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As filed with the Securities and Exchange Commission on October 11, 1996
Registration No 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
PACIFIC SELECT EXEC SEPARATE ACCOUNT OF
PACIFIC MUTUAL LIFE INSURANCE COMPANY
(Exact Name of Registrant)
PACIFIC MUTUAL LIFE INSURANCE COMPANY
(Name of Depositor)
700 Newport Center Drive
Newport Beach, California 92660
(Address of Depositor's Principal Executive Offices) (Zip Code)
Diane N. Ledger
Assistant Vice President
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(Name and address of agent for service)
Copies of all communications to:
Jeffrey S. Puretz, Esq.
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, D.C. 20005
Approximate Date of Commencement of Proposed Public Offering: As soon as
practical after the effective date of the Registration Statement.
Title of securities being registered: Interests in the Separate Account under
Pacific Select Estate Maximizer Modified Single Premium Variable Life Insurance
Policies.
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The Registrant is registering an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940 and will file its Rule 24f-2 Notice for the fiscal year ending December
31, 1996, within the time period required by Section 24 of the Investment
Company Act of 1940 and applicable regulations thereunder.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Pacific Select Exec Separate Account of Pacific Mutual Life Insurance Company
CROSS-REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as to the Prospectus in Form S-6)
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
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1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Prospectus front cover
2. Name and address of each depositor Prospectus front cover
3. Name and address of trustee N/A
4. Name and address of each principal underwriter Pacific Mutual Life Insurance
Company, Distribution of the Policy
5. State of organization of trust Pacific Select Exec Separate Account
6. Execution and termination of trust agreement Pacific Select Exec Separate Account
7. Changes of name N/A
8. Fiscal year N/A
9. Litigation N/A
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer securities The Policy
(b) Cumulative or distributive securities The Policy
(c) Conversion, transfer, etc. Transfer of Accumulated Value;
Policy Loans; Surrender; Partial
Withdrawals
(d) Periodic payment plan N/A
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(e) Voting rights Voting of Fund Shares
(f) Notice to security holders Confirmation Statements and Other
Reports to Owners
(g) Consents required Disregard of Voting Instructions;
Substitution of Investments
(h) Other provisions The Policy
11. Type of securities comprising units The Policy
12. Certain information regarding periodic
payment plan certificates N/A
13. (a) Load, fees, expenses, etc. Charges and Deductions
(b) Certain information regarding periodic
payment plan certificates N/A
(c) Certain percentages Charges and Deductions
(d) Certain other profits or benefits The Policy
(e) Certain other profits or benefits The Policy
(f) Ratio of annual charges to income N/A
14. Issuance of trust's securities The Policy
15. Receipt and handling of payments from
purchasers The Policy; Premiums; Additional
Premium Payments
16. Acquisition and disposition of underlying
securities Pacific Select Exec Separate Account;
The Policy
17. Withdrawal or redemption Transfers of Accumulated Value;
Policy Loans; Surrender; Partial
Withdrawals
18. (a) Receipt, custody and disposition
of income The Policy
(b) Reinvestment of distributions N/A
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(c) Reserves or special funds N/A
(d) Schedule of distributions N/A
19. Records, accounts and reports Confirmation Statements and
Other Reports to Owners
20. Certain miscellaneous provisions of trust
agreement
(a) Amendment N/A
(b) Termination N/A
(c) and (d) Trustee, removal and successor N/A
(e) and (f) Depositors, removal and successor N/A
21. Loans to securities holders Policy Loans
22. Limitations on liability N/A
23. Bonding arrangements N/A
24. Other material provisions of trust agreement N/A
III. Organizations, Personnel and Affiliated Persons of Depositor
25. Organization of depositor Pacific Mutual Life Insurance Company
26. Fees received by depositor See Items 13(a) and 13(e)
27. Business of depositor Pacific Mutual Life Insurance
Company
28. Certain information as to officials and
affiliated persons of depositor More About Pacific Mutual
29. Voting securities of depositor N/A
30. Persons controlling depositor N/A
31. Payments by depositor for certain services
rendered to trust N/A
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32. Payments by depositor for certain other services
rendered to trust N/A
33. Remuneration of employees of depositor for
certain services rendered to trust Charges and Deductions
34. Remuneration of other persons for certain
services rendered to trust Charges and Deductions
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities by states N/A
36. Suspension of sales of trust's securities N/A
37. Revocation of authority to distribute N/A
38. (a) Method of distribution Distribution of the Policy
(b) Underwriting agreements Distribution of the Policy
(c) Selling agreements Distribution of the Policy
39. (a) Organization of principal underwriters See Item 25
(b) N.A.S.D. membership of principal
underwriters See Item 25
40. Certain fees received by principal underwriters See Items 13(a) and 13(e)
41. (a) Business of each principal underwriter See Item 27
(b) Branch offices of each principal
underwriter N/A
(c) Salesmen of each principal underwriter N/A
42. Ownership of trust's securities by certain
persons N/A
43. Certain brokerage commissions received by
principal underwriters N/A
44. (a) Method of valuation Determination of Accumulated Value
(b) Schedule as to offering price Charges and Deductions
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(c) Variation in offering price to certain
persons Charges and Deductions
45. Suspension of redemption rights Surrender
46. (a) Redemption valuation See Items 10(c) and 10(d)
(b) Schedule as to redemption price Surrender
47. Maintenance of position in underlying securities The Pacific Select Fund
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of trustee N/A
49. Fees and expenses of trustees N/A
50. Trustee's lien N/A
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's securities Pacific Mutual Life Insurance
Company; The Policy
52. (a) Provisions of trust agreement with respect
to selection or elimination of underlying
securities Substitution of Investments
(b) Transactions involving elimination of
underlying securities Substitution of Investments
(c) Policy regarding substitution or
elimination of underlying securities See Items 13(a) and 52(a)
(d) Fundamental policy not otherwise
covered N/A
53. Tax status of the trust Federal Income Tax Considerations
VII. Financial and Statistical Information
54. Trust's securities during last ten years N/A
55. N/A
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56. Certain information regarding periodic payment
plan certificates Premiums
57. N/A
58. N/A
59. Financial statements (Instruction 1(c) of
"Instructions as to the Prospectus" of Form S-6) Financial Statements
</TABLE>
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[LOGO of PACIFIC SELECT ESTATE MAXIMIZER]
VARIABLE UNIVERSAL LIFE
PROSPECTUS FOR
PACIFIC SELECT ESTATE MAXIMIZER
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY
PACIFIC MUTUAL LIFE INSURANCE COMPANY
DATED
--------------
---------------------
PACIFIC SELECT FUND
DATED
--------------
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PACIFIC SELECT ESTATE MAXIMIZER
MODIFIED SINGLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
[LOGO of PACIFIC SELECT
ESTATE MAXIMIZER] ISSUED BY PACIFIC MUTUAL LIFE INSURANCE
COMPANY
700 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
1-800-800-7681
This prospectus describes Pacific Select Estate Maximizer--a Modified Single
Premium Variable Life Insurance Policy (individually, the "Policy," and
collectively, the "Policies") offered by Pacific Mutual Life Insurance Company
("Pacific Mutual," "we," "us," or "our"). The Policy provides lifetime
insurance protection on the Insured or Joint Insureds (the "Insureds") named
in the Policy so long as the Policy is in force. A Policy may be surrendered
for its Cash Surrender Value less any outstanding Policy Debt during the
lifetime of the Insured(s). The Policy can be purchased for a minimum initial
premium of $10,000; however, if the Insured (Younger Insured if this is a last
survivor Policy) is age 70 or over, the minimum initial premium is $50,000.
The Policy provides limited flexibility to pay additional premiums.
Policies can provide insurance protection on the life of one Insured or, as
a last survivor Policy, on the lives of two Insureds. A last survivor Policy,
for so long as it remains in force, provides a death benefit the proceeds of
which are payable when the last surviving Insured dies while the Policy is in
force.
Premium payments may be allocated at the Policy Owner's discretion to one or
more of the Investment Options currently available. Each of the fourteen
Variable Investment Options ("Variable Account") is a subaccount of our
separate account called the Pacific Select Exec Separate Account (the
"Separate Account"). Any portion of the premium payments allocated to the
Variable Accounts is invested in one or more of the corresponding Portfolios
of the Pacific Select Fund (the "Fund"), which are: the Money Market
Portfolio, the High Yield Bond Portfolio, the Managed Bond Portfolio, the
Government Securities Portfolio, the Growth Portfolio, the Aggressive Equity
Portfolio, the Growth LT Portfolio, the Equity Income Portfolio, the Multi-
Strategy Portfolio, the Equity Portfolio, the Bond and Income Portfolio, the
Equity Index Portfolio, the International Portfolio, and the Emerging Markets
Portfolio.
Accumulated Value allocated to the Variable Accounts will vary based upon
the investment performance of the Variable Accounts. No minimum amount of
Accumulated Value is guaranteed. A fixed option (the "Fixed Account") is also
available to you. The Accumulated Value in the Fixed Account will accrue
interest at an interest rate that is guaranteed by Pacific Mutual.
The death benefit will be the Face Amount of insurance stated in the Policy
or, under certain circumstances, a higher amount. After the death of the
Insured(s), Pacific Mutual will pay the Beneficiary the death benefit minus
any Debt under the Policy.
The Policies usually will be a type of life insurance policy classified as a
modified endowment contract. For information on the tax treatment of modified
endowment contracts, see "Federal Income Tax Considerations," on page 23. A
Policy may be returned according to the terms of its Free-Look Right (see
"Right to Examine a Policy--Free-Look Right," page 19), during which time
premium payments allocated to the Separate Account will be invested in the
Money Market Variable Account.
It may not be advantageous to replace existing insurance with the Policy.
The Contract is titled a "Flexible Premium Variable Life Insurance Policy"
in Texas.
This prospectus generally describes only the portion of the Policy involving
the Separate Account. For a brief summary of the Fixed Account, see "The Fixed
Account," page 29.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE PACIFIC
SELECT FUND. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
DATE:
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TABLE OF CONTENTS
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PAGE
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IMPORTANT TERMS............................................................ 4
SUMMARY OF THE POLICY...................................................... 5
Purpose of the Policy.................................................... 5
Policy Values............................................................ 5
The Death Benefit........................................................ 5
Premium Features......................................................... 5
Allocation Options....................................................... 6
Free-Look Right.......................................................... 6
Surrender and Partial Withdrawal Rights.................................. 6
Policy Loans............................................................. 6
Policy Charges and Deductions............................................ 7
Fund Annual Expenses After Expense Limitation............................ 8
Tax Treatment of Increases in Accumulated Value.......................... 8
Tax Treatment of Death Benefit........................................... 9
The Fixed Account........................................................ 9
Contacting Pacific Mutual................................................ 9
INFORMATION ABOUT PACIFIC MUTUAL, THE SEPARATE ACCOUNT AND THE FUND........ 10
Pacific Mutual Life Insurance Company.................................... 10
Pacific Select Exec Separate Account..................................... 10
The Pacific Select Fund.................................................. 10
The Investment Adviser................................................... 12
THE POLICY................................................................. 12
Application for a Policy................................................. 12
Premiums................................................................. 12
Additional Premium Payments.............................................. 12
Allocation of Premiums................................................... 13
Portfolio Rebalancing.................................................... 13
Dollar Cost Averaging Option............................................. 14
Transfer of Accumulated Value............................................ 14
Death Benefit............................................................ 15
Policy Values............................................................ 16
Determination of Accumulated Value....................................... 16
Policy Loans............................................................. 17
Duration of Contract..................................................... 18
Surrender................................................................ 18
Partial Withdrawals...................................................... 18
Right to Examine a Policy--Free-Look Right............................... 19
Lapse.................................................................... 19
Reinstatement............................................................ 20
Last Survivor Policies................................................... 20
CHARGES AND DEDUCTIONS..................................................... 21
Load from Premiums....................................................... 21
Surrender Charge......................................................... 21
Deductions from Accumulated Value........................................ 21
Other Charges............................................................ 22
Guarantee of Certain Charges............................................. 22
Variations in Charges.................................................... 22
OTHER INFORMATION.......................................................... 23
Federal Income Tax Considerations........................................ 23
Charge for Pacific Mutual Income Taxes................................... 26
</TABLE>
2
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PAGE
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Voting of Fund Shares.................................................... 26
Disregard of Voting Instructions......................................... 27
Confirmation Statements and Other Reports to Owners...................... 27
Substitution of Investments.............................................. 27
Changes to Comply with Law............................................... 28
PERFORMANCE INFORMATION.................................................... 28
THE FIXED ACCOUNT.......................................................... 29
General Description...................................................... 29
Transfers, Surrenders, Withdrawals, and Policy Loans..................... 29
MORE ABOUT THE POLICY...................................................... 30
Ownership................................................................ 30
Beneficiary.............................................................. 30
The Contract............................................................. 30
Instructions to Pacific Mutual........................................... 30
Payments................................................................. 31
Assignment............................................................... 31
Errors on the Application................................................ 31
Incontestability......................................................... 31
Payment in Case of Suicide............................................... 31
Participating............................................................ 31
Policy Illustrations..................................................... 32
Payment Plan............................................................. 32
Optional Insurance Benefits.............................................. 32
Life Insurance Retirement Plans.......................................... 32
Risks of Life Insurance Retirement Plans................................. 33
Distribution of the Policy............................................... 33
MORE ABOUT PACIFIC MUTUAL.................................................. 35
Management............................................................... 35
State Regulation......................................................... 37
Telephone Transfer and Loan Privileges................................... 37
Legal Proceedings........................................................ 37
Legal Matters............................................................ 37
Registration Statement................................................... 37
Independent Accountants.................................................. 38
Financial Statements..................................................... 38
APPENDIX................................................................... 81
ILLUSTRATIONS.............................................................. 82
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THE POLICY IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE
LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN AS CONTAINED IN THIS PROSPECTUS, THE
FUND'S PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION OF THE FUND OR
ANY SUPPLEMENT THERETO.
3
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IMPORTANT TERMS
Accumulated Value--The total value of the amounts in the Investment Options
for the Policy as well as any amount set aside in the Loan Account, including
any accrued earned interest, as of any Valuation Date.
Age--An Insured's age as of his or her last birthday as of the Policy Date,
increased by the number of complete Policy Years elapsed.
Beneficiary--The person or persons you name in the application or by proper
later designation to receive the death benefit proceeds upon the death of the
Insured(s).
Cash Surrender Value--The Accumulated Value, less any applicable surrender
charge.
Death Benefit--The greater of the Face Amount under a Policy or Accumulated
Value multiplied by a specified percentage shown in the Appendix.
Debt--The unpaid loan balance including accrued loan interest.
Face Amount--The minimum death benefit for so long as the Policy remains in
force.
Fixed Account--An account that is part of our General Account to which all or
a portion of premium payments may be allocated for accumulation at a fixed
rate of interest (which may not be less than 3.0%) declared periodically by
us.
Free Withdrawal Amount--The lesser of contract earnings under the Policy or
10% of the initial premium. For purposes of determining this amount, earnings
under the Policy are Accumulated Value less total premiums paid, plus all
prior partial withdrawals deemed to be withdrawals of premium for surrender
charge purposes.
General Account--All of our assets other than those allocated to the Separate
Account or to any of our other segregated separate accounts.
Guideline Single Premium or Guideline Level Premiums--The maximum amount of
premium or premiums that can be paid to qualify a Policy as life insurance for
tax purposes as specified in Section 7702 of the Internal Revenue Code.
Home Office--The Policy Benefits and Services Department at Pacific Mutual's
main office at 700 Newport Center Drive, Newport Beach, California 92660.
Insured or Insured(s)--The person or persons upon whose life the Policy is
issued and whose death is the contingency upon which the death benefit
proceeds are payable.
Investment Option--A Variable Account or the Fixed Account.
Loan Account--An account to which amounts are transferred from the Variable
Accounts and the Fixed Account as collateral for policy loans.
Monthly Payment Date--The day each month on which certain deductions and
charges are assessed against the Accumulated Value. The first Monthly Payment
Date is the Policy Date.
Net Cash Surrender Value--The Cash Surrender Value less Policy Debt.
Policy Owner, Owner, you, or your--The person or persons who own the Policy.
The Policy Owner will be the Insured(s) unless otherwise stated in the
application. If your Policy has been absolutely assigned, the assignee becomes
the Owner. A collateral assignee is not the Owner.
Policy Date--The date used to determine the Monthly Payment Date, Policy
Years, and Policy Monthly, Quarterly, Semi-Annual, and Annual Anniversaries.
It is usually the date the initial premium is received at our Home Office. The
term "Issue Date" is substituted for Policy Date with respect to Policies
issued to residents of the Commonwealth of Massachusetts.
Survivor--In a last survivor Policy, the Insured remaining alive after the
first death of the two Insureds that occurs while the last survivor Policy is
in force.
Valuation Date--Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading and on which our administrative offices are open. The New York Stock
Exchange is closed on weekends and on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, July Fourth, Labor Day,
Thanksgiving, and Christmas. Our administrative offices are normally not open
on the following: the Monday before New Year's Day, July Fourth, or Christmas
Day if any of those holidays falls on a Tuesday; the Tuesday before Christmas
Day if that holiday falls on a Wednesday; the Friday after New Year's Day,
July Fourth or Christmas Day if any of these holidays falls on a Thursday; and
the Friday after Thanksgiving. If any transaction or event called for under a
Policy is scheduled to occur on a day that is not a Valuation Day, such
transaction or event will be deemed to occur at the end of the next following
Valuation Day unless otherwise specified.
Valuation Period--The period that starts at the close of a Valuation Date and
ends at the close of the next succeeding Valuation Date.
Variable Account--A separate account of Pacific Mutual or a subaccount of such
a separate account, which is used only to support the variable death benefits
and policy values of variable life insurance policies, and the assets of which
are segregated from our General Account and our other separate accounts. The
Pacific Select Exec Separate Account serves as the funding vehicle for the
Policies. The Variable Accounts include the Money Market Variable Account,
High-Yield Bond Variable Account, Managed Bond Variable Account, Government
Securities Variable Account, Growth Variable Account, Aggressive Equity
Variable Account, Growth LT Variable Account, Equity Income Variable Account,
Multi-Strategy Variable Account, Equity Variable Account, Bond and Income
Variable Account, Equity Index Variable Account, International Variable
Account, and Emerging Markets Variable Account.
4
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SUMMARY OF THE POLICY
This summary is intended to provide a brief overview of the more significant
aspects of the Policy. Further detail is provided in this prospectus and in the
Policy. Unless the context indicates otherwise, the discussion in this summary
and the remainder of the prospectus relates to the portion of the Policy
involving the Separate Account. The Fixed Account is briefly described under
"The Fixed Account," on page 29 and in the Policy.
PURPOSE OF THE POLICY
The Policy offers you insurance protection on the life of the Insured(s) so
long as your Policy is not surrendered or in default beyond the Grace Period.
Like traditional fixed life insurance, the Policy provides for a death benefit
equal to its Face Amount, accumulation of cash values, and surrender and loan
privileges. Unlike traditional fixed life insurance, the Policy offers a choice
of investment alternatives and an opportunity for the Policy's Accumulated
Value and, under certain circumstances, its death benefit to grow based on
investment results.
POLICY VALUES
You may allocate premium payments among the various Variable Accounts that
comprise the Separate Account and which invest in corresponding Portfolios of
the Pacific Select Fund. Depending on the investment experience of the selected
Variable Accounts, the Accumulated Value may increase or decrease on any day.
The death benefit may or may not increase or decrease depending upon several
factors, although the death benefit will never decrease below the Face Amount
provided your Policy is in force. There is no guarantee that your Policy's
Accumulated Value and death benefit will increase. You bear the investment risk
on that portion of the Accumulated Value allocated to the Variable Accounts.
You may also allocate your premium to the Fixed Account, for accumulation at
a fixed rate of interest that is declared periodically by Pacific Mutual, and
which will be at least 3%. Pacific Mutual guarantees payment of the interest on
Accumulated Value in the Fixed Account.
Your Policy will remain in force unless the Net Cash Surrender Value is
insufficient to pay certain charges deducted on each Monthly Payment Date, and
a Grace Period expires without sufficient additional premium payments or loan
repayments by you.
THE DEATH BENEFIT
Upon the death of the Insured, or, for a last survivor Policy, upon the death
of the Survivor, we will pay to the named Beneficiary death benefit proceeds,
which will be the death benefit under your Policy reduced by any Policy Debt.
The death benefit will be the greater of the Face Amount under your Policy or
the Accumulated Value multiplied by a specified percentage. See "Death
Benefit," page 15.
PREMIUM FEATURES
The Policy can be purchased for a minimum initial premium payment of $10,000,
or $50,000 if the Insured's Age (or Younger Insured's Age if this is a last
survivor Policy) is 70 or over. In determining the Face Amount, you may elect
that the initial premium be equal to 80%, 90% or 100% of the Guideline Single
Premium. The Guideline Single Premium is the maximum premium that can be paid
for any given Face Amount in order for an insurance policy to qualify as a life
insurance contract for tax purposes. The Face Amount in the state of West
Virginia may not be less than $25,000. Additional premiums may be paid under
certain circumstances. See "Additional Premium Payments," page 12.
5
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The Policy is not available to insure residents of certain municipalities in
Kentucky where premium taxes in excess of 4.0% are imposed.
ALLOCATION OPTIONS
The Variable Accounts invest in portfolios of a mutual fund, which offers you
the opportunity to direct us to invest in diversified portfolios of stocks,
bonds, money market instruments, or a combination of these securities, or in
securities of foreign issuers. See "The Pacific Select Fund," page 10. The
Variable Accounts invest exclusively in shares of corresponding Portfolios of
the Pacific Select Fund (the "Fund"), which are the:
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Money Market Portfolio Equity Income Portfolio
High Yield Bond Portfolio Multi-Strategy Portfolio
Managed Bond Portfolio Equity Portfolio
Government Securities Portfolio Bond and Income Portfolio
Growth Portfolio Equity Index Portfolio
Aggressive Equity Portfolio International Portfolio
Growth LT Portfolio Emerging Markets Portfolio
</TABLE>
You may choose to allocate premium payments to any of the fourteen Variable
Accounts and the Fixed Account. You may transfer Accumulated Value among the
Variable Accounts, and, subject to certain limitations, between the Variable
Accounts and the Fixed Account. Transfers may be made by telephone if an
Authorization for Telephone Requests has been signed and filed at our Home
Office. See "Transfer of Accumulated Value," page 14.
FREE-LOOK RIGHT
You may obtain a full refund of the premium paid if your Policy is returned
within 10 days after you receive it (15 days in Colorado and 20 days in North
Dakota) (30 days if you reside in California and are age 60 or older) or 45
days after the application for your Policy is signed, whichever is later.
However, in Pennsylvania, you have a different Free-Look Right, under which
your Policy may be returned only within 10 days after you receive it. Until the
Free-Look Transfer Date, premiums will be allocated to the Money Market
Variable Account which invests in the Money Market Portfolio of the Fund. See
"Allocation of Premiums," page 13.
SURRENDER AND PARTIAL WITHDRAWAL RIGHTS
You can surrender the Policy during the life of the Insured and receive its
Net Cash Surrender Value, which is equal to the Accumulated Value less any
outstanding Policy Debt and less any applicable surrender charge.
Partial withdrawals may be taken beginning on the first Policy Anniversary.
The minimum partial withdrawal is $1,000. The amount that can be withdrawn (1)
can be no greater than the excess of Cash Surrender Value immediately prior to
the withdrawal over Policy Debt divided by 90% and (2) is limited so that after
the withdrawal, the Net Cash Surrender Value is at least $10,000. Partial
withdrawals will reduce the death benefit under a Policy by an amount
proportionate to the reduction in Accumulated Value caused by the partial
withdrawal and may reduce the Face Amount. However, decreases in the Face
Amount and death benefit will be limited so that the policy complies with the
definition of life insurance in the Internal Revenue Code ("IRC"). Upon
surrender of a Policy or a partial withdrawal during the first nine Policy
Years a surrender charge may be assessed. No surrender charge is imposed on the
amount of the first withdrawal in any Policy Year (including a surrender) that
does not exceed the Free Withdrawal Amount. Surrender or partial withdrawals
may give rise to taxable income to you. See "Federal Income Tax
Considerations," page 23.
POLICY LOANS
You may borrow from us using your Policy as security for the loan. You may
borrow up to 50% of Accumulated Value during the first Policy Year, and up to
the greater of (1) 100% of your Accumulated Value
6
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in the Fixed Account and 90% in the Variable Accounts, and (2) 98% of the
excess of the Accumulated Value over twelve times the current monthly deduction
thereafter. The maximum amount is reduced by the amount of any existing Debt
and any surrender charge that would be imposed if you surrendered your Policy
on the date the loan is taken. The minimum loan that can be taken at any time
is $500 ($200 in Connecticut, $250 in Oregon). See "Policy Loans," page 17. The
amount of any Policy Debt will be subtracted from the death benefit under the
Policy, and from your Cash Surrender Value upon surrender. You will pay
interest to us on Policy Debt at an annual rate of 6.00% in the first ten
Policy Years and 5.00% thereafter. A portion of your Policy Debt may qualify as
a Preferred Loan, and will bear interest at 5.25% in the first ten Policy
Years, and 4.75% thereafter. Such portion will be redetermined on each policy
anniversary.
When you take a loan, an amount equal to the loan is transferred from your
Accumulated Value in the Investment Options to the Loan Account to secure the
loans. We will pay interest on amounts in the Loan Account at an annual rate of
4.5%.
A Policy loan is treated as a distribution from a Policy that is a modified
endowment contract and therefore may result in taxable income to you. See
"Federal Income Tax Considerations," page 23.
POLICY CHARGES AND DEDUCTIONS
Load from Premiums
We do not make any deductions from any premium payment before allocating it
to your Accumulated Value.
Surrender Charge
As discussed above under "Surrender and Partial Withdrawal Rights," if you
surrender your policy or take a partial withdrawal within the first nine Policy
Years, a surrender charge may be deducted from Accumulated Value. Approximately
twenty-five percent of the Surrender Charge is assessed to compensate Pacific
Mutual for premium taxes paid. Approximately seventy-five percent of the
Surrender Charge is assessed to compensate Pacific Mutual for sales expenses.
The Surrender Charge will not exceed 10% of the initial premium payment.
Monthly Deductions
An amount called the monthly deduction is deducted from your Accumulated
Value in the Variable Accounts and the Fixed Account beginning on the Policy
Date and on each Monthly Payment Date thereafter. The monthly deduction will be
assessed to each account in proportion to the Policy's Accumulated Value in
each Variable Account and the Fixed Account, unless you specify otherwise in
writing. The monthly deduction consists of the following charges:
--Cost of Insurance Charge: A cost of insurance charge is deducted to
compensate us for the cost of providing life insurance coverage for the
Insured(s); and
--Administrative Charge: An administrative charge equal to 0.00025 (0.30%
annually) of Accumulated Value in the Variable Accounts and the Fixed
Account is assessed. In addition, if Accumulated Value is below $50,000 on
any Policy Anniversary Date, a $40 fee is charged on that Monthly Payment
Date; and
--Tax Expense Charge: A charge equal to 0.000333333 (0.40% annually) of the
Accumulated Value is assessed to pay applicable state and local premium
taxes and federal taxes imposed under Section 848 of the Internal Revenue
Code of 1986, as amended (the "Code"). This charge is eliminated after 10
Policy Years; and
--Mortality and Expense Risk Charge: A charge is assessed to compensate us
for mortality and expense risks assumed. This charge is equal to 0.00075
(0.90% annually) of Accumulated Value in the Variable
7
<PAGE>
Accounts and the Fixed Account. After 10 Policy Years this charge is
reduced to 0.000583333 (0.70% annually).
The operating expenses of the Separate Account are paid by us. The Policy's
charges and deductions shown above are specified under the terms of the
Policy. For a more complete description of these charges, see "Charges and
Deductions," page 21.
FUND ANNUAL EXPENSES AFTER EXPENSE LIMITATION (as a percentage of each
Portfolio's average daily net assets)
Investment advisory fees and operating expenses of the Fund are paid by the
Fund. Fund expenses are not specified under the terms of the Policy, and they
may vary from year to year.
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
FEE EXPENSES EXPENSES
-------- -------- --------
<S> <C> <C> <C>
Money Market Portfolio......................... .40% .13% .53%
High Yield Bond Portfolio...................... .60% .17% .77%
Managed Bond Portfolio......................... .60% .16% .76%
Government Securities Portfolio................ .60% .22% .82%
Growth Portfolio............................... .65% .14% .79%
Aggressive Equity Portfolio.................... .80% .19% .99%
Growth LT Portfolio............................ .75% .19% .94%
Equity Income Portfolio........................ .65% .18% .83%
Multi-Strategy Portfolio....................... .65% .19% .84%
Equity Portfolio............................... .65% .15% .80%
Bond and Income Portfolio...................... .60% .20% .80%
Equity Index Portfolio......................... .25% .17% .42%
International Portfolio........................ .85% .27% 1.12%
Emerging Markets Portfolio..................... 1.10% .25% 1.35%
</TABLE>
The expenses listed for the Fund Portfolios reflect current expenses for the
year ending December 31, 1995. The Aggressive Equity and Emerging Markets
Portfolios did not begin operations until April 1, 1996 and their estimated
"other expenses" reflect the policy adopted by Pacific Mutual as Investment
Adviser to the Fund, to waive its fees or otherwise reimburse expenses so that
operating expenses (exclusive of advisory fees, additional custodial fees
associated with holding foreign securities, foreign taxes on dividends,
interest or capital gains, and extraordinary expenses) expressed as a decimal
are not greater than 0.0025 of average daily net assets per year. We began
this policy in 1989 and intend to continue this policy until at least December
31, 1997, but may discontinue it after that time and any unreimbursed expenses
would be reflected in the Policy Owner's Accumulated Value and in some
circumstances the death benefit. In the absence of this policy, it is
estimated that such expenses for the Emerging Markets Portfolio would exceed
this expense cap in 1996. No reimbursement to the Portfolios was necessary for
the Fund's fiscal year 1995.
The Fund's expenses are assessed at the Fund level and are not direct
charges against the Variable Accounts or the Policy's Accumulated Value. These
expenses are taken into account in computing each Portfolio's per share net
asset value, which in turn is used to compute the corresponding Variable
Account's Accumulation Unit Value. The Fund's investment advisory fees and
operating expenses are more fully described in the Fund's prospectus, which
accompanies this Prospectus.
TAX TREATMENT OF INCREASES IN ACCUMULATED VALUE
The Accumulated Value under the Policy is currently subject to the same
federal income tax treatment as the cash value under fixed life insurance.
Therefore, generally, you will not be deemed to be in constructive receipt of
the Accumulated Value unless and until actual surrender of a Policy or upon
making a partial
8
<PAGE>
withdrawal or a Policy Loan. Any such distribution may give rise to taxable
income to you and may, under certain circumstances, subject you to an
additional income tax of 10% of the amount includable in taxable income. For
more information on the tax treatment of the Policy and the tax treatment of
distributions see "Federal Income Tax Considerations," page 23.
TAX TREATMENT OF DEATH BENEFIT
The death benefit under the Policy is currently subject to federal income tax
treatment consistent with that of fixed life insurance. Therefore, generally
the death benefit will be fully excludable from the gross income of the
Beneficiary under the IRC. See "Federal Income Tax Considerations," page 23.
THE FIXED ACCOUNT
You may allocate all or a portion of premium payments and transfer
Accumulated Value to the Fixed Account. Amounts allocated to the Fixed Account
are held in our General Account. We guarantee that the Accumulated Value
allocated to the Fixed Account will be credited interest monthly at a rate
equivalent to an effective annual rate of 3%. In addition, we may in our sole
discretion pay interest in excess of the guaranteed amount. The initial rate of
interest, but no more than 6%, will be guaranteed until the first Policy
Anniversary. Interest rates will be effected thereafter on each Policy
Anniversary and guaranteed until the next Policy Anniversary. See "The Fixed
Account," page 29.
CONTACTING PACIFIC MUTUAL
All written requests, notices, and forms required by the Policies, and any
questions or inquiries should be directed to Pacific Mutual, Policy Benefits
and Services Department, at 700 Newport Center Drive, P.O. Box 7500, Newport
Beach, California 92658-7500.
9
<PAGE>
INFORMATION ABOUT PACIFIC MUTUAL, THE SEPARATE ACCOUNT, AND THE FUND
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Pacific Mutual is a mutual life insurance company organized under the laws
of the state of California. We were authorized to conduct business as a life
insurance company on January 2, 1868, as Pacific Mutual Life Insurance Company
of California, and were reincorporated under our present name on July 22,
1936.
We offer a complete line of life insurance policies and annuity contracts,
as well as financial and retirement services. We are admitted to do business
in the District of Columbia, and in all states except New York. As of the end
of 1995, we had $44.2 billion of individual life insurance in force and total
assets of $17.6 billion. Together with our subsidiaries and affiliated
enterprises, we had total assets and funds under management of $116.6 billion.
We have been ranked according to assets as the 23rd largest life insurance
carrier in the nation for 1995.
The Principal Underwriter for the Policies is Pacific Mutual Distributors,
Inc. ("PMD"). PMD is registered as a broker-dealer with the Securities and
Exchange Commission ("SEC") and is a wholly-owned subsidiary of Pacific
Mutual.
PACIFIC SELECT EXEC SEPARATE ACCOUNT
The Pacific Select Exec Separate Account is one of our separate investment
accounts used only to support the variable death benefits and policy values of
variable life insurance policies. The assets in the Separate Account are kept
separate from the assets of our General Account and our other separate
accounts. The Separate Account funds other variable life insurance policies
issued by Pacific Mutual in addition to the Policies.
We own the assets in the Separate Account and are required to maintain
sufficient assets in the Separate Account to meet anticipated obligations of
the Policies funded by the Account. The Separate Account is divided into
subaccounts called Variable Accounts. The income, gains, or losses, realized
or unrealized, of each Variable Account are credited to or charged against the
assets held in the Variable Account without regard to our other income, gains,
or losses. Assets in the Separate Account attributable to the reserves and
other liabilities under the variable life insurance policies funded by the
Separate Account are not chargeable with liabilities arising from any other
business that we conduct. We may transfer to our General Account assets which
exceed anticipated obligations of the Account. All obligations arising under
the Policy are general corporate obligations of Pacific Mutual. We may
accumulate in the Account proceeds from Policy charges and investment results
applicable to those assets.
The Separate Account was established under California law by a resolution of
our Board of Directors adopted on November 20, 1986. The Separate Account is
registered as a unit investment trust with the SEC. Such registration does not
involve any supervision by the SEC of the administration or investment
practices or policies of the Account.
Each of the fourteen Variable Accounts invests exclusively in shares of
designated Portfolios of the Fund. We may in the future establish additional
Variable Accounts within the Separate Account, which may invest in other
Portfolios of the Fund or in other securities.
THE PACIFIC SELECT FUND
The Fund is a diversified, open-end management investment company of the
series type. The Fund is registered with the SEC under the Investment Company
Act of 1940. The Fund currently offers fourteen separate Portfolios to the
Separate Account. Each Portfolio pursues different investment objectives and
policies. We purchase the shares of each Portfolio for the corresponding
Variable Account at net asset value, i.e., without sales load. All dividends
and capital gains distributions received from a Portfolio are automatically
reinvested in such Portfolio at net asset value, unless we, on behalf of the
Separate Account, elect otherwise. Fund shares will be redeemed by us at their
net asset value to the extent necessary to make payments under the Policies.
10
<PAGE>
Shares of the Fund currently are offered for purchase only to our Separate
Accounts and to a separate account of Pacific Corinthian Life Insurance
Company, a subsidiary of Pacific Mutual, to serve as an investment medium for
variable life insurance policies and for variable annuity contracts issued by
us and administered by Pacific Corinthian. Shares of the Fund may also be sold
in the future to separate accounts of other insurance companies, both
affiliated and not affiliated with us. Investment in the Fund by other
separate accounts in connection with variable annuity and variable life
insurance contracts may create conflicts. See "MORE ON THE FUND'S SHARES" in
the accompanying prospectus of the Fund.
The chart below summarizes some basic data about each Portfolio of the Fund
offered to the Separate Account. There can be no assurance that any Portfolio
will achieve its objective. This chart is only a summary. You should read the
more detailed information which is contained in the accompanying prospectus of
the Fund, including information on the risks associated with the investments
and investment techniques of each of the Portfolios.
THE FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
<TABLE>
<CAPTION>
PRIMARY INVESTMENTS PORTFOLIO
PORTFOLIO OBJECTIVE (UNDER NORMAL CIRCUMSTANCES) MANAGER
<C> <S> <C> <C>
Money Market Current income Highest quality money market Pacific Mutual
consistent with instruments
preservation of capital
- -----------------------------------------------------------------------------------------------------------------
High-Yield Bond High level of current Intermediate and long-term, high- Pacific Mutual
income yielding, lower and medium quality
(high risk) fixed-income securities
- -----------------------------------------------------------------------------------------------------------------
Managed Bond Maximize total return Investment grade marketable debt Pacific Investment
consistent securities. Will normally maintain an Management Company
with prudent investment average portfolio duration of 3-7 years
management
- -----------------------------------------------------------------------------------------------------------------
Government Maximize total return U.S. Government securities including Pacific Investment
Securities consistent futures and options thereon and high- Management Company
with prudent investment grade corporate debt securities. Will
management normally maintain an average portfolio
duration of 3-7 years
- -----------------------------------------------------------------------------------------------------------------
Growth Growth of capital Common stock Capital Guardian Trust
Company
- -----------------------------------------------------------------------------------------------------------------
Aggressive Eq- Capital appreciation Stocks of small- and medium-sized Columbus Circle Investors
uity companies
- -----------------------------------------------------------------------------------------------------------------
Growth LT Long-term growth of Common stock Janus Capital Corporation
capital
consistent with the
preservation
of capital
- -----------------------------------------------------------------------------------------------------------------
Equity Income Long-term growth of Dividend paying common stock J.P. Morgan Investment
capital Management Inc.
and income
- -----------------------------------------------------------------------------------------------------------------
Multi-Strategy High total return Equity and fixed income securities J.P. Morgan Investment
Management Inc.
- -----------------------------------------------------------------------------------------------------------------
Equity Capital appreciation Common stocks and securities Greenwich Street Advisors
convertible into or exchangeable for Division of Smith Barney
common stocks Mutual Funds Management Inc.
- -----------------------------------------------------------------------------------------------------------------
Bond and Income High level of current Investment grade debt securities Greenwich Street Advisors
income Division of Smith Barney
consistent with prudent Mutual Funds Management
investment management Inc.
and
preservation of capital
- -----------------------------------------------------------------------------------------------------------------
Equity Index Provide investment Stocks included in the S&P 500 Bankers Trust Company
results that
correspond to the total
return
performance of common
stocks
publicly traded in the
U.S.
- -----------------------------------------------------------------------------------------------------------------
International Long-term capital Equity securities of corporations Templeton Investment
appreciation domiciled outside the United States Counsel, Inc.
- -----------------------------------------------------------------------------------------------------------------
Emerging Mar- Long-term growth of Common stocks of companies Blairlogie Capital
kets capital domiciled in emerging market Management
countries
</TABLE>
11
<PAGE>
THE INVESTMENT ADVISER
Pacific Mutual, located at 700 Newport Center Drive, Newport Beach,
California 92660, serves as Investment Adviser to each Portfolio of the Fund.
We are registered with the SEC as an Investment Adviser. For twelve of the
Portfolios, the Investment Adviser and the Fund have engaged other firms to
serve as Portfolio Managers which are shown in the chart above.
THE POLICY
The variable life insurance benefits provided by your Policy are funded
through your Accumulated Value in the Pacific Select Exec Separate Account and
the Fixed Account. The information included below describes the benefits,
features, charges, and other major provisions of the Policy.
APPLICATION FOR A POLICY
Any person or persons wishing to purchase the Policy may submit an
application to us. A Policy can be issued on the life of a single Insured for
issue Ages up to and including age 85 and Insureds under a last survivor
Policy for issue Ages between 20 and 85, and, in both cases, with evidence of
insurability satisfactory to us. The Insured's Age is calculated as of the
Insured's last birthday. Acceptance is subject to our underwriting rules, and
we reserve the right to request additional information and to reject an
application.
After your Policy is issued, insurance coverage under the Policy will be
deemed to have begun as of the Policy Date. Your Policy Date is usually the
date the initial premium is received at our Home Office. Your Policy Date is
the date used to determine Policy Years, Policy Months, and Policy Monthly,
Quarterly, Semi-Annual and Annual Anniversaries. For purposes of determining
the Monthly Payment Date for all Policies issued, the Policy Date will never
be the 29th, 30th, or 31st of any month.
Insureds are assigned to underwriting classes which are used in calculating
the cost of insurance rates. In assigning Insureds to underwriting classes, we
will usually use either simplified or medical underwriting, although other
forms of underwriting may be used when deemed appropriate by us.
PREMIUMS
The minimum initial premium to purchase a Policy is $10,000 if the Insured's
issue Age is less than 70 and $50,000 if the Insured's issue Age is greater
than 69. If this is a last survivor Policy, the minimum initial premium is
based upon the issue Age of the younger Insured. You may elect the initial
premium to be 80%, 90% or 100% of the Guideline Single Premium. The Guideline
Single Premium is the maximum premium that can be paid for a given Face Amount
in order for an insurance policy to qualify as a life insurance contract for
tax purposes. If you reside in the state of West Virginia the Face Amount of
the Policy must be at least $25,000. We may reduce the minimum initial premium
required under certain circumstances, such as for group or sponsored
arrangements.
ADDITIONAL PREMIUM PAYMENTS
You have limited ability to make additional premium payments. Subsequent
premium payments of at least $1,000 are permitted under the following
circumstances:
1. an additional premium payment is required to keep the Policy in force
(see "Grace Period"); or
2. the premium payment would not cause total premiums to exceed the premium
limits prescribed by the Internal Revenue Service ("IRS") to qualify the
Policy as a life insurance contract.
We reserve the right to require satisfactory evidence of insurability before
accepting any additional premium payment that results in an immediate increase
in the death benefit. A premium payment would result in an immediate increase
in the death benefit if the death benefit under your Policy is, or upon
acceptance of the premium would be, greater than the Face Amount. See "Death
Benefit." If satisfactory evidence of insurability
12
<PAGE>
is not received, the payment, or a portion thereof, may be returned. The
Company may require that existing Policy Debt be repaid prior to accepting any
additional premium payments.
All or a portion of a premium payment will be rejected and returned to you
if it would exceed the maximum premium limitations prescribed by federal tax
law. We also reserve the right to make distributions from your Policy to the
extent we deem it necessary to continue to qualify your Policy as life
insurance under the IRC.
If your Policy is issued in exchange for a policy that is not a modified
endowment contract, then in order for your Policy to continue to avoid being
treated as a modified endowment contract, the sum of the premiums less a
portion of any Partial Withdrawals may not exceed the "seven pay premium"
limit as defined in the IRC. See "Federal Income Tax Considerations". If we
receive any premium payment that we believe, if applied to your Policy in that
Policy Year, would cause your Policy to become a modified endowment contract,
the portion of the payment that we believe would cause your Policy to become a
modified endowment contract will not be applied to your Policy but will be
returned to you, unless you have previously notified us that payments that
cause your Policy to become a modified endowment contract may be accepted by
us and applied to your Policy. However, for premium payments received by us at
our Home Office within 20 days before the upcoming Policy Anniversary, we may
apply the portion of the premium payment that we believe would cause your
Policy to become a modified endowment contract to your Policy on the upcoming
Policy Anniversary.
ALLOCATION OF PREMIUMS
In the application for your Policy, you select the Investment Options to
which premium payments will be allocated after the Free-Look Transfer Date.
Until the Free-Look Transfer Date, premium payments will be allocated to the
Money Market Variable Account, which invests in the Money Market Portfolio of
the Fund (except for amounts allocated to the Loan Account to secure a Policy
loan). Your Accumulated Value will be automatically allocated according to
your instructions contained in the application (or if received more recently,
in written instructions) the later of 15 days after the Policy is issued or 45
days after the application is completed (the "Free-Look Transfer Date").
Currently, fourteen Variable Accounts and the Fixed Account are available to
you.
Additional premium payments will be allocated among the Variable Accounts
and the Fixed Account according to your most recent instructions. You may
change the allocation of payments by submitting a proper written request to
our Home Office, or by telephone if an Authorization for Telephone Requests
for changes in premium allocation instruction has been completed, signed and
filed at our Home Office.
PORTFOLIO REBALANCING
You may direct us to automatically re-set the percentage of your Accumulated
Value allocated to each Variable Account at a predetermined level. This
process is called portfolio rebalancing. (The Fixed Account is not available
for portfolio rebalancing.) Over time, the variations in each Variable
Account's investment results will shift the percentage allocations of your
Accumulated Value. The portfolio rebalancing feature will automatically
transfer your Accumulated Value among the Variable Accounts back to the preset
percentages. Rebalancing can be made quarterly, semi-annually or annually,
measured from your Policy Date ("frequency period"). Rebalancing may result in
transferring amounts from a Variable Account with relatively higher investment
performance to a Variable Account with relatively lower investment
performance.
You may initiate portfolio rebalancing by sending our Home Office a signed,
written request in good form or a properly completed Automatic Portfolio
Rebalancing form. You must specify the frequency for rebalancing and a
beginning date. The first rebalancing will usually occur on your Monthly
Payment Date that starts the frequency period you elected and that occurs on
or follows the beginning date you elected. If you stop portfolio rebalancing,
you must wait 30 days to begin again. Portfolio rebalancing cannot be used
with the Dollar Cost Averaging Option.
We may modify, terminate or suspend the portfolio rebalancing feature at any
time.
13
<PAGE>
DOLLAR COST AVERAGING OPTION
We currently offer an option under which you may dollar cost average your
allocations in the Variable Accounts under your Policy by authorizing us to
make periodic allocations of Accumulated Value from any one Variable Account
to one or more of the other Variable Accounts. Dollar cost averaging is a
systematic method of investing in which securities are purchased at regular
intervals in fixed dollar amounts so that the cost of the securities gets
averaged over time and possibly over various market cycles. The option will
result in the allocation of Accumulated Value to one or more Variable
Accounts, and these amounts will be credited at the Accumulation Unit values
as of the end of the Valuation Dates on which the transfers are processed.
Since the value of Accumulation Units will vary, the amounts allocated to a
Variable Account will result in the crediting of a greater number of units
when the Accumulation Unit value is low and a lesser number of units when the
Accumulation Unit value is high. Similarly, the amounts transferred from a
Variable Account will result in a debiting of a greater number of units when
the Accumulation Unit value is low and a lesser number of units when the
Accumulation Unit value is high. Dollar cost averaging does not guarantee
profits, nor does it assure that you will not have losses.
A Dollar Cost Averaging Request form is available upon request. On the form,
you must designate the specific dollar amounts or percentage to be
transferred, the Variable Account or Accounts to which the transfer will be
made, the desired frequency of the transfer, which may be on a monthly,
quarterly, semi-annual, or annual basis, and the length of time during which
the transfers shall continue or the total amount to be transferred over time.
To elect the Dollar Cost Averaging Option, your Accumulated Value in the
Variable Account from which the Dollar Cost Averaging transfers will be made
must be at least $5,000; the Dollar Cost Averaging Request form will not be
considered complete until this requirement is met. After we have received and
processed a Dollar Cost Averaging Request in proper form at our Home Office,
we will transfer Accumulated Value in amounts you designate from the Variable
Account from which transfers are to be made to the Variable Account or
Accounts you choose. The minimum amount that may be transferred to any one
Variable Account is $50. After the Free-Look Period, the first transfer will
be effected on your Policy's Monthly, Quarterly, Semi-Annual, or Annual
Anniversary, whichever corresponds to the period selected by you, coincident
with or next following receipt at our Home Office and processing of a Dollar
Cost Averaging Request in proper form, and subsequent transfers will be
processed on the following Monthly, Quarterly, Semi-Annual, or Annual
Anniversary for so long as you designate until the total amount elected has
been transferred, until Accumulated Value in the Variable Account from which
transfers are made has been depleted, or until your Policy enters the Grace
Period. Amounts periodically transferred under this option will not be subject
to any transfer charges that may be imposed by us in the future, except as may
be required by applicable law.
You may instruct us at any time to terminate the option by written request
to our Home Office. In that event, the Accumulated Value in the Variable
Account from which transfers were being made that has not been transferred
will remain in that Variable Account, subject to monthly deductions, unless
you instruct otherwise or until your Policy enters the Grace Period. We may
discontinue, modify, or suspend the Dollar Cost Averaging Option at any time.
TRANSFER OF ACCUMULATED VALUE
You may transfer Accumulated Value among the Variable Accounts after the
Free-Look Transfer Date upon proper written request to our Home Office.
Transfers (other than transfers in connection with the Dollar Cost Averaging
Option) may be made by telephone if a properly completed, Authorization for
Telephone Requests is on file at our Home Office. Currently, there are no
limitations on the number of transfers between Variable Accounts, no minimum
amount required for a transfer, nor any minimum amount required to be
remaining in a given Variable Account after a transfer (except as required
under the Dollar Cost Averaging Option). No transfers are allowed during the
Grace Period if the required premium has not been paid. No charges are
currently imposed upon such transfers. We reserve the right, however, at a
future date to limit the size of transfers and remaining balances, to assess
transfer charges, to limit the number and frequency of transfers, and to
modify, suspend and/or discontinue telephone transfers.
14
<PAGE>
Accumulated Value may also be transferred from the Variable Accounts to the
Fixed Account, however, such a transfer will only be permitted in the Policy
Month preceding a Policy Anniversary, except that you may make such a transfer
at any time during the first 18 Policy Months. Transfers from the Fixed
Account to the Variable Accounts are restricted as described in "The Fixed
Account."
DEATH BENEFIT
When your Policy is issued, we will determine the initial amount of
insurance for the initial premium payment based on the instructions provided
in your application. That amount will be shown on the specifications page of
the Policy and is called the "Face Amount."
Upon due proof of the death of the Insured(s), we will pay to your named
Beneficiary death benefit proceeds, which will be the death benefit under your
Policy reduced by any outstanding Policy Debt (and if in the Grace Period, any
overdue charges). The death benefit will be the greater of the Face Amount
under your Policy or Accumulated Value multiplied by a specified percentage.
The specified percentages vary according to the Age of the Insured, or, in the
case of a last survivor Policy, the Youngest Insured, and will be at least
equal to the cash value corridor in Section 7702 of the IRC, which addresses
the definition of a life insurance policy for tax purposes. A table showing
the specified percentages is in the Appendix and in the Policy. Because the
specified percentage is applied to your Accumulated Value, an increase in
Accumulated Value may increase the death benefit. However, because the death
benefit will never be less than the Face Amount, a decrease in Accumulated
Value may decrease the death benefit but never below the Face Amount. The
following examples illustrate how the death benefit will be determined:
EXAMPLES
<TABLE>
<CAPTION>
POLICY A POLICY B
-------- --------
<S> <C> <C>
Face Amount........................................... $100,000 $100,000
Insured's Age......................................... 40 40
Accumulated Value on Date of Death.................... $ 46,500 $ 34,000
Specified Percentage.................................. 250% 250%
</TABLE>
In Policy A, the death benefit equals $116,250, i.e., the greater of
$100,000 (the Face Amount) or $116,250 (the Accumulated Value at the date of
death of $46,500 multiplied by the specified percentage of 250%). Assuming
that there is no outstanding Policy Debt, this amount constitutes the death
benefit proceeds that would be paid to the Beneficiary.
In Policy B, the death benefit is $100,000, i.e., the greater of $100,000
(the Face Amount) or $85,000 (the Accumulated Value of $34,000 multiplied by
the specified percentage of 250%).
If the death benefit is equal to the Guideline Minimum Death Benefit, we
reserve the right to reduce the death benefit by requiring Partial Withdrawals
be made in order to maintain the net amount at risk at a level that will not
exceed three times the death benefit on the Policy Date.
The Policy is intended to qualify as a life insurance contract under the
Internal Revenue Code for Federal tax purposes, and the death benefit under
the Policy is intended to qualify for the income tax exclusion under the
Internal Revenue Code. If your Policy is issued in exchange for another life
insurance policy that was not a modified endowment contract, then unless
otherwise specified by you in writing, it is intended that the Policy will not
be treated as a modified endowment contract under the Internal Revenue Code.
To these ends, the provisions of the Policy, including any other Rider,
Benefit, or endorsement, are to be interpreted to ensure such tax
qualification and to prevent the Policy from being treated as a modified
endowment contract, notwithstanding any other provisions to the contrary.
If at any time the premiums paid under your policy exceed the amount
allowable for such tax qualification, such excess amount shall be removed from
the Policy as of the date of its payment, and any appropriate adjustment in
the death benefit shall be made as of such date. The excess amount shall be
refunded to you no
15
<PAGE>
later than 60 days after the end of the applicable Policy Year. The excess
amount removed from the Policy and refunded to you may be adjusted for
interest or for changes in Accumulated Value attributable to the excess
amount. If for some reason this excess amount is not refunded by then, the
death benefit under this Policy shall be increased retroactively and
prospectively so that at no time is the death benefit ever less than the
amount needed to ensure such tax qualification. To the extent that the death
benefit as of any time is increased by this provision, appropriate adjustments
shall be made retroactively in any cost of insurance charge or supplemental
benefits as of that time that are consistent with such an increase.
If your Policy is issued in exchange for another life insurance policy that
was not a modified endowment contract, then at any time the premiums or other
amounts paid under the Policy exceed the limit for avoiding modified endowment
contract treatment, and you have not specified in writing that such treatment
is acceptable to you, such excess amount shall be removed from the Policy as
of the date of its payment, and any appropriate adjustment in the Policy's
death benefit shall be made as of such date. This excess amount shall be
refunded to you no later than 60 days after the end of the applicable Policy
Year. The excess amount removed from the Policy and refunded to you may be
adjusted for interest or for changes in Accumulated Value attributable to the
excess amount. If this excess amount is not refunded by then, the death
benefit under your Policy shall be increased retroactively and prospectively
to the minimum amount necessary so that at no time is the death benefit ever
less than the amount needed to avoid modified endowment contract treatment. To
the extent the death benefit as of any time is increased by this provision,
appropriate adjustments shall be made, retroactively or otherwise, in any cost
of insurance or supplemental benefits as of that time that are consistent with
such an increase.
All calculations of death benefit will be made as of the end of the
Valuation Period during which the Insured (or for a last survivor Policy, the
Survivor) dies. Death benefit proceeds may be paid to your Beneficiary in a
lump sum or under a payment plan offered by us under the Policy. The plan
offers monthly income for the lifetime of the Beneficiary with a minimum
period of ten years. The Policy should be consulted for details.
POLICY VALUES
Accumulated Value
Your Accumulated Value is the sum of the amounts under your Policy held in
each Investment Option, as well as the amount set aside in the Loan Account,
including any accrued earned interest.
On each Valuation Date, the portion of your Accumulated Value allocated to
any particular Variable Account will be adjusted to reflect the investment
experience of that Variable Account. See "Determination of Accumulated Value,"
described below. On each Monthly Payment Date, a portion of the Accumulated
Value allocated to Variable Accounts will be adjusted to reflect the
assessment of the Monthly Deduction. No minimum amount of Accumulated Value in
the Variable Accounts is guaranteed. You bear the risk for the investment
experience of such amounts.
Cash Surrender Value
Your Cash Surrender Value of your Policy equals your Accumulated Value less
any Surrender Charge. Once the duration of the surrender charge has expired,
your Cash Surrender Value will equal your Accumulated Value.
Net Cash Surrender Value
Your Net Cash Surrender Value is the Cash Surrender Value minus any
outstanding Policy Debt. You can surrender your Policy at any time while the
Insured (either Insured if this is a last survivor Policy) is living and
receive your Net Cash Surrender Value.
DETERMINATION OF ACCUMULATED VALUE
Although your Policy's death benefit can never be less than the Face Amount
for as long as your Policy is in force, the Policy's Accumulated Value in the
Separate Account will vary to a degree that depends upon several
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factors, including investment performance of the Variable Accounts to which
Accumulated Value has been allocated, payment of additional premiums, the
amount of any outstanding Policy Debt, any Partial Withdrawals, and the
charges assessed in connection with your Policy.
The amounts allocated to the Variable Accounts will be invested in shares of
the corresponding Portfolios of the Fund. The investment performance of each
Variable Account will reflect increases or decreases in the net asset value
per share of the corresponding Portfolio and any dividends or distributions
declared by a Portfolio.
Assets in the Variable Accounts are divided into accumulation units, which
are a measure of value used for bookkeeping purposes. When you allocate
premiums to a Variable Account, your Policy is credited with accumulation
units. In addition, other transactions including loans, surrender, partial
withdrawals, transfers, and assessment of charges against your Policy affect
the number of accumulation units credited to your Policy. The number of units
credited or debited in connection with any such transaction is determined by
dividing the dollar amount of such transaction by the unit value of the
affected Variable Account. The unit value of each Variable Account is
determined on each Valuation Date at or about 4:00 p.m. Eastern time. The
number of units credited will not change because of subsequent changes in unit
value.
The accumulation unit value of each Variable Account's unit initially was
$10. The unit value of a Variable Account on any Valuation Date is calculated
by adjusting the unit value from the previous Valuation Date for (1) the
investment performance of the Variable Account, which is based upon the
investment performance of the corresponding Portfolio of the Fund, (2) any
dividends or distributions paid by the corresponding Portfolio, and (3) any
charges that may be assessed by us for income taxes attributable to the
operation of the Variable Account (which are currently not anticipated).
POLICY LOANS
You may borrow money from us using your Policy as the only security for the
loan by submitting a proper written request to our Home Office. We may in our
discretion permit loans to be made by telephone if an Authorization for
Telephone Requests has been completed, signed and filed at our Home Office. A
loan may be taken any time your Policy is in force. The minimum loan that can
be taken at any time is $500, ($200 in Connecticut, $250 in Oregon). The
maximum amount that can be borrowed in the first Policy Year is 50% of your
Accumulated Value, and thereafter the maximum at any time is the greater of
(1) 100% of your Accumulated Value in the Fixed Account and 90% in the
Variable Accounts, and (2) 98% of the excess of the Accumulated Value over
twelve times the current monthly deduction. The maximum amount is reduced by
any existing Debt and the amount of any Surrender Charge that would be imposed
if you surrendered your Policy on the date the loan is taken.
When you take a loan, an amount equal to the loan is transferred out of your
Accumulated Value in the Investment Options into the Loan Account to secure
the loan. Unless you request otherwise, loan amounts will be deducted from the
Investment Options proportionately.
The interest rate we charge on loans is 6.00% a year on Policy Debt in the
first ten Policy Years and 5.00% thereafter.
A portion of your Policy Debt may qualify as a Preferred Loan. We charge a
lower rate of interest on Preferred Loans. Subject to the limitations
described above, the maximum amount available as Preferred Loans is the excess
of the Accumulated Value over the premiums paid. We will determine the amount
of a loan that is Preferred on the date of the loan, and we will redetermine
the total amount of Preferred Loans on each Policy Anniversary. Loan
repayments will be considered repayment of Preferred Loans last. We will
charge interest on Preferred Loans at an annual rate of 5.25% in the first ten
Policy Years, and 4.75% thereafter.
We will credit interest monthly on amounts held in the Loan Account to
secure the loan at an annual rate of 4.5%.
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You may repay all or part of the loan at any time while your Policy is in
force. Interest on a loan is accrued daily and is due on each Policy
Anniversary for the prior year, or on termination of the Policy. If interest
is not paid when due, it will be added to the amount of the loan principal and
interest will begin accruing thereon from that date. An amount equal to the
loan interest charged will be transferred to the Loan Account from the
Variable Accounts and Fixed Account on a proportional basis.
Unless you request otherwise, any loan repayment will cause an equal amount
to be transferred from the Loan Account into the Investment Options in
accordance with your current premium allocation instructions. In addition, any
interest earned on the amount held in the Loan Account will be transferred to
each of the Investment Options in accordance with your current premium
allocation instructions on each Policy Anniversary and on full repayment of
your Policy Debt.
While the amount to secure the loan is held in the Loan Account, you forgo
the investment experience of the Variable Accounts and the current interest
rates of the Fixed Account. Thus, a loan, whether or not repaid, will have a
permanent effect on the Policy's values and may have an effect on the amount
and duration of the death benefit. If not repaid, your Policy Debt will be
deducted from the amount of the death benefit payable upon the death of the
Insured (or the Survivor Insured for a last survivor Policy), the Cash
Surrender Value paid upon surrender, or the refund of premium upon exercise of
the Free-Look Right.
A loan may affect the length of time your Policy remains in force. Your
Policy will lapse when Debt equals or exceeds your Cash Surrender Value and
the minimum payment required is not made during the Grace Period. Moreover,
your Policy may enter the Grace Period more quickly when a loan is
outstanding, because the loaned amount is not available to cover monthly
deductions. Additional payments or repayment of a portion of Debt may be
required to keep the Policy in force. See "Lapse".
A loan is treated as a distribution from a Policy that is a modified
endowment contract, and therefore may give rise to taxable income to you. For
information on the tax treatment of loans, see "Federal Income Tax
Considerations."
DURATION OF CONTRACT
The Policy does not mature. Coverage under a Policy will remain in effect
until the Policy is surrendered; until the death of a single Insured or, for a
last survivor Policy, the Survivor; or until the Policy lapses.
SURRENDER
You may surrender your Policy at any time during the life of the Insured(s).
The amount received in the event of a full surrender is your Policy's Net Cash
Surrender Value, which is equal to your Accumulated Value less outstanding
Policy Debt, and applicable surrender charges. Surrender could give rise to
taxable income.
PARTIAL WITHDRAWALS
Partial withdrawals may be taken beginning on the first Policy Anniversary
and thereafter. Under this Benefit, you may withdraw a portion of your Net
Cash Surrender Value.
A partial withdrawal must be for at least $1,000. The amount that can be
withdrawn (1) can be no greater than the excess of the Cash Surrender Value
prior to the withdrawal over the Policy Debt divided by 90% and (2) is limited
so that after the withdrawal, your Net Cash Surrender Value is at least
$10,000.
You may make a partial withdrawal by submitting a proper written request to
us. As of the effective date of any withdrawal, your Accumulated Value will be
reduced by the amount of the withdrawal and any applicable Surrender Charge.
The reduction in Accumulated Value will be allocated proportionately to your
Accumulated Value in the Investment Options unless you request otherwise. If
the Insured(s) dies after the request for a withdrawal is sent to us and prior
to the withdrawal being effected, the amount of the withdrawal will be
deducted from the death benefit proceeds, which will be determined without
taking into account the withdrawal.
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Preferred Withdrawal. A Preferred Withdrawal is a portion of the first
withdrawal in any Policy Year. This portion is the lesser of the withdrawal
and the Free Withdrawal Amount. No Surrender Charge is imposed on Preferred
Withdrawals. Amounts in excess of the Free Withdrawal Amount and any
subsequent withdrawals in the same Policy Year may be subject to the Surrender
Charge. See "Surrender Charge". If there is no Free Withdrawal Amount at the
time of the first withdrawal in a Policy Year, the next withdrawal in the same
Policy Year will be considered the first.
When a partial withdrawal is made, the death benefit under the Policy is
decreased by an amount proportionate to the reduction in Accumulated Value
caused by the partial withdrawal, and the Face Amount may also be reduced. For
example, if you withdraw one-half of your Accumulated Value, the death benefit
after the withdrawal will be one-half of the death benefit prior to the
withdrawal. If the death benefit prior to a partial withdrawal is the Face
Amount, the Face Amount will be reduced by the entire amount of the reduction
in death benefit. If the death benefit prior to a partial withdrawal is equal
to a Policy's Accumulated Value multiplied by the applicable specified
percentage, the Face Amount after the withdrawal will be equal to the new
death benefit if the new death benefit is less than the Face Amount prior to
the withdrawal, and to the prior Face Amount otherwise. However decreases in
the Face Amount and death benefit will be limited so that the Policy complies
with the definition of life insurance in the IRC without any additional
distribution from the Policy at the time of the withdrawal.
A partial withdrawal is treated as a distribution from the Policy that may
give rise to taxable income to you. See "Federal Income Tax Considerations."
RIGHT TO EXAMINE A POLICY--FREE-LOOK RIGHT
You have a Free-Look Right, under which your Policy may be returned within
10 days after you receive it (15 days in Colorado and 20 days in North Dakota)
(30 days if you are a resident of California and age 60 or older), or within
45 days after you complete the application for insurance, whichever is later.
For this purpose, your application is considered complete when you sign it.
However, in Pennsylvania, you have a different Free-Look Right, under which
your Policy may be returned only within 10 days after you receive it. It can
be mailed or delivered to us or our agent. The returned Policy will be treated
as if we never issued it and we will promptly refund the full amount of the
premium paid. If you have taken a loan during the Free-Look Period, your
Policy Debt will be deducted from the amount refunded. Until the Free-Look
Transfer Date, premiums will be allocated to the Money Market Variable Account
which invests in the Money Market Portfolio of the Fund (except for amounts
allocated to the Loan Account to secure a Policy loan). See "Allocation of
Premiums."
LAPSE
Your Policy will lapse only when your Net Cash Surrender Value is
insufficient to cover Policy charges on a Monthly Payment Date, and a Grace
Period expires without you making a sufficient payment. You must pay during
the Grace Period an amount equal to the amount by which your Cash Surrender
Value less Policy Debt is less than zero plus a minimum of three times the
full charges and deductions due on the Monthly Payment Date when the
insufficiency occurred to avoid termination.
To avoid potential lapse, you may wish to repay a portion of any Policy
Debt. If premium payments have not exceeded the maximum permissible premiums,
you may wish to make a premium payment.
If your Net Cash Surrender Value is insufficient to cover the deductions and
charges on a Monthly Payment Date, we will deduct the amount available to pay
for any portion of the monthly deductions and charges due. Any remaining
Accumulated Value in the Variable Accounts will be transferred to the Money
Market Variable Account. We will notify you (and any assignee of record) of
the payment required to keep the Policy in force. You will then have a "Grace
Period" of 61 days, measured from the date the notice is sent, to make the
required payment. Your Policy will remain in force through the Grace Period.
Failure to make the required payment will result in termination of coverage
under your Policy upon expiration of the Grace Period, and your Policy will
lapse with no value. If the required payment is made during the Grace Period,
any premium paid and any
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Accumulated Value in the Money Market Variable Account will be allocated among
the Investment Options in accordance with your current premium allocation
instructions. Any monthly deductions and charges due will be charged to the
Investment Options on a proportionate basis. If the Insured (or Survivor if
this is a last survivor Policy) dies during the Grace Period, the death
benefit proceeds will equal the amount of the death benefit immediately prior
to the commencement of the Grace Period, reduced by any unpaid monthly
deductions and charges due and any Policy Debt.
REINSTATEMENT
We will reinstate a lapsed Policy (but not a Policy which has been
surrendered for its Net Cash Surrender Value) at any time within three years
after the end of the Grace Period provided we receive the following: (1) your
written application; (2) evidence of insurability satisfactory to us; and (3)
payment of all monthly charges and deductions that were due and unpaid during
the Grace Period, payment of the amount by which Net Cash Surrender Value was
less than zero at the beginning of the Grace Period, and payment of a premium
at least equal to three times the most recent monthly deduction.
When your Policy is reinstated, your Accumulated Value will be equal to your
Accumulated Value on the date of the lapse, plus any additional premium
subject to the following: If your Policy is reinstated after your first
Monthly Payment Date following lapse, your Accumulated Value will be reduced
by the amount of Policy Debt on the date of lapse and no Policy Debt will
exist on the date of the reinstatement. If your Policy is reinstated on or
before your Monthly Payment Date next following lapse, any Policy Debt on the
date of lapse will also be reinstated. No interest on amounts held in the Loan
Account to secure Policy Debt will be paid or credited between lapse and
reinstatement. Reinstatement will be effective as of your Monthly Payment Date
on or next following the date of our approval, and your Accumulated Value
minus Policy Debt will be allocated among the Investment Options in accordance
with your current premium allocation instructions.
LAST SURVIVOR POLICIES
Policies are offered that provide insurance protection, either on the life
of one Insured or--as a last survivor Policy--on the lives of two Insureds. A
last survivor Policy provides a death benefit the proceeds of which are paid
on the death of the Survivor Insured. The other significant differences
between single Insured and last survivor Policies are listed below:
1. The cost of insurance charges under last survivor Policies are different
in that they are determined in a manner that reflects the anticipated
mortality of the two Insureds. See "Charges and Deductions" and the last
survivor illustrations in the "Appendix".
2. In an application for a last survivor Policy, we require evidence of
insurability satisfactory to us for both Insureds.
3. For a last survivor Policy to be reinstated, both Insureds must be alive
on the date of reinstatement.
4. The Policy provisions regarding misstatement of age or sex, suicide and
incontestability apply to both Insureds.
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CHARGES AND DEDUCTIONS
LOAD FROM PREMIUMS
We do not make any deductions from the premium payment before allocating it
to your Accumulated Value.
SURRENDER CHARGE
A Surrender Charge may be assessed upon a surrender or a partial withdrawal
within the first nine Policy Years. The Surrender Charge is assessed against
the portion of the resulting reduction in Accumulated Value considered to be a
return of initial premium. For the purpose of determining the Surrender Charge
only, a reduction in Accumulated Value upon a surrender or withdrawal will be
deemed to be a distribution of earnings from the available Free Withdrawal
Amount, if any, first, a return of initial premium next, then a return of
additional premium, and a distribution from remaining earnings last. The
available Free Withdrawal Amount is the amount available as a Preferred
Withdrawal, if any. The Surrender Charge varies with the Policy Year according
to the following schedule:
<TABLE>
<CAPTION>
SURRENDER
TIME OF WITHDRAWAL CHARGE
------------------ ---------
<S> <C>
Policy Year 1-2 10%
Policy Year 3 9%
Policy Year 4 8%
Policy Year 5 7%
Policy Year 6 6%
Policy Year 7 5%
Policy Year 8 4%
Policy Year 9 3%
Policy Year 10 and thereafter 0%
</TABLE>
In no event will the Surrender Charges imposed exceed the maximum prescribed
by state nonforfeiture laws for life insurance.
Approximately twenty-five percent of the Surrender Charge is assessed to
compensate Pacific Mutual for premium taxes. Approximately seventy-five
percent is assessed to compensate Pacific Mutual for sales expenses. The
Surrender Charge is not assessed against premiums other than the initial
premium.
DEDUCTIONS FROM ACCUMULATED VALUE
The charges described below are deducted from Accumulated Value on the
Policy Date, and on each Monthly Payment date thereafter. Each charge will be
assessed to the Fixed Account and to each Variable Account in proportion to
the Policy's Accumulated Value in that account, unless you specify otherwise
in writing.
Cost of Insurance. A cost of insurance charge is deducted to compensate us
for the anticipated cost of paying death benefits under the Policies. We may
use any profit derived from this charge for any lawful purpose including the
cost of claims processing and investigation.
The guaranteed maximum cost of insurance charge will be the net amount at
risk under the Policy multiplied by the guaranteed maximum cost of insurance
rates shown in your Policy. The net amount at risk is the death benefit less
the Accumulated Value. For the purpose of this charge, the death benefit is
divided by 1.002466 (a discount factor to account for interest deemed to be
earned during the month). Guaranteed maximum cost of insurance rates are based
on the Age, sex (where permissible), and underwriting classification of the
Insured(s). The cost of insurance rates generally increase with the Age of the
Insured(s). If your initial premium was 100% of the Guideline Single Premium
we may charge less than the guaranteed maximum cost of insurance charge.
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Administrative Charge. We assess an administrative charge of 0.00025 (0.30%
annually) of the Accumulated Value in the Variable Accounts and the Fixed
Account for administrative expenses. In addition, if the Accumulated Value is
less than $50,000 on any Policy Anniversary Date a $40 fee is charged on that
Monthly Payment Date.
The administrative charge is to cover administrative expenses in connection
with the Policies, including expenses of underwriting and issuing the Policy,
recordkeeping, determining Policy values and benefits, processing death
benefit claims, processing withdrawals and transfers, preparing reports to
Policy Owners, and overhead costs. We do not expect to profit from this
charge.
Tax Expense Charge. A charge equal to 0.000333333 (0.40% annually) of the
Accumulated Value is assessed to pay applicable state and local premium taxes
and federal taxes under Section 848 of the Code. This charge is eliminated
after 10 Policy Years. The deduction over 10 Policy Years approximates our
average expenses for taxes on premiums. Premium taxes vary from state to
state, and in some instances, among municipalities. We do not expect to profit
from this charge.
Mortality and Expense Risk Charges. A charge equal to 0.00075 (0.90%
annually) of Accumulated Value in the Variable Accounts and the Fixed Account
will be assessed to compensate us for mortality and expense risks assumed.
After 10 Policy Years, this charge is reduced to 0.000583333% (0.70%
annually).
This charge is made to compensate us for assuming certain mortality and
expense risks under the Policies. The mortality risk assumed is that Insureds,
as a group, may live for a shorter period of time than estimated and,
therefore, the cost of insurance charges specified in the Policy will be
insufficient to meet actual claims. The expense risk assumed is that other
expenses incurred in issuing and administering the Policies and operating the
Separate Account will be greater than the charges assessed for such expenses.
We will realize a gain from this charge to the extent it is not needed to
provide the mortality benefits and expenses under the Policies, and will
realize a loss to the extent the charge is not sufficient. We may use any
profit derived from this charge for any lawful purpose, including any
distribution expenses not covered by the Surrender Charge.
OTHER CHARGES
We may charge the Variable Accounts for the federal income taxes incurred by
us that are attributable to the Separate Account and its Variable Accounts. No
such charge is currently assessed. See "Charge for Pacific Mutual Income
Taxes".
We will bear the operating expenses of the Separate Account. Each Variable
Account purchases shares of the corresponding Portfolio of the underlying
Fund. The Fund and each of its Portfolios incur certain charges including the
investment advisory fee and certain operating expenses. The Fund is governed
by its Board of Trustees. The Fund's expenses are not fixed or specified under
the terms of the Policy, and they may vary from year to year. The advisory
fees and other expenses are more fully described in the prospectus of the
Fund.
GUARANTEE OF CERTAIN CHARGES
We guarantee that certain charges will not increase, including the
guaranteed rates for the cost of insurance, the administrative charge, the tax
charge, and the charge for mortality and expense risk.
VARIATIONS IN CHARGES
We may reduce or waive the amount of the Surrender Charge or administrative
charges, or other charges for Policies where the expenses associated with the
sale of the Policy or the administrative costs associated with the Policy are
reduced for reasons such as the amount of the initial premium payment, the
amounts of projected premium payments, or that the Policy is sold in
connection with a group or sponsored arrangement. We may also reduce or waive
these charges on Policies sold to the directors or employees of Pacific Mutual
or any of its affiliates or to trustees or any employees of the Fund.
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OTHER INFORMATION
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion provides a general description of the federal
income tax considerations relating to the Policy. This discussion is based
upon our understanding of the present federal income tax laws as they are
currently interpreted by the IRS. This discussion is not intended as tax
advice. Because of the inherent complexity of such laws and the fact that tax
results will vary according to the particular circumstances of the individual
involved, tax advice may be needed by a person contemplating the purchase of
the Policy. These comments concerning federal income tax consequences are not
an exhaustive discussion of all tax questions that might arise with respect to
the Policy. Special rules which are not discussed herein may apply in certain
situations. Moreover, no representation is made as to the likelihood of
continuation of federal income tax or estate tax laws or of the current
interpretations by the IRS or the courts. Future legislation may adversely
affect the tax treatment of life insurance policies or other tax rules
described in this discussion or that relate directly or indirectly to life
insurance policies. Finally, these comments do not take into account any
considerations relating to state or local income or other taxes which may be
involved in the purchase or ownership of the Policy.
While we believe that the Policy meets the statutory definition of life
insurance and hence will receive federal income tax treatment consistent with
that of fixed life insurance the area of the tax law relating to the
definition of life insurance does not explicitly address all relevant issues
(including, for example, the treatment of substandard risk Policies). We
reserve the right to make changes to the Policy if changes are deemed
appropriate by us to attempt to assure qualification of the Policy as a life
insurance contract. If a Policy were determined not to qualify as life
insurance, the Policy would not provide the tax advantages normally provided
by life insurance. The discussion below summarizes the tax treatment of life
insurance contracts.
The death benefit under a Policy should be excludable from the gross income
of the Beneficiary under Section 101(a)(1) of the IRC for purposes of the
regular federal income tax and you generally should not be deemed to be in
constructive receipt of the cash values, including increments thereof, under
your Policy until a full or partial surrender thereof, or lapse of your
Policy, or until receipt of deemed distributions (including, in the case of a
modified endowment contract, policy loans). Prospective Owners that intend to
use Policies to fund deferred compensation arrangements for their employees
are urged to consult their tax advisers with respect to the tax consequences
of such arrangements. Prospective corporate Owners should consult their tax
advisers about the treatment of life insurance in their particular
circumstances for purposes of the alternative minimum tax applicable to
corporations and the environmental tax under IRC section 59A. Changing the
Policy Owner may also have tax consequences. Exchanging a Policy for another
involving the same Insured generally will not result in the recognition of
gain or loss according to Section 1035(a) of the IRC. Changing the Insured
under a Policy will, however, not be treated as a tax-free exchange under
Section 1035, but rather as a taxable exchange.
Diversification Requirements. To comply with regulations under Section
817(h) of the IRC, each Portfolio of the Fund will be required to diversify
its investments. For details on these diversification requirements, see "What
is the Federal Income Tax Status of the Fund" in the Fund's prospectus.
The IRS has stated in published rulings that a variable contract owner will
be considered the owner of separate account assets if the contract owner
possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. In those circumstances, income
and gains from the separate account assets would be includable in the variable
policy owner's gross income. The Treasury Department also announced, in
connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account may
cause the investor [i.e., the Policy Owner], rather than the insurance
company, to be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of regulations
or rulings on the "extent to which policyholders may direct their investments
to particular subaccounts without being treated as owners of the underlying
assets." As of the date of this prospectus, no such guidance has been issued.
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The ownership rights under your Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, you have additional flexibility in allocating premium payments and
Policy Values. These differences could result in you being treated as the
owner of your Policy's pro rata portion of the assets of the Separate Account.
In addition, we do not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. We therefore reserve the right to modify the Policy, as deemed
appropriate by us, to attempt to prevent you from being considered the owner
of your Policy's pro rata share of the assets of the Separate Account.
Moreover, in the event that regulations are adopted or rulings are issued,
there can be no assurance that the Portfolio will be able to operate as
currently described in the Prospectus, or that the Fund will not have to
change any Portfolio's investment objective or investment policies.
Modified Endowment Contracts. IRC Section 7702A defines a class of insurance
contracts referred to as modified endowment contracts. Under this provision,
the Policies will be treated for federal tax purposes in one of two ways. It
is expected that most of the Policies will be modified endowment contracts.
A life insurance contract becomes a "modified endowment contract" if, at any
time during the first seven contract years, the sum of actual premiums paid
exceeds the sum of the "seven-pay premium." Generally, the "seven-pay premium"
is the level annual premium, such that if paid for each of the first seven
years, will fully pay for all future death and endowment benefits under a
contract. For example, if the "seven-pay premium" were $1,000, the maximum
premiums that could be paid during the first seven years to avoid "modified
endowment" treatment would be $1,000 in the first year; $2,000 through the
first two years; and $3,000 through the first three years, etc.
Pre-death distributions from modified endowment contracts may give rise to
taxable income. Upon full surrender of your Policy, you would recognize
ordinary income for federal income tax purposes equal to the amount by which
the Net Cash Surrender Value plus Debt exceeds the investment in your Policy
(usually the premiums paid plus pre-death distributions that were taxable less
any premiums previously recovered that were excludable from gross income).
Upon partial withdrawals and Policy loans, you would recognize ordinary income
to the extent allocable to income (which includes all previously non-taxed
gains) on your Policy. The amount allocated to income is the amount by which
the Accumulated Value of your Policy exceeds investment in the Policy
immediately before the distribution. Under a tax law provision, if two or more
policies which are classified as modified endowment contracts are purchased
from any one insurance company, including Pacific Mutual, during any calendar
year, all such policies will be aggregated for purposes of determining the
portion of the pre-death distributions allocable to income on the policies and
the portion allocable to investment in the policies.
If you assign or pledge (or agree to assign or pledge) any portion of the
value of a modified endowment contract, such amount or portion generally will
be treated as a pre-death distribution.
The portion of pre-death distributions that are treated as taxable income
will also be subject to an additional income tax of 10%, except where the
distribution (1) occurs on or after the date on which the taxpayer attains age
59 1/2, (2) is attributable to the taxpayer becoming disabled, or (3) occurs
as part of a series of substantially equal (annual or more frequent) periodic
payments made for the life (or life expectancy) of the taxpayer or the joint
lives (or joint life expectancies) of the taxpayer and his or her beneficiary.
With respect to Policy loans, it is unclear whether interest paid (or
accrued by an accrual basis taxpayer) constitutes interest for federal income
tax purposes. Tax law provisions may limit the deduction of interest payable
on loan proceeds that are used to purchase or carry certain life insurance
policies.
Policies that are Not Modified Endowment Contracts. Policies entered into
before June 21, 1988, may not be subject to treatment as modified endowment
contracts even though they fail to meet the seven-pay premium test provided
that such Policies do not experience a "material change." The definition of
"material change" is complex, but, in general, if you do not pay any further
premium or institute any changes to the death benefits, there will be no
material change. In this connection, an additional premium payment necessary
to keep your
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Policy in force should not constitute a material change so long as the death
benefit under the Policy does not increase. If a Policy that was not a
modified endowment contract becomes one, under Treasury Department regulations
which may be prescribed, pre-death distributions received in anticipation of a
failure of a Policy to meet the seven-pay premium test will be treated as pre-
death distributions from a modified endowment contract (and, therefore, will
be taxable as described above) even though, at the time of the
distribution(s), the Policy was not yet a modified endowment contract. For
this purpose, pursuant to the IRC, any distribution made within two years
before the Policy is classified as a modified endowment contract shall be
treated as being made in anticipation of the Policy's failing to meet the
seven-pay premium test.
Pre-death distributions from Policies that are not modified endowment
contracts may also give rise to taxable income. Upon full surrender or
maturity of your Policy for its Net Cash Surrender Value, the excess, if any,
of the Net Cash Surrender Value plus any outstanding Policy Debt over the cost
basis under your Policy will be treated as ordinary income for federal income
tax purposes. Your Policy's cost basis will usually equal the premiums paid
less any premiums previously recovered in partial withdrawals. Under Section
7702 of the IRC, if a partial withdrawal is accompanied by a reduction in
benefits under a life insurance contract, special rules apply to determine
whether part or all of the cash received is paid out of the income of the
contract and is taxable. Cash distributed to you on partial withdrawals
occurring more than 15 years after the Policy Date will be taxable as ordinary
income to you to the extent that it exceeds the cost basis under your Policy.
We also believe that loans received under Policies that are not modified
endowment contracts will be treated as Debt of the Owner, and that no part of
any loan under the Policy will constitute income to you unless your Policy is
surrendered or lapses. However, interest on Policy Debt paid (or accrued by an
accrual basis taxpayer) may be deductible. Tax law provisions may limit the
deduction of interest payable on loan proceeds that are used to purchase or
carry certain life insurance policies.
Last Survivor Policies. While we believe that last survivor Policies meet
the statutory definition of life insurance under Section 7702 of the IRC and
hence will receive federal income tax treatment consistent with that of
traditional fixed life insurance, the area of the tax law relating to the
definition of life insurance does not explicitly address all relevant issues
relating to last survivor life insurance policies. We reserve the right to
make changes to the last survivor Policy if changes are deemed appropriate by
us to attempt to assure qualification of the last survivor Policy as a life
insurance contract. If a last survivor Policy were determined not to qualify
as life insurance, the Policy would not provide the tax advantages normally
provided by life insurance, including the excludability of the death benefit
from the gross income of the Beneficiary.
Other. Another provision of the tax law deals with allowable charges for
mortality costs and other expenses that are used in making calculations to
determine whether a contract qualifies as life insurance for federal income
tax purposes. These calculations must be based upon reasonable mortality
charges and other charges reasonably expected to be actually paid. The
Treasury Department has issued proposed regulations and is expected to
promulgate temporary or final regulations governing reasonableness standards
for mortality charges. While we believe under IRS pronouncements currently in
effect, that the mortality costs and other expenses used in making
calculations to determine whether the Policy qualifies as life insurance meet
the current requirements, complete assurance cannot be given that the IRS
would necessarily agree. It is possible that future regulations will contain
standards that would require us to modify our mortality charges used for the
purpose of the calculations in order to retain the qualification of the Policy
as life insurance for federal income tax purposes, and we reserve the right to
make any such modifications.
Federal estate and gift and state and local estate, inheritance, and other
tax consequences of ownership or receipt of Policy proceeds depend on the
jurisdiction and the circumstances of each Owner or Beneficiary.
For complete information on federal, state, local and other tax
considerations, a qualified tax adviser should be consulted.
Accelerated Living Benefits. An Accelerated Living Benefit Rider is
available in connection with the Policy. Benefits under the Accelerated Living
Benefit Rider may be taxable. The IRS has issued proposed regulations and is
expected to issue final regulations in the near future under which accelerated
living benefits that meet the
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requirements set forth in the regulations can be received without incurring a
Federal income tax. The precise requirements which will be incorporated in the
final regulations are not known.
In some cases, there may be a question as to whether a life insurance policy
that has an accelerated living benefit rider can meet certain technical
aspects of the definition of "life insurance contract" under the Code. The IRS
regulations mentioned above are expected to set forth the requirements under
which a policy with an accelerated living benefits rider will be deemed to
meet the definitional requirements of a life insurance contract. Pacific
Mutual reserves the right to (but is not obligated to) modify the Rider to
conform with requirements under the final regulations. Owners considering
adding an Accelerated Living Benefit Rider or exercising rights under the
rider should first consult a qualified tax advisor.
PACIFIC MUTUAL DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY
POLICY.
CHARGE FOR PACIFIC MUTUAL INCOME TAXES
In the provisions of the IRC on life insurance, variable life insurance is
treated in a manner consistent with fixed life insurance. We will periodically
review the question of a charge to the Separate Account or a Variable Account
for our federal income taxes. A charge may be made for any federal income
taxes incurred by us that are attributable to the Separate Account or a
Variable Account. This might become necessary if our tax treatment is
ultimately determined to be other than what we currently believe it to be, if
there are changes made in the federal income tax treatment of variable life
insurance at the insurance company level, or if there is a change in our tax
status.
Under current laws, we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, we
reserve the right to charge the Account for such taxes, if any, attributable
to the Account.
VOTING OF FUND SHARES
In accordance with its view of present applicable law, we will exercise
voting rights attributable to the shares of each Portfolio of the Fund held in
the Variable Accounts at any regular and special meetings of the shareholders
of the Fund on matters requiring shareholder voting. We will exercise these
voting rights based on instructions received from persons having the voting
interest in corresponding Variable Accounts of the Separate Account. However,
if the Investment Company Act of 1940 or any regulations thereunder should be
amended, or if the present interpretation thereof should change, and as a
result we determine that we are permitted to vote the shares of the Fund in
its own right, we may elect to do so.
The Owner is the person having the voting interest under a Policy. Unless
otherwise required by applicable law, the number of votes as to which you will
have the right to instruct will be determined by dividing your Accumulated
Value in a Variable Account by the net asset value per share of the
corresponding Portfolio of the Fund. Fractional votes will be counted. The
number of votes as to which you will have the right to instruct will be
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the meeting of the Fund. If
required by the Securities and Exchange Commission, we reserve the right to
determine in a different fashion the voting rights attributable to the shares
of the Fund based upon instructions received from Policy Owners. Voting
instructions may be cast in person or by proxy.
Voting rights attributable to your Accumulated Value held in each Variable
Account for which no timely voting instructions are received will be voted by
us in the same proportion as the voting instructions which are received in a
timely manner for all policies participating in that Variable Account. We will
also exercise the voting rights from assets in each Variable Account which are
not otherwise attributable to Policy Owners, if any, in the same proportion as
the voting instructions which are received in a timely manner for all Policies
participating in that Variable Account. If we hold shares of a Portfolio in
our General Account and/or if any of our non-insurance subsidiaries holds
shares of a Portfolio, such shares will be voted in the same proportion as
votes cast by the Separate Account and our other separate accounts, in the
aggregate.
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DISREGARD OF VOTING INSTRUCTIONS
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that voting rights be
exercised so as to cause a change in the subclassification or investment
objective of a Portfolio or to approve or disapprove an investment advisory
contract. In addition, we may disregard voting instructions of changes
initiated by Policy Owners in the investment policy or the investment adviser
(or portfolio manager) of a Portfolio, provided that our disapproval of the
change is reasonable and is based on a good faith determination that the
change would be contrary to state law or otherwise inappropriate, considering
the Portfolio's objectives and purpose, and considering the effect the change
would have on us. In the event we do disregard voting instructions, a summary
of that action and the reasons for such action will be included in the next
report to Owners.
CONFIRMATION STATEMENTS AND OTHER REPORTS TO OWNERS
We will send you confirmations for premium payments and transfers, loans,
loan repayments, loan interest transfers, partial withdrawals, a surrender,
and on payment of any death benefit proceeds. Confirmation of scheduled
transactions under Dollar Cost Averaging, portfolio rebalancing, and monthly
deductions will appear on your quarterly statement.
A statement will be sent quarterly to you setting forth a summary of the
transactions which occurred during the quarter, indicating the death benefit,
Accumulated Value, Cash Surrender Value, and any Policy Debt as of the end of
each quarter. In addition, the statement will indicate the allocation of
Accumulated Value among the Investment Options and any other information
required by law.
You will also be sent an annual report containing financial statements for
the Separate Account and an annual and a semiannual report for the Fund which
will include a list of the portfolio securities of the Fund, as required by
the Investment Company Act of 1940, and/or such other reports as may be
required by federal securities laws.
SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with the laws as then in effect,
to make additions to, deletions from, or substitutions for the securities that
are held by the Separate Account or any Variable Account or that the Separate
Account or any Variable Account may purchase. If shares of any or all of the
Portfolios of the Fund should no longer be available for investment, or if, in
the judgment of Pacific Mutual's management, further investment in shares of
any or all Portfolios of the Fund should become inappropriate in view of the
purposes of the Policies, we may substitute shares of another Portfolio of the
Fund or of a different fund for shares already purchased, or to be purchased
in the future, under the Policies.
Where required, we will not substitute any shares attributable to your
interest in a Variable Account or the Separate Account without notice or prior
approval of the Securities and Exchange Commission and without following the
filing or other procedures established by applicable state insurance
regulators.
We also reserve the right to establish additional Variable Accounts of the
Separate Account, each of which would invest in a new Portfolio of the Fund,
or in shares of another investment company, a portfolio thereof, or
suitable investment vehicle, with a specified investment objective. New
Variable Accounts may be established when, in our sole discretion, marketing
needs or investment conditions warrant, and any new Variable Accounts will be
made available to existing Policy Owners on a basis to be determined by us. We
may also eliminate one or more Variable Accounts if, in our sole discretion,
marketing, tax, or investment conditions so warrant.
In the event of any such substitution or change, we may, by appropriate
endorsement, make such changes in this and other policies as may be necessary
or appropriate to reflect such substitution or change. If deemed by us to be
in the best interests of persons having voting rights under the Policies, the
Separate Account may be operated as a management investment company under the
Investment Company Act of 1940 or any other form permitted by law; it may be
deregistered under that Act in the event such registration is no longer
required; or it
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may be combined with other separate accounts of Pacific Mutual or an affiliate
thereof. Subject to compliance with applicable law, we also may combine one or
more Variable Accounts and may establish a committee, board, or other group to
manage one or more aspects of the operation of the Separate Account.
CHANGES TO COMPLY WITH LAW
We reserve the right to make any changes without your consent to the
provisions of the Policy to comply with, or give you the benefit of, any
Federal or State statute, rule, or regulation, including but not limited to
requirements for life insurance contracts under the IRC of the United States
or regulations thereunder, or any state statute or regulation.
PERFORMANCE INFORMATION
Performance information for the Variable Accounts or the Fund may appear in
advertisements, sales literature, or reports to Policy Owners or prospective
purchasers. Performance information in advertisements or sales literature may
be expressed in any fashion permitted under applicable law, which may include
presentation of a change in a Policy Owner's Accumulated Value attributable to
the performance of one or more Variable Accounts, or as a change in a Policy
Owner's death benefit. Performance quotations may be expressed as a change in
a Policy Owner's Accumulated Value over time or in terms of the average annual
compounded rate of return on the Policy Owner's Accumulated Value based upon a
hypothetical Policy in which premiums have been allocated to a particular
Variable Account over certain period of time that will include one year or
from the commencement of operation of the Variable Account. If a Portfolio has
been in existence for a longer period of time than its corresponding Variable
Account, we may also present hypothetical returns that the Variable Account
would have achieved had it invested in its corresponding Portfolio for periods
through the commencement of operation of the Portfolio. For the period that a
particular Variable Account has been in existence, the performance will be
actual performance and not hypothetical in nature. Any such quotation may
reflect the deduction of all applicable charges to the Policy including
premium load, the cost of insurance, the administrative charge, and the
mortality and expense risk charge. The cost of insurance charge varies
according to the Insured (or joint Insureds if a last survivor Policy), and
therefore the cost of insurance charge reflected in performance for the
hypothetical Policy is based on the hypothetical Insured (or joint Insureds)
assumed. The quotation may also reflect the deduction of the surrender charge,
if applicable, by assuming a surrender at the end of the particular period,
although other quotations may simultaneously be given that do no assume a
surrender and do not take into account deduction of the surrender charge or
other charges.
Performance information for a Variable Account or a Portfolio of the Fund
may be compared, in advertisements, sales literature, and reports to Policy
Owners to: (i) other variable life separate accounts, mutual funds, or
investment products tracked by research firms, ratings services, companies,
publications, or persons who rank separate accounts or investment products on
overall performance or other criteria; and (ii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from the purchase of
a Policy. Reports and promotional literature may also contain our rating or a
rating of our claim-paying ability as determined by firms that analyze and
rate insurance companies and by nationally recognized statistical rating
organizations.
Performance information for any Variable Account reflects only the
performance of a hypothetical Policy whose Accumulated Value is allocated to
the Variable Account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies, characteristics and quality of the
Portfolio of the Fund in which the Variable Account invests, and the market
conditions during the given period of time, and should not be considered as a
representation of what may be achieved in the future.
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THE FIXED ACCOUNT
You may allocate all or a portion of your premium payments and transfer
Accumulated Value to the Fixed Account. Amounts allocated to the Fixed Account
become part of our General Account, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in
the Fixed Account have not been registered under the Securities Act of 1933
and the Fixed Account has not been registered as an investment company under
the Investment Company Act of 1940. Accordingly, neither the Fixed Account nor
any interest therein is generally subject to the provisions of these Acts and,
as a result, the staff of the Securities and Exchange Commission has not
reviewed the disclosure in this prospectus relating to the Fixed Account.
Disclosures regarding the Fixed Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in the prospectus. For more
details regarding the Fixed Account, see the Policy itself.
GENERAL DESCRIPTION
Amounts allocated to the Fixed Account become part of our General Account.
Subject to applicable law, we have sole discretion over the investment of the
assets of our General Account.
You may elect to allocate premium payments to the Fixed Account, the
Variable Account, or both. You may also transfer Accumulated Value from the
Variable Accounts to the Fixed Account, or from the Fixed Account to the
Variable Accounts, subject to the limitations described below. We guarantee
that the Accumulated Value in the Fixed Account will be credited with interest
at a rate of 0.24663% per month, compounded monthly, for an effective annual
rate of 3%. We guarantee that such interest will be paid regardless of our
actual investment experience for the Fixed Account. In addition, we may in our
sole discretion pay current interest in excess of the 3% guarantee. The
initial rate of interest, or 6% if less, will be guaranteed until the first
Policy Anniversary. Current interest rates will be effected thereafter on each
Policy Anniversary. Once declared for a Policy on a Policy's Anniversary, the
current rates are guaranteed for one year until the next Policy Anniversary.
The portion of your Accumulated Value in the Loan Account that is used to
secure Policy Debt will be credited with interest at a rate of 0.36748% per
month, compounded monthly, for an effective annual rate of 4.5%.
We bear the full investment risk for the Accumulated Value allocated to the
Fixed Account.
The death benefit under the Policy will be determined in the same fashion
for an Owner who has Accumulated Value in the Fixed Account as for an Owner
who has Accumulated Value in the Variable Accounts.
The Surrender Charge and the Policy charges, cost of insurance,
administrative, tax, and mortality and expense risk, will be the same whether
you transfer Accumulated Value to the Fixed Account or to the Variable
Accounts. The administrative charges and mortality and expense risk charges
will not be assessed against the Loan Account, and any amounts that Pacific
Mutual pays for income taxes allocable to the Variable Accounts will not be
charged against the Fixed Account. In addition, the investment advisory fees
and operating expenses paid by the Fund will not be paid directly or
indirectly by you to the extent the Accumulated Value is allocated to the
Fixed Account; however, to such extent, you will not participate in the
investment experience of the Variable Accounts.
TRANSFERS, SURRENDERS, WITHDRAWALS, AND POLICY LOANS
Amounts may be transferred from the Variable Accounts to the Fixed Account
and from the Fixed Account to the Variable Accounts, subject to the following
limitations. You may not make more than one transfer from the Fixed Account to
the Variable Accounts in any twelve month period. Further, you may not
transfer more than the greater of 25% of your Accumulated Value in the Fixed
Account or $5,000 in any year. Currently there is no charge imposed upon
transfers; however, we reserve the right to assess such a charge in the future
and to impose other limitations on the number of transfers, the amount of
transfers, and the amount remaining in the Fixed Account or Variable Accounts
after a transfer. Transfers from the Variable Accounts to the Fixed Account
may only be made in the Policy Month preceding a Policy Anniversary, except
that you may make such a transfer at any time during the first 18 Policy
Months. No transfers may be made if the Policy is in the grace period and the
required premium has not been paid.
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You may also make full surrenders and partial withdrawals to the same extent
as a Policy Owner who has allocated Accumulated Value to the Variable
Accounts. See "Surrender"and "Partial Withdrawals". In addition, to the same
extent as Policy Owners with Accumulated Value in the Variable Accounts, you
may obtain a Policy Loan and borrow up to 100% of your Accumulated Value in
the Fixed Account (50% in the first Policy Year) less Policy Debt. See "Policy
Loans". Transfers, surrenders, and withdrawals payable from the Fixed Account,
and the payment of Policy loans allocated to the Fixed Account may be delayed
for up to six months.
MORE ABOUT THE POLICY
OWNERSHIP
The Policy Owner is the individual named as such in the application or in
any later change shown in our records. While the Insured is living, the Policy
Owner alone has the right to receive all benefits and exercise all rights that
the Policy grants or we allow.
Joint Owners. If more than one person is named as Policy Owner, they are
joint Owners. Any Policy transaction requires the signature of all persons
named jointly. Unless otherwise provided, if a joint Owner dies, ownership
passes to the surviving joint Owner(s). When the last joint Owner dies,
ownership passes through that person's estate, unless otherwise provided.
BENEFICIARY
The Beneficiary is the individual named as such in the application or any
later change shown in our records. You may change the Beneficiary at any time
during the life of the Insured (or either Insured, if this is a last survivor
Policy) by written request on forms provided by us, which must be received by
us at our Home Office. The change will be effective as of the date this form
is signed. Contingent and/or concurrent Beneficiaries may be designated. You
may designate a permanent Beneficiary, whose rights under the Policy cannot be
changed without his or her consent. Unless otherwise provided, if no
designated Beneficiary is living upon the death of the Insured (or Survivor,
if this is a last survivor Policy), you or your estate is the Beneficiary.
We will pay the death benefit proceeds to the Beneficiary. Unless otherwise
provided, in order to receive proceeds at the Insured's (or Survivor's, if
this is a last survivor Policy) death, the Beneficiary must be living at the
time of the Insured's (or Survivor's) death.
THE CONTRACT
The Policy is a contract between you and us. The entire contract consists of
the Policy, a copy of the initial application, all subsequent applications to
change the Policy, any endorsements, any Riders and Benefits and all
additional Policy information sections (specification pages) added to the
Policy.
INSTRUCTIONS TO PACIFIC MUTUAL
The effective date of certain notices or of instructions is determined by
the date and time on which Pacific Mutual "receives" the notice or
instructions. Unless otherwise stated, we "receive" this information only when
it arrives "properly completed" at our Home Office. Premium payments after
your initial premium payment, loan requests, loan repayments, transfer
requests, and withdrawal requests we receive before 4:00 p.m. Eastern time (or
the close of the New York Stock Exchange, if earlier) will normally be
effective as of the end of Valuation Day that we receive them "properly
completed," unless the transaction or event is scheduled to occur on another
day. Transactions are effected as of the end of the Valuation Date on which
they are effective. "Properly completed" may require, among other things, a
signature guarantee or other verification of authenticity. Requests regarding
death benefits must be accompanied by both proof of death and instructions
regarding payment satisfactory to us. You should call your registered
representative or Pacific Mutual if you have questions regarding the required
form of a request.
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PAYMENTS
We ordinarily will pay death benefit proceeds, Net Cash Surrender Value on
surrender, Partial Withdrawals, and loan proceeds based on allocations made to
the Variable Accounts, and will effect a transfer between Variable Accounts or
from a Variable Account to the Fixed Account within seven days after we
receive all information needed to process a payment or transfer or, if sooner,
other period required by law.
However, we can postpone the calculation or payment of such a payment or
transfer of amounts based on investment performance of the Variable Accounts
if:
. The New York Stock Exchange is closed on other than customary weekend and
holiday closings or trading on the New York Stock Exchange is restricted
as determined by the SEC; or
. An emergency exists, as determined by the SEC, as a result of which
disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the Account's net
assets; or
. The SEC by order permits postponement for the protection of Policy Owners.
ASSIGNMENT
You may assign a Policy as collateral security for a loan or other
obligation. No assignment will bind us unless the original, or a copy, is
received and recorded by our Home Office. An assignment does not change the
ownership of the Policy. However, after an assignment, the rights of any Owner
or Beneficiary will be subject to the assignment. The entire Policy, including
any attached option or Rider, Benefit, and Endorsement, will be subject to the
assignment. We will rely solely on the assignee's statement as to the amount
of the assignee's interest. We will not be responsible for the validity of any
assignment. Unless otherwise provided, the assignee may exercise all rights
this Policy grants except (a) the right to change the Owner or Beneficiary;
and (b) the right to elect a payment option. Assignment of a Policy that is a
modified endowment contract may generate taxable income. See "Federal Income
Tax Considerations".
ERRORS ON THE APPLICATION
If the Age of an Insured has been misstated, the death benefit under this
Policy will be the greater of that which would be purchased by the original
initial premium, using the Guideline Single Premium at issue for the correct
Age and the original elected percent of the Guideline Single Premium, or the
death benefit derived by multiplying Accumulated Value by the specified
percentage for the correct Age.
INCONTESTABILITY
We may contest the validity of this Policy if any material misstatements are
made in the application. However, this Policy will be incontestable after the
expiration of the following: the initial Face Amount cannot be contested with
respect to an Insured after the Policy has been in force during that Insured's
lifetime for two years from the Policy Date.
PAYMENT IN CASE OF SUICIDE
If the Insured (or either Insured, if this is a last survivor Policy) dies
by suicide, while sane or insane, within two years from the Policy Date, we
will limit the death benefit proceeds to the premium payments less any Policy
Debt and less the amount of any partial withdrawals.
PARTICIPATING
The Policy is participating and will share in our surplus earnings. However,
the current dividend scale is zero and we do not anticipate that dividends
will be paid. Any dividends that do become payable will be paid in cash.
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POLICY ILLUSTRATIONS
Upon request, we will send you an illustration of estimated future benefits
under the Policy based on both guaranteed and current cost factor assumptions.
However, we reserve the right to charge a fee for requests for illustrations
in excess of one per Policy Year.
PAYMENT PLAN
Surrender or withdrawal benefits may be used to purchase a payment plan
providing monthly income for the lifetime of the Insured, and death benefit
proceeds may be used to purchase a payment plan providing monthly income for
the lifetime of the Beneficiary. The monthly payments consisting of proceeds
plus interest will be paid in equal installments for at least ten years. The
purchase rates for the payment plan are guaranteed not to exceed those shown
in the Policy, but current rates that are lower (i.e., providing greater
income) may be established by us from time to time. This benefit is not
available if the income would be less than $25 a month. Surrender, withdrawal,
or death benefit proceeds may be used to purchase any other Payment Plan that
we make available at that time.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, you may elect to add an Accelerated Living
Benefit Rider at any time while this Policy is in force. This Rider provides
Policy Owner access to a portion of the Policy's proceeds if the Insured (or
the Survivor Insured in the case of a last survivor Policy) has been diagnosed
with a terminal illness resulting in a life expectancy of six months or less
(or such other period that may be required by state insurance authorities).
LIFE INSURANCE RETIREMENT PLANS
Any Policy Owners or applicants who wish to consider using the Policy as a
funding vehicle for (non-qualified) retirement purposes may obtain additional
information from us. An Owner could pay premiums under a Policy for a number
of years, and upon retirement could utilize a Policy's loan and partial
withdrawal features to access Accumulated Value as a source of retirement
income for a period of time. This use of a Policy does not alter an Owner's
rights or our obligations under a Policy; the Policy would remain a life
insurance contract that, so long as it remains in force, provides for a death
benefit payable when the Survivor dies.
Ledger illustrations are available upon request that portray how the Policy
can be used as a funding mechanism for (non-qualified) retirement plans,
referred to herein as "life insurance retirement plans," for individuals.
Ledger illustrations provided upon request show the effect on Accumulated
Value, Net Cash Surrender Value, and the net death benefit of premiums paid
under a Policy and Partial Withdrawals and loans taken for retirement income;
or reflecting allocation of premiums to specified Variable Accounts. This
information will be portrayed at hypothetical rates of return that are
requested. Charts and graphs presenting a comparison of retirement strategies
will also be furnished upon request. Any graphic presentations and retirement
strategy charts must be accompanied by a corresponding ledger illustration;
ledger illustrations must always include or be accompanied by comparable
information that is based on guaranteed cost of insurance rates and that
presents a hypothetical gross rate of return of 0%. Retirement illustrations
will not be furnished with a hypothetical gross rate of return in excess of
12%.
The hypothetical rates of return in ledger illustrations are illustrative
only and should not be interpreted as a representation of past or future
investment results. Policy values and benefits shown in the ledger
illustrations would be different if the gross annual investment rates of
return were different from the hypothetical rates portrayed, if premiums were
not paid when due, and loan interest was paid when due. Withdrawals or loans
may have an adverse effect on Policy benefits.
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RISKS OF LIFE INSURANCE RETIREMENT PLANS
Using the Policy as a funding vehicle for retirement income purposes
presents several risks, including the risk that if the Policy is
insufficiently funded in relation to the income stream from the Policy, the
Policy can lapse prematurely and result in significant income tax liability to
the Owner in the year in which the lapse occurs. Other risks associated with
borrowing from the Policy also apply. Loans will be automatically repaid from
the gross death benefit at the death of the Survivor, resulting in the
estimated payment to the Beneficiary of the net death benefit, which will be
less than the gross death benefit and may be less than the Face Amount. Upon
surrender, the loan will be automatically repaid, resulting in the payment to
you of the Net Cash Surrender Value. Similarly, upon lapse, the loan will be
automatically repaid. The automatic repayment of the loan upon lapse or
surrender will cause the recognition of taxable income to the extent that Net
Cash Surrender Value plus the amount of the repaid loan exceeds your basis in
the Policy. Thus, under certain circumstances, surrender or lapse of the
Policy could result in tax liability to you. In addition, to reinstate a
lapsed Policy, you would be required to make certain payments as described
under "Reinstatement". Thus, you should be careful to fashion a life insurance
plan so that the Policy will not lapse prematurely under various market
scenarios as a result of withdrawals and loans taken from your Policy.
The Policy will lapse if your Net Cash Surrender Value less Policy Debt is
insufficient to cover the current monthly deduction on any Monthly Payment
Date, and a grace period expires without your making a sufficient payment. To
avoid lapse of your Policy, it is important to fashion a payment stream that
does not leave your Policy with insufficient Accumulated Value. Determinations
as to the amount to withdraw or borrow each year warrant careful
consideration. Careful consideration should also be given to any assumptions
respecting the hypothetical rate of return, to the duration of withdrawals and
loans, and to the amount of Accumulated Value that should remain in your
Policy upon its maturity. Poor investment performance can contribute to the
risk that your Policy may lapse. In addition, the cost of insurance generally
increases with the Age of the Insured, which can further erode existing
Accumulated Value and contribute to the risk of lapse.
Further, interest on a Policy loan is due to us for any Policy Year on the
Policy Anniversary. If this interest is not paid when due, it is added to the
amount of the outstanding Policy Debt, and interest will begin accruing
thereon from that date. This can have a compounding effect, and to the extent
that the outstanding loan balance exceeds your basis in the Policy, the
amounts attributable to interest due on the loans can add to your federal (and
possibly state) income tax liability.
You should consult with your attorney and financial advisers in designing a
life insurance retirement plan that is suitable. Further, you should continue
to monitor the Accumulated Value net of loans remaining in a Policy to assure
that the Policy is sufficiently funded to continue to support the desired
income stream and so that it will not lapse. In this regard, you should
consult your periodic statements to determine the amount of their remaining
Accumulated Value minus the outstanding loan balance. Illustrations showing
the effect of charges under the Policy upon existing Accumulated Value or the
effect of future withdrawals or loans upon the Policy's Accumulated Value and
death benefit are available from your agent. Consideration should be given
periodically to whether the Policy is sufficiently funded so that it will not
lapse prematurely.
Because of the potential risks associated with borrowing from a Policy, use
of the Policy in connection with a life insurance retirement plan may not be
suitable for all Policy Owners. These risks should be carefully considered
before borrowing from the Policy to provide an income stream.
DISTRIBUTION OF THE POLICY
Pacific Mutual Distributors, Inc. ("PMD"), a wholly-owned subsidiary of
Pacific Mutual, is Principal Underwriter of the Policies. PMD is registered as
a broker-dealer with the SEC and is a member of the National Association of
Securities Dealers ("NASD"). Pacific Mutual pays PMD for acting as Principal
Underwriter under a Distribution Agreement. PMD's principal business address
is 700 Newport Center Drive, Newport Beach, California 92660.
33
<PAGE>
Pacific Mutual and PMD have sales agreements with various broker-dealers
under which the Policy will be sold by registered representatives of the
broker-dealers. The registered representatives are required to be authorized
under applicable state regulations to sell variable life insurance. The
broker-dealers are required to be registered with the SEC and members of the
NASD. We pay compensation directly to broker-dealers for promotion and sales
of the Policy. The compensation payable to a broker-dealer by Pacific Mutual
and PMD for sales of the product may vary with the Sales Agreement, but is not
expected to exceed 6.75% of the initial premium payment. Broker-dealers may
also receive an annual renewal compensation of approximately 0.25% of
Accumulated Value less Policy Debt. In addition, we may also pay override
payments, expense allowances, bonuses, production credits, wholesaler fees and
training allowances. Registered representatives earn commissions from the
broker-dealers with whom they are affiliated for selling our Policies.
Compensation arrangements vary among broker-dealers. In addition, registered
representatives who meet specified production levels may qualify, under sales
incentive programs adopted by us, to receive non-cash compensation such as
expense-paid trips, expense-paid educational seminars and merchandise. We make
no separate deductions, other than as previously described, from premiums to
pay sales commissions or sales expenses.
34
<PAGE>
MORE ABOUT PACIFIC MUTUAL
MANAGEMENT
The directors and officers of Pacific Mutual are listed below together with
information as to their principal occupations during the past five years and
certain other current affiliations. Unless otherwise indicated, the business
address of each director and officer is c/o Pacific Mutual Life Insurance
Company, 700 Newport Center Drive, Newport Beach, California 92660.
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION LAST FIVE YEARS
----------------- ------------------------------------
<C> <S>
Thomas C. Sutton Director, Chairman of the Board and Chief Executive
Director, Chairman of the Officer of Pacific Mutual; Equity Board Member of
Board and Chief Executive PIMCO Advisors L.P.; Director of Pacific Corinthian
Officer Life Insurance Company; similar positions with other
subsidiaries of Pacific Mutual; Director of: Newhall
Land & Farming; The Irvine Company; The Edison
Company.
Glenn S. Schafer Director and President of Pacific Mutual, January
Director and President 1995 to present; Executive Vice President and Chief
Financial Officer of Pacific Mutual, March 1991 to
January 1995; Equity Board Member of PIMCO Advisors
L.P.; Director of Pacific Corinthian Life Insurance
Company; similar positions with other subsidiaries
of Pacific Mutual.
Harry G. Bubb Director and Chairman Emeritus of Pacific Mutual.
Director and
Chairman Emeritus
Richard M. Ferry Director of Pacific Mutual; President, Director and
Director Chairman of Korn/Ferry International; Director of:
Avery Dennison Corporation; ConAm Management; First
Business Bank; Mullin Consulting, Inc.; Northwestern
Restaurants, Inc.; Dole Food Co. Address: 1800
Century Park East, Suite 900, Los Angeles,
California 90067.
Donald E. Guinn Director of Pacific Mutual; Chairman Emeritus and
Director Director of Pacific Telesis Group; Director of: The
Dial Corp.; Bank of America NT & SA; BankAmerica
Corporation. Address: Pacific Telesis Center, 130
Kearny Street, Room 3704, San Francisco, California
94108-4818.
Ignacio E. Lozano, Jr. Director of Pacific Mutual; Chairman and Former
Director Editor-in-Chief of La Opinion; Director of:
BankAmerica Corporation; Bank of America NT&SA;
Pacific Enterprises; The Walt Disney Company.
Address: 411 West Fifth Street, 12th Floor, Los
Angeles, California 90013.
Charles A. Lynch Director of Pacific Mutual; Chairman and Former
Director Chief Executive Officer of Fresh Choice, Inc.;
Director of: Nordstrom, Inc.; PST Vans, Inc.; SRI
International, Inc.; Age Wave; Artmaster, Inc.;
Bojangles Acquisitions Corp.; Cucina Holdings, Inc.;
Dakin, Inc.; Greyhound Lines, Inc.; Krh' Thermal
Systems; La Salsa Restaurants; Mid Peninsula Bank;
Syntex Corporation; Former Chairman of Market Value
Partners Company. Address: 2901 Tasman Drive, Suite
109, Santa Clara, California 95054-1169.
Dr. Allen W. Mathies, Jr. Director of Pacific Mutual; Director and President
Director Emeritus of Huntington Memorial Hospital; Director
of Occidental College; Former President and Chief
Executive Officer of Huntington Memorial Hospital.
Address: 314 Arroyo Drive, South Pasadena, CA 91030.
Charles D. Miller Director of Pacific Mutual; Director, Chairman, and
Director Chief Executive Officer of Avery Dennison
Corporation; Director of: Davidson & Associates;
Great Western Financial Corporation; Nationwide
Health Properties, Inc.; Southern California Edison
Company. Address: 150 N. Orange Grove Boulevard,
Pasadena, California 91103.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION LAST FIVE YEARS
----------------- ------------------------------------
<C> <S>
Donn B. Miller Director of Pacific Mutual; President, Chief
Director Executive Officer and Director of Pearson-Sibert Oil
Co. of Texas; Director of: The Irvine Company;
Automobile Club of Southern California; St. John's
Hospital and Health Center Foundation; Former Senior
Partner with the law firm of O'Melveny & Meyers.
Address: 136 El Camino, Suite 216, Beverly Hills,
California 90212.
Jacqueline C. Morby Director of Pacific Mutual, February 28, 1996 to
Director present; Managing Director, TA Associates, Inc.,
Director of Axent Technologies Inc. Address: High
Street Tower, Suite 2500, 125 High Street, Boston,
Massachusetts 02110.
J. Fernando Niebla Director of Pacific Mutual, May 1995 to present;
Director Director, Chairman and Chief Executive Officer of
Infotec Commercial Systems, formerly Infotec
Development, Inc.; Director of: Bank of California.
Address: 3100 South Harbor Boulevard, Suite 100,
Santa Ana, CA 92704.
Susan Westerberg Prager Director of Pacific Mutual; Dean of the UCLA School
Director of Law at the University of California at Los
Angeles; Director of Lucille Salter Packard
Children's Hospital of Stanford. Address: 405 Hilgard
Avenue, Room 3374, Los Angeles, California 90095-
1476.
Richard M. Rosenberg Director of Pacific Mutual, November 1995 to present;
Director Director, and Chairman and Chief Executive Officer
Retired of BankAmerica Corporation and Bank of
America NT&SA; Director of: Airborne Express
Corporation; Northrop Grumman Corporation; Potlatch
Corporation; Pacific Telesis Group. Address: 555
California Street, 40th Floor, San Francisco,
California 94104.
James R. Ukropina Director of Pacific Mutual; Partner with the law firm
Director of O'Melveny & Myers; Former Chairman and Chief
Executive Officer of Pacific Enterprises; Director of
Lockheed Corporation. Address: 400 S. Hope Street,
16th Floor, Los Angeles, California 90071-2899.
Raymond L. Watson Director of Pacific Mutual; Vice Chairman and
Director Director of The Irvine Company; Director of: The Walt
Disney Company; The Mitchell Energy and Development
Company. Address: 550 Newport Center Drive, 9th
Floor, Newport Beach, California 92660.
Lynn C. Miller Executive Vice President, Individual Insurance, of
Executive Vice President Pacific Mutual, January 1995 to present; Sr. Vice
President, Individual Insurance of Pacific Mutual
1989 to 1995.
David R. Carmichael Senior Vice President and General Counsel of Pacific
Senior Vice President Mutual; Vice President and Investment Counsel of
and General Counsel Pacific Mutual, April 1989 to April 1992; Director
of: Pacific Corinthian Life Insurance Company; PM
Group Life Insurance Company.
Audrey L. Milfs Vice President and Corporate Secretary of Pacific
Vice President and Mutual; Secretary to other subsidiaries of Pacific
Corporate Secretary Mutual.
Edward R. Byrd Vice President and Controller of Pacific Mutual, June
Vice President and 1992 to present; Vice President, Corporate Audit and
Controller Financial Planning of Pacific Mutual, November 1991
to June 1992; Assistant Vice President, Corporate
Audit of Pacific Mutual, May 1990 to November 1991.
Khanh T. Tran Senior Vice President and Chief Financial Officer,
Senior Vice President June 1996 to present; Vice President and Treasurer of
and Chief Financial Pacific Mutual, November 1991 to June 1996; Assistant
Officer Vice President and Treasurer of Pacific Mutual,
September 1990 to November 1991; Chief Financial
Officer to other subsidiaries of Pacific Mutual.
</TABLE>
No officer or director listed above receives any compensation from the
Separate Account. No separately allocable compensation has been paid by
Pacific Mutual or any of its affiliates to any person listed for services
rendered to the Account.
36
<PAGE>
STATE REGULATION
We are subject to the laws of the state of California governing insurance
companies and to regulation by the Commissioner of Insurance of California. In
addition, we are subject to the insurance laws and regulations of the other
states and jurisdictions in which we are licensed or may become licensed to
operate. An annual statement in a prescribed form must be filed with the
Commissioner of Insurance of California and with regulatory authorities of
other states on or before March 1st in each year. This statement covers our
operations for the preceding year and our financial condition as of December
31st of that year. Our affairs are subject to review and examination at any
time by the Commissioner of Insurance or his agents, and subject to full
examination of our operations at periodic intervals.
TELEPHONE TRANSFER AND LOAN PRIVILEGES
You may request a transfer of Accumulated Value or a Policy Loan by
telephone if a properly completed Authorization for Telephone Requests
("Telephone Authorization") is on file at our Home Office. All or part of any
telephone conversation with respect to transfer or loan instructions may be
recorded by us. Telephone instructions received by us by 1:00 P.M. Pacific
time, or the close of the New York Stock Exchange, if earlier, on any
Valuation Date will be effected as of the end of that Valuation Date in
accordance with your instructions (presuming that the Free-Look Period has
expired). We reserve the right to deny any telephone transfer or loan request.
If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), you might not be able to request
transfers and loans by telephone and would have to submit written requests.
We have established procedures to confirm that instructions communicated by
telephone are genuine. Under the procedures, any person requesting a transfer
by telephone must provide certain personal identification as requested by us,
and we will send a written confirmation of all transfers requested by
telephone within 7 days of the transfer. Upon your submission of a Telephone
Authorization, you authorize us to accept and act upon telephonic instructions
for transfers or loans involving your Policy, and agree that neither Pacific
Mutual, any of our affiliates, Pacific Select Fund, nor any of their
directors, trustees, officers, employees or agents, will be liable for any
loss, damages, cost, or expense (including attorneys fees) arising out of any
requests effected in accordance with the Telephone Authorization and believed
by us to be genuine, provided that we have complied with our procedures. As a
result of this policy on telephonic requests, you will bear the risk of loss
arising from the telephone transfer and loan privileges.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Account is a party, or
which would materially affect the Account.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Policies
described in this Prospectus and the organization of Pacific Mutual, our
authority to issue the Policies under California law, and the validity of the
forms of the Policies under California law have been passed on by our General
Counsel.
Legal matters relating to the federal securities and federal income tax laws
have been passed upon by Dechert Price & Rhoads.
REGISTRATION STATEMENT
A Registration Statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this Prospectus. This
Prospectus does not include all of the information set forth in the
Registration Statement, as portions have been omitted pursuant to the rules
and regulations of the SEC. The omitted information may be obtained at the
SEC's principal office in Washington, D.C., upon payment of the SEC's
prescribed fees.
37
<PAGE>
INDEPENDENT ACCOUNTANTS
The audited financial statements for the Separate Account and for Pacific
Mutual included in this Prospectus and in the Registration Statement have been
audited by Deloitte & Touche LLP, independent certified public accountants, as
indicated in their report hereon, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
The audited financial statements for the Separate Account as of December 31,
1995 and for the years ended December 31, 1995 and 1994 are set forth herein,
starting on page 39. The unaudited financial statements for the Separate
Account as of the 6 month period ended June 30, 1996 are set forth herein
starting on page 47. The audited financial statements of Pacific Mutual as of
and for the years ended December 31, 1995 and 1994 are set forth herein
starting on page 58. The unaudited financial statements of Pacific Mutual as
of the six month period ended June 30, 1996 are set forth herein starting on
page 75.
The financial statements of the Separate Account and Pacific Mutual have
been audited by Deloitte & Touche LLP. The financial statements of Pacific
Mutual should be distinguished from the financial statements of the Separate
Account and should be considered only as bearing upon our ability to meet our
obligations under the Policies. The unaudited financial statements of the
Separate Account and Pacific Mutual include all adjustments (consisting only
of normal recurring adjustments) which management of the Separate Account and
Pacific Mutual consider necessary for a fair presentation of the results of
operations.
38
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
AUDITED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
39
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pacific Mutual Life Insurance Company
We have audited the accompanying statements of assets and liabilities of the
Pacific Select Exec Separate Account (comprised of the Money Market, Managed
Bond, Government Securities, High Yield Bond, Growth, Equity Income, Multi-
Strategy, International, Equity Index, and Growth LT Variable Accounts) as of
December 31, 1995 and the related statements of operations for the year then
ended and statements of changes in net assets for each of the two years ended
December 31, 1995 and 1994. These financial statements are the responsibility
of the Separate Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective Variable
Accounts constituting the Pacific Select Exec Separate Account as of
December 31, 1995 and the results of their operations for the year then ended
and the changes in their net assets for each of the two years then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 16, 1996
40
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1995
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield
Market Bond Securities Bond Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market Portfolio (2,301 shares; cost $23,106) ...........$ 23,045
Managed Bond Portfolio (4,265 shares; cost $45,342) ........... $ 47,343
Government Securities Portfolio (581 shares; cost $5,877) ..... $ 6,299
High Yield Bond Portfolio (1,479 shares; cost $13,881) ........ $ 14,474
Growth Portfolio (4,719 shares; cost $78,927) ................. $ 87,624
Equity Income Portfolio (2,731 shares; cost $43,643) ..........
Multi-Strategy Portfolio (3,822 shares; cost $48,796) .........
International Portfolio (4,354 shares; cost $54,916) ..........
Equity Index Portfolio (3,592 shares; cost $51,564) ...........
Growth LT Portfolio (3,810 shares; cost $49,540) ..............
Receivables:
Due from Pacific Mutual Life Insurance Company ................ 223 387 144 75
-------- -------- -------- -------- --------
TOTAL ASSETS .................................................... 23,268 47,730 6,299 14,618 87,699
-------- -------- -------- -------- --------
LIABILITIES
Payables:
Due to Pacific Mutual Life Insurance Company .................. 30
Fund shares purchased ......................................... 90 40 5 27 180
-------- -------- -------- -------- --------
TOTAL LIABILITIES ............................................... 90 40 35 27 180
-------- -------- -------- -------- --------
NET ASSETS ......................................................$ 23,178 $ 47,690 $ 6,264 $ 14,591 $ 87,519
======== ======== ======== ======== ========
<CAPTION>
Equity Multi- Inter- Equity Growth
Income Strategy national Index LT
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market Portfolio (2,301 shares; cost $23,106) ...........
Managed Bond Portfolio (4,265 shares; cost $45,342) ...........
Government Securities Portfolio (581 shares; cost $5,877) .....
High Yield Bond Portfolio (1,479 shares; cost $13,881) ........
Growth Portfolio (4,719 shares; cost $78,927) .................
Equity Income Portfolio (2,731 shares; cost $43,643) ..........$ 49,717
Multi-Strategy Portfolio (3,822 shares; cost $48,796) ......... $ 54,269
International Portfolio (4,354 shares; cost $54,916) .......... $ 56,325
Equity Index Portfolio (3,592 shares; cost $51,564) ........... $ 62,687
Growth LT Portfolio (3,810 shares; cost $49,540) .............. $ 53,801
Receivables:
Due from Pacific Mutual Life Insurance Company ................ 117 696 196 166 198
-------- -------- -------- -------- --------
TOTAL ASSETS .................................................... 49,834 54,965 56,521 62,853 53,999
-------- -------- -------- -------- --------
LIABILITIES
Payables:
Due to Pacific Mutual Life Insurance Company ..................
Fund shares purchased ......................................... 118 659 94 178 240
-------- -------- -------- -------- --------
TOTAL LIABILITIES ............................................... 118 659 94 178 240
-------- -------- -------- -------- --------
NET ASSETS $ 49,716 $ 54,306 $ 56,427 $ 62,675 $ 53,759
======== ======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield
Market Bond Securities Bond Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................................ $ 1,418 $ 2,208 $ 294 $ 944 $ 656
------- ------- ------- ------- -------
NET INVESTMENT INCOME..................................... 1,418 2,208 294 944 656
------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions...... 31 (141) (41) (92) (1,046)
Net unrealized appreciation on investments............... 65 4,063 624 1,042 16,423
------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS........................................... 96 3,922 583 950 15,377
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................ $ 1,514 $ 6,130 $ 877 $ 1,894 $16,033
======= ======= ======= ======= =======
<CAPTION>
Equity Multi- Inter- Equity Growth
Income Strategy national Index LT
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................................ $ 577 $ 1,401 $ 1,070 $ 1,015 $ 3,592
------- ------- ------- ------- -------
NET INVESTMENT INCOME..................................... 577 1,401 1,070 1,015 3,592
------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions...... 785 71 574 2,069 1,225
Net unrealized appreciation on investments............... 7,737 7,406 2,646 10,698 3,892
------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS........................................... 8,522 7,477 3,220 12,767 5,117
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................ $ 9,099 $ 8,878 $ 4,290 $13,782 $ 8,709
======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield
Market Bond Securities Bond Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income........................................ $ 1,418 $ 2,208 $ 294 $ 944 $ 656
Net realized gain (loss) from security transactions.......... 31 (141) (41) (92) (1,046)
Net unrealized appreciation on investments................... 65 4,063 624 1,042 16,423
-------- -------- -------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................... 1,514 6,130 877 1,894 16,033
-------- -------- -------- -------- --------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums..................................... 72,942 7,113 1,962 5,029 25,318
Transfers--policy charges and deductions..................... (4,297) (2,830) (908) (1,423) (9,201)
Transfers in (from other variable accounts).................. 29,120 15,186 2,845 7,781 30,352
Transfers out (to other variable accounts)................... (110,816) (2,813) (2,390) (6,185) (22,297)
Transfers--other............................................. 119 339 (31) 116 (103)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS............................. (12,932) 16,995 1,478 5,318 24,069
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS.......................... (11,418) 23,125 2,355 7,212 40,102
NET ASSETS
Beginning of year............................................ 34,596 24,565 3,909 7,379 47,417
-------- -------- -------- -------- --------
End of year.................................................. $ 23,178 $ 47,690 $ 6,264 $ 14,591 $ 87,519
======== ======== ======== ======== ========
<CAPTION>
Equity Multi- Inter- Equity Growth
Income Strategy national Index LT
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income........................................ $ 577 $ 1,401 $ 1,070 $ 1,015 $ 3,592
Net realized gain (loss) from security transactions.......... 785 71 574 2,069 1,225
Net unrealized appreciation on investments................... 7,737 7,406 2,646 10,698 3,892
-------- -------- -------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................... 9,099 8,878 4,290 13,782 8,709
-------- -------- -------- -------- --------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums..................................... 13,169 14,278 16,778 11,713 12,930
Transfers--policy charges and deductions..................... (4,072) (3,990) (5,319) (4,228) (3,931)
Transfers in (from other variable accounts).................. 16,222 5,601 25,476 17,636 32,699
Transfers out (to other variable accounts)................... (4,940) (2,670) (16,093) (6,615) (8,074)
Transfers--other............................................. 16 38 141 (6) 18
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS............................. 20,395 13,257 20,983 18,500 33,642
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS.......................... 29,494 22,135 25,273 32,282 42,351
NET ASSETS
Beginning of year............................................ 20,222 32,171 31,154 30,393 11,408
-------- -------- -------- -------- --------
End of year.................................................. $ 49,716 $ 54,306 $ 56,427 $ 62,675 $ 53,759
======== ======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS FOR THE
YEAR ENDED DECEMBER 31, 1994
(In thousands)
<TABLE>
<CAPTION>
High
Money Managed Government Yield Equity
Market Bond Securities Bond Growth Income
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income.................................... $ 812 $ 1,143 $ 170 $ 472 $ 4,039 $ 1,838
Net realized gain (loss) from security transactions...... 131 (14) (172) (101) 1,075 207
Net unrealized appreciation (depreciation)
on investments........................................... (68) (2,086) (160) (330) (10,371) (2,115)
--------- --------- ----------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................................ 875 (957) (162) 41 (5,257) (70)
--------- --------- ----------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................. 53,082 6,795 2,740 2,716 21,157 6,781
Transfers--policy charges and deductions................. (3,578) (1,634) (1,212) (748) (5,776) (2,110)
Transfers in (from other variable accounts).............. 47,668 5,550 1,200 4,398 31,248 6,482
Transfers out (to other variable accounts)............... (81,555) (1,862) (1,816) (2,395) (28,528) (2,573)
Transfers--other.......................................... (189) 5 (6) (13) 79 46
--------- --------- ----------- --------- --------- ---------
NET INCREASE IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS......................... 15,428 8,854 906 3,958 18,180 8,626
--------- --------- ----------- --------- --------- ---------
NET INCREASE IN NET ASSETS................................ 16,303 7,897 744 3,999 12,923 8,556
NET ASSETS
Beginning of year........................................ 18,293 16,668 3,165 3,380 34,494 11,666
--------- --------- ----------- --------- --------- ---------
End of year.............................................. $ 34,596 $ 24,565 $ 3,909 $ 7,379 $ 47,417 $ 20,222
========= ========= =========== ========= ========= =========
<CAPTION>
Multi- Inter- Equity Growth
Strategy national Index LT
Variable Variable Variable Variable
Account Account Account Account
--------- --------- --------- ---------
<C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income.................................... $ 1,767 $ 1,290 $ 718 $ 174
Net realized gain (loss) from security transactions...... 218 831 342 56
Net unrealized appreciation (depreciation)
on investments........................................... (2,374) (2,049) (841) 369
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................................ (389) 72 219 599
--------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................. 12,158 11,673 10,776 3,920
Transfers--policy charges and deductions................. (2,364) (2,878) (2,180) (684)
Transfers in (from other variable accounts).............. 2,983 19,282 4,498 8,962
Transfers out (to other variable accounts)............... (1,864) (8,521) (2,407) (1,436)
Transfers--other......................................... 32 23 44 47
--------- --------- --------- ---------
NET INCREASE IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS......................... 10,945 19,579 10,731 10,809
--------- --------- --------- ---------
NET INCREASE IN NET ASSETS................................ 10,556 19,651 10,950 11,408
NET ASSETS
Beginning of year........................................ 21,615 11,503 19,443
--------- --------- --------- ---------
End of year.............................................. $ 32,171 $ 31,154 $ 30,393 $ 11,408
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
44
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Pacific Select Exec Separate Account (the "Separate Account") is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended, and is currently comprised of ten subaccounts called Variable
Accounts: the Money Market Variable Account, the Managed Bond Variable Account,
the Government Securities Variable Account, the High Yield Bond Variable
Account, the Growth Variable Account, the Equity Income Variable Account, the
Multi-Strategy Variable Account, the International Variable Account, the Equity
Index Variable Account, and the Growth LT Variable Account. The assets in each
Variable Account are invested in shares of the corresponding portfolios of
Pacific Select Fund (the "Fund"), each of which pursues different investment
objectives and policies.
The Separate Account was established by Pacific Mutual Life Insurance
Company ("Pacific Mutual") on May 12, 1988 and commenced operations on
November 22, 1988. Under applicable insurance law, the assets and liabilities of
the Separate Account are clearly identified and distinguished from the other
assets and liabilities of Pacific Mutual. The assets of the Separate Account
will not be charged with any liabilities arising out of any other business
conducted by Pacific Mutual, but the obligations of the Separate Account,
including benefits related to variable life insurance, are obligations of
Pacific Mutual.
The Separate Account held by Pacific Mutual represents funds from
individual flexible premium variable life policies. The assets of these accounts
are carried at market value.
The preparation of the accompanying financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates.
A. Valuation of Investments
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios.
B. Security Transactions
Transactions are recorded on the trade date. Realized gains and losses on
sales of investments are determined on the basis of identified cost.
C. Federal Income Taxes
The operations of the Separate Account will be reported on the Federal
income tax return of Pacific Mutual, which is taxed as a life insurance company
under the provisions of the Tax Reform Act of 1986. Under current tax law, no
Federal income taxes are expected to be paid by Pacific Mutual with respect to
the operations of the Separate Account.
2. DIVIDENDS
During 1995, the Fund has declared dividends for each portfolio. The
amounts accrued by the Separate Account for its share of the dividends were
reinvested in additional full and fractional shares of the related portfolio.
3. CHARGES AND EXPENSES
With respect to variable life insurance policies funded by the Separate
Account, Pacific Mutual makes certain deductions from premiums for sales load
and state premium taxes before amounts are allocated to the Separate Account.
Pacific Mutual also makes certain deductions from the net assets of each
Variable Account for the mortality and expense risks Pacific Mutual assumes,
administrative expenses, cost of insurance, charges for optional benefits and
any sales and underwriting surrender charges. The operating expenses of the
Separate Account are paid by Pacific Mutual.
4. RELATED PARTY AGREEMENT
Pacific Equities Network, a wholly-owned subsidiary of Pacific Mutual, is
the principal underwriter of variable life insurance policies funded by
interests in the Separate Account, and is compensated by Pacific Mutual.
45
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
5. SELECTED ACCUMULATION UNIT** INFORMATION
Selected accumulation unit information for the year ended December 31, 1995
were as follows:
<TABLE>
<CAPTION>
High
Money Managed Government Yield
Market Bond Securities Bond Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ACCUMULATION UNIT
VALUE:
Beginning $ 13.76 $ 16.68 $ 16.23 $ 18.29 $ 19.00
======== ======== ======== ======== ========
Ending $ 14.52 $ 19.86 $ 19.28 $ 21.74 $ 23.89
======== ======== ======== ======== ========
Number of Units Outstanding at
End of Period 1,596,322 2,401,282 324,905 671,116 3,663,739
<CAPTION>
Equity Multi- Inter- Equity Growth
Income Strategy national Index LT
Variable Variable Variable Variable Variable
Account Account Account Account Account
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ACCUMULATION UNIT
VALUE:
Beginning $ 18.01 $ 17.24 $ 14.07 $ 14.76 $ 11.32
======== ======== ======== ======== ========
Ending $ 23.72 $ 21.60 $ 15.55 $ 20.21 $ 15.49
======== ======== ======== ======== ========
Number of Units Outstanding at
End of Period 2,096,246 2,514,394 3,628,251 3,101,024 3,471,271
</TABLE>
__________
**Accumulation Unit: unit of measure used to calculate the value of a Contract
Owner's interest in a Variable Account during the Accumulation Period.
46
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
UNAUDITED FINANCIAL STATEMENTS
AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
47
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF ASSETS & LIABILITIES
JUNE 30, 1996 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
High
Money Yield Managed Government Aggressive
Market Bond Bond Securities Growth Equity
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Money Market Portfolio (2,223 shares; cost $22,328).. $ 22,284
High Yield Bond Portfolio (1,949 shares;
cost $18,525)....................................... $ 18,542
Managed Bond Portfolio (5,479 shares; cost $57,971).. $ 57,524
Government Securities Portfolio (663 shares;
cost $6,758)........................................ $ 6,759
Growth Portfolio (5,525 shares; cost $94,649)........ $ 108,476
Aggressive Equity Portfolio (824 shares; cost $9,011) $ 8,690
Receivables:
Due from Pacific Mutual Life Insurance Company....... 28 8 94 12
Fund shares redeemed 1,442 15
--------- --------- --------- ---------- ---------- ----------
TOTAL ASSETS 23,726 18,570 57,539 6,767 108,570 8,702
--------- --------- --------- ---------- ---------- ----------
LIABILITIES
Payables:
Due to Pacific Mutual Life Insurance Company......... 1,423 15
Fund shares purchased................................ 28 8 94 12
--------- --------- --------- ---------- ---------- ----------
TOTAL LIABILITIES..................................... 1,423 28 15 8 94 12
--------- --------- --------- ---------- ---------- ----------
NET ASSETS............................................ $ 22,303 $ 18,542 $ 57,524 $ 6,759 $ 108,476 $ 8,690
========= ========= ========= ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF ASSETS & LIABILITIES (Continued)
JUNE 30, 1996 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Growth Equity Multi- Equity Inter- Emerging
LT Income Strategy Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
--------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in Pacific Select Fund:
Growth LT Portfolio (4,695 shares; cost $64,865)..... $ 73,684
Equity Income Portfolio (3,506 shares; cost $58,281). $ 64,600
Multi-Strategy Portfolio (4,448 shares; cost $57,650) $ 61,158
Equity Index Portfolio (4,855 shares; cost $74,831).. $ 89,798
International Portfolio (5,515 shares; cost $71,098). $ 77,994
Emerging Markets Portfolio (72 shares; cost $724).... $ 729
Receivables:
Due from Pacific Mutual Life Insurance Company....... 313 111 70 10 175 4
--------- --------- --------- ---------- ---------- ----------
TOTAL ASSETS.......................................... 73,997 64,711 61,228 89,808 78,169 733
--------- --------- --------- ---------- ---------- ----------
LIABILITIES
Payables:
Fund shares purchased................................ 313 111 70 10 175 4
--------- --------- --------- ---------- ---------- ----------
TOTAL LIABILITIES..................................... 313 111 70 10 175 4
--------- --------- --------- ---------- ---------- ----------
NET ASSETS............................................ $ 73,684 $ 64,600 $ 61,158 $ 89,798 $ 77,994 $ 729
========= ========= ========= ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
High
Money Yield Managed Government Aggressive
Market Bond Bond Securities Growth Equity
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 563 $ 843 $ 2,040 $ 259 $ 6,332 $ 2
------- ------- ------- ------- -------- -------
NET INVESTMENT INCOME............................. 563 843 2,040 259 6,332 2
------- ------- ------- ------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions.................................... 75 (124) 36 600
Net unrealized appreciation
(depreciation) on investments................... 18 (575) (2,448) (421) 5,130 (321)
------- ------- ------- ------- -------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS............................ 18 (500) (2,572) (385) 5,730 (321)
------- ------- ------- ------- -------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........................ $ 581 $ 343 $ (532) $ (126) $ 12,062 $ (319)
======= ======= ======= ======= ======== =======
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS (Continued)
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Growth Equity Multi- Equity Inter- Emerging
LT Income Strategy Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 317 $ 2,921 $ 3,612 $ 2,739 $ 678
------- ------- ------- ------- -------
NET INVESTMENT INCOME............................ 317 2,921 3,612 2,739 678
------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain from security
transactions................................... 2,087 452 240 508 167
Net unrealized appreciation
(depreciation) on investments.................. 4,558 244 (1,965) 3,843 5,486 $ 4
------- ------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS........................... 6,645 696 (1,725) 4,351 5,653 4
------- ------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 6,962 $ 3,617 $ 1,887 $ 7,090 $ 6,331 $ 4
======= ======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
PACIFIC EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
High
Money Yield Managed Government Aggressive
Market Bond Bond Securities Growth Equity
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income .............. $ 563 $ 843 $ 2,040 $ 259 $ 6,332 $ 2
Net realized gain (loss) from
security transactions ............. 75 (124) 36 600
Net unrealized appreciation
(depreciation) on investments ..... 18 (575) (2,448) (421) 5,130 (321)
---------- --------- ---------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS .... 581 343 (532) (126) 12,062 (319)
---------- --------- ---------- ---------- ----------- ----------
INCREASE (DECREASE) IN NET
ASSETS FROM POLICY TRANSACTIONS
Transfer of net premiums ........... 26,333 3,688 12,717 956 16,252 96
Transfers--policy charges and
deductions ........................ (1,318) (679) (1,238) (285) (3,737) (36)
Transfers in (from other
variable accounts) ................ 16,232 4,039 3,669 1,108 30,709 9,079
Transfers out (to other
variable accounts) ................ (41,596) (3,043) (4,315) (989) (33,024) (89)
Transfers--other ................... (1,107) (397) (467) (169) (1,305) (41)
---------- --------- ---------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS DERIVED FROM POLICY
TRANSACTIONS ....................... (1,456) 3,608 10,366 621 8,895 9,009
---------- --------- ---------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS ............................. (875) 3,951 9,834 495 20,957 8,690
NET ASSETS
Beginning of year .................. 23,178 14,591 47,690 6,264 87,519
---------- --------- ---------- ---------- ----------- ----------
End of year ........................ $ 22,303 $ 18,542 $ 57,524 $ 6,759 $ 108,476 $ 8,690
========== ========= ========== ========== =========== ==========
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
FOR THE PERIOD ENDED JUNE 30, 1996 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Growth Equity Multi- Equity Inter- Emerging
LT Income Strategy Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
-------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income .............. $ 317 $ 2,921 $ 3,612 $ 2,739 $ 678
Net realized gain from security
transactions ...................... 2,087 452 240 508 167
Net unrealized appreciation
(depreciation) on investments ..... 4,558 244 (1,965) 3,843 5,486 $ 4
---------- --------- --------- --------- --------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......... 6,962 3,617 1,887 7,090 6,331 4
---------- --------- --------- --------- --------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS
Transfer of net premiums ........... 11,347 13,747 7,770 16,120 13,573 73
Transfers--policy charges and
deductions ........................ (2,436) (1,920) (1,703) (2,302) (2,507) (6)
Transfers in (from other variable
accounts) ......................... 24,610 4,139 1,841 12,203 12,512 674
Transfers out (to other variable
accounts) ......................... (19,700) (3,716) (1,335) (5,338) (7,632) (16)
Transfers--other ................... (858) (983) (1,608) (650) (710)
---------- --------- --------- --------- --------- --------
NET INCREASE IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS ... 12,963 11,267 4,965 20,033 15,236 725
---------- --------- --------- --------- --------- --------
NET INCREASE IN NET ASSETS .......... 19,925 14,884 6,852 27,123 21,567 729
NET ASSETS
Beginning of year .................. 53,759 49,716 54,306 62,675 56,427
---------- --------- --------- --------- --------- --------
End of year ........................ $ 73,684 $ 64,600 $ 61,158 $ 89,798 $ 77,994 $ 729
========== ========= ========= ========= ========= ========
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
<TABLE>
<CAPTION>
High
Money Yield Managed Government
Market Bond Bond Securities Growth
Variable Variable Variable Variable Variable
Account Account Account Account Account
------- ------- ------- ------- -------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
<S> <C> <C> <C> <C> <C>
Net investment income.................................... $ 1418 $ 944 $ 2,208 $ 294 $ 656
Net realized gain (loss) from security transactions...... 31 (92) (141) (41) (1,046)
Net unrealized appreciation on investments............... 65 1,042 4,063 624 16,423
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................ 1,514 1,894 6,130 877 16,033
------- ------- ------- ------- -------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................. 72,942 5,029 7,113 1,962 25,318
Transfers--policy charges and deductions*................ (3,157) (1,065) (1,983) (490) (6,369)
Transfers in (from other variable accounts).............. 29,120 7,781 15,186 2,845 30,352
Transfers out (to other variable accounts)............... (110,816) (6,185) (2,813) (2,390) (22,297)
Transfers--other*........................................ (1,021) (242) (508) (449) (2,935)
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS......................... (12,932) 5,318 16,995 1,478 24,069
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS...................... (11,418) 7,212 23,125 2,355 40,102
NET ASSETS
Beginning of year........................................ 34,596 7,379 24,565 3,909 47,417
------- ------- ------- ------- -------
End of year.............................................. $23,178 $14,591 $47,690 $ 6,264 $87,519
======= ======= ======= ======= =======
</TABLE>
*Prior year balances have been restated to conform with current year
presentation.
See Notes to Financial Statements.
54
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Growth Equity Multi- Equity Inter-
LT Income Strategy Index national
Variable Variable Variable Variable Variable
Account Account Account Account Account
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income...................................... $ 3,592 $ 577 $ 1,401 $ 1,015 $ 1,070
Net realized gain from security transactions............... 1,225 785 71 2,069 574
Net unrealized appreciation on investments................. 3,892 7,737 7,406 10,698 2,646
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................. 8,709 9,099 8,878 13,782 4,290
------- ------- ------- ------- -------
INCREASE (DECREASE) IN NET ASSETS FROM
POLICY TRANSACTIONS
Transfer of net premiums................................... 12,930 13,169 14,278 11,713 16,778
Transfers--policy charges and deductions*.................. (2,765) (2,773) (2,760) (2,873) (3,967)
Transfers in (from other variable accounts)................ 32,699 16,222 5,601 17,636 25,476
Transfers out (to other variable accounts)................. (8,074) (4,940) (2,670) (6,615) (16,093)
Transfers--other*.......................................... (1,148) (1,283) (1,192) (1,361) (1,211)
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS
DERIVED FROM POLICY TRANSACTIONS........................... 33,642 20,395 13,257 18,500 20,983
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS 42,351 29,494 22,135 32,282 25,273
NET ASSETS
Beginning of year.......................................... 11,408 20,222 32,171 30,393 31,154
------- ------- ------- ------- -------
End of year................................................ $53,759 $49,716 $54,306 $62,675 $56,427
======= ======= ======= ======= =======
</TABLE>
*Prior year balances have been restated to conform with current year
presentation.
See Notes to Financial Statements.
55
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Pacific Select Exec Separate Account (the "Separate Account") is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended, and is currently comprised of twelve subaccounts called Variable
Accounts: the Money Market Variable Account, the High Yield Bond Variable
Account, the Managed Bond Variable Account, the Government Securities Variable
Account, the Growth Variable Account, the Aggressive Equity Variable Account
(Note 5), the Growth LT Variable Account, the Equity Income Variable Account,
the Multi-Strategy Variable Account, the Equity Index Variable Account, the
International Variable Account, and the Emerging Markets Variable Account (Note
5). The assets in each Variable Account are invested in shares of the
corresponding portfolios of Pacific Select Fund (the "Fund"), each of which
pursues different investment objectives and policies.
The Separate Account was established by Pacific Mutual Life Insurance Company
("Pacific Mutual") on May 12, 1988 and commenced operations on November 22,
1988. Under applicable insurance law, the assets and liabilities of the Separate
Account are clearly identified and distinguished from the other assets and
liabilities of Pacific Mutual. The assets of the Separate Account will not be
charged with any liabilities arising out of any other business conducted by
Pacific Mutual, but the obligations of the Separate Account, including benefits
related to variable life insurance, are obligations of Pacific Mutual.
The Separate Account held by Pacific Mutual represents funds from individual
flexible premium variable life policies. The assets of these accounts are
carried at market value.
The preparation of the accompanying financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
A. Valuation of Investments
Investments in shares of the Fund are valued at the reported net asset values
of the respective portfolios.
B. Security Transactions
Transactions are recorded on the trade date. Realized gains and losses on
sales of investments are determined on the basis of identified cost.
C. Federal Income Taxes
The operations of the Separate Account will be reported on the Federal income
tax return of Pacific Mutual, which is taxed as a life insurance company under
the provisions of the Tax Reform Act of 1986. Under current tax law, no Federal
income taxes are expected to be paid by Pacific Mutual with respect to the
operations of the Separate Account.
2. DIVIDENDS
During 1996, the Fund has declared dividends for each portfolio. The amounts
accrued by the Separate Account for its share of the dividends were reinvested
in additional full and fractional shares of the related portfolio.
3. CHARGES AND EXPENSES
With respect to variable life insurance policies funded by the Separate
Account, Pacific Mutual makes certain deductions from premiums for sales load
and state premium taxes before amounts are allocated to the Separate Account.
Pacific Mutual also makes certain deductions from the net assets of each
Variable Account for the mortality and expense risks Pacific Mutual assumes,
administrative expenses, cost of insurance, charges for optional benefits and
any sales and underwriting surrender charges. The operating expenses of the
Separate Account are paid by Pacific Mutual.
4. RELATED PARTY AGREEMENT
Pacific Mutual Distributors, Inc. (formerly known as Pacific Equities
Network), a wholly-owned subsidiary of Pacific Mutual, is the principal
underwriter of variable life insurance policies funded by interests in the
Separate Account, and is compensated by Pacific Mutual.
56
<PAGE>
PACIFIC SELECT EXEC SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. AGGRESSIVE EQUITY VARIABLE ACCOUNT AND EMERGING MARKETS VARIABLE ACCOUNT
The Separate Account has organized and registered with the Securities and
Exchange Commission two new Variable Accounts, the Aggressive Equity Variable
Account and the Emerging Markets Variable Account. Both Variable Accounts
commenced operations on April 8, 1996.
6. SELECTED ACCUMULATION UNIT** INFORMATION
Selected accumulation unit information for the period ended June 30, 1996
were as follows:
<TABLE>
<CAPTION>
High
Money Yield Managed Government Aggressive
Market Bond Bond Securities Growth Equity
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT
VALUE:
Beginning $ 14.52 $ 21.74 $ 19.86 $ 19.28 $ 23.89 $ 10.00
======== ======== ======== ======== ======== ========
Ending $ 14.88 $ 22.24 $ 19.59 $ 18.88 $ 26.97 $ 10.62
======== ======== ======== ======== ======== ========
Number of Units Outstanding at
End of Period 1,499,306 833,813 2,937,012 358,007 4,022,216 817,991
<CAPTION>
Growth Equity Multi- Equity Inter- Emerging
LT Income Strategy Index national Markets
Variable Variable Variable Variable Variable Variable
Account Account Account Account Account Account
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ACCUMULATION UNIT
VALUE:
Beginning $ 15.49 $ 23.72 $ 21.60 $ 20.21 $ 15.55 $ 10.00
======== ======== ======== ======== ======== ========
Ending $ 17.30 $ 25.37 $ 22.33 $ 22.18 $ 17.18 $ 10.34
======== ======== ======== ======== ======== ========
Number of Units Outstanding at
End of Period 4,258,959 2,545,935 2,739,343 4,048,911 4,540,397 70,438
</TABLE>
- ------------
** Accumulation Unit: unit of measure used to calculate the value of a
Contract Owner's interest in a Variable Account during the Accumulation
Period.
57
<PAGE>
PACIFIC MUTUAL LIFE INSURANCE COMPANY
AUDITED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
58
<PAGE>
INDEPENDENT AUDITORS' REPORT
Pacific Mutual Life Insurance Company:
We have audited the accompanying statements of financial position of
Pacific Mutual Life Insurance Company as of December 31, 1995 and 1994,
and the related statements of operations and surplus, and of cash flow
for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Pacific Mutual Life
Insurance Company as of December 31, 1995 and 1994, and the results of
its operations and its cash flow for the years then ended, in
conformity with accounting practices prescribed or permitted by the
Insurance Department of the State of California and with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 23, 1996
59
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
1995 1994
- ------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Bonds $ 6,699,489 $ 6,669,853
Preferred stocks 156,097 132,604
Common stocks 54,504 57,874
Unconsolidated subsidiaries 182,040 196,401
Mortgage loans 1,388,743 1,421,182
Real estate 145,178 157,507
Home office properties 48,446 51,419
Policy loans 2,700,544 2,312,455
Cash and short-term investments 262,527 97,745
Investment income due and accrued 135,607 125,534
Premiums due and uncollected, and other assets 295,159 245,243
Separate account assets 5,520,478 3,260,374
- ------------------------------------------------------------------------
TOTAL ASSETS $17,588,812 $14,728,191
- ------------------------------------------------------------------------
LIABILITIES AND SURPLUS
Liabilities
Policy reserves $ 7,204,362 $ 6,476,634
Deposit funds 3,262,340 3,298,915
Other liabilities 686,989 885,638
Asset valuation reserve 191,392 179,006
Separate account liabilities 5,520,478 3,260,374
- ------------------------------------------------------------------------
Total Liabilities 16,865,561 14,100,567
Surplus 723,251 627,624
- ------------------------------------------------------------------------
TOTAL LIABILITIES AND SURPLUS $17,588,812 $14,728,191
- ------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
60
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF OPERATIONS AND SURPLUS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
- ------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
REVENUES
Premiums, annuity considerations and deposit funds $2,919,920 $2,180,409
Net investment income 945,546 879,116
Other income 5,685 5,073
- ------------------------------------------------------------------------------
TOTAL REVENUES 3,871,151 3,064,598
- ------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future policy benefits 3,371,448 2,659,601
Operating expenses 309,588 249,018
Premium and other taxes (excluding tax on capital
gains) 35,168 28,705
Dividends to policyowners 16,639 17,162
- ------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 3,732,843 2,954,486
- ------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES 138,308 110,112
Federal income taxes 59,470 41,510
- ------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 78,838 68,602
NET REALIZED CAPITAL GAINS 6,311 12,424
- ------------------------------------------------------------------------------
NET INCOME $ 85,149 $ 81,026
- ------------------------------------------------------------------------------
SURPLUS
Net income $ 85,149 $ 81,026
Other surplus transactions, net 10,478 (36,178)
- ------------------------------------------------------------------------------
Increase in surplus 95,627 44,848
Surplus, beginning of year 627,624 582,776
- ------------------------------------------------------------------------------
SURPLUS, END OF YEAR $ 723,251 $ 627,624
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
61
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
- -------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Receipts
Premiums, annuity considerations and deposit
funds $ 2,687,698 $ 1,687,583
Net investment income 927,918 809,791
Allowances and reserve adjustments on reinsurance
ceded 187,380 491,363
Other 13,885 23,862
Payments
Policy benefit payments (1,677,788) (1,408,650)
Net policy loans (388,320) (352,358)
Operating expenses (278,138) (247,437)
Net transfer to separate accounts (1,178,622) (594,284)
Premium and other taxes (41,116) (34,795)
Dividends to policyowners (16,715) (17,319)
Federal income taxes (35,779) (23,995)
- -------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES 200,403 333,761
- -------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds
Bonds 2,496,486 2,937,210
Stocks 208,235 139,785
Mortgage loans 261,514 390,642
Real estate 21,419 20,163
Other investments 49,089 47,132
Payments for the purchase of
Bonds (2,431,687) (3,673,859)
Stocks (222,678) (126,823)
Mortgage loans (239,355) (230,859)
Real estate (4,716) (17,466)
Other investments (124,164) (114,106)
- -------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY (USED IN)
INVESTING ACTIVITIES 14,143 (628,181)
- -------------------------------------------------------------------------------
</TABLE>
(Continued)
See Notes to Financial Statements
62
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C>
(Continued) 1995 1994
- ------------------------------------------------------------------------------
<CAPTION>
(In Thousands)
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Issuance (repayment) of short-term borrowings $ (49,764) $ 49,764
- ------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY (USED IN) FINANCING
ACTIVITIES (49,764) 49,764
- ------------------------------------------------------------------------------
Increase (decrease) in cash and short-term
investments 164,782 (244,656)
Cash and short-term investments, beginning of year 97,745 342,401
- ------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 262,527 $ 97,745
- ------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 18,376 $ 22,120
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
63
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
1.SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Pacific Mutual Life Insurance Company ("Pacific Mutual") was established
in 1868 and is organized under the laws of the State of California as a
mutual life insurance company. Pacific Mutual conducts business in every
state except New York.
Pacific Mutual, including its subsidiaries and affiliates, has primary
business segments which consist of life insurance, annuities, pension
products, group employee benefits and investment management and advisory
services. These primary business segments provide products for
individuals and corporations and offer a range of investment products to
institutions and pension plans.
BASIS OF PRESENTATION
Pacific Mutual's financial statements are prepared in accordance with
accounting practices prescribed or permitted by the Insurance Department
of the State of California, which are currently considered generally
accepted accounting principles ("GAAP") for mutual life insurance
companies. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations, and general administrative
rules. Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The financial statements of Pacific Mutual
are not consolidated with those of its subsidiaries.
The Financial Accounting Standards Board ("FASB") has issued certain
pronouncements effective for 1996 financial statements and thereafter
that will no longer allow statutory financial statements of mutual life
insurance companies to be described as being prepared in conformity with
GAAP.
Upon the effective date of these pronouncements, in order for their
financial statements to be described as being prepared in accordance with
GAAP, mutual life insurance companies and their insurance subsidiaries
will be required to adopt all applicable authoritative GAAP
pronouncements in any general purpose financial statements that they may
issue. Pacific Mutual intends to issue 1996 general purpose financial
statements reflecting the adoption of all applicable GAAP pronouncements.
INVESTMENTS
Bonds qualifying for amortization are carried at amortized cost; all
other bonds are carried at prescribed values. Preferred stocks are
principally stated at amortized cost. Unaffiliated common stocks are
carried at market value. Investments in unconsolidated subsidiaries are
reported on the equity method of accounting, except for Pacific
Corinthian Life Insurance Company ("PCL") (Note 2) which is carried at
cost.
Mortgage loans and policy loans are stated at unpaid principal balances.
Real estate is valued at the lower of depreciated cost or market, less
related mortgage debt. Real estate is depreciated using the straight-line
method over 30 years.
Short-term investments generally mature within a year and are carried at
amortized cost which approximates estimated fair value.
The Asset Valuation Reserve ("AVR") is computed in accordance with a
prescribed formula and is designed to stabilize surplus against valuation
and credit-related losses for certain invested assets. Changes to the AVR
are reported as direct additions or deductions from surplus. The Interest
Maintenance Reserve ("IMR"), included in other liabilities on the
accompanying statements of financial position, results in the deferral of
after-tax realized capital gains and losses attributable to interest rate
fluctuations on fixed income investments. These capital gains and losses
are amortized into investment income over the remaining life of the
investment sold. The IMR was $25.3 million and $13.1 million as of
December 31, 1995 and 1994, respectively.
64
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
1.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net realized capital gains and losses are determined on the specific
identification method and are presented net of federal capital gains tax
of $18.5 million and $(2.3) million and transfers to the IMR of $22.6
million and $(.4) million for the years ended December 31, 1995 and 1994,
respectively.
Derivatives which qualify for hedge accounting are valued consistently
with the hedged items. Realized hedged gains and losses on fixed income
contracts are deferred and amortized over the average life of the related
hedged assets or insurance liabilities. Realized gains and losses on
equity securities, which are marked to market, are recognized
immediately. Derivatives which do not qualify for hedge accounting are
valued at market value through surplus while still held and when realized
through income.
On November 15, 1994, Pacific Financial Asset Management Corporation
("PFAMCo"), a wholly-owned, subsidiary of Pacific Mutual, and five of its
subsidiaries (Pacific Investment Management Company and subsidiaries,
Parametric Portfolio Associates, Inc., Cadence Capital Management
Corporation, NFJ Investment Group, Inc. and Blairlogie Capital Management
Limited) entered into an agreement and plan of consolidation with Thomson
Advisory Group L.P., a Delaware limited partnership with publicly traded
units, to merge into a newly capitalized partnership named PIMCO Advisors
L.P. Collectively, PFAMCo and various of its subsidiaries beneficially
own approximately 42% of the outstanding general and limited partner
units of PIMCO Advisors L.P. as of December 31, 1995 and 1994. Net cash
distributions received on these units are recorded as income as permitted
by the Insurance Department of the State of California.
On December 21, 1995, Pacific Mutual completed a subsidiary
reorganization in which PFAMCo became a direct, wholly-owned subsidiary
of Pacific Mutual. Prior to that PFAMCo was a wholly-owned second-tier
subsidiary of Pacific Mutual. The intermediate company, Pacific Financial
Holding Company ("PFHC") and certain of its assets and liabilities were
merged into PFAMCo in connection with this reorganization. The remaining
assets were merged into Pacific Mutual which consisted of investments in
subsidiaries as follows: Pacific Equities Network, PM Group Life
Insurance Company and PFAMCo.
POLICY RESERVES AND DEPOSIT FUNDS
Life insurance reserves are valued using the net level premium method,
the Commissioners' Reserve Valuation Method, or other modified reserve
methods.
Reserves for individual annuities are maintained principally on the
Commissioners' Annuity Reserve Valuation Method. Group annuity contract
reserves are valued using the net single premium method.
The liability for deposit funds, including guaranteed interest contracts,
is based primarily upon and is not less than the policyowners' equity in
their deposit accounts, including credited interest.
REVENUES AND EXPENSES
Premiums are recognized as income over the premium paying period.
Deposits made in connection with annuity contracts are recognized as
revenue when received. Investment income is recorded as earned.
Expenses, including policy acquisition costs, such as commissions, and
Federal income taxes are charged to operations as incurred.
DIVIDENDS
Dividends are provided based on dividend formulas approved by the Board
of Directors and reviewed for reasonableness and equitable treatment of
policyowners by an independent consulting actuary.
65
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
1.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES
Pacific Mutual is taxed as a life insurance company for Federal income
tax purposes. Pacific Mutual's income tax return is consolidated with all
its includable domestic subsidiaries except PCL. The amount of Federal
income tax expense includes an equity tax calculated by a prescribed
formula that incorporates a differential earnings rate between stock and
mutual life insurance companies. Under prescribed statutory accounting
practices, deferred tax assets and liabilities are not recorded. The
difference between the effective tax rate and the statutory tax rate of
35% for 1995 and 1994 is primarily due to certain policy acquisition
costs being deferred and amortized over a ten-year period for tax
purposes, reserve differences, non-taxable investment income and the
equity tax.
OTHER SURPLUS TRANSACTIONS
Other surplus transactions consist primarily of unrealized capital gains
and losses, changes in nonadmitted assets, and changes in the AVR.
SEPARATE ACCOUNTS
Separate account assets are recorded at market value and the related
liabilities represent segregated contract owner funds maintained in
accounts with individual investment objectives. The investment results of
separate account assets generally pass through to separate account policy
owners and contract owners.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments disclosed in Notes 3
and 4 have been determined using available market information and
appropriate valuation methodologies. However, considerable judgment is
required to interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented may not be indicative of the amounts
Pacific Mutual could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies could have a
significant effect on the estimated fair value amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
practices prescribed or permitted by regulatory authorities and generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1995
financial statement presentation.
2.REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY
Pursuant to a five-year rehabilitation agreement approved by a California
Superior Court and the Insurance Department of the State of California in
July 1992, Pacific Mutual, through its wholly-owned subsidiary, PCL, will
facilitate the rehabilitation of First Capital Life Insurance Company
("FCL"). In accordance with the rehabilitation agreement, insurance
policies of FCL were restructured and assumed by PCL on December 31,
1992.
The rehabilitation agreement provides for the holders of restructured
policies to share in a substantial percentage of the unallocated surplus
of PCL at the end of the rehabilitation period. Policyholders have the
option to surrender their restructured policies with reduced benefits
during this five-year period. During the rehabilitation
66
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
2.REHABILITATION OF FIRST CAPITAL LIFE INSURANCE COMPANY (CONTINUED)
plan period, PCL is prohibited from issuing new insurance policies. At
the end of the rehabilitation period, PCL will merge into Pacific Mutual,
with Pacific Mutual as the surviving entity. Substantially all of the
assets and certain of the liabilities of FCL were assumed by PCL on
December 31, 1992, pursuant to an assumption reinsurance agreement and
asset purchase agreement.
In accordance with the rehabilitation agreement, PCL was capitalized by a
cash contribution of $8.3 million from Pacific Mutual and a $45 million
certificate of contribution provided by a wholly-owned subsidiary of
Pacific Mutual for a total of $53.3 million initial capitalization.
In the event PCL is unable to pay contract benefits, Pacific Mutual is
obligated to contribute funds to pay those benefits in accordance with
the rehabilitation agreement.
3.INVESTMENTS IN DEBT SECURITIES
The statement value, gross unrealized gains and losses and estimated fair
value of bonds and redeemable preferred stocks ("debt securities"),
including short-term investments, are shown below. The estimated fair
value of publicly traded securities was based on quoted market prices.
For securities not actively traded, estimated fair values were provided
by independent pricing services specializing in "matrix pricing" and
modeling techniques. Pacific Mutual also estimates certain fair values
based on interest rates, credit quality and average maturity or from
securities with comparable trading characteristics.
<TABLE>
<CAPTION>
Gross Unrealized Estimated
Statement ----------------- Fair
Value Gains Losses Value
---------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
December 31, 1995:
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 147,436 $ 28,214 $ 175,650
Obligations of states, political
subdivisions and foreign
governments 452,273 66,960 $ 3,064 516,169
Corporate securities 3,901,979 442,497 46,539 4,297,937
Mortgage-backed securities 2,438,052 116,650 10,106 2,544,596
Redeemable preferred stock 89,191 2,840 2,472 89,559
---------------------------------------------
Total $7,028,931 $657,161 $ 62,181 $7,623,911
---------------------------------------------
December 31, 1994:
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 216,201 $ 1,064 $ 37,113 $ 180,152
Obligations of states, political
subdivisions and foreign
governments 321,798 5,371 16,309 310,860
Corporate securities 3,771,271 104,311 160,712 3,714,870
Mortgage-backed securities 2,475,472 28,472 81,111 2,422,833
Redeemable preferred stock 81,026 343 5,031 76,338
---------------------------------------------
Total $6,865,768 $139,561 $300,276 $6,705,053
---------------------------------------------
</TABLE>
67
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
3.INVESTMENTS IN DEBT SECURITIES (CONTINUED)
The statement value and estimated fair value of debt securities as of
December 31, 1995 by contractual repayment date of principal are shown
below. Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Statement Fair
Value Value
-----------
(In Thousands)
<S> <C> <C>
Due in one year or less $ 445,645 $ 449,283
Due after one year through five years 1,319,487 1,426,373
Due after five years through ten years 1,409,209 1,542,228
Due after ten years 1,416,538 1,661,431
-----------
4,590,879 5,079,315
Mortgage-backed securities 2,438,052 2,544,596
-----------
Total $ 7,028,931 $ 7,623,911
-----------
</TABLE>
Proceeds from sales of investments in debt securities were $1.4 billion
and $1.5 billion for the years ended December 31, 1995 and 1994,
respectively. In 1995 and 1994, gross gains of $36 million and $30
million and gross losses of $14 million and $43 million, respectively,
were realized on those sales.
4.FINANCIAL INSTRUMENTS
The estimated fair values of Pacific Mutual's financial instruments,
including debt securities, are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Statement Estimated Statement Estimated
Value Fair Value Value Fair Value
----------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Assets:
Debt securities (Note
3) $ 7,028,931 $ 7,623,911 $ 6,865,768 $ 6,705,053
Preferred and common
stocks 121,420 139,613 109,458 116,993
Mortgage loans 1,388,743 1,500,000 1,421,182 1,452,596
Policy loans 2,700,544 2,700,544 2,312,455 2,312,455
Derivative financial
instruments:
Interest rate swaps 1,068 3,379 121 (24,809)
Other 18,008 30,649 2,672 (2,822)
Liabilities:
Guaranteed interest
contracts 2,375,898 2,459,323 2,635,356 2,614,961
Deposit liabilities 876,276 899,393 897,743 859,469
Annuity liabilities 308,742 311,441 220,026 223,423
Other derivative fi-
nancial instruments 2,373 1,490 2,270 2,128
Surplus:
Contribution certifi-
cates 149,596 157,688 149,593 124,313
</TABLE>
68
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
4.FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair
values of these financial instruments as of December 31, 1995 and 1994:
PREFERRED AND COMMON STOCKS
The estimated fair values are based on quoted market prices or dealer
quotes.
MORTGAGE LOANS
The estimated fair value of the mortgage loan portfolio is determined by
discounting the estimated future cash flows, using a year-end market rate
which is applicable to the yield, credit quality and average maturity of
the composite portfolio.
POLICY LOANS
The statement value of policy loans is a reasonable estimate of their
fair value.
GUARANTEED INTEREST CONTRACTS AND DEPOSIT LIABILITIES
The estimated fair values of fixed-maturity guaranteed interest contracts
are estimated using the rates currently offered for deposits of similar
remaining maturities. The estimated fair values of deposit liabilities
with no defined maturities are the amounts payable on demand.
Pacific Mutual has issued PRO GIC and Diversifier GIC contracts to plan
sponsors totaling $914 million as of December 31, 1995, pursuant to the
terms of which the plan sponsor retains direct ownership and control of
the assets related to these contracts. Pacific Mutual agrees to provide
benefit responsiveness in the event that plan benefit requests exceed
plan cash flows. In return for this guarantee, Pacific Mutual receives a
fee which varies by contract. Pacific Mutual sets the investment
guidelines to provide for appropriate credit quality and cash flow
matching.
ANNUITY LIABILITIES
The fair value of annuity liabilities approximates statement value and
primarily includes policyholder deposits and accumulated credited
interest.
DERIVATIVE FINANCIAL INSTRUMENTS
Pacific Mutual utilizes certain derivative financial instruments to
diversify its business risk and to minimize its exposure to fluctuations
in market prices, interest rates, or basis risk. Pacific Mutual has also
set aside a corporate total return portfolio utilizing derivative
financial instruments. These instruments include interest rate and
currency swaps, asset swaps, credit derivatives, forwards, options held,
options written, and futures contracts, and involve elements of credit
risk and market risk in excess of amounts recognized in the accompanying
financial statements. The notional amounts of those instruments reflect
the extent of involvement in those various types of financial
instruments. The estimated fair values of these instruments are based on
market or dealer quotes. Pacific Mutual determines, on an individual
counterparty basis, the need for collateral or other security to support
financial instruments with off-balance sheet credit risks.
69
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
4.FINANCIAL INSTRUMENTS (CONTINUED)
Options and Floors
Pacific Mutual uses options and floors to hedge against fluctuations in
interest rates and in its corporate total return portfolio. Cash
requirements on options held are limited to the premium paid by Pacific
Mutual at acquisition. Pacific Mutual uses written options on a limited
basis consisting primarily of covered calls. Gains and losses on covered
calls are offset by gains and losses on the underlying position. Options
and floors held are reported as assets and options written are reported
as liabilities. As of December 31, 1995, the notional amount of options
held and options written approximated $1.3 billion and $30 million,
respectively. As of December 31, 1994, the notional amount of options
held and options written approximated $1.5 billion and $42 million,
respectively. Option contracts mature during 1996 through 2007.
Interest Rate Swap Contracts
Pacific Mutual has entered into interest rate swap contracts to reduce
the impact of changes in interest rates on its variable short-term and
long-term investments. These contracts effectively change the interest
rate exposure on variable rate notes to fixed rates which range from 1.9%
to 8.9% as of December 31, 1995, and from 1.9% to 8.6% as of December 31,
1994. Interest rate swap contracts mature during 1996 through 2013. As of
December 31, 1995 and 1994, interest rate swap contracts outstanding with
financial institutions had a total notional amount of $656 million and
$411 million, respectively.
Asset Swap Contracts
Pacific Mutual has entered into an asset swap contract to reduce interest
rate risk by shortening both the duration and maturity of one of its
fixed rate investments. The asset swap contract matures during 1998. As
of December 31, 1995, the asset swap contract had a notional amount of
$10 million.
Credit Derivatives
Pacific Mutual uses credit derivatives to take advantage of market
opportunities. As of December 31, 1995 and 1994, the notional amount of
credit derivatives outstanding approximated $90 million and $66 million,
respectively. Credit derivatives mature during 1996 through 2000.
Foreign Currency Exchange Contracts
Pacific Mutual enters into foreign currency exchange contracts that are
used to hedge against fluctuations in foreign currency-denominated assets
and related income. Gains and losses on such agreements offset currency
gains and losses on the related assets. As of December 31, 1995 and 1994,
the notional amount of foreign currency exchange contracts approximated
$15 million and $35 million, respectively. Foreign currency exchange
contracts expire during 1998 and 1999.
Future Contracts
Pacific Mutual uses exchange-traded futures contracts for asset and
liability management of fixed maturity securities and insurance
liabilities and for hedging market fluctuations on equity securities.
Price changes on futures are settled daily through the daily margin cash
flows. As of December 31, 1995 and 1994, the notional amounts of futures
contracts were $340 million and $163 million, respectively. The notional
amounts of the contracts do not represent future cash requirements, as
Pacific Mutual intends to close out open positions prior to expiration.
70
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
4.FINANCIAL INSTRUMENTS (CONTINUED)
CONTRIBUTION CERTIFICATES
The estimated fair value of contribution certificates is based on market
quotes.
5.CONCENTRATION OF CREDIT RISK
Pacific Mutual manages its investments to limit credit risk by
diversifying its portfolio among various security types and industry
sectors. The credit risk of financial instruments is controlled through
credit approvals, limits and monitoring procedures. Real estate and
mortgage loan investments are diversified by geographic location and
property type. Management believes that significant concentrations of
credit risk do not exist.
Pacific Mutual is exposed to credit loss in the event of nonperformance
by the other parties to the interest rate swaps contracts and other
derivative securities. However, Pacific Mutual does not anticipate
nonperformance by the counterparties.
6.UNCONSOLIDATED SUBSIDIARIES
Pacific Mutual's subsidiary operations primarily include other life and
health insurance and investment management and advisory services. As of
December 31, 1995 and 1994, subsidiary assets were $4.5 billion and
liabilities were $4.3 billion as of December 31, 1995 and $4.2 billion as
of December 31, 1994.
Revenue and net income, including PCL, were $908 million and $63 million
for the year ended December 31, 1995, and $1.1 billion and $75 million
for the year ended December 31, 1994. Dividends from subsidiaries totaled
$64.7 million and $2 million for the years ended December 31, 1995 and
1994, respectively. Earnings of subsidiaries, excluding PCL, and
excluding capital gains, are included in net investment income.
7.BORROWINGS
Pacific Mutual borrows for short-term needs by issuing commercial paper.
Approximately $50 million was outstanding as of December 31, 1994,
bearing an interest rate of 5.86%, and was repaid in January, 1995. There
were no borrowings outstanding as of December 31, 1995.
In addition, Pacific Mutual had available a revolving credit facility
totaling approximately $250 million as of December 31, 1995 and 1994.
There were no borrowings outstanding as of December 31, 1995 and 1994.
8.CONTRIBUTION CERTIFICATES
Pacific Mutual has $150 million of Contribution Certificates (the
"Certificates"), also referred to as Surplus Notes, outstanding at an
interest rate of 7.9% maturing on December 30, 2023. Interest is payable
semiannually on June 30 and December 30. The Certificates may not be
redeemed at the option of Pacific Mutual or any holder of the
Certificates. The Certificates are unsecured and subordinated to all
present and future senior indebtedness and policy claims of Pacific
Mutual. Each payment of interest on and the payment of principal of the
Certificates may be made only out of Pacific Mutual's surplus and with
the prior approval of the Insurance Commissioner of the State of
California. In accordance with accounting practices prescribed or
permitted by the Insurance Department of the State of California, the
Certificates are not part of the liabilities of Pacific Mutual and are
included in surplus.
71
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
9.REINSURANCE
Pacific Mutual has reinsurance agreements with other insurance companies
for the purpose of diversifying risk and limiting exposure on larger
risks. For the years ended December 31, 1995 and 1994, individual life
and annuity premiums assumed were $16 million and $20 million and
premiums ceded were $339 million and $363 million, respectively. Amounts
recoverable from reinsurers for individual life and annuities include
reinsured and paid claims of $8 million and $13 million as of December
31, 1995 and 1994, respectively. Policy benefits payable are net of
reinsurance recoveries of $8 million and $4 million at December 31, 1995
and 1994, respectively.
Pacific Mutual also reinsures substantially all of its group life and
health business with a subsidiary insurance company. Premiums of $72
million and $90 million, and benefits of $53 million and $70 million were
ceded during the years ended December 31, 1995 and 1994, respectively.
Amounts payable to the subsidiary under this agreement were $6 million
and $8 million as of December 31, 1995 and 1994, respectively.
To the extent that the assuming companies become unable to meet their
obligations under these treaties, Pacific Mutual remains contingently
liable. However, Pacific Mutual does not anticipate nonperformance by
these assuming companies.
10.PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
PENSION PLAN
Pacific Mutual maintains a defined benefit pension plan covering eligible
employees and agents. In 1995, Pacific Mutual accrued $2.5 million in
pension expense that will be funded in 1996 based on the latest actuarial
valuation report. No expense or contributions were made during 1994
because of the funded status of the plans and related income tax
considerations. Accumulated benefits and net assets available for
benefits as of the latest valuation dates (January 1, 1995 and April 1,
1994) are as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------------
(In Thousands)
<S> <C> <C>
Actuarial present value of accumulated benefits:
Vested $ 92,966 $ 88,122
Nonvested 392 1,115
-----------------------------
Total $ 93,358 $ 89,237
-----------------------------
Net assets available for benefits $ 107,530 $ 111,089
-----------------------------
</TABLE>
The above present values were determined using an assumed discount rate
of 8.5% in 1995 and 1994.
POSTRETIREMENT HEALTHCARE AND LIFE INSURANCE PLANS
Pacific Mutual sponsors a defined benefit health care plan and a defined
benefit life insurance plan ("The Plans") that provide postretirement
benefits for all eligible retirees and their dependents. Generally,
qualified employees may become eligible for these benefits if they reach
normal retirement age, have been covered under Pacific Mutual's policy as
an active employee for a minimum continuous period prior to the date
retired, and have an employment date before January 1, 1990. The Plans
contain cost-sharing features such as deductibles and coinsurance and
require retirees to make contributions which can be adjusted annually.
Pacific Mutual's
72
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
10.PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
commitment to qualified employees who retire after April 1, 1994 is
limited to specific dollar amounts. Pacific Mutual reserves the right to
modify or terminate The Plans at any time. As in the past, the general
policy is to fund these benefits on a pay-as-you-go basis. The amount of
benefits paid under The Plans for the years ended December 31, 1995 and
1994 was approximately $1.7 million for both years.
Pacific Mutual utilizes the accrual method of accounting for the costs of
The Plans as prescribed by the Insurance Department of the State of
California and amortizes its transition obligation of $26.7 million over
twenty years.
Components of net periodic postretirement benefit cost are as follows (In
Thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
---------------------------
<S> <C> <C>
Service cost $ 177 $ 186
Interest cost 1,921 1,790
Amortization (260) (260)
---------------------------
1,838 1,716
Recognized transition obligation-net 1,336 1,337
---------------------------
Net periodic postretirement benefit cost $ 3,174 $ 3,053
---------------------------
</TABLE>
The following table presents The Plans' funded status reconciled with
amounts recorded in other liabilities on Pacific Mutual's statement of
financial position (In Thousands):
<TABLE>
<CAPTION>
1995 1994
----------------------------
<S> <C> <C>
Accumulated postretirement obligation:
Retirees $ 20,936 $ 20,580
Fully eligible active plan participants 1,695 1,346
Other active plan participants 2,290 2,455
----------------------------
24,921 24,381
Fair value of plan assets 0 0
----------------------------
Unfunded accumulated postretirement obligation 24,921 24,381
Unrecognized net gain 878 942
Prior service cost 1,589 1,849
Unrecognized transition obligation-net (22,720) (24,056)
----------------------------
Accrued postretirement benefit liability $ 4,668 $ 3,116
----------------------------
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
benefit obligation was 10% for 1995 and 11% for 1994, and is assumed to
decrease gradually to 5% in 2003 and remain at that level thereafter. The
amount reported is materially affected by the health care cost trend rate
assumptions. If the health care cost trend
73
<PAGE>
Pacific Mutual Life Insurance Company
NOTES TO FINANCIAL STATEMENTS
10.PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
rate assumptions were increased by 1%, the accumulated postretirement
benefit obligation as of December 31, 1995 and 1994 would be increased by
10.9% and 11.2%, respectively. The effect of this change would increase
the aggregate of the service, interest and amortization cost components
of the net periodic benefit cost by 11.4% and 13.6%, respectively.
The discount rate used in determining the accumulated postretirement
benefit obligation is 7% and 8% for 1995 and 1994, respectively.
11.INVESTMENT COMMITMENTS
Pacific Mutual has outstanding commitments to make investments in bonds
and other invested assets as follows (In Thousands):
<TABLE>
<CAPTION>
Year ended December
31:
-------------------
<S> <C>
1996 $ 179,551
1997-2000 88,698
2001 and thereafter 32,091
Total $ 300,340
</TABLE>
12.LITIGATION
Pacific Mutual and its subsidiaries are respondents in a number of legal
proceedings, some of which involve extra-contractual damages. In the
opinion of management, the outcome of these proceedings is not likely to
have a material adverse effect on the financial position of Pacific
Mutual.
--------------------------------------------------------------------------
74
<PAGE>
PACIFIC MUTUAL LIFE INSURANCE COMPANY
UNAUDITED FINANCIAL STATEMENTS
AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
75
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENT OF FINANCIAL POSITION
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1996
- ---------------------------------------------------------------
(In Thousands)
<S> <C>
ASSETS
Bonds $ 7,463,993
Preferred stocks 157,698
Common stocks 64,668
Unconsolidated subsidiaries 197,687
Mortgage loans 1,378,267
Real estate 141,784
Home office properties 47,743
Policy loans 2,767,737
Cash and short-term investments 76,080
Investment income due and accrued 163,132
Premiums due and uncollected, and other assets 293,064
Separate account assets 6,699,629
- ---------------------------------------------------------------
TOTAL ASSETS $19,451,482
- ---------------------------------------------------------------
LIABILITIES AND SURPLUS
Liabilities
Policy reserves $ 7,503,832
Deposit funds 3,465,254
Other liabilities 800,639
Asset valuation reserve 199,097
Separate account liabilities 6,699,629
- ---------------------------------------------------------------
Total Liabilities 18,668,451
Surplus 783,031
- ---------------------------------------------------------------
TOTAL LIABILITIES AND SURPLUS $19,451,482
- ---------------------------------------------------------------
</TABLE>
See Note to Financial Statements
76
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF OPERATIONS AND SURPLUS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
- ------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
REVENUES
Premiums, annuity considerations and deposit funds $2,020,639 $1,463,457
Net investment income 494,944 470,704
Other income 22,680 18,554
- ------------------------------------------------------------------------------
TOTAL REVENUES 2,538,263 1,952,715
- ------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future policy benefits 2,252,006 1,718,096
Operating expenses 172,908 135,774
Premium and other taxes (excluding tax on capital
gains) 17,057 15,077
Dividends to policyowners 9,583 9,363
- ------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 2,451,554 1,878,310
- ------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES 86,709 74,405
Federal income taxes 45,938 45,127
- ------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 40,771 29,278
NET REALIZED CAPITAL GAINS 18,473 2,148
- ------------------------------------------------------------------------------
NET INCOME $ 59,244 $ 31,426
- ------------------------------------------------------------------------------
SURPLUS
Net income $ 59,244 $ 31,426
Other surplus transactions, net 536 3,172
- ------------------------------------------------------------------------------
Increase in surplus 59,780 34,598
Surplus, beginning of period 723,251 627,624
- ------------------------------------------------------------------------------
SURPLUS, END OF PERIOD $ 783,031 $ 662,222
- ------------------------------------------------------------------------------
</TABLE>
See Note to Financial Statements
77
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
- -------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Receipts
Premiums, annuity considerations and deposit
funds $ 1,976,681 $ 1,456,159
Net investment income 382,817 390,390
Allowances and reserve adjustments on reinsurance
ceded 35,715 28,352
Other 99,989
Payments
Policy benefit payments (933,575) (791,899)
Net policy loans (66,911) (40,440)
Operating expenses (171,715) (129,968)
Net transfer to separate accounts (804,517) (476,532)
Premium and other taxes (20,718) (24,477)
Dividends to policyowners (9,802) (9,545)
Federal income taxes (97,148) (14,230)
Other applications, net (23,467)
- -------------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES 390,816 364,343
- -------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds
Bonds 1,171,813 1,080,201
Stocks 143,772 74,947
Mortgage loans 106,816 129,865
Real estate 2,372 3,412
Other investments 42,020 59,310
Payments for the purchase of
Bonds (1,888,627) (1,363,710)
Stocks (122,945) (87,817)
Mortgage loans (100,764) (115,727)
Real estate (1,018) (1,422)
Other investments (45,485) (33,979)
- -------------------------------------------------------------------------------
NET CASH FLOW USED IN
INVESTING ACTIVITIES (692,046) (254,920)
- -------------------------------------------------------------------------------
</TABLE>
(Continued)
See Note to Financial Statements
78
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
<S> <C> <C>
(Continued) 1996 1995
- -----------------------------------------------------------------------------
<CAPTION>
(In Thousands)
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of short-term borrowings $ 114,783 $ 158,281
- -----------------------------------------------------------------------------
NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES 114,783 158,281
- -----------------------------------------------------------------------------
Increase (decrease) in cash and short-term
investments (186,447) 267,704
Cash and short-term investments, beginning of pe-
riod 262,527 97,745
- -----------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 76,080 $ 365,449
- -----------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 3,440 $ 7,651
- -----------------------------------------------------------------------------
</TABLE>
See Note to Financial Statements
79
<PAGE>
Pacific Mutual Life Insurance Company
NOTE TO FINANCIAL STATEMENTS
(Unaudited)
1.BASIS OF PRESENTATION
The information set forth in the statement of financial position as of
June 30, 1996 and the statements of operations and surplus and of cash
flow for the six months ended June 30, 1996 and 1995 is unaudited. The
information reflects all adjustments, consisting only of normal recurring
adjustments, that, in the opinion of management, are necessary to present
fairly the financial position and results of operations of Pacific Mutual
Life Insurance Company ("Pacific Mutual") for the periods indicated.
Results of operations for the interim periods are not necessarily
indicative of the results of operations for the full year. For further
information, refer to the financial statements and footnotes thereto
included in Pacific Mutual's audited financial statements for the years
ended December 31, 1995 and December 31, 1994.
Pacific Mutual's financial statements are prepared in accordance with
accounting practices prescribed or permitted by the Insurance Department
of the State of California, which are currently considered generally
accepted accounting principles ("GAAP") for mutual life insurance
companies. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations, and general administrative
rules. Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The financial statements of Pacific Mutual
are not consolidated with those of its subsidiaries.
The Financial Accounting Standards Board has issued certain
pronouncements effective for 1996 financial statements and thereafter
that will no longer allow statutory financial statements of mutual life
insurance companies to be described as being prepared in conformity with
GAAP. Upon the effective date of these pronouncements, in order for their
financial statements to be described as being prepared in accordance with
GAAP, mutual life insurance companies and their insurance subsidiaries
will be required to adopt all applicable authoritative GAAP
pronouncements in any general purpose financial statements that they may
issue. Pacific Mutual intends to issue December 31, 1996 general purpose
financial statements reflecting the adoption of all applicable GAAP
pronouncements.
80
<PAGE>
APPENDIX
DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
---- ---------- --- ---------- --- ---------- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94+ 101
</TABLE>
81
<PAGE>
ILLUSTRATIONS
The following tables illustrate how the death benefits, Accumulated Values
and Net Cash Surrender Values of a hypothetical policy may vary over an
extended period of time assuming a single premium that is 100% of the
Guideline Single Premium and hypothetical rates of return equivalent to
constant gross annual rates of 0%, 6% and 12%.
The policies illustrated include the following:
1. Age 60, Male Nonsmoker, $40,000 initial premium, Current Cost of
Insurance Rates.
2. Age 60, Male Nonsmoker, $40,000 initial premium, Guaranteed Cost of
Insurance Rates.
3. Age 60, Female Nonsmoker, $40,000 initial premium, Current Cost of
Insurance Rates.
4. Age 60, Female Nonsmoker, $40,000 initial premium, Guaranteed Cost of
Insurance Rates.
5. Age 60, Male/Female Nonsmoker, $40,000 initial premium, Current Cost
of Insurance Rates.
6. Age 60, Male/Female Nonsmoker, $40,000 initial premium, Guaranteed
Cost of Insurance Rates.
The values would be different from those shown if the gross annual
investment rates of return averaged 0%, 6% or 12% over a period of years, but
also fluctuated above or below those averages for individual Policy Years.
The second column of each table, labeled "Premium Paid Plus Interest at 5%,"
shows the amount which would accumulate if an amount equal to the initial
premium (after taxes) were invested to earn interest at 5% compounded
annually. The premium payment is illustrated as if made at the beginning of
the year. These illustrations assume that no Policy loans have been made. The
values were calculated using the current and guaranteed maximum cost of
insurance charges.
The amounts shown for the death benefits, Accumulated Values and Net Cash
Surrender Values, reflect the fact that the net investment return on the
Variable Accounts is lower than the gross investment return on the assets as a
result of charges levied against the Variable Accounts. These values also take
into account any administration charges, and Net Cash Surrender Value takes
into account any Surrender Charge. The daily investment advisory fee is
assumed to be equivalent to an annual weighted rate of 0.64% of the aggregate
average daily net assets of the Fund. This hypothetical rate is representative
of the weighted average investment advisory fee applicable to the fourteen
Portfolios of the Fund available to the Separate Account.
The tables also reflect other expenses of the Fund at the weighted rate of
0.23% of the average daily net assets of a Portfolio, which amounts to 0.87%
of the average daily net assets of a Portfolio including the investment
advisory fee, operating expenses and any foreign taxes. Foreign taxes were
0.30% of the average daily net assets of the International Portfolio for the
year ended December 31, 1995 and have been estimated at 0.28% for the Emerging
markets Portfolio. SEE "SUMMARY OF THE POLICY: Fund Annual Expenses After
Expense Limitation" for more complete information on Fund investment advisory
fees and operating expenses.
After deduction of the charges and Fund expenses described above, the
illustrated gross annual investment rates of return of 0%, 6%, and 12%
correspond to approximate net annual rates of return of -0.87%, 5.08%, and
11.03%.
The hypothetical values shown in the tables do not reflect any charges
against the Variable Accounts for income taxes that may be attributable to the
Variable Accounts in the future, since we are not currently making these
charges.
We will furnish upon request a comparable illustration reflecting the
proposed Insured's Age, Face Amount and premium amounts requested. In
addition, upon request, illustrations will be furnished reflecting allocation
of
82
<PAGE>
premiums to specified Variable Accounts. Such illustrations will reflect the
expenses of the Portfolio of the Fund in which the Variable Account invests.
Illustrations that use a hypothetical gross rate of return in excess of 12%
are available to certain large institutional investors upon request.
83
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Current Cost of Insurance Charges
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $80,044
CLASS: MALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
PREMIUM END OF YEAR DEATH BENEFIT ASSUMING
END OF PAID PLUS HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
POLICY INTEREST AT -----------------------------------------------
YEAR 5% 0% 6% 12%
------ ----------- ----------- -------------- ----------------
<S> <C> <C> <C> <C>
1 $ 42,000 $ 80,044 $ 80,044 $ 80,044
2 $ 44,100 $ 80,044 $ 80,044 $ 80,044
3 $ 46,305 $ 80,044 $ 80,044 $ 80,044
4 $ 48,620 $ 80,044 $ 80,044 $ 80,044
5 $ 51,051 $ 80,044 $ 80,044 $ 80,044
6 $ 53,604 $ 80,044 $ 80,044 $ 80,044
7 $ 56,284 $ 80,044 $ 80,044 $ 85,293
8 $ 59,098 $ 80,044 $ 80,044 $ 91,948
9 $ 62,053 $ 80,044 $ 80,044 $ 99,116
10 $ 65,156 $ 80,044 $ 80,044 $ 106,834
15 $ 83,157 $ 80,044 $ 80,044 $ 155,781
20 $106,132 $ 80,044 $ 80,044 $ 241,655
25 $135,454 $ 80,044 $ 95,928 $ 382,008
30 $172,878 $ 80,044 $ 115,149 $ 603,879
35 $220,641 $ 80,044 $ 132,989 $ 918,480
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR ACCUMULATED
VALUE
ASSUMING HYPOTHETICAL END OF YEAR NET CASH SURRENDER VALUE
GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF INVESTMENT RETURN OF INVESTMENT RETURN OF
POLICY ------------------------------ ------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ------- -------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 $38,827 $ 41,157 $ 43,487 $34,827 $ 37,157 $ 39,487
2 $37,650 $ 42,306 $ 47,234 $33,650 $ 38,306 $ 43,234
3 $36,507 $ 43,489 $ 51,307 $32,907 $ 39,889 $ 47,707
4 $35,398 $ 44,705 $ 55,780 $32,198 $ 41,505 $ 52,580
5 $34,321 $ 45,957 $ 60,642 $31,521 $ 43,157 $ 57,842
6 $33,276 $ 47,245 $ 65,928 $30,876 $ 44,845 $ 63,528
7 $32,262 $ 48,570 $ 71,674 $30,262 $ 46,570 $ 69,674
8 $31,277 $ 49,934 $ 77,922 $29,677 $ 48,334 $ 76,322
9 $30,321 $ 51,337 $ 84,714 $29,121 $ 50,137 $ 83,514
10 $29,393 $ 52,822 $ 92,098 $29,393 $ 52,822 $ 92,098
15 $26,177 $ 63,406 $145,589 $26,177 $ 63,406 $ 145,589
20 $23,293 $ 76,110 $230,148 $23,293 $ 76,110 $ 230,148
25 $20,706 $ 91,360 $363,818 $20,706 $ 91,360 $ 363,818
30 $18,385 $109,665 $575,123 $18,385 $109,665 $ 575,123
35 $16,303 $131,672 $909,386 $16,303 $131,672 $ 909,386
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
84
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Current Cost of Insurance Charges
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $80,044
CLASS: MALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
PREMIUM END OF YEAR DEATH BENEFIT ASSUMING
END OF PAID PLUS HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
POLICY INTEREST AT -----------------------------------------------
YEAR 5% 0% 6% 12%
------ ----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
1 $ 42,000 $80,044 $80,044 $ 80,044
2 $ 44,100 $80,044 $80,044 $ 80,044
3 $ 46,305 $80,044 $80,044 $ 80,044
4 $ 48,620 $80,044 $80,044 $ 80,044
5 $ 51,051 $80,044 $80,044 $ 80,044
6 $ 53,604 $80,044 $80,044 $ 80,044
7 $ 56,284 $80,044 $80,044 $ 81,266
8 $ 59,098 $80,044 $80,044 $ 87,545
9 $ 62,053 $80,044 $80,044 $ 94,286
10 $ 65,156 $80,044 $80,044 $101,522
15 $ 83,157 * $80,044 $146,294
20 $106,132 * $80,044 $225,832
25 $135,454 * * $351,284
30 $172,878 * * $537,022
35 $220,641 * * $797,030
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR ACCUMULATED VALUE END OF YEAR NET CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF INVESTMENT RETURN OF INVESTMENT RETURN OF
POLICY ---------------------------------- ------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ------- ------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 $38,343 $40,681 $ 43,020 $ 34,343 $ 36,681 $ 39,020
2 $36,592 $41,292 $ 46,272 $ 32,592 $ 37,292 $ 42,272
3 $34,773 $41,864 $ 49,830 $ 31,173 $ 38,264 $ 46,230
4 $32,871 $42,391 $ 53,738 $ 29,671 $ 39,191 $ 50,538
5 $30,866 $42,862 $ 58,092 $ 28,066 $ 40,062 $ 55,292
6 $28,742 $43,270 $ 62,917 $ 26,342 $ 40,870 $ 60,517
7 $26,478 $43,606 $ 68,291 $ 24,478 $ 41,606 $ 66,291
8 $24,055 $43,862 $ 74,191 $ 22,455 $ 42,262 $ 72,591
9 $21,444 $44,026 $ 80,586 $ 20,244 $ 42,826 $ 79,386
10 $18,610 $44,080 $ 87,519 $ 18,610 $ 44,080 $ 87,519
15 * $43,269 $136,724 * $ 43,269 $136,724
20 * $33,892 $215,078 * $ 33,892 $215,078
25 * * $334,556 * * $334,556
30 * * $511,449 * * $511,449
35 * * $789,138 * * $789,138
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
*Additional payment will be required to prevent policy termination.
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
85
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Current Cost of Insurance Charges
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $94,464
CLASS: FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
PREMIUM END OF YEAR DEATH BENEFIT ASSUMING
END OF PAID PLUS HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
POLICY INTEREST AT -----------------------------------------------
YEAR 5% 0% 6% 12%
------ -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
1 $ 42,000 $94,464 $94,464 $94,464
2 $ 44,100 $94,464 $94,464 $94,464
3 $ 46,305 $94,464 $94,464 $94,464
4 $ 48,620 $94,464 $94,464 $94,464
5 $ 51,051 $94,464 $94,464 $94,464
6 $ 53,604 $94,464 $94,464 $94,464
7 $ 56,284 $94,464 $94,464 $94,464
8 $ 59,098 $94,464 $94,464 $94,464
9 $ 62,053 $94,464 $94,464 $99,296
10 $ 65,156 $94,464 $94,464 $107,203
15 $ 83,157 $94,464 $94,464 $156,427
20 $106,132 $94,464 $94,464 $243,300
25 $135,454 $94,464 $95,928 $384,608
30 $172,878 $94,464 $115,149 $607,989
35 $220,641 $94,464 $133,009 $924,873
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR ACCUMULATED VALUE END OF YEAR NET CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF INVESTMENT RETURN OF INVESTMENT RETURN OF
POLICY ---------------------------------- -------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ --------- ---------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1 $38,827 $ 41,157 $ 43,487 $ 34,827 $ 37,157 $ 39,487
2 $37,650 $ 42,306 $ 47,234 $ 33,650 $ 38,306 $ 43,234
3 $36,507 $ 43,489 $ 51,307 $ 32,907 $ 39,889 $ 47,707
4 $35,398 $ 44,705 $ 55,780 $ 32,198 $ 41,505 $ 52,580
5 $34,321 $ 45,957 $ 60,642 $ 31,521 $ 43,157 $ 57,842
6 $33,276 $ 47,245 $ 65,928 $ 30,876 $ 44,845 $ 63,528
7 $32,262 $ 48,570 $ 71,674 $ 30,262 $ 46,570 $ 69,674
8 $31,277 $ 49,934 $ 77,947 $ 29,677 $ 48,334 $ 76,347
9 $30,321 $ 51,337 $ 84,868 $ 29,121 $ 50,137 $ 83,668
10 $29,393 $ 52,822 $ 92,417 $ 29,393 $ 52,822 $ 92,417
15 $26,177 $ 63,406 $146,194 $ 26,177 $ 63,406 $ 146,194
20 $23,293 $ 76,110 $231,714 $ 23,293 $ 76,110 $ 231,714
25 $20,706 $ 91,360 $366,293 $ 20,706 $ 91,360 $ 366,293
30 $18,385 $109,665 $579,037 $ 18,385 $109,665 $ 579,037
35 $16,303 $131,692 $915,716 $ 16,303 $131,692 $ 915,716
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
86
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Guaranteed Cost of Insurance Charges
SINGLE LIFE OPTION
ISSUE AGE: 60 FACE AMOUNT: $94,464
CLASS: FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
PREMIUM END OF YEAR DEATH BENEFIT ASSUMING
END OF PAID PLUS HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
POLICY INTEREST AT ------------------------------------------------
YEAR 5% 0% 6% 12%
------ ----------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
1 $ 42,000 $94,464 $94,464 $ 94,464
2 $ 44,100 $94,464 $94,464 $ 94,464
3 $ 46,305 $94,464 $94,464 $ 94,464
4 $ 48,620 $94,464 $94,464 $ 94,464
5 $ 51,051 $94,464 $94,464 $ 94,464
6 $ 53,604 $94,464 $94,464 $ 94,464
7 $ 56,284 $94,464 $94,464 $ 94,464
8 $ 59,098 $94,464 $94,464 $ 94,464
9 $ 62,053 $94,464 $94,464 $ 95,660
10 $ 65,156 $94,464 $94,464 $ 103,278
15 $ 83,157 $94,464 $94,464 $ 150,575
20 $106,132 * $94,464 $ 234,183
25 $135,454 * $94,464 $ 367,649
30 $172,878 * * $ 567,594
35 $220,641 * * $ 846,137
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR ACCUMULATED
VALUE
ASSUMING HYPOTHETICAL END OF YEAR NET CASH SURRENDER VALUE
GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF INVESTMENT RETURN OF INVESTMENT RETURN OF
POLICY ------------------------ --------------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ------- ------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $38,488 $40,823 $ 43,158 $34,488 $36,823 $ 39,158
2 $36,917 $41,600 $ 46,560 $32,917 $37,600 $ 42,560
3 $35,313 $42,361 $ 50,270 $31,713 $38,761 $ 46,670
4 $33,661 $43,095 $ 54,364 $30,461 $39,895 $ 51,164
5 $31,950 $43,797 $ 58,841 $29,150 $40,997 $ 56,041
6 $30,169 $44,461 $ 63,754 $27,769 $42,061 $ 61,354
7 $28,312 $45,085 $ 69,162 $26,312 $43,085 $ 67,162
8 $26,374 $45,669 $ 75,137 $24,774 $44,069 $ 73,537
9 $24,346 $46,210 $ 81,760 $23,146 $45,010 $ 80,560
10 $22,210 $46,698 $ 89,032 $22,210 $46,698 $ 89,032
15 $ 8,929 $49,238 $140,724 $ 8,929 $49,238 $ 140,724
20 * $46,605 $223,032 * $46,605 $ 223,032
25 * $28,778 $350,142 * $28,778 $ 350,142
30 * * $540,566 * * $ 540,566
35 * * $837,759 * * $ 837,759
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
*Additional payment will be required to prevent policy termination.
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
87
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Current Cost of Insurance Charges
LAST SURVIVOR OPTION
ISSUE AGE: 60 FACE AMOUNT: $114,740
CLASS: MALE/FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
PREMIUM END OF YEAR DEATH BENEFIT ASSUMING
END OF PAID PLUS HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
POLICY INTEREST AT ----------------------------------------------
YEAR 5% 0% 6% 12%
------ ----------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
1 $ 42,000 $114,740 $114,740 $114,740
2 $ 44,100 $114,740 $114,740 $114,740
3 $ 46,305 $114,740 $114,740 $114,740
4 $ 48,620 $114,740 $114,740 $114,740
5 $ 51,051 $114,740 $114,740 $114,740
6 $ 53,604 $114,740 $114,740 $114,740
7 $ 56,284 $114,740 $114,740 $114,740
8 $ 59,098 $114,740 $114,740 $114,740
9 $ 62,053 $114,740 $114,740 $114,740
10 $ 65,156 $114,740 $114,740 $114,740
15 $ 83,157 $114,740 $114,740 $161,952
20 $106,132 $114,740 $114,740 $252,704
25 $135,454 $114,740 $114,740 $399,537
30 $172,878 $114,740 $119,320 $631,588
35 $220,641 $114,740 $137,827 $960,765
</TABLE>
<TABLE>
<CAPTION>
End of Year ACCUMULATED VALUE End of Year NET CASH SURRENDER VALUE
Assuming Hypothetical Gross Annual Assuming Hypothetical Gross Annual
End of Investment Return of Investment Return of
Policy ---------------------------------- -----------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1 $39,010 $ 41,351 $ 43,692 $35,010 $ 37,351 $ 39,692
2 $37,977 $ 42,679 $ 47,656 $33,977 $ 38,679 $ 43,656
3 $36,933 $ 44,020 $ 51,958 $33,333 $ 40,420 $ 48,358
4 $35,901 $ 45,367 $ 56,670 $32,701 $ 42,167 $ 53,470
5 $34,897 $ 46,755 $ 61,786 $32,097 $ 43,955 $ 58,986
6 $33,920 $ 48,186 $ 67,346 $31,520 $ 45,786 $ 64,946
7 $32,969 $ 49,663 $ 73,401 $30,969 $ 47,663 $ 71,401
8 $32,043 $ 51,186 $ 80,001 $30,443 $ 49,586 $ 78,401
9 $31,143 $ 52,799 $ 87,201 $29,943 $ 51,599 $ 86,001
10 $30,267 $ 54,462 $ 95,073 $30,267 $ 54,462 $ 95,073
15 $27,029 $ 65,539 $151,357 $27,029 $ 65,539 $151,357
20 $24,117 $ 78,867 $240,671 $24,117 $ 78,867 $240,671
25 $21,445 $ 94,670 $380,511 $21,445 $ 94,670 $380,511
30 $19,048 $113,638 $601,512 $19,048 $113,638 $601,512
35 $16,898 $136,462 $951,253 $16,898 $136,462 $951,253
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
88
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE
Illustration of Death Benefits, Accumulated Values and Net Cash Surrender
Values
Based on Guaranteed Cost of Insurance Charges
LAST SURVIVOR OPTION
ISSUE AGE: 60 FACE AMOUNT: $114,740
CLASS: MALE/FEMALE NONSMOKER INITIAL PREMIUM: $40,000
GUIDELINE SINGLE PREMIUM %: 100%
<TABLE>
<CAPTION>
PREMIUM END OF YEAR DEATH BENEFIT ASSSUMING
END OF PAID PLUS HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
POLICY INTEREST AT ------------------------------------------------
YEAR 5% 0% 6% 12%
------ ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
1 $ 42,000 $114,740 $114,740 $114,740
2 $ 44,100 $114,740 $114,740 $114,740
3 $ 46,305 $114,740 $114,740 $114,740
4 $ 48,620 $114,740 $114,740 $114,740
5 $ 51,051 $114,740 $114,740 $114,740
6 $ 53,604 $114,740 $114,740 $114,740
7 $ 56,284 $114,740 $114,740 $114,740
8 $ 59,098 $114,740 $114,740 $114,740
9 $ 62,053 $114,740 $114,740 $114,740
10 $ 65,156 $114,740 $114,740 $114,740
15 $ 83,157 $114,740 $114,740 $161,870
20 $106,132 * $114,740 $252,576
25 $135,454 * $114,740 $397,463
30 $172,878 * * $614,108
35 $220,641 * * $915,379
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR ACCUMULATED
ASSUMING HYPOTHETICAL END OF YEAR NET CASH SURRENDER VALUE
GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS ANNUAL
END OF INVESTMENT RETURN OF INVESTMENT RETURN OF
POLICY ----------------------------- --------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ------- ------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $39,010 $41,351 $ 43,692 $35,010 $37,351 $ 39,692
2 $37,977 $42,679 $ 47,656 $33,977 $38,679 $ 43,656
3 $36,933 $44,020 $ 51,958 $33,333 $40,420 $ 48,358
4 $35,869 $45,367 $ 56,670 $32,669 $42,167 $ 53,470
5 $34,774 $46,712 $ 61,786 $31,974 $43,912 $ 58,986
6 $33,636 $48,047 $ 67,343 $31,236 $45,647 $ 64,943
7 $32,440 $49,365 $ 73,386 $30,440 $47,365 $ 71,386
8 $31,173 $50,656 $ 79,970 $29,573 $49,056 $ 78,370
9 $29,820 $51,953 $ 87,158 $28,620 $50,753 $ 85,958
10 $28,358 $53,204 $ 95,025 $28,358 $53,204 $ 95,025
15 $18,790 $59,944 $151,280 $18,790 $59,944 $151,280
20 * $61,883 $240,549 * $61,883 $240,549
25 * $49,618 $378,537 * $49,618 $378,537
30 * * $584,865 * * $584,865
35 * * $906,316 * * $906,316
</TABLE>
- -------
This illustration assumes no policy loans or partial withdrawals have been
made.
*Additional payment will be required to prevent policy termination.
THE DEATH BENEFITS, ACCUMULATED VALUES AND THE CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE
INVESTMENT RESULTS. ACTUAL RATES MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
VARIABLE ACCOUNTS AND THE EXPERIENCE OF THE ACCOUNTS. NO REPRESENTATION CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
THIS IS AN ILLUSTRATION ONLY. AN ILLUSTRATION IS NOT INTENDED TO PREDICT
ACTUAL PERFORMANCE. INTEREST RATES, DIVIDENDS, AND VALUES SET FORTH IN THE
ILLUSTRATION ARE NOT GUARANTEED.
89
<PAGE>
Issued by:
LOGO
PACIFIC MUTUAL LIFE INSURANCE COMPANY 700 NEWPORT CENTER DRIVE P.O. BOX 9000
NEWPORT BEACH, CA 92660
Principal Underwriter:
PACIFIC MUTUAL DISTRIBUTORS, INC. MEMBER: NASD/SIPC 700 NEWPORT CENTER DRIVE
P.O. BOX 9000 NEWPORT BEACH, CA 92660
Sponsored by:
LOGO
PACIFIC MUTUAL LIFE INSURANCE COMPANY 700 NEWPORT CENTER DRIVE NEWPORT BEACH,
CA 92660
Distributed by:
<PAGE>
PART II. ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet.
The cross-reference sheet.
The prospectus consisting of 89 pages (including illustrations).
The undertaking to file reports.
Notice pursuant to Paragraph (b)(13)(i) under Rule 6e-3(T).
Representation pursuant to Paragraph (b)(13)(iii)(F) under Rule 6e-3(T).
The signatures.
The following exhibits:
1. (1) Resolution of the Board of Directors of the Depositor dated
November 22, 1989 and copies of the Memoranda concerning Pacific
Select Exec Separate Account dated May 12, 1988 and January 26, 1993.
(2) Inapplicable
(3) (a) Distribution Agreement Between Pacific Mutual Life Insurance
Company and Pacific Mutual Distributors, Inc. (formerly known
as Pacific Equities Network)
(b) Form of Selling Agreement Between Pacific Mutual Distributors,
Inc. and Various Broker-Dealers
(4) Inapplicable
(5) (a) Pacific Select Estate Maximizer Modified Single Premium
Variable Life Insurance Policy (Form 97-50)
(b) Last Survivor Pacific Select Estate Maximizer Modified Single
Premium Variable Life Insurance Policy (Form 97-50-J)
(c) Accelerated Living Benefit Rider (Form R92-ABR)
(6) (a) Articles of Incorporation of Pacific Mutual Life Insurance
Company
(b) Bylaws of Pacific Mutual Life Insurance Company
(7) Inapplicable
(8) Inapplicable
(9) Participation Agreement Between Pacific Mutual Life Insurance Company
and Pacific Select Fund
(10) Applications and General Questionnaire
2. See Exhibit 1.(5)
3. Form of Opinion and Consent of Legal Officer of Pacific Mutual as to
Legality of Policies Being Registered
4. Inapplicable
<PAGE>
5. Inapplicable
6. (a) Consent of Independent Accountants
(b) Consent of Dechert Price & Rhoads
7. Opinion of Actuary
8. Memorandum Describing Issuance, Transfer, and Redemption Procedures
9. Powers of Attorney
27. Financial Data Statements
<PAGE>
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.
NOTICE PURSUANT TO PARAGRAPH (b)(13)(i) UNDER RULE 6e-3(T)
Registrant hereby notifies the Securities and Exchange Commission that it
elects to be governed by subparagraph (A) of Rule 6e-3(T)(b)(13)(i) for purposes
of determining the maximum permitted sales load.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
Pacific Mutual Life Insurance Company and Registrant represent that the
fees and charges to be deducted under the Variable Life Insurance Policy
("Policy") described in the prospectus contained in this registration statement
are, in the aggregate, reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed in connection with the
Policy.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Pacific Select Exec Separate Account of Pacific Mutual Life Insurance Company,
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, all in the City of Newport Beach, and
State of California, on this 11th day of October, 1996.
PACIFIC SELECT EXEC SEPARATE ACCOUNT
(Registrant)
PACIFIC MUTUAL LIFE INSURANCE COMPANY
(Depositor)
BY: _____________________________________
Thomas C. Sutton*
Chairman & Chief Executive Officer
BY: /s/DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact
(Power of attorney is contained as Exhibit 9 in this Registration Statement.)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pacific Mutual
Life Insurance Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned thereunto duly authorized, all in the City of
Newport Beach, and State of California, on this 11th day of October, 1996.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
(Depositor)
BY: _____________________________________
Thomas C. Sutton*
Chairman & Chief Executive Officer
BY: /s/DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact
(Power of attorney is contained as Exhibit 9 in this Registration Statement.)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Thomas C Sutton* Director, Chairman of the Board ___________, 1996
and Chief Executive Officer
Glenn S. Schafer* Director and President ___________, 1996
Harry G. Bubb* Director and Chairman Emeritus ___________, 1996
Richard M. Ferry* Director ___________, 1996
Donald E. Guinn* Director ___________, 1996
Ignacio E. Lozano, Jr.* Director ___________, 1996
Charles A. Lynch* Director ___________, 1996
Dr. Allen W. Mathies, Jr.* Director ___________, 1996
Charles D. Miller* Director ___________, 1996
Donn B. Miller* Director ___________, 1996
Jacqueline C. Morby* Director ___________, 1996
J. Fernando Niebla* Director ___________, 1996
Susan Westerberg Prager* Director ___________, 1996
Richard M. Rosenberg* Director ___________, 1996
James R. Ukropina* Director ___________, 1996
Raymond L. Watson* Director ___________, 1996
Edward Byrd* Vice President and Controller ___________, 1996
By: /s/DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact October 11, 1996
</TABLE>
(Powers of Attorney are contained in this Registration Statement for the Pacific
Select Exec Separate Account as Exhibit 9.)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<INVESTMENTS-AT-COST> 23,106 22,328
<INVESTMENTS-AT-VALUE> 23,045 22,284
<RECEIVABLES> 223 1,442
<ASSETS-OTHER> 0 0
<OTHER-ITEMS-ASSETS> 0 0
<TOTAL-ASSETS> 23,268 23,726
<PAYABLE-FOR-SECURITIES> 90 0
<SENIOR-LONG-TERM-DEBT> 0 0
<OTHER-ITEMS-LIABILITIES> 0 1,423
<TOTAL-LIABILITIES> 90 1,423
<SENIOR-EQUITY> 0 0
<PAID-IN-CAPITAL-COMMON> 0 0
<SHARES-COMMON-STOCK> 0 0
<SHARES-COMMON-PRIOR> 0 0
<ACCUMULATED-NII-CURRENT> 0 0
<OVERDISTRIBUTION-NII> 0 0
<ACCUMULATED-NET-GAINS> 0 0
<OVERDISTRIBUTION-GAINS> 0 0
<ACCUM-APPREC-OR-DEPREC> 0 0
<NET-ASSETS> 23,178 22,303
<DIVIDEND-INCOME> 1,418 563
<INTEREST-INCOME> 0 0
<OTHER-INCOME> 0 0
<EXPENSES-NET> 0 0
<NET-INVESTMENT-INCOME> 1,418 563
<REALIZED-GAINS-CURRENT> 31 0
<APPREC-INCREASE-CURRENT> 65 18
<NET-CHANGE-FROM-OPS> 1,514 581
<EQUALIZATION> 0 0
<DISTRIBUTIONS-OF-INCOME> 0 0
<DISTRIBUTIONS-OF-GAINS> 0 0
<DISTRIBUTIONS-OTHER> 0 0
<NUMBER-OF-SHARES-SOLD> 0 0
<NUMBER-OF-SHARES-REDEEMED> 919 97
<SHARES-REINVESTED> 0 0
<NET-CHANGE-IN-ASSETS> (11,418) (875)
<ACCUMULATED-NII-PRIOR> 0 0
<ACCUMULATED-GAINS-PRIOR> 0 0
<OVERDISTRIB-NII-PRIOR> 0 0
<OVERDIST-NET-GAINS-PRIOR> 0 0
<GROSS-ADVISORY-FEES> 0 0
<INTEREST-EXPENSE> 0 0
<GROSS-EXPENSE> 0 0
<AVERAGE-NET-ASSETS> 28,079 23,889
<PER-SHARE-NAV-BEGIN> 0 0
<PER-SHARE-NII> 0 0
<PER-SHARE-GAIN-APPREC> 0 0
<PER-SHARE-DIVIDEND> 0 0
<PER-SHARE-DISTRIBUTIONS> 0 0
<RETURNS-OF-CAPITAL> 0 0
<PER-SHARE-NAV-END> 0 0
<EXPENSE-RATIO> 0 0
<AVG-DEBT-OUTSTANDING> 0 0
<AVG-DEBT-PER-SHARE> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 2
<NAME> HIGH YIELD BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<INVESTMENTS-AT-COST> 13,881 18,525
<INVESTMENTS-AT-VALUE> 14,474 18,542
<RECEIVABLES> 144 28
<ASSETS-OTHER> 0 0
<OTHER-ITEMS-ASSETS> 0 0
<TOTAL-ASSETS> 14,618 18,570
<PAYABLE-FOR-SECURITIES> 27 28
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<EXPENSES-NET> 0 0
<NET-INVESTMENT-INCOME> 944 843
<REALIZED-GAINS-CURRENT> (92) 75
<APPREC-INCREASE-CURRENT> 1,042 (575)
<NET-CHANGE-FROM-OPS> 1,894 343
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<NET-CHANGE-IN-ASSETS> 7,212 3,951
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 3
<NAME> GOVERNMENT SECURITIES PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
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<INVESTMENTS-AT-VALUE> 6,299 6,759
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<NET-INVESTMENT-INCOME> 294 259
<REALIZED-GAINS-CURRENT> (41) 36
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 4
<NAME> MANAGED BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<INVESTMENTS-AT-COST> 45,342 57,971
<INVESTMENTS-AT-VALUE> 47,343 57,524
<RECEIVABLES> 387 15
<ASSETS-OTHER> 0 0
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<NET-ASSETS> 47,690 57,524
<DIVIDEND-INCOME> 2,208 2,040
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<EXPENSES-NET> 0 0
<NET-INVESTMENT-INCOME> 2,208 2,040
<REALIZED-GAINS-CURRENT> (141) (124)
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<NET-CHANGE-IN-ASSETS> 23,125 9,834
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 5
<NAME> GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
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<INVESTMENTS-AT-VALUE> 87,624 108,476
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<ASSETS-OTHER> 0 0
<OTHER-ITEMS-ASSETS> 0 0
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 6
<NAME> EQUITY INCOME PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<INVESTMENTS-AT-COST> 43,643 58,281
<INVESTMENTS-AT-VALUE> 49,717 64,600
<RECEIVABLES> 117 111
<ASSETS-OTHER> 0 0
<OTHER-ITEMS-ASSETS> 0 0
<TOTAL-ASSETS> 49,834 64,711
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 7
<NAME> MULTI-STRATEGY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
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<NET-ASSETS> 54,306 61,158
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<EXPENSES-NET> 0 0
<NET-INVESTMENT-INCOME> 1,401 3,612
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 8
<NAME> INTERNATIONAL PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 9
<NAME> EQUITY INDEX PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
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<PERIOD-END> DEC-31-1995 JUN-30-1996
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 10
<NAME> GROWTH LT PORTFOLIO
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
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<OTHER-INCOME> 0 0
<EXPENSES-NET> 0 0
<NET-INVESTMENT-INCOME> 3,592 317
<REALIZED-GAINS-CURRENT> 1,225 2,087
<APPREC-INCREASE-CURRENT> 3,892 4,558
<NET-CHANGE-FROM-OPS> 8,709 6,962
<EQUALIZATION> 0 0
<DISTRIBUTIONS-OF-INCOME> 0 0
<DISTRIBUTIONS-OF-GAINS> 0 0
<DISTRIBUTIONS-OTHER> 0 0
<NUMBER-OF-SHARES-SOLD> 2,464 788
<NUMBER-OF-SHARES-REDEEMED> 0 0
<SHARES-REINVESTED> 0 0
<NET-CHANGE-IN-ASSETS> 42,351 19,925
<ACCUMULATED-NII-PRIOR> 0 0
<ACCUMULATED-GAINS-PRIOR> 0 0
<OVERDISTRIB-NII-PRIOR> 0 0
<OVERDIST-NET-GAINS-PRIOR> 0 0
<GROSS-ADVISORY-FEES> 0 0
<INTEREST-EXPENSE> 0 0
<GROSS-EXPENSE> 0 0
<AVERAGE-NET-ASSETS> 30,953 65,199
<PER-SHARE-NAV-BEGIN> 0 0
<PER-SHARE-NII> 0 0
<PER-SHARE-GAIN-APPREC> 0 0
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<PER-SHARE-DISTRIBUTIONS> 0 0
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<PER-SHARE-NAV-END> 0 0
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<AVG-DEBT-PER-SHARE> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000832908
<NAME> PACIFIC SELECT EXEC SEPARATE ACCOUNT
<SERIES>
<NUMBER> 13
<NAME> AGGRESSIVE EQUITY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-08-1996
<PERIOD-END> JUN-30-1996
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<INVESTMENTS-AT-VALUE> 8,690
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</TABLE>
<PAGE>
EXHIBIT 99.1(1)
Resolution of the Board of Directors of the Depositor
dated November 22, 1989 and copies of the Memoranda
concerning Pacific Select Exec Separate Account
dated May 12, 1988 and January 26, 1993
<PAGE>
SECRETARY'S CERTIFICATE
PACIFIC MUTUAL LIFE INSURANCE COMPANY
RESOLVED, that the Board of Directors of this Corporation hereby authorizes this
Corporation to obtain approval from the appropriate regulatory authorities of an
amendment to its Certificate of Authority to issue variable life insurance
policies and variable annuity contracts and any derivative thereof being herein
collectively referred to as "variable contracts"; and
RESOLVED FURTHER, that the Board of Directors of this Corporation hereby
authorizes and directs the establishment of Separate Accounts ("Separate
Accounts") that may be required to which the amounts received by this
Corporation in connection with the sale of the Contracts shall be allocated; and
RESOLVED FURTHER, that within the Separate Accounts there may be a number of
Variable Accounts with different investment policies and objectives into which a
policyowner may direct his interests in the Separate Accounts and the Variable
Accounts; and
RESOLVED FURTHER, that the Separate Accounts are to be established and
maintained in accordance with the provisions of Section 10506 of the California
Insurance Code and the regulations promulgated under that Section; and
RESOLVED FURTHER, that any Officer of this Corporation is authorized and
directed to take whatever action may be necessary or advisable to establish and
maintain such Separate Accounts and to register, file, or qualify the Contracts
for sale, including, but not limited to, determining the states or other
jurisdictions in which necessary or advisable action shall be taken to qualify,
file, or register the Contracts for sale, performing any and all acts as such
Officer deems necessary or advisable to comply with the applicable laws of any
such state or jurisdiction including making any required filings with the
California Insurance Department or any other regulatory authority in California
or any other regulatory authority in any state or jurisdiction having
jurisdiction over the insurance activities of the Company or over the Contracts;
performing any and all acts as such Officer deems necessary or advisable to
comply with the applicable laws of the United States including, but not limited
to, preparing and filing registration statements with the Securities and
Exchange Commission to register the Contracts or interests therein under the
Securities Act of 1933 and the Investment Company Act of 1940 and to register
the Separate Account under the Investment Company Act of 1940, and to file an
exemptive application if necessary or advisable under the Investment Company Act
of 1940 and to make such other filings or seek any interpretations that are
necessary or advisable from the Securities and Exchange Commission or any other
agency of the United States Government; or making any filings, seek any
interpretations, or make other submissions that such Officer deems necessary or
advisable with other regulatory authorities having jurisdiction over the offer
and sale of the Contracts; and to execute and file all requisite papers and
documents, including, but not limited to, applications, reports, surety bonds,
irrevocable consents, powers of attorneys, and appointments of agents for
service of process, and the paying of all necessary fees and expenses as
<PAGE>
in such Officer's judgment may be necessary or advisable.
*****
I, AUDREY L. MILFS, do hereby certify that I am the duly elected, qualified and
acting Secretary of Pacific Mutual Life Insurance Company, a California
corporation, and I do hereby further certify that the foregoing is a true and
correct copy of a resolution adopted at a meeting of the Executive Committee of
the Board of Directors of said corporation held on November 22, 1989, at which a
quorum was present and voted in favor thereof, and that said resolution has not
been revoked or amended and is now in full force and effect.
IN, WITNESS WHEREOF, I have executed this certificate as Secretary of said
Corporation on this 13th day of January, 1993.
Audrey L. Milfs, Secretary
#4427
<PAGE>
OFFICE MEMORANDUM
DATE
May 12, 1988
TO
Harry G. Bubb
FROM
Clement B. Penrose
SUBJECT
PACIFIC SELECT EXEC SEPARATE ACCOUNT
RECOMMENDATION:
- --------------
That you authorize the establishment of the Pacific Select Exec Separate
Account, as requested in the attached May 11, 1988 memo from Ms. Ledger and Mr.
Hezzelwood.
WHY RECOMMENDATION IS SUBMITTED AT THIS TIME:
- --------------------------------------------
Documentation of this authorization must accompany the registration filing about
to be made with the Securities and Exchange Commission for the Pacific Select
Exec Individual Flexible Premium Variable Life Insurance Policy.
BACKGROUND:
- ----------
General Management has approved the development of a second variable life
product, Pacific Select Exec Individual Flexible Premium Life Insurance Policy.
Amounts received by Pacific Mutual in connection with the sale of this new
product will be allocated to the Pacific Select Exec Separate Account, and among
its eight subaccounts, at the policyowners' direction.
On November 20, 1986, the Board of Directors of Pacific Mutual adopted a
resolution authorizing any officer of the corporation to take whatever action is
necessary to establish and maintain Separate Accounts which may be required in
connection with variable life insurance policies. Outside counsel for our
variable life products recommends that this authorization for the new Separate
Account be obtained from the Chief Executive Officer of Pacific Mutual.
OTHERS CONSULTED:
- ----------------
Mr. Joanning concurs in this recommendation.
Clement B. Penrose
mva
cc: Mr. Joanning
Establishment of
<PAGE>
Pacific Select Exec Separate Account
Is Authorized:
5-12-88
Harry G. Bubb Date
Chief Executive Officer
<PAGE>
OFFICE MEMORANDUM
DATE: January 26, 1993
TO: Mr. Thomas C. Sutton
FROM: Arthur Kesselhaut
SUBJECT: Pacific Select Exec Separate Account Variable Life Products
RECOMMENDATION:
That you authorize that, in addition to the Pacific Select Exec Flexible Premium
Variable Life Insurance policy, the Pacific Select Exec Separate Account may be
used in connection with additional variable life insurance products that Pacific
Mutual may develop and establish.
WHY RECOMMENDATION IS REQUESTED:
Documentation of this authorization must accompany variable life insurance
product registration filings made with the Securities and Exchange Commission
and the California Insurance Department.
BACKGROUND:
On November 20, 1986 and on November 22, 1989, the Board of Pacific Mutual Life
Insurance Company adopted resolutions authorizing any Officer of the Corporation
to take whatever action necessary to establish and maintain Separate Accounts
and to register, file or qualify variable life insurance policies for sale. The
Pacific Select Exec Separate Account was established pursuant to the November
20, 1986 resolution and a Memorandum dated May 12, 1988.
The original authorization for the Pacific Select Exec Separate Account referred
specifically to the Pacific Select Exec Flexible Premium Variable Life Insurance
product, however, Pacific Mutual intends to develop and establish additional
variable life insurance products that may utilize the Pacific Select Exec
Separate Account.
OTHERS CONSULTED:
Mr. Lynn Miller and Ms. Sharon Cheever concur in this recommendation.
AUTHORIZATION:
On behalf of Pacific Mutual Life Insurance Company, the Pacific Select Exec
Separate Account is hereby authorized to be used in connection with additional
variable life insurance products that Pacific Mutual may develop and establish.
<PAGE>
Thomas C. Sutton
Chairman & Chief Executive Officer
<PAGE>
EXHIBIT 99.1(3)(a)
Distribution Agreement between Pacific Mutual
Life Insurance Company and Pacific Equities Network
<PAGE>
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made this 7th day of September, 1988, by and between Pacific Mutual
Life Insurance Company, a California company, ("Pacific Mutual") on its own
behalf and on behalf of the Pacific Select Exec Separate Account ("Separate
Account"), and Pacific Equities Network, a California corporation, ("PEN").
WHEREAS, Pacific Mutual has established and maintains the Separate Account, a
separate investment account, for the purpose of selling variable life contracts
("Contracts") to commence after the effectiveness of the Registration Statement
relating thereto filed with the Securities and Exchange Commission on form S-6
pursuant to the Securities Act of 1933, as amended (the "1933 Act"), through
PEN, acting as general agent of Pacific Mutual;
WHEREAS, the Separate Account is registered as a unit investment trust under the
Investment Company Act of 1940 ("the 1940 Act");
WHEREAS, PEN is registered as a broker-dealer under the Securities Exchange Act
of 1934 (the "Securities Exchange Act") and is a member of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, Pacific Mutual desires to retain PEN as the Distributor and Principal
Underwriter to provide for the sale and distribution to the public of the
Contracts issued by Pacific Mutual and funded by interests in the General
Account of Pacific Mutual and in the Separate Account and PEN is willing to
render such services:
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
1. Principal Underwriter. Pacific Mutual hereby appoints PEN, during the term
of this Agreement, subject to the registration requirements of the 1933 Act and
the 1940 Act and the provisions of the Securities Exchange Act, to be the
Distributor and Principal Underwriter for the sale of Contracts to the public in
each state and other jurisdictions in which the Contracts may be lawfully sold.
Pacific Mutual also appoints PEN as its independent General Agent for sale of
its Contracts (including any riders which Pacific Mutual may make available in
connection therewith or any contracts for which the Contracts may be exchanged
or converted) and for sale of such other insurance contracts or annuity
contracts as Pacific Mutual may, from time to time, authorize in writing by
amendment thereto. PEN shall offer the Contracts for sale and distribution at
premium rates set by Pacific Mutual.
2. Selling Agreements. PEN is hereby authorized to enter into separate written
agreements, on such terms and conditions as PEN determines are not inconsistent
with this Agreement, with such organizations which agree to participate as a
general agent and/or broker-dealer in the distribution of the Contracts and to
use their best efforts to solicit applications for Contracts. Any such broker-
dealer (hereinafter "Broker") shall be both registered as a broker-dealer under
the Securities
<PAGE>
Exchange Act and a member of the NASD. PEN shall be responsible for ensuring
that Broker and its agents or representatives and general agent and its sub-
agents soliciting applications for Contracts shall be duly and appropriately
licensed, registered and otherwise qualified for the sale of the Contracts (and
the riders and other contracts offered in connection therewith) under the
insurance laws and any applicable blue sky laws of each state or other
jurisdiction in which such policies may be lawfully sold and in which Pacific
Mutual is licensed to sell such Contracts. Pacific Mutual shall undertake to
appoint Broker's qualified agents or representatives and general agent's sub-
agents as life insurance agents of Pacific Mutual, provided that Pacific Mutual
reserves the right to refuse to appoint any proposed representative, agent, or
sub-agent, or once appointed, to terminate such appointment. PEN shall be
responsible for ensuring that Broker and general agent supervise its agents,
representatives, or sub-agents.
PEN is also authorized to enter into separate written agreements, on such terms
and conditions as PEN determines are not inconsistent with this Agreement, with
such organizations ("wholesalers") that agree to participate in the distribution
of the Contracts and to use their best efforts to solicit Brokers and general
agents that, in turn, will solicit applications of the Contracts.
3. Life Insurance Agents. Pacific Mutual shall be responsible for ensuring
that Broker and its agents or representatives and general agent and its sub-
agents meet all qualifications and hold any licenses or authorizations that may
be required for the solicitation or sale of the Contracts under the insurance
laws of the applicable jurisdictions.
4. Suitability. Pacific Mutual desires to ensure that Contracts will be sold
to purchasers for whom the Contract will be suitable. PEN shall take reasonable
steps to ensure that the various representatives of Broker and sub-agents of
general agents shall not make recommendations to an applicant to purchase a
Contract in the absence of reasonable grounds to believe the purchase of the
Contract is suitable for such applicant. While not limited to the following, a
determination of suitability shall be based on information furnished to a
representative or sub-agent after reasonable inquiry of such applicant
concerning the applicant's other security holdings, insurance and investment
objectives, financial situation and needs, and the likelihood that the applicant
will continue to make any premium payments contemplated by the Contracts and
will keep the Policy in force for a sufficient period of time so that Pacific
Mutual's acquisition costs are amortized over a reasonable period of time.
5. Conformity With Registration Statement and Approved Sales Materials. In
performing its duties as Distributor, PEN will act in conformity with the
Prospectus and with the instructions and directions of Pacific Mutual, the
requirements of the 1933 Act, the 1940 Act, the Securities Exchange Act, and all
other applicable federal and state laws and regulations. PEN shall not give any
information nor make any representations, concerning any aspect of the Contract
or of Pacific Mutual's operations to any persons or entity unless such
information or representations are contained in the Registration Statement and
the pertinent prospectus filed with the Securities and Exchange Commission, or
are contained in sales or promotional literature approved by Pacific Mutual.
PEN will not use and will take reasonable steps to ensure Broker will not use
any sales promotion material and advertising which has not been previously
approved by Pacific Mutual.
<PAGE>
6. Expenses. During the term of this Agreement, PEN will bear all of its
expenses in complying with this Agreement, including the following expenses:
(a) costs of sales presentations, mailings, sales promotion materials,
advertising, and any other marketing efforts by PEN in connection with the
distribution or sale of the Contracts; and
(b) any compensation paid to employees of PEN and to wholesalers, Brokers
and general agents in connection with the distribution or sale of the
Contracts.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that Pacific Mutual shall at all times retain the ultimate responsibility
for and control of all functions performed pursuant to this Agreement, and for
marketing the Contract, and reserves the right to direct, approve or disapprove
any action hereunder taken on its behalf by PEN.
7. Applications. Completed applications for Contracts solicited by such Broker
through its agents or representatives or by general agent through its sub-agents
shall be transmitted directly to Pacific Mutual. All payments under the
Contracts shall be made by check to Pacific Mutual or by other method acceptable
to Pacific Mutual, and if received by PEN, shall be held at all times in a
fiduciary capacity and remitted promptly to Pacific Mutual. All such payments
will be the property of Pacific Mutual. Pacific Mutual has the sole authority
to approve or reject such applications or payments and maintains ultimate
responsibility for underwriting. Anything in this Agreement to the contrary
notwithstanding, Pacific Mutual retains the ultimate right to control the sale
of the Contracts and to appoint and discharge life insurance agents of Pacific
Mutual.
8. Standard of Care. PEN shall be responsible for exercising reasonable care
in carrying out the provisions of this Agreement.
9. Reports. PEN shall be responsible for maintaining the records of Broker and
general agent and their agents, representatives or sub-agents who are licensed,
registered and otherwise qualified to sell the Contracts; calculating and
furnishing the fees payable to Brokers or general agents; and for furnishing
periodic reports to Pacific Mutual as to the sale of Contracts made pursuant to
this Agreement.
10. Records. Pen shall maintain and preserve such records as are required of
it by applicable laws and regulations. The books, accounts and records of
Pacific Mutual, the Separate Account and PEN shall be maintained so as to
clearly and accurately disclose the nature and details of the transactions,
including such accounting information as necessary to support the reasonableness
of the amounts to be paid by Pacific Mutual hereunder.
11. Compensation. For the services rendered and product development in the
initial sales efforts and continuing obligations under this Agreement, Pacific
Mutual shall pay PEN in the amounts set forth in Schedule A, which schedule is
incorporated herein. Pacific Mutual shall arrange for the payment of
commissions, through PEN, to those Brokers and general agents that sell
Contracts under agreements entered into pursuant to Section 2, hereof, and to
wholesalers that solicit brokers and
<PAGE>
general agents to sell Contracts under agreements entered into pursuant to
Section 2, hereof, in amounts as may be agreed to by Pacific Mutual and PEN
specified in such written agreements.
12. Investigation and Proceedings. PEN and Pacific Mutual agree to cooperate
fully in any insurance regulatory investigation or proceeding or judicial
proceeding arising in connection with the Contracts distributed under this
Agreement. PEN further agrees to furnish regulatory authorities with any
information or reports in connection with such services which may be requested
in order to ascertain whether the operations of Pacific Mutual and the Separate
Account are being conducted in a manner consistent with applicable laws and
regulations. PEN and Pacific Mutual further agree to cooperate fully in any
securities regulatory investigation or proceeding with respect to Pacific
Mutual, PEN, their affiliates and their agents or representatives to the extent
that such investigation or proceeding is in connection with Contracts
distributed under this Agreement. Without limiting the foregoing:
(a) PEN will be notified promptly of any customer complaint or notice of
any regulatory investigation or proceeding or judicial proceeding received
by Pacific Mutual with respect to PEN or any agent, representative, or sub-
agent of a Broker or general agent or which may affect Pacific Mutual's
issuance of any Contract sold under this Agreement; and
(b) PEN will promptly notify Pacific Mutual of any customer complaint or
notice of any regulatory investigation or proceeding received by PEN or its
affiliates with respect to PEN or any agent, representative, or sub-agent
of a Broker or general agent in connection with any Contract distributed
under this Agreement or any activity in connection with any such Contract.
In the case of a meritorious customer complaint, PEN and Pacific Mutual will
cooperate in investigating such complaint and any response will be sent to the
other party to this Agreement for approval not less than five business days
prior to its being sent to the customer or regulatory authority, except that if
a more prompt response is required, the proposed response shall be communicated
by telephone or telegraph.
13. Indemnification. Pacific Mutual hereby agrees to indemnify and hold
harmless PEN and its officers and directors, and employees for any expenses
(including legal expenses), losses, claims, damages, or liabilities incurred by
reason of any untrue or alleged untrue statement or representation of a material
fact or any omission or alleged omission to state a material fact required to be
stated to make other statements not misleading, if made in reliance on any
prospectus, registration statement, post-effective amendment thereof, or sales
materials supplied or approved by Pacific Mutual or the Separate Account.
Pacific Mutual shall reimburse each such person for any legal or other expenses
reasonably incurred in connection with investigating or defending any such loss,
liability, damage, or claim. However, in no case shall Pacific Mutual be
required to indemnify for any expenses, losses, claims, damages, or liabilities
which have resulted from the willful misfeasance, bad faith, negligence,
misconduct, or wrongful act of PEN.
PEN hereby agrees to indemnify and hold harmless Pacific Mutual, its officers,
directors, and employees, and the Separate Account for any expenses, losses,
claims, damages, or liabilities arising
<PAGE>
out of or based upon any of the following in connection with the offer or sale
of the contracts: 1) except for such statements made in reliance on any
prospectus, registration statement or sales material supplied or approved by
Pacific Mutual or the Separate Account, any untrue or alleged untrue statement
or representation made; 2) any failure to deliver a currently effective
prospectus; 3) the use of any unauthorized sales literature by any officer,
employee, agent, or sub-agent of PEN, Broker or general agent; or 4) any willful
misfeasance, bad faith, negligence, misconduct or wrongful act. PEN shall
reimburse each such person for any legal or other expenses reasonably incurred
in connection with investigating or defending any such loss, liability, damage,
or claim.
Promptly after receipt by a party entitled to indemnification ("indemnified
party") of notice of the commencement of any action, if a claim for
indemnification in respect thereof is to be made against Pacific Mutual or PEN
("indemnifying party") such indemnified party will notify indemnifying party in
writing of the commencement thereof, but failure to notify the indemnifying
party of any claim shall not relieve it from any liability which it may have to
the person against whom such action is brought otherwise than on account of this
agreement contained in this Section 13. The indemnifying party will be entitled
to participate in the defense of the indemnified party and such participation
will not relieve such indemnifying party of the obligation to reimburse the
indemnified party for reasonable legal and other expenses incurred by such
indemnified party in defending himself.
14. Agent of Pacific Mutual or Separate Account. Any person, even though also
an officer, director, employee, or agent of PEN, who may be or become an
officer, director, employee, or agent of Pacific Mutual or the Separate Account
shall be deemed when rendering services to Pacific Mutual or the Separate
Account or acting in any business of Pacific Mutual or the Separate Account, to
be rendering such services to or acting solely for Pacific Mutual or the
Separate Account and not as an officer, director, employee, or agent or one
under the control or direction of PEN even though paid by PEN. Likewise, any
person even though also an officer, director, employee, or agent of Pacific
Mutual or the Separate Account, who may be or become an officer, director,
employee, or agent of PEN shall be deemed, when rendering services to PEN or
acting in any business of PEN, to be rendering such services to or acting solely
for PEN and not as an officer, director, employee, or agent or one under the
control or direction of Pacific Mutual or the Separate Account even though paid
by Pacific Mutual or the Separate Account.
15. Books and Records. It is expressly understood and agreed that all
documents, reports, records, books, files and other materials relating to this
Agreement and the services to be performed hereunder shall be the sole property
of Pacific Mutual and the Separate Account and that such property shall be held
by PEN as agent, during the effective term of this Agreement. This material
shall be delivered to Pacific Mutual upon the termination of this Agreement free
from any claim or retention of rights by PEN. During the term of this Agreement
and for a period of three years from the date of termination of this Agreement,
PEN will not disclose or use any records or information and will regard and
preserve as confidential all information related to the business of Pacific
Mutual or the Separate Account that may be obtained by PEN from any source as a
result of this Agreement and will disclose such information only if Pacific
Mutual or the Separate Account has authorized such disclosure, or if such
disclosure is expressly required by applicable federal or state regulatory
authorities. PEN further acknowledges and agrees that, in the event of a breach
or threatened breach by it of the provisions of this article, Pacific Mutual
will have no adequate remedy in moneys or
<PAGE>
damages and, accordingly, Pacific Mutual shall be entitled in its discretion to
seek an injunction against such breach. However, no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a waiver
or prohibition against any other legal or equitable remedy in the event of a
breach of a provision of this Agreement.
16. Employees. PEN will not employ, except with the prior written approval of
the Commissioner of Insurance of the state of California, in any material
connection with the handling of the Separate Account's assets any person who, to
the knowledge of PEN:
(a) in the last 10 years has been convicted of any felony or misdemeanor
arising out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of
Sections 1341, 1342, or 1343 of Title 18, United States Code; or
(b) within the last 10 years has been found by any state regulatory
authority to have violated or has acknowledged violation of any provision
of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(c) within the last 10 years has been found by any federal or state
regulatory authorities to have violated or have acknowledged violation of
any provision of federal or state securities laws involving fraud, deceit,
or knowing misrepresentation.
17. Termination. This Agreement shall terminate automatically upon its
assignment without the prior written consent of both parties. This Agreement
may be terminated at any time, for any reason, by either party on 60 days'
written notice to the other party, without the payment of any penalty. Upon
termination of this Agreement, all authorizations, rights and obligations shall
cease except the obligation to settle accounts hereunder, including commissions
on premiums subsequently received for Contracts in effect at time of
termination, and the agreements contained in Sections 12 and 13 hereof.
18. Regulation. This Agreement shall be subject to the provisions of the 1940
Act and the Securities Exchange Act and the rules, regulations and rulings
thereunder, and of the applicable rules and regulations of the NASD, and
applicable state insurance law and other applicable law, from time to time in
effect, and the terms hereof shall be interpreted and construed in accordance
therewith.
19. Independent Contractor. PEN shall act as an independent contractor and
nothing herein contained shall constitute PEN or its agents, officers or
employees as agents, officers, or employees of Pacific Mutual in connection with
the sale of the Contracts.
20. Notices. Notices of any kind to be given to PEN by Pacific Mutual or the
Separate Account shall be in writing and shall be duly given if mailed, first
class postage prepaid, or delivered to PEN at 800 Newport Center Drive, Suite
300, Newport Beach, California 92660, or at such other address or to such
individual as shall be specified by PEN. Notices of any kind to be given to
Pacific Mutual or the Separate Account shall be in writing and shall be duly
given if mailed, first class postage prepaid, or delivered to them at 700
Newport Center Drive, Post Office Box 9000, Newport
<PAGE>
Beach, California 92660, or at such other address or to such individual as
shall be specified by Pacific Mutual.
If any provisions of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
21. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
ATTEST: By: /s/TC SUTTON
PRESIDENT
/s/AUDREY L. MILFS
SECRETARY
PACIFIC EQUITIES NETWORK
By: /s/RICHARD F. HANLY
PRESIDENT
/s/DIANE N. LEDGER
ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT 99.1(3)(b)
Form of Selling Agreement between Pacific Mutual,
PEN and Various Broker-Dealers
<PAGE>
SELLING AGREEMENT
AGREEMENT by and between PACIFIC MUTUAL LIFE INSURANCE COMPANY ("Pacific
Mutual"), a California corporation; PACIFIC EQUITIES NETWORK ("PEN"), a
California corporation, a broker-dealer registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (the "1934 Act"),
and a member of the National Association of Securities Dealers, Inc. ("NASD");
_______________________________________________________________________________
_______________________________________________________________________________
("Selling Broker-Dealer"), also a broker-dealer registered under the 1934 Act
and a member of the NASD; and each of the undersigned General Agents jointly and
severally referred to herein as "General Agent".
W I T N E S S E T H:
WHEREAS, Pacific Mutual issues certain insurance and annuity contracts listed
in Schedule B (the "Contracts"), some of which are registered ("Securities
Registered Contracts") under the Securities Act of 1933 (the "1933 Act");
WHEREAS, Pacific Mutual has authorized PEN, as principal underwriter of the
Contracts, to enter into agreements, subject to the consent of Pacific Mutual,
with broker-dealers and general agents for the distribution of the Contracts;
WHEREAS, PEN has agreed to secure duly qualified broker-dealers and general
agents to contract with Pacific Mutual and PEN for the distribution of the
Contracts, assist these broker-dealers and general agents in obtaining licenses,
registrations and appointments to enable their registered representatives and
sub-agents to sell the Contracts, and provide educational meetings to
familiarize these broker-dealers and general agents and their registered
representatives and sub-agents with the provisions and features of the
Contracts; and
WHEREAS, Selling Broker-Dealer and General Agent have been selected by PEN to
distribute the contracts and Selling Broker-Dealer and General Agent wish to
participate in the distribution of the Contracts.
NOW THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
I.
APPOINTMENT
Subject to the terms and conditions of this Agreement, Pacific Mutual and PEN
hereby appoint Selling Broker-Dealer and General Agent for the solicitation of
applications for the purchase of the Contracts.
Selling Broker-Dealer and General Agent accept such appointment and each
agrees to use its best efforts to find purchasers for the Contracts acceptable
to Pacific Mutual. Selling Broker-Dealer and General Agent will seek purchasers
of Securities Related Contracts only while the registration statement relating
to such contracts is effective under the 1933 Act.
<PAGE>
II.
AUTHORITY AND DUTIES OF GENERAL AGENT
A. LICENSING AND APPOINTMENT OF SUB-AGENTS
General Agent is authorized to appoint sub-agents ("Sub-agents") to solicit
sales of the Contracts. General Agent agrees to fulfill all requirements set
forth in the General Letter of Recommendation attached as Schedule A hereto in
conjunction with its submission of licensing and appointment papers for all Sub-
agents.
General Agent warrants that it and all of its Sub-agents appointed pursuant to
this Agreement shall not solicit nor aid, directly or indirectly, in the
solicitation of any application for any Contract until they are fully licensed
by the proper authorities under the applicable insurance laws within the
applicable jurisdictions where General Agent and Sub-agents propose to offer the
Contracts, where Pacific Mutual is authorized to conduct business and where the
Contracts may be lawfully sold.
General Agent shall periodically provide Pacific Mutual with a list of all
Sub-agents appointed by General Agent and the jurisdictions where such Sub-
agents are licensed to solicit sales of the Contracts. Pacific Mutual shall
periodically provide General Agent with a list which shows; (i) the
jurisdictions where Pacific Mutual is authorized to do business; and (ii) any
limitations on the availability of the Contracts in any of such jurisdictions.
General Agent shall prepare and transmit the appropriate appointment forms to
Pacific Mutual. General Agent shall pay all fees to state insurance regulatory
authorities in connection with obtaining necessary licenses and authorizations
for Sub-agents to solicit and sell the Contracts. Pacific Mutual will pay
appointment fees for General Agent and resident appointment fees for Sub-agents.
Non-resident appointment fees for Sub-agents will be paid by the General Agent.
All renewal appointment fees will be paid by the General Agent for Sub-agents
who have generated less than $20,000 target premium within the prior 12 months.
Pacific Mutual may refuse for any reason to apply for the appointment of a Sub-
agent and may cancel any existing appointment at any time.
B. REJECTION OF SUB-AGENT
Pacific Mutual or PEN may refuse for any reason, by written notice to General
Agent, to permit any Sub-agent the right to solicit applications for the sale of
any of the Contracts. Upon receipt of such notice, General Agent immediately
shall cause such Sub-agent to cease such solicitations of sales and cancel the
appointment of any Sub-agent under this agreement.
C. SUPERVISION OF SUB-AGENTS
General Agent shall supervise all Sub-agents appointed pursuant to this
Agreement to solicit sales of the Contracts and bear responsibility for all acts
and omissions of each Sub-agent. General Agent shall comply with and exercise
all responsibilities required by applicable federal and state law and
regulations. General Agent shall train and supervise its Sub-agents to ensure
that purchase of a Contract is not recommended to an applicant in the absence of
reasonable grounds to believe the purchase of the Contract is suitable for that
applicant. While not limited to the following, a determination of suitability
shall be based on information furnished to a Sub-agent after reasonable inquiry
of such applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and the likelihood that the applicant
will continue to make any premium payments contemplated by the Contracts and
will keep the Contract in force for a sufficient period of time so that Pacific
Mutual's acquisition costs are amortized over a reasonable period of time.
Nothing contained in this Agreement or otherwise shall be deemed to make any
Sub-agent appointed by General Agent an employee or agent of Pacific Mutual or
PEN. Pacific Mutual and PEN shall not have any responsibility for the training
and supervision of any Sub-agent or any other employee of General Agent. If the
act or omission of a Sub-agent or any other employee of General Agent is the
proximate cause of claim, damage or liability (including reasonable attorneys'
fees) to Pacific Mutual or PEN, General Agent shall be responsible and liable
therefor.
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<PAGE>
III.
AUTHORITY AND DUTIES OF SELLING BROKER-DEALER
Selling Broker-Dealer agrees that it has full responsibility for the training
and supervision of all persons, including Sub-agents of General Agent,
associated with Selling Broker-Dealer who are engaged directly or indirectly in
the offer or sale of Securities Regulated Contracts. All such persons shall be
registered representatives of Selling Broker-Dealer and shall be subject to the
control of Selling Broker-Dealer with respect to their securities regulated
activities. Broker-Dealer shall: (i) train and supervise Sub-agents, in their
capacity as registered representatives, in the sale of Securities Regulated
Contracts; (ii) use its best efforts to cause such Sub-agents to qualify under
applicable federal and state laws to engage in the sale of Securities Regulated
Contracts; (iii) provide Pacific Mutual and PEN to their satisfaction with
evidence of Sub-agents' qualifications to sell Securities Regulated Contracts;
(iv) notify Pacific Mutual if any of such Sub-agents ceases to be a registered
representative of Selling Broker-Dealer; and (v) train and supervise Sub-agents
to ensure compliance with applicable federal and state securities laws, rules,
regulations, statements of policy thereunder and with NASD rules. Selling
Broker-Dealer shall train and supervise Sub-agents to ensure that purchase of a
Contract is not recommended to an applicant in the absence of reasonable grounds
to believe the purchase of the Contract is suitable for that applicant. While
not limited to the following, a determination of suitability shall be based on
information furnished to a Sub-agent after reasonable inquiry of such applicant
concerning the applicant's other security holdings, financial situation and
needs. Selling Broker-Dealer shall ensure that any offer of a Securities
Regulated Contract made by a Sub-agent will be made by means of a currently
effective prospectus.
Pacific Mutual and PEN shall not have any responsibility for the supervision
of any registered representative or any other employee or affiliate of Selling
Broker-Dealer. If the act or omission of a registered representative or any
other employee or affiliate of Selling Broker-Dealer is the proximate cause of
any claim, damage or liability (including reasonable attorney's fees) to Pacific
Mutual or PEN, Selling Broker-Dealer shall be responsible and liable therefor.
Selling Broker-Dealer at all times shall be duly registered as a broker-dealer
under the 1934 Act, a member in good standing of the NASD and duly licensed in
all states and jurisdictions where required to perform pursuant to this
agreement. Selling Broker-Dealer shall fully comply with the requirements of
the 1934 Act and all other applicable federal or state laws and with the rules
of the NASD. Selling Broker-Dealer shall establish such rules and procedures as
may be necessary to cause diligent supervision of the securities activities of
the Sub-agents including ensuring compliance with the prospectus delivery
requirements of the 1933 Act.
IV.
AUTHORITY AND DUTIES OF
GENERAL AGENT AND SELLING BROKER-DEALER
A. CONTRACTS
The securities and insurance regulated Contracts issued by Pacific Mutual to
which this Agreement applies are listed in Schedule B, which may be amended from
time to time by Pacific Mutual. Pacific Mutual, in its sole discretion, with
prior or concurrent written notice to Selling Broker-Dealer and General Agent,
may suspend distribution of any Contract. Pacific Mutual also has the right to
amend any Contract at any time.
B. SECURING APPLICATIONS
Each application for a Contract shall be made on an application form provided
by Pacific Mutual, and all payments collected by Selling Broker-Dealer, General
Agent or any registered representative and Sub-agent shall be remitted promptly
in full, together with such application form and any other required
documentation, directly to Pacific Mutual at the address indicated on such
application or to such other address as may be designated by Pacific Mutual.
All such payments and documents shall be the property of Pacific Mutual.
Selling Broker-Dealer and
3
<PAGE>
General Agent shall review all such applications for completeness and for
compliance with the conditions herein, including the suitability and prospectus
delivery requirements set forth above under Sections II.C and III. Check or
money order in payment of such Contracts should be made payable to the order of
"Pacific Mutual". All applications are subject to acceptance or rejection by
Pacific Mutual in its sole discretion.
C. RECEIPT OF MONEY
All money payable in connection with any of the Contracts, whether as premium,
purchase payment or otherwise and whether paid by or on behalf of any contract
owner or anyone else having an interest in the Contracts, is the property of
Pacific Mutual and shall be transmitted immediately in accordance with the
administrative procedures of Pacific Mutual without any deduction or offset for
any reason including, but not limited to, any deduction or offset for
compensation claimed by Selling Broker-Dealer or General Agent, unless there has
been a prior arrangement for net wire transmissions between Pacific Mutual and
Selling Broker-Dealer or General Agent.
D. NOTICE OF SUB-AGENT'S NONCOMPLIANCE
Selling Broker-Dealer shall immediately notify PEN and General Agent in the
event a Sub-agent fails or refuses to submit to the supervision of Selling
Broker-Dealer or General Agent in accordance with this Agreement, the agreement
between Selling Broker-Dealer, General Agent and Sub-agent referred to in
Section IV.H, below, or otherwise fails to meet the rules and standards imposed
by Selling Broker-Dealer or its registered representatives or General Agent or
its Sub-agents. Selling Broker-Dealer or General Agent shall also immediately
notify such Sub-agent that he or she is no longer authorized to sell the
Contracts, and both Selling Broker-Dealer and General Agent shall take whatever
additional action may be necessary to terminate the sale activities of such Sub-
agent relating to the Contracts.
E. SALES PROMOTION, ADVERTISING AND PROSPECTUSES
No sales promotion materials, circulars, documents or any advertising relating
to any of the Contracts shall be used by Selling Broker-Dealer, General Agent or
any Sub-agents unless the specific item has been approved in writing by PEN and
Pacific Mutual prior to use. Selling Broker-Dealer shall be provided, without
any expense to Selling Broker-Dealer, with prospectuses relating to Securities
Regulated Contracts. Selling Broker-Dealer and General Agent shall be provided
with such other material as PEN determines necessary or desirable for use in
connection with sales of the Contracts. Nothing in these provisions shall
prohibit Selling Broker-Dealer or General Agent from advertising life insurance
and annuities on a generic basis.
Selling Broker-Dealer, General Agent and Sub-agents shall make no material
representations relating to the Securities Regulated Contracts, other than those
contained in the relevant registration statement, as may be amended, or in sales
promotion or other materials approved by Pacific Mutual and PEN as provided in
this section.
F. CONFIDENTIALITY
Selling Broker-Dealer and General Agent shall keep confidential all
information obtained pursuant to this Agreement, including, without limitation,
names of the purchasers of the Policies, and shall disclose such information,
only if Pacific Mutual or PEN have authorized such disclosure in writing, or if
such disclosure is expressly required by applicable federal or state regulatory
authorities.
G. RECORDS
Selling Broker-Dealer and General Agent shall have the responsibility for
maintaining the records of its Sub-agents and representatives licensed,
registered and otherwise qualified to sell the Contracts. Selling Broker-Dealer
and General Agent shall maintain such other records as are required of them by
applicable laws and regulations. The books, accounts and records of Selling
Broker-Dealer and General Agent relating to the sale of the Contracts shall be
maintained so as to clearly and accurately disclose the nature and details of
the transactions. Selling Broker-Dealer and General Agent each agree to make
the books and records relating to the sale of the Contracts available to Pacific
Mutual or PEN upon their written request.
4
<PAGE>
H. SUB-AGENT AGREEMENTS
Before a Sub-agent is permitted to sell the Contracts, General Agent, Selling
Broker-Dealer and Sub-agent shall have entered into a written agreement pursuant
to which: (i) Sub-agent is appointed a Sub-agent of General Agent and a
registered representative of Selling Broker-Dealer; (ii) Sub-agent agrees that
his or her selling activities relating to Securities Regulated Contracts shall
be under the supervision and control of Selling Broker-Dealer; and (iii) that
Sub-agent's right to continue to sell such Contracts is subject to his or her
continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or General Agent.
V.
COMPENSATION
A. COMMISSIONS AND FEES
Commissions and fees payable to General Agent or any Sub-agent in connection
with the Contracts shall be paid by Pacific Mutual through PEN to General Agent,
or as otherwise permitted by law or regulation. General Agent shall pay Sub-
agents. PEN will provide Selling Broker-Dealer and General Agent with a copy of
its current Compensation Schedule(s), attached hereto as Schedule B. Unless
otherwise provided in Schedule B, compensation will be paid as a percentage of
premiums or purchase payments (collectively, "Payments") received in cash or
other legal tender and accepted by Pacific Mutual on applications obtained by
the various Sub-agents appointed by General Agent hereunder. Upon termination
of this Agreement, all compensation to General Agent hereunder shall cease.
However, General Agent shall be entitled to receive compensation for all new and
additional premium payments which are in process at the time of termination, and
shall continue to be liable for any charge-backs pursuant to the provisions of
said Schedule B, or for any other amount advanced by or otherwise due Pacific
Mutual or PEN hereunder. Pacific Mutual reserves the right not to pay
compensation on a policy or contract for which the premium is paid in whole or
in part by the loan or surrender value of any other life insurance policy or
annuity contract issued by Pacific Mutual.
PEN shall deduct any chargebacks from compensation otherwise due General Agent
or Selling Broker-Dealer. If any amount to be deducted exceeds compensation
otherwise due, General Agent and/or Selling Broker-Dealer shall promptly pay
back the amount of the excess following a written demand by PEN or Pacific
Mutual. General Agent and Selling Broker-Dealer are jointly and severally
liable for such chargebacks.
Pacific Mutual reserves the right to reduce first year commissions and renewal
commissions, if necessary, on any life policies sold to residents of the State
of Kentucky and paid for after May 1, 1991. Such reduction shall be in an
amount sufficient to cover any premium tax levied by cities and counties within
the State of Kentucky which is over and above the premium tax paid by Pacific
Mutual to the State of Kentucky.
Pacific Mutual recognizes the Contract owners' right on issued Contracts to
terminate Selling Broker-Dealer and/or change a Selling Broker-Dealer, provided
that the Contract owner notifies PEN in writing. When a Contract owner
terminates Selling Broker-Dealer, no further compensation on any payments due or
received, or on any increases in face amount in the existing policy after
termination, shall be payable to that Selling Broker-Dealer in accordance with
Schedule B after the notice of termination is received and accepted by PEN.
However, when a Contract owner designates a Selling Broker-Dealer other than the
Selling Broker-Dealer of record, compensation on any payments due or received,
or on any increases in face amount in the existing Contract after the change,
shall be payable to the new Selling Broker-Dealer in accordance with Schedule B
in effect at the time of issuance of the Contract.
5
<PAGE>
A change of Selling Broker-Dealer request shall be honored only if there
exists a valid Selling Agreement between Pacific Mutual, PEN and the new
Selling Broker-Dealer and (1) the Contract owner(s) requests in writing that the
Sub-agent remains as representative of record, or (2) both the former and future
Selling Broker-Dealers direct Pacific Mutual and PEN in a joint writing to
transfer all policies and future compensation to the new Selling Broker-Dealer,
or (3) the NASD approves and effects a bulk transfer of all representatives to a
new Selling Broker-Dealer.
B. TIME OF PAYMENT
PEN will pay any commissions due General Agent at least twice monthly in
accordance with Schedule B of this Agreement, as it may be amended from time to
time.
C. AMENDMENT OF SCHEDULES
PEN may amend Schedule B upon at least ten (10) days' prior written notice to
Selling Broker-Dealer and General Agent. The submission of an application for
the Contracts by Selling Broker-Dealer or General Agent after the effective date
of any such amendment shall constitute agreement to such amendment. Any such
amendment shall apply to compensation due on applications received by Pacific
Mutual after the effective date of such notice.
D. Prohibition Against Rebates
Pacific Mutual or PEN may terminate this Agreement if Selling Broker-Dealer,
General Agent or any Sub-agent rebates, offers to rebate or withholds any part
of any Payment on the Contracts. If Selling Broker-Dealer, General Agent or any
Sub-agent of General Agent shall at any time induce or endeavor to induce any
owner of any Contract issued hereunder to discontinue payments or to relinquish
any such Contract, except under circumstances where there is reasonable grounds
for believing the Contract is not suitable for such person, any and all
compensation due General Agent hereunder shall cease and terminate.
E. INDEBTEDNESS AND RIGHT OF SET OFF
Nothing contained in this Agreement shall be construed as giving Selling
Broker-Dealer or General Agent the right to incur any indebtedness on behalf of
Pacific Mutual or PEN. Selling Broker-Dealer and General Agent hereby authorize
PEN and Pacific Mutual to set off liabilities of Selling Broker-Dealer and
General Agent to Pacific Mutual and PEN against any and all amounts otherwise
payable to Selling Broker-Dealer or General Agent.
VI.
GENERAL PROVISIONS
A. Waiver
Failure of any party to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a waiver of any of the
conditions, but the same shall remain in full force and effect. No waiver of
any of the provisions of this Agreement shall be deemed to be, or shall
constitute, a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver.
6
<PAGE>
B. LIMITATIONS
The Selling Broker-Dealer and General Agent are independent contractors with
respect to Pacific Mutual and PEN. No party other than Pacific Mutual and or
PEN, as the case may be, shall have the authority to: (i) make, alter or
discharge any Contract issued by Pacific Mutual; (ii) waive any forfeiture or
extend the time of making any payments; (iii) enter into any proceeding in a
court of law or before a regulatory agency in the name of or on behalf of
Pacific Mutual or PEN; (iv) contract for the expenditure of funds of Pacific
Mutual or PEN; (v) alter the forms which PEN prescribes, or substitute other
forms in place of those prescribed by PEN.
C. FIDELITY BOND AND OTHER LIABILITY COVERAGE
Selling Broker-Dealer and General Agent each represent that all directors,
officers, agents, employees and Sub-agents who are licensed pursuant to this
Agreement as Pacific Mutual agents for state insurance law purposes or who have
access to funds of Pacific Mutual, including but not limited to, funds submitted
with applications for the Contracts are and shall be covered by a blanket
fidelity bond, including coverage for larceny and embezzlement, issued by a
reputable bonding company. This bond shall be maintained by Selling Broker-
Dealer or General Agent at their expense. Such bond shall be, at a minimum, of
the form, type, and amount required under NASD Rules, endorsed to extend
coverage to transactions relating to the Contracts. Pacific Mutual may require
evidence, satisfactory to it, that such coverage is in force and Selling Broker-
Dealer or General Agent, as the case may be, shall give prompt written notice to
Pacific Mutual of any notice of cancellation of the bond or change of coverage.
Selling Broker-Dealer and General Agent hereby assign any proceeds received
from a fidelity bonding company, error and omissions or other liability
coverage, to Pacific Mutual or PEN as their interest may appear, to the extent
of their loss due to activities covered by the bond, policy or other liability
coverage. If there is any deficiency amount, whether due to a deductible or
otherwise, Selling Broker-Dealer or General Agent shall promptly pay such
amounts on demand. Selling Broker-Dealer and General Agent hereby indemnify and
hold harmless Pacific Mutual and PEN from any such deficiency and from the costs
of collection thereof (including reasonable attorneys' fees).
D. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns provided that neither
Selling Broker-Dealer nor General Agent may assign this Agreement or any rights
or obligations hereunder without the prior written consent of Pacific Mutual.
E. 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.
F. INDEMNIFICATION
Pacific Mutual and PEN agree to indemnify and hold harmless Selling Broker-
Dealer and General Agent, their officers, directors, agents and employees,
against any and all losses, claims, damages or liabilities to which they may
become subject under the 1933 Act, the 1934 Act, or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in the
registration statement for the Contracts or for the shares of Pacific Select
Fund (the "Fund") filed pursuant to the 1933 Act, or any prospectus included as
a part thereof, as from time to time amended and supplemented, or in any
advertisement or sales literature approved in writing by Pacific Mutual and PEN
pursuant to Section IV.E. of this Agreement
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<PAGE>
Selling Broker-Dealer and General Agent agree to indemnify and hold harmless
Pacific Mutual, the Fund and PEN, their officers, directors, agents and
employees, against any and all losses, claims, damages or liabilities to which
they may become subject under the 1933 Act, the 1934 Act, or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon; (a) any oral or written misrepresentation by Selling
Broker-Dealer or General Agent or their officers, directors, employees or agents
unless such misrepresentation is contained in the registration statement for the
Contracts or Fund shares, any prospectus included as a part thereof, as from
time to time amended and supplemented, or any advertisement or sales literature
approved in writing by Pacific Mutual and PEN pursuant to Section IV.E. of this
Agreement, (b) the failure of Selling Broker-Dealer or General Agent or their
officers, directors, employees or agents to comply with any applicable
provisions of this Agreement or (c) claims by Sub-agents or employees of General
Agent or Selling Broker-Dealer for payments of compensation or remuneration of
any type. Selling Broker-Dealer and General Agent will reimburse Pacific Mutual
or PEN or any director, officer, agent or employee of either entity for any
legal or other expenses reasonably incurred by Pacific Mutual, PEN, or such
officer, director, agent or employee in connection with investigating or
defending any such loss, claims, damages, liability or action. This indemnity
agreement will be in addition to any liability which Broker-Dealer may otherwise
have.
G. NOTICES
All notices or communications shall be sent to the following address for
Pacific Mutual or PEN, or to such other address as Pacific Mutual or PEN may
request by giving written notice to the other parties:
Pacific Mutual Life Insurance Company Pacific Equities Network
700 Newport Center Drive 700 Newport Center Drive
Newport Beach, CA 92660 Newport Beach, CA 92660
All notices or communications to the Selling Broker-Dealer or General Agent
shall be sent to the last address known to Pacific Mutual or PEN for that party,
or to such other address as Selling Broker-Dealer or General Agent 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 California.
I. AMENDMENT OF AGREEMENT
PEN may amend this Agreement upon at least ten (10) days' prior written notice
to Selling Broker-Dealer and General Agent. The submission of an application
for the Contracts by Selling Broker-Dealer or General Agent after the effective
date of any such amendment shall constitute agreement to such amendment.
Additional General Agents may be added as parties to this Agreement at any
time by a written amendment signed by Pacific Mutual, PEN, Selling Broker-Dealer
and such additional General Agents. All General Agents which are parties to
this Agreement at the time of such amendment hereby consent and agree in advance
to the addition of such additional General Agents.
J. GENERAL AGENT AS BROKER-DEALER
Selling Broker-Dealer and General Agent shall not have the other entity's
authority and shall not be responsible for the other entity's duties hereunder
unless Selling Broker-Dealer and General Agent are the same entity. If Selling
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 Selling
Broker-Dealer and General Agent and this Agreement shall be binding and
enforceable by and against such person or legal entity in both capacities.
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K. COMPLAINTS AND INVESTIGATIONS
Pacific Mutual, PEN, Selling Broker-Dealer and General Agent agree to
cooperate fully in any insurance regulatory investigation or proceeding or
judicial proceeding arising in connection with the Contracts distributed under
this Agreement. Pacific Mutual, PEN, Selling Broker-Dealer and General Agent
further agree to cooperate fully in any securities regulatory investigation or
proceeding with respect to Pacific Mutual, PEN, Selling Broker-Dealer and
General Agent, their affiliates and their agents or representatives to the
extent that such investigation or proceeding is in connection with the Contracts
distributed under this Agreement. Without limiting the foregoing:
(a) Selling Broker-Dealer or General Agent will be notified promptly of any
customer complaint or notice of any regulatory investigation or proceeding or
judicial proceeding received by Pacific Mutual or PEN with respect to Selling
Broker-Dealer or General Agent or any Sub-agent or which may affect Pacific
Mutual's issuance of any contracts sold under this Agreement; and
(b) Selling Broker-Dealer and General Agent will promptly notify Pacific
Mutual and PEN of any customer complaint or notice of any regulatory
investigation or proceeding received by Selling Broker-Dealer, General Agent
or their affiliates with respect to Selling Broker-Dealer, General Agent or
any Sub-agent in connection with any Contracts distributed under this
Agreement or any activity in connection with any such policies.
In the case of a substantive customer complaint, Pacific Mutual, PEN, Selling
Broker-Dealer and General Agent will cooperate in investigating such complaint
and any response will be sent to the other party to this Agreement for approval
not less than five business days prior to its being sent to the customer or
regulatory authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or telegraph.
L. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days' prior written notice. This Agreement also may be terminated, for cause,
by any party immediately. This Agreement shall be terminated immediately if PEN
or Selling Broker-Dealer shall cease to be a registered Broker-Dealer under the
1934 Act or a member in good standing of the NASD, or if there occurs the
dissolution, bankruptcy or insolvency of Selling Broker-Dealer or General Agent.
Sections VI F and K shall survive termination of this Agreement.
Upon termination of this Agreement, Selling Broker-Dealer and General Agent
shall each use their best efforts to have all property of Pacific Mutual and PEN
in Selling Broker-Dealer, General Agent or Sub-agents' possession promptly
returned to Pacific Mutual or PEN, as the case may be. Such property includes
prospectuses, applications and other literature supplied by Pacific Mutual or
PEN.
THIS SPACE INTENTIONALLY LEFT BLANK
9
<PAGE>
M. EXCLUSIVITY
Selling Broker-Dealer and General Agent each agree that no territory is
assigned exclusively hereunder and that Pacific Mutual and PEN reserve the right
in their discretion to establish one or more agencies in any jurisdiction in
which Selling Broker-Dealer and General Agent transact business hereunder.
This Agreement shall be effective as of __________________________________.
PACIFIC EQUITIES NETWORK -------------------------------------
(SELLING BROKER-DEALER)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
PACIFIC MUTUAL LIFE INSURANCE COMPANY -------------------------------------
(GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
10
<PAGE>
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- --------------------------------------- -------------------------------------
(GENERAL AGENT) (GENERAL AGENT)
By: By:
------------------------------------ ----------------------------------
(Signature) (Signature)
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
11
<PAGE>
SCHEDULE A
----------
GENERAL LETTER OF RECOMMENDATION
General Agent hereby certifies to Pacific Mutual that all of the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as Sub-agents ("applicant")
submitted by General Agent. General Agent will, upon request, forward proof of
compliance with same to Pacific Mutual 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 Pacific Mutual, and
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 in which each applicant is requesting a license, and that all such persons
have fulfilled the appropriate examination, education and training requirements.
4. If the applicant is required to submit his or her picture, signature, and
securities registration in the state in which he or she is applying for a
license, we certify that those items forwarded to Pacific Mutual 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
Pacific Mutual in order to place insurance chiefly or solely on his or her life
or property, lives or property of his or her relatives, or property or liability
of his or her 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 therefor. No applicants have been given a contract or furnished
supplies, nor have any applicants have 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.
8. We certify that General Agent, Selling Broker-Dealer and applicant shall
have entered into a written agreement pursuant to which: (i) applicant is
appointed a Sub-agent of General Agent and a registered representative of
Selling Broker-Dealer; (ii) applicant agrees that his or her selling activities
relating to securities regulated Contracts shall be under the supervision and
control of Selling Broker-Dealer and his or her selling activities relating to
all Contracts shall be under the supervision and control of General Agent; and
(iii) that applicant's right to continue to sell such Contracts is subject to
his or her continued compliance with such agreement and any procedures, rules or
regulations implemented by Selling Broker-Dealer or General Agent.
12
<PAGE>
SCHEDULE B
COMPENSATION SCHEDULE TO PACIFIC MUTUAL SELLING AGREEMENT
FOR PACIFIC SELECT ESTATE MAXIMIZER LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
POLICY FORM 97-50
(TO BE FILED BY PRE-EFFECTIVE AMENDMENT)
<PAGE>
EXHIBIT 99.1(5)(a)
PACIFIC MUTUAL
LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 92660
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Benefits will vary based on Investment Experience
Face Amount can be Decreased
READ YOUR POLICY CAREFULLY. This is a legal contract between you, the Owner,
and us, Pacific Mutual Life Insurance Company, a mutual company.
We agree to pay the benefits of this policy according to its provisions.
The consideration for this policy is the application for it, a copy of which is
attached, and payment of the premiums.
VARIABLE ACCOUNT CASH SURRENDER VALUES MAY INCREASE OR DECREASE DEPENDING UPON
VARIABLE ACCOUNT INVESTMENT EXPERIENCE, SUBJECT TO ANY MINIMUM GUARANTEES.
THERE IS NO GUARANTEED VARIABLE ACCOUNT CASH SURRENDER VALUE.
THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED DEPENDING
UPON VARIABLE ACCOUNT INVESTMENT EXPERIENCE. THE AMOUNT OF THE DEATH BENEFIT
WILL NEVER BE LESS THAN THE FACE AMOUNT AS LONG AS YOUR POLICY IS IN FORCE. SEE
THE POLICY BENEFITS PROVISION FOR DETAILS.
POLICY LOAN VALUE IS LESS THAN ONE HUNDRED PERCENT (100%) OF THE POLICY'S CASH
SURRENDER VALUE.
Free Look Right - You may return this policy within (1) 10 days after you
receive it, (2) 10 days after we mail or deliver a notice of the right of
withdrawal, or (3) 45 days after you sign the application, whichever is later.
To do so, deliver or mail it to us or our agent. This policy will then be
deemed void from the beginning and we will refund the premiums paid.
Signed at our Home Office, 700 Newport Center Drive, Newport Beach,
California 92660.
/s/TC SUTTON /s/AUDREY L. MILFS
Chairman and Chief Executive Officer Secretary
Form 97-50
<PAGE>
POLICY SPECIFICATIONS
BASIC POLICY: MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PREMIUMS: INITIAL PREMIUM PAYMENT - $10,000.00
GUIDELINE SINGLE PREMIUM - $10,000.00
GUIDELINE LEVEL PREMIUM - $561.00
GUIDELINE SINGLE PERCENTAGE - 100%
</TABLE>
ACCOUNT ALLOCATIONS AVAILABLE:
FIXED EQUITY INCOME MONEY MARKET
GROWTH EQUITY INDEX MULTI-STRATEGY
GROWH LT MANAGED BOND GOVERNMENT SECURITIES
INTERNATIONAL HIGH YIELD BOND AGGRESSIVE EQUITY
EMERGING MARKETS ENHANCED US EQUITY BOND & INCOME
VAR AC I - O'SEAS EQY VAR AC II - CORE GRW VAR AC III - CAP APPR
VAR AC IV - ENHNC EQY
INTEREST ON THE FIXED ACCOUNT IS GUARANTEED TO BE NOT LESS THAN 3.00% ANNUALLY.
WE GUARANTEE THAT WE WILL NOT CHANGE OUR DECLARED RATE OF INTEREST ON THE FIXED
ACCOUNT MORE THAN ONCE IN ANY YEAR.
POLICY NUMBER: 123456789-0 INSURED: LELAND STANFORD
POLICY DATE: XXXX XX, XXXX RISK CLASSIFICATION: MALE/NONSMOKER
INITIAL FACE AMOUNT: $48,537.00 AGE ON POLICY DATE: 35
OWNER(S): LELAND STANFORD
NOTE: IT IS POSSIBLE THAT COVERAGE WILL EXPIRE IF THE ACCUMULATED VALUE LESS
DEBT AND SURRENDER CHARGES IS INSUFFICIENT TO PAY THE CHARGES ASSESSED ON A
MONTHLY PAYMENT DATE. ACCUMULATED VALUE MAY BE BASED ON THE INVESTMENT RESULTS
OF THE SEPARATE ACCOUNT. THE PAYMENT OF INITIAL AND SUBSEQUENT PREMIUMS WILL
NOT GUARANTEE THAT THE POLICY WILL REMAIN IN FORCE OR THAT THERE WILL BE ANY
ACCUMULATED VALUE.
PAGE 3.0
<PAGE>
POLICY SPECIFICATIONS 123456789-0
- --------------------------------------------------------------------------------
SUMMARY OF COVERAGES EFFECTIVE ON THE POLICY DATE
- --------------------------------------------------------------------------------
97-50: BASIC COVERAGE FACE AMOUNT: $48,537.00
INSURED: LELAND STANFORD
AGE AT ISSUE: 35
RISK CLASSIFICATION: MALE/NONSMOKER
PAGE 3.1
<PAGE>
POLICY SPECIFICATIONS 123456789-0
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE 0.90% (.00075 MONTHLY) OF UNLOANED
RISK CHARGE: ACCUMULATED VALUE IN POLICY YEARS 1-10;
0.70% (.000583333 MONTHLY) OF UNLOANED
ACCUMULATED VALUE THEREAFTER.
ADMINISTRATIVE CHARGE: 0.30% (.00025 MONTHLY) OF UNLOANED
ACCUMULATED VALUE FOR ALL POLICY YEARS.
PLUS $40 ON EACH POLICY ANNIVERSARY
ACCUMULATED VALUE IS BELOW $50,000.
TAX CHARGE: 0.40% (.000333333 MONTHLY) OF ACCUMULATED
VALUE IN POLICY YEARS 1-10.
<TABLE>
<CAPTION>
SURRENDER CHARGE RATE: POLICY DURATION
---------------
<S> <C>
YEAR 1 10%
YEAR 2 10%
YEAR 3 9%
YEAR 4 8%
YEAR 5 7%
YEAR 6 6%
YEAR 7 5%
YEAR 8 4%
YEAR 9 3%
YEAR 10+ 0%
</TABLE>
PAGE 3.2
<PAGE>
POLICY SPECIFICATIONS 123456789-0
- --------------------------------------------------------------------------------
TABLE OF COST OF INSURANCE RATES
- --------------------------------
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1.00 APPLICABLE TO BASE
POLICY COVERING LELAND STANFORD.
<TABLE>
<CAPTION>
POLICY MONTHLY POLICY MONTHLY
YEAR RATE YEAR RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 0.00018101 40 0.00524008
2 0.00019354 41 0.00578471
3 0.00020774 42 0.00635945
4 0.00022361 43 0.00695767
5 0.00024199 44 0.00758525
6 0.00036288 45 0.00826195
7 0.00028545 46 0.00901186
8 0.00030969 47 0.00985816
9 0.00033646 48 0.01082233
10 0.00036490 49 0.01190240
11 0.00039502 50 0.01307745
12 0.00042767 51 0.01432473
13 0.00046201 52 0.01562627
14 0.00049887 53 0.01697619
15 0.00053993 54 0.01837543
16 0.00058521 55 0.01983434
17 0.00063807 56 0.02137882
18 0.00069683 57 0.02305177
19 0.00076404 58 0.02493709
20 0.00083802 59 0.02724423
21 0.00091795 60 0.03044527
22 0.00100301 61 0.03549222
23 0.00109322 62 0.04451508
24 0.00118942 63 0.06221164
25 0.00129417 64 0.08333333
26 0.00141090 65+ 0.08333333
27 0.00154303
28 0.00169233
29 0.00185974
30 0.00204535
31 0.00224587
32 0.00246053
33 0.00268857
34 0.00293440
35 0.00320679
36 0.00351465
37 0.00368703
38 0.00427231
39 0.00473295
</TABLE>
PAGE 4.0
<PAGE>
Definitions
Company, PM, we, our, and us - refers to Pacific Mutual Life Insurance Company.
Monthly Payment Date - is the day each month on which certain Policy Charges are
deducted from the Accumulated Value. This day is shown on page 3. The first
monthly payment date
is the Policy Date.
Home Office - means PM's Policy Benefits and Services Department located at 700
Newport Center Drive, P.O. Box 7500, Newport Beach, California 92658 - 7500.
You, your or Owner - refers to the owner of this policy.
Policy Date - is shown on page 3. Policy months, years and anniversaries are
measured from this date.
Free Look Transfer Date - The date which is the later of 15 days after the
policy is issued or 45 days after the application is signed.
Age - means age as of last birthday increased by the number of complete policy
years elapsed.
Evidence of Insurability - is information, including medical information,
satisfactory to us that is used to determine insurability and the insured's
class of risk.
Debt - means all unpaid Policy Loans plus accrued interest on such loans.
Face Amount - is the amount used to determine the policy's death benefit. The
initial Face Amount is shown on page 3.
Written Request - is a request in writing satisfactory to PM and filed at its
Home Office.
Separate Account - refers to the Pacific Select Exec Separate Account which is a
separate account of PM that consists of subaccounts, which may be referred to as
Variable Accounts. Each Variable Account may invest its assets in a separate
class of shares of a designated investment company or companies.
Variable Account - A separate account of PM or a subaccount of a PM separate
account in which assets of PM are segregated from its assets in PM's general
account and other separate accounts and to which premiums and Accumulated Value
under this policy may be allocated for variable accumulation.
Owner and Beneficiary
Owner - The Owner of this policy is shown on the Policy Specifications pages or
in a later written change. If there are two or more Owners, they will own this
policy as joint tenants with right of survivorship, unless otherwise stated.
Assignment - This policy may be assigned at any time. PM is not bound by any
Assignment unless written notice of such Assignment is recorded at our Home
Office. We are not responsible for the validity of any Assignment.
Beneficiary - The Beneficiary is named in the application to receive any Death
Benefit Proceeds. The interest of any Beneficiary will be subject to any
Assignment.
You may make a change of Beneficiary by Written Request on forms provided by PM
while the insured is living. The change will take place as of the date the
request is signed. Any rights created by the change will be subject to any
payments made or actions taken by PM before the written request is received.
You may designate an irrevocable Beneficiary whose rights under the policy
cannot be changed without his or her consent.
<PAGE>
The interest of a Beneficiary who does not survive to receive payment will pass
to the surviving Beneficiaries in proportion to their share in the proceeds,
unless otherwise provided. If no Beneficiaries survive to receive payment, the
Death Benefit Proceeds will pass to the Owner, or the Owner's estate if the
Owner does not survive to receive payment.
Premiums
Premiums - This policy will not be in force before the initial premium, shown on
the Policy Specifications pages, is paid. The initial premium is due on the
Policy Date and is payable either at our Home Office or to an agent of PM. The
initial premium may be 80%, 90%, or 100% of the Guideline Single Premium as
shown on the Policy Specifications pages. Additional Premiums, if any, are
payable at our Home Office. The minimum amount of any additional premium is
$1,000. A receipt, signed by an officer of PM, will be furnished upon request.
Premium Allocation - The initial premium will be allocated to the Money Market
Variable Account on the date it is received and accepted by us. On the Free
Look Transfer Date, the Accumulated Value in the Money Market Variable Account
will be allocated to the Fixed and Variable Accounts according to the Premium
Allocation specified in the application or your more recent instructions
received by us, if any.
Upon written request, you may change the Premium Allocation. Subsequent
premiums received, if any, will be allocated to the Fixed and Variable Accounts
according to your most recent instructions.
P9750 Page 5
<PAGE>
Premium Limitation - We reserve the right to require evidence of insurability,
satisfactory to us, for any premium payment that would result in an immediate
increase in the difference between the Death Benefit and the Accumulated Value.
In order for this policy to be treated as life insurance under the Internal
Revenue Code, the sum of the premiums paid less a portion of any Withdrawals as
defined in the Internal Revenue Code may not exceed the greater of:
- - the Guideline Single Premium; or
- - the sum of the Guideline Level Premiums to the date of payment.
The amounts of the Guideline Premiums are shown on the Policy Specifications
pages. The Guideline Premiums will change whenever there is a change in the Face
Amount of insurance or in other Policy Benefits. Such changes in the Guideline
Premiums will be shown in the supplemental schedule of benefits and premiums.
The Guideline Premiums are determined according to the rules applicable to this
policy set forth in the Internal Revenue Code. The Guideline Premiums will be
adjusted to conform to any changes in the Internal Revenue Code.
In the event that a premium payment would exceed these limits, we reserve the
right to refund the excess payment to the Owner. Further, we reserve the right
to make distributions from the policy to the extent we deem it necessary to
continue to qualify this policy as life insurance under the Internal Revenue
Code.
If this policy was issued in exchange for a policy that was not a Modified
Endowment Contract (MEC), then in order for this policy to continue as a non-
MEC, the sum of premiums paid less a portion of any Withdrawals may not exceed
the 7-Pay limit as defined in the Internal Revenue Code. In the event that a
premium payment would exceed the 7-Pay limit, we reserve the right to refund the
excess payment to the Owner, unless the Owner has previously notified us in
writing that payments that cause this policy to become a MEC may be accepted by
us and applied to this policy.
Grace Period and Lapse - If the Accumulated Value less Debt and Surrender
Charges on a Monthly Payment Date is not sufficient to cover the current monthly
deduction, a grace period of 61 days will be allowed for the payment of
sufficient premium to keep your policy in force.
We will send a notice at the start of the Grace Period to you at your last known
address and to any assignee of record. The Grace Period will end 61 days after
we mail you the notice. The notice will state the due date and the amount of
premium needed to keep your policy in force. A minimum of three times the
monthly deduction due when the insuffiency occurred must be paid. Your policy
will remain in force during the Grace Period. If sufficient premium is not paid
by the end of the Grace Period, a Lapse will occur. We will send you and any
assignee of record, a written notice 30 days prior to lapse. Upon Lapse, the
policy will terminate with no value.
Reinstatement - If it has not been surrendered, this policy may be reinstated
not more than three years after the end of the Grace Period. To reinstate this
policy you must provide us with:
- - written application;
- - evidence of insurability satisfactory to us;
- - payment of sufficient premium to cover all monthly deductions that were due
and unpaid during the Grace Period; plus
- - payment of sufficient premium to keep the policy in force for three months
after the date of Reinstatement.
<PAGE>
When this policy is reinstated, the Accumulated Value will be equal to the
Accumulated Value on the date of Lapse subject to the following. We will
allocate the Accumulated Value and your premium payment to the Variable Accounts
and Fixed Account according to your most recent premium allocation instructions.
If the policy is reinstated after the first Monthly Payment Date following
Lapse, the Accumulated Value will be reduced by the amount of any Debt on the
date of Lapse and no Debt will exist on the date of Reinstatement. If the
policy is reinstated on the first Monthly Payment Date following Lapse, any
Debt on the date of Lapse will also be reinstated, with the corresponding
portion of the Accumulated Value allocated to the Loan Account as described in
the Policy Loans provision.
The effective date of the reinstated policy will be the first monthly payment
date on or following the date we approve your Reinstatement application.
Policy Benefits
The Death Benefit for this policy will be the greater of:
- - the Face Amount, or
- - the Guideline Minimum Death Benefit.
P9750 Page 6
<PAGE>
The Guideline Minimum Death Benefit at any time is the Accumulated Value
multiplied by the Death Benefit Percentage shown below:
<TABLE>
<CAPTION>
Death Benefit Death Benefit
Age Percentage Age Percentage
<S> <C> <C> <C>
0-40 250% 60 130%
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 114
52 171 72 113
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 >93 101
</TABLE>
Age is the Age of the insured at issue, increased by the number of complete
policy years elapsed.
This policy is intended to qualify as a life insurance contract under the
Internal Revenue Code for federal tax purposes, and the Death Benefit under this
policy is intended to qualify for the income tax exclusion under the Internal
Revenue Code. To that end, the provisions of this policy, including any other
rider, benefit, or endorsement, are to be interpreted to ensure such tax
qualification, notwithstanding any other provisions to the contrary.
If at any time the premiums paid under this policy exceed the amount allowable
for such tax qualification, such excess amount shall be removed from the policy
as of the date of its payment, and any appropriate adjustment in the Death
Benefit shall be made as of such date. This excess amount shall be refunded to
the Owner no later than 60 days after the end of the applicable policy year. We
shall adjust the excess amount refunded for interest from the date of its
payment or for changes in Accumulated Value attributable to the excess amount.
If the excess amount is not refunded by then, the Death Benefit under this
policy shall be increased retroactively and prospectively so that at no time is
this Death Benefit ever less than the amount needed to ensure such tax
qualification. To the extent that the Death Benefit as of any time is increased
by this provision, appropriate adjustments shall be made retroactively in any
Cost of Insurance Charge or supplemental benefits as of the time that are
consistent with such an increase.
If this policy was issued in exchange for a policy that is not a MEC, then
unless specified otherwise by you in writing, it is intended that this policy
will not be treated as a MEC under the Internal Revenue Code. To that end, the
provisions of this policy, including any other rider, benefit or endorsement,
are to be interpreted to prevent the policy from being subject to such
treatment, notwithstanding any other provisions to the contrary.
If this policy was issued in exchange for a policy that is not a MEC, then if at
any time the premiums or other amounts paid under the policy exceed the limit
for avoiding such MEC treatment, unless otherwise specified in writing by you
that such MEC treatment is acceptable, such excess amount shall be removed from
the policy as of the date of its payment, and any appropriate adjustment in the
policy's Death Benefit shall be made as of such date. This excess amount shall
be refunded to the Owner no later than 60 days after the end of the applicable
policy year.
<PAGE>
We shall adjust the excess amount refunded for interest from the date of its
payment or for changes in Accumulated Value attributable to the excess amount.
If the excess amount is not refunded by then, the Death Benefit under the policy
shall be increased retroactively and prospectively to the minimum amount
necessary (e.g., to the end of any test period) so that at no time is this Death
Benefit ever less than the amount needed to avoid such MEC treatment. To the
extent that the Death Benefit as of any time is increased by this provision,
appropriate adjustments shall be made, retroactively or otherwise, in any
Insurance Charge or supplemental benefits as of that time that are consistent
with such an increase.
PM reserves the right to reduce the Guideline Minimum Death Benefit by requiring
Withdrawals be made in order to maintain the net amount at risk at a level that
will not exceed three times the Death Benefit on the Policy Date. The net
amount at risk is the difference between the Death Benefit and the Accumulated
Value.
PM reserves the right to increase the Death Benefit if required for this policy
to continue to qualify this policy as life insurance under the Internal Revenue
Code.
Death Benefit Proceeds - The actual amount payable to the Beneficiary if the
insured dies while your policy is in force is called the Death Benefit Proceeds.
The Death Benefit proceeds are equal to the Death Benefit provided by your
policy, as of the date of death, less any Debt and less any due and unpaid
monthly deductions occurring during a Grace Period.
P9750 Page 7
<PAGE>
We will pay the Death Benefit Proceeds to the Beneficiary after we receive, at
our Home Office, proof of the insured's death satisfactory to us and such other
information as we may reasonably require. The actual Death Benefit Proceeds
paid are subject to the conditions and adjustments defined in other policy
provisions, such as General Provisions, Withdrawals and Policy Loans.
We will pay interest on Death Benefit Proceeds from the date of death to the
date of payment at a rate not less than 3%, or if higher, the interest rate
required by the state in which the policy is issued.
Accumulated Value
Accumulated Value - The Accumulated Value on any date is the sum of your
policy's Accumulated Value in the Fixed and Variable Accounts, plus the amount
set aside in the Loan Account to secure any Debt and any interest credited
thereon.
The amount set aside to secure Debt in the Loan Account on each policy
anniversary is equal to the amount of Debt. During each policy year, the amount
in the Loan Account on any date is:
- - the amount in the Loan Account on the prior anniversary increased by
interest;
- - plus any loan taken since the prior anniversary increased by interest; and
- - minus any loan amount repaid since the prior anniversary increased by
interest.
Fixed Account - The Accumulated Value in the Fixed Account on any date is:
- - the Accumulated Value in the Fixed Account on the prior Monthly Payment
Date increased by interest;
- - plus the amount of any additional premiums received and allocated to the
Fixed Account since the last Monthly Payment Date, increased by interest;
- - plus the amount of any transfer to the Fixed Account, including transfers
from the Loan Account, since the last Monthly Payment Date, increased by
interest;
- - minus the amount of any Withdrawals, or transfers from the Fixed Account,
including transfers to the Loan Account, since the last Monthly Payment Date,
increased by interest; and
- - minus the monthly deduction and other deductions due, if any, and assessed
against the Fixed Account increased by interest.
Variable Accounts - Assets in the Variable Accounts are divided into
Accumulation units, which are a measure of value used for bookkeeping purposes.
We credit your policy with Accumulation units in each Variable Account as a
result of:
- - the amount of any premiums received and allocated to the Variable Account;
and
- - transfers of Accumulated Value to the Variable Account, including transfers
from the Loan Account.
We debit Accumulation units in each Variable Account as a result of:
- - transfers from the Variable Account, including transfers to the Loan
Account;
- - surrenders and Withdrawals from the Variable Account; and
- - the monthly deduction and other deductions due, if any, and assessed
against the Variable Account.
<PAGE>
To determine the number of Accumulation units debited or credited in connection
with a transaction, we divide the dollar amount of the transaction by the unit
value of the affected Variable Account. The unit value of each Variable Account
is determined on each Valuation Date. The number of units in each Variable
Account will not change because of subsequent changes in unit value.
To calculate the unit value of a Variable Account on any Valuation Date, we
adjust the unit value from the previous Valuation Date, for:
- - the investment performance of the Variable Account;
- - any dividends or distributions paid to the Variable Account;
- - charges, if any, that may be assessed by us for income taxes attributable
to the operation of the Variable Account.
A Valuation Date is each day required by applicable law and currently includes
each day that both the New York Stock Exchange is open for trading and Pacific
Mutual's administrative offices are open. If any transaction or event is
scheduled to occur on a day that is not a Valuation Date, such transaction or
event will be deemed to occur on the next following Valuation Date unless
otherwise specified.
To determine your Accumulated Value in each Variable Account, we multiply the
number of units in the Variable Account by the unit value of such Account.
P9750 Page 8
<PAGE>
Interest - We will credit interest on the Accumulated Value in the Fixed Account
at a rate not less than .24663% per month, compounded monthly. This is
equivalent to an annual effective rate of 3%. At our discretion, we may credit
a higher rate of interest from time to time. We will credit interest on the
amount in the Loan Account at a rate of .36748% per month, compounded monthly.
This is equivalent to an annual effective rate of 4.5%.
On each policy anniversary, any interest earned and held in the Loan Account
will be transferred to the Fixed and Variable Accounts in accordance with your
most recent premium allocation instructions.
Transfers - On and after the Free Look Transfer Date and while your policy is in
force, you may, upon written request, transfer your Accumulated Value, or a part
of it, among the Fixed and Variable Accounts subject to the following.
No transfer may be made if the policy is in a Grace Period and the required
premium has not been paid.
Only one transfer from the Fixed Account may be made in any twelve month period.
Transfers from the Fixed Account will be limited to the greater of $5,000 and
25% of the Accumulated Value in the Fixed Account.
Transfers from the Variable Accounts to the Fixed Account may be made only
during the policy month preceding each policy anniversary.
No charges are currently imposed upon a Transfer. We reserve the right at a
future date to limit the size of Transfers and remaining balances, to assess
transfer charges and to limit the number and frequency of Transfers.
Policy Charges
Monthly Deduction - A Monthly Deduction for a policy month is due on each
Monthly Payment Date and is equal to the sum of the following items:
- - the monthly Cost of Insurance Charge;
- - the Mortality and Expense Risk Charge;
- - the Administrative Charge;
- - the Tax Charge, if any, and
- - rider charges, if any.
Unless you request otherwise in writing, the Monthly Deduction will be charged
proportionately to the Accumulated Value in each Variable Account and the Fixed
Account on the Monthly Payment Date.
Cost of Insurance Charge - Beginning on the Policy Date and monthly thereafter,
there will be a Cost of Insurance Charge against the Accumulated Value.
The Cost of Insurance Charge Rates are based on the insured's Age, sex, risk
classification, and the policy duration. The current monthly Cost of Insurance
Rates will be determined by us. The rates will never exceed the Guaranteed
Maximum Monthly Cost of Insurance Rates shown on the Policy Specifications
pages.
The Guaranteed Maximum Monthly Cost of Insurance Charge for each policy month is
determined by multiplying the Guaranteed Maximum Monthly Cost of Insurance Rate
by the net amount at risk. Net amount at risk is the difference between the
Death Benefit and the Accumulated Value, each calculated at the beginning of the
policy month. Any change in the Cost of Insurance Charge Rates will apply
uniformly to all members of the same class.
<PAGE>
Mortality and Expense Risk Charge - Beginning on the Policy Date and monthly
thereafter, there will be a charge equal to .00075 (.90% annually) in the first
10 policy years and .000583333 (.70% annually) thereafter, multiplied by the
Accumulated Value of the Variable and Fixed Accounts at the beginning of the
policy month. The Mortality and Expense Risk Charge is to compensate us for the
risk we assume that mortality and expenses will be greater than estimated.
Administrative Charge - Beginning on the Policy Date and monthly thereafter,
there will be a charge equal to .00025 (.30% annually) in all policy years,
multiplied by the Accumulated Value of the Variable and Fixed Accounts at the
beginning of the policy month.
If the Accumulated Value is less than $50,000 on a policy anniversary, we will
charge an additional $40.00 fee on that Monthly Payment Date.
Tax Charge - Beginning on the Policy Date and monthly thereafter, there will be
a charge equal to .000333333 (.40% annually) in the first 10 policy years,
multiplied by the Accumulated Value at the beginning of the policy month. There
will be no charge after the tenth policy year.
Surrender Charge - A Surrender Charge may be deducted proportionately from the
Accumulated Value of the Variable and Fixed Accounts upon surrender of the
policy, and upon a Withdrawal from the policy's Net Cash Surrender Value. The
Surrender Charge is needed to help pay for underwriting and policy issue costs.
The Surrender Charge rates are shown on the Policy Specifications pages. These
rates are applied only to the portion of the reduction in Accumulated Value that
is deemed to be a return of initial premium.
P9750 Page 9
<PAGE>
For the purpose of determining Surrender Charges only, a reduction in
Accumulated Value will be deemed to be a return of initial premium first, a
return of additional Premiums next, and a distribution from cumulative policy
earnings last. However, a Preferred Withdrawal is deemed to be a distribution
from cumulative policy earnings and incurs no Surrender Charge. In no event
will the aggregate amount to which Surrender Charges are applied exceed the
initial premium. There are no Surrender Charges after the ninth policy year.
Other Deductions - We reserve the right to make charges for federal, state or
local taxes against the Accumulated Value that may attributable to the Variable
Accounts or to our operations with respect to this policy if we incur any such
taxes.
Surrender and Withdrawal of Values
Surrender - Upon written request while the insured is living you may surrender
this policy for its Net Cash Surrender Value. The policy will terminate on the
date the request is received at our Home Office.
Net Cash Surrender Value - The Net Cash Surrender Value is the Cash Surrender
Value less any Debt.
Cash Surrender Value - The Cash Surrender Value is the Accumulated Value less
any Surrender Charge.
Withdrawals - Withdrawals of the Net Cash Surrender Value may be taken as
follows:
Upon written request on or after the first policy anniversary while the insured
is living, you may withdraw a portion of the Net Cash Surrender Value of this
policy as a Withdrawal. A Withdrawal may cause a decrease in the Face Amount.
The Face Amount will be reduced in direct proportion to the reduction in
Accumulated Value. However, the Face Amount will not be reduced by more than
the excess, if any, of the original Face Amount over the Guideline Minimum Death
Benefit after the Withdrawal.
The Face Amount decrease will be subject to the Guideline Premium Limitation as
defined in the Internal Revenue Code. Any such decrease will be limited so
that no additional distribution of Accumulated Value is required to comply with
the Guideline Premium Limitation.
Withdrawals will be subject to the following conditions: The amount of each
Withdrawal must be at least $1,000 and the Net Cash Surrender Value remaining
after each Withdrawal must be at least $10,000. Also, if there is any Debt at
the time of each withdrawal, the amount of the Withdrawal is limited to the
excess, if any, of the Cash Surrender Value immediately prior to the Withdrawal
over the result of the Debt divided by 90%. Withdrawals may be subject to
Surrender Charges. The Surrender Charge on a Withdrawal is the Surrender Charge
rate shown on the Policy Specifications pages applied to the portion of the
reduction in Accumulated Value that is deemed to be a return of initial premium.
A Preferred Withdrawal is permitted once per policy year. There is no Surrender
Charge on a Preferred Withdrawal. The amount of each Preferred Withdrawal is
limited to the lesser of the cumulative policy earnings and 10% of the initial
premium amount as of the date of the Withdrawal. Cumulative policy earnings is
the Accumulated Value, less premiums paid, plus all prior reductions in
Accumulated Value deemed to be returns of initial or additional premiums for the
purpose of Surrender Charges. Any amount withdrawn in excess of the Preferred
Withdrawal amount will be subject to Surrender Charges.
Withdrawals will not be permitted if the Face Amount reduction would cause the
policy to fail to qualify as life insurance for federal tax purposes. The
amount of each Withdrawal will be allocated proportionately to the Accumulated
Value in the Fixed and Variable Accounts unless otherwise requested by you. If
the insured dies after the request for a Withdrawal is sent to us and prior to
the Withdrawal being effected, the amount of the Withdrawal will be deducted
from the Death Benefit Proceeds, which will be determined without taking the
Withdrawal into account.
<PAGE>
If this policy is issued in exchange for a life insurance policy that is not a
MEC, a request for a Withdrawal will not be processed if the Withdrawal would
cause the policy to be treated as a MEC, unless you specify otherwise in
writing.
Income Benefits
Income Benefits - Surrender or Withdrawal benefits may be used to buy a lifetime
monthly income. Death Benefits may be used to buy a monthly income for the
lifetime of the Beneficiary. The monthly income will be payable for at least
ten years. The purchase rates for the monthly income will be set from time to
time.
P9750 Page 10
<PAGE>
<TABLE>
<CAPTION>
However, the income bought by each $1,000 will always be at least as large as
that shown below.
Age Monthly Income Age Monthly Income
<S> <C> <C> <C>
30 3.12 54 4.15
32 3.17 56 4.30
34 3.23 58 4.47
36 3.29 60 4.66
38 3.35 62 4.87
40 3.42 64 5.10
42 3.50 66 5.36
44 3.58 68 5.65
46 3.67 70 5.97
48 3.78 72 6.32
50 3.89 74 6.69
52 4.01 75 6.89
</TABLE>
Monthly income amounts for ages not shown are halfway between the two amounts
for the nearest two ages which are shown.
Guaranteed amounts for ages under 30 are the same as those for age 30;
guaranteed amounts for ages over 75 are the same as those for age 75. Amounts
shown are based on the 1983 Table a with interest at 3%.
This benefit is not available if the income would be less than $100 a month. We
may require evidence of survival for incomes which last more than ten years.
Other Options - Surrender, Withdrawal or Death Benefits may be applied under any
other payment plans that we make available at that time.
Policy Loans
Policy Loans - You may obtain loans by written request while this policy is in
force on the sole security of the amount in the Loan Account for this policy.
Amount Available - The amount available for a loan is equal to 50% of the
Accumulated Value less existing Debt in the first policy year, and 90% of the
Accumulated Value in the Variable Accounts plus 100% of the Accumulated Value
in the Fixed Account less Debt in any policy year thereafter, less any
Surrender Charge that would be imposed if the policy were surrendered on the
date the loan is taken. The amount of a loan must be at least $500.
Preferred Loans - If the Accumulated Value exceeds the total of all Premiums
paid since issue, a Preferred Loan is available. The amount available for
Preferred Loans is the amount by which the Accumulated Value exceeds total
Premiums paid. The amount of loan that qualifies as a Preferred Loan is
determined on the date of the loan, and on each policy anniversary, thereafter.
On a policy anniversary, the amount of Debt classified as Preferred Loans may
increase or decrease.
Preferred Loans or Debt are charged interest as described below. Debt may be
allocated or reallocated between Preferred and non-Preferred on each policy
anniversary.
Loan Interest - Interest will accrue daily and is payable at the end of the
policy year. Annual loan interest rates are 6% in the first ten policy years
and 5% thereafter on non-Preferred Loans. Preferred Loans accrue daily at 5.25%
in the first ten policy years and 4.75% thereafter.
Interest not paid when due will be added to the loan principal.
Loan Account - When a loan is taken, an amount equal to the loan is transferred
out of the Accumulated Value in the Fixed and Variable Accounts into the Loan
Account to secure the loan. Unless you request otherwise, loan
<PAGE>
amounts will be transferred from the Variable Accounts and the Fixed
Account on a proportionate basis, up to the amount available. We will credit
interest monthly on amounts in the Loan Account at a rate equivalent to an
annual effective rate of 4.50%.
On each policy anniversary, if the amount in the Loan Account exceeds Debt, the
excess will be transferred from the Loan Account to the Fixed and Variable
Accounts according to your most recent instructions. If Debt exceeds the amount
in the Loan Account, an amount equal to such excess will be transferred from the
Fixed and Variable Accounts on a proportionate basis to the Loan Account.
Repayment - Loans may be repaid at any time prior to lapse of this policy. An
amount equal to the portion of any loan repaid, but not more than the amount in
the Loan Account, will be transferred from the Loan Account to the Fixed and
Variable Accounts according to your most recent instructions. Loan repayments
will be deemed repayment of the non-Preferred Loan amounts first.
Any payment intended as a loan payment, rather than an additional premium
payment, must be identified as such.
P9750 Page 11
<PAGE>
General Provisions
Entire Contract - This policy is a contract between the Owner and PM.
This policy, the attached copy of the initial application, any applications for
Reinstatement, all subsequent applications to change the policy, any
endorsements, any riders, and any additional policy information sections added
to this policy are the Entire Contract.
Only an authorized officer is permitted to change this contract or extend the
time for paying premiums.
All statements in the application shall, in the absence of fraud, be deemed
representations and not warranties. PM will not use any statement to contest
this policy or defend a claim on grounds of misrepresentation unless the
statement is in the application.
Incontestability - Except for failure to pay premiums, this policy cannot be
contested after the policy has been in force during the insured's lifetime for
two years from the Policy Date.
Participating - The current dividend scale is zero and it is not expected that
dividends will be paid. Any dividends that do become payable will be paid in
cash annually.
Juvenile Insured - If an insured's Age on the Policy Date is less than 20, the
insured will be notified at least 60 days prior to attainment of age 20 of the
option to apply for "Nonsmoker" risk status. This option must be requested in
writing and accompanied by satisfactory evidence of nonsmoking.
Suicide Exclusion - If the insured dies by suicide, while sane or insane, within
two years of the Policy Date and while the policy is in force, no Death Benefit
Proceeds will be paid. Instead, we will return the sum of the premiums paid,
less the sum of any Debt, any Withdrawal amounts, and any dividends paid by us
in cash.
Misstatement - If the insured's Age or sex is misstated in the application, the
Face Amount shall be adjusted as follows in order to reflect the correct Age and
sex. The adjusted Face Amount shall be (a) times (b) divided by (c), where:
- - (a) is the Face Amount before this adjustment;
- - (b) is the Guideline Single Premium at issue, using the misstated Age
and/or sex; and
- - (c) is the Guideline Single Premium at issue if the policy had originally
been issued at the correct Age, sex, and the original Face Amount.
The Guideline Minimum Death Benefit percentages shall be adjusted to the correct
Age and/or sex. For all policy months after the policy month in which the
misstatement is discovered, the Accumulated Value will be calculated using Cost
of Insurance Charges, rider charges, and benefit charges based on the correct
Age and sex. The Accumulated Value for the policy months through the policy
month in which the misstatement is discovered will not be recalculated.
If unisex Cost of Insurace Rates apply, no adjustment will be made for a
misstatement of sex.
Reports - A report will be mailed to you at the end of each policy quarter to
your last known address. This report will include the following information for
the policy quarter:
- - the Accumulated Value;
- - the Cash Surrender Value;
<PAGE>
- - the current Death Benefit;
- - transactions that occurred during the policy quarter;
- - existing Debt;
- - changes in the Guideline Premiums;
- - Surrender Charges; and
- - any information required by law.
In addition to the above reports, we will send you annual financial statements
for the Separate Account and annual and semiannual financial statements for the
designated investment company or companies in which the Separate Account
invests, the latter of which will include a list of the portfolio securities of
the investment company, as required by the Investment Company Act of 1940 and/or
any other reports as required by federal securities law.
Policy Illustrations - Upon request we will give you an illustration of the
future benefits under this policy based upon both guaranteed and current cost
factor assumptions. However, if you ask us to do this more than once in any
policy year, we reserve the right to charge you a fee, not to exceed $25 for
this service.
Basis of Values - A detailed statement showing how values are determined has
been filed with the state insurance department. No value is less than the
minimums required by the Standard Nonforfeiture Law and by the law in the state
in which this policy is delivered. All guaranteed values and Guaranteed Maximum
Monthly Cost of Insurance Charges are based on the Commissioner's 1980 Standard
Ordinary Mortality Table (ALB) and interest at the rate of 3%. For policies
that are issued on a unisex basis, the 1980 CSO Mortality Table B applies.
P9750 Page 12
<PAGE>
Ownership of Assets - We have the exclusive and absolute control of our assets,
including all assets in the Separate Account.
Compliance - We reserve the right to make any change to the provisions of this
policy to comply with, or give you the benefit of, any federal or state statute,
rule, or regulation, including but not limited to requirements for life
insurance contracts under the Internal Revenue Code or any state.
We will provide you with a copy of any such change, and will notify the
insurance supervisory official of the state in which this policy is delivered.
Exchange Right - During the first 18 months from the Policy Date, you have the
right to transfer all of the Accumulated Value in the Variable Accounts to the
Fixed Account. The policy will no longer be impacted by the investment
experience of any Variable Account.
Payments
Variable Accounts - We will calculate Net Cash Surrender Value on surrender,
Withdrawals, and loan proceeds, and unless transfers are restricted, transfers
between Variable Accounts or from Variable Accounts to the Fixed Account based
on allocations made to the Variable Accounts as of the end of the Valuation Date
on or next following the day on which such instructions are received. We will
calculate Death Benefit Proceeds based on allocations made to the Variable
Accounts as of the end of the Valuation Date on or next following the day on
which the insured's death occurs. We will pay such amounts and will effect a
transfer from a Variable Account within seven days after we receive all the
information needed to process a payment or transfer.
However, we may postpone the calculation or payment of such a payment or
transfer of amounts based on investment performance of the Variable Accounts if:
The New York Stock Exchange is closed on other than customary weekend and
holiday closings or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission (SEC); or
An emergency exists, as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable to determine the value of the Account
assets; or
The SEC by order permits postponement for the protection of policy owners.
Fixed Account - As to amounts allocated to the Fixed Account, we may defer
payment of any Net Cash Surrender Value on surrender, Withdrawals, or loan
amounts or defer transfers from the Fixed Account for up to six months after we
receive a request for it. We will allow interest, at a rate of at least 3%
annually, on any Net Cash Surrender Value or Withdrawal benefit derived from the
Fixed Account that we defer for 30 days or more.
Separate Account Provisions
Separate Account - We established the Separate Account and maintain it under the
laws of California. The Separate Account is divided into subaccounts, called
Variable Accounts. Realized and unrealized gains and losses from the assets of
each Variable Account are credited or charged against it without regard to our
other income, gains, or losses. Assets may be put in our Separate Account to
support this policy and other variable life insurance policies. Assets may be
put in our Separate Account for other purposes, but not to support contracts or
policies other than variable life contracts or policies.
The assets of our Separate Account are our property. The portion of its assets
equal to the reserves and other policy liabilities with respect to our Separate
Account will not be chargeable with liabilities arising out of any other
business we conduct. We may transfer assets of a Variable Account in excess of
the reserves and other liabilities with respect to that account to another
Variable Account or to our general account. All obligations arising under the
<PAGE>
policy are general corporate obligations of Pacific Mutual. We do not hold
ourselves out to be trustees of the Separate Account assets.
Variable Accounts - Each Variable Account may invest its assets in a separate
class of shares of a designated investment company or companies. The Variable
Accounts of our Separate Account that were available for your initial
allocations, are shown on the Policy Specifications pages. The allocations that
you initially choose are shown on the copy of the application attached to this
policy. From time to time we may make other Variable Accounts available to you.
We will provide you with written notice of all material details including
investment objectives and all charges.
We reserve the right, subject to compliance with the law then in effect, to:
- - change or add designated investment companies;
- - add, remove or combine Variable Accounts;
P9750 Page 13
<PAGE>
- - add, delete or make substitutions for the securities that are held or
purchased by the Separate Account or any Variable Account;
- - register or deregister any Variable Account under the Investment Company
Act of 1940;
- - to change the classification of any Variable Account;
- - operate any Variable Account as a managed investment company or as a unit
investment trust;
- - combine the assets of any Variable Account with other separate accounts or
subaccounts thereof of PM or an affiliate thereof;
- - transfer the assets of any Variable Account to other separate accounts or
subaccounts thereof of PM or and affiliate thereof;
- - run any Variable Account under the direction of a committee, board, or
other group;
- - restrict or eliminate any voting rights of policy owners with respect to
any Variable Account, or other persons who have voting rights as to any Variable
Account. Also, unless required by law or regulation, an investment policy may
not be changed without our consent;
- - change the allocations permitted under the policy;
- - terminate and liquidate any Variable Account; and
- - comply with law.
If any of these changes result in a material change in the underlying
investments of a Variable Account of our Separate Account, we will notify you of
such change.
We will not change the investment policy of the Separate Account without
following the filing and other procedures of the Insurance Commissioner in the
State of California and without following the filing and other procedures
established by insurance regulators of the state of issue.
P9750 Page 14
<PAGE>
<TABLE>
<CAPTION>
Index
Subject Page
<S> <C>
Accumulated Value................................................................................... 8
Administrative Charge............................................................................... 9
Age................................................................................................. 5
Assignment.......................................................................................... 5
Basis of Values..................................................................................... 13
Beneficiary......................................................................................... 5
Cash Surrender Value................................................................................ 10
Compliance.......................................................................................... 13
Cost of Insurance Charge............................................................................ 3,9
Definitions......................................................................................... 5
Dividends........................................................................................... 12
Face Amount......................................................................................... 3
General Provisions.................................................................................. 12
Grace Period and Lapse.............................................................................. 6
Income Benefits..................................................................................... 10,11
Incontestability.................................................................................... 12
Interest............................................................................................ 9
Loan Interest....................................................................................... 11
Misstatement........................................................................................ 12
Mortality and Expense Risk Charge................................................................... 9
Other Deductions.................................................................................... 10
Owner............................................................................................... 3,5
Payments............................................................................................ 13
Policy Benefits..................................................................................... 7
Policy Charges...................................................................................... 9
Policy Date......................................................................................... 3,5
Policy Illustrations................................................................................ 12
Policy Loans........................................................................................ 11
Preferred Loans..................................................................................... 11
Premium Limitation.................................................................................. 6
Premiums............................................................................................ 5
Reinstatement....................................................................................... 6
Reports............................................................................................. 12
Suicide Exclusion................................................................................... 12
Surrender Charge.................................................................................... 9,10
Tax Charge.......................................................................................... 9
Transfers........................................................................................... 9
Variable Accounts................................................................................... 8,14
Withdrawals......................................................................................... 10
</TABLE>
I-9750
<PAGE>
PACIFIC MUTUAL
LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 91660
================================================================================
Form 97-50
<PAGE>
EXHIBIT 99.1(5)(b)
PACIFIC MUTUAL
LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 92660
LAST SURVIVOR MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Benefits will vary based on Investment Experience
Face Amount can be Decreased
READ YOUR POLICY CAREFULLY. This is a legal contract between you, the Owner,
and us, Pacific Mutual Life Insurance Company, a mutual company.
We agree to pay the benefits of this policy according to its provisions.
The consideration for this policy is the application for it, a copy of which is
attached, and payment of the premiums.
VARIABLE ACCOUNT CASH SURRENDER VALUES MAY INCREASE OR DECREASE DEPENDING UPON
VARIABLE ACCOUNT INVESTMENT EXPERIENCE, SUBJECT TO ANY MINIMUM GUARANTEES. THERE
IS NO GUARANTEED VARIABLE ACCOUNT CASH SURRENDER VALUE.
THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED DEPENDING
UPON VARIABLE ACCOUNT INVESTMENT EXPERIENCE. THE AMOUNT OF THE DEATH BENEFIT
WILL NEVER BE LESS THAN THE FACE AMOUNT AS LONG AS YOUR POLICY IS IN FORCE. SEE
THE POLICY BENEFITS PROVISION FOR DETAILS.
POLICY LOAN VALUE IS LESS THAN ONE HUNDRED PERCENT (100%) OF THE POLICY'S CASH
SURRENDER VALUE.
Free Look Right - You may return this policy within (1) 10 days after you
receive it, (2) 10 days after we mail or deliver a notice of the right of
withdrawal, or (3) 45 days after you sign the application, whichever is later.
To do so, deliver or mail it to us or our agent. This policy will then be deemed
void from the beginning and we will refund the premiums paid.
Signed at our Home Office, 700 Newport Center Drive, Newport Beach,
California 92660.
/s/TC SUTTON /s/AUDREY L. MILFS
Chairman and Chief Executive Officer Secretary
Form 97-50-J
<PAGE>
POLICY SPECIFICATIONS
BASIC POLICY: MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
PREMIUMS: INITIAL PREMIUM PAYMENT -- $10,000.00
GUIDELINE SINGLE PREMIUM -- $10,000.00
GUIDELINE LEVEL PREMIUM -- $531.00
GUIDELINE SINGLE PERCENTAGE -- 100%
ACCOUNT ALLOCATIONS AVAILABLE:
FIXED EQUITY INCOME MONEY MARKET
GROWTH EQUITY INDEX MULTI-STRATEGY
GROWH LT MANAGED BOND GOVERNMENT SECURITIES
INTERNATIONAL HIGH YIELD BOND AGGRESSIVE EQUITY
EMERGING MARKETS ENHANCED US EQUITY BOND & INCOME
VAR AC I - O'SEAS EQY VAR AC II - CORE GRW VAR AC III - CAP APPR
VAR AC IV - ENHNC EQY
INTEREST ON THE FIXED ACCOUNT IS GUARANTEED TO BE NOT LESS THAN 3.00% ANNUALLY.
WE GUARANTEE THAT WE WILL NOT CHANGE OUR DECLARED RATE OF INTEREST ON THE FIXED
ACCOUNT MORE THAN ONCE IN ANY YEAR.
POLICY NUMBER: 123456789-0 INSURED #1: LELAND STANFORD
POLICY DATE; XXXX XX, XXXX RISK CLASSIFICATION: MALE/NONSMOKER
INITIAL FACE AMOUNT: $85,188.00 AGE ON POLICY DATE: 35
INSURED #2: MARY STANFORD
OWNER(S): LELAND STANFORD RISK CLASSIFICATION: FEMALE/NONSMOKER
AGE ON POLICY DATE: 35
NOTE: IT IS POSSIBLE THAT COVERAGE WILL EXPIRE IF THE ACCUMULATED VALUE LESS
DEBT AND SURRENDER CHARGES IS INSUFFICIENT TO PAY THE CHARGES ASSESSED ON A
MONTHLY PAYMENT DATE. ACCUMULATED VALUE MAY BE BASED ON THE INVESTMENT RESULTS
OF THE SEPARATE ACCOUNT. THE PAYMENT OF INITIAL AND SUBSEQUENT PREMIUMS WILL NOT
GUARANTEE THAT THE POLICY WILL REMAIN IN FORCE OR THAT THERE WILL BE ANY
ACCUMULATED VALUE.
PAGE 3.0
<PAGE>
POLICY SPECIFICATIONS 123456789-0
================================================================================
SUMMARY OF COVERAGES EFFECTIVE ON THE POLICY DATE
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97-50: BASIC COVERAGE FACE AMOUNT: $85,188.00
INSURED #1: LELAND STANFORD
AGE AT ISSUE: 35
RISK CLASSIFICATION: MALE/NONSMOKER
INSURED #2: MARY STANFORD
AGE AT ISSUE: 35
RISK CLASSIFICATION: FEMALE/NONSMOKER
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PAGE 3.1
<PAGE>
POLICY SPECIFICATIONS 123456789-0
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MORTALITY AND EXPENSE 0.90% (.00075 MONTHLY) OF UNLOANED
RISK CHARGE: ACCUMULATED VALUE IN POLICY YEARS 1-10;
0.70% (.000583333 MONTHLY) OF UNLOANED
ACCUMULATED VALUE THEREAFTER.
ADMINISTRATIVE CHARGE: 0.30% (.00025 MONTHLY) OF UNLOANED
ACCUMULATED VALUE FOR ALL POLICY YEARS.
PLUS $40 ON EACH POLICY ANNIVERSARY
ACCUMULATED VALUE IS BELOW $50,000.
TAX CHARGE: 0.40% (.000333333 MONTHLY) OF ACCUMULATED
VALUE IN POLICY YEARS 1-10.
SURRENDER CHARGE RATE: POLICY DURATION
---------------
YEAR 1 10%
YEAR 2 10%
YEAR 3 9%
YEAR 4 8%
YEAR 5 7%
YEAR 6 6%
YEAR 7 5%
YEAR 8 4%
YEAR 9 3%
YEAR 10+ 0%
PAGE 3.2
<PAGE>
POLICY SPECIFICATIONS 123456789-0
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TABLE OF COST OF INSURANCE RATES
- --------------------------------
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1.00 APPLICABLE TO BASE
POLICY COVERING BOTH LIVES.
POLICY MONTHLY POLICY MONTHLY
YEAR RATE YEAR RATE
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1 0.00000031 40 0.00223567
2 0.00000101 41 0.00261880
3 0.00000186 42 0.00304993
4 0.00000291 43 0.00352755
5 0.00000421 44 0.00405654
6 0.00000582 45 0.00465139
7 0.00000777 46 0.00533173
8 0.00001012 47 0.00611799
9 0.00001288 48 0.00703162
10 0.00001617 49 0.00807700
11 0.00001999 50 0.00924446
12 0.00002442 51 0.01052290
13 0.00002960 52 0.01190193
14 0.00003564 53 0.01337691
15 0.00004271 54 0.01494755
16 0.00005100 55 0.01662441
17 0.00006087 56 0.01842945
18 0.00007261 57 0.02040542
19 0.00008658 58 0.02263331
20 0.00010279 59 0.02530558
21 0.00012144 60 0.02886224
22 0.00014251 61 0.03425039
23 0.00016603 62 0.04359570
24 0.00019242 63 0.06221164
25 0.00022265 64 0.08333333
26 0.00025813 65+ 0.08333333
27 0.00030050
28 0.00035204
29 0.00041403
30 0.00048731
31 0.00057152
32 0.00066689
33 0.00077292
34 0.00089153
35 0.00102821
36 0.00118906
37 0.00138258
38 0.00161821
39 0.00190189
PAGE 4.0
<PAGE>
Definitions
Company, PM, we, our, and us - refers to Pacific Mutual Life Insurance Company.
Monthly Payment Date - is the day each month on which certain Policy Charges are
deducted from the Accumulated Value. This day is shown on page 3. The first
monthly payment date is the Policy Date.
Home Office - means PM's Policy Benefits and Services Department located at 700
Newport Center Drive, P.O. Box 7500, Newport Beach, California 92658 - 7500.
You, your or Owner - refers to the owner of this policy.
Policy Date - is shown on page 3. Policy months, years and anniversaries are
measured from this date.
Free Look Transfer Date - The date which is the later of 15 days after the
policy is issued or 45 days after the application is signed.
Age - means age as of last birthday increased by the number of complete policy
years elapsed.
Evidence of Insurability - is information, including medical information,
satisfactory to us that is used to determine insurability and each insured's
class of risk.
Debt - means all unpaid Policy Loans plus accrued interest on such loans.
Face Amount - is the amount used to determine the policy's death benefit. The
initial Face Amount is shown on page 3.
Survivor - is the insured remaining alive after the first death of the two
insureds that occurs while this policy is in force. If both insureds die either
simultaneously or in circumstances where it is not clear which insured died
first, the older of the two insureds will be deemed to be the Survivor.
Written Request - is a request in writing satisfactory to PM and filed at its
Home Office.
Separate Account - refers to the Pacific Select Exec Separate Account which is a
separate account of PM that consists of subaccounts, which may be referred to as
Variable Accounts. Each Variable Account may invest its assets in a separate
class of shares of a designated investment company or companies.
Variable Account - A separate account of PM or a subaccount of a PM separate
account in which assets of PM are segregated from its assets in PM's general
account and other separate accounts and to which premiums and Accumulated Value
under this policy may be allocated for variable accumulation.
Owner and Beneficiary
Owner - The Owner of this policy is shown on the Policy Specifications pages or
in a later written change. If there are two or more Owners, they will own this
policy as joint tenants with right of survivorship, unless otherwise stated.
Assignment - This policy may be assigned at any time. PM is not bound by any
Assignment unless written notice of such Assignment is recorded at our Home
Office. We are not responsible for the validity of any Assignment.
Beneficiary - The Beneficiary is named in the application to receive any Death
Benefit Proceeds. The interest of any Beneficiary will be subject to any
Assignment.
<PAGE>
You may make a change of Beneficiary by Written Request on forms provided by PM
while the insured is living. The change will take place as of the date the
request is signed. Any rights created by the change will be subject to any
payments made or actions taken by PM before the written request is received. You
may designate an irrevocable Beneficiary whose rights under the policy cannot be
changed without his or her consent.
The interest of a Beneficiary who does not survive to receive payment will pass
to the surviving Beneficiaries in proportion to their share in the proceeds,
unless otherwise provided. If no Beneficiaries survive to receive payment, the
Death Benefit Proceeds will pass to the Owner, or the Owner's estate if the
Owner does not survive to receive payment.
Premiums
Premiums - This policy will not be in force before the initial premium, shown on
the Policy Specifications pages, is paid. The initial premium is due on the
Policy Date and is payable either at our Home Office or to an agent of PM. The
initial premium may be 80%, 90%, or 100% of the Guideline Single Premium as
shown on the Policy Specifications pages. Additional Premiums, if any, are
payable at our Home Office. The minimum amount of any additional premium is
$1,000. A receipt, signed by an officer of PM, will be furnished upon request.
Premium Allocation - The initial premium will be allocated to the Money Market
Variable Account on the date it is received and accepted by us. On the Free Look
Transfer Date, the Accumulated Value in the Money Market Variable Account will
be allocated to the Fixed and Variable Accounts according to the Premium
Allocation specified in the application or your more recent instructions
received by us, if any.
P9750-J Page 5
<PAGE>
Upon written request, you may change the Premium Allocation. Subsequent premiums
received, if any, will be allocated to the Fixed and Variable Accounts according
to your most recent instructions.
Premium Limitation - We reserve the right to require evidence of insurability,
satisfactory to us, for any premium payment that would result in an immediate
increase in the difference between the Death Benefit and the Accumulated Value.
In order for this policy to be treated as life insurance under the Internal
Revenue Code, the sum of the premiums paid less a portion of any Withdrawals as
defined in the Internal Revenue Code may not exceed the greater of:
- - the Guideline Single Premium; or
- - the sum of the Guideline Level Premiums to the date of payment.
The amounts of the Guideline Premiums are shown on the Policy Specifications
pages. The Guideline Premiums will change whenever there is a change in the Face
Amount of insurance or in other Policy Benefits. Such changes in the Guideline
Premiums will be shown in the supplemental schedule of benefits and premiums.
The Guideline Premiums are determined according to the rules applicable to this
policy set forth in the Internal Revenue Code. The Guideline Premiums will be
adjusted to conform to any changes in the Internal Revenue Code.
In the event that a premium payment would exceed these limits, we reserve the
right to refund the excess payment to the Owner. Further, we reserve the right
to make distributions from the policy to the extent we deem it necessary to
continue to qualify this policy as life insurance under the Internal Revenue
Code.
If this policy was issued in exchange for a policy that was not a Modified
Endowment Contract (MEC), then in order for this policy to continue as a
non-MEC, the sum of premiums paid less a portion of any Withdrawals may not
exceed the 7-Pay limit as defined in the Internal Revenue Code. In the event
that a premium payment would exceed the 7-Pay limit, we reserve the right to
refund the excess payment to the Owner, unless the Owner has previously notified
us in writing that payments that cause this policy to become a MEC may be
accepted by us and applied to this policy.
Grace Period and Lapse - If the Accumulated Value less Debt and Surrender
Charges on a Monthly Payment Date is not sufficient to cover the current monthly
deduction, a grace period of 61 days will be allowed for the payment of
sufficient premium to keep your policy in force.
We will send a notice at the start of the Grace Period to you at your last known
address and to any assignee of record. The Grace Period will end 61 days after
we mail you the notice. The notice will state the due date and the amount of
premium needed to keep your policy in force. A minimum of three times the
monthly deduction due when the insuffiency occurred must be paid. Your policy
will remain in force during the Grace Period. If sufficient premium is not paid
by the end of the Grace Period, a Lapse will occur. We will send you and any
assignee of record, a written notice 30 days prior to lapse. Upon Lapse, the
policy will terminate with no value.
Reinstatement - If it has not been surrendered, this policy may be reinstated
not more than three years after the end of the Grace Period. To reinstate this
policy you must provide us with:
- - written application;
- - evidence of insurability satisfactory to us;
- - payment of sufficient premium to cover all monthly deductions that were
due and unpaid during the Grace Period; plus
- - payment of sufficient premium to keep the policy in force for three
months after the date of Reinstatement.
When this policy is reinstated, the Accumulated Value will be equal to the
Accumulated Value on the date of Lapse subject to the following. We will
allocate the Accumulated Value and your premium payment to the Variable Accounts
and Fixed Account according to your most recent premium allocation instructions.
<PAGE>
If the policy is reinstated after the first Monthly Payment Date following
Lapse, the Accumulated Value will be reduced by the amount of any Debt on the
date of Lapse and no Debt will exist on the date of Reinstatement. If the policy
is reinstated on the first Monthly Payment Date following Lapse, any Debt on the
date of Lapse will also be reinstated, with the corresponding portion of the
Accumulated Value allocated to the Loan Account as described in the Policy Loans
provision.
The effective date of the reinstated policy will be the first monthly payment
date on or following the date we approve your Reinstatement application.
P9750-J Page 6
<PAGE>
Policy Benefits
The Death Benefit for this policy will be the greater of:
- - the Face Amount, or
- - the Guideline Minimum Death Benefit.
The Guideline Minimum Death Benefit at any time is the Accumulated Value
multiplied by the Death Benefit Percentage shown below:
<TABLE>
<CAPTION>
Death Benefit Death Benefit
Age Percentage Age Percentage
<S> <C> <C> <C>
0-40 250% 60 130%
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 114
52 171 72 113
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 >93 101
</TABLE>
Age is the Age of the younger insured at issue, increased by the number of
complete policy years elapsed.
This policy is intended to qualify as a life insurance contract under the
Internal Revenue Code for federal tax purposes, and the Death Benefit under this
policy is intended to qualify for the income tax exclusion under the Internal
Revenue Code. To that end, the provisions of this policy, including any other
rider, benefit, or endorsement, are to be interpreted to ensure such tax
qualification, notwithstanding any other provisions to the contrary.
If at any time the premiums paid under this policy exceed the amount allowable
for such tax qualification, such excess amount shall be removed from the policy
as of the date of its payment, and any appropriate adjustment in the Death
Benefit shall be made as of such date. This excess amount shall be refunded to
the Owner no later than 60 days after the end of the applicable policy year. We
shall adjust the excess amount refunded for interest from the date of its
payment or for changes in Accumulated Value attributable to the excess amount.
If the excess amount is not refunded by then, the Death Benefit under this
policy shall be increased retroactively and prospectively so that at no time is
this Death Benefit ever less than the amount needed to ensure such tax
qualification. To the extent that the Death Benefit as of any time is increased
by this provision, appropriate adjustments shall be made retroactively in any
Cost of Insurance Charge or supplemental benefits as of the time that are
consistent with such an increase.
If this policy was issued in exchange for a policy that is not a MEC, then
unless specified otherwise by you in writing, it is intended that this policy
will not be treated as a MEC under the Internal Revenue Code. To that end,
<PAGE>
the provisions of this policy, including any other rider, benefit or
endorsement, are to be interpreted to prevent the policy from being subject to
such treatment, notwithstanding any other provisions to the contrary.
If this policy was issued in exchange for a policy that is not a MEC, then if at
any time the premiums or other amounts paid under the policy exceed the limit
for avoiding such MEC treatment, unless otherwise specified in writing by you
that such MEC treatment is acceptable, such excess amount shall be removed from
the policy as of the date of its payment, and any appropriate adjustment in the
policy's Death Benefit shall be made as of such date. This excess amount shall
be refunded to the Owner no later than 60 days after the end of the applicable
pollicy year. We shall adjust the excess amount refunded for interest from the
date of its payment or for changes in Accumulated Value attributable to the
excess amount. If the excess amount is not refunded by then, the Death Benefit
under the policy shall be increased retroactively and prospectively to the
minimum amount necessary (e.g., to the end of any test period) so that at no
time is this Death Benefit ever less than the amount needed to avoid such MEC
treatment. To the extent that the Death Benefit as of any time is increased by
this provision, appropriate adjustments shall be made, retroactively or
otherwise, in any Insurance Charge or supplemental benefits as of that time that
are consistent with such an increase.
PM reserves the right to reduce the Guideline Minimum Death Benefit by requiring
Withdrawals be made in order to maintain the net amount at risk at a level that
will not exceed three times the Death Benefit on the Policy Date. The net amount
at risk is the difference between the Death Benefit and the Accumulated Value.
PM reserves the right to increase the Death Benefit if required for this policy
to continue to qualify this policy as life insurance under the Internal Revenue
Code.
P9750-J Page 7
<PAGE>
Death Benefit Proceeds - The actual amount payable to the Beneficiary if the
insured dies while your policy is in force is called the Death Benefit Proceeds.
The Death Benefit proceeds are equal to the Death Benefit provided by your
policy, as of the date of death, less any Debt and less any due and unpaid
monthly deductions occurring during a Grace Period.
We will pay the Death Benefit Proceeds to the Beneficiary after we receive, at
our Home Office, proof of both insureds' deaths satisfactory to us and such
other information as we may reasonably require. The actual Death Benefit
Proceeds paid are subject to the conditions and adjustments defined in other
policy provisions, such as General Provisions, Withdrawals and Policy Loans.
We will pay interest on Death Benefit Proceeds from the date of the Survivor's
death to the date of payment at a rate not less than 3%, or if higher, the
interest rate required by the state in which the policy is issued.
Accumulated Value
Accumulated Value - The Accumulated Value on any date is the sum of your
policy's Accumulated Value in the Fixed and Variable Accounts, plus the amount
set aside in the Loan Account to secure any Debt and any interest credited
thereon.
The amount set aside to secure Debt in the Loan Account on each policy
anniversary is equal to the amount of Debt. During each policy year, the amount
in the Loan Account on any date is:
- - the amount in the Loan Account on the prior anniversary increased by
interest;
- - plus any loan taken since the prior anniversary increased by interest;
and
- - minus any loan amount repaid since the prior anniversary increased by
interest.
Fixed Account - The Accumulated Value in the Fixed Account on any date is:
- - the Accumulated Value in the Fixed Account on the prior Monthly Payment
Date increased by interest;
- - plus the amount of any additional premiums received and allocated to
the Fixed Account since the last Monthly Payment Date, increased by interest;
- - plus the amount of any transfer to the Fixed Account, including
transfers from the Loan Account, since the last Monthly Payment Date, increased
by interest;
- - minus the amount of any Withdrawals, or transfers from the Fixed
Account, including transfers to the Loan Account, since the last Monthly Payment
Date, increased by interest; and
- - minus the monthly deduction and other deductions due, if any, and
assessed against the Fixed Account increased by interest.
Variable Accounts - Assets in the Variable Accounts are divided into
Accumulation units, which are a measure of value used for bookkeeping purposes.
We credit your policy with Accumulation units in each Variable Account as a
result of:
- - the amount of any premiums received and allocated to the Variable
Account; and
- - transfers of Accumulated Value to the Variable Account, including
transfers from the Loan Account.
We debit Accumulation units in each Variable Account as a result of:
<PAGE>
- - transfers from the Variable Account, including transfers to the Loan
Account;
- - surrenders and Withdrawals from the Variable Account; and
- - the monthly deduction and other deductions due, if any, and assessed
against the Variable Account.
To determine the number of Accumulation units debited or credited in connection
with a transaction, we divide the dollar amount of the transaction by the unit
value of the affected Variable Account.
The unit value of each Variable Account is determined on each Valuation Date.
The number of units in each Variable Account will not change because of
subsequent changes in unit value.
To calculate the unit value of a Variable Account on any Valuation Date, we
adjust the unit value from the previous Valuation Date, for:
- - the investment performance of the Variable Account;
- - any dividends or distributions paid to the Variable Account;
- - charges, if any, that may be assessed by us for income taxes
attributable to the operation of the Variable Account.
A Valuation Date is each day required by applicable law and currently includes
each day that both the New York Stock Exchange is open for trading and Pacific
Mutual's administrative offices are open. If any transaction or event is
scheduled to occur on a day that is not a Valuation Date, such transaction or
event will be deemed to occur on the next following Valuation Date unless
otherwise specified.
P9750-J Page 8
<PAGE>
To determine your Accumulated Value in each Variable Account, we multiply the
number of units in the Variable Account by the unit value of such Account.
Interest - We will credit interest on the Accumulated Value in the Fixed Account
at a rate not less than .24663% per month, compounded monthly. This is
equivalent to an annual effective rate of 3%. At our discretion, we may credit a
higher rate of interest from time to time. We will credit interest on the amount
in the Loan Account at a rate of .36748% per month, compounded monthly. This is
equivalent to an annual effective rate of 4.5%.
On each policy anniversary, any interest earned and held in the Loan Account
will be transferred to the Fixed and Variable Accounts in accordance with your
most recent premium allocation instructions.
Transfers - On and after the Free Look Transfer Date and while your policy is in
force, you may, upon written request, transfer your Accumulated Value, or a part
of it, among the Fixed and Variable Accounts subject to the following.
No transfer may be made if the policy is in a Grace Period and the required
premium has not been paid.
Only one transfer from the Fixed Account may be made in any twelve month period.
Transfers from the Fixed Account will be limited to the greater of $5,000 and
25% of the Accumulated Value in the Fixed Account.
Transfers from the Variable Accounts to the Fixed Account may be made only
during the policy month preceding each policy anniversary.
No charges are currently imposed upon a Transfer. We reserve the right at a
future date to limit the size of Transfers and remaining balances, to assess
transfer charges and to limit the number and frequency of Transfers.
Policy Charges
Monthly Deduction - A Monthly Deduction for a policy month is due on each
Monthly Payment Date and is equal to the sum of the following items:
- - the monthly Cost of Insurance Charge;
- - the Mortality and Expense Risk Charge;
- - the Administrative Charge;
- - the Tax Charge, if any, and
- - rider charges, if any.
Unless you request otherwise in writing, the Monthly Deduction will be charged
proportionately to the Accumulated Value in each Variable Account and the Fixed
Account on the Monthly Payment Date.
Cost of Insurance Charge - Beginning on the Policy Date and monthly thereafter,
there will be a Cost of Insurance Charge against the Accumulated Value.
The Cost of Insurance Charge Rates are based on the insureds' Age, sex, risk
classification, and the policy duration. The current monthly Cost of Insurance
Rates will be determined by us. The rates will never exceed the Guaranteed
Maximum Monthly Cost of Insurance Rates shown on the Policy Specifications
pages.
The Guaranteed Maximum Monthly Cost of Insurance Charge for each policy month is
determined by multiplying the Guaranteed Maximum Monthly Cost of Insurance Rate
by the net amount at risk. Net amount at risk is the
<PAGE>
difference between the Death Benefit and the Accumulated Value, each calculated
at the beginning of the policy month. Any change in the Cost of Insurance Charge
Rates will apply uniformly to all members of the same class.
Mortality and Expense Risk Charge - Beginning on the Policy Date and monthly
thereafter, there will be a charge equal to .00075 (.90% annually) in the first
10 policy years and .000583333 (.70% annually) thereafter, multiplied by the
Accumulated Value of the Variable and Fixed Accounts at the beginning of the
policy month. The Mortality and Expense Risk Charge is to compensate us for the
risk we assume that mortality and expenses will be greater than estimated.
Administrative Charge - Beginning on the Policy Date and monthly thereafter,
there will be a charge equal to .00025 (.30% annually) in all policy years,
multiplied by the Accumulated Value of the Variable and Fixed Accounts at the
beginning of the policy month.
If the Accumulated Value is less than $50,000 on a policy anniversary, we will
charge an additional $40.00 fee on that Monthly Payment Date.
Tax Charge - Beginning on the Policy Date and monthly thereafter, there will be
a charge equal to .000333333 (.40% annually) in the first 10 policy years,
multiplied by the Accumulated Value at the beginning of the policy month. There
will be no charge after the tenth policy year.
Surrender Charge - A Surrender Charge may be deducted proportionately from the
Accumulated Value of the Variable and Fixed Accounts upon surrender of the
policy, and upon a Withdrawal from the policy's Net Cash Surrender Value. The
Surrender Charge is needed to help pay for underwriting and policy issue costs.
The Surrender Charge rates are shown on the Policy
P9750-J Page 9
<PAGE>
Specifications pages. These rates are applied only to the portion of the
reduction in Accumulated Value that is deemed to be a return of initial premium.
For the purpose of determining Surrender Charges only, a reduction in
Accumulated Value will be deemed to be a return of initial premium first, a
return of additional Premiums next, and a distribution from cumulative policy
earnings last. However, a Preferred Withdrawal is deemed to be a distribution
from cumulative policy earnings and incurs no Surrender Charge. In no event will
the aggregate amount to which Surrender Charges are applied exceed the initial
premium. There are no Surrender Charges after the ninth policy year.
Other Deductions - We reserve the right to make charges for federal, state or
local taxes against the Accumulated Value that may attributable to the Variable
Accounts or to our operations with respect to this policy if we incur any such
taxes.
Surrender and Withdrawal of Values
Surrender - Upon written request while either insured is living you may
surrender this policy for its Net Cash Surrender Value. The policy will
terminate on the date the request is received at our Home Office.
Net Cash Surrender Value - The Net Cash Surrender Value is the Cash Surrender
Value less any Debt.
Cash Surrender Value - The Cash Surrender Value is the Accumulated Value less
any Surrender Charge.
Withdrawals - Withdrawals of the Net Cash Surrender Value may be taken as
follows:
Upon written request on or after the first policy anniversary while either
insured is living, you may withdraw a portion of the Net Cash Surrender Value of
this policy as a Withdrawal. A Withdrawal may cause a decrease in the Face
Amount. The Face Amount will be reduced in direct proportion to the reduction in
Accumulated Value. However, the Face Amount will not be reduced by more than the
excess, if any, of the original Face Amount over the Guideline Minimum Death
Benefit after the Withdrawal.
The Face Amount decrease will be subject to the Guideline Premium Limitation as
defined in the Internal Revenue Code. Any such decrease will be limited so that
no additional distribution of Accumulated Value is required to comply with the
Guideline Premium Limitation.
Withdrawals will be subject to the following conditions: The amount of each
Withdrawal must be at least $1,000 and the Net Cash Surrender Value remaining
after each Withdrawal must be at least $10,000. Also, if there is any Debt at
the time of each withdrawal, the amount of the Withdrawal is limited to the
excess, if any, of the Cash Surrender Value immediately prior to the Withdrawal
over the result of the Debt divided by 90%. Withdrawals may be subject to
Surrender Charges. The Surrender Charge on a Withdrawal is the Surrender Charge
rate shown on the Policy Specifications pages applied to the portion of the
reduction in Accumulated Value that is deemed to be a return of initial premium.
A Preferred Withdrawal is permitted once per policy year. There is no Surrender
Charge on a Preferred Withdrawal. The amount of each Preferred Withdrawal is
limited to the lesser of the cumulative policy earnings and 10% of the initial
premium amount as of the date of the Withdrawal. Cumulative policy earnings is
the Accumulated Value, less premiums paid, plus all prior reductions in
Accumulated Value deemed to be returns of initial or additional premiums for the
purpose of Surrender Charges. Any amount withdrawn in excess of the Preferred
Withdrawal amount will be subject to Surrender Charges.
Withdrawals will not be permitted if the Face Amount reduction would cause the
policy to fail to qualify as life insurance for federal tax purposes. The amount
of each Withdrawal will be allocated proportionately to the Accumulated Value in
the Fixed and Variable Accounts unless otherwise requested by you. If the
Survivor dies after the request for a Withdrawal is sent to us and prior to the
Withdrawal being effected, the amount of the
<PAGE>
Withdrawal will be deducted from the Death Benefit Proceeds, which will be
determined without taking the Withdrawal into account.
If this policy is issued in exchange for a life insurance policy that is not a
MEC, a request for a Withdrawal will not be processed if the Withdrawal would
cause the policy to be treated as a MEC, unless you specify otherwise in
writing.
Income Benefits
Income Benefits - Surrender or Withdrawal benefits may be used to buy a lifetime
monthly income. Death Benefits may be used to buy a monthly income for the
lifetime of the Beneficiary. The monthly income will be payable for at least ten
years. The purchase rates for the monthly income will be set from time to time.
P9750-J Page 10
<PAGE>
However, the income bought by each $1,000 will always be at least as large as
that shown below.
Age Monthly Income Age Monthly Income
30 $3.12 54 $4.15
32 3.17 56 4.30
34 3.23 58 4.47
36 3.29 60 4.66
38 3.35 62 4.87
40 3.42 64 5.10
42 3.50 66 5.36
44 3.58 68 5.65
46 3.67 70 5.97
48 3.78 72 6.32
50 3.89 74 6.69
52 4.01 75 6.89
Monthly income amounts for ages not shown are halfway between the two amounts
for the nearest two ages which are shown.
Guaranteed amounts for ages under 30 are the same as those for age 30;
guaranteed amounts for ages over 75 are the same as those for age 75. Amounts
shown are based on the 1983 Table a with interest at 3%.
This benefit is not available if the income would be less than $100 a month. We
may require evidence of survival for incomes which last more than ten years.
Other Options - Surrender, Withdrawal or Death Benefits may be applied under any
other payment plans that we make available at that time.
Policy Loans
Policy Loans - You may obtain loans by written request while this policy is in
force on the sole security of the amount in the Loan Account for this policy.
Amount Available - The amount available for a loan is equal to 50% of the
Accumulated Value less existing Debt in the first policy year, and 90% of the
Accumulated Value in the Variable Accounts plus 100% of the Accumulated Value in
the Fixed Account less Debt in any policy year thereafter, less any Surrender
Charge that would be imposed if the policy were surrendered on the date the loan
is taken. The amount of a loan must be at least $500.
Preferred Loans - If the Accumulated Value exceeds the total of all Premiums
paid since issue, a Preferred Loan is available. The amount available for
Preferred Loans is the amount by which the Accumulated Value exceeds total
Premiums paid. The amount of loan that qualifies as a Preferred Loan is
determined on the date of the loan, and on each policy anniversary, thereafter.
On a policy anniversary, the amount of Debt classified as Preferred Loans may
increase or decrease.
Preferred Loans or Debt are charged interest as described below. Debt may be
allocated or reallocated between Preferred and non-Preferred on each policy
anniversary.
Loan Interest - Interest will accrue daily and is payable at the end of the
policy year. Annual loan interest rates are 6% in the first ten policy years and
5% thereafter on non-Preferred Loans. Preferred Loans accrue daily at 5.25% in
the first ten policy years and 4.75% thereafter.
Interest not paid when due will be added to the loan principal.
Loan Account - When a loan is taken, an amount equal to the loan is transferred
out of the Accumulated Value in the Fixed and Variable Accounts into the Loan
Account to secure the loan. Unless you request otherwise, loan
<PAGE>
amounts will be transferred from the Variable Accounts and the Fixed Account on
a proportionate basis, up to the amount available. We will credit interest
monthly on amounts in the Loan Account at a rate equivalent to an annual
effective rate of 4.50%.
On each policy anniversary, if the amount in the Loan Account exceeds Debt, the
excess will be transferred from the Loan Account to the Fixed and Variable
Accounts according to your most recent instructions. If Debt exceeds the amount
in the Loan Account, an amount equal to such excess will be transferred from the
Fixed and Variable Accounts on a proportionate basis to the Loan Account.
Repayment - Loans may be repaid at any time prior to lapse of this policy. An
amount equal to the portion of any loan repaid, but not more than the amount in
the Loan Account, will be transferred from the Loan Account to the Fixed and
Variable Accounts according to your most recent instructions. Loan repayments
will be deemed repayment of the non-Preferred Loan amounts first.
Any payment intended as a loan payment, rather than an additional premium
payment, must be identified as such.
P9750-J Page 11
<PAGE>
General Provisions
Entire Contract - This policy is a contract between the Owner and PM.
This policy, the attached copy of the initial application, any applications for
Reinstatement, all subsequent applications to change the policy, any
endorsements, any riders, and any additional policy information sections added
to this policy are the Entire Contract.
Only an authorized officer is permitted to change this contract or extend the
time for paying premiums.
All statements in the application shall, in the absence of fraud, be deemed
representations and not warranties. PM will not use any statement to contest
this policy or defend a claim on grounds of misrepresentation unless the
statement is in the application.
Incontestability - Except for failure to pay premiums, this policy cannot be
contested with respect to a given insured after the policy has been in force
during that insured's lifetime for two years from the Policy Date.
If this policy has been reinstated, it cannot be contested with respect to a
given insured after it has been in force during that insured's lifetime for two
years from the date of Reinstatement. Except for failure to pay Premiums, in no
event will a contest be made after Reinstatement unless there is a material
misrepresentation in the Reinstatement application.
This policy will terminate upon successful contest with respect to either
insured.
Participating - The current dividend scale is zero and it is not expected that
dividends will be paid. Any dividends that do become payable will be paid in
cash annually.
Suicide Exclusion - If either insured dies by suicide, while sane or insane,
within two years of the Policy Date and while the policy is in force, no Death
Benefit Proceeds will be paid. Instead, we will return the sum of the premiums
paid, less the sum of any Debt, any Withdrawal amounts, and any dividends paid
by us in cash.
Misstatement - If either insured's Age or sex is misstated in the application,
the Face Amount shall be adjusted as follows in order to reflect the correct Age
and sex. The adjusted Face Amount shall be (a) times (b) divided by (c), where:
(a) is the Face Amount before this adjustment;
(b) is the Guideline Single Premium at issue, using the misstated Age and/or
sex; and
(c) is the Guideline Single Premium at issue if the policy had originally been
issued at the correct Age, sex, and the original Face Amount.
The Guideline Minimum Death Benefit percentages shall be adjusted to the correct
Age and/or sex. For all policy months after the policy month in which the
misstatement is discovered, the Accumulated Value will be calculated using Cost
of Insurance Charges, rider charges, and benefit charges based on the correct
Age and sex. The Accumulated Value for the policy months through the policy
month in which the misstatement is discovered will not be recalculated.
If unisex Cost of Insurace Rates apply, no adjustment will be made for a
misstatement of sex.
Reports - A report will be mailed to you at the end of each policy quarter to
your last known address. This report will include the following information for
the policy quarter:
- - the Accumulated Value;
<PAGE>
- - the Cash Surrender Value;
- - the current Death Benefit;
- - transactions that occurred during the policy quarter;
- - existing Debt;
- - changes in the Guideline Premiums;
- - Surrender Charges; and
- - any information required by law.
In addition to the above reports, we will send you annual financial statements
for the Separate Account and annual and semiannual financial statements for the
designated investment company or companies in which the Separate Account
invests, the latter of which will include a list of the portfolio securities of
the investment company, as required by the Investment Company Act of 1940 and/or
any other reports as required by federal securities law.
Policy Illustrations - Upon request we will give you an illustration of the
future benefits under this policy based upon both guaranteed and current cost
factor assumptions. However, if you ask us to do this more than once in any
policy year, we reserve the right to charge you a fee, not to exceed $25 for
this service.
P9750-J Page 12
<PAGE>
Basis of Values - A detailed statement showing how values are determined has
been filed with the state insurance department. No value is less than the
minimums required by the Standard Nonforfeiture Law and by the law in the state
in which this policy is delivered. All guaranteed values and Guaranteed Maximum
Monthly Cost of Insurance Charges are based on the Commissioner's 1980 Standard
Ordinary Mortality Table (ALB) and interest at the rate of 3%. For policies that
are issued on a unisex basis, the 1980 CSO Mortality Table B applies.
Ownership of Assets - We have the exclusive and absolute control of our assets,
including all assets in the Separate Account.
Compliance - We reserve the right to make any change to the provisions of this
policy to comply with, or give you the benefit of, any federal or state statute,
rule, or regulation, including but not limited to requirements for life
insurance contracts under the Internal Revenue Code or any state.
We will provide you with a copy of any such change, and will notify the
insurance supervisory official of the state in which this policy is delivered.
Exchange Right - During the first 18 months from the Policy Date, you have the
right to transfer all of the Accumulated Value in the Variable Accounts to the
Fixed Account. The policy will no longer be impacted by the investment
experience of any Variable Account.
Payments
Variable Accounts - We will calculate Net Cash Surrender Value on surrender,
Withdrawals, and loan proceeds, and unless transfers are restricted, transfers
between Variable Accounts or from Variable Accounts to the Fixed Account based
on allocations made to the Variable Accounts as of the end of the Valuation Date
on or next following the day on which such instructions are received. We will
calculate Death Benefit Proceeds based on allocations made to the Variable
Accounts as of the end of the Valuation Date on or next following the day on
which the Survivor's death occurs. We will pay such amounts and will effect a
transfer from a Variable Account within seven days after we receive all the
information needed to process a payment or transfer.
However, we may postpone the calculation or payment of such a payment or
transfer of amounts based on investment performance of the Variable Accounts if:
The New York Stock Exchange is closed on other than customary weekend and
holiday closings or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission (SEC); or
An emergency exists, as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable to determine the value of the Account
assets; or
The SEC by order permits postponement for the protection of policy owners.
Fixed Account - As to amounts allocated to the Fixed Account, we may defer
payment of any Net Cash Surrender Value on surrender, Withdrawals, or loan
amounts or defer transfers from the Fixed Account for up to six months after we
receive a request for it. We will allow interest, at a rate of at least 3%
annually, on any Net Cash Surrender Value or Withdrawal benefit derived from the
Fixed Account that we defer for 30 days or more.
Separate Account Provisions
Separate Account - We established the Separate Account and maintain it under the
laws of California. The Separate Account is divided into subaccounts, called
Variable Accounts. Realized and unrealized gains and losses from the assets of
each Variable Account are credited or charged against it without regard to our
other income, gains, or losses. Assets may be put in our Separate Account to
support this policy and other variable life insurance policies. Assets may be
put in our Separate Account for other purposes, but not to support contracts or
policies other than variable life contracts or policies.
<PAGE>
The assets of our Separate Account are our property. The portion of its assets
equal to the reserves and other policy liabilities with respect to our Separate
Account will not be chargeable with liabilities arising out of any other
business we conduct. We may transfer assets of a Variable Account in excess of
the reserves and other liabilities with respect to that account to another
Variable Account or to our general account. All obligations arising under the
policy are general corporate obligations of Pacific Mutual. We do not hold
ourselves out to be trustees of the Separate Account assets.
P9750-J Page 13
<PAGE>
Variable Accounts - Each Variable Account may invest its assets in a separate
class of shares of a designated investment company or companies. The Variable
Accounts of our Separate Account that were available for your initial
allocations, are shown on the Policy Specifications pages. The allocations that
you initially choose are shown on the copy of the application attached to this
policy. From time to time we may make other Variable Accounts available to you.
We will provide you with written notice of all material details including
investment objectives and all charges.
We reserve the right, subject to compliance with the law then in effect, to:
- - change or add designated investment companies;
- - add, remove or combine Variable Accounts;
- - add, delete or make substitutions for the securities that are held or
purchased by the Separate Account or any Variable Account;
- - register or deregister any Variable Account under the Investment
Company Act of 1940;
- - to change the classification of any Variable Account;
- - operate any Variable Account as a managed investment company or as a
unit investment trust;
- - combine the assets of any Variable Account with other separate accounts
or subaccounts thereof of PM or an affiliate thereof;
- - transfer the assets of any Variable Account to other separate accounts
or subaccounts thereof of PM or and affiliate thereof;
- - run any Variable Account under the direction of a committee, board,
or other group;
- - restrict or eliminate any voting rights of policy owners with respect
to any Variable Account, or other persons who have voting rights as to any
Variable Account. Also, unless required by law or regulation, an investment
policy may not be changed without our consent;
- - change the allocations permitted under the policy;
- - terminate and liquidate any Variable Account; and
- - comply with law.
If any of these changes result in a material change in the underlying
investments of a Variable Account of our Separate Account, we will notify you of
such change.
We will not change the investment policy of the Separate Account without
following the filing and other procedures of the Insurance Commissioner in the
State of California and without following the filing and other procedures
established by insurance regulators of the state of issue.
P9750-J Page 14
<PAGE>
Index
Subject Page
Accumulated Value..................................................... 8
Administrative Charge................................................. 9
Age................................................................... 5
Assignment............................................................ 5
Basis of Values....................................................... 13
Beneficiary........................................................... 5
Cash Surrender Value.................................................. 10
Compliance............................................................ 13
Cost of Insurance Charge.............................................. 3,9
Definitions........................................................... 5
Dividends............................................................. 12
Face Amount........................................................... 3
General Provisions.................................................... 12
Grace Period and Lapse................................................ 6
Income Benefits....................................................... 10,11
Incontestability...................................................... 12
Interest.............................................................. 9
Loan Interest......................................................... 11
Misstatement.......................................................... 12
Mortality and Expense Risk Charge..................................... 9
Other Deductions...................................................... 10
Owner................................................................. 3,5
Payments.............................................................. 13
Policy Benefits....................................................... 7
Policy Charges........................................................ 9
Policy Date........................................................... 3,5
Policy Illustrations.................................................. 12
Policy Loans.......................................................... 11
Preferred Loans....................................................... 11
Premium Limitation.................................................... 6
Premiums.............................................................. 5
Reinstatement......................................................... 6
Reports............................................................... 12
Suicide Exclusion..................................................... 12
Surrencer Charge...................................................... 9,10
Tax Charge............................................................ 9
Transfers............................................................. 9
Variable Accounts..................................................... 8,14
Withdrawals........................................................... 10
<PAGE>
PACIFIC MUTUAL
LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 91660
================================================================================
Form 97-50-J
<PAGE>
EXHIBIT 99.1(5)(c)
Accelerated Living Benefit Rider
<PAGE>
ACCELERATED LIVING BENEFIT RIDER
THIS RIDER IS ATTACHED TO AND MADE PART OF YOUR POLICY.
ISSUE DATE: _________________________________
POLICY NUMBER: ____________________________
AN ACCELERATED BENEFIT RECEIVED UNDER THIS RIDER MAY BE TAXABLE. YOU SHOULD
CONSULT YOUR PERSONAL TAX ADVISOR PRIOR TO REQUESTING THIS BENEFIT.
ANY BENEFIT RECEIVED UNDER THIS RIDER MAY IMPACT YOUR ELIGIBILITY FOR MEDICAID
OR OTHER GOVERNMENT BENEFITS.
This rider is not meant to cause involuntary access to proceeds ultimately
payable to the beneficiary. Therefore, this benefit is not available:
a) if either the owner or insured is required by law to use this benefit to meet
the claims of creditors, whether in bankruptcy or otherwise; or
b) if either the owner or insured is required by a government agency to use this
benefit in order to apply for, obtain or otherwise keep a government benefit or
entitlement.
ACCELERATED BENEFIT
The owner may elect to receive, while the insured is living, a portion of the
policy's proceeds. We will pay an Accelerated Benefit if an insured has been
diagnosed with a non-correctable terminal illness and has a life expectancy of 6
months or less.
DEFINITIONS
ACCELERATED BENEFIT PAYMENT is the actual dollar amount of benefit you will
receive under this rider.
REQUESTED PORTION is the amount of the policy proceeds the owner requests. The
Requested Portion divided by the Eligible Coverage will be called the Requested
Percentage. The Requested Portion cannot exceed the lesser of a) 50% of the
Eligible Coverage, or b) $250,000 for all policies in force with us.
ELIGIBLE COVERAGE is the portion of the policy proceeds which will qualify for
determining the Accelerated Benefit under this rider.
The Eligible Coverage includes:
- the base policy death benefit;
- any paid-up additions; and
- any term rider, term policy, or term coverage on the primary insured that
has at least two years of coverage remaining. For coverage amounts that
vary by year, the lowest coverage amount during the remaining two year
period will be used.
- Survivor Life policies will be eligible for acceleration only after the
death of the first insured and the surviving insured has been diagnosed as
terminally ill. Any term rider, term policy or term coverage on the
surviving insured that has at least two years of coverage remaining, will
be eligible for acceleration. For coverage amounts that vary by year, the
lowest coverage amount during the remaining two year period will be used.
R92-ABR 1
<PAGE>
Eligible Coverage does not include:
- any insurance provided under the policy on the life of someone other than
the insured;
- the face amount of any scheduled increase(s) in insurance as provided by an
additional benefit rider during the 12 month period after the date the
accelerated payment is requested;
- the amount of any accidental death benefit.
The minimum Accelerated Benefit Payment amount is $500. The Accelerated Benefit
will be paid either in a lump sum or any other payment plan available at the
time of payment. WE WILL PAY THE ACCELERATED BENEFIT AMOUNT ONLY ONCE PER
INSURED. If a settlement option is selected and the insured dies before all
payments are made, the remaining amount will be paid to the beneficiary.
ACCELERATED BENEFIT PAYMENT
The Accelerated Benefit Payment will be determined as of the date we approve
your written request. Your Accelerated Benefit Payment will equal the Requested
Portion less the following adjustments:
1. An actuarial discount will apply to the Requested Portion. This
discount reflects the early payment of the Requested Portion of your policy.
The discount will be based on an annual interest rate declared by us and
which is in effect as of the date we approve your written request.
2. If there is a policy loan outstanding on your policy as of the date we
approve your written request, we will reduce the Requested Portion in order
to repay a portion of the outstanding policy loan equal to the Requested
Percentage times the outstanding loan.
3. A reduction to the Requested Portion will be applied to any premiums
due and unpaid if the policy has entered the Grace Period at the time we
approve your request.
4. An administrative charge not to exceed $150.
We will refund the amounts discussed in 1. and 4. above should the death of the
Insured occur within 30 days of the Accelerated Benefit Payment.
IMPACT ON POLICY
After an Accelerated Benefit Payment is made, the policy and all riders will
remain in force subject to the following adjustments. The policy death benefit,
any cash value, any paid-up additions, Accumulated Value, if any, and any term
insurance eligible to be accelerated under this rider, and any required premium
payments will be reduced by the Requested Percentage. Any outstanding policy
loan will be reduced as specified in the Accelerated Benefit Payment Section.
Any adjustment in Accumulated Value will be allocated to the Fixed Account and
Variable Accounts on a prorata basis. Cost of Insurance Charges will be
adjusted to reflect the reduction in the death benefit.
ELIGIBILITY
The following conditions must be met prior to any Accelerated Benefit Payment:
- The policy must be in force on the date the Accelerated Benefit Payment is
approved. If you have a term insurance policy or your policy is on Extended
Term, a minimum period of two years of coverage must be remaining in order
to qualify for an Accelerated Benefit Payment.
- We must receive written proof satisfactory to us that the insured's or for
Survivor Life policies the surviving insured's life-expectancy is 6 months
or less from the date of the written request. Proof will include the
certification by a licensed physician, who is not yourself or a member of
your family. Such proof should include documentation supported by clinical,
radiological or laboratory evidence of the condition. We reserve the right
to obtain a second medical opinion from a physician of our choice at our
expense.
R92-ABR 2
<PAGE>
- Owner or legal guardian must apply in writing for this benefit on a form
supplied by us.
- Written consent from any irrevocable beneficiary is required in order to
apply for accelerated benefits.
- Written consent from any assignee must be obtained.
INCONTESTABILITY
This rider is subject to the Incontestability provision of the base policy to
which it is attached.
EFFECTIVE DATE
This rider is effective on the issue date specified.
GENERAL PROVISIONS
There will be an administrative charge, not to exceed $150, which will be
deducted from the Accelerated Benefit.
This rider will terminate:
- on your written request;
- on lapse or termination of the policy; or
- when an Accelerated Benefit is paid under this rider.
Pacific Mutual Life Insurance Company
Chairman and Chief Executive Officer Secretary
R92-ABR 3
<PAGE>
EXHIBIT 99.1(6)(a)
Pacific Mutual's Articles of Incorporation
<PAGE>
ARTICLES OF INCORPORATION
of
PACIFIC MUTUAL LIFE INSURANCE COMPANY
ONE: The name of this corporation is
PACIFIC MUTUAL LIFE INSURANCE COMPANY.
TWO: The purposes for which this corporation is formed are:
(a) To transact the business of life insurance, including insurance upon the
lives of persons or appertaining thereto, and the granting, purchasing and/or
disposing of annuities; to transact the business of disability insurance,
including insurance appertaining to injury, disablement or death resulting to
the insured from accidents, and appertaining to disablements resulting to the
insured from sickness.
(b) To issue its policies and contracts of insurance upon a legal reserve basis,
including, but not limited to, participating insurance policies and contracts.
(c) To purchase, take in exchange, or by gift or otherwise, hold, own, maintain,
work, develop, subdivide, improve, sell, convey, encumber by mortgage, deed of
trust or otherwise, lease or otherwise acquire and dispose of, real and/or
personal property and any interest or right therein as provided by law; to
acquire, hold, erect, remodel, repair, operate, maintain, lease and sell
buildings of any and every kind and description as provided by law.
(d) To lend or borrow money and incur indebtedness as provided by law, to issue
bonds, debentures, coupons, notes and other negotiable or non-negotiable
instruments and/or securities, and to secure the same by mortgage, pledge, deed
of trust or otherwise as provided by law.
(e) To acquire the capital stock of other corporations, or any other property,
rights or franchise as provided by law; to hold, purchase or otherwise acquire,
sell, assign, transfer, mortgage, pledge, hypothecate or otherwise dispose of
shares of the capital sock of other evidences of indebtedness created by any
other corporation, or any other property rights or franchises as provided by
law; to aid in any manner any corporation whose stock, bonds, or other
obligations are held or are guaranteed in any manner by the corporation hereby
created, and to do any other acts or things for the preservation, protection,
improvement or enhancement of the value of any such stock, bonds or other
obligations as provided by law; and while the owner of any stock of other
corporations to exercise all of the rights and privileges of such ownership,
including the right to vote thereon, to the same extent as a natural person
might or could do as provided by law.
(f) To acquire all or any part of the assets of any other corporation authorized
to transact an insurance
<PAGE>
business, either from such corporation directly or from its conservator,
liquidator or receiver, and in connection with such acquisition to reinsure or
assume any or all of the obligations of such corporation to its policyholders or
other creditors and to execute such agreements with, or in favor of such
corporation, its conservator, liquidator or receiver, or its policyholders,
creditors or stockholders, as may be approved by the board of directors of this
corporation.
(g) Generally to carry on any other business necessarily or impliedly incidental
to or in any way connected with the foregoing purposes, or any of them; to have
and exercise all of the powers conferred by the laws of the State of California
upon corporations; to do any or all of the things hereinbefore set forth, either
as principal or as agent, and to the same extent as natural persons might or
could do; to enter into, make, perform and carry out contracts of every sort and
kind with any person, firm, association or corporation, private, public or
municipal, or body politic, or with the Government of the United States, or any
state or territory thereof, or any foreign government or municipal corporation
or body politic; to exercise all or any of its said powers and own and hold
property and to transact business in the State of California and elsewhere
within and without the United States; and, for the purpose of attaining or
furthering any of its objects, to do any and all other acts and things, and to
exercise all or any other powers, which a natural person could do or exercise,
which now or hereafter may be authorized by law.
(h) To carry on any other business or businesses not prohibited to domestic life
insurance companies, either as principal, partner, or agent, which this
corporation deems proper or convenient whether in connection with any of the
foregoing purposes or otherwise, or which may be calculated directly or
indirectly to promote the interest of this corporation or to enhance the value
of its property or business.
The foregoing clauses contained in this statement of purposes shall be construed
as purposes, objects and powers, and the statement contained in any clause shall
not be limited or restricted in any way by reference to or inference from the
terms of any other clause. Each such object, purpose and power shall be
regarded as an independent object, purpose or power, and shall be in furtherance
and not in limitation of each and/or every other object, purpose and power.
THREE: The county in the State of California where the principal office for the
transaction of the business of this corporation is to be located is Orange
County.
FOUR: This corporation shall be a nonstock life and disability insurance
corporation, conducted for the benefit of its members who shall be the
policyholders of the Participating and Non-Participating Life classes.
FIVE: (There is no article five).
SIX: (a) The number of the directors of this corporation shall be fifteen (15);
(b) The names and addresses of the persons who are appointed to act as the first
directors of this corporation are:
<PAGE>
Name Address
HARRY J. BAUER Edison Building, Los Angeles, CA
ASA V. CALL Pacific Mutual Building, Los Angeles, CA
ANDREW M. CHAFFEY California Bank Building, Los Angeles, CA
H. S. DUDLEY 19433 Roosevelt Highway, Los Angeles, CA
CAREY GROETEN 1472 Beaudry Blvd., Glendale, CA
GEORGE GUND The Riverside, Reno, Nevada
H. W. O'MELVENY 433 South Spring St., Los Angeles, CA
T. RUSSELL HARRIMAN 537 South Euclid Ave., Pasadena, CA
ALFRED G. HANN Pacific Mutual Building, Los Angeles, CA
A. N. KEMP Pacific Mutual Building, Los Angeles, CA
H. S. MacKAY, Jr. 458 South Spring St., Los Angeles, CA
D. C. McEWEN Pacific Mutual Building, Los Angeles, CA
HENRY S. McKEE 650 South Spring Street, Los Angeles, CA
LAWRENCE MORGAN 537 Las Palmas, Los Angeles, CA
HENRY M. ROBINSON Pacific Southwest Bldg., Los Angeles, CA
SEVEN: This corporation expressly reserves the right to amend its articles of
incorporation from time to time in such manner and for such purposes as may at
the time be permitted by law.
IN WITNESS WHEREOF, for the purpose of forming this corporation under the laws
of the State of California, we, the undersigned, constituting the incorporators
of this corporation and the persons named hereinabove as the first directors
thereof, have executed these articles of incorporation this 21st day of July,
1936.
Harry J. Bauer
Asa V. Call
Andrew M. Chaffey
<PAGE>
H. S. Dudley
Carey Groeten
George Gund
H. W. O'Melveny
T. Russell Harriman
Alfred G. Hann
H. S. MacKay, Jr.
D. C. McEwen
Henry S. McKee
Lawrence Morgan
Henry M. Robinson
STATE OF CALIFORNIA, ss:
COUNTY OF LOS ANGELES
On this 21st day of July, 1936, before me, E. W. MUHSFELD, a notary public in
and for said county and state, residing therein, duly commissioned and sworn,
personally appeared HARRY J. BAUER, known to me to be the person whose name is
subscribed to the foregoing Articles of Incorporation, and acknowledged to me
that he executed the same.
WITNESS my hand and official seal.
E. W. MUHSFELD
Notary Public in and for the County of
Los Angeles, State of California. My
Commission expires June 27, 1940.
(Seal)
STATE OF CALIFORNIA, ss:
COUNTY OF LOS ANGELES
<PAGE>
On this 21st day of July, 1936, before me, E. W. MUHSFELD, a notary public in
and for said county and state, residing therein, duly commissioned and sworn,
personally appeared ANDREW M. CHAFFEY, known to me to be the person whose name
is subscribed to the foregoing Articles of Incorporation, and acknowledged to me
that he executed the same.
WITNESS my hand and official seal.
E. W. MUHSFELD
Notary Public in and for the County of
Los Angeles, State of California. My
Commission expires June 27, 1940.
(Seal)
STATE OF CALIFORNIA, ss:
COUNTY OF LOS ANGELES
On this 21st day of July, 1936, before me, E. W. MUHSFELD, a notary public in
and for said county and state, residing therein, duly commissioned and sworn,
personally appeared HENRY S. McKEE, known to me to be the person whose name is
subscribed to the foregoing Articles of Incorporation, and acknowledged to me
that he executed the same.
WITNESS my hand and official seal.
E. W. MUHSFELD
Notary Public in and for the County of
Los Angeles, State of California. My
Commission expires June 27, 1940.
(Seal)
STATE OF CALIFORNIA, ss:
COUNTY OF LOS ANGELES
On this 21st day of July, 1936, before me, E. W. MUHSFELD, a notary public in
and for said county and state, residing therein, duly commissioned and sworn,
personally appeared HENRY M. ROBINSON, known to me to be the person whose name
is subscribed to the foregoing Articles of Incorporation, and acknowledged to me
that he executed the same.
WITNESS my hand and official seal.
E. W. MUHSFELD
Notary Public in and for the County of
Los
<PAGE>
Angeles, State of California. My
Commission expires June 27, 1940.
(Seal)
STATE OF CALIFORNIA, ss:
COUNTY OF LOS ANGELES
On this 21st day of July, 1936, before me, MILTON A. TAYLOR, a notary public in
and for said county and state, residing therein, duly commissioned and sworn,
personally appeared ASA V. CALL, GEORGE GUND, H. W. O'MELVENY and H. S. MacKAY,
JR., known to me to be the persons whose names are subscribed to the foregoing
Articles of Incorporation, and acknowledged to me that they executed the same.
WITNESS my hand and official seal.
MILTON A. TAYLOR
Notary Public in and for the County of
Los Angeles, State of California.
(Seal)
STATE OF CALIFORNIA, ss:
COUNTY OF LOS ANGELES
On this 21st day of July, 1936, before me, E. W. MUHSFELD, a notary public in
and for said county and state, residing therein, duly commissioned and sworn,
personally appeared H. S. DUDLEY, CAREY GROETEN, T. RUSSELL HARRIMAN, ALFRED G.
HANN, A. N. KEMP, D. C. McEWEN and LAWRENCE MORGAN, known to me to be the
persons whose names are subscribed to the foregoing Articles of Incorporation,
and acknowledged to me that they executed the same.
WITNESS my hand and official seal.
E. W. MUHSFELD
Notary Public in and for the County of
Los Angeles, State of California. My
Commission expires June 27, 1940.
(Seal)
<PAGE>
EXHIBIT 99.1(6)(b)
BYLAWS
OF
PACIFIC MUTUAL LIFE INSURANCE COMPANY
AS AMENDED NOVEMBER 27, 1991
<PAGE>
BYLAWS
For the Regulation, Except As
Otherwise Provided by Statute
Or Its Articles of Incorporation,
of
Pacific Mutual Life Insurance Company
Article I. - OFFICES
SECTION 1. Principal Office. - The principal office for the transaction
of business of the corporation is hereby fixed and located at 700 Newport Center
Drive, City of Newport Beach, County of Orange, State of California.
SEC. 2. Other Offices. - Branch or subordinate offices may at any time
be established by the board of directors at any place or places where the
corporation is qualified to do business.
Article II. - MEETINGS OF MEMBERS
SECTION 1. - Place of Meetings. - The annual meeting of members shall be
held at 700 Newport Center Drive, Newport Beach, California. All other meetings
of members shall be held at any place within or without the State of California
designed by the board of directors pursuant to authority hereinafter granted to
said board. In the absence of any such designation, such meetings shall be held
at 700 Newport Center Drive, Newport Beach, California.
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SEC. 2. Annual Meetings. - The annual meetings of members shall be held
on the fourth Wednesday of March of each year at 9:00 a.m. of said day.
Written notice of each annual meeting may be given to each member
entitled to vote thereat either personally or by mail or other means of written
communication, charges prepaid, addressed to such member at his address
appearing on the books of the corporation or given by him to the corporation for
the purpose of notice. At the option of the corporation such notice may be
imprinted on premium notices or receipts or on both. If a member gives no
address, notice shall be deemed to have been given if sent by mail or other
means of written communication addressed to the place where the principal office
of the corporation is situated, or if published at least once in some newspaper
of general circulation in the county in which said office is located. All such
notices shall be sent to each member entitled thereto not less than seven (7)
days before each annual meeting and shall specify the place, the day and the
hour of such meeting and the general nature of the business to be transacted;
provided that, notwithstanding anything to the contrary contained in these
bylaws, notice of an annual meeting to be held at the time and place specified
in Section 11532.1 of the California Insurance Code shall be sufficiently given
if published at least once in each of four successive weeks in a newspaper of
general circulation in the county in which the principal office of the
corporation is located, and if so published no other notice of such meeting
shall be required.
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SEC. 3. Special Meetings. - Special meetings of members, for any
purpose or purposes whatsoever, may be called at any time by the chairman of the
board, the president or by the board of directors or by any two or more members
thereof or by one or more members holding not less than one-fifth of the voting
power of the corporation. Notices of special meetings shall be sent to each
member entitled thereto not less than seven (7) days before each such special
meeting and shall specify, in addition to the place, day and hour of the
meeting, the general nature of the business to be transacted.
SEC. 4. Adjourned Meetings and Notice Thereof. - Any members' meeting,
annual or special, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the members who are either present in
person or represented by proxy thereat, but in the absence of a quorum no other
business may be transacted at any such meeting.
When any members' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be necessary
to give any notice of the time and place of the adjourned meeting or of the
business to be transacted at an adjourned meeting, other than by announcement at
the meeting at which said adjournment is taken.
SEC. 5. Entry of Notice. - Whenever any member entitled to vote has
been absent from any meeting of members, whether annual or special, an entry in
the minutes to the effect that notice has been duly given shall be conclusive
and incontrovertible evidence that due
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notice of such meeting was given to such member as required by law and the
bylaws of the corporation.
SEC. 6. Voting. - At all meetings of members each member entitled to
vote, and either present in person or by proxy thereat, shall have only one vote
regardless of the number of policies or the amount of insurance that each such
member holds. Such vote may be viva voce or by ballot; provided, however, that
all elections for directors shall be by ballot upon demand made by a member at
any election and before the voting begins.
SEC. 7. Quorum. - The presence in person or by proxy of the holders of
five percent (5%) of the members entitled to vote at any meeting shall
constitute a quorum for the transaction of business. The members present at a
duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough members to
leave less than a quorum.
SEC. 8. Proxies. - Each member entitled to vote or execute consents
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such member or his duly authorized
agent and filed with the secretary of the corporation; provided that no such
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution unless the member executing it specifies therein the length of
time for which such proxy is to continue in force, which in no case shall exceed
seven (7) years from the date of its execution. Any proxy duly executed is not
revoked, and continues in full force
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and effect, until an instrument revoking it, or a duly executed proxy bearing a
later date, is filed with the secretary.
SEC. 9. Inspectors of Election. - In advance of any meeting of members,
the board of directors shall appoint one or three inspectors of election to act
at such meeting or any adjournment or adjournments thereof. The inspector or
inspectors of election shall determine the number of members present or
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, receive votes, ballots or consents, hear and
determine all challenges and questions in any way arising in connection with the
right to vote, count and tabulate all votes or consents, determine the result of
and do such acts as may be proper to conduct the election or vote with fairness
to all members. The inspector or inspectors of elections shall perform their
duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. On request of the chairman of the meeting or of
any member or his proxy, the inspector or inspectors shall make a report in
writing of any challenge or question or matter determined by them and execute a
certificate of any fact found by them. If there be three inspectors of
election, the decision, act or certificate of a majority shall be effective in
all aspects as the decision, act or certificate of all, an shall be final and
conclusive as to all matters passed upon and determined. If there be one
inspector of election, his decision, act or certificate shall be final and
conclusive as to all matters passed upon and determined. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment made by the board of directors in advance of the
convening of the meeting, or at the meeting by the person or officer acting as
chairman.
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<PAGE>
Article III. - BOARD OF DIRECTORS
SECTION 1. Powers. - Subject to limitations of the articles of
incorporation and of the bylaws, and of any statutory provisions as to action to
be authorized or approved by the members, all corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be controlled by the board of directors. Without prejudice to
such general powers, but subject to the same limitations, it is hereby expressly
declared that the directors shall have the following powers, to-wit:
First. Corporate Business. - To conduct, manage and control all the
business and affairs of the corporation, and to make such rules and regulations
therefor not inconsistent with law, the articles of incorporation or the bylaws,
as they may deem best.
Second. Select and Remove Officers, Agents and Employees. - To select
and remove all officers of the corporation, as more fully provided for in
Article V hereof, and to select and remove all agents and employees of the
corporation, and to prescribe such duties and powers for its officers, agents
and employees as may not be inconsistent with law, the articles of incorporation
or the bylaws, fix or change their salaries, compensation and emoluments, and if
the board of directors deem it necessary, require of them security for faithful
service, including surety bonds, and from time to time thereafter require of
them other and different security for faithful service, including surety bonds
in different amounts and with different
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sureties. The board of directors may delegate to the executive committee or
other committee and/or to any officer or officers its power hereunder to select
or remove officers appointed under the provisions of Section 3 of Article V and
agents or employees, and to fix or change their respective salaries,
compensation or emoluments.
Third. Appoint Committees. - To appoint an executive committee and other
committees, and to delegate, by resolution or resolutions, to such committee any
of the powers and authority of the board of directors in the management of the
business and affairs of the corporation, except the power to declare dividends
on policies of insurance and adopt, amend or repeal bylaws; to fix and
prescribe, by resolution or resolutions, the powers and duties of committees
appointed by it; and to fix, by resolution or resolutions, the quorum for the
transaction of business of committees, other than the executive committee, which
may be less than a majority, but not less than one-third of the authorized
number of committee members.
Fourth. Incur Indebtedness. - To borrow money and incur indebtedness for
the purposes of the corporation and to cause to be executed and delivered
therefor, in the corporate name, promissory notes, bonds, debentures, deeds of
trust, pledges, hypothecations, or other evidences of debt and securities
therefor.
Fifth. Participating and Non-Participating Insurance. - To determine
which agreements and policies of insurance made by the corporation shall be upon
the basis of full or partial participation in the profits or without any
participation therein.
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Sixth. Dividends. - To declare dividends or to provide other
participation in the profits in the case of policies of insurance entitled to
such dividends or participation at such times and in such amounts as in its
opinion the condition of the affairs of the corporation shall render it
advisable.
Seventh. Miscellaneous. - To designate any place within or without the
State of California for the holding of any members' meeting or meetings, other
than the annual meeting.
SEC. 2. Number of Directors.
(a) Authorized Number of Directors. - The authorized number of directors
of the corporation shall be not less than fifteen (15) nor more than eighteen
(18).
(b) Exact Number of Directors. - The exact number of directors is hereby
fixed at Sixteen (16).
SEC. 3. Term of Office and Election. - The directors shall be divided into
three classes, as nearly equal in number as possible, and the terms of office of
the respective classes shall expire at annual intervals and at the times fixed
for successive annual meetings of members. The directors in office at the time
this bylaw becomes effective shall be divided by lot into one
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<PAGE>
class of six directors and two classes of five directors each, and the terms of
office of the class composed of six directors shall expire at the time fixed for
the first annual meeting of members to be held after the annual meeting of
members in 1990 and the terms of office of the classes composed of five
directors each shall expire at the time of the second and third annual meeting
of members to be held after the annual meeting of members in 1990. Each director
thereafter elected at annual or special meetings of members shall hold office
for a term expiring at the time fixed for the third annual meeting of members to
be held after the meeting of members at which he was elected provided that if
any election would put more than six directors in the class whose terms expire
at such annual meeting, then the excess shall be chosen serially by lot and
allocated serially to the class or classes next in order whose terms expire at
the second and first annual meetings respectively and whose membership shall be
less than six to bring the membership of such class or classes up to six.
At each annual meeting of members, directors in number equal to the
number of directors whose terms expire at the time fixed for such meeting, shall
be elected, but if any such annual meeting of members is not held, or if
directors are not elected thereat, directors may be elected at any special
meeting of members held for the purpose of electing directors.
All directors shall hold office for the term for which they are elected
and until their respective successors are elected and qualified, except that
each director who attains age 72 during the term for which elected shall hold
office only until the next annual meeting of members following attainment of age
72 at which time a person may be elected as director to
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<PAGE>
complete the unexpired term of office, if any, for which the director attaining
age 72 had been elected.
SEC. 4. Resignation. - Any director may resign at any time by giving written
notice to the board of directors or to the chairman of the board or to the
secretary of the corporation. Any such resignation shall take effect at the
date of receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SEC 5. Vacancies. - Each director elected to fill a vacancy caused by the
death, resignation or removal of a director shall hold office for a term which
will complete the unexpired term of office of such deceased, resigned or removed
director. Each director elected to fill a vacancy created by an increase in the
authorized number of directors or by failure of the members to elect the full
authorized number of directors shall hold office for a term expiring at the time
fixed for the third annual meeting of members to be held after the election
which fills the vacancy provided that if any election would put more than six
directors in the class whose terms expire at such annual meeting, then the
excess shall be chosen serially by lot and allocated serially to the class or
classes next in order whose terms expire at the second and first meetings,
respectively, and whose membership shall be less than six to bring the
membership of such class or classes up to six.
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<PAGE>
SEC 6. Place of Meetings. - Regular meetings of the board of directors shall be
held at any place within or without the State of California which has been
designated from time to time by resolution of the board of directors or by
written consent of all members of the board. In the absence of such
designation, regular meetings, other than the annual meeting, shall be held at
700 Newport Center Drive, Newport Beach, California, unless not less than ten
(10) days prior to said meeting, a written notice designating another location
is mailed to each director at the address as shown upon the records of the
corporation. Special meetings of the board may be held either at a place so
designated or at 700 Newport Center Drive, Newport Beach, California.
SEC. 7 Regular Annual Meetings. - Immediately following each annual meeting of
members, the board of directors shall hold a regular annual meeting for the
purpose of organization, election of officers, and the transaction of other
business. The regular annual meeting shall be held at 700 Newport Center Drive,
Newport Beach, California. Notice of such meeting is hereby dispensed with.
SEC 8. Other Regular Meetings. - Other regular meetings of the board of
directors shall be held without call, on the fourth Wednesday of February, May,
August, October and November. All meeting shall be held at the hour of 9:00
o'clock A.M., except in the month in which the regular annual meeting of the
board of directors is held. Should any meeting day for a meeting of the board
of directors fall upon a legal holiday, then said meeting shall be
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<PAGE>
held at the same time on the next day thereafter ensuing which is not a legal
holiday. Notice of all such regular meetings of the board of directors is hereby
dispensed with.
SEC 9. Special Meetings. - Special meetings of the board of directors for any
purpose or purposes shall be called at any time by the chairman of the board, or
if he is absent or unable or refuses to act, by the president, or, if he is
absent or unable or refuses to act, by any three (3) directors.
Written notice of the time and place of special meetings shall be
delivered personally to each director or sent to each director by mail or other
form of written communication, charges prepaid, addressed to him at his address
as it is shown upon the records of the corporation, or, if it is not so shown on
such records and is not readily ascertainable, at the place in which the
meetings of the directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or delivered to the
telegraph company at least twenty-four (24) hours prior to the time of the
holding of the meeting. In case such notice is delivered as above provided, it
shall be so delivered at least twelve (12) hours prior to the time of the
holding of the meeting. Such mailing, telegraphing or delivery as above
provided shall be due, legal and personal notice to such director.
SEC. 10. Adjournment. - A quorum of the directors may adjourn any directors'
meeting to meet again at a stated day and hour; provided, however, that in the
absence of a quorum, a
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majority of the directors present at any directors' meeting, either regular or
special, may adjourn from time to time or until the time fixed for the next
regular meeting of the board.
SEC. 11. Notice of Adjournment. - Notice of the time and place of holding an
adjourned meeting need not be given to absent directors if the time and place be
fixed at the meeting adjourned.
SEC. 12. Entry of Notice. - Whenever any director has been absent from any
special meeting of the board of directors, an entry in the minutes to the effect
that notice has been duly given shall be conclusive and incontrovertible
evidence that due notice of such special meeting was given to such director as
required by law and the bylaws of the corporation.
SEC. 13. Waiver of Notice. - The transactions of any meeting of the board of
directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum be
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice of or consent to holding such meeting
or an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
SEC. 14. Quorum. - Eight directors shall be necessary to constitute a quorum
for the transaction of business, except to adjourn, as provided in Section 10 of
this article. Every act
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or decision done or made by a majority of the directors at a meeting duly held,
at which a quorum is present, shall be regarded as an act of the board of
directors, unless a greater number be required by law or by the articles of
incorporation.
SEC. 15. Fees and Compensation. - The directors shall, by resolution of the
board, determine from time to time the manner and amount of compensation payable
for their services as directors, with or without expenses of attendance at
meetings. Directors who are salaried officers of the corporation shall not
receive additional fees or compensation for their services as directors.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity as an officer, agent, employee, or
otherwise, and receiving compensation therefor.
Article IV. - EXECUTIVE COMMITTEE
SECTION 1. Powers and Duties. - The executive committee shall have and
exercise, to the extent provided in a resolution or resolutions of the board of
directors, such powers and authority of the board of directors in the management
of the business and affairs of the corporation, except the power to declare
dividends on policies of insurance or adopt, amend or repeal bylaws, as the
board of directors may delegate to it.
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SEC. 2. Number of Members. - The authorized number of members of the
executive committee shall be seven (7), in addition to ex officio members, until
changed by a resolution of the board of directors.
SEC. 3. Qualifications. - Each member of the executive committee shall
be a member of the board of directors.
SEC 4. Appointment and Term of Office. - The members of the executive
committee shall be appointed at each annual meeting of the board of directors,
but if any such annual meeting is not held or the members are not appointed
thereat, the members may be appointed at any subsequent meeting of the board of
directors. All members of the executive committee shall hold office until their
respective successors are appointed.
SEC. 5. Resignation. - Any member of the executive committee may resign
at any time by giving written notice to the board of directors or to the
chairman of the board or to the secretary of the corporation. Any such
resignation shall take effect at the date of receipt of such notice or at any
later time, specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SEC. 6. Vacancies. - Vacancies in the executive committee shall be
filled by appointment by the board of directors and each member so appointed
shall hold office until his successor is appointed.
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SEC. 7. Organization, etc. - The chairman of the executive committee
shall be as designated, the chairman of the board shall be vice chairman of the
executive committee, and the secretary of the corporation, or in his absence
such other officer or employee as the chairman of the executive committee may
designate, shall act as secretary. The executive committee shall keep a record
of its acts and proceedings and report the same from time to time to the board
of directors.
SEC. 8. Regular Meetings. - A regular meeting of the executive committee
shall be held without call or notice upon the day and at such hours and place as
the committee shall from time to time determine or at such other place as
designated by the chairman of the executive committee in a written notice to the
members thereof. Should the day so selected by the committee fall upon a legal
holiday, then the meeting shall be held at the same time on the next day which
is not a legal holiday.
SEC. 9. Special Meetings. - Special meetings of the executive committee
for any purpose or purposes shall be held at such place as shall be called by
the chairman of the executive committee, the chairman of the board, the
president, or secretary or any three (3) members of the executive committee.
Notice of each special meeting of the executive committee shall be sent by mail,
telegraph or telephone, or be delivered personally to each member of said
committee not later than twelve (12) hours before the day on which such meeting
is to be held.
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SEC. 10. Waiver of Notice. - The transactions at any meeting of the
executive committee, however called and noticed or whenever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each of the
members not present sign a written waiver of notice of or consent to holding
such meeting or an approval of the minutes thereof. All such waivers, consents,
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
SEC. 11. Quorum. - Any three (3) members of the executive committee,
either regular or ex officio, shall constitute a quorum for the transaction of
business. Every act or decision done or made by a majority of the members at a
meeting duly held, at which a quorum is present, shall be regarded as an act of
the executive committee.
SEC 12. Adjournment. - A quorum of the members may adjourn any executive
committee meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum the majority of members present at any executive
committee meeting, either regular or special, may adjourn from time to time or
until the time fixed for the next regular meeting of the executive committee.
SEC. 13. Inspection of Records. - The record or records of the acts and
proceedings of the executive committee, including its minutes, shall at all
times be open to inspection by any
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member of the board of directors or any committee or any person appointed by the
board of directors for that purpose and such inspection shall include the right
to make extracts.
SEC. 14. Fees. - Each member of the executive committee, except those
members who are salaried officers of the corporation, shall receive such fee, if
any, as shall be fixed by the board of directors for their respective attendance
at each meeting. Members of the executive committee who are salaried officers
of this corporation shall not receive additional fees or compensation for their
respective attendance at executive committee meetings.
Article V. - OFFICERS
SECTION 1. Number and Qualifications. - The officers of the corporation
shall be a chairman of the board who shall be a member of the board of
directors; a president; one or more executive vice presidents, senior vice
presidents, vice presidents, and 2nd vice presidents as the board of directors
may from time to time determine; a secretary, treasurer, general counsel,
corporate actuary, controller, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article. One person may
hold any two offices and perform the duties thereof except that of chairman and
secretary and except that of president and secretary.
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SEC. 2 Election, Term of Office. - Each officer, except such officers as
may be appointed in accordance with the provisions of Section 3 of this Article
V, shall be chosen annually by the board of directors and shall hold his office
until his successor shall have been duly chosen and shall have qualified, or
until his death, or until he shall resign, or until he shall have been removed
in the manner hereinafter provided.
SEC. 3. Other Officers, etc. - The Board of directors may appoint such
assistant vice presidents, assistant secretaries, assistant treasurers, and
other officers as the business of the corporation may require, each of whom
shall hold office for such period and have such authority and perform such
duties as are provided in these bylaws or as the board of directors may from
time to time determine. The board of directors may delegate to the executive
committee, or any officer or officers, the power to appoint any officer or
officers provided for in this Section 3 of Article V.
SEC. 4. Removal. - Any officer chosen under Section 2 of this Article V
may be removed, either with or without cause, by a two-thirds vote of the
directors present at any regular meeting of the board of directors. Any
officer, except an officer chosen by the board of directors pursuant to Section
2 of this Article V, may also be removed at any time, with or without cause, by
the executive committee or any officer or officers upon whom such powers of
removal may be conferred by the board of directors.
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SEC. 5. Resignation. - Any officer may resign at any time by giving
written notice to the board of directors or to the chairman of the board or to
the chief executive officer or to the secretary of the corporation. Any such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SEC. 6. Vacancies. - A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the bylaws for regular election or appointment to such
office.
SEC. 7. Chairman of the Board. - The chairman of the board shall be the
chief executive officer of the corporation and shall have supervision, direction
and control of the business and affairs of the corporation and shall consult
with the president and the executive vice presidents as to policies laid down or
defined by the board of directors and major policy decisions relating to the
policies laid down or defined by the board of directors and major policy
decisions relating to the conduct of the affairs of the corporation. He shall
preside at all meetings of the members of the board of directors and in the
absence or disability of the chairman of the executive committee, he shall
exercise the powers and perform the duties of the chairman of the executive
committee. He shall be an ex officio member of all committees, and shall have
such other powers and duties as may be prescribed from time to time by the board
of directors or elsewhere in these bylaws.
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SEC. 8. Vice Chairman. - The vice chairman shall also be the chief
investment officer and shall have such powers and duties as may be prescribed
from time to time by the board of directors, the chairman of the board, or
elsewhere in these bylaws. He shall be an ex officio member of all committees.
In the absence or disability of the chairman of the board, he shall exercise the
powers and perform the duties of the chairman of the board. In the absence or
disability of both the chairman of the board and vice chairman, an officer
designated by the chairman of the board shall exercise the powers and perform
the duties of the vice chairman.
SEC. 9. Executive Vice Presidents. - The executive vice presidents shall
assist the chairman of the board and the president in the exercise of their
powers and duties and shall have such other powers and perform such other duties
as may be prescribed from time to time by the chairman of the board, the
president, the board of directors, or elsewhere in these bylaws.
SEC. 10. Senior Vice President, Vice Presidents and 2nd Vice Presidents.
- - The senior vice presidents, vice presidents and 2nd vice presidents shall
assist the chairman of the board, the president and the executive vice
presidents in the exercise of their powers and duties and shall have such other
powers and perform such other duties as may be prescribed from time to time by
the chairman of the board, the president, the executive vice presidents, the
board of directors or elsewhere in these bylaws.
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SEC. 11. Secretary. - The secretary shall keep, or cause to be kept, a
book of minutes at the principal office, or such other place as the board of
directors may order, of all meetings of the directors, executive committee and
members with the time and place of holding, whether regular or special, and if
special, how authorized, the notice thereof given, the names of those present at
directors' and executive committee meetings, the number of members present or
represented at members meetings and the proceedings thereof.
The secretary shall give, or cause to be given, notice of all meetings of
the members, the board of directors and the executive committee, required by the
bylaws or bylaw to be given; and he shall keep the seal of the corporation in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the chairman of the board, the president, the executive
vice presidents, the board of directors or elsewhere in these bylaws.
SEC. 12. Treasurer. - The treasurer shall have custody of all funds,
securities and other valuables of the corporation which may have or shall come
into his hands. He shall have such powers and perform such duties as may be
prescribed by the chairman of the board, the president, the executive vice
presidents, the board of directors or elsewhere in these bylaws, and in addition
thereto shall:
(a) Deposit or cause to be deposited all funds, securities and other
valuables in the name of and to the credit of the corporation in its own or with
such depositaries as shall be designated in accordance with the provision of
Section 4, Article VI of these bylaws.
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(b) Be responsible for the due and proper disbursement of the funds
of the corporation.
(c) When necessary or proper, endorse on behalf of this corporation
for collection, checks, notes and other obligations.
(d) Make a report each month to the board of directors of such cash
receipts and disbursements as shall have occurred during the period of the
report and, in addition, shall render to the board of directors, the chairman of
the board, or the president, whenever requested, an account of all his
transactions as treasurer.
(e) Record regularly, full and accurate accounts of all monies
received and paid by him on account of the corporation.
SEC. 13. General Counsel. - The general counsel shall have the general
powers and duties usually vested in such officer and shall have such other
powers and duties as may be prescribed by the chairman of the board, the
president, the executive vice presidents, the board of directors or elsewhere in
these bylaws.
SEC. 14. Corporate Actuary. - The corporate actuary's duties shall be to
coordinate the actuarial bases of the company's operations, to maintain
surveillance of the financial
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performance of the company and its subsidiaries, to maintain surveillance of tax
and regulatory compliance, to direct the auditing of the various accounts and
records, and to have such other duties and responsibilities as may from time to
time be assigned to him by the chairman of the board, the president, the
executive vice presidents, the board of directors or elsewhere in these bylaws.
SEC. 15. Controller. - The controller's duties shall be to direct the
maintenance of the various accounts and other accounting media of the
corporation, to supervise expenses and operating efficiencies of the company and
its subsidiaries, and to have such further duties and responsibilities as may
from time to time be assigned to him by the chairman of the board, the
president, the executive vice presidents, the board of directors or elsewhere in
these bylaws.
SEC. 16. Assistant Vice Presidents. - The assistant vice presidents
shall have such powers and perform such duties as may from time to time be fixed
and prescribed for them by the board of directors, the chairman of the board,
the president, the executive vice presidents or elsewhere in these bylaws.
SEC. 17. Assistant Secretaries and Assistant Treasurers. - The assistant
secretaries and the assistant treasurers shall have such powers and perform such
duties as are assigned to them by these bylaws and shall have such other powers
and perform such other duties not inconsistent with these bylaws as may from
time to time be assigned to them by the secretary or the treasurer,
respectively, or by the board of directors.
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Article VI. - INSURANCE POLICIES, CONTRACTS, CHECKS,
DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. Insurance Policies, How Signed. - All policies issued by this
corporation shall be signed by the chairman or president and countersigned by
the secretary either personally or by facsimile.
SEC. 2. Checks, Drafts, etc. - All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, except as in these
bylaws otherwise provided, issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the board of directors or by
resolution of the executive committee, if the board of directors delegate such
authority to it.
SEC. 3. Contracts, etc., How Executed. - The board of directors, or the
executive committee if such authority is delegated to it by the board of
directors, except as by law or in the bylaws otherwise provided, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to special instances; and unless so
authorized, no officer, agent or employee shall have any power or authority to
bind the corporation by any
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contract or engagement or to pledge its credit to render it liable for any
purpose or to any amount.
SEC. 4. Bank Accounts. - All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation,
and in its name, in such banks, trust companies, or other depositaries as the
board of directors may select or as may be selected by any committee, officer or
officers, agent or agents of the corporation to whom such powers may from time
to time be delegated by the board of directors; and for the purpose of such
deposits the chairman of the board, the president, any vice president, the
secretary, the treasurer, or any other officer or agent or employee of the
corporation to whom such power may be delegated by the board of directors or by
the executive committee, if such authority be delegated to it by the board of
directors, may endorse, assign and deliver checks, drafts and other orders for
the payments of monies which are payable to the order of the corporation.
SEC. 5. Departmentalization. - So long as the corporation maintains two
or more departments, the corporation may apportion among them their fair and
equitable share of expenses; may exchange assets between such departments on a
fair and equitable basis; and may, at customary reinsurance rates, reinsure
business between such departments.
Article VII. - INVESTMENTS
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SECTION 1. Investments in the Corporation's Name. - All investments of
the corporation shall be made in the name of Pacific Mutual Life Insurance
Company or its nominee.
SEC. 2. Investments by the Corporation. - The corporation shall invest
as much of its capital, surplus and accumulations as the board of directors or
the executive committee, if such authority is delegated to it by the board of
directors, may determine in the purchase of or loans upon any of the securities
specified by law, which investment or investments shall be approved by the
executive committee, if such authority is delegated to it by the board of
directors, and by a vote of two-thirds of all the directors of the corporation,
unless such latter approval is not required by law, and any such approval by the
board of directors shall be entered upon the records or minutes of the
corporation which must show the fact of making such investment or investments,
the amount thereof, the name of each director voting to approve the same, the
amount, character and value of the security purchased or taken as collateral
and, if the investment be a loan, the name of the borrower, the rate of interest
thereon, and the date when the loan will become due or payable.
Article VIII. - MEMBERS
SECTION 1. Members Defined. - The words "member" and "members" as used in these
bylaws are hereby defined to include only those policyholders of the
Participating and Non-
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Participating Life classes. In any case where a Participating or Non-
Participating Life policy names two or more persons as joint insureds, payees,
owners or holders thereof, the persons so named shall be deemed collectively to
be but one member for the purposes of these bylaws. In any case where such a
policy shall have been assigned by assignment absolute on its face to an
assignee other than the corporation, and such assignment shall have been filed
at the principal office of the corporation at least thirty days prior to the
date of any election or meeting referred to in these bylaws, then such assignee
shall be deemed to be the member entitled to vote at such election or meeting.
SEC. 2. One Class of Members. - There shall be but one class of members
of the corporation.
Article IX. - CORPORATE RECORDS, ANNUAL REPORT
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
SECTION 1. Inspection of Bylaws. - The corporation shall keep in its principal
office for the transaction of business the original or a copy of the bylaws as
amended or otherwise altered to date, certified by the secretary, which shall be
open to inspection by the members at all reasonable times during office hours.
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SEC. 2. Inspection of Corporate Records. - The books of account, and
minutes of proceedings of the members, of the board of directors and of the
executive committee shall be open to inspection upon the written demand of any
member at any reasonable time and for a purpose reasonably related to his
interests as a member and shall be exhibited at any time when required by the
demand of ten percent (10%) of the members entitled to vote at any members'
meeting shall be made in writing upon the chairman of the board, the president,
secretary or assistant secretary of the corporation.
SEC. 3. Representation of Shares of Other Corporations. - The chairman
of the board, the president or any vice president and the secretary or any
assistant secretary of this corporation are authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all share
or other evidence of ownership of any other business entities such as
corporations, business trusts and partnerships standing in the name of this
corporation. The authority herein granted to said officers to vote or represent
on behalf of this corporation any and all such evidences of ownership held by
this corporation may be exercised either by such officers n person or by any
person authorized so to do by proxy or power of attorney duly executed by said
officers.
Article X. - AMENDMENTS
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SECTION 1. Powers of Members. - A bylaw or bylaws may be adopted,
amended, or repealed by the vote of members entitled to exercise a majority of
the voting power of the corporation or by the written assent of such members.
SEC. 2. Power of Directors. - Subject to the rights of the members, as
provided in Section I of this Article, to adopt, amend or repeal a bylaw or
bylaws, other than a bylaw or amendment thereof changing the authorized number
of directors, may be adopted, amended, or repealed by the board of directors.
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EXHIBIT 99.1(9)
Fund Participation Agreement
<PAGE>
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 6th day of November, 1992, by and between Pacific
Mutual Life Insurance Company (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California corporation.
WITNESSETH
WHEREAS, the Fund 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 ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interests ("shares"), each representing
an interest in a separate portfolio of assets known as a "series" and each
series has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is currently
comprised of nine separate series, and other series may be established in the
future; and
WHEREAS, the Fund has obtained an order from the SEC granting Participating
Insurance Companies, separate accounts funding Variable Contracts of
Participating Insurance Companies, and the Fund exemptions from the provisions
of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and paragraph (b)(15)
of Rule 6e-3(T) under the 1940 Act, to the extent necessary to permit such
persons to rely on the exemptive relief provided under paragraph (b)(15) of Rule
6e-3(T), even though shares of the Fund may be offered to and held by separate
accounts funding variable annuity contracts or scheduled or flexible premium
variable life insurance contracts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended ("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 wishes to purchase shares of one or more of the Fund's series on
behalf of its Separate Accounts to serve as an investment medium for Variable
Contracts funded by the Separate Accounts, and the Distributor is authorized to
sell shares of the Fund's series;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
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1.1. The Distributor agrees to sell to the Company those shares of the series
offered and made available by the Fund and identified on Exhibit B ("Series")
that the Company orders on behalf of its Separate Accounts, and agrees to
execute such orders on each day on which the Fund calculates its net asset value
pursuant to rules of the SEC ("business day") 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.
1.2. The Fund agrees to make available on each business day shares of the
Series for purchase at the applicable net asset value per share by the Company
on behalf of its Separate Accounts' provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series, if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Series.
1.3. The Fund and the Distributor agree that shares of the Series of the Fund
will be sold only to Participating Insurance Companies, their separate accounts,
and other persons consistent with each Series being adequately diversified
pursuant to Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code") and the regulations thereunder. No shares of any Series will be sold
directly to the general public.
1.4. The Fund and the Distributor will not sell shares of the Series to any
insurance company or separate account unless an agreement containing provisions
substantially the same as this Agreement is in effect to govern such sales.
1.5. Upon receipt of a request for redemption in proper form from the Company,
the Fund agrees to redeem any full or fractional shares of the Series held by
the Company, ordinarily executing such requests on each business day at the net
asset value next computed after receipt and acceptance by the Fund or its agent
of the request for redemption, except that the Fund reserves the right to
suspend the right of redemption, consistent with Section 22(e) of the 1940 Act
and any rules thereunder. Such redemption shall be paid consistent with
applicable rules of the SEC and procedures and policies of the Fund as described
in the current prospectus.
1.6. The Company agrees to purchase and redeem the shares of each Series in
accordance with the provisions of the current prospectus for the Fund.
1.7. The Company shall pay for shares of the Series on the same day that it
places an order to purchase shares of the Series. Payment shall be in federal
funds transmitted by wire.
1.8. Issuance and transfer of shares of the Series will be by book entry only
unless otherwise agreed by the Fund. Stock certificates will not be issued to
the Company or the Separate Accounts unless otherwise agreed by the Fund.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.9. The Fund shall promptly furnish notice (by wire or telephone, followed by
written confirmation) to the Company of any income dividends or capital gain
distributions payable on the
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shares of the Series. The Company hereby elects to reinvest in the Series all
such dividends and distributions as are payable on a Series' shares and to
receive such dividends and distributions in additional shares of that Series.
The Company reserves the right to revoke this election in writing 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 instruct its recordkeeping agent to advise the Company on
each business day of the net asset value per share for each Series as soon as
reasonably practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it is taxed as an
insurance company under Subchapter L of the Code.
2.2. The Company represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the ________________________ Insurance Code, and that each of the Separate
Accounts is a validly existing segregated asset account under applicable federal
and state law.
2.3. The Company represents and warrants that the Variable Contracts issued by
the Company or interests in the Separate Accounts under such Variable Contracts
(1) are or, prior to issuance, will be registered as securities under the
Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.
2.4. The Company represents and warrants that each of the Separate Accounts (1)
has been registered as a unit investment trust in accordance with the provisions
of the 1940 Act or, alternatively (2) has not been registered in proper reliance
upon an exclusion from registration under the 1940 Act.
2.5. The Company represents that it believes, in good faith, that the Variable
Contracts issued by the Company are currently treated as annuity contracts or
life insurance policies (which may include modified endowment contracts),
whichever is appropriate, under applicable provisions of the Code.
2.6. The Company represents and warrants that any of its Separate Accounts that
fund variable life insurance contracts and that are registered with the SEC as
investment companies rely on the exemptions provided by Rule 6e-3(T), or any
successor thereto, and not on Rule 6e-2 under the 1940 Act.
2.7. The Fund represents and warrants that it is duly organized as a business
trust under the laws of the Commonwealth of Massachusetts, and is in good
standing under applicable law.
2.8. The Fund represents and warrants that the shares of the Series are duly
authorized for issuance
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in accordance with applicable law and that the Fund is registered as an open-end
management investment company under the 1940 Act.
2.9. The Fund represents that it believes, in good faith, that the Series
currently comply with the diversification provisions of Section 817(h) of the
Code and the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity
contracts.
2.10. The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
3.1. The Fund shall take all such actions as are necessary to permit the sale
of the shares of each Series to the Separate Accounts, including maintaining its
registration as an investment company under the 1940 Act, and registering the
shares of the Series sold to the Separate Accounts under the 1933 Act for so
long as required by applicable law. The Fund shall amend its Registration
Statement filed with the SEC under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of the shares of the
Series. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states to the extent deemed necessary by the Fund
or the Distributor.
3.2. The Fund shall make every effort to maintain qualification of each Series
as a Regulated Investment Company under Subchapter M of the Code (or any
successor or similar provision) and shall notify the Company immediately upon
having a reasonable basis for believing that a Series has ceased to so qualify
or that it might not so qualify in the future.
3.3. The Fund shall make every effort to enable each Series to comply with the
diversification provisions of Section 817(h) of the Code and the regulations
issued thereunder relating to the diversification requirements for variable life
insurance policies and variable annuity contracts and any prospective amendments
or other modifications to Section 817 or regulations thereunder, and shall
notify the Company immediately upon having a reasonable basis for believing that
any Series has ceased to comply.
3.4. The Fund shall be entitled to receive and act upon advice of its General
Counsel or its outside counsel in meeting the requirements specified in Sections
3.2 and 3.3 hereof.
3.5 The Company shall take all such actions as are necessary under applicable
federal and state law to permit the sale of the Variable Contracts issued by the
Company, including registering each Separate Account as an investment company to
the extent required under the 1940 Act, and registering the Variable Contracts
or interests in the Separate Accounts under the Variable Contracts to the extent
required under the 1933 Act, and obtaining all necessary approvals to offer the
Variable Contracts from state insurance commissioners.
3.6. The Company shall make every effort to maintain the treatment of the
Variable Contracts issued
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<PAGE>
by the Company as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code, and shall notify the Fund
and the Distributor immediately upon having a reasonable basis for believing
that such Variable Contracts have ceased to be so treated or that they might not
be so treated in the future.
3.7. The Company shall offer and sell the Variable Contracts issued by the
Company in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.8. The Distributor shall sell and distribute the shares of the Series of the
Fund in accordance with the applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.9. A majority of the Board of Trustees of the Fund shall consist of persons
who are not "interested persons" of the Fund ("disinterested Trustees"), as
defined by Section 2(a)(19) of the 1940 Act, except that if this provision of
this Section 3.9 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 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.
3.10. The Company agrees to provide, as promptly as possible, notice to the
Fund and to the Distributor if the Company has reason to know about a meeting of
some or all of the owners of the Variable Contracts or shareholders of the Fund,
where the agenda or purpose of the meeting relates, in whole or in part, to the
Fund and that has not been called by the Fund's Board of Trustees (and which
shall not include a vote of Variable Contract Owners having an interest in a
Separate Account to substitute shares of another investment company for
corresponding shares of the Fund or a Series, as described in Section 9(e) and
to which the notice provision of Section 9.2 shall apply). In such an event,
the Company agrees to distribute proxy statements and any additional
solicitation materials upon the request of the Fund or the Distributor to the
owners of the Variable Contracts issued by the Company at least 30 days prior to
the meeting. The Company further agrees that it shall take no action, directly
or indirectly, in furtherance of shareholders of the Fund or Contract Owners
taking any action with respect to the Fund by written consent and without a
meeting.
3.11. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
4.1. The Fund's Board of Trustees shall monitor the Fund for the existence of
any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable
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<PAGE>
life insurance policies, and (2) between the interests of owners of Variable
Contracts ("Variable Contract Owners") issued by different Participating
Insurance Companies that invest 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 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 the Fund or any Series are being managed; or (e) a decision by a
Participating Insurance Company to disregard the voting instructions of Variable
Contract Owners.
4.2. The Company agrees that it shall be responsible for reporting any
potential or existing conflicts to the Fund's Board of Trustees. The Company
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under this agreement, 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 Variable Contract Owner voting instructions are disregarded. The
Company shall carry out its responsibility under this Section 4.2 with a view
only to the interests of the Variable Contract Owners.
4.3. The Company agrees that in the event that it is determined by a majority
of the Board of Trustees of the Fund or a majority of the Fund's disinterested
Trustees that a material irreconcilable conflict exists, the Company shall, to
the extent reasonably practicable (as determined by a majority of the
disinterested Trustees of the Board of the Fund), take whatever steps are
necessary to eliminate the irreconcilable material conflict, including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Series and reinvesting such assets in a different investment
medium, which may include another series of the Fund, or submitting the question
of whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., Contract Owners of Variable Contracts issued by one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract Owners the option of making such a
change; and (2) establishing a new registered management investment company or
managed separate account. If a material irreconcilable conflict arises because
of the Company's decision to disregard Variable Contract Owners' voting
instructions and that decision represents a minority position or would preclude
a majority vote, the Company shall be required, at the Fund's election, to
withdraw the Separate Accounts' investment in the Fund, and no charge or penalty
will be imposed as a result of such withdrawal. The Fund shall neither be
required to bear the costs of remedial actions taken to remedy a material
irreconcilable conflict nor shall it be requested to pay a higher investment
advisory fee for the sole purpose of covering such costs. In addition, no
Variable Contract Owner shall be required directly or indirectly to bear the
direct or indirect costs of remedial actions taken to remedy a material
irreconcilable conflict. A new funding medium for any Variable Contract need
not be established pursuant to this Section 4.3, if an offer to do so has been
declined by vote of a majority of Variable Contract Owners materially adversely
affected by the irreconcilable material conflict. All reports received by the
Fund's Board of Trustees of potential or existing conflicts, and all Board
action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies and the Fund's investment adviser of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded
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in the minutes of the Board of Trustees of the Fund or other appropriate
records, and such minutes or other records shall be made available to the SEC
upon request. The Company and the Fund shall carry out their responsibilities
under this Section 4.3 with a view only to the interests of the Variable
Contract Owners.
4.4. The Board of Trustees of the Fund shall promptly notify the Company in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Company as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2. The Distributor shall provide the Company with as many copies of the
current prospectus of the Fund as the Company may reasonably request. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Company to print together in one document the current prospectus for the
Variable Contracts issued by the Company and the current prospectus for the
Fund. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Company shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Company.
5.3. The Fund and the Distributor shall provide (1) at the Fund's expense, one
copy of the Fund's current Statement of Additional Information ("SAI") to the
Company and to any owner of a Variable Contract issued by the Company who
requests such SAI, (2) at the Company's expense, such additional copies of the
Fund's current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law in connection with offering the
Variable Contracts issued by the Company.
5.4. The Fund, 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 owners of Variable Contracts issued by the Company.
The Fund, 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 shall reasonably request for use in connection with
offering the Variable Contracts issued by the Company. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund'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 owners of Variable Contracts
issued by the Company.
5.5. For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the
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1940 Act, the Company shall vote shares of each Series of the Fund held in a
Separate Account or a subaccount thereof, whether or not registered under the
1940 Act, at regular and special meetings of the Fund in accordance with
instructions timely received by the Company (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Series. The Company shall vote shares
of a Series of the Fund held in a Separate Account or a subaccount thereof that
are attributable to the Variable Contracts as to which no timely instructions
are received, as well as shares held in such Separate Account or subaccount
thereof that are not attributable to the Variable Contracts and owned
beneficially by the Company (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Series from whom instructions have been timely
received. The Company shall vote shares of each Series of the Fund held in its
general account, if any, in the same proportion as the votes cast with respect
to shares of the Series held in all Separate Accounts of the Company or
subaccounts thereof, in the aggregate.
5.6. The Fund shall disclose in its prospectus that (1) shares of the Series of
the Fund are offered to affiliated or unaffiliated insurance company separate
accounts which fund both annuity and life insurance contracts, (2) due to
differences in tax treatment or other considerations, the interests of various
Variable Contract Owners participating in the Fund or a Series might at some
time be in conflict, and (3) the Board of Trustees of the Fund will monitor for
any material conflicts and determine what action, if any, should be taken. The
Fund hereby notifies the Company that prospectus disclosure may be appropriate
regarding potential risks of offering shares of the Fund to separate accounts
funding both variable annuity contracts and variable life insurance policies and
to separate accounts funding Variable Contracts of unaffiliated life insurance
companies.
ARTICLE VI. Sales Material and Information
6.1. The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material in
which the Fund (or any Series thereof) or its investment adviser or the
Distributor is named, and no such sales literature or other promotional material
shall be used without the approval of the Fund and the Distributor or the
designee of either.
6.2. The Company agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund 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
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.
6.3. The Fund or the Distributor or the designee of either shall furnish to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company or its Separate Accounts are named, and no such
material shall be used without the approval of the Company or its designee.
8
<PAGE>
6.4. The Fund and the Distributor agree that each and the affiliates and agents
of each shall not give any information or make any representations on behalf of
the Company or concerning the Company, the Separate Accounts, or the Variable
Contracts issued by the Company, other than the information or representations
contained in a registration statement or prospectus for such Variable Contracts,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in reports for the Separate Accounts or prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by the Company or its designee, except with
the permission of the Company.
6.5. The Fund will provide to the Company at least one complete copy of all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
6.6. The Company will provide to the Fund at least one complete copy of all
prospectuses (which shall include an offering memorandum if the Variable
Contracts issued by the Company or interests therein are not registered under
the 1933 Act), Statements of Additional Information, reports, solicitations for
voting instructions, and all amendments or supplements to any of the above, that
relate to the Variable Contracts issued by the Company or the Separate Accounts
promptly after the filing of such document with the SEC or other regulatory
authority.
6.7. For purposes of this Article VI, 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, computerized media, 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.
ARTICLE VII. Indemnification
7.1. Indemnification By The Company
7.1(a). The Company agrees to indemnify and hold harmless the Fund, each of its
Trustees and officers, any affiliated person of the Fund within the meaning of
Section 2(a)(3) of the 1940 Act, and the Distributor (collectively, the
"Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation expenses (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 litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Company
and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material
9
<PAGE>
fact contained in the registration statement or prospectus (which shall include
an offering memorandum) for the Variable Contracts issued by the Company or
sales literature for such Variable Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement or prospectus for the Variable
Contracts issued by the Company or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of such Variable
Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or representation (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 any of its
affiliates, employees or agents with respect to the sale or distribution of the
Variable Contracts issued by the Company or the 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;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation expenses
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Fund.
7.1(c). The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such 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 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
10
<PAGE>
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.1(d). The Indemnified Parties shall 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 Variable Contracts issued by the
Company or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a). The Distributor agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who is an affiliated
person of the Company within the meaning of Section 2(a)(3) of the 1940 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor) or litigation
expenses (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 litigation expenses are related to
the sale or acquisition of the Fund's shares or the Variable Contracts issued by
the Company 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 Distributor or the Fund
or the designee of either by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Company or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other than
statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful conduct of the Fund
or Distributor, or the affiliates, employees, or agents of the Fund or the
Distributor with respect to the sale or distribution of the Variable Contracts
issued by the Company 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 covering the Variable Contracts issued by the Company, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
11
<PAGE>
7.2(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations and
duties under this Agreement or to the Company or the Separate Accounts.
7.2(c). The Distributor shall not be liable under this indemnification
provision with respect to any claim made against the Indemnified Party unless
such Party shall have notified the Distributor 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 Distributor of any such claim shall not relieve the
Distributor 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 Distributor will be entitled to participate, at its own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor'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 Distributor
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.2(d). The Company shall promptly notify the Distributor 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 Variable Contracts issued by the
Company or the operation of the Separate Accounts.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of California.
8.2. 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 Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice to the other
parties; or
(b) at the option of the Company if shares of the Series are not reasonably
available to meet the requirements of the Variable Contracts issued by the
Company, as determined by the Company, and upon prompt notice by the Company to
the other parties; or
12
<PAGE>
(c) at the option of the Fund or the Distributor upon institution of formal
proceedings against the Company or its agent by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Company, the operation of the Separate Accounts, or the
purchase of the Fund shares; or
(d) at the option of the Company upon institution of formal proceedings against
the Fund or the Distributor by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an interest in
the Separate Accounts (or any subaccounts thereof) to substitute the shares of
another investment company for the corresponding shares of the Fund or a Series
in accordance with the terms of the Variable Contracts for which those shares
had been selected to serve as the underlying investment media; or
(f) in the event any of the shares of a Series 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
Variable Contracts issued or to be issued by the Company; or
(g) by any party to the Agreement upon a determination by a majority of the
Trustees of the Fund, or a majority of its disinterested Trustees, that an
irreconcilable conflict exists; or
(h) at the option of the Company if the Fund or a Series fails to meet the
diversification requirements specified in Section 3.3 hereof.
9.2. Each party to this Agreement shall promptly notify the other parties to
the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Company shall
give 60 day's prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3. Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Company (as opposed to Fund shares attributable to the Company's assets held
in the Separate Accounts), and the Company shall not prevent Variable Contract
Owners from allocating payments to a Series, until 60 days after the Company
shall have notified the Fund or Distributor of its intention to do so.
9.4. If this Agreement terminates, any provision of this Agreement necessary to
the orderly windup of business under it will remain in effect as to that
business, after termination.
ARTICLE X. 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.
13
<PAGE>
If to the Fund:
Pacific Select Fund
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA 92260
If to the Distributor:
Pacific Equities Network
Attn: Compliance Officer
700 Newport Center Drive, NB-4
Newport Beach, CA 92660
If to the Company:
Pacific Mutual Life Insurance Company
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA 92660
ARTICLE XI. Miscellaneous
11.1. The Fund and the Company agree that if and to the extent Rule 6e-3(T)
under the 1940 Act is amended or if Rule 6e-3 is adopted in final form, to the
extent applicable, ,the Fund and the Company shall each take such steps as may
be necessary to comply with the Rule as amended or adopted in final form.
11.2. A copy of the Fund's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts and notice is hereby given
that the Agreement has been executed on behalf of the Fund by a Trustee of the
Fund in his or her capacity as Trustee and not individually. The obligations of
this Agreement shall only be binding upon the assets and property of the Fund
and shall not be binding upon any Trustee, officer or shareholder of the Fund
individually.
11.3. Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Series from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Company upon request.
11.4. It is understood that the name "Pacific", "Pacific Mutual", "Pacific
Select" or any derivative thereof or logo associated with that name is the
valuable property of the Distributor and its affiliates, and that the Company
has the right to use such name (or derivative or logo) only so long as this
Agreement is in effect. Upon termination of this Agreement the Company shall
forthwith cease to
14
<PAGE>
use such name (or derivative or logo).
11.5. 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.
11.6. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.7. 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.
11.8. This Agreement may not be assigned by any party to the Agreement except
with the written consent of the other parties to the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PACIFIC SELECT FUND
ATTEST: /s/ AUDREY L. MILFS BY: /s/ THOMAS C. SUTTON
Name: AUDREY L. MILFS Name: THOMAS C. SUTTON
Title: SECRETARY Title: PRESIDENT
PACIFIC EQUITIES NETWORK
ATTEST: /s/ AUDREY L. MILFS BY: /s/ ARTHUR M. KESSELHAUT
Name: AUDREY L. MILFS Name: ARTHUR M. KESSELHAUT
Title: SECRETARY Title: PRESIDENT
PACIFIC MUTUAL LIFE INSURANCE CO.
ATTEST: /s/ AUDREY L. MILFS BY: /s/ WILLIAM D. CVENGROS
Name: AUDREY L. MILFS Name: WILLIAM D. CVENGROS
Title: SECRETARY Title: CHIEF INVESTMENT OFFICER
15
<PAGE>
EXHIBIT A
PACIFIC SELECT SEPARATE ACCOUNT
PACIFIC SELECT EXEC SEPARATE ACCOUNT
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
PACIFIC COLI SEPARATE ACCOUNT
SEPARATE ACCOUNT A
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to be executed
by their Officers designated below on this 3rd day of January, 1995.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
17
<PAGE>
EXHIBIT B
MONEY MARKET SERIES
MANAGED BOND SERIES
GOVERNMENT SECURITIES SERIES
HIGH YIELD BOND SERIES
GROWTH SERIES
GROWTH LT SERIES
EQUITY INCOME SERIES
MULTI-STRATEGY SERIES
EQUITY SERIES
BOND AND INCOME SERIES
EQUITY INDEX SERIES
INTERNATIONAL SERIES
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit B to be executed
by their Officers designated below on this 3rd day of January, 1995.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
19
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
The Participation Agreement, made the 6th day of November, 1992 by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 4th day of
January, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and
WHEREAS, the Fund currently consists of nine separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series and Equity Index Series; and
WHEREAS, the Fund intends to establish one additional Series to be designated as
the Growth LT Series; and
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this
Addendum, it is agreed between the parties hereto as follows:
The Agreement is amended by replacing the second paragraph with the following
language:
"WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts') and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is comprised of
multiple separate series, and other series may be established in the future;
and"
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
1
<PAGE>
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GLENN S. SCHAFER
Name: Audrey L. Milfs Name: Glenn S. Schafer
Title: Secretary Title: President
Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER
Name: Audrey L. Milfs Name: Diane N. Ledger
Title: Secretary Title: Assistant Vice President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
2
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
The Participation Agreement, made the 6th day of November, 1992, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 15th day of
August, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and
WHEREAS, the Fund currently consists of ten separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series; and
WHEREAS, the Fund intends to establish two additional Series to be designated as
the Equity Series and Bond and Income Series; and
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this addendum, it is agreed between the parties hereto as follows:
The Agreement is amended by replacing the second paragraph with the following
language:
"WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is comprised of
multiple separate series, and other series may be established in the future;
and"
IN WITNESS WHEREOF, the parties hereto have caused this addendum to be executed
by their officers designated below on the date written above.
PACIFIC SELECT FUND
1
<PAGE>
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GLENN S. SCHAFER
Name: Audrey L. Milfs Name: Glenn S. Schafer
Title: Secretary Title: President
Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER
Name: Audrey L. Milfs Name: Diane N. Ledger
Title: Secretary Title: Assistant Vice President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
2
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
-----------------------------------
The Participation Agreement, made the 6th day of November, 1992 and
subsequently amended on January 4, 1994 and August 15, 1994, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance
company domiciled in California, on its behalf and on behalf of the segregated
asset accounts of the Company listed on Exhibit A to this Agreement (the
"Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts
business trust; and Pacific Equities Network ("Distributor"), a California
Corporation (the "Agreement") is hereby amended by the addition of the
provisions set forth in this Addendum to the Agreement ("Addendum"), which
is made this 20th day of November, 1995.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("Shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own
investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
series to separate accounts of insurance companies that fund variable
life insurance policies and variable annuity contracts ("Variable
Contracts"); and
WHEREAS, the Fund currently consists of twelve separate series
designated as the Money Market Portfolio, Managed Bond Portfolio, High
Yield Bond Portfolio, Government Securities Portfolio, Growth Portfolio,
Equity Income Portfolio, Multi-Strategy Portfolio, International
Portfolio, Equity Index Portfolio, Growth LT Portfolio, Equity Portfolio
and Bond and Income Portfolio (each referred to as a "Series" in the
Agreement, and hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund intends to establish two additional Portfolios to
be designated as the Emerging Markets Portfolio and Aggressive Equity
Portfolio; and
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as
follows:
The Agreement is amended by replacing the second paragraph
with the following language:
"WHEREAS, the Fund is available to offer shares of one or more
of its Portfolios to separate accounts of insurance companies that
fund variable life insurance policies and variable annuity contracts
("Variable Contracts") and to serve as an investment medium for
Variable Contracts offered by insurance companies that have entered
into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is
comprised of multiple separate Portfolios, and other Portfolios may
be established in the future; and"
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President, Director & CEO
Attest: /s/ AUDREY L. MILFS By: /s/ EDWARD R. BYRD
Name: Audrey L. Milfs Name: Edward R. Byrd
Title: Secretary Title: CFO & Treasurer
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ THOMAS C. SUTTON
Name: Diane N. Ledger Name: Thomas C. Sutton
Title: Assistant Vice President Title: Chairman and CEO
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
<PAGE>
EXHIBIT B
MONEY MARKET PORTFOLIO
MANAGED BOND PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
HIGH YIELD BOND PORTFOLIO
GROWTH PORTFOLIO
GROWTH LT PORTFOLIO
EQUITY INCOME PORTFOLIO
MULTI-STRATEGY PORTFOLIO
EQUITY PORTFOLIO
BOND AND INCOME PORTFOLIO
EQUITY INDEX PORTFOLIO
INTERNATIONAL PORTFOLIO
EMERGING MARKETS PORTFOLIO
AGGRESSIVE EQUITY PORTFOLIO
<PAGE>
EXHIBIT 99.1(10)
PACIFIC MUTUAL
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
APPLICATION FOR MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
INSTRUCTIONS TO SOLICITING AGENT(S)
GENERAL INSTRUCTIONS
Every appropriate section of the application must be fully completed prior to
signing the application. A blank application must never be signed.
Changes noted on this application must be lined out and the new information must
be indicated and initialed by the Proposed Insured(s) in Sections A-I, and Agent
in Section J. Changes made any other way will be amended.
The DISCLOSURE NOTICE TO PROPOSED INSURED(S) (which is on the reverse side of
this page) must be detached and given to the Proposed Insured(s). If the
DISCLOSURE NOTICE TO PROPOSED INSURED(S) is not detached when the application is
received at Pacific Mutual ("PM"), written verification that the Notice was
given to the Proposed Insured(s) will be required before the underwriting
process can begin.
For a Joint Life Policy, Proposed Joint Insured questions must be answered.
Refer to the Modified Single Premium Variable Life Insurance Marketing Guide for
specific instructions on how to complete each section of the application.
IMPORTANT SIGNATURE REQUIREMENTS
The following parties must sign page 5 of the application:
Proposed Insured
Proposed Joint Insured (if applicable)
Owner (if other than Proposed Insured or Proposed Joint Insured)
Soliciting Agent(s)
If multiple Owners, then all Owners must sign on page 5 of the application.
For corporate signatures, the signature and title of any authorized officer
other than the Proposed Insured is required and the full name of the corporation
must be shown on page 5.
If policy is trust owned, trustee(s) must sign on page 5 of the application on
the Signature of Owner line indicating the title "Trustee" after the signature.
Owner designation, on page 1, must include name of trust, date of trust,
trustee(s) name, with the wording "successor or successors in trust."
UNDERWRITING REQUIREMENTS
Refer to the Modified Single Premium Variable Life Insurance Marketing Guide to
determine the appropriate requirements.
AP9750 15-20409-00 1/97
<PAGE>
DETACH AND LEAVE WITH APPLICANT
DISCLOSURE NOTICE TO PROPOSED INSURED(S) FOR INSURANCE
This brief description of our underwriting process is designed to help you to
understand how an application for insurance is handled, the types and sources of
information we may collect about you, the circumstances under which we may
disclose that information to others and your right to learn the nature and
substance of that information upon written request. The purpose of the
underwriting process is to make sure you qualify for insurance under Pacific
Mutual's rules, and assuming you do, establish the proper premium charge for
that insurance. This process - the evaluation of risks - assures that the cost
of insurance is distributed equitably among all policyowners, and that each
individual pays his or her fair share. To determine your insurability, we must
consider such factors as your medical history, physical condition, occupation
and hazardous avocations. We get this information from various sources.
SOURCES OF INFORMATION
APPLICATION AND MEDICAL RECORDS - Your application, including the medical
history, is the primary source of information in the evaluation process. In
addition, we may ask you to take a physical examination or other special test
such as a electrocardiogram. We may also ask for a report from your doctor or
hospital, another insurance company, or the Medical Information Bureau, Inc.
When we do so, we will use the Authorization to Obtain Information Section of
the application that you signed.
MIB, INC., (MEDICAL INFORMATION BUREAU, INC.) - is a non-profit corporation
which operates an information exchange on behalf of member life insurance
companies. As a member company, we will ask the MIB if it has a record
concerning you. If you previously applied to a member company for insurance,
MIB may have information about you in its file. The purpose of the MIB is to
protect member companies and their policyowners from those who would conceal
significant facts relevant to their insurability. The information which is
obtained from MIB may be used only as an alert to the possible need for further
independent investigation. It cannot be used as a basis in making a final
underwriting decision.
Information regarding your insurability will be treated as confidential.
Pacific Mutual, its subsidiaries or its reinsurer(s) may, however, make a brief
report to the MIB. If you later apply to another MIB member company for life or
health insurance coverage, or a claim for benefits is submitted to such a
company, the MIB, upon request, will supply the company with the information it
may have about you in its file. Pacific Mutual, its subsidiaries or its
reinsurer(s) 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 a claim
for benefits may be submitted.
At your request, the MIB will arrange disclosure of any information it may have
about you in its file. If you question the accuracy of information on file, you
may contact the MIB and seek a correction in accordance with the procedures set
forth in the federal Fair Credit Reporting Act. The address of the information
office of MIB, Inc. is Post Office Box 105, Essex Station, Boston, Massachusetts
02112, telephone number (617) 426-3660.
INVESTIGATIVE CONSUMER REPORT - As part of our underwriting procedure, we may
request an investigative consumer report from a consumer reporting agency.
A consumer report confirms and supplements the information on your application
pertaining to employment and residence verification, smoking habits, marital
status, occupation, hazardous avocations and general health. This report may
also cover information concerning your general reputation, personal
characteristics and mode of living, (except as may be related directly or
indirectly to your sexual orientation) including drug and alcohol use, motor
vehicle driving record and any criminal activity. This information may be
obtained through personal interviews with you, your family, friends, neighbors
and business associates. If a report is required and you wish to be personally
interviewed, please let us know and we will notify the consumer reporting
agency.
The information contained in the report may be retained by the consumer
reporting agency and subsequently disclosed to other companies to the extent
permitted by the Fair Credit Reporting Act.
<PAGE>
Investigative consumer reports are held in strict confidence and used only to
evaluate your application on a fair and equitable basis. You have a right to
inspect and obtain a copy of the report from the consumer reporting agency.
DISCLOSURE TO OTHERS
Personal information obtained about you during the underwriting process is
confidential and will not be disclosed to other persons or organizations without
your written authorization except to the extent necessary for the conduct of our
business. Examples of situations where we may share information about you are
as follows:
1. The agent may retain a copy of your application.
2. If reinsurance is required, the reinsurance company would have access to our
application file.
3. We may release information to another life insurance company to whom you
have applied for life or health insurance or to whom you have submitted a
claim for benefits, if you have authorized it to obtain such information.
4. As stated earlier, we may report information to the Medical Information
Bureau, Inc.
5. We will disclose information to government regulatory officials, law
enforcement authorities and others where required by law.
DISCLOSURE TO YOU
In general, you have a right to learn the nature and substance of any personal
information about you in our file upon written request. Whenever an adverse
underwriting decision is made, we will notify you of the reason(s) for the
decision and the source of the information upon which our action is based.
Medical record information, however, will normally be given only to a licensed
physician of your choice. Please refer to the section on MIB, Inc., for that
organization's disclosure procedure.
Should you feel that any information we have is inaccurate or incomplete, please
write to: Manager, Risk Selection Department, Pacific Mutual Life Insurance
Company, 700 Newport Center Drive, Newport Beach, California 92660. Your
comments will be carefully considered and corrections made where justified.
We hope this Notice will help you understand how we obtain and use personal
information in the underwriting process, and the ways you can learn about this
information. We are concerned with insuring privacy as well as lives, and the
collection, use and disclosure of personal information is limited to those
specified in this Notice.
AP9750 15-20409-00
<PAGE>
NEWBS APPLC
PACIFIC MUTUAL
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
APPLICATION
TO PACIFIC MUTUAL LIFE INSURANCE COMPANY
FOR MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
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 such person to criminal and civil penalties.
PLEASE PRINT USING DARK INK
SECTION A PROPOSED INSURED INFORMATION NO.
1. Name of Proposed Insured
2. Age
3. Date of Birth
4. Place of Birth
5. Sex
6. Social Security No.
7. Occupation/Duties
8. Residence Address
9. Business Address
SECTION B PROPOSED JOINT INSURED - COMPLETE IF APPLICABLE.
10. Name of Proposed Insured
11. Age
12. Date of Birth
13. Place of Birth
14. Sex
15. Social Security No.
16. Relationship to First Insured
17. Residence Address
18. Business Address
19. Occupation/Duties
SECTION C PERSONAL HISTORY INTERVIEW
<TABLE>
<CAPTION>
Proposed Insured Proposed Joint Insured
<C> <S> <C> <C>
20. Driver's License Number and State ------------------ ----------------------
21. Former Name (If Any)
------------------------------------------------
22. Most convenient time to call Morning Afternoon Evening
--- --- ---
23. Place to call Home Business Phone number
--- --- --- ---------------
24. May we interview the Spouse or an adult member of the family? Yes No
--- ---
25. Show any unusual name pronunciation phonetically.
-----------------------------------------
</TABLE>
SECTION D OWNER/BENEFICIARY INFORMATION
<PAGE>
26. Policy Owner Name and Address
27. Soc. Sec. No. or Tax ID
28. Relationship to Proposed Insured(s)
29. Primary Beneficiary(s). Give Full Legal Names and Address.
30. Relationship to Proposed Insured(s)
31. Contingent Beneficiary. Give Full Legal Name and Address
32. Relationship to Proposed Insured(s)
SECTION E PLAN OF INSURANCE/PREMIUM
33. Plan of Insurance: Modified Single Premium Variable Life
34. Initial Premium $
35. Initial Face Amount $
36. PREMIUM ALLOCATIONS. INDICATE ALLOCATION (MUST TOTAL 100% - WHOLE NUMBERS
ONLY)
<TABLE>
<CAPTION>
<S> <C> <C>
Aggressive Equity: _______% Government Securities: ___________% Multi-Strategy: __________%
Bond and Income: _________% Growth: __________________________% [Other: __________ ______%]
Emerging Markets: _______% Growth LT: _______________________% [Other: __________ ______%]
Equity: _________________% High Yield Bond: _________________% [Other: __________ ______%]
Equity Income: __________% International: ___________________% [Other: __________ ______%]
Equity Index: ___________% Managed Bond: ____________________% [Other: __________ ______%]
Fixed Account: __________% Money Market: ____________________% [Other: __________ ______%]
</TABLE>
AP9750 -1- 15-20409-00
<PAGE>
SECTION F REPLACEMENT
37. Will the policy applied for replace or change any existing insurance or
annuity on the Proposed Insured or Propose Joint Insured? (Agent must
complete state replacement notice, if applicable) Yes No
--- ---
If yes, indicate company name?
----------------------------------------
A. Is this a 1035 Exchange? Yes No
--- ---
B. Will a loan be carried over? Yes Estimated Amount? No
--- ------ ---
SECTION G SIMPLIFIED UNDERWRITING Proposed
Proposed Joint
Insured Insured
YES NO YES NO
38. Have you smoked a cigarette(s) in the last 12 months?
If yes, give date last smoked.
Date _______________________________/______________________________
PROPOSED INSURED PROPOSED JOINT INSURED
39. Have you been treated by a member of the medical profession for cancer,
insulin dependent diabetes, heart trouble, chest pains, heart attack,
stroke, central nervous system disorder, muscular disorder or respiratory
disorder?
40. Within the past 5 years, have you been treated by a member of the medical
profession for alcoholism, drug use other than prescribed by a physician,
nervous or mental disorder, Alzheimer's disease, epilepsy, emphysema, kidney
or liver disorder?
41. Have you been treated by a member of the medical profession for AIDS, AIDS
Related Complex or other immune deficiency disorder?
42. Have you ever been declined for life insurance?
SECTION H QUESTION FOR PROPOSED INSURED(S)
43. If we are unable to issue a life insurance policy, do you wish to receive
information about an annuity contract?
Yes No
---- ----
SECTION I SUITABILITY Proposed
Proposed Joint
Insured Insured
YES NO YES NO
44. Do you believe that this policy will meet your insurance needs and financial
objectives?
45. Do you understand that the amount and duration of the death benefit may
vary, depending on the investment performance of the variable accounts in
the separate account?
46. Do you understand that the policy values may increase or decrease, depending
on the investment experience of the variable accounts in the separate
account?
<PAGE>
Proposed
Proposed Joint
Insured Insured
YES NO YES NO
47. Did you receive the separate account prospectus and
the fund prospectus for the policy applied for?
If Yes, give date shown on prospectuses:
Separate Account______________________ Fund ____________
AP9750 -2- 15-20409-00
<PAGE>
SECTION J -AGENT INFORMATION - COMPLETE FOR ALL APPLICATIONS.
1. Do you have knowledge or reason to believe that replacement of existing life
insurance or annuities is involved in this transaction?
Proposed Insured Proposed Joint Insured
Yes No Yes No
---- ---- ---- ----
2. Have you personally asked all applicable questions in this application?
(If no, explain in REMARKS) Proposed Insured Proposed Joint Insured
Yes No Yes No
---- ---- ---- ----
3. Are you aware of any information not given in the application which might
affect the insurability of: (If yes, explain in REMARKS)
Proposed Insured Proposed Joint Insured
Yes No Yes No
---- ---- ---- ----
4. Did the Proposed Insured(s) or Owner make the initial inquiry which led to
the sale of this insurance? (If yes, explain in REMARKS)
Yes No
---- ----
REMARKS - IDENTIFY QUESTION AND GIVE DETAILS
HOME OFFICE ENDORSEMENT (NOT APPLICABLE IN KENTUCKY, PENNSYLVANIA, WEST
VIRGINIA)
PRODUCER CERTIFICATION - COMPLETE FOR ALL APPLICATIONS.
I certify that to the best of my knowledge and belief: Yes No
A. I have presented to the Company all pertinent facts and have correctly and
completely recorded all required answers.
B. I have given the Proposed Insured(s) (or Parent for Juvenile insurance) a
copy of the Fair Credit Reporting Act and MIB Disclosure Notice, and any
other disclosure notice or statement required by state or federal law.
C. I have fully explained the terms and conditions of the Temporary Insurance
Agreement to the Proposed Insured(s) (or Owner) and have given it to him/her
(them).
D. I have complied with state and federal laws on disclosure, cost comparison
and replacement.
E. I have reviewed the purchase of this insurance policy as to suitability.
Signature(s) Of Soliciting Agent(s). Pay Commission as Indicated Below.
X X
------------------------------------ ----------------------------------------
First Name Listed Below Will Be The Servicing Agent
<TABLE>
<CAPTION>
PHONE FAX AGENCY AGENT
AGENT NAME NUMBER NUMBER NUMBER CODE COMM%
<S> <C> <C> <C> <C> <C>
- ---------------- ----------- ----------- ----------- ---------- ---------
- ---------------- ----------- ----------- ----------- ---------- ---------
- ---------------- ----------- ----------- ----------- ---------- ---------
- ---------------- ----------- ----------- ----------- ---------- ---------
</TABLE>
Broker/Dealer Name
--------------------------------------------------------
AP9750 -3- 15-20409-00
<PAGE>
DETACH AND LEAVE WITH PROPOSED INSURED
PACIFIC MUTUAL LIFE INSURANCE COMPANY
TEMPORARY INSURANCE AGREEMENT - LIFE
This Agreement provides a Limited Amount of Life Insurance coverage, for a
Limited Period of time, subject to the terms of this Agreement.
Advance payment in the amount of $____________ in connection with Application
No. ______________________ is made for Life Insurance on
_____________________________________
NAME(S) OF PROPOSED INSURED(S)
TERMS AND CONDITIONS
AMOUNT OF COVERAGE - $500,000 OVERALL MAXIMUM FOR ALL APPLICATIONS OR AGREEMENTS
($500,000 OVERALL FOR JOINT LIFE)
If money has been accepted by PM as advance payment for an application for Life
Insurance and any Proposed Insured dies while this temporary insurance is in
effect, PM will pay to the designated beneficiary the lesser of (a) the amount
of death benefit, if any, which would be payable under the policy if issued as
applied for, or (b) $500,000 ($500,000 for Joint Life). This total benefit
limit applies to all insurance applied for under this and any other current
applications to PM and any other Temporary Insurance Agreements for Life
Insurance whether applied for on the life or lives of one or more Proposed
Insureds. (NOTE: No death benefit is payable under this Agreement for any Joint
Life coverages unless both Proposed Insureds under such coverages have died.)
DATE COVERAGE BEGINS
Temporary Life Insurance under this Agreement will begin on the date of this
Agreement but only if the above-numbered application for Life Insurance has been
completed on the same date.
DATE COVERAGE TERMINATES - 60 DAY MAXIMUM
Temporary Life Insurance under this Agreement will terminate automatically on
the earliest of:
a. 60 days from the date of this Agreement, or
b. the date any policy is offered to the Proposed Insured(s) in connection with
the above-numbered application, or
c. five days after the date PM mails notice of termination of coverage and
refund of the advance payment to the premium notice address designated in
such application.
PM reserves the right to terminate this Agreement under any of the following
circumstances:
a. 30 days have elapsed since the date of this Agreement and PM has not
received in its Home Office the report of a medical examination if such
examination is required by PM's underwriting rules, or
b. PM has determined that any Proposed Insured is not insurable as a standard
risk at the time of the application or the medical examination, if later, or
c. there are any errors or omissions on the above-numbered application.
LIMITATIONS
This Agreement does not provide benefits for disability.
Fraud or material misrepresentation in the application invalidates this
Agreement and PM's only liability is to refund any premium payment made.
<PAGE>
No one is authorized to accept money on Proposed Insureds under 15 days of age
or over the age of 80 (last birthday) on the date of this Agreement, nor will
any coverage take effect.
If any Proposed Insured dies by suicide, PM's liability under this Agreement is
limited to a refund of the payment made.
There is no coverage under this Agreement if the check submitted as payment is
not honored by the bank on first presentation.
No one is authorized to waive or modify any of the provisions of this Agreement.
NOTICE TO PROPOSED INSURED(S):
You should retain this Agreement. If you do not hear from us regarding the
insurance applied for within 65 days from the date of this Agreement, notify us
at 700 Newport Center Drive, Newport Beach, CA 92660, Attention: Risk Selection
Department.
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 such person to criminal and civil penalties.
AP9750 -4- 15-20409-00
<PAGE>
- --------------------------------------------------------------------------------
TEMPORARY INSURANCE AGREEMENT ACKNOWLEDGEMENT
================================================================================
I (We) acknowledge receiving a copy of the Temporary Insurance Agreement and
understand and agree to the terms and conditions as stipulated in that document.
Amount submitted with application $________
================================================================================
AUTHORIZATION TO OBTAIN INFORMATION
================================================================================
I (We) authorize any physician, medical practitioner, hospital, clinic, other
medical or medically related facility, insurance company, the Medical
Information Bureau, Inc., consumer reporting agency or employer to release to
Pacific Mutual Life Insurance Company, its subsidiaries, its reinsurer(s) or its
legal representative any information they may have as to diagnosis, treatment
and prognosis of any physical or mental condition including drug and/or alcohol
abuse and/or any other information about me or my spouse.
I (We) understand that any information obtained will be used to determine
eligibility for insurance and will not be released to any person or organization
except reinsurer(s), the Medical Information Bureau, Inc., and other persons or
organizations performing business or legal services in connection with my (our)
application, or as may be otherwise lawfully required, or as I (we) may further
authorize. I (We) also understand that I (we) may revoke this authorization as
it applies to drug and/or alcohol abuse information at anytime, except to the
extent it will not affect any action taken or information released prior to the
revocation. Such revocation may cause the denial of this application. I (We)
know that I (we) may request to receive a copy of this authorization. I (We)
also acknowledge receipt of Disclosure Notice to Proposed Insured(s) for
Insurance.
A photographic copy of this Authorization shall be as valid as the original and
shall be valid for two years from the date shown below.
================================================================================
DECLARATIONS
================================================================================
I represent that the foregoing answers and statements contained in this
application are correctly recorded, complete, and true to the best of my
knowledge and belief. I understand that:
1. EXCEPT AS OTHERWISE PROVIDED IN ANY TEMPORARY INSURANCE AGREEMENT, NO
INSURANCE WILL TAKE EFFECT BEFORE THE POLICY FOR SUCH INSURANCE IS DELIVERED
AND THE FIRST PREMIUM PAID DURING THE LIFETIME(S) AND BEFORE ANY CHANGE IN
THE HEALTH OF THE PROPOSED INSURED(S). UPON SUCH DELIVERY AND PAYMENT,
INSURANCE WILL TAKE EFFECT IF THE ANSWERS AND STATEMENTS IN THIS APPLICATION
ARE THEN TRUE.
2. Acceptance of a life insurance policy will be ratification of any
administrative change with respect to such policy made by Pacific Mutual
Life Insurance Company, the "Company," in the space entitled "Home Office
Endorsements," where permitted by state law. All other changes, including
policy type and amount of insurance, benefits, classification or age at
issue, must be accepted in writing.
3. No agent or medical examiner is authorized to make or modify contracts or to
waive any of the Company's rights or requirements.
4. I (We) have read and agree to the terms in the Authorization to Obtain
Information.
<PAGE>
Signed and Dated by the Proposed Insured(s) in:
On
- ----------------- -------------- ---------------------------------------
City State Mo. Day Year Signature of Proposed Insured
(or Parent if Proposed Insured is under age
16 or age 18 in Pennsylvania)
---------------------------------------
Signature of Proposed Joint Insured
---------------------------------------
Signature of Owner (if other than Proposed
Insured(s))
IF OWNER IS A CORPORATION, THE SIGNATURE AND TITLE OF ANY AUTHORIZED OFFICER
OTHER THAN THE PROPOSED INSURED IS REQUIRED AND THE FULL NAME OF THE CORPORATION
MUST BE SHOWN.
I certify that I have truly and accurately recorded hereon the information
supplied.
- ----------------------------- ----------------------------------
Signature of Soliciting Agent Please Print Soliciting Agent Name
- -----------------------------
State License Number
AP9750 -5- 15-20409-00
<PAGE>
NEWBS APPLC
PACIFIC MUTUAL
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
SUPPLEMENT TO APPLICATION FOR
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
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 such person to criminal and civil penalties.
SUPPLEMENT TO APPLICATION NUMBER: ____________________ PLEASE PRINT USING DARK
INK
SECTION A PROPOSED INSURED(S) INFORMATION
1. Name of Proposed Insured
2. Age
3. Date of Birth
4. Sex
5. Height ____ ft ____ in
6. Weight _____ lbs
7. Name of Proposed Joint Insured
8. Age
9. Date of Birth
10. Sex
11. Height ____ ft ____ in
12. Weight ______lbs
SECTION B ADDITIONAL UNDERWRITING - IF ANY QUESTION IS ANSWERED YES,
PLEASE GIVE DETAILS IN SECTION C
Proposed
Proposed Joint
Insured Insured
Yes No Yes No
--- --- --- ---
13. During the past 5 years, have you consulted a physician or visited a clinic
or hospital as a patient?
14. Have you had insurance offered with a rated premium?
15. Do you plan to travel or reside outside the United States? (If yes, state
when, where, how long)
16. Have you flown in the past 5 years as a pilot or student pilot? (If yes,
give details)
17. Have you participated in the past 5 years in any type of vehicle racing, sky
or scuba diving or hang gliding? (If yes, give details)
18. Have you in the past 5 years had motor vehicle moving violations or driver's
license suspended? (If yes, give date, violation, license number and state)
19. During the past 5 years, have you been treated by a member of the medical
profession for a heart murmur, high blood pressure or other heart, blood or
circulatory disorder, or diabetes (whether or not on insulin)?
20. During the past 5 years, have you been treated by a member of the medical
profession for convulsions, brain or spinal cord disorders?
21. During the past 5 years, have you been treated by a member of the medical
profession for any disease of the bones, lymph glands, stomach, intestines
or any immune disorder?
<PAGE>
SECTION C GIVE COMPLETE DETAILS INCLUDING NAMES AND ADDRESSES OF DOCTORS AND
HOSPITALS
<TABLE>
<CAPTION>
QUES. NO. Proposed Insured Proposed Joint Insured
<S> <C> <C>
- ---------------- ---------------------------- ------------------------------
- ---------------- ---------------------------- ------------------------------
- ---------------- ---------------------------- ------------------------------
- ---------------- ---------------------------- ------------------------------
</TABLE>
DELCARATIONS/DELIVERY RECEIPT
THE ABOVE STATEMENTS ARE TRUE AND COMPLETE TO THE BEST OF MY KNOWLEDGE AND
BELIEF. I AGREE THAT SUCH STATEMENTS AND ANSWERS SHALL BE A PART OF THE
APPLICATION.
THE OWNER ACKNOWLEDGES RECEIPT OF POLICY NUMBERED:
--------------------------
DATED AT on
-------------------------------- -----------------------------------
CITY STATE MONTH DAY YEAR
X X
--------------------------------- ----------------------------------------
SIGNATURE OF PROPOSED INSURED SIGNATURE OF PROPOSED JOINT INSURED
X X
--------------------------------- ----------------------------------------
SIGNATURE OF OWNER IF OTHER THAN SIGNATURE OF AGENT
PROPOSED INSURED
WHITE - HOME OFFICE COPY YELLOW - POLICYOWNER COPY PINK - AGENT COPY
AP9750-SUPP 15-20433-00
<PAGE>
EXHIBIT 99.3
[Logo of Pacific Mutual]
October 8, 1996
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Post Office Box 9000
Newport Beach, California 92660
Dear Sirs:
In my capacity as Senior Vice President and General Counsel of Pacific Mutual
Life Insurance Company ("Pacific Mutual") I, or attorneys employed by Pacific
Mutual under my general supervision, have supervised the establishment of
Pacific Select Exec Separate Account of Pacific Mutual Life Insurance Company
which has been authorized by resolutions of the Board of Directors of Pacific
Mutual adopted November 20, 1986 and November 22, 1989 and Memoranda dated May
12, 1988 and January 26, 1993 concerning Pacific Select Exec Separate Account as
the separate account for assets applicable to Pacific Select Estate Maximizer
Modified Single Premium Variable Universal Life Insurance Policies ("Policies"),
pursuant to the provisions of Section 10506 of the Insurance Code of the State
of California. Moreover, I have been associated with the preparation of the
Registration Statement on Form S-6 ("Registration Statement") filed by Pacific
Mutual and Pacific Select Exec Separate Account with the Securities and Exchange
Commission (File No. 33-57908 and File No. 811-5563), under the Securities Act
of 1933, as amended, for the registration of interests in the Pacific Select
Exec Separate Account funding the Policies.
I have made such examination of the law and examined such corporate records and
such other documents as in my judgment are necessary and appropriate to enable
me to render the following opinion that:
1. Pacific Mutual has been duly organized under the laws of the State
of California and is a validly existing corporation.
2. Pacific Select Exec Separate Account is duly created and validly
existing as a separate account, pursuant to the aforesaid provisions
of California law.
3. The portion of the assets to be held in Pacific Select Exec
Separate Account equal to the reserves and other liabilities under the
Policies is not chargeable with liabilities arising out of any other
business Pacific Mutual may conduct, pursuant to the aforesaid
provision of California law.
4. The Policies have been duly authorized by Pacific Mutual and, when
issued as contemplated by the Registration Statement, will constitute
legal, validly issued and binding obligations of Pacific Mutual,
except as limited by bankruptcy and insolvency laws affecting the
right of creditors generally.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ DAVID R. CARMICHAEL
- -----------------------
David R. Carmichael
Senior Vice President and
General Counsel
DRC/kjh
PACIFIC MUTUAL LIFE INSURANCE COMPANY
700 Newport Center Drive, Newport Beach, California 92660
Telephone (714) 640-3011
<PAGE>
EXHIBIT 99.6A
INDEPENDENT AUDITOR'S CONSENT
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
We hereby consent to the use in this Registration Statement for Pacific Select
Estate Maximizer on Form S-6 of our report dated February 16, 1996 related to
Pacific Select Exec Separate Account and of our report dated February 23, 1996
related to Pacific Mutual Life Insurance Company appearing in the Prospectus,
which is a part of such Registration Statement.
We also consent to the reference to us under the headings of "Independent
Accountants" and "Financial Statements" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
October 11, 1996
<PAGE>
EXHIBIT 99.6(B)
[LETTERHEAD OF DECHERT PRICE & RHOADS]
October 9, 1996
Board of Directors
Pacific Mutual Life Insurance
Company
700 Newport Center Drive
Newport Beach, California 92660
Re: Registration Statement on Form S-6 for Interests in Pacific
Select Exec Separate Account of Pacific Mutual Life Insurance
Company under the Pacific Select Estate Maximizer Modified Single
Premium Variable Life Insurance Policies
-----------------------------------------------------------------
Dear Sirs and Madams:
We hereby consent to the reference to our firm under the caption
"Legal Matters" in the Prospectus comprising a part of the above-referenced
Registration Statement.
Very truly yours,
/s/ DECHERT PRICE & RHOADS
-----------------------------
Dechert Price & Rhoads
<PAGE>
EXHIBIT 99.7
[LETTERHEAD OF PACIFIC MUTUAL LIFE INSURANCE COMPANY]
October 4, 1996
PACIFIC MUTUAL LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 92660
To whom it may concern:
In my capacity as Assistant Vice President of the Product Design Department of
Pacific Mutual Life Insurance Company, I have provided actuarial advice
concerning:
The preparation of the Registration Statement on Form S-6 filed by Pacific
Mutual Life Insurance Company with the Securities and Exchange Commission under
the Securities Act of 1933 with respect to variable life insurance policies (the
"Registration Statement") and the preparation of the policy forms for the
variable life insurance policies described in the Registration Statement (the
"Policies").
It is my professional opinion that:
The illustration of death benefits, cash values and accumulated premiums shown
in the Appendix to the prospectus, based on the assumptions stated in the
illustrations and on two pages immediately preceding the illustrations, 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 correspondingly more
favorable to the prospective purchaser of the policies at age 60 in the
underwriting classes illustrated than to prospective purchasers of Policies at
other ages or underwriting classes.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ DARAGH O'SULLIVAN
-------------------------
Daragh O'Sullivan, FSA
Assistant Vice President
<PAGE>
EXHIBIT 99.8
PACIFIC MUTUAL LIFE INSURANCE COMPANY'S
DESCRIPTION OF ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR POLICIES PURSUANT TO
RULE 6e-3(T)(b)(12)(iii)
This document sets forth the administrative procedures that will be
followed by Pacific Mutual Life Insurance Company ("Pacific Mutual") in
connection with the issuance of its Pacific Select Estate Maximizer Modified
Single Premium Variable Life Insurance Policy ("Policy"), the transfer of assets
held under the Policies, and the redemption by Policy owners of their interests
in said Policies.
I. PURCHASE AND RELATED TRANSACTIONS
A. Premium Schedules and Underwriting Standards
--------------------------------------------
The Policy is a modified single premium variable life insurance policy.
The Policy provides lifetime insurance protection on the life of the insured
named in the Policy, with a death benefit payable when the insured dies while
the Policy is in force. In the case of a last survivor Policy, the Policy
provides lifetime insurance protection on the lives of two insureds named in the
Policy, with a death benefit payable when the last surviving insured dies while
the Policy is in force. The Policy will be offered and sold pursuant to an
established mortality structure and underwriting standards in accordance with
state insurance laws which prohibit unfair discrimination among Policy owners,
but allow cost of insurance rates to be based upon factors such as age, health
or occupation.
The initial premium to purchase a Policy must be equal to 80% or 90% or
100% of the Policy's guideline single premium, which will be based upon the
Policy's face amount and the age, gender, and underwriting classes of the
insured(s). Thereafter, a Policy owner may make additional premium payments.
However, additional premium payments will be subject to three restrictions noted
under "Additional Premium Payments", Section I.C. on page 2 of this document.
B. Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application for a Policy, Pacific Mutual will
follow certain insurance underwriting (i.e., evaluation of risk) procedures
----
designed to determine whether the proposed insureds are insurable. This process
may involve verification procedures and may require that further information be
provided by the applicant before determination can be made. Pacific Mutual will
first become obligated under a Policy when the total initial premium is received
or on the date the application is accepted by Pacific Mutual, whichever is
later.
After the Policy is issued, insurance coverage under the Policy will be
deemed to have begun as of the Policy date. The Policy date is usually the date
the premium is received at Pacific Mutual's home office. The Policy date is the
date used to determine Policy years, Policy months, and Policy monthly,
quarterly, semi-annual and annual anniversaries.
1
<PAGE>
C. Additional Premium Payments
---------------------------
The Policy is a flexible premium policy, and it provides flexibility to pay
premiums at the Policy owner's discretion; however, the Policy owner is not
required to pay additional premiums.
Payment of the initial premium will not guarantee that a Policy will remain
in force. Instead, the duration of the Policy depends upon the Policy's
accumulated value. Even if additional premiums are paid, the Policy will lapse
any time accumulated value less Policy debt less surrender charges is
insufficient to pay the current monthly deduction and a grace period expires
without sufficient payment. Any premium payment must be for at least $1,000.00.
Pacific Mutual also may reject or limit any premium payment that would result in
an immediate increase in the net amount at risk under the Policy, although such
a premium may be accepted with satisfactory evidence of insurability. Any
additional premium payment that causes the Policy to fail to qualify as life
insurance under the Internal Revenue Code will be limited or returned. Any
additional premium payment that causes a Policy that was not a modified
endowment contract, as defined in the Internal Revenue Code, to become one, will
be returned, unless the Policy owner specifies otherwise in writing.
D. Premium Allocation
------------------
A Policy owner may allocate premiums among the variable accounts and/or the
fixed account. When an application is approved and a Policy is issued, the
Accumulated Value will be automatically allocated according to the Policy
owner's instructions in the application or more recent instructions if any
(except for amounts allocated to the Loan Account to secure any Debt). The
initial allocation must be made in the application for the Policy. During the
free-look period (a limited period of time during which the Policy owner may
return and cancel the Policy for a full refund of premiums paid (Free Look
Right)), all premiums are allocated to the Money Market Variable Account. The
accumulated value is allocated according to the Policy owner's instructions the
later of 15 days after the Policy is issued or 45 days after the application is
signed (the Free Look Transfer Date).
Additional premium payments will be allocated among the investment
alternatives according to the Policy owner's instructions (after the Free Look
Transfer Date). A Policy owner may change the allocation of accumulated value
by submitting a proper written request to Pacific Mutual's home office.
E. Reinstatement
-------------
Pacific Mutual will reinstate a lapsed Policy (see "Policy Lapsation,"
Section III.C. on page 5 of this document) at any time within three years after
the end of the grace period, provided Pacific Mutual receives the following: (1)
a written application of the Policy owner; (2) evidence of insurability
satisfactory to Pacific Mutual for each insured; and (3) payment of all monthly
charges and deductions that were due and unpaid during the grace period, and
payment of a premium at least equal to three times the most recent monthly
deduction.
2
<PAGE>
When the Policy is reinstated, the accumulated value will be equal to the
accumulated value on the date of the lapse subject to the following: (1) if the
Policy is reinstated after the first monthly payment date following lapse, the
accumulated value will be reduced by the amount of Policy debt on the date of
lapse and no Policy debt will exist on the date of reinstatement; (2) if the
Policy is reinstated on the monthly payment date next following lapse, any
Policy debt on the date of lapse will also be reinstated; and (3) no interest on
amounts held in Pacific Mutual's Loan Account to secure Policy debt will be paid
or credited between lapse and reinstatement.
Reinstatement will be effective as of the monthly payment date on or next
following the date of approval by Pacific Mutual, and accumulated value minus
Policy debt will be allocated among the variable accounts and the fixed account
in accordance with the Policy owner's current premium allocation instructions.
F. Policy Loans
------------
A Policy owner may borrow from Pacific Mutual up to 50% of the accumulated
value in the first Policy year, and thereafter an amount up to the greater of
(1) 100% of accumulated value allocated to the fixed account and 90% of the
Policy's accumulated value allocated to the variable accounts, or (2) 98% of the
excess of the Policy's accumulated value over 12 times the current monthly
deduction. The maximum amount is reduced by the amount of existing debt and by
the surrender charge that would be imposed if the Policy were surrendered on the
date the loan is taken. The minimum loan that may be taken is $500. A Policy
is the only security required for a loan.
When a Policy owner takes a loan, an amount equal to the loan is
transferred out of the Policy owner's accumulated value in the variable accounts
and the fixed account on a proportional basis, unless the Policy owner instructs
Pacific Mutual otherwise.
The interest rate on loans is 6.00% for years one through ten, and 5.00%
thereafter. Pacific Mutual will credit interest monthly on amounts held in the
Loan Account to secure the loan at an annual rate of 4.5%. The owner may repay
all or part of the loan at any time while the Policy is in force. If not
repaid, the Policy debt will reduce the amount of death proceeds paid upon the
death of the surviving insured, the cash surrender value paid upon surrender, or
the refund of premium upon exercise of the free-look right.
Preferred loans will be available, subject to the limitations described
above, up to the excess of the accumulated value over all premiums paid. The
amount of all loans considered Preferred will be redetermined (increased or
decreased) on each Policy Anniversary. Interest rates on Preferred loans are
5.25% for years one through ten, and 4.75% thereafter.
A loan may affect the length of time the Policy remains in force. The
Policy will lapse when accumulated value minus Policy debt less surrender
charges is insufficient to cover the monthly deduction against the Policy's
accumulated value on any monthly payment date and the minimum payment required
is not made during the grace period. Moreover, the Policy may enter the grace
3
<PAGE>
period more quickly when a loan is outstanding, because the loaned amount is not
available to cover monthly deductions.
II. TRANSFER AMONG INVESTMENT DIVISIONS
The Pacific Select Exec Separate Account (the "Separate Account") is a
separate investment account of Pacific Mutual used to support the variable death
benefits and policy values of Pacific Mutual's life insurance policies. The
Separate Account currently is divided into variable accounts, each of which
invest in shares of a corresponding portfolio of an underlying mutual fund that
is registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 as an open-end management investment company of the series
type.
A Policy owner may allocate accumulated value among the variable accounts
in any way he or she chooses. No transfers are allowed during the grace period
if the required premium has not been paid. There is currently no charge imposed
upon transfers, and no limit to the number and frequency of transfers permitted.
Accumulated value may also be transferred from the variable accounts to the
fixed account. However, after the first eighteen months such a transfer will
only be permitted in the Policy month preceding a Policy anniversary. Transfers
from the fixed account to the variable account are also permitted, subject to
the following restrictions: (1) the Policy owner may not make more than one
transfer from the fixed account to the variable accounts in any 12-month period;
and (2) a Policy owner may transfer no more than the greater of 25% of the
Accumulated Value in the Fixed Account or $5,000.
III. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Net Cash Surrender Value
--------------------------------------
A Policy owner can make withdrawals of the net cash surrender value of the
Policy starting on the first Policy anniversary. A partial withdrawal may
reduce the face amount under the Policy.
A withdrawal must be for at least $1,000, and the Policy's net cash
surrender value after the withdrawal must be at least $10,000. If there is any
Policy debt, the maximum withdrawal amount is limited to the excess, if any, of
the cash surrender value immediately prior to the withdrawal over the result of
the Policy debt divided by 90%.
When a partial withdrawal is made the death benefit under the Policy is
decreased in proportion to the reduction in accumulated value caused by the
withdrawal and the face amount may also be reduced. The face amount decrease
will be limited so that: (1) the decrease does not exceed the excess, if any, of
the original face amount over the death benefit after the withdrawal, and (2)
the Policy continues to be a life insurance contract under the Internal Revenue
Code.
4
<PAGE>
Withdrawals in the first nine policy years may be subject to surrender
charges. Surrender charges will be imposed, at rates shown in the Policy, on
the amount of the withdrawal deemed to be initial premium returned. For the
purpose of calculating surrender charges only, a withdrawal is taken from the
available Free Withdrawal Amount, if any, first, then from initial premium, from
additional premium next, and from remaining Policy earnings last. The Free
Withdrawal Amount is the lesser of: (1) the accumulated value less premiums paid
plus prior withdrawals of premium, and (2) 10% of the initial premium. Only one
withdrawal from the Free Withdrawal Amount is available in any Policy year. If
there is no Free Withdrawal Amount at the time of the first withdrawal in a
Policy year, the next withdrawal in the same Policy year will be considered the
first for this purpose.
B. Death Claims
------------
Upon receipt of satisfactory proof of death of the insured (or both
insureds, in the case of a last survivor Policy), Pacific Mutual will pay to a
named beneficiary death benefit proceeds, either in a lump sum or under a
payment plan offered under the Policy. The proceeds will be the death benefit
under the Policy, plus any insurance proceeds provided by rider, reduced by
adjustments for any outstanding Policy debt (and, if in the grace period, any
overdue charges), and any requested and due withdrawals.
The death benefit will be the greater of accumulated value multiplied by a
specified death benefit percentage, or the face amount of the Policy. The
specified death benefit percentages vary according to the age of the insured (or
younger insured in the case of a last survivor Policy), and are shown in a table
in the Policy. Because the specified percentage is applied to a Policy owner's
accumulated value, an increase in accumulated value may increase the death
benefit. However, because the death benefit will never be less than the face
amount while the Policy is in force, a decrease in the accumulated value may
decrease the death benefit but never below the face amount while the Policy is
in force.
C. Policy Lapsation
----------------
If the accumulated value less Policy debt less the surrender charges that
would be imposed if the Policy were surrendered of a Policy is insufficient to
cover deductions and charges on a monthly payment date, Pacific Mutual will give
written notice to the Policy owner that if an amount shown in the notice (which
will be sufficient to cover the deduction amount(s) due) is not paid within 61
days (the "grace period"), the Policy owner faces a danger of lapse. The Policy
will remain in force through the grace period, but if no payment is forthcoming,
it will terminate at the end of the grace period. In order to avoid termination,
the Policy owner must pay the amount by which the deductions and charges due on
the monthly payment date exceeded the accumulated value less debt less surrender
charges, and three times the charges and deductions due on the monthly payment
date in which the insufficiency occurred.
If the required payment is made during the grace period, such payment will
be allocated among the variable accounts and the fixed account in accordance
with the Policy owner's allocation
5
<PAGE>
instructions. If the insured (or surviving insured, in the case of a last
survivor Policy) dies during the grace period, the death benefit proceeds will
equal the amount of the death benefit immediately prior to the commencement of
the grace period, reduced by any unpaid monthly deductions and charges dues and
any Policy debt.
A lapsed Policy may be reinstated at any time within three years after the
end of the grace period. See "Reinstatement," Section I.E. on page 2 of this
document.
D. Policy Loans
------------
See Section I.F. on page 3 of this document.
6
<PAGE>
EXHIBIT 99.9
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9/13/94 Thomas C. Sutton
Chairman of the Board
and Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 1/3/95 Glenn S. Schafer
Director and President
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9-13-94 Edward Byrd
Controller
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9-15-94 Harry G. Bubb
Director and
Chairman Emeritus
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9/13/94 Richard M. Ferry
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9-16-94 Donald E. Guinn
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9/15/94 Ignacio E. Lozano, Jr.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9-14-94 Charles A. Lynch
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: Sept 14, 1994 Dr. Allen W. Mathies, Jr.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: Sept 15, 1994 Charles D. Miller
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 9/15/94 Donn B. Miller
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: 6/23/95 J. Fernando Niebla
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: Sept 14, 1994 Susan Westerberg Prager
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: Sept. 14, 1994 James R. Ukropina
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: Sept. 26, 1994 Raymond L. Watson
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his/her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: 9/9/96 /s/ JACQUELINE C. MORBY
------ -----------------------
Jacqueline C. Morby
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane N.
Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis Sandlaufer his/her true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him/her in his/her name, place, and stead, in any and all
Registration Statements applicable to Pacific Select Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Exec Separate Account of Pacific
Mutual Life Insurance Company, Pacific Select Variable Annuity Separate Account
of Pacific Mutual Life Insurance Company and Separate Account A of Pacific
Mutual Life Insurance Company and any amendments or supplements thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his/her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: 9/11/96 /s/ RICHARD M. ROSENBERG
------- ------------------------
Richard M. Rosenberg
Director
