-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QSOsBP3xh8CY2EhhbByuK6VaHvwOOaFuLpjoz8m6HluvxBsh++xrAaRJ1ajofwRE lf3+dxTGQrik/YCk/st57Q== 0001047469-99-016574.txt : 19990428 0001047469-99-016574.hdr.sgml : 19990428 ACCESSION NUMBER: 0001047469-99-016574 CONFORMED SUBMISSION TYPE: S-6/A PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 19990427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUN LIFE OF CANADA U S VARIABLE ACCOUNT I CENTRAL INDEX KEY: 0001074760 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042461439 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6/A SEC ACT: SEC FILE NUMBER: 333-68601 FILM NUMBER: 99602160 BUSINESS ADDRESS: STREET 1: C/O SUN LIFE ASSURANCE CO OF CANADA U S STREET 2: SUN LIFE EXECUTIVE PARK CITY: WELLESLEY HILLS STATE: MA ZIP: 02481 BUSINESS PHONE: 7814461182 S-6/A 1 S-6/A 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. 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 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 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 PART I [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 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"). 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
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 TABLE OF CONTENTS
TOPIC PAGE ------------------------------------------------------------ ---- 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
III FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
TOPIC PAGE ------------------------------------------------------------ ---- 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
IV FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
TOPIC PAGE ------------------------------------------------------------ ---- 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
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 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 - 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 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 - 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)
ISSUE AGE 25 ISSUE AGE 35 ISSUE AGE 45 - ------------- ------------- ------------- $ 4.63 $ 5.77 $ 7.74 ISSUE AGE 55 ISSUE AGE 65 ISSUE AGE 75 - ------------- ------------- ------------- $ 11.25 $ 22.38 $ 31.38
- 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)
TOTAL ANNUAL FUND MANAGEMENT OTHER OPERATING FEES EXPENSES EXPENSES ---------- -------- ------------ 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
4 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
TOTAL ANNUAL FUND MANAGEMENT OTHER OPERATING FEES EXPENSES EXPENSES ---------- -------- ------------ 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 - ------------------------
(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 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 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 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 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 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 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 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 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 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 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 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 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 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 - 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)
ISSUE AGE 25 ISSUE AGE 35 ISSUE AGE 45 - ------------- ------------- ------------- $ 4.63 $ 5.77 $ 7.74 ISSUE AGE 55 ISSUE AGE 65 ISSUE AGE 75 - ------------- ------------- ------------- $ 11.25 $ 22.38 $ 31.38
19 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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.
SURRENDER CHARGE (AS A PERCENTAGE OF THE FIRST YEAR YEAR SURRENDER CHARGE) - ------------------------------------------------------------------------- --------------------- 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
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 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 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 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 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 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 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 - 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 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 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 (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 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 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 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 - 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 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 - 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 - 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 - 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 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 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 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 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 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 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 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 - 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 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 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 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 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 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 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 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 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 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 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 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)
1998 1997 ------------- ------------- 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 ------------- ------------- ------------- -------------
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS. 57 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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)
1998 1997 1996 ---------- ---------- ---------- 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 ---------- ---------- ---------- ---------- ---------- ----------
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS. 58 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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)
1998 1997 1996 ---------- ----------- ----------- 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 ---------- ----------- ----------- ---------- ----------- -----------
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS. 59 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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)
1998 1997 1996 ----------- ----------- ----------- 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 ----------- ----------- ----------- ----------- ----------- -----------
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS. 60 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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 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 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 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 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:
1998 1997 1996 --------- --------- --------- (IN THOUSANDS) 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 -- --
Summarized combined financial information of the Company's subsidiaries as of December 31, 1998, 1997 and 1996 and for the years then ended, follows:
1998 1997 1996 ------------- ------------- ------------- (IN THOUSANDS) 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 ------------- ------------- ------------- ------------- ------------- -------------
On December 24, 1997, the Company transferred all of its shares of MFS to its parent, Life Holdco. 65 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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:
DECEMBER 31, 1998 ---------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS (LOSSES) VALUE ------------ ----------- ----------- ------------ (IN THOUSANDS) 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 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
66 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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):
DECEMBER 31, 1997 ---------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS (LOSSES) VALUE ------------ ----------- ----------- ------------ (IN THOUSANDS) 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 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
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.
DECEMBER 31, 1998 -------------------------- AMORTIZED ESTIMATED COST FAIR VALUE ------------ ------------ (IN THOUSANDS) 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 ------------ ------------ ------------ ------------
67 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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.
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- (IN THOUSANDS) 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 ---------- ---------- ---------- ----------
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 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
YEARS ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 ---------- ---------- --------- (IN THOUSANDS) 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) ---------- ---------- --------- ---------- ---------- ---------
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 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:
YEARS ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 ---------- ---------- ---------- (IN THOUSANDS) 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 ---------- ---------- ---------- ---------- ---------- ----------
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 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:
SWAPS OUTSTANDING AT DECEMBER 31, 1998 --------------------------------- NOTIONAL MARKET VALUE PRINCIPAL AMOUNTS OF POSITIONS ------------------ ------------- (IN THOUSANDS) Conventional interest rate swaps $ 45,000 $ 508 Foreign currency swap 1,178 263
SWAPS OUTSTANDING AT DECEMBER 31, 1997 --------------------------------- NOTIONAL MARKET VALUE PRINCIPAL AMOUNTS OF POSITIONS ------------------ ------------- (IN THOUSANDS) 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
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 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:
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- (IN THOUSANDS) 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 ---------- ---------- ---------- ----------
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 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:
YEARS ENDED DECEMBER 31, ---------------------------------------- 1998 1997 1996 ------------ ------------ ------------ (IN THOUSANDS) 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 ------------ ------------ ------------ ------------ ------------ ------------
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 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:
DECEMBER 31, 1998 ---------------------------- AMOUNT % OF TOTAL ------------- ------------- (IN THOUSANDS) 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 ------------- --- ------------- ---
DECEMBER 31, 1997 ---------------------------- AMOUNT % OF TOTAL ------------- ------------- (IN THOUSANDS) 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 ------------- --- ------------- ---
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 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:
FEDERAL TOTAL TOTAL PRETAX INCOME TOTAL (IN THOUSANDS) REVENUES EXPENDITURES INCOME TAXES ASSETS - ----------------------------------------------------- ------------ ------------- ---------- ---------- ------------- 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 ------------ ------------- ---------- ---------- -------------
- ------------------------ * 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 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 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:
PENSION BENEFITS OTHER BENEFITS 1998 1997 1998 1997 ---------- ---------- ---------- --------- (IN THOUSANDS) 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
77 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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.
1998 1997 1998 1997 ---------- --------- --------- --------- 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 ---------- --------- --------- --------- ---------- --------- --------- ---------
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:
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT INCREASE DECREASE ------------------- ------------------- (IN THOUSANDS) Effect on total of service and interest cost components $ 210 $ (170) Effect on postretirement benefit obligation 2,026 (1,697)
78 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE 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:
DECEMBER 31, 1998 --------------------------------------- CARRYING AMOUNT ESTIMATED FAIR VALUE ----------------- -------------------- (IN THOUSANDS) 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 DECEMBER 31, 1997 --------------------------------------- CARRYING AMOUNT ESTIMATED FAIR VALUE ----------------- -------------------- (IN THOUSANDS) 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)
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 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.
YEARS ENDED DECEMBER 31, 1998 1997 -------------------- -------------------- AVR IMR AVR IMR --------- --------- --------- --------- (IN THOUSANDS) 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 --------- --------- --------- --------- --------- --------- --------- ---------
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 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 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 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 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. 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 APPENDIX B TABLE OF DEATH BENEFIT PERCENTAGES
APPLICABLE APPLICABLE AGE PERCENTAGE AGE PERCENTAGE --- ----------- --- ----------- 20 250% 60 130% 21 250% 61 128% 22 250% 62 126% 23 250% 63 124% 24 250% 64 122% 25 250% 65 120% 26 250% 66 119% 27 250% 67 118% 28 250% 68 117% 29 250% 69 116% 30 250% 70 115% 31 250% 71 113% 32 250% 72 111% 33 250% 73 109% 34 250% 74 107% 35 250% 75 105% 36 250% 76 105% 37 250% 77 105% 38 250% 78 105% 39 250% 79 105% 40 250% 80 105% 41 243% 81 105% 42 236% 82 105% 43 229% 83 105% 44 222% 84 105% 45 215% 85 105% 46 209% 86 105% 47 203% 87 105% 48 197% 88 105% 49 191% 89 105% 50 185% 90 105% 51 178% 91 104% 52 171% 92 103% 53 164% 93 102% 54 157% 94 101% 55 150% 95 100% 56 146% 96 100% 57 142% 97 100% 58 138% 98 100% 59 134% 99 100%
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. 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
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 ------ --------- --------- --------- --------- --------- ------- ------- --------- --------- --------- 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
(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 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
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 ------ --------- --------- --------- --------- --------- ------- ------- --------- --------- --------- 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
(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 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
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 ------ --------- --------- --------- --------- --------- ------- ------- --------- --------- --------- 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
(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 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
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 ------ --------- --------- --------- --------- --------- ------- ------- --------- --------- --------- 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
(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 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 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. 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 (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 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 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. EX-1.A(1)(C) 2 EXHIBIT 1A(1)(C) 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: "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 EX-1.A(3)(A) 3 EXHIBIT 1A(3)(A) 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 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 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 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 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. 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 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. 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. 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. 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 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) EXHIBIT B DISTRIBUTION AGREEMENT EXHIBIT C DISTRIBUTION AGREEMENT EXHIBIT D DISTRIBUTION AGREEMENT EXHIBIT E DISTRIBUTION AGREEMENT 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) EX-1.A(3)(B) 4 EXHIBIT 1A(3)(B) 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
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
- -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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- 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 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- 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: ------------------------------------------------- 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. 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 __________________________________________________ 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
EX-1.A(3)(C) 5 EXHIBIT 1A(3)(C) 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.
First Year Excess Renewal Plan Premium Premium Premium - ---- ------- ------- ------- yrs. 2- 10 Futurity Variable Universal Life Insurance 75% 1.5 1.5
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.
Chargeback Schedule Month Percentage 1-6 100 7-12 50
EX-1.A(5)(A) 6 EXHIBIT 1A(5)(A) SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY 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.
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. TABLE OF CONTENTS
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) 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 RIDERS AND ENDORSEMENTS................................................................................... APPLICATION...............................................................................................
1. POLICY SPECIFICATIONS 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)
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. 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 SUB- ACCOUNTS 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
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. 1. POLICY SPECIFICATIONS (CONTINUED) TABLE OF DEATH BENEFIT PERCENTAGES
APPLICABLE APPLICABLE AGE PERCENTAGE AGE PERCENTAGE 20 250% 60 130% 21 250% 61 128% 22 250% 62 126% 23 250% 63 124% 24 250% 64 122% 25 250% 65 120% 26 250% 66 119% 27 250% 67 118% 28 250% 68 117% 29 250% 69 116% 30 250% 70 115% 31 250% 71 113% 32 250% 72 111% 33 250% 73 109% 34 250% 74 107% 35 250% 75 105% 36 250% 76 105% 37 250% 77 105% 38 250% 78 105% 39 250% 79 105% 40 250% 80 105% 41 243% 81 105% 42 236% 82 105% 43 229% 83 105% 44 222% 84 105% 45 215% 85 105% 46 209% 86 105% 47 203% 87 105% 48 197% 88 105% 49 191% 89 105% 50 185% 90 105% 51 178% 91 104% 52 171% 92 103% 53 164% 93 102% 54 157% 94 101% 55 150% 95 100% 56 146% 96 100% 57 142% 97 100% 58 138% 98 100% 59 134% 99 100%
2. TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1,000 OF NET AMOUNT AT RISK.
Guaranteed Bi Monthly Rates per $1,000 NAR POLICY MONTHLY POLICY MONTHLY Year Rate Year Rate 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
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, Page 6 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 Page 7 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. Page 8 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. Page 9 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. Page 10 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. Page 11 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 Page 12 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. Page 13 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 Page 14 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. Page 15 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. Page 16 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. Page 17 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 Page 18 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. Page 19 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. Page 20 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. Page 21 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. Page 22 RIDERS AND ENDORSEMENTS APPLICATION Page 23 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 EX-1.A(5)(B) 7 EXHIBIT 1A(5)(B) 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. - ------------------------------------------------------------------------------- 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: 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. 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 EX-1.A(5)(C) 8 EXHIBIT 1A(5)(C) 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; 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 EX-1.A(5)(D) 9 EXHIBIT 1A(5)(D) 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 1 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 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 EX-1.A(5)(E) 10 EXHIBIT 1A(5)(E) 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 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 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 EX-1.A(8)(A)(I) 11 EXHIBIT 1A(8)(A)(I) 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. 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 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 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 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. (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 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; (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 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 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 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 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 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 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 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 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 (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. 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. 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 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. (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 (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 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 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 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. (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 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 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] 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 - -------------------------------------------------------------------------------- EX-1.A(8)(A)(II) 12 EXHIBIT 1A(8)(A)(II) 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
- ---------------------------------------------------------------------------------------------------------------------------- FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE POLICIES UTILIZING THE FUNDS ACCOUNTS - ---------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------
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) 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) EX-1.A(8)(A)(III) 13 EXHIBIT 1A(8)(A)(III) 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
- ---------------------------------------------------------------------------------------------------------------------------- FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE POLICIES UTILIZING THE FUNDS ACCOUNTS - ---------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------
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) 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) EX-1.A(8)(B) 14 EXHIBIT 1A(8)(B) 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 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 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 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 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 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, 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 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, 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, 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 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 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 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. 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 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. 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 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. 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 SCHEDULE A The Alger American Fund: Alger American Growth Portfolio Alger American Income and Growth Portfolio Alger American Small Capitalization Portfolio 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 EX-1.A(8)(C) 15 EXHIBIT 1A(8)(C) 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 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 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 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 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 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 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 (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 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 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 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 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 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 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 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 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 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; (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 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 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. 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 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 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. 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 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:
- -------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------- Sun Life of Canada U.S. July 13, 1989 811-5846 Combination Variable Account F Fixed/Variable Annuity - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- [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:
- -------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------
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. 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:
- ---------------------------------------------------------------------------------------- SEC 1933 Act Policy Marketing Name Registration Number Contract Form Number Annuity or Life - ---------------------------------------------------------------------------------------- Futurity 333-37907 FY-MVA-CONT-1 Annuity - ----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- [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:
- ---------------------------------------------------------------------------------------- SEC 1933 Act Policy Marketing Name Registration Number Contract Form Number Annuity of Life - ---------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------
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. 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. 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. EX-1.A(8)(D) 16 EXHIBIT 1A(8)(D) 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 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. 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 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. 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. 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. 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 (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 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 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 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 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. 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 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 - ------------------------------------------------------------------------------- EX-1.(8)(E) 17 EXHIBIT 1A(8)(E) 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, 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: 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 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 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. 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 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. 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 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 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 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 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 " 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 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 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 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. 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 (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 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 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 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 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. (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 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 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 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. 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 ---------------------- 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 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 EX-1.A(8)(F) 18 EXHIBIT 1A(8)(F) 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 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 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 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 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; (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 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 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 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) 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 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 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 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 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 (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. 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: 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 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 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: SCHEDULE A SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) on behalf of its segregated accounts ACCOUNT DATE OF ORGANIZATION SCHEDULE B SUN CAPITAL ADVISERS TRUST Sun Capital Money Market Fund Sun Capital Investment Grade Bond Fund Sun Capital Real Estate Fund EX-1.A(10) 19 EXHIBIT 1A(10) 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 #: ----------- 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 / / / - ------------------------------ -------------------- ------------------- -------- - ------- / / / - ------------------------------ -------------------- ------------------- -------- - ------- / / / - ------------------------------ -------------------- ------------------- -------- - ------- / / / - ------------------------------ -------------------- ------------------- -------- - ------- 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) / / - -------------------- --------------------- ------------------------------------- - --------------- 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: 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 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 ------------------------------------------------ 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 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 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 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 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) 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 - -------- 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 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 - ------------------------------------------- ----------- - ------------------. - ------------------------------------------- - ------------------------------------------- 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 SUN LIFE (U.S.) COPY SLPC 4943 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 ------------------------------------- ----------- . - -------------------- - ------------------------------------------------- - ------------------------------------------------- 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 EX-1.A(11) 20 EXHIBIT 1A(11) 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: 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 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, 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. 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. 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. 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 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 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. 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 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). EX-2 21 EXHIBIT 2 [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. 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 EX-6 22 EXHIBIT 6 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 EX-7 23 EXHIBIT 7 [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 -----END PRIVACY-ENHANCED MESSAGE-----