V.I.T. CORE Large Cap Growth Fund
- --------
Goldman Sachs V.I.T. CORE Small Cap Equity Fund
- --------
Goldman Sachs V.I.T. CORE U.S. Equity Fund
- --------
Goldman Sachs V.I.T. Growth and Income Fund
- --------
Goldman Sachs V.I.T. International Equity Fund
- --------
$
MFS/Sun Life Capital Appreciation Series
- --------
MFS/Sun Life Emerging Growth Series
- --------
MFS/Sun Life Government Securities Series
- --------
MFS/Sun Life High Yield Series
- --------
MFS/Sun Life Utilities Series
- --------
OCC Accumulation Trust Equity Portfolio
- --------
OCC Accumulation Trust Mid Cap Portfolio
- --------
OCC Accumulation Trust Small Cap Portfolio
- --------
OCC Accumulation Trust Managed Portfolio
- --------
Sun Capital Investment Grade Bond Fund
- --------
Sun Capital Real Estate Fund
- --------
<PAGE>
If participating in the Asset Allocation Program, the initial and any future
premium payments will be allocated entirely to the model selected.
1. Select ONE of the following programs: o Conservative Asset Allocation Model
o Moderate Asset Allocation Model
o Aggressive Asset Allocation Model
NOTE: DO NOT complete Section A, PREMIUM PAYMENT ALLOCATION.
If participating in the Portfolio Rebalancing Program, exchanges will be made
among the Sub-Accounts to ensure they reflect the initial allocation chosen in
Section A of the Investment Designation Form, PREMIUM PAYMENT ALLOCATION. These
allocations will be used for future payments unless otherwise specified. Premium
payments allocated to the Fixed Account Guarantee Option will not be rebalanced.
1. Select the Sub-Accounts and percentages for rebalancing in Section A, PREMIUM
PAYMENT ALLOCATION, of the Investment Designation Form. Percentages must be
whole and total 100%.
2. Select frequency: o Quarterly o Semi-annually o Annually
NOTE: If you do not make a frequency election, your Portfolio Rebalancing
Program will default to quarterly.
I understand this authorization for participation in the Optional Program(s) for
the policy applied for will continue until my written, signed
revocation is received by Sun Life Assurance Company of Canada (U.S.), One Sun
Life Executive Park, Attn: ,
---------------------
Wellesley Hills, MA 02481.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Owner Signature Date
UND 14/XXX SLPC 4943
<PAGE>
FUTURITY VARIABLE UNIVERSAL LIFE
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
1 Sun Life Executive Park
Wellesley Hills, MA 02481 1-800-700-6554
Sun Life (U.S.) will provide temporary life insurance coverage on the person
proposed for insurance, who has signed the Temporary Life insurance Application,
made an advance payment and completed Part 1 of the application for the policy,
subject to the following:
PERSON COVERED--Coverage will be provided on the Proposed Insured.
START OF COVERAGE--Coverage begins the date you sign the Temporary Life
Insurance Application.
LIMITATIONS OF COVERAGE--No coverage will be provided if: (a) any question
material to our assessment of the risk on the Temporary Life Insurance
Application is not answered completely and truthfully; (b) any question on the
Temporary Life Insurance Application is answered "Yes"; or (c) Proposed Insured,
whether sane or insane, commits suicide.
AMOUNT AND LIMITATIONS ON AMOUNT--Amount of coverage will be the amount you
request in Part 1 of the application associated with this Temporary Life
Insurance Application subject to limitations. Coverage on the Proposed Insured
under this and all other Sun Life (U.S.) temporary life insurance agreements
will be limited to the total coverage provided by such agreements or to
$2,000,000, including Accidental Death Benefit, whichever is less. If more than
one application is pending on the Proposed Insured and the total amount of
insurance applied for exceeds $2,000,000, then the coverage under this Temporary
Life Insurance Agreement will be reduced to that proportion of $2,000,000 which
the amount applied for under Part 1 of the application associated with this
Temporary Life Insurance Application bears to the total amount applied for under
all such applications for temporary life insurance coverage.
TERMINATION OF COVERAGE--Coverage will terminate: (a) on written notice from Sun
Life (U.S.); (b) on the date a policy is issued and Sun Life (U.S.) has received
the balance of any premiums owed; or (c) on the refund of any advance payment
made with the applications associated with this Temporary Life Insurance
Application; or (d) on the date of your request; or (e) on the ninetieth
(90TH) day following the date of the Temporary Life Insurance Application.
PAYMENT OF BENEFITS--If the Proposed Insured dies while covered by this
Agreement, the benefit will be paid to the Beneficiary named in the Application
for the policy.
AMOUNT PAID--The amount paid, as listed below, will be held by the Company while
this Temporary Life Insurance coverage is provided; but this amount is not
allocated to any Sub-Account and/or Fixed Account until such date as a policy is
issued and the Company receives the balance of any premiums owed. Prior to such
date, the Company may deduct Cost of Insurance charges for the period
of this Temporary Life Insurance coverage.
Sun Life (U.S.) acknowledges receipt of $ _____________________________ paid in
connection with application for life insurance on the life of
dated this day of
- ------------------------------------------- -----------
- ------------------.
- -------------------------------------------
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Name of Owner Signature of Owner
<PAGE>
- -------------------------------------------
- -------------------------------------------
Name of Registered Representative Signature of Registered Representative
PREMIUM CHECKS MUST BE MADE PAYABLE TO SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.).
TEMPORARY LIFE INSURANCE APPLICATION
1. Within the last three years, have you, the Proposed Insured, consulted a
physician or received treatment for cancer, stroke, pneumonia, heart attack or
any disease of the heart? o Yes o No
2. Have you, the Proposed Insured, within the last 60 days had or been advised
to have any diagnostic test, treatment or surgery not yet performed? o Yes o No
3. Do you, the Proposed Insured, have health symptoms or complaints for which a
physician has not yet been consulted or treatment received? For example,
persistent fever, unexplained weight loss, loss of appetite, pain or swelling,
etc.? o Yes o No
IF ANY OF THE PREVIOUS QUESTIONS HAS A "YES" ANSWER, NO PAYMENT WILL BE
ACCEPTED. IN ADDITION, DO NOT DETACH RECEIPT.
I/we have read and understand the conditions of the Temporary Life Insurance
Agreement and agree that the above statements are complete and true to the best
of my/our knowledge and believe that they are correctly recorded.
- -------------------------------------------
- -------------------------------------------
Signature of Proposed Insured Date
- -------------------------------------------
- -------------------------------------------
Signature of Owner Date
SUN LIFE (U.S.) COPY SLPC 4943
<PAGE>
FUTURITY VARIABLE UNIVERSAL LIFE
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
1 Sun Life Executive Park
Wellesley Hills, MA 02481 1-800-700-6554
CLIENT COPY
Sun Life (U.S.) will provide temporary life insurance coverage on the person
proposed for insurance, who has signed the Temporary Life insurance Application,
made an advance payment and completed Part 1 of the application for the policy,
subject to the following:
PERSON COVERED--Coverage will be provided on the Proposed Insured.
START OF COVERAGE--Coverage begins the date you sign the Temporary Life
Insurance Application.
LIMITATIONS OF COVERAGE--No coverage will be provided if: (a) any question
material to our assessment of the risk on the Temporary Life Insurance
Application is not answered completely and truthfully; (b) any question on the
Temporary Life Insurance Application is answered "Yes"; or (c) Proposed Insured,
whether sane or insane, commits suicide.
AMOUNT AND LIMITATIONS ON AMOUNT--Amount of coverage will be the amount you
request in Part 1 of the application associated with this Temporary Life
Insurance Application subject to limitations. Coverage on the Proposed Insured
under this and all other Sun Life (U.S.) temporary life insurance agreements
will be limited to the total coverage provided by such agreements or to
$2,000,000, including Accidental Death Benefit, whichever is less. If more than
one application is pending on the Proposed Insured and the total amount of
insurance applied for exceeds $2,000,000, then the coverage under this Temporary
Life Insurance Agreement will be reduced to that proportion of $2,000,000 which
the amount applied for under Part 1 of the application associated with this
Temporary Life Insurance Application bears to the total amount applied for under
all such applications for temporary life insurance coverage.
TERMINATION OF COVERAGE--Coverage will terminate: (a) on written notice from Sun
Life (U.S.); (b) on the date a policy is issued and Sun Life (U.S.) has received
the balance of any premiums owed; or (c) on the refund of any advance payment
made with the applications associated with this Temporary Life Insurance
Application; or (d) on the date of your request; or (e) on the ninetieth
(90TH) day following the date of the Temporary Life Insurance Application.
PAYMENT OF BENEFITS--If the Proposed Insured dies while covered by this
Agreement, the benefit will be paid to the Beneficiary named in the Application
for the policy.
AMOUNT PAID--The amount paid, as listed below, will be held by the Company while
this Temporary Life Insurance coverage is provided; but this amount is not
allocated to any Sub-Account and/or Fixed Account until such date as a policy is
issued and the Company receives the balance of any premiums owed. Prior to such
date, the Company may deduct Cost of Insurance charges for the period
of this Temporary Life Insurance coverage.
Sun Life (U.S.) acknowledges receipt of $ _____________________________ paid in
connection with application for life insurance on
the life of dated this day of
------------------------------------- -----------
.
- --------------------
- -------------------------------------------------
- -------------------------------------------------
<PAGE>
Name of Owner Signature of Owner
- -------------------------------------------------
- -------------------------------------------------
Name of Registered Representative Signature of Registered Representative
PREMIUM CHECKS MUST BE MADE PAYABLE TO SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.).
TEMPORARY LIFE INSURANCE APPLICATION
1. Within the last three years, have you, the Proposed Insured, consulted a
physician or received treatment for cancer, stroke, pneumonia, heart attack or
any disease of the heart? o Yes o No
2. Have you, the Proposed Insured, within the last 60 days had or been advised
to have any diagnostic test, treatment or surgery not yet performed? o Yes o No
3. Do you, the Proposed Insured, have health symptoms or complaints for which a
physician has not yet been consulted or treatment received? For example,
persistent fever, unexplained weight loss, loss of appetite, pain or swelling,
etc.? o Yes o No
IF ANY OF THE PREVIOUS QUESTIONS HAS A "YES" ANSWER, NO PAYMENT WILL BE
ACCEPTED. IN ADDITION, DO NOT DETACH RECEIPT.
I/we have read and understand the conditions of the Temporary Life Insurance
Agreement and agree that the above statements are complete and true to the best
of my/our knowledge and believe that they are correctly recorded.
- -------------------------------------------------
- -------------------------------------------------
Signature of Proposed Insured Date
- -------------------------------------------------
- -------------------------------------------------
Signature of Owner Date
SLPC 4943
<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.) (the "Company"), in
connection with the issuance of a Flexible Premium Variable Universal 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 basis and may require medical examinations and further
information before the proposed application is approved. 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 death benefit option, supplemental benefits and
allocation instructions.
The Specified Face Amount must not be below the Minimum Specified Face Amount,
which is $100,000.
The Policy must satisfy the Guideline Premium compliance test in order to
qualify as life insurance as defined by section 7702 of the Internal Revenue
Code. Under the Guideline Premium compliance test the premiums paid may not
exceed the guideline premiums as defined by section 7702 of the Internal Revenue
Code. In addition, the Policy's death benefit may not be less than the Account
Value multiplied by the applicable Death Benefit Percentage defined by section
7702 of the Internal Revenue Code.
The Policy provides the following two death benefit options:
<PAGE>
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.
Prior to the approval of the application, any advance payments received are
not premiums for the policy and will be held in the Company's General Account
and will not accrue interest. The Company may offer a Temporary Insurance
Agreement to the owner on the life of the proposed Insured subject to our
conditions and limitations. The Temporary Insurance Agreement provides
coverage for up to 90 days. However, this coverage will not extend beyond the
effective date of the Policy if earlier than the end of the 90 day period.
Coverage will not exceed the lesser of the specified face amount being
applied for or $2,000,000. If the proposed Insured dies during the period
when the Temporary Insurance Agreement is in effect, the full amount of the
advance payment will be retained by the Company and the coverage amount under
the Temporary Insurance Agreement will be paid to the beneficiary. If the
Temporary Insurance Agreement terminates prior to the issuance of the Policy
the total amount of the advance payment will be refunded. Upon approval of
the application, the Policy on the life of the Insured will be issued. The
initial premium is due and payable as of the Issue Date. If a Temporary
Insurance Agreement is in effect when the Policy is issued, any such advance
payment will be credited toward the initial premium for the Policy that has
been issued. At that point, appropriate adjustments for items such as cost
of insurance and other monthly charges will be made. The effective date of
coverage for the Policy will be the date the initial premium is received at
our Principal Office. If an application is not approved, any advance payment
received for a Temporary Insurance Agreement will be returned promptly.
During the Right to Return period set forth in the Policy, the Company will
allocate the net premiums received to the sub-account of the Sun Life of
Canada (U.S.) Variable Account I (the "Variable Account") that invests in the
Sun Capital Money Market Fund. Upon expiration of this period, the account
value in that sub-account will be transferred, as applicable, to the
sub-accounts of the variable account and to the Fixed Account Value in
accordance with the Owner's allocation instructions.
B. PREMIUM PAYMENTS
The initial premium is an amount specified for each Policy based on the
requested Specified Face Amount, issue age, sex, class of the Insured, and any
supplemental benefits requested. Coverage under the Policy does not exist until
we have received the initial premium at the Company's Principal Office. The
initial premium for the Policy
<PAGE>
will not be the same for all owners of policies.
All premium payments are payable to the Company, at our Principal Office. The
Owner is not required to make premium payments according to a fixed schedule,
but may select a planned periodic premium amount and corresponding billing
period, subject to our Premium limits. The billing period must be annual,
semi-annual, quarterly or by pre-authorized check on a monthly basis. We will
send a billing notice for the annual, semi-annual and quarterly 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 premium payment
or make unscheduled payments. If premium payments are being made by
pre-authorized check, skipping payments may result in a billing period change to
semi-annual. The Owner may change the planned premium amount or billing period,
subject to our approval. The payment of a planned periodic premium may not be
sufficient to keep the Policy in force, and the Owner may need to change the
planned periodic premium payment amount and/or the corresponding billing period
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 on each Policy. No premium payment may be less than $50
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 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.
The Company will not accept premium payments which would cause the Policy to
fail to qualify as life insurance as defined by section 7702 of the Internal
Revenue Code, or any successor provision. The maximum premium limit for each
policy year is the largest premium that can be paid such that the sum of all
premiums paid will not exceed the guideline premium limitations of section 7702
of the Internal Revenue Code, or any successor provision. If a premium is made
in excess of these limits, we will accept only that portion of the premium
within those limits, and will refund the remainder. The portion accepted will
be applied in accordance with the allocation percentages.
A Policy will remain in force as long as the Cash Surrender Value is
sufficient to cover the Policy deductions. However, during the first five
policy years the Policy will remain in force if the sum of premiums paid less
any partial surrender less the policy debt is equal or greater than the
cumulative minimum monthly premiums applicable to the Policy. Thus, the
amount of a premium, if any, that must be paid to keep the Policy in force
depends upon the Cash Surrender Value of the Policy and the Minimum Monthly
Premium applicable to the Policy each month. The Account Value and, therefore,
the Cash Surrender Value depend on such factors as the premiums paid, the
investment experience of the sub-accounts, the interest rate credited to the
Fixed Account Value,
<PAGE>
the monthly cost of insurance, the monthly expense charge and the mortality and
expense risk charge. The rate utilized in computing the cost of insurance will
not be the same for each Insured. The reason for this 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 issue age, attained
age, sex (except under Unisex policies), and risk 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 costs, persistency,
interest rates, expenses and taxes. The costs of insurance rates are guaranteed
not to exceed rates based on the 1980 CSO Mortality Tables. The Policies will
be offered and sold pursuant to established standards in accordance with state
insurance laws.
The interest rate credited to the Fixed Account Value is guaranteed to be 3.00%
annual effective rate. Interest in excess of the guaranteed rate may be applied
in the calculation of the Fixed Account Value at such increased rates and in
such manner as we may determine, based on our expectations of future interest,
mortality costs, persistency, expenses and taxes.
C. REINSTATEMENT
Before the Insured's death, we will reinstate your Policy prior to its Maturity
date, provided that the Policy has not been surrendered and you --
*make a request for reinstatement within five years from the date of
termination;
*submit satisfactory evidence of insurability to us; and
*pay an amount sufficient to put your Policy in force.
To put your Policy in Force, you must pay an amount of at least --
*the Unpaid Policy Charges at the end of the Grace Period; plus
*any excess of the Policy Debt over the Cash Value at the end of the Grace
Period; plus
*three times the Monthly Cost of Insurance charges applicable at the date
of reinstatement; plus
*three times the Monthly Expense Charge.
During the first five Policy Years, an amount is sufficient to put your
Policy in force if it meets the minimum premium test.
<PAGE>
A reinstated Policy's Specified Face Amount may not exceed the Specified Face
Amount at the time of termination. Your Account Value on the reinstatement date
will reflect:
*the Account Value at the time of termination; PLUS
*net premiums attributable to premiums paid to reinstate the Policy; LESS
*the Monthly Expense Charge; LESS
*the Monthly Cost of Insurance charge applicable on the date of
reinstatement.
The effective date of reinstatement will be the Monthly Anniversary Day that
falls on or next follows the date we approve your request.
Any Policy Debt at the time of termination must be repaid upon the reinstatement
of the Policy or carried over to the reinstated Policy.
If your Policy was subject to surrender charges when it lapsed, the reinstated
Policy will be subject to surrender charges as if it had not terminated.
The incontestability provision of the Policy will apply to the Policy after
reinstatement as regards statements made in the application for reinstatement.
The suicide provision of the Policy will apply to the policy after
reinstatement. In those provisions of a reinstated Policy, "Issue Date" means
the effective date of reinstatement.
D. UNPROCESSIBLE REQUESTS
If the Company receives a request from an Owner which is incomplete or
otherwise unprocessible, the Company will, if it is a premium payment, allocate
it in accordance with the Owner's most recent allocation instructions and
otherwise communicate with the Owner by mail and, perhaps, take other steps to
clarify the request. Except as noted above, the Company reserves the right not
to take any action until the matter is resolved.
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.
<PAGE>
A. SURRENDERS AND PARTIAL SURRENDERS
The Owner may surrender the Policy for the Cash Surrender Value at any time
by sending a written request, in a form satisfactory to us, to our Principal
Office. The amount available for surrender is the Cash Surrender Value at
the end of the valuation period during which the surrender request is
received at our Principal Office. The Cash Surrender Value is the Account
Value, decreased by any Surrender Charges, and decreased by any Policy Debt.
Coverage under a Policy terminates as of the date of surrender.
After the first policy year, the Owner may make a Partial Surrender of the
Policy once each policy year. The maximum Partial Surrender in policy years
2 -10 is 20% of the Cash Surrender Value at the end of the first Valuation
Date after we receive your request, and after year 10 it is the amount of the
Cash Surrender Value. The minimum Partial Surrender is $200. The Specified
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. The Specified Face Amount remaining in force after a
Partial Surrender must not be lower than the Minimum Specified Face Amount
which is generally $100,000.
The Owner may allocate the Partial Surrender amount to the sub-accounts of the
Variable Account and the Fixed Account Value. If the allocation is not
specified, then the Partial Surrender will be allocated proportionally to the
Sub-accounts and the Fixed Account Value in excess of any Policy Debt.
Amounts payable from the Variable Account upon a Surrender or Partial Surrender
will ordinarily be paid within seven days of receipt at our Principal Office of
a written request in a form satisfactory to us and any additional requirements
deemed necessary by the state and federal governments.
The Company may delay payment (i) for any period during which the New York Stock
Exchange is closed for trading (except for normal holiday (ii) an emergency
exists, as defined by the SEC, or the SEC requires that trading be restricted;
or (iii) the SEC permits a delay for the protection of Owners. Transfers also
may be deferred under the circumstances set forth in clauses (i), (ii) and (iii)
above and in certain other circumstances.
B. CHANGES IN SPECIFIED FACE AMOUNT
After the end of the first policy year the Owner may change the Specified Face
Amount.
<PAGE>
Requests for a change in the Specified Amount must be made in writing, in a form
satisfactory to us, and submitted to our Principal Office. The effective date
of coverage for changes in Specified Face Amount is:
- For any increase in coverage, the next policy anniversary following 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 the request.
The Specified Face Amount may not decrease to less than the Minimum Specified
Face Amount, which is generally $100,000 and is specified in the Policy. A
decrease in the Specified Face Amount will cause a Partial Surrender Charge
to be deducted from the Account Value. A decrease in the 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 increase in reverse chronological order;
and
- Finally, to the initial Specified Face Amount.
An increase in the Specified 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. CHANGES IN DEATH BENEFIT OPTION
After the end of the first policy year the Owner may change the Death Benefit
Option. Requests for a change in Death Benefit Option must be made in writing,
in a form satisfactory to us, and submitted to our Principal Office. Changes in
the Death Benefit Option are subject to our underwriting rules in effect at the
time of the change. 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 A to Option B, the Specified
Face Amount will be reduced by the Account Value. If the Death Benefit Option
change is from Option B to Option A, the Specified Face Amount will be increased
by the Account Value. In both cases, 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 amount of the Death Benefit from that point on.
D. DEATH CLAIMS
<PAGE>
While the Policy remains in force the Company ordinarily will pay a death
benefit to the named beneficiary of record, subject to the rights of any
assignee, in accordance with the designated death benefit option within seven
days after receipt, in its Principal Office, of due proof of death of the
Insured. Payment of death benefits may be postponed or delayed under certain
circumstances. By example, an investigation may be warranted to verify the
validity of the claim, resolve unclear beneficiary arrangements or
investigate a death occurring during the suicide and contestability periods.
Also, the New York Stock Exchange being closed for reasons other than
customary weekend and holiday closings may impact the ability to pay a death
benefit within seven days.
Unless otherwise specified, the proceeds will be divided equally among all
primary Beneficiaries who survive the Insured. If no primary Beneficiary
survives the Insured, then the proceeds will be divided equally among all
contingent Beneficiaries. If no Beneficiary (primary or contingent) is living,
then the proceeds will be paid to the Insured's estate.
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 Specified Face Amount of the Policy. The Policy Proceeds paid to
the beneficiary equal the death benefit plus any amounts payable under any
supplemental benefits added to the Policy decreased by any Policy Debt and
Unpaid Policy Charges.
If the Insured is living on the date of maturity and has not requested an
extension of the maturity date, the Company will then 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 Cash Value, less any
outstanding 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 written request in a form satisfactory to us, at its Principal
Office, although payments may be delayed or postponed under some circumstances.
The Owner may allocate the Policy loan among the Sub-Accounts and the Fixed
Account Value. If the allocation is not specified, then the loan will be
allocated proportionally to the Sub-accounts and the Fixed Account Value in
excess of any Policy Debt. The Policy loan amounts allocated to the
sub-accounts will be transferred to the Fixed Account.
The outstanding loan amounts will earn interest at an annual rate of 3.00%.
Interest on the Policy loan will accrue at the policy loan interest rate of
4% annually in policy years
<PAGE>
one through ten and 3.25% annually 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 loan amount as an additional Policy loan and will bear
interest in the same manner as the prior policy loan.
All funds we receive from the Owner will be credited to the Policy as Premium
unless we have received written notice, in a form satisfactory to us, at our
Principal Office, 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.
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. The Owner may also
transfer amounts to or from the Fixed Account Value.
All requests for transfers must be made to our Principal Office. The Company
will make transfers pursuant to a valid request, made in writing or by
telephone, received at our Principal Office. Telephone requests will be honored
only if the Company has a properly completed and signed 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-accounts at the end of the valuation period during which
the request was made.
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.
<PAGE>
IV. REFUNDS
A. RIGHT TO RETURN POLICY
The Policy has a "Right of 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 sales representative
from whom the Policy was purchased within 10 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 "Right of
Return 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 total of 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
at our Principal Office; less (3) any fees or charges imposed on amounts
allocated to the Variable Account.
However, certain states currently require a full refund of premium. If the
Policy is issued in a state which requires a full refund under its "Right of
Return" provision, the Owner will receive a refund of all premium payments made,
with no adjustment for investment experience.
B. 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.
If the Insured, whether sane or insane, commits suicide within two years after
the effective date of an increase in the specified amount, then our liability as
to that increase will be the cost of insurance for that increase.
C. INCONTESTABILITY CLAUSE
All statements made in the Application or in a supplemental application are
representations and not warranties. The Company will rely on these statements
when approving the issuance, increase in face amount, increase in Death Benefit
over Premium paid, change in Death Benefit Option, or reinstatement of the
Policy. The Company in defense of a claim can use no statement unless the
statement was made
<PAGE>
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 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 increases 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.
D. MISSTATEMENT OF AGE OR SEX
If the age or sex (in the case of a Non-Unisex Policy) 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
recalculated to that which would be purchased by the most recently
charged Monthly Cost of Insurance Rate for the correct age or sex
(for a Non-Unisex Policy).
- Misstatement discovered prior to death: The Account Value will
be recalculated from the Policy Effective Date using the Monthly
Cost of Insurance Rates based on the correct age or sex (for a
Non-Unisex Policy).
<PAGE>
[logo] One Sun Life Executive Park
Wellesly Hills, MA 02181
Tel (781) 237-6030
March 31, 1999
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
Re: Registration Statement of Sun Life of Canada (U.S.)
Variable Account I on Form S-6, File No. 333-68601
Dear Ladies and Gentlemen:
This opinion is furnished in connection with the filing of the
above-referenced registration statement (the "Registration Statement") of Sun
Life of Canada (U.S.) Variable Account I (the "Variable Account"), a separate
account of Sun Life Assurance Company of Canada (U.S.), a Delaware corporation
(the "Company"), with respect to the proposed sale of an indefinite amount of
flexible premium variable universal life insurance policies (the "Policies")
described in the prospectus (the "Prospectus") contained in the Registration
Statement.
I have examined all such corporate records of the Company and such other
documents and laws as I consider necessary as a basis for this opinion. On the
basis of such examination, it is my opinion that:
1. The Company is a corporation in good standing duly organized and
validly existing under the laws of the State of Delaware.
2. The Variable Account has been duly established by the Company under
the laws of the State of Delaware.
3. Assets allocated to the Variable Account will be owned by the Company,
and the Policies provide that the portion of the assets of the Variable Account
equal to the reserves and other Policy liabilities with respect to the Variable
Account will not be chargeable with liabilities arising out of any other
business the Company may conduct.
<PAGE>
4. When issued and sold as described in the Prospectus, the Policies will
be duly authorized and will constitute validly issued and binding obligations of
the Company in accordance with their terms.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Roy P. Creedon
Roy P. Creedon
Assistant Vice President and Counsel
<PAGE>
March 11, 1999
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 I 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 and 55 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/ Georges Rouhart
Georges Rouhart, FSA, MAAA
Product Officer
<PAGE>
[Letterhead]
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6 of Sun Life of Canada (U.S.) Variable Account I (Reg.
No. 333-68601) of our report dated February 5, 1999 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 5, 1999 appearing in
the Annual Report on Form 10-K of Sun Life Assurance Company of Canada (U.S.)
for the year ended December 31, 1998.
We also consent to the reference to us under the heading "Accountants"
appearing in such Prospectus.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
April 12, 1999
