<PAGE>
As filed with the Securities and Exchange Commission on March 25, 1996
Registration No. 33-57908
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4 TO
FORM 485B24F
FOR REGISTRATION 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
P.O. Box 9000
Newport Beach, California 92660
(Address of Depositor's Principal Executive Office)
______________________________________________________________________________
Sharon A. Cheever
Vice President and Investment
Counsel of Pacific Mutual Life
Insurance Company
700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92660
(Name and Address of Agent for Service of Process)
Copies to:
Jeffrey S. Puretz, Esq.
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, D.C. 20005
______________________________________________________________________________
It is proposed that this filing will become effective on April 1, 1996 pursuant
to paragraph (b) of Rule 485.
Title of securities being registered: Interests in the Separate Account under
Pacific Select Choice Flexible Premium Variable Life Insurance Policies.
Filing fee: None
The Registrant has registered 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, on or before February 28, 1997.
<PAGE>
Pacific Select Exec Separate Account of Pacific Mutual
Life Insurance Company
Pacific Select Choice Flexible Premium
Variable Life Insurance Policies
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)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
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 Pacific Mutual Life
underwriter Insurance Company
5. State of organization of trust Pacific Select Exec
Separate Account
6. Execution and termination of trust Pacific Select Exec
agreement 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
<PAGE>
securities The Policy
(b) Cumulative or distributive
securities The Policy
(c) Conversion, Transfer, etc. Transfer of Accumulated
Value; Policy Loans;
Surrender; Partial
Withdrawal Benefit;
Systematic
Withdrawals; Right to
Convert Policy
(d) Periodic payment plan N/A
(e) Voting rights Voting on Fund Shares
(f) Notice to security holders 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 fees, etc. Charges and Deductions
(e) Certain other profits or
benefits The Policy
<PAGE>
(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
16. Acquisition and disposition of Introduction; Pacific
underlying securities Select Exec Separate
Account; The Policy
17. Withdrawal or redemption Transfers of
Accumulated Value;
Policy Loans;
Surrender; Partial
Withdrawals
18.(a) Receipt, custody and dis-
position of income The Policy
(b) Reinvestment of
distributions N/A
(c) Reserves or special funds N/A
(d) Schedule of distributions N/A
19. Records, accounts and reports Reports to Owners
20. Certain miscellaneous provisions
of trust agreement:
(a) Amendment N/A
(b) Termination N/A
(c) and (d) Trustees, removal and
successor N/A
(e) and (f) Depositors, removal
and successor N/A
21. Loans to security holders Policy Loans
<PAGE>
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 More about Pacific
depositor 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
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
<PAGE>
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 See Items 13(a) and
underwriters 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
<PAGE>
(b) Schedule as to offering
price Charges and Deductions
(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 (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 Pacific Mutual Life
securities Insurance Company;
The Policy
52.(a) Provisions of trust agreement
with respect to selection or
elimination of under- Substitution of
lying securities Investments
(b) Transactions involving elimi-
nation of underlying Substitution of
securities Investments
(c) Policy regarding substitution
or elimination of under- See Items 13(a) and
lying securities 52(a)
<PAGE>
(d) Fundamental policy not other-
wise covered N/A
53. Tax status of trust Federal Income Tax
Considerations
VIII. Financial and Statistical Information
54. Trust's securities during last
ten years N/A
55. N/A
56. Certain information regarding peri-
odic payment plan certificates Premiums
57. N/A
58. N/A
59. Financial statements (Instruc-
tion 1(c) of "Instructions as
to the Prospectus" of Form
S-6) Financial Statements
<PAGE>
[LOGO of PACIFIC SELECT CHOICE]
Flexible Premium Variable Universal Life
PROSPECTUSES FOR
PACIFIC SELECT CHOICE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY
PACIFIC MUTUAL LIFE INSURANCE COMPANY
DATED APRIL 1, 1996
--------------
PACIFIC SELECT FUND
DATED APRIL 1, 1996
<PAGE>
PROSPECTUS
PACIFIC SELECT CHOICE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
ISSUED BY PACIFIC MUTUAL LIFE INSURANCE
COMPANY
700 NEWPORT CENTER DRIVE
[LOGO of PACIFIC SELECT CHOICE] NEWPORT BEACH, CALIFORNIA 92660
1-800-800-7681
This prospectus describes Pacific Select Choice--a Flexible Premium
Variable Life Insurance Policy (individually, the "Policy," and
collectively, the "Policies") offered by Pacific Mutual Life Insurance
Company ("Pacific Mutual," "we," "us," "you," or "our"). The Policy, for so
long as it remains in force, provides lifetime insurance protection on the
Insured named in the Policy through the Maturity Date. The Policy permits
the Policy Owner ("Owner," "you," or "your"), subject to certain
restrictions, to vary the frequency and amount of premium payments and to
decrease the death benefit payable under the Policy. A Policy may also be
surrendered for its Cash Surrender Value less outstanding Policy Debt.
Net premium payments may be allocated at your discretion to one or more of
the Investment Options available to you. Each of the twelve Variable
Investment Options ("Variable Accounts") is a subaccount of our separate
account called the Pacific Select Exec Separate Account (the "Separate
Account"). Any portion of a net premium allocated to one or more of the
Variable Accounts is invested in the corresponding Portfolios of the Pacific
Select Fund (the "Fund"): 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 Index Portfolio, the International Portfolio and the Emerging Markets
Portfolio. A fixed option called the Fixed Account is also available. Your
Accumulated Value in the Fixed Account will accrue interest at an interest
rate that is guaranteed by Pacific Mutual.
To the extent that all or a portion of net premium payments are allocated
to the Separate Account, the Accumulated Value under the Policy will vary
based upon the investment performance of the Variable Accounts to which the
Accumulated Value is allocated. No minimum amount of Accumulated Value is
guaranteed.
The Policy permits you to have one or two elections in determining the
death benefit under a Policy. First, you will choose from two death benefit
qualification tests--the cash value accumulation test or the guideline
premium test. If you choose the guideline premium test, the Policy also
permits you to choose from two death benefit options: under one option, the
death benefit remains fixed at the Face Amount you choose (or, if greater,
it equals Accumulated Value multiplied by a certain percentage) (Option A);
under the other option, the death benefit equals the Face Amount plus
Accumulated Value (or, if greater, Accumulated Value multiplied by a certain
percentage) (Option B). Under any election or option, for so long as the
Policy remains in force, the death benefit will never be less than the
current Face Amount.
A Policy may be returned according to the terms of its Free-Look Right
(see "Right to Examine a Policy--Free-Look Right," page 23), during which
time net premium payments will be allocated to the Money Market Variable
Account.
It may not be advantageous to replace existing insurance with the Policy.
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 33.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCU-
RACY 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: APRIL 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
IMPORTANT TERMS............................................................ 4
SUMMARY OF THE POLICY...................................................... 6
Purpose Of The Policy.................................................... 6
Policy Values............................................................ 6
The Death Benefit........................................................ 6
Premium Features......................................................... 7
Investment Options....................................................... 7
Transfer Of Accumulated Value............................................ 7
Policy Loans............................................................. 7
Free-Look Right.......................................................... 8
Surrender Right.......................................................... 8
Partial Withdrawal Benefit............................................... 8
Charges and Deductions................................................... 9
Tax Treatment Of Increases In Accumulated Value.......................... 10
Tax Treatment Of Death Benefit........................................... 10
The Fixed Account........................................................ 10
Contacting Pacific Mutual................................................ 10
INFORMATION ABOUT PACIFIC MUTUAL, THE SEPARATE ACCOUNT
AND THE FUND.............................................................. 11
Pacific Mutual Life Insurance Company.................................... 11
Pacific Select Exec Separate Account..................................... 11
The Pacific Select Fund.................................................. 11
The Investment Adviser................................................... 12
THE POLICY................................................................. 13
Application For A Policy................................................. 13
Premiums................................................................. 13
Allocation Of Net Premiums............................................... 14
Portfolio Rebalancing.................................................... 15
Dollar Cost Averaging Option............................................. 15
Transfer Of Accumulated Value............................................ 16
Death Benefit............................................................ 16
Changes In Guideline Premium Test Death Benefit Option................... 18
Change in Death Benefit by Pacific Mutual................................ 19
Decrease In Face Amount.................................................. 19
Policy Values............................................................ 19
Determination Of Accumulated Value....................................... 20
Policy Loans............................................................. 20
Benefits At Maturity..................................................... 21
Surrender................................................................ 21
Partial Withdrawal Benefit............................................... 22
Right To Examine A Policy--Free-Look Right............................... 23
Lapse.................................................................... 23
Reinstatement............................................................ 24
Right to Convert Policy.................................................. 24
CHARGES AND DEDUCTIONS..................................................... 25
Premium Load............................................................. 25
Sales Load Refund........................................................ 25
Deductions From Accumulated Value........................................ 25
Underwriting Surrender Charge............................................ 27
Withdrawal Fee........................................................... 27
Corporate and Other Purchasers........................................... 27
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Other Charges............................................................ 27
Guarantee Of Certain Charges............................................. 28
OTHER INFORMATION.......................................................... 28
Federal Income Tax Considerations........................................ 28
Charge For Pacific Mutual Income Taxes................................... 31
Voting On Fund Shares.................................................... 31
Disregard Of Voting Instructions......................................... 32
Confirmation Statements and Other Reports To Owners...................... 32
Substitution Of Investments.............................................. 32
Changes To Comply With Law............................................... 33
THE FIXED ACCOUNT.......................................................... 33
General Description...................................................... 33
Death Benefit............................................................ 34
Policy Charges........................................................... 34
Transfers, Surrenders, Withdrawals, And Policy Loans..................... 34
MORE ABOUT THE POLICY...................................................... 35
Ownership................................................................ 35
Beneficiary.............................................................. 35
The Contract............................................................. 35
Payments................................................................. 35
Assignment............................................................... 35
Errors On The Application................................................ 36
Incontestability......................................................... 36
Payment In Case Of Suicide............................................... 36
Participating............................................................ 36
Policy Illustrations..................................................... 36
Payment Plan............................................................. 36
Optional Insurance Benefits.............................................. 37
Life Insurance Retirement Plans.......................................... 37
Risks of Life Insurance Retirement Plans................................. 37
Distribution Of The Policy............................................... 38
MORE ABOUT PACIFIC MUTUAL.................................................. 40
Management............................................................... 40
State Regulation......................................................... 42
Telephone Transfer and Loan Privileges................................... 42
Legal Proceedings........................................................ 43
Legal Matters............................................................ 43
Registration Statement................................................... 43
Independent Accountants.................................................. 43
Financial Statements..................................................... 43
APPENDIX A................................................................. 66
APPENDIX B................................................................. 67
ILLUSTRATIONS.............................................................. 68
</TABLE>
----------------
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
<PAGE>
IMPORTANT TERMS
Accumulated Value--The total value of the amounts in the Investment Option for
the Policy as well as any amount set aside in the Loan Account to secure
Policy Debt as of any Valuation Date.
Age--The Insured's age as of his or her nearest 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.
Cash Surrender Value--The Accumulated Value less the underwriting surrender
charge.
Face Amount--The minimum death benefit for so long as the Policy remains in
force. The Face Amount may be decreased under certain circumstances.
Fixed Account--An account that is part of our General Account to which all or
a portion of net premium payments may be allocated for accumulation at a fixed
rate of interest (which may not be less than 4.0%) declared by us.
General Account--All of our assets other than those allocated to the Separate
Account or to any of our other segregated separate accounts.
Guideline Annual Premium--A hypothetical premium that is used in the
measurement of any sales load refund upon surrender or lapse of the Policy
during the first two years after issuance. The Guideline Annual Premium is
equal to the premium that would be payable under a Policy for one year if the
Policy Owner were to pay level annual premiums for the life of the Policy,
taking into account fees and charges under the Policy (including charges, if
any, for substandard risks and optional insurance benefits) and assuming net
investment earnings at an annual rate of 5% or, if greater, the rate or rates
guaranteed in the Policy at issuance.
Home Office--The Policy Benefits and Services Department at our main office at
700 Newport Center Drive, Newport Beach, California 92660.
Investment Option--A Variable Account or the Fixed Account.
Insured--The person upon whose life the Policy is issued and whose death is
the contingency upon which the death benefit proceeds are payable.
Loan Account--An account to which amounts are transferred from the Investment
Options as collateral for policy loans.
Maturity Date--The Policy Anniversary on which the Insured is Age 100. The
Maturity Date may be extended beyond Age 100 at your written request, in which
case reserves, cost of insurance rates, and any other calculations depending
on the Insured's Age will be based on Age 99.
Monthly Payment Date--The day each month on which the monthly deduction is due
against the Accumulated Value. The first Monthly Payment Date is the Policy
Date.
Net Cash Surrender Value--The Cash Surrender Value less Policy Debt.
Planned Periodic Premium--The premium determined by you as a level amount
planned to be paid at fixed intervals over a specified period of time.
Policy Date--The date used to determine the Monthly Payment Date, Policy
Months, 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, although it will never be the 29th, 30th, or 31st of any month.
The term "Issue Date" is substituted for Policy Date with respect to Policies
issued to residents of the Commonwealth of Massachusetts.
4
<PAGE>
Policy Debt--The unpaid loan balance including accrued loan interest charged.
Policy Owner, Owner, You or Your--The person who owns the Policy. The Policy
Owner will be the Insured 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.
Target Premium--A hypothetical premium that is used in the measurement of
sales load under the Policy. The Target Premium varies with the death benefit
election, the Age of the Insured at issue, and the sex of the Insured (unless
unisex rates are required by law). The Target Premium will be equal to or less
than the Guideline Annual Premium. The Target Premium is shown in the Policy.
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 Day, and Christmas Day. 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 on 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 ours 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 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 Index Variable Account, and International Variable Account and Emerging
Markets Variable Account are all subaccounts of the Pacific Select Exec
Separate Account.
5
<PAGE>
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 33 and in the Policy.
PURPOSE OF THE POLICY
The Policy offers you insurance protection on the life of the Insured through
the Maturity Date for so long as your Policy is in force. Like traditional
fixed life insurance, the Policy provides for a death benefit equal to its Face
Amount, accumulation of cash value, and surrender and loan privileges. Unlike
traditional fixed life insurance, the Policy offers a choice of investment
alternatives and an opportunity for your Policy's Accumulated Value and, if
elected by you and under certain circumstances, its death benefit to grow based
on investment results. The Policy is a flexible premium policy, so that, unlike
many other insurance policies and subject to certain limitations, you may
choose the amount and frequency of premium payments.
POLICY VALUES
You may allocate net premium payments among the various Variable Accounts
that are available to you and that invest in corresponding Portfolios of the
Pacific Select Fund. You may also allocate net premium payments to the Fixed
Account.
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, including the
death benefit election or option you select, 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 your net premiums and
Accumulated Value allocated to the Separate Account.
Your Policy will remain in force until the earliest of the Maturity Date, the
death of the Insured, or a full surrender of your Policy, unless, before any of
these events, Accumulated Value less Policy Debt is insufficient to pay the
current monthly deduction on a Monthly Payment Date and a Grace Period expires
without sufficient additional premium payment or loan repayment by you.
THE DEATH BENEFIT
You will have one or two elections in determining the death benefit under the
Policy. First, you will choose from two death benefit qualification tests--the
cash value accumulation test or the guideline premium test. Under the cash
value accumulation test, the death benefit will be equal to the Face Amount or,
if greater, Accumulated Value divided by the "net single premium" that would
purchase $1 of future benefits under your Policy. If you choose the guideline
premium test, the Policy also permits you to choose from two death benefit
options. Under Option A, the death benefit will be equal to the Face Amount of
your Policy or, if greater, Accumulated Value multiplied by a death benefit
percentage. Under Option B, the death benefit will be equal to the Face Amount
of your Policy plus the Accumulated Value (determined as of the end of the
Valuation Period during which the Insured dies) or, if greater, Accumulated
Value multiplied by a death benefit percentage. For a discussion of these
elections see "Death Benefit," page 16. If you choose the guideline premium
test you may change the death benefit option among Option A and Option B
subject to certain conditions. See "Death Benefit" and "Changes in Guideline
Premium Test Death Benefit Option," pages 16 and 18, respectively.
6
<PAGE>
PREMIUM FEATURES
We require an initial premium equal to at least 25% of an annual premium that
will be estimated by us. Thereafter, subject to certain limitations, you may
choose the amount and frequency of premium payments. The Policy, therefore,
provides you with the flexibility to vary premium payments to reflect varying
financial conditions.
When applying for a Policy, you will determine a Planned Periodic Premium
that provides for the payment of level premiums over a specified period of
time. You will receive a premium reminder notice, or listbill for multiple
policies, on an annual, semi-annual, or quarterly basis, or if a listbill, a
monthly basis, at your option; however, you are not required to pay Planned
Periodic Premiums. Premiums may be paid monthly under the Uni-check electronic
funds transfer plan where you authorize us to withdraw premiums from your
checking account each month.
The amount, frequency, and period of time over which you pay premiums may
affect whether or not your Policy will be classified as a modified endowment
contract, which is a type of life insurance contract subject to different tax
treatment for certain pre-death distributions. For more information on the tax
treatment of life insurance contracts, including those classified as modified
endowment contracts, see "Federal Income Tax Considerations," page 28.
Payment of the Planned Periodic Premiums will not guarantee that your Policy
will remain in force. Instead, the duration of your Policy depends upon your
Policy's Accumulated Value. Even if Planned Periodic Premiums are paid, your
Policy will lapse any time Accumulated Value less Policy Debt is insufficient
to pay the current monthly deduction and a Grace Period expires without
sufficient payment. Any premium payment must be for at least $50. We 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.
INVESTMENT 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. The Variable Accounts available to you invest
exclusively in shares of 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 Index
Portfolio, the International Portfolio, and the Emerging Markets Portfolio. See
"The Pacific Select Fund," page 11.
You may choose to allocate net premium payments among the twelve Variable
Accounts and the Fixed Account.
TRANSFER OF ACCUMULATED VALUE
You may transfer Accumulated Value among the Variable Accounts, and, subject
to certain other limitations, between the Variable Accounts and the Fixed
Account. Transfers may be made by telephone if a properly completed
Authorization For Telephone Requests has been filed at our Home Office. See
"Transfer of Accumulated Value," page 16.
POLICY LOANS
You may borrow from us an amount up to the greater of (1) 90% of your
Policy's Accumulated Value allocated to the Variable Accounts and 100% of
Accumulated Value allocated to the Fixed Account, less any underwriting
surrender charge, or (2) 100% of the product of (a X b/c - d) where (a) equals
your Policy's
7
<PAGE>
Accumulated Value less any surrender charge that would be imposed if your
Policy were surrendered on the date the loan is taken and less 12 times the
current monthly deduction; (b) equals 1 plus the annual loan interest rate
credited; (c) equals 1 plus the annual loan interest rate currently charged;
and (d) equals any existing Policy Debt. The minimum loan is $500. Your Policy
will be the only security required for a loan. See "Policy Loans," page 20.
The amount of any Policy Debt is subtracted from the death benefit or from
your Cash Surrender Value upon surrender. See "Policy Loans," page 20. Your
Policy will lapse when Accumulated Value less Policy Debt is insufficient to
cover the current monthly deduction on a Monthly Payment Date, and a Grace
Period expires without a sufficient premium or repayment of Policy Debt.
FREE-LOOK RIGHT
You may return the Policy within the Free-Look Period, which is 10 days after
you receive it (30 days if you reside in California and are age 60 or older),
10 days after we mail or deliver a notice of the right of withdrawal, or 45
days after the application for the Policy is signed, whichever is latest. In
the event you return your Policy within the Free-Look Period, except as
indicated below, we will refund any charges deducted from premiums received,
any net premiums received allocated to the Fixed Account, plus the sum of your
Policy's Accumulated Value allocated to the Variable Accounts as of the end of
the Valuation Period in which we receive your Policy, plus any Policy charges
and fees deducted from your Policy's Accumulated Value in the Variable
Accounts. We will allocate any net premiums received according to your
allocation instructions contained in the application, or more recent written
instructions, if any, when the application is approved and your Policy is
issued.
If you reside in a state where applicable law so requires, we will refund
premiums received to you if you choose to exercise the Free-Look Right. We will
allocate any net premiums received before the Free-Look Transfer Date to the
Money Market Variable Account. See "Allocation of Net Premiums," page 14.
SURRENDER RIGHT
You can surrender your Policy during the life of the Insured and receive its
Net Cash Surrender Value, which is equal to your Accumulated Value less the
underwriting surrender charge and less any outstanding Policy Debt. If your
Policy is surrendered during the first two years following its issuance, a
portion of the sales load paid under your Policy may be refunded to you. See
"Sales Load Refund," page 25.
PARTIAL WITHDRAWAL BENEFIT
A partial surrender benefit is available under your Policy on and after the
First Policy Anniversary. Under this Benefit, you may make "Partial
Withdrawals" of Net Cash Surrender Value. A Partial Withdrawal may decrease the
Face Amount on a Policy on which you have elected the cash value accumulation
test or the guideline premium test death benefit Option A, and will decrease
the death benefit if the death benefit is greater than the Face Amount under
any of the death benefit options or elections. See "Partial Withdrawal
Benefit," page 22. You may elect to receive systematic Partial Withdrawals
after the first Policy Year while the Policy is in force as described under
"Systematic Withdrawals," page 22.
Among other restrictions, Partial Withdrawals must be for at least $500, and
your Policy's Net Cash Surrender Value after the withdrawal must be at least
$500. No underwriting surrender charge will be assessed upon a Partial
Withdrawal. A $25 withdrawal fee will be deducted from your Policy's
Accumulated Value for each Partial Withdrawal. The Withdrawal Fee is currently
waived on each systematic withdrawal following the first systematic withdrawal.
8
<PAGE>
CHARGES AND DEDUCTIONS
Premium Load
A premium load is deducted from each premium payment under your Policy prior
to allocation of the net premium to your Accumulated Value. The premium load
consists of a sales load and a charge for state and local premium tax.
For purposes of assessing the sales load, premiums are measured in terms of
Target Premiums. The Target Premium is set forth in your Policy. The sales load
is based on Target Premiums and varies with the death benefit election. The
maximum sales load assessed upon the Target Premiums received under a Policy
are shown in the chart below:
<TABLE>
<CAPTION>
SALES LOAD UNDER OPTION A
AND CASH VALUE SALES LOAD UNDER
TARGET PREMIUMS ACCUMULATION TEST OPTION B
- --------------- ------------------------- ----------------
<S> <C> <C>
1 through 3.......................... 25% 30%
4 through 10......................... 4% 4%
11 and thereafter.................... 2% 2%
</TABLE>
The state and local premium tax charge currently is equal to 2.35% of each
premium.
Sales Load Refund
If a Policy is surrendered for its Net Cash Surrender Value or the Policy
lapses at any time during the first two years following its issuance, a portion
of the sales load paid under a Policy may be refunded. This refund will be paid
only for premiums paid in the first two years following issuance of the Policy.
We will refund the excess of the sales load charged over the sum of (1) 30% of
the premiums paid during the first years from issuance up to one Guideline
Annual Premium, plus (2) 10% of the premiums paid during the first years from
issuance that exceed one Guideline Annual Premium by up to one Guideline Annual
Premium, plus (3) 9% of actual premium payments paid during the first two years
from issuance in excess of two times the Guideline Annual Premium.
Deductions from Accumulated Value
A charge called the monthly deduction is deducted from your Policy's
Accumulated Value on each Monthly Payment Date. The monthly deduction consists
of the following items:
--Cost of Insurance: This monthly charge compensates us for providing life
insurance coverage for the Insured. The amount of the charge is equal to a
current cost of insurance rate multiplied by the net amount at risk under
your Policy at the beginning of the Policy Month.
--Administrative Charge: A monthly administrative charge is deducted equal
to $25 in each of the first 12 Policy Months and, after the first Policy
Year, $8.00 per month for Face Amounts of less than $100,000, and $5.00
per month for Face Amounts of $100,000 and less than $500,000. There is no
charge for Face Amounts of $500,000 or more. This charge is guaranteed not
to exceed $25 in each of the first 12 Policy Months and $10.00 per month
thereafter.
--Mortality and Expense Risk Charge: A monthly charge is deducted for
mortality and expense risks we assume. During the first ten Policy Years,
this charge is equal to .000625 multiplied by a Policy's Accumulated Value
in the Investment Options, which is equivalent to an annual rate of .75%
of such amount. During the 11th through 20th Policy Years, the charge is
equal to .000208333 multiplied by a Policy's Accumulated Value in the
Variable and Fixed Accounts, which is equivalent to an annual rate of .25%
of such amount. After the 20th Policy Year the charge reduces to 0%.
--Optional Insurance Benefits Charges: Charges for any optional insurance
benefits added to the Policy by rider will be included in the monthly
deduction or as otherwise specified in the rider and/or the Policy.
9
<PAGE>
Underwriting Surrender Charge
We will assess an underwriting surrender charge against Accumulated Value
upon surrender of your Policy until the tenth Policy Anniversary. The
underwriting surrender charge is equal to a specified amount that varies with
the Age of the Insured for each $1,000 of a Policy's Face Amount in accordance
with a schedule shown on page 27. The amount of the charge remains level for
five Policy Years. After the fifth Policy Year, the charge decreases by 1.666%
per month until it reaches zero at the end of the 120th Policy Month.
Withdrawal Fee
We will assess a $25 Withdrawal Fee against your Policy's Accumulated Value
when a Partial Withdrawal is made. The Withdrawal Fee is currently waived on
each systematic withdrawal following the first systematic withdrawal.
The operating expenses of the Separate Account are paid by us. Investment
advisory fees and operating expenses of the Fund are paid by the Fund. For a
description of these charges, see "Charges and Deductions," page 25.
TAX TREATMENT OF INCREASES IN ACCUMULATED VALUE
The Accumulated Value under your 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 you are deemed to be in receipt of a
distribution from your Policy. For information on the tax treatment of the
Policy and on the tax treatment of a surrender, a Partial Withdrawal, or a
Policy Loan, see "Federal Income Tax Considerations," page 28.
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, the death
benefit generally will be fully excludable from the gross income of the
Beneficiary under the Internal Revenue Code. See "Federal Income Tax
Considerations," page 28.
THE FIXED ACCOUNT
You may allocate all or a portion of net 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 4%. In addition, we may at our sole
discretion pay interest in excess of the guaranteed amount. See "The Fixed
Account," page 33.
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,
CA 92658-7500.
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, 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 the 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. We do not generally require a signature guarantee unless it
appears that your signature may have changed over time or due to other
circumstances. 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.
10
<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 over $44.2 billion of 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 over $116.6 billion. We have
been ranked according to assets as the 24th largest insurance carrier in the
nation for 1994.
The Principal Underwriter for the Policies is Pacific Mutual Distributors,
Inc. ("PMD") (formerly known as Pacific Equities Network). 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 ("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 Separate Account
supports the Policies as well as other variable life insurance policies issued
by Pacific Mutual. The assets in the Separate Account are kept separate from
the assets of our General Account and our other separate accounts.
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 variable life insurance 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. However, we may
transfer to our General Account any assets which exceed anticipated
obligations of the Separate Account. All obligations arising under the Policy
are general corporate obligations of Pacific Mutual. We may accumulate in the
Separate Account proceeds from various Policy charges and investment results
applicable to those assets.
The Separate Account was established on May 12, 1988 under California law
under the authority of our Board of Directors. 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 Variable Account invests exclusively in shares of a designated
Portfolio 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. Such registration does not involve supervision by the SEC of the
investments or investment policies of the Fund. The Fund currently offers
twelve separate Portfolios to the Separate Account. Each Portfolio pursues
different investment objectives and policies. We purchase 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.
11
<PAGE>
Shares of the Fund currently are offered only for purchase by our Separate
Accounts to serve as an investment medium for variable life insurance policies
and for variable annuity contracts issued by us and to a separate account of
Pacific Corinthian Life Insurance Company, a subsidiary of Pacific Mutual, to
serve as an investment medium for variable annuity contracts administered by
Pacific Corinthian. Shares of the Fund may also be sold in the future to
separate accounts of other insurance companies either affiliated or 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 OBJECTIVE (UNDER NORMAL CIRCUMSTANCES) PORTFOLIO MANAGER
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
Money Market Current income consistent Highest quality money Pacific Mutual
with preservation of capital market instruments
- -------------------------------------------------------------------------------------------------------------------
High-Yield Bond High level of current income Intermediate and long- Pacific Mutual
term, high-yielding,
lower and medium quality
(high risk) fixed-income
securities
- -------------------------------------------------------------------------------------------------------------------
Managed Bond Maximize total return Investment grade Pacific Investment
consistent with prudent marketable debt Management Company
investment management securities. Will
normally maintain an
average portfolio
duration of 3-7 years
- -------------------------------------------------------------------------------------------------------------------
Government Maximize total return U.S. Government Pacific Investment
Securities consistent with prudent securities including Management Company
investment management futures and options
thereon and high-grade
corporate debt
securities. Will
normally maintain an
average portfolio
duration of 3-7 years
- -------------------------------------------------------------------------------------------------------------------
Growth Growth of capital Common stock Capital Guardian Trust Company
- -------------------------------------------------------------------------------------------------------------------
Aggressive Equity Capital appreciation Stock of small- and Columbus Circle Investors
medium-sized companies
- -------------------------------------------------------------------------------------------------------------------
Growth LT Long-term growth of capital Common stock Janus Capital Corporation
consistent with the
preservation of capital
- -------------------------------------------------------------------------------------------------------------------
Equity Income Long-term growth of capital Dividend paying common J.P. Morgan Investment
and income stock Management Inc.
- -------------------------------------------------------------------------------------------------------------------
Multi-Strategy High total return Equity and fixed income J.P. Morgan Investment
securities Management Inc.
- -------------------------------------------------------------------------------------------------------------------
Equity Index Provide investment results Stocks included in the Bankers Trust Company
that correspond to the total S&P 500
return performance of
common stocks publicly traded
in the U.S.
- -------------------------------------------------------------------------------------------------------------------
International Long-term capital Equity securities of Templeton Investment Counsel, Inc.
appreciation corporations domiciled
outside the United
States
- -------------------------------------------------------------------------------------------------------------------
Emerging Markets Long-term growth of capital Common stocks of Blairlogie Capital Management
companies domiciled in
emerging market
countries
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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 ten 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.
12
<PAGE>
THE POLICY
The variable life insurance benefits provided by the Policies are funded
through the Policy Owner's Accumulated Value in the Separate Account and the
Fixed Account. The information included below describes the benefits,
features, charges, and other major provisions of the Policies.
APPLICATION FOR A POLICY
The Policy is designed to meet the needs of individuals and of corporations
that wish to provide coverage and benefits for key employees. Anyone wishing
to purchase the Policy may submit an application to us. A Policy can be issued
on the life of an Insured for Ages up to and including Age 80 with evidence of
insurability satisfactory to us. The Insured's Age is calculated as of the
Insured's birthday nearest the Policy Date. Acceptance is subject to our
underwriting rules, and we reserve the right to request additional information
and to reject an application.
Each Policy is issued with a Policy Date, which is the date used to
determine the Monthly Payment Date, Policy Months, Policy Years, and Policy
Monthly, Quarterly, Semi-annual and Annual Anniversaries. If the application
is accompanied by all or a portion of the initial premium and is accepted by
us, the Policy Date is the date the application and premium payment were
received at our Home Office, although the Policy Date will never be the 29th,
30th, or 31st of any month. If an application is not accompanied by all or a
portion of the initial premium payment, the Policy Date is the date the
application is accepted by us. We first become obligated under the Policy on
the date the total initial premium is received or on the date the application
is accepted, whichever is later. Any monthly deductions due will be taken on
the Monthly Payment Date on or next following the date we become obligated.
The initial premium must be received within 20 days after the Policy is
issued, although we may waive the 20 day requirement at our discretion. If the
initial premium is not received or the application is rejected by us, the
Policy will be cancelled and any partial premium received will be refunded.
Subject to our approval, a Policy may be backdated, but the Policy Date may
not be more than six months prior to the date of the application. Backdating
can be advantageous if the Insured's lower issue Age results in lower cost of
insurance rates. If the Policy is backdated, the minimum initial premium
required will include sufficient premium to cover the backdating period.
Monthly deductions will be made for the period the Policy Date is backdated.
Insureds are assigned to underwriting (risk) classes which are used in
calculating the cost of insurance charges. In assigning Insureds to
underwriting classes, we will normally use the medical or paramedical
underwriting method, which may require a medical examination of a proposed
Insured, although other forms of underwriting may be used when deemed
appropriate by us.
PREMIUMS
The Policy is a flexible-premium policy, and it provides considerable
flexibility, subject to the limitations described below, to pay premiums at
your discretion. We usually require you to pay a minimum initial premium equal
to at least 25% of the sum of the Policy's monthly deductions plus premium
load for the first year, which will be based upon your Policy's Face Amount
and the Age, smoking status, gender (unless unisex cost of insurance rates
apply, (see "Cost of Insurance," page 26)), and underwriting class of the
Insured. Thereafter, subject to the limitations described below, you may
choose the amount and frequency of premium payments. The Policy, therefore,
provides you with the flexibility to vary premium payments to reflect varying
financial conditions.
When applying for a Policy, you will determine a Planned Periodic Premium
that provides for the payment of level premiums over a specified period of
time. You will receive a premium reminder notice, or a listbill for multiple
policies, on an annual, semiannual, or quarterly basis, or, if a listbill, a
monthly basis, at your option; however, you are not required to pay Planned
Periodic Premiums. Premiums may be paid monthly under the Uni-check plan
electronic funds transfer where you authorize us to withdraw premiums from
your checking account each month. The minimum initial premium required must be
paid before the Uni-check plan will be
13
<PAGE>
accepted by Pacific Mutual. You may elect the day each month on which premiums
are paid under the Uni-check plan, provided the day elected is between the 4th
and the 28th day of the month. If you do not elect a payment day, the day on
which premiums are paid will be the Monthly Anniversary.
The amount, frequency and period of time over which you pay premiums may
affect whether the Policy will be classified as a modified endowment contract,
which is a type of life insurance contract subject to different tax treatment
for certain pre-death distributions than conventional life insurance
contracts. Accordingly, variations from the Planned Periodic Premiums on a
Policy that is not otherwise a modified endowment contract may result in the
Policy becoming a modified endowment contract for tax purposes.
In order for your Policy to avoid being treated as a modified endowment
contract, the sum of the premiums paid less a portion of any Partial
Withdrawals may not exceed the "seven pay premium" limit as defined in the
Internal Revenue Code. (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 had 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 Annual Anniversary of your
Policy, 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 Annual Anniversary.
Payment of the Planned Periodic Premium will not guarantee that your Policy
will remain in force. Instead, the duration of your Policy depends upon your
Policy's Accumulated Value. Even if Planned Periodic Premiums are paid, your
Policy will lapse any time Accumulated Value less Policy Debt is insufficient
to pay the current monthly deduction and a Grace Period expires without
sufficient payment. See "Lapse," page 23.
Any premium payment must be for at least $50. We 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. See "Cost of Insurance," page 26. If
satisfactory evidence of insurability is not received, the payment, or a
portion thereof, may be returned. 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 for Policy Owners electing the
guideline premium test.
Certain charges will be deducted from each premium payment. See "Charges and
Deductions," page 25. The remainder of the premium, known as the net premium,
will be allocated as described below under "Allocation of Net Premiums."
Except in Texas, additional payments will first be treated as repayments of
Policy Debt unless you request otherwise. Any portion of a payment that
exceeds the amount of Policy Debt will be applied as an additional premium
payment.
ALLOCATION OF NET PREMIUMS
In the application for your Policy, you select the Investment Options to
which net premium payments will be allocated. When the application is approved
and the Policy is issued, the Accumulated Value will be automatically
allocated according to your instructions contained in the application, or more
recent written instructions, if any (except for amounts allocated to the Loan
Account to secure any Policy loan). For residents of states that require a
refund of premium to an Owner who returns the Policy during the Free-Look
Period, net premiums received by us before the Free-Look Transfer Date will be
allocated to the Money Market Variable Account (except for amounts allocated
to the Loan Account to secure any Policy loan). The Free-Look Transfer Date is
the later of 15 days after the Policy is issued or 45 days after the
application is signed, or, if longer, upon receipt of the minimum initial
premium. After the Free-Look Transfer Date, net premiums will be allocated
according to your most recent instructions as of the end of the Valuation
Period in which the premiums are received at our Home Office. Available
Investment Options include the twelve Variable Accounts and the Fixed Account.
You may change the allocation of net premiums by submitting a proper written
request to our Home Office. Changes in net premium allocation instructions may
be made by telephone if a properly completed Authorization
14
<PAGE>
for Telephone Requests has been filed at our Home Office. We reserve the right
to discontinue telephone net premium allocation instructions.
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.
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 values. 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 your Accumulated Value in the Variable Account from
which the transfers will be made is at least $5,000. After we have received a
Dollar Cost Averaging Request in proper form at our Home Office, we will
transfer Accumulated Value in amounts designated by you from the Variable
Account from which transfers are to be made to the Variable Account or
Accounts chosen by you. The minimum amount that may be transferred to any one
Variable Account is $50. After the Free-Look Transfer Date, the first transfer
will be effected on the 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 of a Dollar Cost Averaging
Request in proper form, and subsequent transfers will be effected on the
following Monthly, Quarterly, Semi-Annual, or Annual Anniversary for so long
as designated by you, until the total amount elected has been transferred,
until Accumulated Value in the Variable Account from which transfers are
15
<PAGE>
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 unless you instruct otherwise or until
your Policy enters the Grace Period. If you wish to continue transferring on a
dollar cost averaging basis after the expiration of the applicable period, the
total amount elected has been transferred, or the Variable Account has been
depleted, or after the Dollar Cost Averaging Option has been cancelled, a new
Dollar Cost Averaging Request must be completed and sent to our Home Office.
The Variable Account from which transfers are to be made must meet the $5,000
minimum amount of the Accumulated Value. We may discontinue, modify, or
suspend the Dollar Cost Averaging Option at any time.
TRANSFER OF ACCUMULATED VALUE
During the Accumulation Period, you may transfer Accumulated Value among the
Variable Accounts upon proper written request to our Home Office. Transfers
may not be made until after the Free-Look Transfer Date if you reside in a
state that requires us to refund premiums to Owners that return their Policies
during the Free-Look Period. 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 form 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 transfer may
be made if a Policy is in the Grace Period and a payment required to avoid
lapse is not paid. See "Lapse," page 23. 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 suspend and discontinue
telephone transfers.
Accumulated Value may also be transferred after the Free-Look Transfer Date
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 Owners residing in Maryland, Connecticut, and Pennsylvania 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," page 33.
DEATH BENEFIT
When your Policy is issued, we will determine the initial amount of
insurance based on the instructions provided in your application. That amount
will be shown on the specifications page of your Policy and is called the
"Face Amount." The minimum Face Amount at issuance of a Policy is $50,000. We
may reduce the minimum Face Amount required at issuance under certain
circumstances, such as for group or sponsored arrangements or if you acquire
multiple Policies on the life of the same Insured.
For so long as the Policy remains in force, Pacific Mutual will, upon proof
of the death of an Insured, pay death benefit proceeds to a named Beneficiary.
Death benefit proceeds will consist of the death benefit under the Policy,
plus any death benefit proceeds on the life of the Insured provided by rider,
reduced by any outstanding Policy Debt (and, if in the Grace Period, any
overdue charges).
You will have one or two elections in determining the death benefit under a
Policy. First, you will choose the death benefit qualification test, which is
the method for qualifying the Policy as a life insurance contract for purposes
of federal tax law. Two tests are available under the Policy. Once elected,
the death benefit qualification test cannot be changed for the duration of
your Policy. As described below, the available death benefit qualification
tests are the cash value accumulation test and the guideline premium test.
Generally, an applicant designates the death benefit election or option in the
application. If no option is designated, we will assume the guideline premium
test Option A has been selected.
Cash Value Accumulation Test. The death benefit will be determined with
reference to the requirements for the cash value accumulation test for
qualifying a Policy as a life insurance contract under Section 7702 of the
Internal Revenue Code. For Policy Owners choosing the cash value accumulation
test, the death benefit
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will be equal to the Face Amount or, if greater, Accumulated Value (determined
as of the end of the Valuation Period during which the Insured dies) divided
by the "net single premium" that would purchase $1 of future benefits under
the Policy. Generally, the cash value accumulation test requires that under
the terms of a life insurance policy, the death benefit must be sufficient so
that the cash surrender value, as defined in Section 7702, does not at any
time exceed the net single premium required to fund the future benefits under
the policy. The net single premiums under the Policy vary according to the
Age, sex, and underwriting classification of the Insured, and the resulting
death benefit determined by using the net single premium will be at least
equal to the amount required for the Policy to be deemed life insurance under
Section 7702 of the Internal Revenue Code. The net single premium is
calculated using a four percent interest rate or, if higher, the contractually
guaranteed interest rate and using mortality charges specified in the
prevailing commissioners standard tables as of the time the Policy is issued.
The net single premium that would purchase $1 of future benefits under the
Policy for a male Insured, Age 40, is 0.2966. A table showing net single
premiums that would purchase $1 of future benefits under the Policy for
Insureds in a standard underwriting classification is in Appendix A to this
Prospectus.
Guideline Premium Test. The death benefit will be determined with reference
to the requirements for the guideline premium test for qualifying a Policy as
a life insurance contract under the Internal Revenue Code. If you choose this
test you will be given another election under the Policy--to select one of two
death benefit options: Option A or Option B. Subject to certain restrictions,
you can change the death benefit option selected. So long as your Policy
remains in force, the death benefit under either option will never be less
than the Face Amount of your Policy.
Option A. Under Option A, the death benefit will be equal to the Face Amount
of your Policy or, if greater, Accumulated Value (determined as of the end of
the Valuation Period during which the Insured dies) multiplied by a death
benefit percentage. The death benefit percentages vary according to the Age of
the Insured and will be at least equal to the cash value corridor in Section
7702 of the Internal Revenue Code. The death benefit percentage is 250% for an
Insured at Age 40 or under, and it declines for older Insureds. A table
showing the death benefit percentages is in Appendix B to this Prospectus.
Option B. Under Option B, the death benefit will be equal to the Face Amount
of your Policy plus your Accumulated Value (determined as of the end of the
Valuation Period during which the Insured dies) or, if greater, Accumulated
Value multiplied by a death benefit percentage. The specified percentage is
the same as that used in connection with Option A and as stated in Appendix B.
The death benefit under Option B will always vary as Accumulated Value varies.
Comparison of Death Benefit Elections. There are two main differences
between the cash value accumulation test and the guideline premium test.
First, the guideline premium test limits the amount of premium that may be
paid into a Policy. No such limits apply under the cash value accumulation
test. (However, any premium that would increase the net amount at risk is
subject to evidence of insurability satisfactory to us.) Second, the factors
that determine the minimum death benefit relative to the Policy's Accumulated
Value are different. Required increases in the minimum death benefit due to
growth in Accumulated Value will generally be greater under the cash value
accumulation test than under the guideline premium test.
If you desire to pay premiums in excess of the guideline premium test
limitations you should elect the cash value accumulation test. If you do not
desire to pay premiums in excess of the guideline premium test limitations you
should consider the guideline premium test. Favorable investment performance
will be reflected in increasing Accumulated Value to the greatest degree under
the guideline premium test Option A. At times, favorable investment
performance will be reflected in increasing insurance coverage to the greatest
degree under the guideline premium test Option B; at other times, insurance
coverage will be greater under the cash value accumulation test. APPLICANTS
FOR A POLICY SHOULD CONSULT A QUALIFIED TAX ADVISER IN CHOOSING A DEATH
BENEFIT ELECTION.
The following examples demonstrate the determination of death benefits under
Options A and B of the guideline premium test and under the cash value
accumulation test. The examples show three Policies--
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Policies I, II, and III--with the same Face Amount, but Accumulated Values
that vary as shown, and which assume a male Insured, Age 40, at the time of
calculation of the death benefit and that there is no outstanding Policy Debt.
<TABLE>
<CAPTION>
POLICY POLICY
POLICY I II III
-------- -------- --------
<S> <C> <C> <C>
Face Amount................................. $100,000 $100,000 $100,000
Accumulated Value........................... $ 25,000 $ 50,000 $ 75,000
Death Benefit Percentage.................... 250% 250% 250%
Net Single Premium Factor................... 0.2966 0.2966 0.2966
Death Benefit Under Option A................ $100,000 $125,000 $187,500
Death Benefit Under Option B................ $125,000 $150,000 $187,500
Death Benefit Under Cash Value
Accumulation Test.......................... $100,000 $168,577 $252,866
</TABLE>
Payment of Death Benefit Proceeds. All calculations of death benefit will be
made as of the end of the Valuation Period during which the Insured dies.
Death benefit proceeds may be paid to a Beneficiary in a lump sum or under a
payment plan offered under the Policy. The Policy should be consulted for
details.
CHANGES IN GUIDELINE PREMIUM TEST DEATH BENEFIT OPTION
If you elect the guideline premium test (and not the cash value accumulation
test), you may request that the death benefit under the Policy be changed from
Option A to Option B, or from Option B to Option A. Changes in the death
benefit option may be made only once per Policy Year after the fifth Policy
Year, and should be made in writing to our Home Office. A change from Option B
to Option A may be made without evidence of insurability; a change from Option
A to Option B will require evidence of insurability satisfactory to us. The
effective date of any such change shall be the next Monthly Payment Date after
the change is accepted.
A change in the death benefit from Option A to Option B will result in a
reduction in the Face Amount of your Policy by the amount of your Policy's
Accumulated Value, with the result that the death benefit payable under
Option B at the time of the change will equal that which would have been
payable under Option A immediately prior to the change. The change in option
will affect the determination of the death benefit from that point on since
Accumulated Value will then be added to the new Face Amount, and the death
benefit will then vary with Accumulated Value. This change will not be
permitted if it would result in a Face Amount of less than $50,000, although
we reserve the right to waive this minimum under certain circumstances, such
as for group or sponsored arrangements. A charge of $100 will be deducted from
your Accumulated Value in the Investment Options on a prorata basis on the
effective date of the change to cover the cost of processing the request.
A change in the death benefit from Option B to Option A will result in an
increase in the Face Amount of your Policy by the amount of your Policy's
Accumulated Value, with the result that the death benefit payable under
Option A at the time of the change will equal that which would have been
payable under Option B immediately prior to the change. However, the change in
option will affect the determination of the death benefit from that point on
since your Accumulated Value will no longer be added to the Face Amount in
determining the death benefit. From that point on, the death benefit will
equal the new Face Amount (or, if greater, the Accumulated Value times the
applicable specified percentage). No charge will be made on a change from
Option B to Option A.
A change in death benefit option may affect the monthly cost of insurance
charge since this charge varies with the net amount at risk, which generally
is the amount by which the death benefit exceeds Accumulated Value. See "Cost
of Insurance," page 26. Assuming that the Policy's death benefit would not be
equal to Accumulated Value times a death benefit percentage under either
Option A or B, changing from Option B to Option A will generally result in a
decreasing net amount at risk, and therefore will decrease the cost of
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<PAGE>
insurance charges relatively. Changing from Option A to Option B will
generally result in a net amount at risk that remains level. Such a change,
however, will result in an increase in the cost of insurance charges over
time, since the cost of insurance rates increase with the Insured's Age.
CHANGE IN DEATH BENEFIT BY PACIFIC MUTUAL
We reserve the right to reduce the death benefit under a Policy by requiring
Partial Withdrawals in order to maintain the net amount at risk at an amount
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. Similarly, we reserve the right to require Partial Withdrawals or
otherwise to distribute amounts under a Policy in order to comply with tax-
related requirements. Such withdrawals or other distributions may be taxable
to you in whole or in part. See "Federal Income Tax Considerations," page 28.
The $25 withdrawal fee will not be assessed on Partial Withdrawals we require.
We reserve the right to increase the death benefit if required for a Policy
to be deemed a life insurance contract under the Internal Revenue Code.
DECREASE IN FACE AMOUNT
You may request a decrease in the Face Amount under a Policy subject to our
approval. A decrease in Face Amount may only be made once per year, and only
after the fifth Policy Year. Decreasing the Face Amount could decrease the
death benefit. The amount of change in the death benefit will depend, among
other things, upon the death benefit election you choose and whether and the
degree to which the death benefit under your Policy exceeds the Face Amount
prior to the decrease. Decreasing the Face Amount could affect the subsequent
level of the death benefit while your Policy is in force and the subsequent
level of Policy values. A decrease in Face Amount may decrease the net amount
at risk, which will decrease your cost of insurance charge.
Any request for a decrease in Face Amount must be made by written
application to our Home Office. It will become effective on the Monthly
Payment Date on or next following our acceptance of the request. If you are
not the Insured, we will also require the consent of the Insured before
accepting a request.
A decrease in Face Amount will not be permitted if the Face Amount would
fall below $50,000, although we reserve the right to waive the minimum Face
Amount under certain circumstances, such as for group or sponsored
arrangements or if you have multiple Policies on the life of the same Insured.
No charge will be deducted in connection with a decrease. If a decrease in the
Face Amount would result in total premiums paid exceeding the premium
limitations prescribed under tax law to qualify the Policy as a life insurance
contract, we will refund to you the amount of such excess above the premium
limitations. These refunds may be taxable in whole or in part. See "Federal
Income Tax Considerations," page 28.
We reserve the right to disallow a requested decrease, and will not permit a
requested decrease, among other reasons, (1) if compliance with the guideline
premium limitations under tax law resulting from the requested decrease would
result in immediate termination of the Policy, or (2) if, to effect the
requested decrease, payments to you would have to be made from Accumulated
Value for compliance with the guideline premium limitations, and the amount of
such payments would exceed the Net Cash Surrender Value under your Policy.
Increases in Face Amount are not available under your Policy unless state law
requires otherwise.
POLICY VALUES
Accumulated Value. Your Accumulated Value is the sum of the amounts under
the Policy held in the Investment Options, as well as the amount set aside in
the Loan Account to secure any Policy Debt.
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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. On each Monthly Payment Date, the portion
of your Accumulated Value allocated to a particular Variable Account also will
be adjusted to reflect the assessment of the monthly deduction. See
"Determination of Accumulated Value," page 20. No minimum amount of
Accumulated Value is guaranteed. You bear the risk for the investment
experience of Accumulated Value allocated to the Variable Accounts.
Cash Surrender Value. The Cash Surrender Value of your Policy equals your
Accumulated Value less the underwriting surrender charge. Thus, your
Accumulated Value will exceed your Policy's Cash Surrender Value by the amount
of the underwriting surrender charge. Once the surrender charge has expired,
your Accumulated Value will equal the Cash Surrender Value.
Net Cash Surrender Value. The Net Cash Surrender Value of your Policy equals
your Cash Surrender Value less any outstanding Policy Debt. You can surrender
your Policy at any time while the Insured is living and receive your Net Cash
Surrender Value. See "Surrender," page 21.
DETERMINATION OF ACCUMULATED VALUE
Although the death benefit under your Policy can never be less than your
Policy's Face Amount, the Accumulated Value will vary to a degree that depends
upon several factors, including investment performance of the Variable
Accounts to which your Accumulated Value has been allocated, payment of
premiums, the amount of any outstanding Policy Debt, Partial Withdrawals, and
the charges assessed in connection with your Policy. There is no guaranteed
minimum Accumulated Value and you bear the entire investment risk relating to
the investment performance of Accumulated Value allocated to the Variable
Accounts.
The amounts allocated to the Variable Accounts available to you 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. Any dividends or distributions from
any Portfolio of the Fund will be automatically reinvested in shares of the
same Portfolio, unless we, on behalf of the Separate Account, elect otherwise.
Assets in the Variable Accounts are divided into accumulation units, which
are a measure of value used for bookkeeping purposes. When you allocate net
premiums to a Variable Account, the Policy is credited with accumulation
units. In addition, other transactions including loans, a 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. 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) the
charges, if any, we may assess for income taxes attributable to the operation
of the Variable Account.
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 properly completed 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. The maximum amount that can be borrowed at any
time is the greater of (1) 90% of your Policy's Accumulated Value allocated to
the Variable Accounts and 100% of Accumulated Value allocated to the Fixed
Account, less
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<PAGE>
any underwriting surrender charges that would be imposed if your Policy were
surrendered on the date the loan is taken, or (2) 100% of the product of
(a X b/c - d) where (a) equals your Policy's Accumulated Value less any
surrender charge that would be imposed if your Policy were surrendered on the
date the loan is taken and less 12 times the current monthly deduction; (b)
equals 1 plus the annual loan interest rate credited; (c) equals 1 plus the
annual loan interest rate currently charged; and (d) equals any existing
Policy Debt.
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
Variable Accounts and the Fixed Account in the proportion that each bears to
the Accumulated Value less Debt.
The Policy loan annual effective interest rate is 4.75% per year for the
first 10 years and 4.25% thereafter. We will credit interest monthly on any
Policy Debt to secure the loan at an annual effective rate of 4.0%.
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 for the prior year on
each Policy Anniversary. 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 Investment Options on a proportional basis.
Unless you request otherwise, any loan repayment will be transferred into
the Investment Options in accordance with your most recent premium allocation
instructions. In addition, any interest earned on the loan balance held in the
Loan Account will be transferred to each of the Investment Options in
accordance with your most recent premium allocation instructions.
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
rate of the Fixed Account on the loaned amount. Thus your loan, whether or not
repaid, will have a permanent effect on your Policy's values and may have an
effect on the amount and duration of the death benefit. If not repaid, the
Policy Debt will be deducted from the amount of death benefit paid upon the
death of the Insured, the Cash Surrender Value paid upon surrender or
maturity, 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 Accumulated Value minus Policy Debt 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, your Policy may enter the Grace Period more quickly
when a loan is outstanding, because the loaned amount is not available to
cover the monthly deduction. Additional payments or repayment of a portion of
Policy Debt may be required to keep the Policy in force. See "Lapse," page 23.
A loan will not be treated as a distribution from the Policy and will not
result in taxable income to you unless the Policy is a modified endowment
contract, or unless the Policy is surrendered or upon maturity or lapse of the
Policy, in which case a loan will be treated as a distribution that may give
rise to taxable income.
For information on the tax treatment of loans, see "Federal Income Tax
Considerations," page 28.
BENEFITS AT MATURITY
If the Insured is living on the Maturity Date, we will pay you, as an
endowment benefit, your Accumulated Value, reduced by any Policy Debt. Payment
ordinarily will be made within seven days of your Policy Anniversary, although
payments may be postponed in certain circumstances. See "Payments," page 35.
SURRENDER
You may fully surrender your Policy at any time during the life of the
Insured. 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 any
applicable underwriting surrender charge and less any outstanding Policy Debt.
If your Policy is surrendered during the first two years following its
issuance, a portion of the sales load paid under the Policy may be refunded to
you. See "Sales Load Refund," page 25.
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You may surrender your Policy by sending a written request together with the
Policy to our Home Office. The proceeds will be determined as of the end of
the Valuation Period during which the request for a surrender is received. You
may elect to have the proceeds paid in cash or applied under a payment plan
offered under the Policy. See "Payment Plan," page 36. For information on the
tax effects of a surrender of a Policy, see "Federal Income Tax
Considerations," page 28.
PARTIAL WITHDRAWAL BENEFIT
We offer a partial surrender benefit by which you can obtain a portion of
your Net Cash Surrender Value called the Partial Withdrawal Benefit. The
Partial Withdrawal Benefit is available on and after the first Policy Year.
Under this Benefit, you may make "Partial Withdrawals" of your Net Cash
Surrender Value. There is no limit on the number of Partial Withdrawals that
may be taken after the first Policy Anniversary. There is a $25 withdrawal fee
for Partial Withdrawals. The fee will be deducted from your Policy's
Accumulated Value in the Investment Options in the same proportion as the
withdrawal amount. If you have elected to receive systematic withdrawals as
described below, the withdrawal fee is currently waived on each systematic
withdrawal following the first systematic withdrawal.
Partial Withdrawals must be for at least $500, and your Policy's Net Cash
Surrender Value after the withdrawal must be at least $500. If there is any
Policy Debt, the maximum Partial 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%.
You may make a Partial Withdrawal by submitting a proper written request to
our Home Office. As of the effective date of any withdrawal, your Accumulated
Value, Cash Surrender Value, and Net Cash Surrender Value will be reduced by
the amount of the withdrawal. The amount of the withdrawal will be allocated
proportionately to your Value in the Investment Options unless you request
otherwise. If, after a withdrawal is effected, we are notified that the
Insured died after the request for the withdrawal was sent to us and prior to
the withdrawal being effected, the amount of the withdrawal will be deducted
from the death benefit. Under these circumstances, the death benefit will be
determined without taking into account the withdrawal.
When a Partial Withdrawal is made on a Policy on which you have selected the
cash value accumulation test or guideline premium test death benefit Option A,
the Face Amount under the Policy is decreased by the lesser of (1) the amount
of the Partial Withdrawal or (2) if the death benefit prior to the withdrawal
is greater than the Face Amount, the amount, if any, by which the Face Amount
exceeds the difference between the death benefit and the amount of the Partial
Withdrawal. A Partial Withdrawal will not change the Face Amount of a Policy
on which you have selected guideline premium test death benefit Option B.
However, assuming that the death benefit is not equal to Accumulated Value
times a death benefit percentage, the Partial Withdrawal will reduce the death
benefit by the amount of the Partial Withdrawal. To the extent the death
benefit is based upon the Accumulated Value times the death benefit percentage
applicable to the Insured, a Partial Withdrawal may cause the death benefit to
decrease by an amount greater than the amount of the Partial Withdrawal. See
"Death Benefit," page 16.
Systematic Withdrawals. You may elect to receive systematic Partial
Withdrawals after the first Policy Year while the Policy is in force by
sending a Preauthorized Scheduled Withdrawal Request form to us at our Home
Office. You will be requested to designate the systematic withdrawal amount as
a specified dollar amount, and the desired frequency of the systematic
withdrawals, which may be monthly, quarterly, semi-annually, or annually. The
day of the month that you wish each systematic Partial Withdrawal to be
effected may also be elected provided the scheduled day elected is not later
than the 28th of a month. Systematic Partial Withdrawals may be stopped or
modified upon your proper written request, received by us at least 30 days in
advance. A proper request must include the written consent of any effective
assignee or irrevocable Beneficiary, if applicable.
Each systematic withdrawal must be at least $100. Each systematic withdrawal
will be effected as of the end of the Valuation Period during which the
withdrawal is scheduled. The deduction caused by the systematic Partial
Withdrawal will be allocated proportionately from your Accumulated Value in
the Investment Options. If a
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systematic Partial Withdrawal would cause the Net Cash Surrender Value to fall
below $500, the amount withdrawn will be reduced to the amount available and
systematic Partial Withdrawals will automatically terminate. We will notify
you of the termination.
We may, at any time, change the minimum amount for any systematic
withdrawals, impose or increase remaining minimum balances, and limit the
number or frequency of requests for modifying systematic Partial Withdrawals.
Tax Treatment. Receipt of proceeds from a Partial Withdrawal may result in
taxable income to you in the year in which the withdrawal is made, and, if the
Policy is classified as a modified endowment contract, may result in a 10%
additional tax for Owners who are under 59 1/2 years old. For more information
on the tax treatment of Partial Withdrawals, see "Federal Income Tax
Considerations," page 28.
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 (30 days if you are a resident of California and
age 60 or older), within 10 days after we mail or deliver the notice of the
right of withdrawal, or within 45 days after you sign the application for
insurance, whichever is latest. It can be mailed or delivered to us or our
agent. The returned Policy will be treated as if we never issued it and,
except as indicated below, we will refund any charges deducted from premiums
received, any net premium allocated to the Fixed Account, plus the sum of your
Policy's Accumulated Value allocated to the Variable Accounts as of the end of
the Valuation Period in which the Policy is received plus any Policy Charges
and Fees deducted from the Policy's Accumulated Value in the Variable
Accounts. If you have taken a loan during the Free-Look Period, your Policy
Debt will be deducted from the amount refunded. We will allocate any net
premiums received according to your instructions contained in your
application, or more recent written instructions, if any, when the application
is approved and the Policy is issued. If you reside in a state that requires
us to return premium payments to Policy Owners who exercise the Free-Look
Right, we will refund the full amount of the premium paid. Any Policy Debt
will be deducted from the amount refunded. Until the Free-Look Transfer Date,
net 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 Net
Premiums," page 14.
LAPSE
Your Policy will lapse only when your Accumulated Value less Policy Debt is
insufficient to cover the current monthly deduction against your Policy's
Accumulated Value on any Monthly Payment Date, and a Grace Period expires
without you making a sufficient payment. If your Accumulated Value less Policy
Debt is insufficient to cover the current monthly deduction on a Monthly
Payment Date, you must pay during the Grace Period a minimum of three times
the full monthly deduction due on the Monthly Payment Date when the
insufficiency occurred to avoid termination of your Policy. We will not accept
any payment if it would cause your total premium payments to exceed the
maximum permissible premium for your Policy's Face Amount under the Internal
Revenue Code. This is unlikely to occur unless you have outstanding Policy
Debt, in which case you could repay a sufficient portion of the Policy Debt to
avoid termination. In this instance, you may wish to repay a portion of Policy
Debt to avoid recurrence of the potential lapse. If premium payments have not
exceeded the maximum permissible premiums for the Policy's Face Amount, you
may wish to make larger or more frequent premium payments to avoid recurrence
of the potential lapse.
If your Accumulated Value less Policy Debt is insufficient to cover the
monthly deduction on a Monthly Payment Date, we will deduct the amount that is
available. 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 within the Grace Period will result in termination
of coverage under your Policy, and your Policy will lapse with no value.
However, if your Policy lapses during the
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first 2 years from issuance, we will pay you any sales load refund to which
you are entitled. If the required payment is made during the Grace Period, any
premium paid will be allocated among the Investment Options in accordance with
your current premium allocation instructions. Any monthly deduction due will
be charged to the Investment Options on a proportionate basis. If the Insured
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, any sales load refund
already paid, 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 five years
after the end of the Grace Period but before the Maturity Date provided we
receive the following: (1) your written application; (2) evidence of
insurability satisfactory to us; and (3) a premium equal to all monthly
deductions that were due and unpaid during the Grace Period, payment of a
premium at least sufficient to keep the Policy in force for three months after
the date of reinstatement, and payment of any excess sales load refunded to
you at the time the Policy lapsed.
When your Policy is reinstated, your Accumulated Value will be equal to your
Accumulated Value on the date of the lapse subject to the following: 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 the reinstatement. If your
Policy is reinstated on 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 the Monthly Payment Date on or next following the date of our approval, and
Accumulated Value minus, if applicable, Policy Debt will be allocated among
the Investment Options in accordance with your most recent premium allocation
instructions.
RIGHT TO CONVERT POLICY
You may convert your Policy at any time during the first two years after
issue, as long as your Policy is in force, to a universal life insurance
policy on the life of the Insured under a plan of insurance with fixed
benefits then offered by us. You may elect the same death benefit or the same
Net Amount at Risk as under the Policy at the time of the conversion. Cost of
Insurance charges will be based on the same issue Age and risk classification
of the Insured as under the Policy. The conversion is subject to an adjustment
in premium payment limitations to reflect variances in the fees and charges
under the new policy, which would result in a refund of premium and a
corresponding reduction in accumulated value.
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<PAGE>
CHARGES AND DEDUCTIONS
PREMIUM LOAD
A premium load is deducted from each premium payment under your Policy prior
to allocation of the net premium to your Accumulated Value. The premium load
consists of the following items:
Sales Load. For purposes of assessing the sales load, premiums are measured
in terms of Target Premiums. The Target Premium is set forth in your Policy.
The sales load is based on Target Premiums and varies with the death benefit
election. The maximum sales load assessed upon Target Premiums received under
a Policy are shown in the chart below.
<TABLE>
<CAPTION>
SALES LOAD UNDER OPTION A
AND CASH VALUE SALES LOAD UNDER
TARGET PREMIUMS ACCUMULATION TEST OPTION B
--------------- ------------------------- ----------------
<S> <C> <C>
1 through 3.................... 25% 30%
4 through 10................... 4% 4%
11 and thereafter.............. 2% 2%
</TABLE>
The sales load is deducted to compensate us for the cost of distributing the
Policies. The amount derived by us from the sales load is not expected to be
sufficient to cover the sales and distribution expenses in connection with the
Policies. To the extent that sales and distribution expenses exceed sales
loads, such expenses may be recovered from other charges, including amounts
derived indirectly from the charge for mortality and expense risks and from
mortality gains.
We may reduce or waive the sales load 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.
State and Local Premium Tax Charge. A charge equal to 2.35% is assessed
against each premium to pay applicable state and local premium taxes. Premium
taxes vary from state to state, and in some instances, among municipalities.
The 2.35% rate approximates the average tax rate expected to be paid on
premiums from all states. Pacific Mutual reserves the right to change the
premium tax charge to reflect changes in the law.
SALES LOAD REFUND
If a Policy is surrendered for its Net Cash Surrender Value or your Policy
lapses at any time during the first two years following its issuance, a
portion of the sales load paid under your Policy may be refunded. This refund
will be paid only for premiums paid in the first two years following issuance
of the Policy. We will refund the excess of the sales load charged over the
sum of (1) 30% of the premiums paid during the first two years of issuance up
to one Guideline Annual Premium, plus (2) 10% of the premiums paid during the
first two years of issuance that exceed one Guideline Annual Premium by up to
one Guideline Annual Premium, plus (3) 9% of actual premium payments paid
during the first two years from issuance in excess of two times the Guideline
Annual Premium.
The operation of the sales load refund is illustrated by the following
example. Assume the Policy Owner has paid $5,000 in premiums under a Policy
which has a Guideline Annual Premium of $3,000 and a Target Premium of $2,500,
and has elected Death Benefit Option B under the Guideline Annual Premium
Test, and assume that the Policy Owner decides to surrender his or her Policy
during the second year from issuance. Under the formula described above, the
maximum sales load allowable is the sum of $900 (30% of $3,000) and $200 (10%
of $2,000), or $1,100. Since a sales load of $1,500 (30% of $5,000) was
deducted from premiums when received, a refund of $400 ($1,500 - $1,100) will
be payable to the Policy Owner.
DEDUCTIONS FROM ACCUMULATED VALUE
A charge called the monthly deduction is deducted from your Policy's
Accumulated Value in the Investment Options beginning on the Monthly Payment
Date on or next following the date we first become obligated under the Policy
and on each Monthly Payment Date thereafter. The monthly deduction consists of
the following items:
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Cost of Insurance. This monthly charge compensates us for the anticipated
cost of paying death benefits in excess of Accumulated Value to Beneficiaries
of Insureds who die. We may use any profit derived from this charge for any
lawful purpose, including the cost of claims processing and investigation. The
amount of the charge is equal to a current cost of insurance rate multiplied
by the net amount at risk under your Policy at the beginning of the Policy
Month. The net amount at risk for these purposes is equal to the amount of
death benefit payable at the beginning of the Policy Month divided by 1.004074
(a discount factor to account for return deemed to be earned during the month)
less the Accumulated Value at the beginning of the Policy Month.
The Policy contains guaranteed cost of insurance rates that may not be
increased. The guaranteed rates are no greater than certain of the 1980
Commissioners Standard Ordinary Mortality Tables (and where unisex cost of
insurance rates apply, the 1980 Commissioners Ordinary Mortality Table B).
These rates are based on the Age and underwriting class of the Insured. They
are also based on the sex of the Insured, except that unisex rates are used
where appropriate under applicable law, including in the state of Montana and
in Policies purchased by employers and employee organizations in connection
with employment-related insurance or benefit programs. As of the date of this
prospectus, we charge "current rates" that are lower (i.e., less expensive)
than the guaranteed rates, and we may also charge current rates in the future.
Like the guaranteed rates, the current rates also vary with the Age, gender,
and underwriting class of the Insured. In addition, they also vary with the
Insured's smoking status and the policy duration. The cost of insurance rate
generally increases with the Age of the Insured.
Administrative Charge. A monthly administrative charge is deducted equal to
$25 in each of the first 12 Policy Months and which varies with the size of a
Policy's Face Amount thereafter. For Face Amounts of less than $100,000, the
charge is equal to $8 per month; for Face Amounts of $100,000 and less than
$500,000, the charge is equal to $5 per month. There is no charge for Face
Amounts of $500,000 or more. For purposes of this charge, only the initial
Face Amount is considered. The administrative charge is assessed to reimburse
us for the expenses associated with administration and maintenance of the
Policies. The administrative charge is guaranteed never to exceed $25 during
the first 12 Policy Months and $10 per month thereafter. We do not expect to
profit from this charge.
The administrative charge will be waived on the second or subsequent
Policies you acquire on the life of the Insured who is the same Insured as on
the initial Policy. However, a one-time charge of $100 will be assessed upon
issuance to cover processing costs on the second and subsequent Policies.
Mortality and Expense Risk Charge. A monthly charge is deducted for
mortality and expense risks that we assume. During the first ten Policy Years,
this charge is equal to .000625 multiplied by a Policy's Accumulated Value in
the Investment Options, which is equivalent to an annual rate of .75% of such
amount. During the 11th through 20th Policy Years, the charge is equal to
.000208333 multiplied by a Policy's Accumulated Value in the Investment
Options, which is equivalent to an annual rate of .25% of such amount. After
the 20th Policy Year the charge reduces to 0%. For purposes of this charge,
the Accumulated Value is based upon its value on the Monthly Payment Date
after the deduction of the charge for the cost of insurance and any optional
insurance benefits added by rider.
The mortality and expense risk charge is assessed 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 sales load.
Optional Insurance Benefits Charges. Charges for any optional insurance
benefits added to the Policy by rider will be included in the monthly
deduction or as otherwise specified in the rider and/or the Policy. See
"Optional Insurance Benefits," page 37.
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<PAGE>
UNDERWRITING SURRENDER CHARGE
We will assess an underwriting surrender charge against Accumulated Value
upon surrender of your Policy within ten years after its issuance. The
underwriting surrender charge is equal to a specified amount that varies with
the Age of the Insured for each $1,000 of your Policy's initial Face Amount in
accordance with the following schedule:
<TABLE>
<CAPTION>
ISSUE AGE CHARGE PER $1,000
--------- -----------------
<S> <C>
0-30 $2.50
31-40 3.50
41-50 4.50
51-60 5.50
61-80 6.50
</TABLE>
The amount of the charge remains level for five Policy Years. After the
fifth Policy Year, the charge decreases by 1.666% per month until it reaches
zero at the end of the 120th Policy Month.
The charge is based upon the Age of the Insured and the Face Amount on the
Policy Date, and it does not increase as the Insured gets older or with
changes in the Face Amount. For example, if an Insured Age 25 purchases a
Policy with a Face Amount of $50,000 and surrenders the Policy in the third
Policy Year, the underwriting surrender charge would be $125.
The underwriting surrender charge is designed to cover the administrative
expenses associated with underwriting and issuing a Policy, including the
costs of processing applications, conducting medical examinations, determining
insurability and the Insured's underwriting class, and establishing policy
records. We do not expect to profit from the underwriting surrender charge.
WITHDRAWAL FEE
Pacific Mutual will assess a $25 withdrawal fee against the Policy's
Accumulated Value when a Partial Withdrawal is made. The fee will be deducted
from Accumulated Value in the Investment Options in the same proportion as the
withdrawal amount. If you have elected to receive systematic withdrawals, the
withdrawal fee is currently waived on each systematic withdrawal following the
first systematic withdrawal. We reserve the right to reinstate this fee.
CORPORATE AND OTHER PURCHASERS
The Policy is available for individuals and for corporations and other
institutions. For certain individuals and certain corporate or other group or
sponsored arrangements purchasing one or more Policies, we may reduce the
amount of the sales load, underwriting surrender charge, administrative
charge, or other charges where the expenses associated with the sale of the
Policy or Policies or the underwriting or other administrative costs
associated with the Policy or Policies are reduced. Sales, underwriting or
other administrative expenses may be reduced for reasons such as expected
economies resulting from a corporate purchase or a group or sponsored
arrangement, from the purchase of multiple Policies on the life of the same
Insured, from the amount of the initial premium payment or payments, or the
amount of projected premium payments.
OTHER CHARGES
We may charge the Variable Accounts for federal income taxes we incur that
are attributable to the Separate Account and its Variable Accounts or to our
operations with respect to the Policies. No such charge is currently assessed.
See "Charge for Pacific Mutual Income Taxes," page 31.
We will bear the direct operating expenses of the Separate Account. Each
Variable Account available to you 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 these expenses
may vary from year to year. The advisory fees and other expenses are more
fully described in the prospectus of the Fund.
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<PAGE>
GUARANTEE OF CERTAIN CHARGES
We guarantee that certain charges will not increase. This includes the
charge for mortality and expense risks, the administrative charge with respect
to the guaranteed rates described above, the sales load, the guaranteed cost
of insurance rates, the withdrawal fee, and the underwriting surrender charge.
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 Internal Revenue Service ("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. It should, therefore, be understood
that these comments concerning federal income tax consequences are not an
exhaustive discussion of all tax questions that might arise under the Policy
and that 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 or gift 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
state or local tax considerations which may be involved in the purchase 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 and
Policies with term insurance on the Insured). 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 (whether the Beneficiary is a corporation, individual, or
other entity) under Section 101(a)(1) of the Internal Revenue Code ("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 the Policy until a full surrender thereof, maturity of the
Policy, or a Partial Withdrawal. In addition, certain Policy loans and Partial
Withdrawals may be taxable in the case of Policies that are modified endowment
contracts. Prospective Owners that intend to use Policies to fund deferred
compensation arrangements for their employees are urged to consult their tax
advisors 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 Code 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 is 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
possessed 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
28
<PAGE>
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.
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 your 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.
Tax Treatment of Policies. IRC Section 7702A defines a class of life
insurance contracts referred to as "modified endowment contracts". Under this
provision, the Policies are treated for tax purposes in one of two ways.
Policies that are not classified as modified endowment contracts will be taxed
conventional life insurance contracts, as described below. Taxation of pre-
death distributions from Policies that are classified as modified endowment
contracts and that are entered into on or after June 21, 1988 is somewhat
different, as described below.
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 that would be paid for each of the first seven
years if a Policy Owner were to fully pay for the Policy in 7 years. For
example, if the "seven-pay premiums" 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. Under this test, a
Pacific Select Choice Policy may or may not be a modified endowment contract,
depending on the amount of premiums paid during each of the Policy's first
seven contract years. Changes in the Policy, including changes in death
benefits, may require "retesting" of a Policy to determine if it is to be
classified as a modified endowment contract.
Conventional Life Insurance Policies. If a Policy is not a modified
endowment contract, upon full surrender or maturity of a 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 a Policy will be treated
as ordinary income for federal income tax purposes. Such a 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
occurring within 15 years of the Policy Date is accompanied by a reduction in
benefits under the Policy, special rules apply to determine whether part or
all of the cash received is paid out of the income of the Policy and is
taxable. Cash distributed to a Policy Owner on Partial Withdrawals occurring
more than 15 years after the Policy Date will be taxable as ordinary income to
the Policy Owner to the extent that it exceeds the cost basis under a Policy.
We also believe that loans received under Policies that are not modified
endowment contracts will be treated as indebtedness of the Owner for Federal
income tax purposes, and that no part of any loan under the Policy will
constitute income to the Owner unless the Policy is surrendered or upon
maturity or lapse. However, if a loan is still outstanding when a Policy is
surrendered or allowed to lapse, the borrowed amount becomes taxable at that
time to the extent the Accumulated Value exceeds the Policy Owner's basis in
the Policy, as if the borrowed amount was actually received at the time of
surrender or lapse and used to pay off the loan.
29
<PAGE>
Consult with your tax advisor on whether interest paid (or accrued by an
accrual basis taxpayer) on a Policy that is not a modified endowment contract
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.
Modified Endowment Contracts. Pre-death distributions from modified
endowment contracts may give rise to taxable income. Upon full surrender or
maturity of the Policy, the Policy Owner would recognize ordinary income for
federal income tax purposes equal to the amount by which the Net Cash
Surrender Value plus Policy Debt exceeds the investment in the 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, the Policy Owner would recognize
ordinary income to the extent allocable to income (which includes all
previously non-taxed gains) on the Policy. The amount allocated to income is
the amount by which the Accumulated Value of the 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.
Amounts received under a modified endowment contract that are included in
gross income are subject to an additional tax equal to 10% of the amount
included in gross income, unless an exception applies. The 10% additional tax
does not apply to any amount received: (i) when the taxpayer is at least 59
1/2 years old; (ii) which is attributable to the taxpayer becoming disabled;
or (iii) which is part of a series of substantially equal periodic payments
(not less frequently than annually) 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 beneficiaries.
If a Policy was not originally a modified endowment contract but becomes
one, under Treasury Department regulations which are yet to be prescribed,
pre-death distributions received in anticipation of a failure of a Policy to
meet the seven-pay premium test are to be treated as pre-death distributions
from a modified endowment contract (and, therefore, are to 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.
It is unclear whether interest paid (or accrued by an accrual basis
taxpayer) on Policy Debt with respect to a modified endowment contract
constitutes interest for federal income tax purposes. Consult your tax
advisor. Tax law provisions may limit the deduction of interest payable on
Policy loans and on loans that are used to purchase or carry certain life
insurance policies.
30
<PAGE>
Reasonableness Requirement for Charges. 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. For life insurance policies entered
into on or after October 21, 1988, 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 and other charges used
for the purposes 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.
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 Internal Revenue Service has issued proposed
regulations and is expected to issue final regulations in the near future
under which accelerated living benefits that meet the 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 benefit rider will be deemed to meet
the definitional requirements of a life insurance contract. We reserve the
right to (but are 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 that rider should
first consult a qualified tax advisor.
Other. 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.
PACIFIC MUTUAL DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY
POLICY.
CHARGE FOR PACIFIC MUTUAL INCOME TAXES
A charge may be made for any federal income taxes incurred by us that are
attributable to the Separate Account or to our operations with respect to the
Policy. We will review the question of a charge to the Separate Account or the
Policy for our federal income taxes periodically. Charges may become necessary
if the 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 under the Investment
Company Act of 1940. We will exercise these voting rights based on
instructions received from persons having the voting interest in
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<PAGE>
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 it is permitted to vote the shares of the Fund in its
own right, we may elect to do so.
You are 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 the 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.
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 Pacific Mutual. 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 Policy Owners.
CONFIRMATION STATEMENTS AND REPORTS TO OWNERS
A statement will be sent quarterly to you setting forth a summary of the
transactions which occurred during the quarter and indicating the death
benefit, Face Amount, Accumulated Value, Cash Surrender Value, and any Policy
Debt. In addition, the statement will indicate the allocation of Accumulated
Value among the Investment Options and any other information required by law.
Confirmations will be sent out upon premium payments, transfers, loans, loan
repayments, withdrawals, and surrenders. Confirmations of scheduled
transactions under systematic withdrawals, dollar cost averaging, portfolio
rebalancing, and monthly deductions will appear on your quarterly statements.
You will also be sent an annual and a semiannual report containing financial
statements for the Separate Account and the Fund, the latter of 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 law 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 our 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.
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Where required, we will not substitute any shares attributable to your
interest in a Variable Account or the Separate Account without notice, your
approval, 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, which
may include additional subaccounts of the Separate Account to serve as
allocation options under the Policies, which may be managed separate accounts
or may 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, at 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. We may also terminate and liquidate any
Variable Account.
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 or any Variable Account may be operated as a management
investment company under the Investment Company Act of 1940 or any other form
permitted by law, may be deregistered under that Act in the event such
registration is no longer required, or 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
transfer the assets of any such entity to another Variable Account of Pacific
Mutual or any affiliate thereof and may establish a committee, board, or other
group to manage one or more aspects of the operation of any such entity.
CHANGES TO COMPLY WITH LAW
We reserve the right to make any change 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 Internal Revenue Code,
under regulations of the United States Treasury Department or any state.
THE FIXED ACCOUNT
You may allocate all or a portion of your net 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
which consists of all assets owned by us other than those in the Separate
Account and our other separate accounts. Subject to applicable law, we have
sole discretion over the investment of the assets of our General Account.
You may elect to allocate net premium payments to the Fixed Account, the
Separate Account, or both. If you reside in a state that requires us to refund
premiums to Policy Owners who return their Policies, net premiums will not be
applied to the Fixed Account until after the Free-Look Transfer Date. Any net
premium received during the Free-Look Period will be allocated to the Money
Market Account until the Free-Look
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<PAGE>
Transfer Date. You may also transfer Accumulated Value from the Variable
Accounts of the Separate Account 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 a minimum interest rate of .32737% per month, compounded monthly, for a
minimum effective annual rate of 4%. Such interest will be paid regardless of
the actual investment experience of the Fixed Account. In addition, we may at
our sole discretion declare current interest in excess of the 4%, which will
be guaranteed for one year. (The portion of your Accumulated Value that has
been used to secure Policy Debt will be credited with an interest rate of
.32737% per month, compounded monthly, for an effective annual rate of 4%.)
We bear the full investment risk for the Accumulated Value allocated to the
Fixed Account.
DEATH BENEFIT
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. See "Death Benefit," page
16.
POLICY CHARGES
Policy charges will be the same whether you allocate net premiums or
transfer Accumulated Value to the Fixed Account or allocate net premiums to
the Variable Accounts. These charges consist of the premium load, including
the sales load and state and local premium tax charge; the deductions from
Accumulated Value, including the charges for the cost of insurance,
administrative charge, mortality and expense risk charge, the charge for any
optional insurance benefits added by rider, and the underwriting surrender
charge. Any amounts that we pay for income taxes allocable to the Variable
Accounts will not be charged against the Fixed Account. In addition, the
investment advisory fee charged 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. If you reside in a state that requires us to refund premiums to
Policy Owners who return their Policies during the Free-Look Period, you may
not make transfers until after the Free-Look Period. You may not make more
than one transfer from the Fixed Account to the Variable Accounts in any 12-
month period. Further, effective June 1, 1996, you may not transfer more than
the greater of 25% of your Accumulated Value in the Fixed Account or $5,000 in
any year. Until June 1, 1996, if you have $1,000 or more in the Fixed Account,
you may not transfer more than 20% of such amount to the Variable Accounts 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 be made in the
Policy Month preceding a Policy Anniversary, except that Policy Owners
residing in Maryland, Connecticut, and Pennsylvania may make such a transfer
at any time during the first 18 Policy Months.
You may also make full surrenders and Partial Withdrawals to the same extent
as an Owner who has invested in the Variable Accounts. See "Surrender," page
21, and "Partial Withdrawal Benefit," page 22. You may borrow up to the
greater of (1) 100% of Accumulated Value in the Fixed Account and 90% of
Accumulated Value in the Variable Accounts less any underwriting surrender
charge that would be imposed if the Policy were surrendered at the time of the
loan, or (2) 100% of the product of (a X b/c - d) where (a) equals the
Policy's Accumulated Value less any surrender charge that would be imposed if
the Policy were surrendered on the date the loan is taken and less 12 times
the current monthly deduction; (b) equals 1 plus the annual loan interest rate
credited; (c) equals 1 plus the annual loan interest rate currently charged;
and (d) equals any existing Policy Debt. See "Policy Loans," page 20.
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.
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<PAGE>
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 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, you are 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 death, the Beneficiary
must be living at the time of the Insured's death.
THE CONTRACT
This Policy is a contract between the Owner and Pacific Mutual. The entire
contract consists of the Policy, a copy of the initial application, all
subsequent applications to change the Policy, any endorsements, all Riders,
and all additional Policy information sections (specification pages) added to
the Policy.
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 the information needed to process a payment 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 closing 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 at our Home Office, and will be effective only when recorded by us.
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 payment option or Rider,
will be subject to the assignment. We will rely solely on the assignee's
statement as to the amount of
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<PAGE>
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 Policy 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," page 28.)
ERRORS ON THE APPLICATION
If the Age or sex of the Insured has been misstated, the death benefit under
your Policy will be the greater of that which would be purchased by the most
recent cost of insurance charge at the correct Age and sex, or the death
benefit derived by multiplying Accumulated Value by the death benefit
percentage for the correct Age and sex. If the Insured's Age or sex is
misstated in the application, the Accumulated Value will be modified by
recalculating all prior cost of insurance charges and other monthly deductions
based on the correct Age and sex. If unisex cost of insurance rates apply, no
adjustment will be made for a misstatement of sex. See "Cost of Insurance,"
page 26.
INCONTESTABILITY
We may contest the validity of your Policy if any material misstatements are
made in the application. However, your Policy will be incontestable after the
expiration of the following: the Face Amount cannot be contested after your
Policy has been in force during the Insured's lifetime for two years from the
Policy Date; and if the Insured is changed, your Policy cannot be contested
after it has been in force during the new Insured's lifetime for two years
from the effective date of the exchange.
PAYMENT IN CASE OF SUICIDE
If the Insured 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 withdrawal amounts, any Policy Debt and any dividends paid
in cash by Pacific Mutual. If the Insured has been changed and the new Insured
dies by suicide, while sane or insane, within two years of the exchange date,
the death benefit proceeds will be limited to the Net Cash Surrender Value as
of the exchange date, plus the premiums paid since the exchange date, less the
sum of any increases in Debt, withdrawal amounts, and any dividends paid in
cash by Pacific Mutual since the exchange date.
PARTICIPATING
The Policy is participating and may 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.
POLICY ILLUSTRATIONS
Upon request, we will send you an illustration of 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
Maturity, 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.
Maturity, surrender, or withdrawal benefits or death benefit proceeds may be
used to purchase any other payment plan that we make available at that time.
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OPTIONAL INSURANCE BENEFITS
At the time you complete the application for a Policy and subject to certain
requirements, you may elect to add one or more Riders to the Policy as
optional insurance benefits (subject to approval of state insurance
authorities). These optional benefits are: additional insurance coverage for
the accidental death of the Insured (Accidental Death Rider); term insurance
on the Insured's children (Children's Term Rider); annual renewal term
insurance on the Insured or any member of his or her immediate family (Annual
Renewable Term Rider); added protection benefit on the Insured (Added
Protection Benefit Rider); the right to purchase additional insurance on the
Insured's life on certain specified dates without proof of insurability
(Guaranteed Insurability Rider); additional protection in the event of a
disability (Waiver of Charges Rider); or early payment of coverage if the
Insured is diagnosed with a terminal illness (Accelerated Living Benefit
Rider). The cost of any additional insurance benefits will be deducted as part
of the monthly deduction against Accumulated Value or as otherwise specified
in the rider and/or Policy. See "Charges and Deductions," page 25. The amounts
of these benefits are fully guaranteed at issue. Certain restrictions may
apply and are described in the applicable rider. Under certain circumstances,
a Policy can be combined with an added protection benefit rider to result in a
combined coverage amount (face amount) equal to the same Face Amount that
could be acquired under a single Policy. For a given Insured, combining a
Policy and a rider may result in a sales load and underwriting surrender
charge for the Policy that is lower than the single Policy providing the same
Face Amount. An insurance agent authorized to sell the Policy can describe
these extra benefits further. Samples of the provisions are available from
Pacific Mutual upon written request.
LIFE INSURANCE RETIREMENT PLANS
Any Policy Owners or applicants who wish to consider using the Policy as a
funding vehicle for (non-qualified) retirement plans may obtain additional
information from Pacific Mutual. 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 provide retirement income for a period of time.
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 the results of the ledger
illustrations or 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.
RISKS OF LIFE INSURANCE RETIREMENT PLANS
Using the Policy as a funding vehicle for a life insurance retirement plan
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
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gross death benefit at the death of the Insured, 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
or maturity, the loan will be automatically repaid, resulting in the payment
to you of the Net Surrender Value. Similarly, upon lapse, the loan will be
automatically repaid. The automatic repayment of the loan upon maturity,
lapse, or surrender will cause the recognition of taxable income to the extent
that Net Surrender Value plus the amount of the repaid loan exceeds your basis
in the Policy. Thus, under certain circumstances, maturity, surrender, or
lapse of the Policy could result in tax liability to the Owner. In addition,
to reinstate a lapsed Policy, you would be required to make certain payments
as described under "Reinstatement," page 24. Thus, you should be careful to
fashion a retirement plan so that the Policy will not lapse prematurely under
various market scenarios as a result of withdrawals and loans taken from the
Policy.
Your Policy will lapse if your Accumulated Value less Policy Debt is
insufficient to cover the current monthly deduction on any Monthly Payment
Date, and a Grace Period expires without your 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 Pacific Mutual 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 financial advisers in designing a private
retirement plan that is suitable. Further, you should continue to monitor the
Accumulated Value net of loans remaining in a Policy to assure that it 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, such as in the
case of a private retirement plan.
DISTRIBUTION OF THE POLICY
Pacific Mutual Distributors, Inc. ("PMD") is principal underwriter
(distributor) 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 is a wholly-owned subsidiary of Pacific Mutual.
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 promotions and sales
of the Policy. The compensation payable to a broker-dealer for sales of the
Policy may vary with the Sales Agreement, but is not expected to exceed 50% of
the first Target Premium paid, 10% of the
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second and third Target Premiums paid, 4% of premiums paid on the fourth
through tenth Target Premiums, and 2% thereafter. There is a 40% bonus on the
third Target Premium paid, first payable at the beginning of the third Policy
Year. In addition, we may also pay override payments, expense allowances,
bonuses, 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.
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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
----------------- ------------------------------------
<S> <C>
Thomas C. Sutton Director, Chairman of the Board and Chief Executive Officer
Director, Chairman of of Pacific Mutual; Equity Board Member of PIMCO Advisors
the Board and L.P.; Director of Pacific Corinthian Life Insurance
Chief Executive Officer 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 1995 to
Director and President 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 Chairman
Director of Korn/Ferry International; Director of: Avery Dennison
Corporation; ConAm Management; First Business Bank; North-
western Restaurants, Inc.; Dole Food Co. Address: 1800 Cen-
tury 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 3719, San
Francisco, California 94108-4818.
Ignacio E. Lozano, Jr. Director of Pacific Mutual; Chairman and Editor-in-Chief of
Director 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 Chief Executive
Director Officer of Fresh Choice, Inc.; Director of: Nordstrom,
Inc.; PST Vans, Inc.; SRI International, Inc; Age Wave;
Artmaster, Inc.; Bojangles Acquisition 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, President Emeritus of
Director Huntington Memorial Hospital; Director of Occidental
College; Former President and Chief Executive Officer of
Huntington Memorial Hospital. Address: 100 W. California
Blvd., Pasadena, California 91109-7013.
Charles D. Miller Director of Pacific Mutual; Director, Chairman and Chief Ex-
Director ecutive Officer of Avery Dennison Corporation; Director of: Great
Western Financial Corporation; Nationwide Health Proper-
ties, Inc.; Southern California Edison Company. Address:
150 N. Orange Grove Boulevard, Pasadena, California 91103.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION LAST FIVE YEARS
----------------- ------------------------------------
<S> <C>
Donn B. Miller Director of Pacific Mutual; President and Chief Executive
Director Officer and Director of Pearson-Sibert Oil Co. of Texas;
Director of: the Irvine Company; Automobile Club of
Southern California; St. John's Hospital & 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 present;
Director 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
Development, Inc.; Director of: Bank of California; Defense
Policy Advisory Commission on Trade; California Commission
on Science and Technology; Center for Occupational Research
and Development. Address: 3611 South Harbor Boulevard,
Suite 260, Santa Ana, CA 92704.
Susan Westerberg Prager Director of Pacific Mutual; Dean of the UCLA School of Law
Director at the University of California at Los Angeles; Director of
Lucille Salter Packard Children's Hospital of Stanford. Ad-
dress: 405 Hilgard Avenue, Room 3374, Los Angeles, Califor-
nia 90095-1476.
Richard M. Rosenberg Director of Pacific Mutual, November 1995 to present; Chair-
Director man and Chief Executive Officer of BankAmerica Corporation;
Bank of America NT&SA; Director of: Airborne Express Corpo-
ration; Northrop Grumman Corporation; Potlatch Corporation;
Pacific Telesis Group.
Address: 555 California Street, 40th Floor, San Francisco,
California 94107.
James R. Ukropina Director of Pacific Mutual; Partner with the law firm of
Director O'Melveny & Meyers; Former Chairman and Chief Executive
Officer of Pacific Enterprises; Director of Lockheed
Corporation; Trustee of Stanford University. Address:
400 S. Hope Street, 16th Floor, Los Angeles, California
90071-2899.
Raymond L. Watson Director of Pacific Mutual; Vice Chairman and Director of
Director 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 Pacific
Executive Vice President 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 Mutual,
Senior Vice President April 1992 to present; Vice President and Investment Coun-
and General Counsel sel of Pacific Mutual, April 1989 to April 1992; Director
of: Pacific Corinthian Life Insurance Company; PM Group
Life Insurance Company; Association of
California Life Insurance Companies.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION LAST FIVE YEARS
----------------- ------------------------------------
<S> <C>
Marilee Roller Senior Vice President, Corporate Finance and Administration
Senior Vice President of Pacific Mutual, January 1995 to present; President and
Chief Operating Officer of Pacific Corinthian Life
Insurance Company, 1992 to present; Vice President of
Pacific Mutual, 1994 and 1995; Vice President and
Controller of Pacific Mutual, 1990 to 1992; similar
positions with other subsidiaries of Pacific Mutual.
Audrey L. Milfs Vice President and Corporate Secretary of Pacific Mutual;
Vice President similar positions with other subsidiaries of Pacific
and Corporate Secretary Mutual.
Edward R. Byrd Vice President and Controller of Pacific Mutual, June 1992
Vice President and Controller to present; Vice President, Corporate Audit and 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 Vice President and Treasurer of Pacific Mutual, November
Vice President and Treasurer 1991 to present; Assistant Vice President and Treasurer of
Pacific Mutual, September 1990 to November 1991; Treasurer
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.
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
operation 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") has been filed 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, subject to the limitation of transfers
before the Free-Look Transfer Date. 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 attorney's fees) arising out of any
requests effected in
42
<PAGE>
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 Separate Account is a
party, or which would materially affect the Separate 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.
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 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 44. The audited financial statements of Pacific Mutual as of
and for the years ended December 1995 and 1994 are set forth herein starting
on page 51.
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.
43
<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
44
<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.
45
<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.
46
<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.
47
<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 0
--------- --------- --------- ---------
End of year.............................................. $ 32,171 $ 31,154 $ 30,393 $ 11,408
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
48
<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.
49
<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.
50
<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.
February 23, 1996
51
<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
52
<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
53
<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
54
<PAGE>
Pacific Mutual Life Insurance Company
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Years Ended December 31,
(Continued) 1995 1994
- ------------------------------------------------------------------------------
(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
55
<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.
56
<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.
57
<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
58
<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>
59
<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>
60
<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.
61
<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.
62
<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.
63
<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
64
<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
65
<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.
--------------------------------------------------------------------------
66
<PAGE>
APPENDIX A
TABLE OF NET CASH VALUE ACCUMULATION TEST SINGLE PREMIUMS
(PER $1 OF FUTURE BENEFITS)
<TABLE>
<CAPTION>
AGE FEMALE MALE UNISEX AGE FEMALE MALE UNISEX
- --- ------- ------- ------- --- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.07165 0.08697 0.08395 50 0.34637 0.40440 0.39273
1 0.07178 0.08655 0.08364 51 0.35693 0.41653 0.40453
2 0.07383 0.08901 0.08601 52 0.36775 0.42888 0.41655
3 0.07602 0.09165 0.08857 53 0.37880 0.44143 0.42877
4 0.07831 0.09441 0.09124 54 0.39008 0.45416 0.44119
5 0.08072 0.09731 0.09405 55 0.40160 0.46704 0.45376
6 0.08324 0.10038 0.09701 56 0.41336 0.48007 0.46650
7 0.08589 0.10361 0.10012 57 0.42540 0.49324 0.47939
8 0.08865 0.10702 0.10340 58 0.43774 0.50655 0.49246
9 0.09155 0.11061 0.10686 59 0.45042 0.52002 0.50571
10 0.09457 0.11436 0.11047 60 0.46347 0.53364 0.51915
11 0.09773 0.11828 0.11423 61 0.47686 0.54739 0.53274
12 0.10100 0.12232 0.11813 62 0.49058 0.56124 0.54648
13 0.10438 0.12645 0.12211 63 0.50455 0.57516 0.56031
14 0.10788 0.13063 0.12615 64 0.51871 0.58909 0.57418
15 0.11146 0.13484 0.13024 65 0.53301 0.60301 0.58806
16 0.11515 0.13906 0.13435 66 0.54743 0.61689 0.60192
17 0.11895 0.14330 0.13850 67 0.56201 0.63072 0.61578
18 0.12285 0.14757 0.14269 68 0.57676 0.64453 0.62963
19 0.12689 0.15193 0.14699 69 0.59177 0.65831 0.64352
20 0.13106 0.15640 0.15140 70 0.60703 0.67206 0.65742
21 0.13538 0.16103 0.15595 71 0.62253 0.68574 0.67131
22 0.13985 0.16584 0.16069 72 0.63818 0.69929 0.68513
23 0.14449 0.17087 0.16564 73 0.65388 0.71262 0.69878
24 0.14930 0.17613 0.17081 74 0.66948 0.72564 0.71216
25 0.15429 0.18165 0.17622 75 0.68489 0.73828 0.72522
26 0.15946 0.18744 0.18188 76 0.70006 0.75052 0.73792
27 0.16482 0.19351 0.18780 77 0.71496 0.76238 0.75028
28 0.17038 0.19985 0.19398 78 0.72961 0.77391 0.76234
29 0.17613 0.20646 0.20042 79 0.74406 0.78517 0.77417
30 0.18209 0.21334 0.20711 80 0.75830 0.79621 0.78581
31 0.18825 0.22049 0.21407 81 0.77229 0.80702 0.79725
32 0.19462 0.22790 0.22127 82 0.78597 0.81756 0.80843
33 0.20122 0.23558 0.22874 83 0.79922 0.82774 0.81926
34 0.20805 0.24352 0.23646 84 0.81195 0.83745 0.82966
35 0.21510 0.25173 0.24443 85 0.82411 0.84665 0.83956
36 0.22239 0.26019 0.25266 86 0.83569 0.85536 0.84899
37 0.22990 0.26892 0.26114 87 0.84673 0.86362 0.85799
38 0.23761 0.27790 0.26987 88 0.85730 0.87153 0.86665
39 0.24554 0.28712 0.27883 89 0.86749 0.87920 0.87507
40 0.25366 0.29659 0.28802 90 0.87741 0.88679 0.88338
41 0.26197 0.30630 0.29745 91 0.88720 0.89444 0.89175
42 0.27047 0.31623 0.30709 92 0.89704 0.90237 0.90034
43 0.27917 0.32641 0.31697 93 0.90712 0.91083 0.90938
44 0.28807 0.33683 0.32707 94 0.91771 0.92013 0.91917
45 0.29719 0.34748 0.33742 95 0.92905 0.93048 0.92990
46 0.30654 0.35837 0.34800 96 0.94128 0.94201 0.94171
47 0.31613 0.36951 0.35881 97 0.95429 0.95459 0.95445
48 0.32597 0.38089 0.36986 98 0.96766 0.96774 0.96772
49 0.33604 0.39252 0.38118 99 0.98064 0.98064 0.98064
</TABLE>
67
<PAGE>
APPENDIX B
GUIDELINE PREMIUM TEST
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 or older 101
</TABLE>
68
<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 hypothetical rates of return equivalent to
constant gross annual rates of 0%, 6% and 12%.
The policies illustrated include the following:
Guideline Premium Test
<TABLE>
<C> <S> <C>
1. Age 40, Option A, $10,000 annual premium, Current Cost of In-
surance Rates.
2. Age 40, Option A, $10,000 annual premium, Guaranteed Cost of
Insurance Rates.
3. Age 40, Option B, $10,000 annual premium, Current Cost of In-
surance Rates.
4. Age 40, Option B, $10,000 annual premium, Guaranteed Cost of
Insurance Rates.
</TABLE>
Cash Value Accumulation Test
<TABLE>
<C> <S> <C>
1. Age 40, $10,000 annual premium, Current Cost of Insurance
Rates.
2. Age 40, $10,000 annual premium, Guaranteed Cost of Insurance
Rates.
</TABLE>
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 "Total Premiums Paid Plus Interest
at 5%," shows the amount which would accumulate if an amount equal to the
annual premium (after taxes) were invested to earn interest at 5% compounded
annually. All premium payments are illustrated as if they were made at the
beginning of the year. These illustrations assume that no Policy loans have
been made.
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 the premium loads, the administrative charges and the mortality
and expense risk charges. 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 twelve Portfolios
of the Fund available as options under the Policy. The amounts shown would
differ if unisex rates were used or if the Insureds were females and female
rates were used. On those illustrations assuming current rates, the amounts
would also differ if either Insured were a smoker and smoker rates were used.
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, and any foreign taxes. For the year ended December 31, 1995, the
total expenses of each Portfolio were the following percentages of the average
daily net assets of the Portfolios: 0.53% for the Money Market Portfolio;
0.83% for the Equity Income Portfolio; 0.84% for the Multi-Strategy Portfolio;
1.42% for the International Portfolio; 0.76% for the Managed Bond Portfolio;
0.82% for the Government Securities Portfolio; 0.77% for the High Yield Bond
Portfolio; 0.79% for the Growth Portfolio; 0.94% for the Growth LT Portfolio;
and 0.42% for the Equity Index Portfolio. For Aggressive Equity and Emerging
Markets Portfolios, which had not commenced operations as of December 31,
1995, it is estimated that operating expenses, including advisory fees and
foreign taxes, after the expense limitation described below, will be 1.04% and
1.58% of average daily net assets, respectively. We have agreed, until at
least December 31, 1997, to waive our fees or otherwise reimburse each
Portfolio for its operating expenses to the extent that such expenses,
exclusive of advisory fees, additional custodial charges associated with
holding foreign securities, foreign taxes on dividends, interest and gains,
and extraordinary expenses, exceed 0.25% of any Portfolio's average daily net
assets. We
69
<PAGE>
began this expense reimbursement policy in April 1989. Such expenses of the
Portfolios for the year ending December 31, 1995 did not exceed the 0.25%
expense caps. In the absence of this policy, it is estimated that the Emerging
Markets Portfolio's total expenses, including advisory fees and foreign taxes
for the Fund's current year ending December 31, 1996 will be 1.63%. There can
be no assurance that the expense reimbursement arrangement will continue after
December 31, 1997, and any unreimbursed expenses would be reflected in the
Policy Owner's Accumulated Value and in some instances, the death benefit.
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 -0.90%, 5.05%, and
10.99%. 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, Underwriting Class, Face Amount, death benefit and
premium amounts requested. In addition, upon request, illustrations will be
furnished reflecting allocation of 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.
70
<PAGE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
BASED ON CURRENT COST OF INSURANCE CHARGES
ISSUE AGE: 40 FACE AMOUNT: $559,456
CLASS: MALE NONSMOKER DEATH BENEFIT OPTION: A
GUIDELINE PREMIUM TEST ANNUAL PREMIUM: $10,000
<TABLE>
<CAPTION>
TOTAL
PREMIUMS 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 $ 10,500 $559,456 $559,456 $ 559,456
2 $ 21,525 $559,456 $559,456 $ 559,456
3 $ 33,101 $559,456 $559,456 $ 559,456
4 $ 45,256 $559,456 $559,456 $ 559,456
5 $ 58,019 $559,456 $559,456 $ 559,456
6 $ 71,420 $559,456 $559,456 $ 559,456
7 $ 85,491 $559,456 $559,456 $ 559,456
8 $100,266 $559,456 $559,456 $ 559,456
9 $115,779 $559,456 $559,456 $ 559,456
10 $132,068 $559,456 $559,456 $ 559,456
15 $226,575 $559,456 $559,456 $ 559,456
20 $347,193 $559,456 $559,456 $ 662,798
25 $501,135 $559,456 $559,456 $1,085,282
30 $697,608 $559,456 $571,179 $1,790,060
35 $948,363 $559,456 $723,077 $2,811,093
</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 $ 5,271 $ 5,641 $ 6,011 $ 3,313 $ 3,683 $ 4,053
2 $ 10,742 $ 11,818 $ 12,940 $ 10,037 $ 11,113 $ 12,235
3 $ 16,848 $ 19,030 $ 21,392 $ 14,890 $ 17,072 $ 19,433
4 $ 24,196 $ 27,978 $ 32,217 $ 22,238 $ 26,020 $ 30,258
5 $ 31,428 $ 37,317 $ 44,160 $ 29,470 $ 35,359 $ 42,202
6 $ 38,498 $ 47,018 $ 57,292 $ 36,931 $ 45,452 $ 55,725
7 $ 45,401 $ 57,093 $ 71,733 $ 44,226 $ 55,918 $ 70,558
8 $ 52,155 $ 67,573 $ 87,639 $ 51,371 $ 66,790 $ 86,856
9 $ 58,783 $ 78,505 $ 105,194 $ 58,392 $ 78,113 $ 104,802
10 $ 65,432 $ 90,061 $ 124,734 $ 65,432 $ 90,061 $ 124,734
15 $ 97,852 $158,380 $ 262,927 $ 97,852 $158,380 $ 262,927
20 $124,387 $242,139 $ 494,625 $124,387 $242,139 $ 494,625
25 $145,071 $351,297 $ 889,576 $145,071 $351,297 $ 889,576
30 $150,108 $492,395 $1,543,155 $150,108 $492,395 $1,543,155
35 $125,961 $675,773 $2,627,190 $125,961 $675,773 $2,627,190
</TABLE>
- -----------
All premium payments are illustrated as if made at the beginning of the policy
year.
This illustration assumes no policy loans 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.
71
<PAGE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
BASED ON GUARANTEED COST OF INSURANCE CHARGES
ISSUE AGE: 40 FACE AMOUNT: $559,456
CLASS: MALE NONSMOKER DEATH BENEFIT OPTION: A
GUIDELINE PREMIUM TEST ANNUAL PREMIUM: $10,000
<TABLE>
<CAPTION>
TOTAL
PREMIUMS 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 $ 10,500 $559,456 $559,456 $ 559,456
2 $ 21,525 $559,456 $559,456 $ 559,456
3 $ 33,101 $559,456 $559,456 $ 559,456
4 $ 45,256 $559,456 $559,456 $ 559,456
5 $ 58,019 $559,456 $559,456 $ 559,456
6 $ 71,420 $559,456 $559,456 $ 559,456
7 $ 85,491 $559,456 $559,456 $ 559,456
8 $100,266 $559,456 $559,456 $ 559,456
9 $115,779 $559,456 $559,456 $ 559,456
10 $132,068 $559,456 $559,456 $ 559,456
15 $226,575 $559,456 $559,456 $ 559,456
20 $347,193 $559,456 $559,456 $ 586,468
25 $501,135 $559,456 $559,456 $ 957,399
30 $697,608 $559,456 $559,456 $1,569,416
35 $948,363 $ 0* $559,456 $2,450,636
</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 $ 5,199 $ 5,565 $ 5,933 $ 3,240 $ 3,607 $ 3,975
2 $10,361 $ 11,421 $ 12,527 $ 9,657 $ 10,717 $ 11,822
3 $16,042 $ 18,171 $ 20,479 $14,083 $ 16,213 $ 18,521
4 $22,830 $ 26,493 $ 30,606 $20,872 $ 24,535 $ 28,648
5 $29,367 $ 35,034 $ 41,633 $27,409 $ 33,076 $ 39,675
6 $35,640 $ 43,788 $ 53,644 $34,073 $ 42,222 $ 52,077
7 $41,650 $ 52,769 $ 66,746 $40,475 $ 51,594 $ 65,571
8 $47,389 $ 61,976 $ 81,052 $46,606 $ 61,193 $ 80,269
9 $52,890 $ 71,456 $ 96,732 $52,498 $ 71,065 $ 96,340
10 $58,264 $ 81,344 $ 114,070 $58,264 $ 81,344 $ 114,070
15 $81,841 $137,391 $ 234,937 $81,841 $137,391 $ 234,937
20 $94,594 $201,236 $ 437,662 $94,594 $201,236 $ 437,662
25 $92,750 $278,240 $ 784,753 $92,750 $278,240 $ 784,753
30 $62,957 $371,413 $1,352,945 $62,957 $371,413 $1,352,945
35 $ 0* $497,321 $2,290,314 $ 0* $497,321 $2,290,314
</TABLE>
- -----------
All premium payments are illustrated as if made at the beginning of the policy
year.
This illustration assumes no policy loans 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.
72
<PAGE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
BASED ON CURRENT COST OF INSURANCE CHARGES
ISSUE AGE: 40 FACE AMOUNT: $171,518
CLASS: MALE NONSMOKER DEATH BENEFIT OPTION: B
GUIDELINE PREMIUM TEST ANNUAL PREMIUM: $10,000
<TABLE>
<CAPTION>
TOTAL
PREMIUMS 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 $ 10,500 $177,387 $177,761 $ 178,135
2 $ 21,525 $184,780 $185,981 $ 187,228
3 $ 33,101 $193,216 $195,786 $ 198,549
4 $ 45,256 $201,509 $206,006 $ 211,017
5 $ 58,019 $209,691 $216,687 $ 224,782
6 $ 71,420 $217,887 $227,983 $ 240,116
7 $ 85,491 $225,927 $239,738 $ 256,986
8 $100,266 $233,816 $251,976 $ 275,555
9 $115,779 $241,553 $264,714 $ 295,991
10 $132,068 $249,145 $277,978 $ 318,489
15 $226,575 $287,130 $356,781 $ 479,187
20 $347,193 $321,216 $454,330 $ 758,613
25 $501,135 $352,683 $579,462 $1,230,120
30 $697,608 $376,305 $732,380 $2,018,359
35 $948,363 $387,306 $915,127 $3,160,250
</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 $ 5,869 $ 6,243 $ 6,617 $ 5,715 $ 6,089 $ 6,464
2 $ 13,262 $ 14,463 $ 15,710 $ 13,741 $ 14,942 $ 16,188
3 $ 21,698 $ 24,268 $ 27,031 $ 21,097 $ 23,668 $ 26,430
4 $ 29,991 $ 34,488 $ 39,499 $ 29,391 $ 33,887 $ 38,899
5 $ 38,173 $ 45,169 $ 53,264 $ 37,573 $ 44,569 $ 52,664
6 $ 46,369 $ 56,465 $ 68,598 $ 45,889 $ 55,984 $ 68,117
7 $ 54,409 $ 68,220 $ 85,468 $ 54,048 $ 67,860 $ 85,108
8 $ 62,298 $ 80,458 $ 104,037 $ 62,058 $ 80,218 $ 103,797
9 $ 70,035 $ 93,196 $ 124,473 $ 69,915 $ 93,076 $ 124,353
10 $ 77,627 $106,460 $ 146,971 $ 77,627 $106,460 $ 146,971
15 $115,612 $185,263 $ 305,215 $115,612 $185,263 $ 305,215
20 $149,698 $282,812 $ 566,129 $149,698 $282,812 $ 566,129
25 $181,165 $407,944 $1,008,295 $181,165 $407,944 $1,008,295
30 $204,787 $560,862 $1,739,965 $204,787 $560,862 $1,739,965
35 $215,788 $743,609 $2,953,505 $215,788 $743,609 $2,953,505
</TABLE>
- -----------
All premium payments are illustrated as if made at the beginning of the policy
year.
This illustration assumes no policy loans 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.
73
<PAGE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
BASED ON GUARANTEED COST OF INSURANCE CHARGES
ISSUE AGE: 40 FACE AMOUNT: $171,518
CLASS: MALE NONSMOKER DEATH BENEFIT OPTION: B
GUIDELINE PREMIUM TEST ANNUAL PREMIUM: $10,000
<TABLE>
<CAPTION>
TOTAL
PREMIUMS 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 $ 10,500 $177,364 $177,737 $ 178,111
2 $ 21,525 $184,639 $185,834 $ 187,075
3 $ 33,101 $192,919 $195,470 $ 198,213
4 $ 45,256 $201,013 $205,466 $ 210,430
5 $ 58,019 $208,952 $215,864 $ 223,867
6 $ 71,420 $216,869 $226,825 $ 238,799
7 $ 85,491 $224,597 $238,191 $ 255,186
8 $100,266 $232,132 $249,976 $ 273,172
9 $115,779 $239,474 $262,192 $ 292,917
10 $132,068 $246,619 $274,852 $ 314,590
15 $226,575 $281,473 $349,061 $ 465,909
20 $347,193 $310,655 $438,624 $ 725,525
25 $501,135 $334,389 $549,932 $1,165,747
30 $697,608 $347,552 $681,637 $1,894,734
35 $948,363 $344,883 $833,112 $2,944,337
</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 $ 5,846 $ 6,219 $ 6,593 $ 5,693 $ 6,066 $ 6,440
2 $ 13,121 $ 14,316 $ 15,557 $ 13,600 $ 14,795 $ 16,036
3 $ 21,401 $ 23,952 $ 26,695 $ 20,801 $ 23,352 $ 26,094
4 $ 29,495 $ 33,948 $ 38,912 $ 28,895 $ 33,347 $ 38,312
5 $ 37,434 $ 44,346 $ 52,349 $ 36,833 $ 43,746 $ 51,749
6 $ 45,351 $ 55,307 $ 67,281 $ 44,871 $ 54,827 $ 66,800
7 $ 53,079 $ 66,673 $ 83,668 $ 52,719 $ 66,313 $ 83,308
8 $ 60,614 $ 78,458 $ 101,654 $ 60,374 $ 78,217 $ 101,414
9 $ 67,956 $ 90,674 $ 121,399 $ 67,836 $ 90,554 $ 121,279
10 $ 75,101 $103,334 $ 143,072 $ 75,101 $103,334 $ 143,072
15 $109,955 $177,543 $ 294,391 $109,955 $177,543 $ 294,391
20 $139,137 $267,106 $ 541,436 $139,137 $267,106 $ 541,436
25 $162,871 $378,414 $ 955,530 $162,871 $378,414 $ 955,530
30 $176,034 $510,119 $1,633,392 $176,034 $510,119 $1,633,392
35 $173,365 $661,594 $2,751,717 $173,365 $661,594 $2,751,717
</TABLE>
- -----------
All premium payments are illustrated as if made at the beginning of the policy
year.
This illustration assumes no policy loans 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.
74
<PAGE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
BASED ON CURRENT COST OF INSURANCE CHARGES
ISSUE AGE: 40 FACE AMOUNT: $559,456
CLASS: MALE NONSMOKER
CASH VALUE ACCUMULATION TEST ANNUAL PREMIUM: $10,000
<TABLE>
<CAPTION>
TOTAL
PREMIUMS 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 $ 10,500 $559,456 $559,456 $ 559,456
2 $ 21,525 $559,456 $559,456 $ 559,456
3 $ 33,101 $559,456 $559,456 $ 559,456
4 $ 45,256 $559,456 $559,456 $ 559,456
5 $ 58,019 $559,456 $559,456 $ 559,456
6 $ 71,420 $559,456 $559,456 $ 559,456
7 $ 85,491 $559,456 $559,456 $ 559,456
8 $100,266 $559,456 $559,456 $ 559,456
9 $115,779 $559,456 $559,456 $ 559,456
10 $132,068 $559,456 $559,456 $ 559,456
15 $226,575 $559,456 $559,456 $ 578,901
20 $347,193 $559,456 $559,456 $ 937,574
25 $501,135 $559,456 $595,792 $1,452,653
30 $697,608 $559,456 $730,565 $2,180,416
35 $948,363 $559,456 $867,516 $3,208,254
</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 $ 5,271 $ 5,641 $ 6,011 $ 3,313 $ 3,683 $ 4,053
2 $ 10,742 $ 11,818 $ 12,940 $ 10,037 $ 11,113 $ 12,235
3 $ 16,848 $ 19,030 $ 21,392 $ 14,890 $ 17,072 $ 19,433
4 $ 24,196 $ 27,978 $ 32,217 $ 22,238 $ 26,020 $ 30,258
5 $ 31,428 $ 37,317 $ 44,160 $ 29,470 $ 35,359 $ 42,202
6 $ 38,498 $ 47,018 $ 57,292 $ 36,931 $ 45,452 $ 55,725
7 $ 45,401 $ 57,093 $ 71,733 $ 44,226 $ 55,918 $ 70,558
8 $ 52,155 $ 67,573 $ 87,639 $ 51,371 $ 66,790 $ 86,856
9 $ 58,783 $ 78,505 $ 105,194 $ 58,392 $ 78,113 $ 104,802
10 $ 65,432 $ 90,061 $ 124,734 $ 65,432 $ 90,061 $ 124,734
15 $ 97,852 $158,380 $ 262,912 $ 97,852 $158,380 $ 262,912
20 $124,387 $242,139 $ 487,560 $124,387 $242,139 $ 487,560
25 $145,071 $350,976 $ 855,746 $145,071 $350,976 $ 855,746
30 $150,108 $480,937 $1,435,386 $150,108 $480,937 $1,435,386
35 $125,961 $629,502 $2,328,030 $125,961 $629,502 $2,328,030
</TABLE>
- -----------
All premium payments are illustrated as if made at the beginning of the policy
year.
This illustration assumes no policy loans 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.
75
<PAGE>
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
ILLUSTRATION OF DEATH BENEFITS, ACCUMULATED VALUES AND NET CASH SURRENDER VALUES
BASED ON GUARANTEED COST OF INSURANCE CHARGES
ISSUE AGE: 40 FACE AMOUNT: $559,456
CLASS: MALE NONSMOKER
CASH VALUE ACCUMULATION TEST ANNUAL PREMIUM: $10,000
<TABLE>
<CAPTION>
TOTAL
PREMIUMS 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 $ 10,500 $559,456 $559,456 $ 559,456
2 $ 21,525 $559,456 $559,456 $ 559,456
3 $ 33,101 $559,456 $559,456 $ 559,456
4 $ 45,256 $559,456 $559,456 $ 559,456
5 $ 58,019 $559,456 $559,456 $ 559,456
6 $ 71,420 $559,456 $559,456 $ 559,456
7 $ 85,491 $559,456 $559,456 $ 559,456
8 $100,266 $559,456 $559,456 $ 559,456
9 $115,779 $559,456 $559,456 $ 559,456
10 $132,068 $559,456 $559,456 $ 559,456
15 $226,575 $559,456 $559,456 $ 559,456
20 $347,193 $559,456 $559,456 $ 825,227
25 $501,135 $559,456 $559,456 $1,245,491
30 $697,608 $559,456 $564,167 $1,813,364
35 $948,363 $ 0* $661,882 $2,585,732
</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 $ 5,199 $ 5,565 $ 5,933 $ 3,240 $ 3,607 $ 3,975
2 $10,361 $ 11,421 $ 12,527 $ 9,657 $ 10,717 $ 11,822
3 $16,042 $ 18,171 $ 20,479 $14,083 $ 16,213 $ 18,521
4 $22,830 $ 26,493 $ 30,606 $20,872 $ 24,535 $ 28,648
5 $29,367 $ 35,034 $ 41,633 $27,409 $ 33,076 $ 39,675
6 $35,640 $ 43,788 $ 53,644 $34,073 $ 42,222 $ 52,077
7 $41,650 $ 52,769 $ 66,746 $40,475 $ 51,594 $ 65,571
8 $47,389 $ 61,976 $ 81,052 $46,606 $ 61,193 $ 80,269
9 $52,890 $ 71,456 $ 96,732 $52,498 $ 71,065 $ 96,340
10 $58,264 $ 81,344 $ 114,070 $58,264 $ 81,344 $ 114,070
15 $81,841 $137,391 $ 234,937 $81,841 $137,391 $ 234,937
20 $94,594 $201,236 $ 429,137 $94,594 $201,236 $ 429,137
25 $92,750 $278,240 $ 733,709 $92,750 $278,240 $ 733,709
30 $62,957 $371,395 $1,193,752 $62,957 $371,395 $1,193,752
35 $ 0* $480,287 $1,876,305 $ 0* $480,287 $1,876,305
</TABLE>
- -----------
All premium payments are illustrated as if made at the beginning of the policy
year.
This illustration assumes no policy loans 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.
76
<PAGE>
[LOGO of PACIFIC SELECT CHOICE]
Issued By: Principal Underwriter:
Pacific Mutual Life Insurance Company Pacific Mutual Distributors, Inc.
700 Newport Center Drive Member: NASD/SIPC
P.O. Box 9000 700 Newport Center Drive
Newport Beach, California 92660 P.O. Box 9000
Newport Beach, California 92660
<PAGE>
Sponsored by:
[LOGO of PACIFIC MUTUAL]
PACIFIC MUTUAL LIFE INSURANCE COMPANY
700 NEWPORT CENTER DRIVE
NEWPORT BEACH,
CA 92660
Distributed by:
[LOGO of PACIFIC MUTUAL DISTRIBUTORS, INC.]
Pacific Mutual Distributors, Inc.
Member NASD & SIPC
700 NEWPORT CENTER DRIVE, NB-3
NEWPORT BEACH, CA 92660
1-800-800-7681
FORM NO. 15-19044-03
<PAGE>
Pacific Select Choice
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 79 pages (including illustrations).
The undertaking to file reports.
Notice pursuant to Paragraph (b)(13)(i) under Rule 6e-3(T).
The Signatures.
Written consent of the following person (included in the exhibits shown below):
Deloitte & Touche LLP, Independent Public Accountant
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 Equities Network
(b) Form of Selling Agreement Between Pacific Equities Network and Various
Broker-Dealers
(4) Inapplicable
(5)(a) Flexible Premium Variable Life Insurance Policy
(b) Waiver of Charges Rider
(c) Accidental Death Rider
(d) Guaranteed Insurability Rider
(e) Added Protection Benefit Rider
(f) Annual Renewal and Convertible Term Rider
<PAGE>
(g) Exchange of Insured Rider
(h) Children's Term Rider
(i) Accelerated Living Benefit Rider
(j) Aviation Rider
(k) Endorsement Amending Suicide Exclusion Provision
(l) Disability Benefit Rider
(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 for Flexible Premium Variable Life Insurance Policy 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
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
<PAGE>
9. Exhibit Regarding Adjustment for Conversion to a Non-Flexible Contract
10. Power of Attorney
11. Inapplicable
12. Inapplicable
13. Inapplicable
14. Inapplicable
15. Inapplicable
16. Inapplicable
17. Financial Data Schedule - December 31, 1995
<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.
REPRESENTATIONS, DESCRIPTION AND UNDERTAKINGS PURSUANT TO
PARAGRAPH (b)(13)(iii)(F) OF RULE 6e-3(T) UNDER THE
INVESTMENT COMPANY ACT OF 1940
Registrant makes the following representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) is being relied upon.
(2) The level of the mortality and expense risk charge is within the
range of industry practice for comparable flexible premium
variable life insurance policies.
(3) Pacific Mutual has concluded that there is a reasonable likelihood
that the distribution financing arrangement of the Pacific Select
Exec Separate Account will benefit the Separate Account and the
Policy Owners.
(4) The Separate Account will invest only in management companies
which have undertaken to have a board of directors, a majority of
whom are not interested persons of the company, formulate and
approve any plan under the Rule 12b-1 to finance distribution
expenses.
The methodology used to support the representation made in paragraph (2)
above was to analyze a sample of flexible premium variable life policies and one
scheduled premium variable life policy, all of which are currently available for
sale and which contain similar guarantees, and some of which are sold in similar
markets. Registrant undertakes to keep and make available to the Commission on
request the documents used to support the representation in paragraph (2) above
and a memorandum setting forth the basis for the representation in paragraph (3)
above.
<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
certifies that it meets all of the requirements for effectiveness pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 4 to the 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 25th day of March, 1996.
PACIFIC SELECT EXEC SEPARATE ACCOUNT
(Registrant)
BY: 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 in Exhibit 10 of this Post-Effective Amendment
No. 4 to the Registration Statement of Pacific Select Exec Separate Account,
File No. 33-57908.)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pacific Mutual
Life Insurance Company certifies that it meets all of the requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment No. 4 to the 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 25th day of March,
1996.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
(Registrant)
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 in Exhibit 10 of this Post-Effective Amendment
No. 4 to the Registration Statement of Pacific Select Exec Separate Account,
File No. 33-57908.)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 4 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
Signature Title Date
__________________________ Director, Chairman of the Board March 25, 1996
Thomas C. Sutton* and Chief Executive Officer
__________________________ Director and President March 25, 1996
Glenn S. Schafer*
__________________________ Controller March 25, 1996
Edward Byrd*
__________________________ Director and Chairman Emeritus March 25, 1996
Harry G. Bubb*
__________________________ Director March 25, 1996
Richard M. Ferry*
__________________________ Director March 25, 1996
Donald E. Guinn*
__________________________ Director March 25, 1996
Ignacio E. Lozano, Jr.*
__________________________ Director March 25, 1996
Charles A. Lynch*
__________________________ Director March 25, 1996
Dr. Allen W. Mathies, Jr.*
<PAGE>
________________________ Director March 25, 1996
Charles D. Miller*
________________________ Director March 25, 1996
Donn B. Miller*
________________________ Director March 25, 1996
Jacqueline C. Morby
________________________ Director March 25, 1996
J. Fernando Niebla*
________________________ Director March 25, 1996
Susan Westerberg Prager*
________________________ Director March 25, 1996
Richard M. Rosenberg
________________________ Director March 25, 1996
James R. Ukropina*
________________________ Director March 25, 1996
Raymond L. Watson*
*BY: /s/ DAVID R. CARMICHAEL March 25, 1996
David R. Carmichael
as attorney-in-fact
(Power of Attorney is contained in Exhibit 10 of this Post-Effective Amendment
No. 4 to the Registration Statement of Pacific Select Exec Separate Account,
File No. 33-57908.)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 94,486
<INVESTMENTS-AT-VALUE> 94,486
<RECEIVABLES> 1,533
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 96,019
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70
<TOTAL-LIABILITIES> 70
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,975
<SHARES-COMMON-STOCK> 9,579
<SHARES-COMMON-PRIOR> 9,390
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (26)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 95,949
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,737
<OTHER-INCOME> 0
<EXPENSES-NET> 512
<NET-INVESTMENT-INCOME> 5,225
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5,225
<EQUALIZATION> (34)
<DISTRIBUTIONS-OF-INCOME> (5,251)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,344
<NUMBER-OF-SHARES-REDEEMED> 25,679
<SHARES-REINVESTED> 524
<NET-CHANGE-IN-ASSETS> 1,799
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 386
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 512
<AVERAGE-NET-ASSETS> 96,579
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> 0.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 2
<NAME> HIGH YIELD BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 80,122
<INVESTMENTS-AT-VALUE> 82,571
<RECEIVABLES> 1,896
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,477
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 52
<TOTAL-LIABILITIES> 52
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,958
<SHARES-COMMON-STOCK> 8,622
<SHARES-COMMON-PRIOR> 2,843
<ACCUMULATED-NII-CURRENT> 29
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 989
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,449
<NET-ASSETS> 84,425
<DIVIDEND-INCOME> 82
<INTEREST-INCOME> 4,868
<OTHER-INCOME> 0
<EXPENSES-NET> 413
<NET-INVESTMENT-INCOME> 4,537
<REALIZED-GAINS-CURRENT> 990
<APPREC-INCREASE-CURRENT> 3,249
<NET-CHANGE-FROM-OPS> 8,776
<EQUALIZATION> 795
<DISTRIBUTIONS-OF-INCOME> (4,508)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,807
<NUMBER-OF-SHARES-REDEEMED> 2,500
<SHARES-REINVESTED> 472
<NET-CHANGE-IN-ASSETS> 59,087
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 319
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 413
<AVERAGE-NET-ASSETS> 53,315
<PER-SHARE-NAV-BEGIN> 8.91
<PER-SHARE-NII> 0.76
<PER-SHARE-GAIN-APPREC> 0.88
<PER-SHARE-DIVIDEND> 0.76
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.79
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 3
<NAME> GOVERNMENT SECURITIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 65,905
<INVESTMENTS-AT-VALUE> 66,685
<RECEIVABLES> 4,523
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 71,208
<PAYABLE-FOR-SECURITIES> 11,369
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72
<TOTAL-LIABILITIES> 11,441
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,506
<SHARES-COMMON-STOCK> 5,511
<SHARES-COMMON-PRIOR> 2,229
<ACCUMULATED-NII-CURRENT> 56
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,107
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,098
<NET-ASSETS> 59,767
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,422
<OTHER-INCOME> 1
<EXPENSES-NET> 309
<NET-INVESTMENT-INCOME> 2,114
<REALIZED-GAINS-CURRENT> 2,863
<APPREC-INCREASE-CURRENT> 1,330
<NET-CHANGE-FROM-OPS> 6,307
<EQUALIZATION> 300
<DISTRIBUTIONS-OF-INCOME> (2,184)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,681
<NUMBER-OF-SHARES-REDEEMED> 608
<SHARES-REINVESTED> 209
<NET-CHANGE-IN-ASSETS> 38,278
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,630)
<GROSS-ADVISORY-FEES> 227
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 309
<AVERAGE-NET-ASSETS> 37,860
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 1.19
<PER-SHARE-DIVIDEND> 0.57
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.84
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 4
<NAME> MANAGED BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 124,306
<INVESTMENTS-AT-VALUE> 126,608
<RECEIVABLES> 3,557
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 130,179
<PAYABLE-FOR-SECURITIES> 3,021
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166
<TOTAL-LIABILITIES> 3,187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121,763
<SHARES-COMMON-STOCK> 11,440
<SHARES-COMMON-PRIOR> 5,376
<ACCUMULATED-NII-CURRENT> 127
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,377
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,725
<NET-ASSETS> 126,992
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,892
<OTHER-INCOME> 4
<EXPENSES-NET> 655
<NET-INVESTMENT-INCOME> 5,241
<REALIZED-GAINS-CURRENT> 5,734
<APPREC-INCREASE-CURRENT> 3,716
<NET-CHANGE-FROM-OPS> 14,691
<EQUALIZATION> 1,230
<DISTRIBUTIONS-OF-INCOME> (5,400)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,715
<NUMBER-OF-SHARES-REDEEMED> 1,157
<SHARES-REINVESTED> 506
<NET-CHANGE-IN-ASSETS> 73,773
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3,071)
<GROSS-ADVISORY-FEES> 519
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 655
<AVERAGE-NET-ASSETS> 86,713
<PER-SHARE-NAV-BEGIN> 9.90
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> 1.19
<PER-SHARE-DIVIDEND> 0.64
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.10
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 5
<NAME> GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 120,022
<INVESTMENTS-AT-VALUE> 129,567
<RECEIVABLES> 1,048
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 130,616
<PAYABLE-FOR-SECURITIES> 494
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 381
<TOTAL-LIABILITIES> 875
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,305
<SHARES-COMMON-STOCK> 6,988
<SHARES-COMMON-PRIOR> 5,468
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (20)
<ACCUMULATED-NET-GAINS> 8,911
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,545
<NET-ASSETS> 129,741
<DIVIDEND-INCOME> 1,309
<INTEREST-INCOME> 509
<OTHER-INCOME> 0
<EXPENSES-NET> 862
<NET-INVESTMENT-INCOME> 956
<REALIZED-GAINS-CURRENT> 8,911
<APPREC-INCREASE-CURRENT> 14,638
<NET-CHANGE-FROM-OPS> 24,505
<EQUALIZATION> 76
<DISTRIBUTIONS-OF-INCOME> (976)
<DISTRIBUTIONS-OF-GAINS> (13)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,533
<NUMBER-OF-SHARES-REDEEMED> 2,071
<SHARES-REINVESTED> 58
<NET-CHANGE-IN-ASSETS> 48,290
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 13
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 862
<AVERAGE-NET-ASSETS> 109,161
<PER-SHARE-NAV-BEGIN> 14.90
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> 3.67
<PER-SHARE-DIVIDEND> 0.15
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.57
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 6
<NAME> EQUITY INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 187,217
<INVESTMENTS-AT-VALUE> 204,936
<RECEIVABLES> 1,636
<ASSETS-OTHER> 214
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 206,786
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 133
<TOTAL-LIABILITIES> 133
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 177,898
<SHARES-COMMON-STOCK> 11,351
<SHARES-COMMON-PRIOR> 5,343
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (18)
<ACCUMULATED-NET-GAINS> 11,054
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,719
<NET-ASSETS> 206,653
<DIVIDEND-INCOME> 2,852
<INTEREST-INCOME> 281
<OTHER-INCOME> 0
<EXPENSES-NET> 1,070
<NET-INVESTMENT-INCOME> 2,063
<REALIZED-GAINS-CURRENT> 12,389
<APPREC-INCREASE-CURRENT> 19,133
<NET-CHANGE-FROM-OPS> 33,585
<EQUALIZATION> 430
<DISTRIBUTIONS-OF-INCOME> (2,080)
<DISTRIBUTIONS-OF-GAINS> (55)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,041
<NUMBER-OF-SHARES-REDEEMED> 1,161
<SHARES-REINVESTED> 128
<NET-CHANGE-IN-ASSETS> 131,570
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,280)
<GROSS-ADVISORY-FEES> 841
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,070
<AVERAGE-NET-ASSETS> 129,701
<PER-SHARE-NAV-BEGIN> 14.05
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 4.16
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.21
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 7
<NAME> MULTI-STRATEGY PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 128,088
<INVESTMENTS-AT-VALUE> 137,459
<RECEIVABLES> 1,790
<ASSETS-OTHER> 74
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 139,323
<PAYABLE-FOR-SECURITIES> 4,722
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100
<TOTAL-LIABILITIES> 4,822
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 118,536
<SHARES-COMMON-STOCK> 9,471
<SHARES-COMMON-PRIOR> 6,747
<ACCUMULATED-NII-CURRENT> 30
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,564
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,371
<NET-ASSETS> 134,501
<DIVIDEND-INCOME> 1,237
<INTEREST-INCOME> 3,096
<OTHER-INCOME> 1
<EXPENSES-NET> 839
<NET-INVESTMENT-INCOME> 3,495
<REALIZED-GAINS-CURRENT> 7,345
<APPREC-INCREASE-CURRENT> 11,136
<NET-CHANGE-FROM-OPS> 21,976
<EQUALIZATION> 272
<DISTRIBUTIONS-OF-INCOME> (3,457)
<DISTRIBUTIONS-OF-GAINS> (12)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,300
<NUMBER-OF-SHARES-REDEEMED> 838
<SHARES-REINVESTED> 262
<NET-CHANGE-IN-ASSETS> 55,354
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (776)
<GROSS-ADVISORY-FEES> 650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 839
<AVERAGE-NET-ASSETS> 100,215
<PER-SHARE-NAV-BEGIN> 11.73
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 2.47
<PER-SHARE-DIVIDEND> 0.45
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.20
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 8
<NAME> INTERNATIONAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 175,732
<INVESTMENTS-AT-VALUE> 184,405
<RECEIVABLES> 1,345
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 185,750
<PAYABLE-FOR-SECURITIES> 3,343
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208
<TOTAL-LIABILITIES> 3,551
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 171,521
<SHARES-COMMON-STOCK> 14,090
<SHARES-COMMON-PRIOR> 6,360
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,286)
<ACCUMULATED-NET-GAINS> 3,299
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,665
<NET-ASSETS> 182,199
<DIVIDEND-INCOME> 2,889
<INTEREST-INCOME> 735
<OTHER-INCOME> 0
<EXPENSES-NET> 1,354
<NET-INVESTMENT-INCOME> 2,270
<REALIZED-GAINS-CURRENT> 3,100
<APPREC-INCREASE-CURRENT> 6,427
<NET-CHANGE-FROM-OPS> 11,797
<EQUALIZATION> 1,864
<DISTRIBUTIONS-OF-INCOME> (3,358)
<DISTRIBUTIONS-OF-GAINS> (58)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,290
<NUMBER-OF-SHARES-REDEEMED> 1,823
<SHARES-REINVESTED> 263
<NET-CHANGE-IN-ASSETS> 106,228
<ACCUMULATED-NII-PRIOR> 51
<ACCUMULATED-GAINS-PRIOR> 8
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,031
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,354
<AVERAGE-NET-ASSETS> 121,321
<PER-SHARE-NAV-BEGIN> 11.94
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0.25
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.93
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 9
<NAME> EQUITY INDEX PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 115,791
<INVESTMENTS-AT-VALUE> 137,077
<RECEIVABLES> 648
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 137,754
<PAYABLE-FOR-SECURITIES> 203
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32
<TOTAL-LIABILITIES> 235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,798
<SHARES-COMMON-STOCK> 7,880
<SHARES-COMMON-PRIOR> 3,119
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (9)
<ACCUMULATED-NET-GAINS> 4,558
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,172
<NET-ASSETS> 137,519
<DIVIDEND-INCOME> 1,861
<INTEREST-INCOME> 254
<OTHER-INCOME> 6
<EXPENSES-NET> 330
<NET-INVESTMENT-INCOME> 1,791
<REALIZED-GAINS-CURRENT> 4,554
<APPREC-INCREASE-CURRENT> 16,956
<NET-CHANGE-FROM-OPS> 23,301
<EQUALIZATION> 288
<DISTRIBUTIONS-OF-INCOME> (1,800)
<DISTRIBUTIONS-OF-GAINS> (6)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,687
<NUMBER-OF-SHARES-REDEEMED> 1,039
<SHARES-REINVESTED> 113
<NET-CHANGE-IN-ASSETS> 96,907
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 195
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 330
<AVERAGE-NET-ASSETS> 79,109
<PER-SHARE-NAV-BEGIN> 13.02
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 4.43
<PER-SHARE-DIVIDEND> 0.34
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.45
<EXPENSE-RATIO> 0.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 10
<NAME> GROWTH LT PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 177,754
<INVESTMENTS-AT-VALUE> 198,622
<RECEIVABLES> 3,005
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 201,643
<PAYABLE-FOR-SECURITIES> 543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 315
<TOTAL-LIABILITIES> 858
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 180,342
<SHARES-COMMON-STOCK> 14,221
<SHARES-COMMON-PRIOR> 4,443
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (427)
<ACCUMULATED-NET-GAINS> 164
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,706
<NET-ASSETS> 200,785
<DIVIDEND-INCOME> 634
<INTEREST-INCOME> 1,438
<OTHER-INCOME> 0
<EXPENSES-NET> 1,058
<NET-INVESTMENT-INCOME> 1,014
<REALIZED-GAINS-CURRENT> 12,228
<APPREC-INCREASE-CURRENT> 18,562
<NET-CHANGE-FROM-OPS> 31,804
<EQUALIZATION> 181
<DISTRIBUTIONS-OF-INCOME> (815)
<DISTRIBUTIONS-OF-GAINS> (12,566)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,137
<NUMBER-OF-SHARES-REDEEMED> 3,322
<SHARES-REINVESTED> 963
<NET-CHANGE-IN-ASSETS> 151,411
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (125)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 845
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,058
<AVERAGE-NET-ASSETS> 113,131
<PER-SHARE-NAV-BEGIN> 11.11
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 3.96
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.95
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.12
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 11
<NAME> EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 96,129
<INVESTMENTS-AT-VALUE> 107,853
<RECEIVABLES> 372
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 108,226
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90
<TOTAL-LIABILITIES> 90
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 88,141
<SHARES-COMMON-STOCK> 6,174
<SHARES-COMMON-PRIOR> 5,149
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (62)
<ACCUMULATED-NET-GAINS> 8,332
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,725
<NET-ASSETS> 108,136
<DIVIDEND-INCOME> 606
<INTEREST-INCOME> 326
<OTHER-INCOME> 0
<EXPENSES-NET> 697
<NET-INVESTMENT-INCOME> 235
<REALIZED-GAINS-CURRENT> 9,658
<APPREC-INCREASE-CURRENT> 7,633
<NET-CHANGE-FROM-OPS> 17,526
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (296)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,728
<NUMBER-OF-SHARES-REDEEMED> 723
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 35,011
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,326)
<GROSS-ADVISORY-FEES> 565
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 697
<AVERAGE-NET-ASSETS> 87,146
<PER-SHARE-NAV-BEGIN> 14.20
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 3.33
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.52
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING DECEMBER 31, 1995
</LEGEND>
<CIK> 0000832908
<NAME> PACIFIC SELECT CHOICE
<SERIES>
<NUMBER> 12
<NAME> BOND AND INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 49,701
<INVESTMENTS-AT-VALUE> 55,907
<RECEIVABLES> 993
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,901
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 48
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,130
<SHARES-COMMON-STOCK> 4,368
<SHARES-COMMON-PRIOR> 3,269
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (484)
<ACCUM-APPREC-OR-DEPREC> 6,207
<NET-ASSETS> 56,853
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,297
<OTHER-INCOME> 0
<EXPENSES-NET> 339
<NET-INVESTMENT-INCOME> 2,958
<REALIZED-GAINS-CURRENT> 294
<APPREC-INCREASE-CURRENT> 8,971
<NET-CHANGE-FROM-OPS> 12,223
<EQUALIZATION> 35
<DISTRIBUTIONS-OF-INCOME> (2,958)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,501
<NUMBER-OF-SHARES-REDEEMED> 650
<SHARES-REINVESTED> 248
<NET-CHANGE-IN-ASSETS> 22,775
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (778)
<GROSS-ADVISORY-FEES> 255
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 339
<AVERAGE-NET-ASSETS> 42,695
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> 0.82
<PER-SHARE-GAIN-APPREC> 2.59
<PER-SHARE-DIVIDEND> 0.81
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.02
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</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.
/s/ Audrey L. Milfs
Audrey L. Milfs, Secretary
#4427
<PAGE>
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:
/s/ HARRY G. BUBB 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.
/s/ THOMAS C. SUTTON
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.
2
<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
7
<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.
8
<PAGE>
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 Selling Agreement For
Pacific Select Choice
Variable Life Policy Form 93-55
This Schedule to the Pacific Select Selling Agreement by and between the
undersigned is entered into on the dates appearing next to their signatures
below. The provisions of this schedule shall apply only to Pacific Select
Choice Flexible Premium Variable Universal Life policies solicited and issued
while this schedule is in effect. All compensation payable under this schedule
shall be subject to the terms and conditions contained herein when premium
payments are accepted by Pacific Mutual Life Insurance Company ("PM").
<TABLE>
<CAPTION>
Commissions On
For all policies issued in accordance with Premium Payments
- ----------------------------------------------------------------------------------
Standard Compensation (See Note 2): A B C D E
- --------------------------------------------- --- -- -------- ------- --
<S> <C> <C> <C> <C> <C>
Non-Guaranteed Issue 50% 4% 40% 4% 2%
Affiliate Compensation (See Note 2):
Non-Guaranteed Issue 50% 2% 35% 2% 2%
</TABLE>
Notes
1. Commission Structure:
Target Premium Calculation
First Target A% of premium allocated to the first target, regardless
of policy year.
Second & B% of premium allocated to the second and third targets,
Third targets regardless of policy year.
Bonus C% of all premium allocated to the third target. Payable
only on or after the second policy anniversary, provided
policy is in force.
Fourth through D% of all premium allocated to the fourth through and
Tenth targets including the tenth targets, regardless of policy year.
13
<PAGE>
Eleventh target E% of all premium allocated to the eleventh and subsequent
and thereafter targets, regardless of policy year.
2. Compensation Schedules: "Standard Compensation" Schedule shall apply to all
policies solicited and issued under this agreement other than those to which the
"Affiliate Compensation" Schedule applies. The "Affiliate Compensation"
Schedule will become effective only upon acceptance by Pacific Equities Network
("PEN") of the fully executed Affiliate Acknowledgment and Approval form. The
"Affiliate Compensation" Schedule election may be rescinded at any time, as
provided in the Affiliate Acknowledgment and Approval form. Upon such rescision
the "Standard Compensation" Schedule will become effective.
3. Target Premium: The target premium is an amount determined from tables
published by PM with respect to a policy or rider upon which commissions are
based. Target premium shall be calculated in accordance with the rates and
methods of calculations described in the Pacific Select Choice Rates and Values
Booklet. As it applies to future business, the target premium may be changed
from time to time by PM. The target premium applicable to a particular coverage
shall be determined from the table in force when the first premium for such
coverage is entered as paid in the accounting records of PM.
4. Riders: Additional Protection Benefit ("APB") rider is not commissionable
and will have a separate premium target, which is set at issue and will not vary
with additional APB rider coverage. Premium received will be allocated between
the base premium target and the APB premium target in the same proportion as
base and APB target amounts. The premium target for the Accidental Death,
Children's Term, Disability Benefit, Exchange of Insured, Guaranteed
Insurability, and Waiver of Charges Riders will be the base policy target. The
Accelerated Benefit and Annual Renewable and Convertible Term Riders are non-
commissionable. Refer to the Rates and Values Booklet for additional
information.
5. Commission Calculation: Commissions shall only be calculated on premium
actually received and accepted by PM. Commissions shall only be paid on an
earned basis.
6. Premium Allocation: Premium received will be allocated between the base
premium target and the APB premium target in the same proportion as base and APB
target amounts.
7. Guaranteed Issue: Guaranteed Issue for ages 66 and above is available by
exception only. Commission rates will be reduced for Guaranteed Issue for all
issue ages 41-70 in accordance with the following tables (See current Rates and
Values Booklet for more details.):
<TABLE>
<CAPTION>
Commissions On
For all policies issued in accordance with Premium Payments
- --------------------------------------------------------------------------------------------------------
Standard Compensation (See Note 2): A B C D E
- ----------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Guaranteed Issue Age 0-40 47% 4% 37% 4% 2%
Age 41-45 45% 4% 35% 4% 2%
Age 46-50 42% 4% 32% 4% 2%
</TABLE>
<PAGE>
<TABLE>
Age 51-55 38% 4% 28% 4% 2%
Age 56-60 32% 4% 22% 4% 2%
Age 61-65 20% 4% 10% 4% 2%
Age 66-70 0% 4% 0% 4% 2%
Affiliate Compensation (See Note 2): A B C D E
- ---------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C>
Guaranteed Issue Age 0-40 47% 2% 32% 2% 2%
Age 41-45 45% 2% 30% 2% 2%
Age 46-50 42% 2% 27% 2% 2%
Age 51-55 38% 2% 23% 2% 2%
Age 56-60 32% 2% 17% 2% 2%
Age 61-65 20% 2% 5% 2% 2%
Age 66-70 0% 2% 0% 2% 2%
</TABLE>
8. Compensation Payments: Compensation on initial premium shall be due to the
General Agent and/or Selling Broker/Dealer at the time of the issuance of the
policy and for all other premium payments at the time of the receipt and
acceptance of premium by PM. After a change of Compensation Schedule or a
change of Broker/Dealer compensation due on existing policies shall be payable
to the General Agent and/or Broker/Dealer in accordance with the Schedule B in
effect at the time of solicitation of the policy. Moreover, when a Contract
Owner terminates a Broker/Dealer, no further commissions or compensation due on
existing policies after termination shall be payable to the General Agent and/or
Broker/Dealer after the notice of termination is received and accepted by PM.
The amount, if any, and the time of payment of compensation on
replacements, changes, conversions, exchanges, term renewals, premiums paid in
advance, policies issued on a "guaranteed issue" basis, life policies issued
over age 70, policies in excess of PM's retention or policies requiring
reinsurance, and other special cases and programs shall be governed by PM's
underwriting and administrative rules then in effect.
9. Commission Chargeback: In the event that a policy for which a commission
has been paid is lapsed or surrendered by the Contract Owner during the first
two policy years, or is returned to PEN or PM for refund of premium within the
later of 10 days after the purchaser receives it or 45 days after the
application for the policy is completed, or a premium for which commission has
been paid is refunded by PM, PEN shall require reimbursement from General Agent
and/or Selling Broker/Dealer as follows:
. 100% of the commission if the lapse, surrender, return or refund occurs
within six months of the policy issue date;
. 50% of the commission if the lapse, surrender, return or refund occurs during
the seventh through twelfth months after the policy issue date;
. 25% of the commission if the lapse, surrender, return or refund occurs during
the thirteenth through twenty-fourth months after the policy issue date.
<PAGE>
If the amount to be deducted exceeds compensation otherwise due, Representative
shall reimburse PEN before the next commission cycle or within 10 business days
from the date of mailing of a written demand for reimbursement, whichever is
later.
10. Broker/Dealer Transfer: In the event that a Representative terminates from
the Selling Broker/Dealer of record, no future compensation payments shall be
remitted for credit to the Representative unless there exists a valid Selling
Agreement between PM, PEN and the Selling Broker/Dealer that the Representative
is joining, and (1) the Contract Owner(s) requests in writing that the
---
Representative remains as Representative of record, or (2) both the former and
future broker/dealers direct PM and PEN in a joint writing to transfer all
policies and future compensation to the new Selling Broker/Dealer of record, or
(3) the NASD approves and effects a bulk transfer of all Representatives to a
new Selling Broker/Dealer.
11. Production Credits: Representatives will receive Recognition Credits from
PM which may result in an award of trips, bonuses or other items of monetary
value.
12. Internal Exchanges: No commission will be earned on the initial exchange
of any PM policy for Pacific Select Choice. All subsequent premium payments
will receive commission calculated at 30% of commission rates shown in the
compensation schedule in effect at the time of policy issue.
PM and PEN reserve the right to terminate or amend this schedule by providing
written notification to other parties in accordance with Section VI.G of the
Selling Agreement. With the exception of the terms amended by this Amendment,
all other terms and conditions of the original contract shall remain in full
force and effect.
This Schedule shall be effective as of ______________________.
PACIFIC EQUITIES NETWORK ______________________________________
(Selling Broker/Dealer)
By: /s/ GERALD W ROBINSON By:
(Signature) ------------------------------------
(Signature)
Title: President & C.E.O. Title:
Date: Date:
------------------------------ ---------------------------------
PACIFIC MUTUAL LIFE INSURANCE COMPANY
---------------------------------------
(Selling General Agent)
By: By:
--------------------------------- -----------------------------------
(Signature) (Signature)
Title: Title:
----------------------------- --------------------------------
Date: Date:
----------------------------- ----------------------------------
<PAGE>
- ------------------------------------ ---------------------------------------
(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:
----------------------------- ----------------------------------
934/1093/
<PAGE>
EXHIBIT 99.1(5)(a)
Flexible Premium Variable Life Insurance Policy
<PAGE>
PACIFIC MUTUAL
LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 92660
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
. Investment Experience
Reflected in Benefits
. Adjustable Face Amount
. Participating
Form 93-55
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
DEATH BENEFITS OPTIONS 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 to
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.
<PAGE>
TC Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
<PAGE>
POLICY SPECIFICATIONS
BASIC POLICY: FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
PREMIUMS: PLANNED PERIODIC PREMIUM PAYMENT - $ 3,000.00
GUIDELINE SINGLE PREMIUM - $42,747.06
GUIDELINE LEVEL PREMIUM - $ 3,643.22
DEATH BENEFIT QUALIFICATION TEST:
GUIDELINE PREMIUM TEST
(THIS ELECTION IS IRREVOCABLE FOR THE LIFE OF THE CONTRACT)
ACCOUNT ALLOCATIONS AVAILABLE:
MONEY MARKET MULTI-STRATEGY GROWTH
MANAGED BOND INTERNATIONAL EQUITY INCOME
HIGH YIELD BOND GOVERNMENT SECURITIES EQUITY INDEX
GROWTH LT FIXED AGGRESSIVE EQUITY
EMERGING MARKETS
INTEREST ON THE FIXED ACCOUNT IS GUARANTEED TO BE NOT LESS THAN 4.00% ANNUALLY.
IN ADDITION, ANY EXCESS INTEREST DECLARED BY US WILL BE GUARANTEED FOR ONE YEAR.
PREMIUM THERE IS A 25% SALES LOAD ON THE FIRST $9,468.00 OF
LOAD PREMIUM PAID; A 4.00% SALES LOAD ON THE NEXT $22,092.00
OF PREMIUMS PAID; A 2.00% SALES LOAD ON PREMIUMS PAID
THEREAFTER; AND A LOAD OF 2.35% FOR PREMIUM TAXES.
ADMINISTRATIVE CHARGE: $25.00 PER MONTH FOR THE FIRST 12 POLICY
MONTHS; AND A MONTHLY CHARGE NOT
EXCEEDING $10.00 PER MONTH THEREAFTER.
UNDERWRITING
SURRENDER CHARGE: $700.00
MORTALITY AND EXPENSE REFER TO CONTRACT FOR DETAILS
RISK CHARGE RATE:
PAGE 3.0
POLICY NUMBER: VP9999929-0 OWNER(S): LELAND STANFORD
<PAGE>
POLICY DATE: JAN 24, 1996
MATURITY DATE: JAN 24, 2056 INSURED: LELAND STANFORD
RISK CLASSIFICATION: MALE/NONSMOKER AGE ON POLICY DATE: 40
MONTHLY PAYMENT DATE IS THE 24TH INITIAL FACE AMOUNT: $200,000
DAY OF EACH POLICY MONTH.
NOTE: IT IS POSSIBLE THAT COVERAGE WILL EXPIRE PRIOR TO THE MATURITY DATE SHOWN
IF THE ACCUMULATED VALUE 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 ACCUMULATED VALUE AT MATURITY.
<PAGE>
Policy Number VP9999929-0
POLICY SPECIFICATIONS
- --------------------------------------------------------------------------------
SUMMARY OF COVERAGES EFFECTIVE ON THE POLICY DATE
- --------------------------------------------------------------------------------
93-55 : BASIC COVERAGE
FACT AMOUNT: $200,000
AGE AT ISSUE: 40
COVERAGE CEASE DATE: JAN 24, 2056
RISK CLASSIFICATION: MALE NONSMOKER
PERSON COVERED: LELAND STANFORD
- --------------------------------------------------------------------------------
<PAGE>
Policy Number VP9999929-0
POLICY SPECIFICATIONS
TABLE OF INSURANCE CHARGES
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1.00 OF COVERAGE
APPLICABLE TO BASIC POLICY COVERING LELAND STANFORD.
<TABLE>
<CAPTION>
MONTHLY MONTHLY MONTHLY MONTHLY
AGE RATE AGE RATE AGE RATE AGE RATE
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.00034900 25 0.00014762 50 0.00056089 75 0.00551331
1 0.00008921 26 0.00014428 51 0.00091038 76 0.00607653
2 0.00008254 27 0.00014261 52 0.00066577 77 0.00666569
3 0.00008170 28 0.00014178 53 0.00072875 78 0.00727588
4 0.00007920 29 0.00014261 54 0.00080018 79 0.0079237
5 0.00007503 30 0.00014428 55 0.00087672 80 0.00863521
6 0.00007169 31 0.00014845 56 0.00096005 81 0.00943078
7 0.00006669 32 0.00015263 57 0.00104684 82 0.01033895
8 0.00006336 33 0.00016682 58 0.00113962 83 0.01137350
9 0.00006169 34 0.00017600 59 0.00123925 84 0.01251384
10 0.00006085 35 0.00018686 60 0.00134998 85 0.01373773
11 0.00006419 36 0.00020022 61 0.00147355 86 0.01502185
12 0.00007086 37 0.00021525 62 0.00161341 87 0.01635661
13 0.00008254 38 0.00023280 63 0.00177217 88 0.01773798
14 0.00009588 39 0.00025202 64 0.00194908 89 0.01917199
15 0.00011090 40 0.00027458 65 0.00214342 90 0.02067765
16 0.00012592 41 0.00029715 66 0.00235100 91 0.02228714
17 0.00013927 42 0.00032307 67 0.00257276 92 0.02406347
18 0.00014845 43 0.00034984 68 0.00280882 93 0.02611993
19 0.00015513 44 0.00037996 69 0.00306532 94 0.02881300
20 0.00015847 45 0.00041093 70 0.00335367 95 0.03281758
21 0.00015931 46 0.00041093 71 0.00368199 96 0.03964294
22 0.00015764 47 0.00044442 72 0.00406029 97 0.05306605
23 0.00015513 48 0.00047960 73 0.00449620 98 0.08333333
24 0.00015179 49 0.00051898 74 0.00498352 99 0.08333333
</TABLE>
<PAGE>
DEFINITIONS
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 Variable Products and Annuities Administration
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 nearest birthday as of the Policy Date, 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.
WRITTEN REQUEST - is a request in writing satisfactory to PM and filed at its
Home Office.
MATURITY DATE - is the policy anniversary nearest the insured's 100th birthday,
unless extended at your written request to a date you choose. If the maturity
date is extended past age 100, reserves, cost of insurance rates and any other
calculations, depending upon attained age, will be based on age 99.
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
Mutual Fund Variable Accounts. Each Mutual Fund 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
<PAGE>
OWNER - The Owner of this policy is as 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 - Subject to our approval, you may assign this policy by written
request. An assignment will take place only when recorded at our Home Office.
When recorded, the assignment will take effect as of the date the written
request was signed. Any rights created by the assignment will be subject to any
payments made or actions taken by PM before the change is recorded. PM will not
be responsible for the validity of any assignment.
BENEFICIARY - The beneficiary is named by you in the application to receive the
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 a permanent 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 is paid.
No premium may be less than $50. Premiums may be paid at any time prior to the
maturity date, subject to the premium limitations shown on the following page.
Premiums are payable either at our Home Office or to an agent of PM. On written
request a premium receipt signed by an officer of PM will be given after
payment.
PREMIUM ALLOCATION - The initial premium, less the Premium Load, 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.
Any additional premiums received by us prior to such date, less the Premium
Load, will be allocated to the Money Market Variable Account.
Upon written request, you may change the premium allocation. Subsequent
premiums received by us, less the Premium Load, will be allocated to the Fixed
and Variable Accounts according to your most recent instructions, subject to the
Allocation Limitations provision.
<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.
The following applies only if the Guideline Premium Test has been elected as the
Death Benefit Qualification method.
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 in 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 Guideline Premium
change 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.
ALLOCATION LIMITATIONS - The Accumulated Value may be allocated to no more than
five of the Fixed and Variable Accounts. If we receive a premium or loan
repayment and your most recent allocation instructions would violate this
requirement, we will allocate the premium, less the Premium Load, or loan
repayment to the Fixed and Variable Account in the same proportion as the
Accumulated Value in these Accounts.
GRACE PERIOD AND LAPSE - If the Accumulated Value less debt 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 required to keep your policy in force. A minimum of three times the
monthly deduction due when the insufficiency occurred must be paid. Upon
receipt of payment, we will allocate the premium payment, less the Premium Load,
to the Variable Accounts and Fixed Account according to your most recent premium
allocation instructions subject to the
<PAGE>
Allocation Limitations provision. 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. If the policy lapses within 2 years after issuance of the policy, we
will send you a refund of the Net Cash Surrender Value less any monthly
deductions due as of the beginning of the grace period and any Sales Load Refund
due.
REINSTATEMENT - If it has not been surrendered, this policy may be reinstated
not more than five 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; plus
- - payment of any sales load refunded when the lapse occurred.
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, less the Premium Load,
to the Variable Accounts and Fixed Account according to your most recent premium
allocation instructions subject to the Allocation Limitations provision.
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 policy 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
DEATH BENEFIT QUALIFICATION - The owner elects the method for Death Benefit
Qualification in the application. Once elected, this method MAY NOT be changed
for the life of the contract. The owner must choose one of the following
methods:
1. CASH VALUE ACCUMULATION TEST - The death benefit will be the greater of the
face amount or the amount required for this policy to be deemed "life insurance"
according to the Internal Revenue Code. Such required amount will be determined
based on the Accumulated Value and the
<PAGE>
Cash Value Accumulation Test defined in Internal Revenue Code Section 7702(b).
2. GUIDELINE PREMIUM TEST - The death benefit will be determined as described
below under the Guideline Premium Test Death Benefit Options and the Guideline
Minimum Death Benefit provisions.
GUIDELINE PREMIUM TEST DEATH BENEFIT OPTIONS - The death benefit for this policy
will be one of the following if the Guideline Premium Test has been elected.
OPTION A - The death benefit is the greater of:
- - the face amount; or
- - the Guideline Minimum Death Benefit.
OPTION B - The death benefit is the greater of:
- - the face amount plus the Accumulated Value on the date of death; or
- - the Guideline Minimum Death Benefit.
The owner elects the Death Benefit Option in the application. If no option is
elected, Option A is the automatic option. After the fifth policy year, the
option may be changed on written request. After any such change, the face amount
will be that amount which results in the death benefit after the change being
equal to the death benefit before the change. The change will be effective on
the monthly payment date on or next following the day the written request is
received by us at our home office. The Death Benefit Option may not be changed
more than once in any policy year.
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
51 178 71 113
52 171 72 111
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
greater
59 134 than 93 101
</TABLE>
PM reserves the right to reduce the Guideline Minimum 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 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 be deemed "life insurance" according to 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 and any Sales Load Refund
paid.
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.
CHANGE PROVISION - Subject to PM's approval, the owner may decrease the face
amount of insurance if such request is made:
- - during the lifetime of the insured;
- - after the fifth policy year;
- - no more often than once in any policy year; and
- - in writing while this policy is in force.
The effective date of the decreased face amount will be the first monthly
payment date on or following the date the written request is received by us.
A supplemental schedule of benefits and premiums will be issued. This schedule
will include the following information:
<PAGE>
- - the effective date of the decreased face amount;
- - the amount of the decrease and the decreased face amount; and
- - the new Guideline Premiums.
If the Guideline Premium Test has been elected as the Death Benefit
Qualification method, the request for a decrease in the face amount will be
subject to the Guideline Premiums Limitation as defined in the Internal Revenue
Code. This may result in a refund of premiums and/or the distribution of
Accumulated Value in order to maintain compliance with such limitations. Such
request will not be allowed if the resulting Guideline Premiums could cause an
amount in excess of the Net Cash Surrender Value to be distributed from the
policy. The face amount of this policy may not be decreased to less than our
minimum issue limit in effect on the date of the request.
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 policy 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 premiums less Premium Load received and allocated to
the Fixed Account since the last monthly payment date, increased by interest;
- - minus the monthly deduction and other deductions due, if any, and assessed
against the Fixed Account 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
- - 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.
<PAGE>
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 less Premium Load received and allocated to the
Variable Account; and
- - transfers of Accumulated Value to the Variable Account, including transfers to
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.
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.
The Accumulation unit value of each Variable Account initially was $10. 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.
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 .32737% per month, compounded monthly. This is
equivalent to an annual effective rate of 4%. 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 .32737% per month, compounded monthly.
<PAGE>
This is equivalent to an annual effective rate of 4%.
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, subject to the Allocation
Limitation provision.
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.
If the Accumulated Value in the Fixed Account is at least $1000, transfers from
the Fixed Account will be limited to 20% 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. After each
transfer, the Accumulated Value may be allocated to no more than five of the
Fixed and Variable Accounts.
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 CHANGES
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 Administrative Charge, if any;
- - the Mortality and Expense Risk Charge; and
- - the monthly charge of any rider benefits.
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 charge equal to the Cost of Insurance applicable to the policy
face amount.
The monthly Cost of Insurance Charge for the death benefit payable under this
policy, is (1) multiplied by the result of (2) minus (3), where:
- - (1) is the applicable monthly Cost of Insurance Rate;
<PAGE>
- - (2) is the death benefit at the beginning of the policy month divided by
1.004074; and
- - (3) is the Accumulated Value at the beginning of the policy month before the
Monthly Deduction due, including any interest credited to the Loan Account.
COST OF INSURANCE RATES - The Cost of Insurance Rates are based on the insured's
age, gender, risk classification, and the policy duration. The current monthly
Cost of Insurance Rates will be determined by us. These rates will not exceed
the Guaranteed Maximum Monthly Cost of Insurance Rates shown on the Policy
Specifications pages. Any changes in the Cost of Insurance 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 .000625 (.75% annually) in the first
10 policy years; .000208333 (.25% annually) in the next 10 policy years; and .00
(0% annually) thereafter, multiplied by the Accumulated Value in the Variable
and Fixed Accounts at the beginning of the policy month less the Cost of
Insurance Charge and less the monthly charge for rider benefits, if any. 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 an Administrative Charge against the Accumulated Value. The
amount of this charge, will not exceed the amount shown on the Policy
Specifications pages.
We will waive the Administrative Charges for all years of any additional
policies issued under Form 93-55, if purchased by you on the life of the insured
under this policy. However, we will deduct a charge of $100 from the initial
premium of any such additional policies.
PREMIUM LOAD - A Premium Load will be charged each time a premium is paid to
cover premium tax and our sales and distribution expenses. The Premium Load
consists of the following:
- - a sales load which varies by the level of the premium paid for this policy,
including any rider benefits. The sales loads are shown in the Policy
Specifications pages. The sales loads shown apply to the policy, including any
rider benefits; and
- - a charge of 2.35% for premium taxes.
The Premium Load associated with each premium will be immediately deducted from
the premium paid.
We reserve the right to increase the Premium Load with respect to the load for
premium taxes. We will only increase the Premium Load if the effective premium
tax paid by us increases.
SURRENDER CHARGE - A surrender charge will be deducted from the Accumulated
Value upon surrender of the policy. The surrender charge is needed to help pay
for underwriting and policy issue costs. The surrender charge is equal to the
Underwriting Surrender Charge shown on the Policy
<PAGE>
Specifications pages. It remains level for the first five policy years and then
decreases by 1.666% per month to zero at the 120th month.
The surrender charge is based on the initial Face Amount and does not vary if
the Face Amount is changed.
WITHDRAWAL FEE - A withdrawal fee of $25 will be deducted from the Accumulated
Value each time a Partial Withdrawal occurs. The withdrawal fee will be
deducted from the Fixed Account and Variable Accounts in the same proportion as
the Partial Withdrawal.
OTHER DEDUCTIONS - We reserve the right to make a charge for federal, state or
local taxes that may be attributable to the Variable Accounts or to our
operations with respect to this policy if we incur any such taxes.
MATURITY, SURRENDER AND WITHDRAWAL OF VALUES
MATURITY - If the insured is living on the maturity date, this policy will then
terminate. We will pay to you the Net Cash Surrender Value as a final
settlement.
SURRENDER - Upon written request while the insured is living you may surrender
this policy for its Net Cash Surrender Value and any Sales Load Refund. The
policy will terminate on the date the request is received.
SALES LOAD REFUND - If the Policy is surrendered or lapse occurs during the
first two years from issuance of the policy, a portion of the Sales Load charged
as described in the Premium Load provision may be refunded. The amount of this
refund varies based on the amount of premium actually paid in the first two
years from issuance of the policy. We will let you know the amount of this
refund upon written request.
NET CASH SURRENDER VALUE - The Net Cash Surrender Value is the Cash Surrender
Value less any policy 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 Partial Withdrawal. A Partial Withdrawal may cause a decrease in
the face amount under the Cash Value Accumulation Test or under the Guideline
Premium Test when the Death Benefit Option is A. The face amount will be
reduced by the excess, if any, of the face amount over the result of (a) minus
(b) where:
- - (a) is the death benefit immediately prior to the Partial Withdrawal; and
<PAGE>
- - (b) is the amount of the Partial Withdrawal.
Partial Withdrawals will be subject to the following conditions: The amount of
each withdrawal must be at least $500 and the Net Cash Surrender Value remaining
after each withdrawal must be at least $500. Also, if there is any policy 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%.
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.
INCOME BENEFITS
INCOME BENEFITS - Maturity, 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. However, the income bought by each $1,000 will always be at least
as large as that shown below.
<TABLE>
<CAPTION>
Age Monthly Income Age Monthly Income
<S> <C> <C> <C>
30 $3.76 54 $4.73
32 $3.81 56 $4.87
34 $3.86 58 $5.04
36 $3.91 60 $5.22
38 $3.97 62 $5.42
40 $4.03 64 $5.65
42 $4.10 66 $5.91
44 $4.18 68 $6.19
46 $4.27 70 $6.50
48 $4.37 72 $6.85
50 $4.48 74 $7.22
52 $4.59 75 $7.41
</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 4%.
This benefit is not available if the income would be less than $25 a month. We
may require evidence
<PAGE>
of survival for incomes which last more than ten years.
OTHER OPTIONS - Maturity, 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 100% of the
Accumulated Value in the Fixed Account plus 90% of the Accumulated Value in the
Variable Accounts, less any surrender charges 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.
LOAN INTEREST - Interest will accrue daily and is payable in arrears at the
annual rate of
- - 4.75% for years one through ten; and
- - 4.25% for years eleven and after.
Interest not paid when due will be added to the loan principal and bear interest
at the same rate of interest.
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 amounts will be
deducted 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%.
On each policy anniversary, if the amount in the Loan Account exceeds policy
debt, the excess will be transferred from the Loan Account to the Fixed and
Variable Accounts according to your most recent instructions. If policy 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, subject to the
Allocation Limitations provision.
Any payment we receive from you while you have a loan will be first considered a
loan repayment, unless you tell us in writing it is a premium payment.
GENERAL PROVISIONS
<PAGE>
ENTIRE CONTRACT - This policy is a contract between 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 or riders, and all 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 expiration of the following time period:
- - The initial face amount cannot be contested after the policy has been in force
during the insured's lifetime for two years from the policy date.
PARTICIPATING - This policy is participating and will share in the surplus
earnings of PM. However, 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.
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, 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
amount of the death benefit shall be the greater of that which would be
purchased by the most recent Cost of Insurance Charge at the correct age and
sex, or the Guideline Minimum Death Benefit for the correct age and sex.
If the insured's age or sex is misstated in the application, the Accumulated
Value will be modified by recalculating all prior Cost of Insurance charges and
other monthly deductions based on the correct age and sex.
If unisex Cost of Insurance Rates apply, no adjustment will be made for a
misstatement of sex.
<PAGE>
REPORTS - A report will be mailed to you at the end or 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;
- - 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, a semi-annual and an annual report will also
be mailed to you. These reports will contain financial statements for the
Separate Account and 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. We will also send 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 for this service.
BASIS OF VALUES - A detailed statement showing how values are determined has
been filed with the state insurance department. All values are at least equal
to the minimums required by the law in the state in which this policy is
delivered, based on the Commissioner's 1980 Standard Ordinary Mortality Table
and interest at the rate of 4%, except for unisex issues which are based on the
1980 CSO Table B and interest at the rate of 4%.
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 also file such a
change with the insurance supervisory official of the state in which this policy
is delivered. You have the right to
<PAGE>
refuse any such change.
PAYMENTS
VARIABLE ACCOUNTS - We will calculate Net Cash Surrender Value on surrender,
Partial Withdrawals, and loan proceeds based on allocations made to the Variable
Accounts, 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
between Variable Accounts 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, Partial 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 4% 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 of 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
<PAGE>
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.
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 an 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.
<PAGE>
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 the
approval 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, with whom the approval process if on file.
<PAGE>
<TABLE>
<CAPTION>
INDEX
<S> <C>
SUBJECT PAGE
Accumulated Value 8
Administrative Charge 10
Age 5
Assignment 5
Basis of Values 13
Beneficiary 5
Cash Surrender Value 11
Change Provision 8
Compliance 13
Cost of Insurance Rates 10
Definitions 5
Face Amount 3
General Provisions 12
Grace Period and Lapse 6
Income Benefits 11
Incontestability 12
Interest 9
Juvenile Insured 12
Maturity 11
Misstatement 13
Monthly Deduction 10
Mortality and Expense Risk Charge 10
Other Deductions 11
Owner 3, 5
Participating 12
Payments 13
Policy Benefits 7
Policy Date 3
Policy Illustrations 13
Policy Loans 12
Policy Specifications 3. 4
Premium Limitation 6
Premium Load 10
Premiums 5
Reinstatement 6
Reports 13
Suicide Exclusion 13
Surrender 11
Transfers 9
Variable Accounts 9, 14
Withdrawals 11
</TABLE>
<PAGE>
EXHIBIT 99.1(5)(b)
Waiver of Charges Rider
<PAGE>
Waiver of Charges Rider
Benefit - Subject to this rider's terms, we will waive any monthly Cost of
Insurance Charges, any monthly Administrative Charges and any monthly cost of
any rider benefits for this policy which falls due while the insured is totally
disabled.
We will not waive any charges which fall due more than one year before we
receive proof of total disability. We will not waive any charges which fall due
before the insured's age 5. If total disability begins during the grace period
for an unpaid premium, that premium must be paid in order to establish a valid
claim under this rider.
Total Disability - Total disability means a condition which:
- - results from bodily injury accidentally sustained or disease which first
manifests itself while this rider is in effect;
- - occurs before the insured's age 60;
- - lasts continuously for at least 3 months; and, either
- - stops the insured from performing the substantial and material duties of the
job; or
- - includes the insured's total and irrecoverable loss of sight of both eyes or
use of two hands, two feet or one hand and one foot.
During the first 24 months of disability, "the job" means the insured's
occupation for compensation or profit at the time total disability began. After
that, "the job" means any one for which the insured is or becomes reasonably
fitted by education, training or experience. If the insured is a student when
disability begins, "the job" means attending school.
Notice of Disability Claim - We must receive notice of the insured's total
disability: at our home office; on forms we provide; during the insured's
lifetime; and while the insured is disabled.
If it is not reasonably possible for you to give us notice within the time
limits above, you must give us notice within one year from the time total
disability ends.
Proof of Disability - Before we pay a benefit, we must receive proof of total
disability. From time to time after the insured is disabled, we may require
proof of continuing disability. This proof may include a medical exam by a
physician we select and pay. After two years of disability, we will not require
proof of total disability more often than once a year. We will not require
proof after the insured's age 70.
War Service Not Covered - Disability occurring in a period during which the
insured is in the armed forces of any country at war (declared or not) is not
covered under this rider. No insurance charges for this rider will be made for
such a period; if any are made we will reverse them.
Insurance Charges - The monthly Insurance Charge for this rider is based on the
total net amount at risk under the policy including any Added Protection Benefit
(APB) and any Annual Renewable Convertible Term (ART) rider.
<PAGE>
The monthly Insurance Charge for the base policy and any Added Protection
Benefit is (1) multiplied by the result of (2) minus (3) where:
- -(1) is the applicable monthly Waiver of Charges Rate;
- -(2) is the death benefit at the beginning of the policy month divided by
1.004074; and
- -(3) is the Accumulated Value at the beginning of the policy month before the
Monthly Deduction due.
The monthly Insurance Charge for any ART rider is equal to the applicable
monthly Waiver of Charges Rate multiplied by the Benefit Amount of any such ART
rider.
The Waiver of Charges Rates are shown on the Policy Specifications pages.
Effective Date - This rider is effective on the policy date unless otherwise
stated. This rider will terminate (without affecting any claim for disability
occurring before such termination):
- - on your written request; or
- - on lapse or termination of this policy; or
- - when the insured becomes age 60.
Incontestability - This rider will be incontestable after it has been in force
for two years, excluding any period the insured is disabled.
General Conditions - This rider is part of the policy to which it is attached.
All terms of the policy which do not conflict with this rider's terms apply to
this rider.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R93-WC
<PAGE>
EXHIBIT 99.1(5)(c)
Accidental Death Rider
<PAGE>
Accidental Death Rider
Benefit - We will pay the extra benefit amount when we receive proof that the
insured's death:
- - was accidental, subject to this rider's provisions; and
- - occurred while this rider was in force.
Accidental Death - An accidental death is one which:
- - results directly and independently of all other causes from bodily injuries
accidentally sustained while this rider is in force; and
- - is not caused by bodily or mental infirmity, illness or disease; and
- - occurs within 120 days of the injuries. We will waive the 120 day limit if
the insured continuously requires artificial means to sustain life from the time
of injury to the time of death.
Risks Not Covered - This rider does not cover death which results from:
- - intentionally self-inflicted injuries while sane or insane; or
- - medical, surgical or dental treatment; or
- - any poison or gas taken or inhaled voluntarily; or
- - war or any incident of war, declared or not; or
- - descent from any kind of aircraft; or
- - riding in any kind of aircraft unless solely as a passenger in an aircraft not
operated by or for any armed forces.
War Service - This rider will be suspended while the insured is in the armed
forces of any country at war, declared or not. No insurance charges will be
made for this rider during the suspension; if any are made we will reverse them.
Insurance Charges - The monthly Insurance Charge for this rider is shown in the
Policy Specifications pages.
Effective Date - This rider is effective on the policy date unless otherwise
stated hereon. This rider will terminate:
- - on your written request; or
- - on lapse or termination of this policy; or
- - when the insured becomes age 70.
Autopsy - We reserve the right to make an autopsy where this is legal.
Incontestability - This rider will be incontestable after it has been in force
for two years during the insured's lifetime.
General Conditions - This rider is part of the policy to which it is attached.
All terms of the policy which do not conflict with this rider's terms apply to
this rider.
Pacific Mutual Life Insurance Company
<PAGE>
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R84-AD
<PAGE>
EXHIBIT 99.1(5)(d)
Guaranteed Insurability Rider
<PAGE>
Guaranteed Insurability Rider
Benefit - You may, without providing evidence of insurability, buy a new policy
on the life of the insured on each option date shown in the Policy Specification
pages. To do this, you must make a written request on a form we provide, and
you must pay the initial premium for the new policy:
- - while this rider is in effect:
- - during the insured's lifetime: and
- - within 31 days of the option date.
Advance of Option Dates - You may advance the next available option date to any
date you state following the insured's marriage or the birth of any child of the
insured. Birth includes legal adoption. The date you state will be an option
date and will replace and cancel the option date so advanced.
New Policy - The amount of insurance on the new policy may not exceed the
maximum shown on the Policy Specifications pages.
The new policy will be dated on the option date. It will take effect on that
date, if the insured is then living and the first premium is paid.
The new policy will be on any plan of insurance we regularly issue on the option
date. It will be issued in the same underwriting class and contain the same
restrictions, if any, as apply to this policy. It will be issued at our
published premium rates which apply at the insured's age on the new policy's
date.
Riders, whether or not included in this policy, will not be included in the new
policy without our consent at the time.
Insurance Charges - Insurance Charges for this rider are shown in the Policy
Specifications pages.
Effective Date - This rider is effective on the policy date unless otherwise
stated hereon. This rider will terminate:
- - on your written request: or
- - on lapse or termination of this policy: or
- - 31 days after the last option date.
General Conditions - This rider is part of the policy to which it is attached.
As applied to this rider, the periods stated in this policy's Incontestability
and Suicide provisions will start with this rider's effective date. All terms
of this policy which do not conflict with this rider's terms apply to this
<PAGE>
rider.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R93-GI
<PAGE>
EXHIBIT 99.1(5)(e)
Added Protection Benefit Rider
<PAGE>
ADDED PROTECTION BENEFIT
Insured - As used in this benefit, "Insured" means the individual covered under
this benefit. The Insured must be the same individual covered under the base
policy.
Coverage Amount - The Coverage Amount provided by this benefit in any policy
year is the amount you specified in the application for that policy year. This
Coverage Amount is also shown in the Policy Specifications pages; such amount
may be level or varying by policy year.
Subject to our approval, you may change the Coverage Amount for any policy year
if you request such change in writing during the lifetime of the Insured. Such
change requests may be made not more than once per policy year. You must
provide evidence of insurability satisfactory to us before any request for an
increase in Coverage Amount becomes effective. An Administrative Charge of $100
will be deducted from the base policy's Accumulated Value on the effective date
of any such increase in Coverage Amount. The effective date of the increase
will be the first monthly payment date on or following the date all applicable
conditions are met.
Any decrease in Coverage Amount which you request for any policy year will
result in equivalent decreases in Coverage Amounts for future policy years. Any
decrease will first be applied against the most recent increase, if any, and
then against successively earlier increases, if any, and finally against the
original Coverage Amount. The effective date of the decrease will be the first
monthly payment date on or following the date the written request is received by
us.
Cost of Insurance Charge - The monthly Cost of Insurance Charge is calculated
separately for this benefit. The Cost of Insurance Charge for any policy year
is equal to the product of (1) times the excess of (2) over (3) where:
(1) is the applicable monthly Cost of Insurance Rate;
(2) is the Coverage Amount divided by 1.004074; and
(3) is equal to the greater of zero or the excess of (4) over (5) where:
(4) is the Accumulated Value at the beginning of each policy month before the
Monthly Deduction due as defined in this policy; and
(5) is the face amount of the base policy divided by 1.004074.
Cost of Insurance Rates - The Cost of Insurance Rates vary by age, benefit
duration, and risk classification and are subject to change by us at any time,
but will not exceed the Guaranteed Maximum Monthly Cost of Insurance Rates for
this benefit shown in the Policy Specifications pages. Any such change will be
made without regard to any change in the health of the insured.
The Cost of Insurance Rates used to calculate the Cost of Insurance Charges for
an increase in coverage necessary to meet the Guideline Minimum Death Benefit
will be the same as those used
<PAGE>
for the most recent Coverage Amount in force under this benefit.
Death Benefit - The death benefit of the policy to which this benefit is
attached is modified to include the Coverage Amount under this benefit. Based
upon the Death Benefit Qualification Test that you elect, it is now as follows:
1. Cash Value Accumulation Test - The death benefit is the greater of (1) or (2)
where:
(1) is the base policy face amount plus this benefit Coverage Amount; and
(2) is the amount required for this policy to be deemed "life insurance"
according to the Internal Revenue Code.
2. Guideline Premium Test - The death benefit for this policy will be one of the
following if the Guideline Premium Test has been elected.
Option A - The death benefit is the greater of (1) or (2) where:
(1) is the base policy face amount plus this benefit Coverage Amount; and
(2) is the Guideline Minimum Death Benefit; or
Option B - The death benefit is the greater of (1) or (2) where:
(1) is the base policy face amount plus this benefit Coverage Amount plus the
Accumulated Value on the date of death; and
(2) is the Guideline Minimum Death Benefit
Decrease - The Decrease provision of the policy to which this benefit is
attached is modified to include this benefit. This benefit will always be
decreased or eliminated before any decrease is applied to the original base
policy face amount. For further details, please see the Decrease provision of
your contract.
Withdrawals - The Withdrawals provision of the policy, to which this benefit is
attached, is modified to include this benefit. For the purpose of the
Withdrawals provision, the Added Protection Benefit is considered part of the
face amount of the policy. This benefit will always be decreased or eliminated
before any decrease is applied to the original base policy face amount. For
further details, please see the Withdrawals provision of your contract.
Effective Date - This benefit is effective on the policy date unless otherwise
notified.
Termination - it will terminate on the earliest of:
- - your written request, or
<PAGE>
- - lapse of this policy; or
- - termination of this policy.
General Conditions - This benefit is part of the policy to which it is attached.
As applied to this benefit, the periods stated in this policy's Incontestability
and Suicide provisions will start with this benefit's effective date. This will
also apply to any increase in the Coverage Amount under this benefit. All terms
of this policy which do not conflict with this benefit's terms apply to this
benefit.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R92-APBCC
<PAGE>
EXHIBIT 99.1(5)(f)
Annual Renewal and Convertible Term Rider
<PAGE>
Annual Renewable and Convertible Term Rider
Covered Person - As used in this rider, the term "Covered Person" means any of
the individuals covered under this rider on the Policy Date. Covered Persons
may be deleted from or, with evidence of insurability, added to this rider.
When this occurs, we will give you a revised Policy Specifications page.
Benefit Amount - The Benefit Amount is shown on the Policy Specifications pages
for each Covered Person.
Any reduction in Benefit Amount requested after the policy issue date for any
year may require a reduction in Benefit Amounts for future years. Any decrease
in the face amount of the policy to which this rider is attached may require a
decrease in the Benefit Amounts under this rider.
We will pay the Benefit Amount for this rider when we receive proof that the
death of a Covered Person occurred while this rider was in effect.
Mortality Charges - The Mortality Charges for this rider are calculated
separately for each Covered Person. The monthly Mortality Charge for any
Covered Person is equal to the product of the applicable monthly cost of
insurance rate times the Benefit Amount for such Covered Person.
The cost of insurance rates are based on the Covered Person's attained age, risk
classification, and duration applicable to this rider. The current monthly cost
of insurance rates will be determined by the company. These rates will not
exceed the Guaranteed Maximum Monthly Cost of Insurance Rates shown on the
Policy Specifications pages.
Renewal - Coverage under this rider will be automatically renewed on each
Covered Person on each monthly payment date for which there is an applicable
Guaranteed Maximum Monthly Cost of Insurance Rate shown on the Policy
Specifications pages.
Conversion - While this rider is in effect or upon termination of this policy by
death of the Insured, the Benefit Amount for this rider may be converted to a
new policy on any Covered Person's life at any time before such Covered Person
becomes age 65. This rider may be converted during the first two years it is in
effect regardless of the Covered Person's age. The Covered Person's Benefit
Amount for this rider will be cancelled on the new policy's issue date.
The amount of insurance under the new policy will be the same as the Covered
Person's Benefit Amount under this rider. A lower amount may be selected as
long as it is not less than our regular minimum limit at the time of conversion.
The new policy may be on the whole life or any higher premium plan we regularly
issue at the time of conversion. It will be issued in the same underwriting
class and contain the same restrictions, if any, as this rider. It will be
issued at our published rates which apply at the Covered Person's age on the new
policy's issue date.
<PAGE>
Riders will not be included in the new policy without our consent at the time.
If we are waiving charges for this rider at the Covered Person's age 65, and if
this rider is converted to a whole life policy in the manner described above, we
will waive premiums under the new policy while total disability continues
without interruption.
Effective Date - This rider is effective on the policy date unless otherwise
stated. This rider will terminate:
- - on your written request; or
- - on lapse or termination of this policy.
General Conditions - This rider is part of the policy to which it is attached.
As applied to this rider, the periods stated in this policy's Incontestability
and Suicide provisions will start with this rider's effective date. All terms
of this policy which do not conflict with this rider's terms apply to this
rider.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R88-ART-VL
<PAGE>
EXHIBIT 99.1(5)(g)
Exchange of Insured Rider
<PAGE>
Exchange of Insured Rider
Benefit - You may exchange the named insured on this policy for a new insured,
subject to this rider's terms. Only one exchange can be made under this rider.
Exchange Conditions - Exercise of this exchange will be subject to the following
conditions:
- - the new insured must submit evidence of insurability satisfactory to us;
- - you must make written application for the exchange and return this policy for
reissue; and
- - you must pay $100 in cash to cover the administrative costs for processing the
exchange.
A request for an exchange of insured will be subject to the Guideline Premiums
Limitation as defined in the Internal Revenue Code. Such request will not be
allowed if the resulting Guideline Premiums could cause an amount in excess of
the Net Cash Surrender Value to be distributed from the policy.
We reserve the right to deduct, from your policy, a charge to cover PM's
expenses arising from any state or federal taxes generated by the exchange of
this policy.
Exchange Date - The exchange date is the first monthly payment date on or after
the date the exchange conditions are met and approved by us.
Coverage on New Insured - Coverage on the new insured will become effective on
the exchange date. Coverage on the current insured will terminate on the day
before the exchange date.
This policy's policy date will not be changed unless the new insured was born
after the policy date. In that case, the new policy date will be the policy
anniversary on or next following the birthdate of the new insured.
The cost of insurance rates for the new insured will be those applicable for the
new insured's Age, risk classification and the policy duration. Riders on the
new insured will be added only with our consent and subject to our requirements.
The face amount will not be affected by the exchange. If a different face
amount is desired on the new insured, the Increase of Decrease provision of the
policy can be exercised.
Suicide Exclusion - If the new insured dies by suicide, while sane or insane,
within two years of the exchange date, the death benefit proceeds will be the
Net Cash Surrender Value as of the exchange date, plus the sum of the premiums
paid since the exchange date, less the sum of any increase in debt, any
withdrawal amounts, and any dividends paid in cash by us since the Exchange
Date.
Incontestability - Except for failure to pay premiums, this policy cannot be
contested after it has been in force during the new insured's lifetime for two
years from the exchange date.
Effective Date - This rider is effective on the policy date unless otherwise
stated hereon. This rider will terminate:
<PAGE>
- - on termination or lapse of this policy.
General Conditions - Any indebtedness or assignment outstanding against this
policy sill not be affected by the exchange. This rider is a part of the policy
to which it is attached. All terms of this policy which do not conflict with
the rider's terms apply to this rider.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
<PAGE>
EXHIBIT 99.1(5)(h)
Children's Term Rider
<PAGE>
Children's Term Rider
Benefit - We will pay a benefit when we receive proof that a child's death
occurred while this rider was in effect. The benefit provided is term insurance
to the child's 25th birthday. The Benefit Amount is $1,000 for each rider unit.
Child - "Child" means any child of the insured who is:
- - at least 14 days old but not more than 25 years old; and
- - named in the application for this rider, or born or adopted thereafter.
"Child" includes natural child, step-child or adopted child.
Paid-Up Insurance Benefit - The term insurance on each child will become paid-up
upon the insured's death. We will issue a separate policy for the paid-up
insurance with the child as owner.
Insurance Charges - The monthly Insurance Charge for this rider is shown in the
Policy Specifications pages.
Effective Date - This rider is effective on the policy date unless otherwise
stated hereon. This rider will terminate:
- - on your written request; or
- - on lapse or termination of this policy; or
- - when the insured becomes age 65.
Conversion - You may convert the term insurance under this rider to a new policy
on the child's life. The conversion date for insurance on each child is the
earlier of:
- - the child's 25th birthday; or
- - the date the insured becomes age 65.
You or the child must apply in writing on a form we provide within 31 days of
the conversion date. The conversion date will be the new policy's date. The new
policy will become effective on its date only if the child is then living.
The amount of insurance on the new policy will be five times the child's Benefit
Amount. If you wish, you may select a lower amount but not less than our
regular minimum limit at the time of conversion.
The new policy will be on the whole life or any higher premium plan we regularly
issue at the time of conversion. It will be issued at our published rates for
the standard class and for the child's age on the new policy's date.
Incontestability - This rider will be incontestable after it has been in force
for two years during the
<PAGE>
insured's lifetime. Any paid-up term insurance issued under this rider will be
incontestable from its policy date.
Suicide - If the insured dies by suicide, while sane or insane, within two years
from the effective date of this rider, no paid-up benefit will be issued.
Reinstatement - The Reinstatement provision of this policy applies to this rider
except that we will require satisfactory evidence of insurability for each
child.
General Conditions - This rider is part of the policy to which it is attached.
All terms of the policy which do not conflict with this rider's terms apply to
this rider.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R84-CT
<PAGE>
EXHIBIT 99.1(5)(i)
Accelerated Living Benefit Rider
<PAGE>
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 noncorrectable 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
<PAGE>
- - 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 a 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.
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.
<PAGE>
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.
- - 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.
<PAGE>
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
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R92-ABR
<PAGE>
Exhibit 99.1(5)(j)
Aviation Rider
<PAGE>
Aviation Rider
Risks Not Covered - This policy does not cover death or disability resulting
from injuries sustained as a result of riding in, descent with or descent from
an aircraft unless:
- - the deceased was a fare-paying passenger; and
- - the aircraft was being operated by a duly licensed passenger carrier on a
regular schedule over its established route.
The amount payable under this policy in the event of death as a result of a risk
not covered will be greater of:
- - total premiums received under this policy (without interest) less any
withdrawal amounts and any dividends paid in cash; or
- - an amount equal to the cash surrender value of this policy.
Any existing debt on this policy will be deducted from the amount payable.
However, the total amount payable will not exceed the payment that would have
been made in the absence of this rider.
General Conditions - This rider is part of the policy to which it is attached.
This rider becomes effective on the policy date unless otherwise specified
hereon.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R88-AT
<PAGE>
EXHIBIT 99.1(5)(k)
Endorsement Amending Suicide Exclusion Provision
<PAGE>
ENDORSEMENT AMENDING SUICIDE EXCLUSION PROVISION
THIS POLICY IS HEREBY AMENDED TO PROVIDE THAT:
The Suicide Exclusion provision of your policy will be waived for the amount of
Death Benefit that is a replacement of group life insurance.
The Suicide Exclusion provision of your policy will be in effect and will be
applicable to any Death Benefit in excess of the Death Benefit that is a
replacement of group life insurance.
The portion of Death Benefit equal to the group life insurance Death Benefit
will be considered a replacement of group life insurance if all of the following
conditions are met:
1. The group life insurance Death Benefit being replaced is a component of a
group life plan facilitated by the insured's current employer at the issuance of
this policy; and
2. The group life insurance Death Benefit being replaced is terminated within 90
days of the policy date of this policy; and
3. The group life insurance Death Benefit being replaced is not inforce on the
date of the death of the insured of this policy.
Pacific Mutual Life Insurance Company
Thomas C Sutton
Chairman and Chief Executive Officer
E-9104
<PAGE>
EXHIBIT 99.1(5)(l)
Disability Benefit Rider
<PAGE>
Disability Benefit Rider
Disability Benefits - On each monthly payment date that the insured qualifies,
we will add the Disability Benefit Amount shown in the Policy Specifications
pages to the Accumulated Value. To qualify, the insured must be totally
disabled, as defined below, and under age 65. We will make the addition on the
monthly payment date or, if later, at the time we receive proof of disability.
We will not make the addition for a monthly payment date unless we receive proof
of disability within one year following that date.
If total disability begins during the grace period for an unpaid premium, that
premium must be paid in order to establish a valid claim under this rider.
Total Disability - Total disability means a condition which:
- - results from bodily injury accidentally sustained or disease which first
manifests itself while this rider is in effect and before the insured is age 60;
- - lasts continuously for at least 3 months; and, either
- - stops the insured from performing the substantial and material duties of the
job; or
- - results in the insured's total loss of sight of both eyes or use of two hands,
two feet or one hand and one foot.
During the first 24 months of disability, "the job" means the insured's
occupation at the time total disability began. After than, "the job" means any
one for which the insured is or becomes reasonably fitted by education, training
or experience.
Proof of Disability - Before we pay a benefit, we must receive proof of the
insured's total disability: at our home office; on forms we provide; during the
insured's lifetime; and while the insured is disabled.
If it is not reasonably possible for you to give us proof within the time limits
above, you must give us proof within one year from the time total disability
ends.
From time to time after the insured is disabled, we may require proof of
continuing disability. This proof may include a medical exam by a physician we
select and pay. We will not require proof of total disability more often than
once a year.
War Service Not Covered - Disability occurring in a period during which the
insured is in the armed forces of any country at war (declared or not) is not
covered under this rider. No insurance charges for this rider will be made for
such a period; if any are made we will reverse them.
Insurance Charges - Insurance Charges for this rider are shown in the Policy
Specifications pages.
Effective Date - This rider is effective on the policy date unless otherwise
stated hereon.
Termination - This rider will terminate:
<PAGE>
- - on your written request:
- - on termination of this contract: or
- - when the insured becomes age 60.
Incontestability - This rider will be incontestable after it has been in force
for two years, excluding any period the insured is disabled. All statements in
the application are representations and not warranties. Statements not in the
application will not be used to void this contract or to defend a claim.
General Conditions - This rider is part of the contract to which it is attached.
All terms of the contract which do not conflict with this rider's terms apply to
this rider.
Pacific Mutual Life Insurance Company
Thomas C Sutton Audrey L. Milfs
Chairman and Chief Executive Officer Secretary
R84-DB
<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.
1
<PAGE>
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.
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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.
5
<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
6
<PAGE>
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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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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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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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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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)
Participation Agreement between Pacific Mutual Life Insurance Company and
Pacific Select Fund
<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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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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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.
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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
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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
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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: /c/ 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)
Applications and General Questionnaire.
<PAGE>
[LOGO OF PACIFIC MUTUAL]
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
Application for 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.
. The application is color coded for easy completion. The following indicates
who must complete the various colored sections:
Blue Applicant
Gray Applicant or Agent must complete for non-variable life products only
Green Applicant or Agent must complete for variable life products only
Burgundy Agent
. Changes noted on this application must be lined out and the new information
must be indicated and initiated by the Applicant in Sections A - E, Proposed
Insured(s) in Section F and Agent in Sections G - J. Changes made any other
way will be amended.
. The Disclosure Notice To Applicants must be detached and given to the
Applicant. If the Disclosure Notice To Applicants is not detached when the
application is received at Pacific Mutual, written verification that the
Notice was given to the Applicant will be required before the underwriting
process can begin.
. For "Survivor Life" type policies, the Second Insured is considered the
Additional Insured. All Additional Insured sections must be completed.
IMPORTANT SIGNATURE REQUIREMENTS
. The party initiating the application for life insurance is considered the
Applicant. Depending on the situation, the Applicant may also be the Insured
or Owner.
. The following parties must sign page 6 of the application:
Applicant
Proposed Insured (if other than Applicant)
Other Adult Proposed Insured (if applicable)
Child of age 18 and older (required in Pennsylvania)
Owner (if other than Proposed Insured or Applicant)
Soliciting Agent
. The Authorization on page 7 must be signed and dated by the Proposed Insured
and Other Adult Proposed Insured (if applicable). Underwriting cannot begin
without a signed Authorization.
. The Soliciting Agent(s) must sign on pages 6 and 10.
. If multiple Owners, then all Owners must sign on page 6 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 6.
. If policy is trust owned, trustee(s) must sign on page 6 of application on
the Signature of Applicant 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
. Underwriting requirements are based on the age of the Proposed Insured(s) and
amount applied for. Refer to the Life Underwriting Requirements Chart (not
attached) to determine the appropriate requirements.
. The Non-Medical is NOT part of this application. APPLICATION, PART II,
Non-Medical (AP9500-P2) must be obtained separately. Note: Certain states
will have their own version.
- -------------------------------------------------------------------------------
AP9500 15-19503-00 10/95
<PAGE>
INSTRUCTIONS SOLICITING AGENT(S)
- -------------------------------------------------------------------------------
SECTION A - CLIENT INFORMATION
. Complete all questions, unless a question does not apply.
. If submitting money with the application, complete question 31A, B and
C on page 1. Also submit a Temporary Insurance Agreement (TIA) with the
application. The date on the application, check and TIA must all be the
same date.
. Money and the TIA must not be taken if:
a) any health question on the TIA is answered "yes;"
b) the proposed insured is under 15 days of age or is over 70 years old
(nearest birthday) on the date of the application.
If the face amount applied for is greater than the TIA maximum binding
limit, complete the application in the following manner:
1) Indicate the total face amount as applied for in question 31C. Also
indicate all applied for Optional Benefits here. If additional space
is needed, use Remarks section on page 2 or 3.
2) On page 2 (for non-variable products) or page 3 (for variable products),
question 3, complete with the maximum binding limit as noted on the
TIA. Leave question 5 "Optional Benefits" blank.
SECTION B - POLICY INFORMATION FOR NON-VARIABLE LIFE PRODUCTS
. Indicate product desired, base face amount, initial APB amount (if applied
for) and Total Initial Coverage in question 3. Whether APB is level or
varying, always indicate initial APB amount. This information can be found
on the Producer/Home Office Administration Worksheet page of the illustration.
. Indicate all other optional benefits in question 5.
. Complete only those questions that relate to the product (term/fixed or
flexible premium) applied for.
. If requesting an alternate or additional policy, complete the
Alternate/Additional Policy section on page 2.
SECTION C - POLICY INFORMATION FOR VARIABLE LIFE PRODUCTS
. Indicate product desired, base face amount, initial APB amount (if applied
for) and Total Initial Coverage in question 3. Whether APB is level or
varying, always indicate initial APB amount. This information can be found
on the Producer/Home Office Administration Worksheet page of the
illustration.
. Indicate all other optional benefits in question 5.
. Answer all Suitability questions and include the date of the current Separate
Account prospectus and Fund prospectus.
. If requesting an alternate or additional policy, complete the
Alternate/Additional Policy section on page 3. All suitability questions
must also be completed.
SECTION D - MEDICAL CERTIFICATION
. Complete only when submitting a medical examination from another insurance
company.
SECTION E - ADDITIONAL INSURED
. Complete if requesting an optional benefit such as APB, ART or SITR on
an Additional Insured. This section is also completed for "Survivor Life"
type policies.
SECTION F - GENERAL INFORMATION
. Complete every question of this section for the Proposed Insured and
Additional Insured (if applicable).
. If Proposed Insured or Additional Insured (if applicable) participates
in a hazardous occupation/sport, complete a General Questionnaire form
(not attached) for each insured that participates.
SECTION G - UNI-CHECK (AUTOMATIC BANK WITHDRAWAL)
. The Uni-Check billing method is available on a monthly payment frequency
for automatic checking account deductions. Complete this section if electing
Uni-Check. Also complete Uni-Check method and monthly mode on page 1,
questions 30A and 30B. A voided check must be submitted with the application.
SECTION H - BUSINESS INSURANCE
. Complete only if applying for Business Insurance.
SECTION I - FOR PROPOSED INSURED UNDER THE AGE OF 16.
. Complete this section if the application is submitted on a non-medical
basis and the Proposed Insured is under age 16. If the application is
submitted on a medical basis, a medical exam is necessary. Refer to the
Life Underwriting Requirements Chart to determine the appropriate
requirements.
SECTION J - AGENT INFORMATION
. Complete every question of this section.
. The signature of the Soliciting Agent(s) is required at the bottom of
page 10.
. Commissions are paid in accordance with the information presented at the
bottom of page 10. The Agent listed first is the Servicing Agent, unless
indicated otherwise in the remarks section. Always include Agent Code
for prompt payment of commissions.
- -------------------------------------------------------------------------------
AP9500 15-19503-00 10/95
<PAGE>
NEWBS APPLC
[LOGO] PACIFIC MUTUAL
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
No. 814031
APPLICATION FOR LIFE INSURANCE, PART I
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.
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SECTION A | CLIENT INFORMATION
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PROPOSED INSURED
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1. Full Name (PRINT AS TO APPEAR IN POLICY / FIRST, MIDDLE, LAST) _____________
2. Sex: [_] Male [_] Female
3. State of Birth ____________
4. Date of Birth MO. __ __ DAY __ __ YR. __ __
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5. Insurance Age _____
6. Drivers License No. & State ____________________
7. Social Security No. or Taxpayer I.D. No. _______________
8. Telephone No. (______) ______________
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9. Address (STREET, CITY, COUNTY, STATE, ZIP CODE) ____________________________
10. How Long ___________
11. Employer Name and Address (STREET, CITY, COUNTY, STATE, ZIP CODE) __________
12. How Long ___________
13. Occupation ____________________
14. Type of Business ______________________
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OWNER IF OTHER THAN PROPOSED INSURED
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15. Full Name (PRINT AS TO APPEAR IN POLICY / FIRST, MIDDLE, LAST) ____________
16. Date of Birth _________________
17. Relationship __________________
18. Telephone No. (______) ______________
19. Address (STREET, CITY, COUNTY, STATE, ZIP CODE) ___________________________
20. Social Security No. or Taxpayer I.D. No. _______________
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BENEFICIARY
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21. Primary Beneficiary (PRINT FULL NAME / FIRST, MIDDLE, LAST) ________________
22. Relationship __________________
23. Address (STREET, CITY, COUNTY, STATE, ZIP CODE) ___________________________
24. Contingent Beneficiary (PRINT FULL NAME / FIRST, MIDDLE, LAST) _____________
25. Relationship __________________
26. Address (STREET, CITY, COUNTY, STATE, ZIP CODE) ___________________________
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PREMIUM NOTICES
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27. Send to: [_] Insured [_] Owner at [_] Residence [_] Business
or [_] Other (INDICATE BELOW)
28. Name _______________________________________
29. Address (STREET, CITY, COUNTY, STATE, ZIP CODE) ___________________________
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BILLING INFORMATION
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30A. Method
[_] Single Premium
[_] Direct (annual, semi-annual or quarterly only)
[_] List Bill (3 or more lives)
[_] Uni-Check - Attach a Voided Check and Complete Uni-check Section on
Page 6. (monthly only.)
30B. Frequency of Premium Reminder Notice or Premium Payment
[_] Annual
[_] Semi-Annual
[_] Quarterly
[_] Monthly
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AMOUNT PAID WITH THIS APPLICATION
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31A. Is cash or check tendered with this application? [_] Yes [_] No
If Yes, show amount $___________________
If no, do not complete question below
B. Do you understand, accept and agree to the terms of the Temporary Insurance
Agreement (TIA)? [_] Yes [_] No
C. If Yes, and a policy face amount is applied for which is larger than that
which Pacific Mutual will insure under TIA, complete the following
statement:
If approved, please issue a policy for a face amount of $__________________
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SPECIAL DATING REQUESTED
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32. [_] Date to Save Age
[_] Specific Date Month ________ Day ________ Year ________
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AP9500 15-19503-00 10/95
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SECTION B POLICY INFORMATION (COMPLETE FOR NON-VARIABLE LIFE INSURANCE)
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Check one: [_] TERM/FIXED PREMIUM [_] FLEXIBLE PREMIUM
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<S> <C>
1. Policy Name 2. Total Modal Premium or Expected Annual Premium
$
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3. Face Amount (Base only) $________________ Plus Initial APB Amount $________________ = Total Initial Coverage $________________
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FIXED PREMIUM LIFE INSURANCE ONLY FLEXIBLE PREMIUM LIFE INSURANCE ONLY
Yes No
4A. Automatic Premium Loan [_] [_] 4A. Check one: [_] Option A (Level)
B. Variable Loan Interest Rate: [_] [_] [_] Option B (Increasing)
C. Dividend Option (Check one): B. Dividend Option (Check one):
[_] Cash [_] Add to Policy Value [_] Other [_] Cash [_] Increased Accumulated Value [_] Other
5. OPTIONAL BENEFITS 5. OPTIONAL BENEFITS
A. [_] ADB [$ ] A. [_] ADB [$ ]
B. [_] AVR/AVP [$ ] B. [_] ART/APB/SITR on Other Covered Person for [$ ]
C. [_] ART on Other Covered Person [$ ] C. [_] ART on Proposed Insured for [$ for years]
D. [_] Children's Term (units) [ ] (Complete Part II, Section C) D. [_] Children's Term (units) [ ] (Complete Part II, Section C)
E. [_] Exchange of Insured E. [_] Exchange of Insured
F. [_] Guaranteed Insurability [$ ] F. [_] Guaranteed Insurability [$ ]
G. [_] Increasing Death Benefit G. [_] Disability Benefit [$ ]
H. [_] Preliminary Term [_] 1 Yr. [_] 2 Yr. [ ] No. of Months H. [_] Preliminary Term [_] 1 Yr. [_] 2 Yr. [ ] No. of Months
Effective Date [ ] Effective Date [ ]
I. [_] Premium Waiver I. [_] Waiver of Charges
J. [_] Payor Premium Waiver (Complete Part II, Section C) J. [_] Payor Waiver of Charges (Complete Part II, Section C)
K. [_] Owner Premium Waiver (Complete Part II, Section C) K. [_] Owner Waiver of Charges (Complete Part II, Section C)
L. [_] Other ______________________________ L. [_] Other ______________________________
M. [_] Other ______________________________ M. [_] Other ______________________________
N. [_] Other ______________________________ N. [_] Other ______________________________
O. [_] Other ______________________________ O. [_] Other ______________________________
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6. If any optional benefit applied for cannot be approved, should the policy be issued without it? [_] Yes [_] No
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Complete this section if applying for (check one): [ ] Additional Policy or
[ ] Alternate Policy
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7. Policy Name 8. Total Modal Premium or Expected Annual Premium
$
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9. Face Amount (Base only) $________________ Plus Initial APB Amount $________________ = Total Initial Coverage $________________
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10. Optional Benefits:
A. ________________________________________ B. ______________________________________ C. ________________________________________
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11. Complete for FIXED PREMIUM LIFE INSURANCE ONLY 12. Complete for FLEXIBLE PREMIUM INSURANCE ONLY
Yes No A. Check one:
A. Automatic Premium Loan [_] [_] [_] Option A (Level)
B. Variable Loan Interest Rate: [_] [_] [_] Option B (Increasing)
C. Dividend Option: [ ] B. Dividend Option: [ ]
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REMARKS
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AP9500 15-19503-00 10/95
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<S> <C>
SECTION C. POLICY INFORMATION (COMPLETE FOR VARIABLE LIFE INSURANCE)
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VARIABLE LIFE
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<CAPTION>
<S> <C>
1. Policy Name 2. Planned Annual Premium
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<S> <C> <C> <C>
3. Face Amount (Base only) $ Plus Initial APB Amount $ = Total Initial Coverage $
-------- -------- --------
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4. Check one: [_] Option A (Level) [_] Option B (Increasing)
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OPTIONAL BENEFITS
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<TABLE>
<CAPTION>
<S> <C> <C>
5. A. [_] ART on Other Covered Person for [$_____________] E. [_] Guaranteed Insurability [$_____________]
B. [_] ADB [$_____________] F. [_] Waiver of Charges
C. [_] Children's Term (units) [______________] (Complete Part II, Section C) G. [_] Other _______________________
D. [_] Disability Benefit [$_____________] H. [_] Other _______________________
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<TABLE>
<CAPTION>
<S> <C>
6. If any optional benefit applied for cannot be approved, should the policy be issued without it? [_] Yes [_] No
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PREMIUM ALLOCATIONS
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<S> <C>
7. INDICATE ALLOCATIONS. THE TOTAL OF THE PERCENTAGES MUST BE 100% (USE WHOLE NUMBERS)
Fixed Account: _________________% Growth LT:________________% Multi-Strategy:__________%
Equity Income: _________________% High Yield Bond:__________% Other:_______ ___________%
Equity Index:___________________% International:____________% Other:_______ ___________%
Government Securities:__________% Managed Bond:_____________% Other:_______ ___________%
Growth:_________________________% Money Market:_____________% Other:_______ ___________%
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SUITABILITY
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Yes No
8. DO YOU BELIEVE THAT THIS POLICY WILL MEET YOUR INSURANCE NEEDS AND FINANCIAL OBJECTIVES?................... [_] [_]
9. 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?................................... [_] [_]
10. DO YOU UNDERSTAND THAT THE POLICY VALUES MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNTS IN THE SEPARATE ACCOUNT?............................................... [_] [_]
11. 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 ]
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POLICY VALUES MAY INCREASE OR DECREASE, AND MAY EVEN BE REDUCED TO ZERO, IN ACCORDANCE WITH THE EXPERIENCE OF THE VARIABLE ACCOUNTS
IN THE SEPARATE ACCOUNT (SUBJECT TO ANY SPECIFIED MINIMUM GUARANTEES). THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER SPECIFIED
CONDITIONS. CURRENT ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS AND CASH SURRENDER VALUES, ARE AVAILABLE UPON REQUEST.
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<CAPTION>
<S> <C>
COMPLETE THIS SECTION IF APPLYING FOR (Check one): [_] ADDITIONAL POLICY or [_] ALTERNATE POLICY
(COMPLETE SUITABILITY QUESTIONS ABOVE)
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<CAPTION>
<S> <C> <C>
12. Policy Name 13. Planned Annual Premium
$
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
14. Face Amount (Base only) $ Plus Initial APB Amount $ = Total Initial Coverage $
-------- -------- --------
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</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
15. Optional Benefits 17. Premium Allocations:
A. __________________________ Fixed Account:__________________% High Yield Bond:__________%
B. __________________________ Equity Income:__________________% International:____________%
C. __________________________ Equity Index:___________________% Managed Bond:_____________%
Government Securities:__________% Money Market:_____________%
16. Check one: Growth:_________________________% Multi-Strategy:___________%
[_] Option A (Level) Growth LT:______________________% Other:____________________%
[_] Option B (Increasing)
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REMARKS
AP9500 15-19503-00 10/95
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SECTION D | MEDICAL CERTIFICATION (NOT APPLICABLE IN THE STATE OF PENNSYLVANIA)
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COMPLETE WHEN SUBMITTING MEDICAL EXAMINATION OF ANOTHER INSURANCE COMPANY
1. The attached examination is on the life of:
<S> <C> <C>
Proposed Insured Name | Name of the other Insurance Company | Date of Examination
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Additional Insured Name | Name of the other Insurance Company | Date of Examination
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Additional Insured Name | Name of the other Insurance Company | Date of Examination
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Additional Insured Name | Name of the other Insurance Company | Date of Examination
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<TABLE>
<CAPTION>
Proposed Insured Additional Insured
<S> <C> <C> <C> <C>
2. To the best of your knowledge and belief, are the statements in the examination true [_] Yes [_] No [_] Yes [_] No
as of today?
3. Has the person who was examined consulted a doctor or their practitioner or received [_] Yes [_] No [_] Yes [_] No
medical or surgical advice since the date of the examination? (If yes, explain in remarks)
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<CAPTION>
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SECTION E | ADDITIONAL INSURED
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<S> <C> <C> <C>
(PRINT AS TO APPEAR IN POLICY/FIRST, MIDDLE, LAST) | | |
1. Full Name | 2. Sex: [_] Male | 3. State of Birth | 4. Date of Birth
| [_] Female | | | MO. | DAY | YR.
| | | | | | | | | |
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5. Insurance Age | 6. Drivers License No. & State | 7. Social Security No. or Taxpayer I.D. No. | 8. Telephone No.
| | | ( )
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9. Address (STREET, CITY, COUNTY, STATE, ZIP CODE) | 10. How Long
|
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11. Employer Name and Address (STREET, CITY, COUNTY, STATE, ZIP CODE) | 12. How Long
|
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13. Occupation | 14. Type of Business
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15. Relationship to Primary Insured
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<TABLE>
<CAPTION>
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BENEFICIARY TO ADDITIONAL INSURED
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<S> <C>
16. Primary Beneficiary (PRINT FULL NAME/FIRST, MIDDLE, LAST) | Relationship
|
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18. Contingent Beneficiary (PRINT FULL NAME/FIRST, MIDDLE, LAST) | Relationship
|
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<TABLE>
<CAPTION>
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SECTION F | GENERAL INFORMATION
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1. Give details of life insurance in force in other companies on PROPOSED INSURED.
If none (or if conversion application) check this box [_]
Company | Year Taken | Plan | Life Amount | Acc. Death Amount
<S> <C> <C> <C> <C>
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
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<TABLE>
<CAPTION>
2. Give details of life insurance in force in other companies on ADDITIONAL INSURED.
If none (or if conversion application) check this box [_]
Company | Year Taken | Plan | Life Amount | Acc. Death Amount
<S> <C> <C> <C> <C>
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
- -----------------------------------------------|--------------|------------------------|-------------------|-----------------------
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REMARKS
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AP9500 15-19503-00 10/95
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<S> <C> <C>
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SECTION F | GENERAL INFORMATION CONTINUED
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PROPOSED INSURED | COMPLETE EACH QUESTION BELOW FOR THE PROPOSED | ADDITIONAL INSURED
YES NO | INSURED AND ANY ADDITIONAL INSURED. | YES NO
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| | A. Is the Proposed/Additional Insured married? | |
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$ | B. Income of spouse, if any. | $
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$ | C. Amount of insurance in force on spouse. | $
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$ | D. Annual earned income from occupation (after | $
| deduction of business expenses). |
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$ | E. Other income (state source in remarks). | $
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$ | F. Net Worth. | $
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PROPOSED INSURED | | ADDITIONAL INSURED
YES NO | | YES NO
| |
[_] [_] | 4. Does any Proposed Insured/Additional Insured | [_] [_]
| contemplate leaving the U.S.A. for travel or |
| residence? (If yes, explain in remarks) |
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| 5. Within the last 2 years has any Proposed/ |
| Additional Insured: |
[_] [_] | A. Flown or plan to fly as a pilot, student pilot | [_] [_]
| or crew member? |
[_] [_] | B. Engaged in parachute jumping, scuba diving, | [_] [_]
| auto, motor boat or motorcycle racing, hang |
| gliding, mountain climbing or other hazardous |
| sport? (If yes to A. or B., complete a |
| separate General Questionnaire for each |
| Proposed/Additional Insured) |
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[_] [_] | 6. Has any Proposed/Additional Insured ever had | [_] [_]
| insurance declined, rated, modified, cancelled |
| or not renewed? (DO NOT ANSWER THIS QUESTION |
| IN MISSOURI) (If yes, explain in remarks) |
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[_] [_] | 7. Has any Proposed/Additional Insured been | [_] [_]
| convicted of a felony within the past 5 years? |
| (If yes, explain in remarks) |
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[_] [_] | 8. Has any Proposed/Additional Insured had a | [_] [_]
| drivers license restricted or revoked or been |
| charged with 3 or more moving violations within |
| the past 5 years? (If yes, explain in remarks) |
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[_] [_] | 9. Has any other insurance been applied for within | [_] [_]
| the last 3 months on any Proposed/Additional |
| Insured? (If yes, explain in remarks) |
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[_] [_] | 10. Will the policy applied for replace or change | [_] [_]
| any existing insurance or annuity on any |
| Proposed/Additional Insured? (If yes, agent |
| must complete state replacement notice, if |
| applicable) |
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[_] [_] | A. Is this a 1035 Exchange? | [_] [_]
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[_] [_] | B. Will a loan be carried over? | [_] [_]
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[_] [_] | 11. Have you smoked a cigarette(s) in the last | [_] [_]
| 12 months? |
| |
Date:___________ | If yes, give date last smoked. | Date:___________
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[_] [_] | 12. Have you used tobacco in any other form within | [_] [_]
| the last 24 months? |
| |
Type:___________ | If yes, specify type and date last used. | Type:___________
Date:___________ | | Date:___________
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REMARKS
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AP9500 15-19503-00 10/95
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SECTION G UNI-CHECK
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1. [ ] Bank Account No. [ ] 2. Bank Account in Name of [ ]
3. [ ] If other than policy date, complete day of the month you want draft to
draw from bank account.
(Must be between the 4th and 28th) [ ]
As a convenience to me, I request and authorize you to pay and charge to the
above account any debit entries on that account by and payable to the order of
Pacific Mutual Life Insurance Company, provided there are sufficient collected
funds in said account to pay the same upon presentation. I agree that your
rights in respect to each such debit shall be the same as if it were a debit
drawn on you and signed personally by me. This authority is to remain in effect
until revoked by me in writing, and until you actually receive such notice I
agree that you shall be fully protected in honoring any such debit.
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REMARKS
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HOME OFFICE ENDORSEMENT
(NOT APPLICABLE IN KENTUCKY, PENNSYLVANIA, WEST VIRGINIA)
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DECLARATIONS
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I represent that the foregoing answers and statements contained in Parts I and
II 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.
Signed and Dated by Applicant in:
On
- --------------------------------------- --------------------------------------
City State Mo. Day Year Signature of Applicant
--------------------------------------
Signature of Proposed Insured
(IF OTHER THAN APPLICANT OR PARENT
IF PROPOSED INSURED IS UNDER AGE 16 OR
AGE 18 IN PENNSYLVANIA)
--------------------------------------
Signature of Other Adult Proposed
Insured
--------------------------------------
Signature of Child age 18 and older
(REQUIRED IN PENNSYLVANIA)
--------------------------------------
Signature of Owner
(IF OTHER THAN PROPOSED INSURED
OR APPLICANT)
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 Please Print Soliciting State License ID
Agent Agent Name Number
(Required in Florida)
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AUTHORIZATION TO OBTAIN INFORMATION
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I authorize any physician, medical practitioner, hospital, clinic, other medical
or medically related facility, insurance company, the Medical Information
Bureau, 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 of me, my spouse and my minor children.
I 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, and other persons or organizations
performing business or legal services in connection with my application, or as
may be otherwise lawfully required, or as I may further authorize. I also
understand that I 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 know that I may request
to receive a copy of this authorization. I also acknowledge receipt of
Disclosure Notice to Applicants 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.
Signed and Dated by Proposed Insured 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 Other Adult Proposed
Insured
---------------------------------------
Signature of Child age 18 and older
(REQUIRED IN PENNSYLVANIA)
AP9500
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(DETACH-LEAVE WITH APPLICANT)
DISCLOSURE NOTICE TO APPLICANTS 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 an electrocardiogram. We may also ask for a report from your doctor or
hospital, another insurance company, or the Medical Information Bureau. When we
do so, we will use the authorization form you signed with your application.
MIB, Inc., (Medical Information Bureau) - MIB, 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.
Because you may want to know more about the nature and scope of such a report,
we are providing this information on the reverse side as part of this Notice.
(Continued on reverse side)
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DISCLOSURE NOTICE TO APPLICANTS FOR INSURANCE (continued)
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.
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.
These reports may have an adverse affect on an individual's eligibility for
insurance. If it should, however, we will notify you in writing and identify
the 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.
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 the 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 to 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.
AP9500 15-19503-00 10/95
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SECTION H | BUSINESS INSURANCE (COMPLETE THIS SECTION IF APPLYING FOR BUSINESS INSURANCE)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Purpose of this Insurance:
A. [_] Buy & Sell D. [_] Split Dollar
B. [_] Employee Fringe Benefit E. [_] Key Employee
C. [_] Deferred Compensation F. [_] Other (Explain in remarks)
- ---------------------------------------------------------------------------------------------------------------------------------
2. Name of Principal Officers, | | | Amount of Insurance
Partners or Key Employees | Position | % of Business Owned | Owned By Business
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3. What is the current fair market value of the business? [$_________________________]
4. What is the annual net profit (before taxes) of business? [Last Year $____________ 2 Years Ago $_______________]
5. Are other officers, partners or key employees proportionately insured? [_] Yes [_] No (If no, explain in remarks)
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SECTION I | COMPLETE THIS SECTION IF PROPOSED INSURED IS UNDER AGE 16
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Did you personally observe the Proposed Insured? [_] Yes [_] No (If no, explain in remarks)
- ---------------------------------------------------------------------------------------------------------------------------------
2. Are Proposed Insured's brothers and sisters insured for equal amounts? [_] Yes [_] No (If no, explain in remarks)
- ---------------------------------------------------------------------------------------------------------------------------------
3. Person on whom Proposed Insured depends for support:
A. Name | B. Relationship
- ---------------------------------------------------------------------------------------------------------------------------------
C. Estimated annual income | D. Estimated net worth | E. Estimated amount of life insurance
$ | $ | $
- ---------------------------------------------------------------------------------------------------------------------------------
4. Information on Applicant:
A. Name | B. Relationship
- ---------------------------------------------------------------------------------------------------------------------------------
C. Purpose of insurance | D. Amount of life insurance in force
| $
- ---------------------------------------------------------------------------------------------------------------------------------
REMARKS
- ---------------------------------------------------------------------------------------------------------------------------------
AP9500 15-19503-00 10/95
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION J COMPLETE FOR ALL APPLICATIONS-AGENT INFORMATION
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1. How well do you know Proposed Insured? 2. How well do you know Additional Insured?
(or Applicant if Proposed Insured is under age 16)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
3. Have you personally asked all applicable questions in this application? Proposed Insured Additional Insured
(if no, explain in remarks) [_] Yes [_] No [_] Yes [_] No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
4. Are you aware of any information not given in the application which might affect the insurability of:
Proposed Insured [_] Yes [_] No Additional Insured [_] Yes [_] No (If yes, explain in remarks)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
5. Did the Proposed Insured or Applicant make the initial inquiry which led to the sale of this insurance?
[_] Yes [_] No (If yes, explain in remarks)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
6. Has the Proposed Insured changed name within the last 5 years? [_] Yes [_] No
7. Has the Additional Insured changed name within the last 5 years? [_] Yes [_] No (If yes, give former name in remarks)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
8. To the best of your knowledge, does any policy applied for either replace, involve a change in, or involve use of value from
any existing life insurance policy or annuity? Proposed Insured Additional Insured
(IF "YES", GIVE COMPANY AND POLICY NUMBER IN "REMARKS" ON PAGE 5. IF PM POLICY,
THEN GIVE POLICY NUMBER AND HOW VALUES ARE TO BE APPLIED IN "REMARKS") [_] Yes [_] No [_] Yes [_] No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
9. If this policy is a tax qualified plan indicate type: [_] Pension/Profit sharing [_] HR-10 [_] Other
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
10. Is application submitted on a: Proposed Insured Additional Insured
YES NO YES NO
(A) Medical Basis? [_] [_] [_] [_]
(B) Non-Medical Basis? (Submit Part 2) [_] [_] [_] [_]
(C) Guaranteed Issue Basis? [_] [_] [_] [_]
(D) Guaranteed to Issue Basis? [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11. Check appropriate items which have been ordered:
Proposed Insured Additional Insured Proposed Insured Additional Insured
Yes No Yes No Yes No Yes No
Medical Exam [_] [_] [_] [_] H.O. Specimen [_] [_] [_] [_]
Paramedical Exam [_] [_] [_] [_] APS_________ [_] [_] [_] [_]
EKG [_] [_] [_] [_] ____________ [_] [_] [_] [_]
Blood Profile [_] [_] [_] [_] ____________ [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
REMARKS
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
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 (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(s) to the Proposed Insured
(or Applicant) 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>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AGENT NAME PHONE FAX AGENCY AGENT COMM %
NUMBER NUMBER NUMBER CODE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Broker/Dealer Name (if applicable):_________________________________________________________________________________________________
AP9500 15-19503-00 10/95
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPLICATION, PART II RS NONMED
TO PACIFIC MUTUAL LIFE INSURANCE COMPANY
NON-MEDICAL 700 Newport Center Drive, Newport Beach, California 92660 (Logo of Pacific Mutual)
- ------------------------------------------------------------------------------------------------------------------------------------
SECTION A | COMPLETE ON PROPOSED INSURED (AGE 16 OR OVER)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Full Name | 2a. Date of Birth | 2b. Height | 2c. Weight
| MO. DAY YR. | |
| | FT. IN. | LBS.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
3. a. Name and address of personal physician, practitioner or health facility last visited:
<C> <S> <C>
-----------------------------------------------------------------------------------------------------------------------------
(IF NONE, SO STATE)
b. Date: c. Reason consulted:
------------------------- ---------------------------|-------------------------------------------
MO. YR. Yes No | Details of "Yes" answers. (Identify
d. Did any symptoms prompt consultation?................................. [_] [_] | question, and include diagnoses, dates,
e. Was any treatment given or medication prescribed?..................... [_] [_] | duration and names and addresses of all
(IF "D" OR "E" ANSWERED "YES", GIVE DETAILS) | attending physicians and medical
4. To the best of your knowledge and belief, during the past 10 years, have | facilities. Use an additional sheet if
you had, or been told that you had, or been treated by a member of the | necessary.)
medical profession for: |
(CIRCLE APPLICABLE ITEMS AND GIVE DETAILS) |
a. Disorder of the eyes, ears, nose, or throat?.......................... [_] [_] |
b. Dizziness, fainting, convulsions, headaches, speech defect, |
paralysis or stroke, or mental or nervous disorder?................... [_] [_] |
c. Hoarseness or cough, blood spitting, asthma, pneumonia, emphysema, |
tuberculosis, or other respiratory system disorder?................... [_] [_] |
d. Chest pain, high blood pressure, rheumatic fever, murmur, heart |
attack or other disorder of the heart or blood vessels?............... [_] [_] |
e. Jaundice, intestinal bleeding, ulcer, colitis, diverticulitis, |
hepatitis, or other disorder of the liver, gallbladder, stomach, or |
intestines?........................................................... [_] [_] |
f. Sugar, albumin, or blood in urine, venereal disease, stone or other |
disorder of kidney, bladder, prostate, breasts or reproductive organs? [_] [_] |
g. Diabetes; thyroid or other endocrine disorders?....................... [_] [_] |
h. Neuritis, sciatica, arthritis, gout, or disorder of the muscles or |
bones, including the spine, back, or joints?.......................... [_] [_] |
i. Cancer, cyst, tumor or disorder of skin, blood or lymph glands?....... [_] [_] |
j. Any disorder(s) of the Immune System, including AIDS (Acquired |
Immune Deficiency Syndrome) and ARC (AIDS Related Complex)?........... [_] [_] |
5. a. Have you within the past 5 years been a patient in a hospital, clinic, |
sanitarium or other medical facility?................................. [_] [_] |
b. Are you now under regular medical observation or taking treatment?.... [_] [_] |
6. a. Except as prescribed by a physician, have you used heroin, morphine |
or other narcotic drugs in the last 10 years?......................... [_] [_] |
b. Except as prescribed by a physician, have you used cocaine, LSD, |
marijuana or other hallucinogenic agents, or barbiturates, sedatives, |
tranquilizers or any amphetamines in the last 5 years?................ [_] [_] |
c. In the last 5 years have you received treatment for or joined an |
organization because of alcoholism or drug addiction?................. [_] [_] |
7. Other than as stated in answers above, have you within the past 5 years: |
a. Had a checkup, consultation, illness, injury or operation?............ [_] [_] |
b. Had an electrocardiogram, blood test, other test or X-ray?............ [_] [_] |
c. Been advised to have any diagnostic test, hospitalization or surgery |
which was not completed?.............................................. [_] [_] |
8. Have you had any change in weight in the past year?...................... [_] [_] |
9. Have either of your parents, brothers or sisters had diabetes, cancer, |
high blood pressure, heart disease, or mental illness?................... [_] [_] |
(IF "YES", STATE CONDITION, GIVE RELATIONSHIP AND AGE AT ONSET) |
10. Parents' Record (COMPLETE BELOW): |
</TABLE>
<TABLE>
<CAPTION>
- -----------|-------------------------------------|--------------------------------------|
| IF LIVING | IF DECEASED |
- -----------|-----------|-------------------------|-------------|------------------------|
| | | AGE AT | |
| AGE | STATE OF HEALTH | DEATH | CAUSE OF DEATH |
- -----------|-----------|-------------------------|-------------|------------------------|
<S> <C> <C> <C> <C>
Father | | | | |
- -----------|-----------|-------------------------|-------------|------------------------|
Mother | | | | |
- -----------|-----------|-------------------------|-------------|------------------------|
</TABLE>
<TABLE>
<CAPTION>
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.
<S> <C> <C>
Dated at on X
-------------------------------- -------------------------------- -----------------------------------------------------
CITY STATE MO. DAY YR. SIGNATURE OF PROPOSED INSURED
- ---------------------------------------------------------------------------
WITNESS
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.
-1-
AP9500-P2 15-19536-00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPLICATION, PART II RS NONMED
TO PACIFIC MUTUAL LIFE INSURANCE COMPANY
NON-MEDICAL 700 Newport Center Drive, Newport Beach, California 92660 (Logo of Pacific Mutual)
- ------------------------------------------------------------------------------------------------------------------------------------
SECTION B | COMPLETE ON ADDITIONAL INSURED (AGE 16 OR OVER)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Full Name | 2a. Date of Birth | 2b. Height | 2c. Weight
| MO. DAY YR. | |
| | FT. IN. | LBS.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
3. a. Name and address of personal physician, practitioner or health facility last visited:
-----------------------------------------------------------------------------------------------------------------------------
(IF NONE, SO STATE)
b. Date: c. Reason consulted:
------------------------- ---------------------------|-------------------------------------------
<S> <C> <C> <C>
MO. YR. Yes No | Details of "Yes" answers. (Identify
d. Did any symptoms prompt consultation?................................. [_] [_] | question, and include diagnoses, dates,
e. Was any treatment given or medication prescribed?..................... [_] [_] | duration and names and addresses of all
(IF "D" OR "E" ANSWERED "YES", GIVE DETAILS) | attending physicians and medical
4. To the best of your knowledge and belief, during the past 10 years, have | facilities. Use an additional sheet if
you had, or been told that you had, or been treated by a member of the | necessary.)
medical profession for: |
(CIRCLE APPLICABLE ITEMS AND GIVE DETAILS) |
a. Disorder of the eyes, ears, nose, or throat?.......................... [_] [_] |
b. Dizziness, fainting, convulsions, headaches, speech defect, |
paralysis or stroke, or mental or nervous disorder?................... [_] [_] |
c. Hoarseness or cough, blood spitting, asthma, pneumonia, emphysema, |
tuberculosis, or other respiratory system disorder?................... [_] [_] |
d. Chest pain, high blood pressure, rheumatic fever, murmur, heart |
attack or other disorder of the heart or blood vessels?............... [_] [_] |
e. Jaundice, intestinal bleeding, ulcer, colitis, diverticulitis, |
hepatitis, or other disorder of the liver, gallbladder, stomach, or |
intestines?........................................................... [_] [_] |
f. Sugar, albumin, or blood in urine, venereal disease, stone or other |
disorder of kidney, bladder, prostate, breasts or reproductive organs? [_] [_] |
g. Diabetes; thyroid or other endocrine disorders?....................... [_] [_] |
h. Neuritis, sciatica, arthritis, gout, or disorder of the muscles or |
bones, including the spine, back, or joints?.......................... [_] [_] |
i. Cancer, cyst, tumor or disorder of skin, blood or lymph glands?....... [_] [_] |
j. Any disorder(s) of the Immune System, including AIDS (Acquired |
Immune Deficiency Syndrome) and ARC (AIDS Related Complex)?........... [_] [_] |
5. a. Have you within the past 5 years been a patient in a hospital, clinic, |
sanitarium or other medical facility?................................. [_] [_] |
b. Are you now under regular medical observation or taking treatment?.... [_] [_] |
6. a. Except as prescribed by a physician, have you used heroin, morphine |
or other narcotic drugs in the last 10 years?......................... [_] [_] |
b. Except as prescribed by a physician, have you used cocaine, LSD, |
marijuana or other hallucinogenic agents, or barbiturates, sedatives, |
tranquilizers or any amphetamines in the last 5 years?................ [_] [_] |
c. In the last 5 years have you received treatment for or joined an |
organization because of alcoholism or drug addiction?................. [_] [_] |
7. Other than as stated in answers above, have you within the past 5 years: |
a. Had a checkup, consultation, illness, injury or operation?............ [_] [_] |
b. Had an electrocardiogram, blood test, other test or X-ray?............ [_] [_] |
c. Been advised to have any diagnostic test, hospitalization or surgery |
which was not completed?.............................................. [_] [_] |
8. Have you had any change in weight in the past year?...................... [_] [_] |
9. Have either of your parents, brothers or sisters had diabetes, cancer, |
high blood pressure, heart disease, or mental illness?................... [_] [_] |
(IF "YES", STATE CONDITION, GIVE RELATIONSHIP AND AGE AT ONSET) |
10. Parents' Record (COMPLETE BELOW): |
</TABLE>
<TABLE>
<CAPTION>
- -----------|-------------------------------------|--------------------------------------|
| IF LIVING | IF DECEASED |
- -----------|-----------|-------------------------|-------------|------------------------|
| | | AGE AT | |
| AGE | STATE OF HEALTH | DEATH | CAUSE OF DEATH |
- -----------|-----------|-------------------------|-------------|------------------------|
<S> <C> <C> <C> <C>
Father | | | | |
- -----------|-----------|-------------------------|-------------|------------------------|
Mother | | | | |
- -----------|-----------|-------------------------|-------------|------------------------|
</TABLE>
<TABLE>
<CAPTION>
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.
<S> <C> <C>
Dated at on X
-------------------------------- -------------------------------- -----------------------------------------------------
CITY STATE MO. DAY YR. SIGNATURE OF ADDITIONAL INSURED
- ---------------------------------------------------------------------------
WITNESS
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.
-2-
AP9500-P2 15-19536-00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPLICATION, PART II RS NONMED
TO PACIFIC MUTUAL LIFE INSURANCE COMPANY PACIFIC MUTUAL
NON-MEDICAL 700 Newport Center Drive, Newport Beach, California 92660
___________________________________________________________________________________________________________________________________
SECTION C COMPLETE IF APPLYING FOR OWNER PREMIUM WAIVER, PAYOR WAIVER,
CHILDREN'S TERM RIDER AND IF PROPOSED INSURED IS UNDER AGE 16.
___________________________________________________________________________________________________________________________________
| RELATIONSHIP | | | | | AMOUNT OF | AMT. OF INS.
1. NAME OF PERSON TO BE COVERED | TO PROPOSED | DATE OF BIRTH | STATE OF | HEIGHT | WEIGHT | INSURANCE | CURRENTLY
| INSURED | (MO./DAY/YR.) | BIRTH | (FT./IN.) | (POUNDS) | NOW IN FORCE | APPLIED FOR
__________________________________|_________________|_______________|__________|___________|__________|______________|_____________
<S> |<C> |<C> |<C> | <C> |<C> |<C> |<C>
__________________________________|_________________|_______________|__________|___________|__________|______________|_____________
| | | | | | |
__________________________________|_________________|_______________|__________|___________|__________|______________|_____________
| | | | | | |
__________________________________|_________________|_______________|__________|___________|__________|______________|_____________
</TABLE>
<TABLE>
<CAPTION>
Note: If payor or owner waiver of charges is being applied for, please indicate the individual's occupation and the employer's name
and address:_________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
2a. Name and address of your personal physician, practitioner or health facility
___________________________________________________________________________________________________________________________________
b. Date: | c. Reason for and results of last visit
____________________|______________________________________________________________________________________________________________
3. Has any person named in Question 1 during the past 10 years had or been told that he or she had, or been treated for:
(CIRCLE APPLICABLE ITEMS AND GIVE DETAILS)
<S> <C> <C>
Yes No
A. Diabetes, cancer or epilepsy?.............................................................................. [ ] [ ]
B. Heart murmur, high blood pressure or any heart condition?.................................................. [ ] [ ]
C. Any disorder(s) of the Immune System, including AIDS (Acquired Immune Deficiency Syndrome) and ARC (AIDS
Related Complex)?.......................................................................................... [ ] [ ]
4. Has any person named in Question 1:
A. Been in a hospital, sanitarium or other institution for diagnosis, treatment or a surgical operation within
the past 5 years?.......................................................................................... [ ] [ ]
B. Had any medical consultation or treatment within the past 3 years, other than as stated in any answer
above?..................................................................................................... [ ] [ ]
GIVE DETAILS BELOW FOR EACH "YES" ANSWER IN QUESTIONS 3 AND 4:
____________________________________________________________________________________________________________________________________
QUESTION NO. | FIRST NAME | REASON FOR CONSULTATION | DATE | DURATION - RESULT | NAME AND ADDRESS OF PHYSICIAN
_______________|_________________|_____________________________|___________|_______________________|________________________________
_______________|_________________|_____________________________|___________|_______________________|________________________________
_______________|_________________|_____________________________|___________|_______________________|________________________________
_______________|_________________|_____________________________|___________|_______________________|________________________________
_______________|_________________|_____________________________|___________|_______________________|________________________________
DECLARATIONS
____________________________________________________________________________________________________________________________________
I represent that the foregoing answers and statements 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 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.
Signed and Dated in:
________________________________________ on _________________________ X_________________________________________________________
CITY STATE MO. DAY YR. Signature of Proposed Insured (OR PARENT, IF PROPOSED
INSURED IS UNDER AGE 16)
X_________________________________________________________
Signature of Owner/Payor
IF OWNER IS A CORPORATION, THE SIGNATURE AND TITLE OF AN 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 ID Number
(Required in Florida)
</TABLE>
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.
AP9500-P2
-3-
<PAGE>
GENERAL QUESTIONNAIRE [LOGO OF PACIFIC MUTUAL]
PACIFIC MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FULL NAME (PRINT) | DATE OF BIRTH
|
| MO. DAY YR.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
| SECTION A | AUTOMOBILE, MOTORCYCLE AND/OR POWERBOAT RACING |
- --------------------------------------------------------------------------------
1. Type of racing? [_] Midget [_] Go-Kart [_] Sports Car
[_] Modified Stock [_] Drag Racing [_] Motorcycle [_] Powerboat
[_] Other (explain) _________________________________________________________
2. Make? _______________ Model? _______________ Displacement? ______________
Class? ______________ Engine Make & Model? _______________ HP? __________
3. (a) Number of races 12-24 months ago? ________ (b) Past 12 months? ________
(c) Date of last race? ________________ (d) Est. next 12 months? __________
4. Type of race? [_] Midget [_]Sports Car [_] Stock Car [_] Championship
[_] Drag [_] Kart [_] Hillclimb [_] Cross Country [_] Hound & Hare
[_] Moto-Cross [_] Other (explain) ________________________________________
_____________________________________________________________________________
5. Type of course? [_] Paved [_] Dirt [_] Drag Strip [_] Oval
[_] Other (explain) ________________________________________________________
_____________________________________________________________________________
6. Where do you race? [_] Local? If not, where? __________________________
7. Competition against? [_] Other Cars [_] Clock [_] Straightaway
[_] _________________________________________________________________________
8. Average Speed? ____________________ Top Speed? ____________________
Average miles per race? ____________________
9. Is your racing? [_] Professional [_] Amateur
[_] Other (explain) ________________________________________________________
- --------------------------------------------------------------------------------
| SECTION B | UNDERWATER DIVING (SKIN OR SCUBA) |
- --------------------------------------------------------------------------------
1. What type equipment do you use? _____________________________________________
2. Location of diving activities? _________________ Diving for pleasure? _____
Pay? _____
3. Do you belong to a club or association? _____ Do you ever dive alone? _____
4. Depth of Dives
--------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------
| During Past 12 Months | Expected Next 12 Months |
---------------------------------------------------------------------
| No. Dives | Average Time | No. Dives | Average Time |
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Less than 40 feet | | | | |
---------------------------------------------------------------------
b. 40 feet to 60 feet | | | | |
---------------------------------------------------------------------
c. 60 feet & over | | | | |
---------------------------------------------------------------------
d. Maximum depth obtained | | | | |
---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
| SECTION C | PARACHUTE JUMPING AND SKY DIVING |
- --------------------------------------------------------------------------------
1. Are you now a member of any parachute or sky diving club or association? ____
2. Are all of your jumps made under auspices of your club or association? ______
3. (a) Number of jumps 12-24 months ago? ________ (b) Past 12 months? ________
(c) Next 12 months? ________
4. Do you participate in delayed chute opening competition or other stunts? ____
5. Location of jump areas? __________________ Date of last jump? _____________
- --------------------------------------------------------------------------------
| SECTION D | IDENTIFY SECTION AND QUESTION |
- --------------------------------------------------------------------------------
________________________________________________________________________________
I represent that the foregoing answers and statements are correctly recorded,
complete, and true to the best of my knowledge and belief.
Date _____________________________ X________________________________________
MO. DAY YR. SIGNATURE OF PROPOSED INSURED (OR PARENT
IF PROPOSED INSURED IS UNDER AGE 15)
__________________________________
SIGNATURE OF SOLICITING AGENT
_______________
AGENCY NO.
AP7503 15-07503-01 2/90
<PAGE>
<TABLE>
<S> <C>
GENERAL QUESTIONNAIRE
PACIFIC MUTUAL LIFE INSURANCE COMPANY [PACIFIC MUTUAL LOGO]
- -----------------------------------------------------------------------------------------------------------------------------------
FULL NAME (print) DATE OF BIRTH
MO. DAY YR.
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION D Aviation
- -----------------------------------------------------------------------------------------------------------------------------------
1. Type of aviation activity For Civilian and Military Pilots:
HOURS FLOWN
LAST 12 12-24 MO. ALL PRIOR EST. NEXT
MONTHS AGO YEARS 12 MO.
------- --------- ---------- ---------- 5. A. Type of license/certificate/rating held
Civilian Pilot [check appropriate boxes):
------- --------- ---------- ---------- [_] Student [_] Private [_] Commercial [_] ATR [_] IFR
Military Pilot [_] Instructor [_] Other (Specify "Remarks")
------- --------- ---------- ---------- B. Date of last renewal:__________________________________________
Member of Crew C. Purpose of flights:
------- --------- ---------- ---------- ------------------------------------------------------------------
2. Have you ever done or do you intend to engage
in flying for the purpose of exhibition, D. Total flying hours to date:____________________________________
endurance tests, racing, stunt flying, testing, E. Date of last flight:___________________________________________
air cargo operations, crop dusting or spraying, Yes No
or instruction of student pilots?.............. [_] [_] FOR CREW MEMBERS:
3. A. Have you ever flown or do you intend to 6. A. Duties aboard aircraft:_____________________________________
fly outside the United States?.............. [_] [_] _______________________________________________________________
B. Have you ever been involved in any B. Purpose of flights:_________________________________________
accident due to flying activities?.......... [_] [_] ---------------------------------------------------------------
C. Have you ever been charged with any C. Date of last flight:________________________________________
violation of air regulations?............... [_] [_] D. Do you plan to take instructions as a pilot? Yes [_] No [_]
(if "yes" to questions 2, 3A or 3C, explain in (if "yes", explain in "remarks".)
"remarks".) 7. If aviation activity does not permit standard, unrestricted
coverage, please issue as follows:
FOR PILOTS AND CREW MEMBERS OF MILITARY AIRCRAFT: [_] Full aviation coverage, if available, with appropriate
4. Describe type of aircraft flown in (including extra premium.
alphabetic & numeric code). [_] Aviation exclusion rider.
- -----------------------------------------------------------------------------------------------------------------------------------
REMARKS identify section and question
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
I represent that the foregoing answers and statements are correctly recorded, complete, and true to the best of my knowledge and
belief.
Date__________________________________________________________ X_________________________________________________________________
MO. DAY YR. Signature of proposed insured (or parent if proposed insured is
under age 15)
______________________________________________________________
Signature of Solicitating Agent
___________________________________
Agency No.
AP7503
</TABLE>
<PAGE>
EXHIBIT 99.3
Form of Opinion and consent of
legal officer of Pacific Mutual as
to legality of policies being
registered
<PAGE>
[Letterhead of Pacific Mutual Life Insurance Company]
DAVID R. CARMICHAEL
Senior Vice President
General Counsel
Law Department
Telephone (714) 640-3326
FAX (714) 640-2706
July 16, 1993
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 July 26, 1993 concerning Pacific Select Exec Separate Account as
the separate account for assets applicable to Pacific Select Choice Flexible
Premium Variable 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.
<PAGE>
July 16, 1993
Pacific Mutual Life Insurance Company
Page -2-
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 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 effecting the rights 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/rb
Pacific Mutual Life Insurance Company
700 Newport Center Drive, Newport Beach, California 92660,
Telephone (714) 640-3011
<PAGE>
EXHIBIT 99.6(a)
Consent of Deloitte & Touche LLP
<PAGE>
DELOITTE & TOUCHE LLP
Suite 1200 Telephone: (714) 436-7100
695 Town Center Drive Facsimile: (714) 436-7200
Costa Mesa, California 92626-1924
CONSENT OF INDEPENDENT AUDITORS
Pacific Mutual Life Insurance Company:
We hereby consent to the use in Post-Effective Amendment No. 4 to Registration
Statement No. 33-57908 on Form S-6 of Pacific Select Choice of our reports dated
February 16, 1996 related to the financial statements of Pacific Select Exec
Separate Account of Pacific Mutual Life Insurance Company as of and for the year
ended December 31, 1995 and February 23, 1996 related to the financial
statements of Pacific Mutual Life Insurance Company as of and for the years
ended December 31, 1995 and 1994 appearing in such Registration Statement and to
the references to us under the headings "Independent Accountants" and "Financial
Statements" in the Prospectus, which is a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
March 25, 1996
- --------------------
DELOITTE & TOUCHE
TOHMATSU
INTERNATIONAL
- --------------------
<PAGE>
EXHIBIT 99.6(b)
Consent of Dechert Price & Rhoads
<PAGE>
[LETTERHEAD OF LAW OFFICES OF DECHERT PRICE & RHOADS]
July 21, 1993
Board of Directors
Pacific Mutual Life Insurance
Company
700 Newport Center Drive
Newport Beach, California 92660
Re: Pacific Select Exec Separate Account of Pacific Mutual
Life Insurance Company, SEC File No. 33-57908
Dear Sirs and Madam:
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,
Dechert Price & Rhoads
<PAGE>
EXHIBIT 99.7
Opinion of Actuary
<PAGE>
[Letterhead of Pacific Mutual Life Insurance Company]
July 16, 1993
PACIFIC MUTUAL LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 92660
Gentlemen:
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 pre-effective amendment Number 1 to 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 ages 40 and 50 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/ Pierre Delisle
- ------------------
Pierre Delisle, FSA
Assistant Vice President
<PAGE>
EXHIBIT 99.8
Memorandum Describing Issuance, Transfer
and Redemption Procedures
<PAGE>
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 Choice Flexible Premium Variable Life Insurance
Policy ("Policy"), the transfer of assets held under the Policy, and the
redemption by Policy Owners of their interests in said Policy.1/
I. PURCHASE AND RELATED TRANSACTIONS
A. Premium Schedules and Underwriting Standards
The Policy is a flexible premium variable life insurance policy. The Policy
provides lifetime insurance protection on the life of the Insured through the
Maturity Date for so long as the Policy is not surrendered or in default beyond
the grace period. A Policy Owner will have two elections in determining the
death benefit payable under the Policy. First, the Policy Owner will choose
from two death benefit qualification tests -- the cash value accumulation test
or the guideline premium test. If the Policy Owner chooses the guideline
premium test, the Policy also permits the Policy Owner to choose from two death
benefit options, Option A and Option B. 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 minimum initial premium to purchase a Policy must be equal to at least 25%
of the sum of the Policy's monthly deductions plus premium load for the first
year, which will be based upon the Policy's Face Amount and the Age, smoking
status, gender, and underwriting class of the Insured. Thereafter, subject to
certain limitations, a Policy Owner may choose the amount and frequency of
premium payments. Pacific Mutual may reduce the minimum initial premium
required under certain circumstances.
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 insured is insurable. This process may involve
verification procedures and may require that further information be provided by
the applicant before a determination can be made. Pacific Mutual will not
become obligated under a Policy until an initial premium and a completed
application have been received by Pacific Mutual, and this underwriting
procedure has been completed.
After the Policy is issued, insurance coverage under the Policy will be deemed
to have begun as of
<PAGE>
the Policy Date. The Policy Date is usually the date the application is
accepted, or, if later, 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 Anniversaries.
C. Additional Premium Payments
The Policy is a flexible-premium policy, and it provides flexibility to pay
premiums at the Policy Owner's discretion. When applying for a Policy, a Policy
Owner will determine a Planned Periodic Premium that provides for the payment of
level premiums over a specified period of time. Each Policy Owner will receive
a premium reminder notice on either an annual, semi-annual, quarterly, or
monthly basis, at the option of the Policy Owner; however, the Policy Owner is
not required to pay Planned Periodic Premiums.
Payment of the Planned Periodic 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 Planned Periodic Premiums are paid, the Policy will
lapse any time Accumulated Value less Policy Debt is insufficient to pay the
current monthly deduction and a grace period expires without sufficient payment.
Any premium payment must be for at least $50. 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.
D. Premium Allocation
A Policy Owner may allocate net premiums among the Variable Accounts and/or the
Fixed Account. 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), all net 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, or, if longer, upon receipt of the minimum initial premium. The
Accumulated Value may be allocated to no more than five allocation alternatives
at any time. Those alternatives currently include nine Variable Accounts and a
Fixed Account.
Additional net premium payments will be allocated among the allocation
alternatives according to the Policy Owner's instructions. If the current
instructions would cause the Accumulated Value to be allocated to more than five
allocation alternatives, the premium payment less the premium load will be
allocated to the Variable Accounts and Fixed Account in the same proportion as
the Accumulated Value in those accounts. 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 Lapse," Section
III.C. on page 13 of this document) at any time within five years after the end
of the grace period but before the Maturity Date, provided Pacific Mutual
receives the following: (1) a written application of the Policy Owner;
<PAGE>
(2) evidence of insurability satisfactory to Pacific Mutual; and (3) a premium
equal to all monthly deductions that were due and unpaid during the grace
period, payment of a premium at least sufficient to keep the Policy in force for
three months after the date of reinstatement, and payment of any excess sales
load refunded to the Owner at the time the Policy lapsed.
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 an amount up to 90% of the
Policy's Accumulated Value allocated to the Variable Accounts and 100% of
Accumulated Value allocated to the Fixed Account and less the amount of any
underwriting 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 4.75% a year for the first 10 years and 4.25%
thereafter. Pacific Mutual will credit interest monthly on any Policy Debt to
secure the loan at an annual effective rate of 4.0%. 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
Insured or the Cash Surrender Value paid upon surrender or maturity, or the
refund of premium upon exercise of the Free-Look Right.
A loan may affect the length of time the Policy remains in force. The Policy
will lapse when Accumulated Value minus Policy Debt 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 61 day grace
period. Moreover, the Policy may enter the grace period more quickly when a
loan is outstanding, because the loaned amount is not available to cover monthly
deductions and charges.
<PAGE>
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 made up of nine Variable Accounts which invest in shares of
a corresponding series of Pacific Select Fund (the "Fund"), the investment
vehicle of the Separate Account. The Fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end management investment company of
the series type. The series of the Fund, each of which has a different
investment objective, are the Money Market Series, the Managed Bond Series, the
Government Securities Series, the High Yield Bond Series, the Growth Series, the
Equity Income Series, the Multi-Strategy Series, the Equity Index Series and the
International Series.
A Policy Owner may allocate Accumulated Value among the Variable Accounts in any
way he or she chooses. However, after the transfer, the Accumulated Value may
be allocated to no more than five allocation alternatives. 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, such a transfer will only be permitted in the Policy
Month preceding a Policy Anniversary except that Policy Owners residing in
Maryland, Connecticut, and Pennsylvania may make such transfers at any time
during the first 18 Policy Months. Transfers from the Fixed Account to the
Variable Accounts 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; (2) If a Policy Owner has
$1,000 or more in the Fixed Account, the Policy Owner may not transfer more than
20% of such amount to the Variable Accounts in any year.
III. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Net Cash Surrender Value
A Policy Owner can obtain a portion of the Net Cash Surrender Value under the
Partial Withdrawal Benefit. The Partial Withdrawal Benefit is available on and
after the first Policy Year. There is no limit on the number of Partial
Withdrawals. There is a $25 withdrawal fee for Partial Withdrawals. The fee
will be deducted from the Policy's Accumulated Value in the Fixed and Variable
Accounts in the same proportion as the withdrawal.
A Partial Withdrawal must be for at least $500, and the Policy's Net Cash
Surrender Value after the withdrawal must be at least $500. If there is any
Policy Debt, the amount that can be withdrawn is also 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%.
When a Partial Withdrawal is made on a Policy on which the Owner has selected
the cash value accumulation test or the guideline premium test death benefit
Option A, the Face Amount under the
<PAGE>
Policy is decreased by the lesser of (1) the amount of the Partial Withdrawal or
(2) if the death benefit prior to the withdrawal is greater than the Face
Amount, the amount, if any, by which the Face Amount exceeds the difference
between the death benefit and the amount of the Partial Withdrawal. A Partial
Withdrawal will not change the Face Amount of a Policy on which the Owner has
selected death benefit Option B. However, assuming that the death benefit is
not equal to Accumulated Value times a death benefit percentage, the Partial
Withdrawal will reduce the death benefit by the amount of the Partial
Withdrawal. To the extent the death benefit is based upon the Accumulated Value
times the death benefit percentage applicable to the Insured, a Partial
Withdrawal may cause the death benefit to decrease by an amount greater than the
amount of the Partial Withdrawal.
A Policy Owner may elect to receive systematic Partial Withdrawals after the
first Policy Year. He or she may request a specified dollar amount and the
desired frequency of the systematic Partial Withdrawals, which may be monthly,
quarterly, semi-annually or annually. Each systematic withdrawal must be at
least $100. The $25 withdrawal fee is currently waived on each systematic
withdrawal after the first systematic withdrawal. Systematic Partial
Withdrawals will be allocated proportionately from the Policy Owner's
Accumulated Value in the Variable Accounts and the Fixed Account. If a
systematic Partial Withdrawal would cause the Net Cash Surrender Value to fall
below $500, the amount withdrawn will be reduced to the amount available and
systematic Partial Withdrawals will automatically terminate. The Policy Owner
will be notified of the termination. Systematic Partial Withdrawals may be
stopped or modified by the Policy Owner upon proper written request received by
Pacific Mutual at least 30 days in advance.
A Policy Owner may surrender the Policy while the Policy is in force for its Net
Cash Surrender Value. If the Policy is surrendered in the first two years
following its issuance, the Policy Owner will also receive a refund of excess
sales load deducted from premiums paid, if any.
B. Death Claims
Upon the death of an Insured, 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
reduced by adjustments for any outstanding Policy Debt.
Under the guideline premium death benefit qualification test Option A, the death
benefit will be equal to the Face Amount of the Policy, or, if greater,
Accumulated Value multiplied by a death benefit percentage. Under Option B, the
death benefit will be equal to the Face Amount of the Policy plus the
Accumulated Value, or if greater, Accumulated Value multiplied by a death
benefit percentage. The specified percentages vary according to the age of the
Insured, and are shown in a table in the Policy. Under the cash value
accumulation death benefit qualification test, the death benefit will be equal
to the Face Amount or, if greater, the Accumulated Value divided by the "net
single premium" that would purchase one dollar of future benefits under the
Policy. Generally, the cash value accumulation test requires that under the
terms of a life insurance policy, the death benefit must be sufficient so that
the cash surrender value, as defined in Section 7702 of the Internal Revenue
Code, does not at any time exceed the net single premium required to fund the
future benefits under the policy. The net single premiums under the Policy vary
according to the Age, sex,
<PAGE>
and underwriting classification of the Insured, and the resulting death benefit
determined by using the net single premiums will be at least equal to the amount
required for the Policy to be deemed life insurance under Section 7702 of the
Internal Revenue Code. The net single premium is calculated using a four
percent interest rate, or if higher, the contractually guaranteed interest rate
and using mortality charges specified in the prevailing insurance commissioners
standard tables as of the time the Policy is issued.
A Policy Owner may request an increase or decrease in the Face Amount under a
Policy subject to approval from Pacific Mutual. A change in Face Amount may
only be made once per year after the fifth Policy Year. A decrease in face
amount may only be made after the fifth Policy Year, or after the fifth Policy
Year following the last increase in Face Amount. Such a change may change the
death benefit, depending, among other things, upon the death benefit election
chosen by the Policy Owner and whether and the degree to which the death benefit
under a Policy exceeds the Face Amount prior to the change. A change in the
Face Amount may affect the net amount at risk under a Policy, which may affect a
Policy Owner's cost of insurance charge. For these purposes, the net amount at
risk is equal to the death benefit less the Policy Owner's Accumulated Value.
Any request for a change in Face Amount must be in writing at Pacific Mutual's
Home Office. In the case of a request for an increase, additional evidence of
insurability satisfactory to Pacific Mutual will also be required.
C. Policy Lapse
If the Accumulated Value less Policy Debt 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 an amount equal to three times the
charges and deductions due on the monthly payment date in which the
insufficiency occurred. If the Policy terminates at the end of the grace period
during the first two years following issuance of the Policy, Pacific Mutual will
refund excess sales load deducted from premiums paid, if any.
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 instructions. If the Insured 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, any Policy Debt and any sales
load previously refunded.
A lapsed Policy may be reinstated at any time within five years after the end of
the grace period but before the Maturity Date. See "Reinstatement," Section
I.E. on page 5 of this document.
D. Policy Loans
<PAGE>
See Section I.F. on page 6 of this document.
1. Capitalized terms as used herein have the same meaning as in the prospectus
for the Policy.
<PAGE>
EXHIBIT 99.9
Exhibit Regarding Adjustment for
Conversion to a Non-Flexible Contract
<PAGE>
EXHIBIT REGARDING ADJUSTMENT FOR
CONVERSION TO A NON-FLEXIBLE CONTRACT
During the first 24 months after issuance, the contract holder will have the
option to convert the Pacific Select Choice (PSC) Contract to at least one
flexible premium non-flexible contract provided by Pacific Mutual Life. The
contract holder can elect a contract that provides either the same death benefit
or the same net amount at risk as the PSC contract at the time of conversion.
The cost of insurance charges for the non-flexible contract will be based on the
same issue age and risk classification of the insured as the PSC contract.
The Accumulated Value of the PSC contract plus the refund of any excess sales
load, if any, will be transferred to the Accumulated Value of the non-flexible
contract. All charges, loads or fees for the non-flexible contract will be
based on the issue age and the duration at the time of conversion of the PSC
contract.
Guideline premium limits will be recalculated for the non-flexible contract and
PM will do any adjustment necessary, as a refund of premium, to keep the
contract complying as life insurance under Section 7702 of the Internal Revenue
Code. At the same time, the Accumulated Value of the non-flexible contract will
be reduced by the amount of the premium refund. An example of such adjustment
is given below.
Maximum guideline premium under PSC contract: $10,000.
Total premium paid under PSC contract: $10,000.
Recalculated maximum guideline premium under non-flexible contract: $9,000.
Refund of Premium: $1,000.
Adjustment to Accumulated Value: $1,000.
/s/ Pierre Delisle
Pierre Delisle, FSA, MAAA
Assistant Vice President
Product Design
PD/jb/3124
<PAGE>
EXHIBIT 99.10
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
