GROUPAMERICA INSURANCE COMPANY
                 P.O. BOX 1840, HARTFORD, CONNECTICUT 06144-1840
                                 1-800-443-3221

GROUP POLICY NUMBER                  908496-A

NAME OF POLICYHOLDER                 Pacific Capital Bancorp

TYPE OF COVERAGE                     Long Term Disability Insurance

EFFECTIVE DATE                       January 1, 1995

INITIAL POLICY TERM                  Two Years

PREMIUM DUE DATES                    January 1, 1995,  and the first day of each
                                     calendar month thereafter

POLICY DELIVERED IN                  California and governed by the laws of that
                                     state.

GroupAmerica Insurance Company agrees to pay the benefits provided by this Group
Policy, in accordance with the provisions of this Group Policy.

The  consideration  for this Group Policy is the application of the Policyholder
and the payment by the Policyholder of premiums as provided herein.

The Group Policy is issued for the Initial  Policy Term shown  above,  ending on
the first day after the end of such policy term at 12:01 A.M.  Standard  Time at
the  Policyholder's  address.  This Group  Policy may be renewed for  successive
renewal periods by the payment of the premium on each renewal date, provided the
number of persons  insured on each renewal date is neither less than the Minimum
Participation Number nor less than the Minimum  Participation  Percentage (shown
in the Policy Data). The length of each renewal period will be determined by us,
but will not be less than 12 months.

All provisions on this and the following  pages are a part of this Group Policy.
The  Certificate  Of Insurance  issued for delivery to each insured  Member will
include  Section One of this Group Policy.  The  definitions of terms in Section
One apply  whenever the terms are used anywhere in this Group Policy.  "You" and
"your" refer to the insured Member.  "We", "us", and "our" refer to GroupAmerica
Insurance  Company.  Other  defined  terms are printed  with an initial  capital
letter.

                         GroupAmerica Insurance Company

                                       By




                    Secretary                     President

                             Group Insurance Policy



GP292-LTD

<PAGE>


                           REQUIRED CALIFORNIA NOTICE

To Our California Policyholders and Certificate Holders:


     We are here to serve you ...

     As our  policyholder  or  certificate  holder,  your  satisfaction  is very
     important to us. Should you have a valid claim,  we fully expect to provide
     a fair  settlement  in a timely  fashion.  In the event you need to contact
     someone about this policy for any reason, please contact your agent. If you
     have additional questions,  you may contact GroupAmerica  Insurance Company
     at the following address and toll-free telephone number:

                  GroupAmerica Insurance Company
                  P.O. Box 1840
                  Hartford, Connecticut 06144-1840

                  Telephone number: 1-800-443-3221


     If you are not satisfied...

     Should you feel you are not being  treated  fairly and you have been unable
     to contact or obtain satisfaction from us or the agent, we want you to know
     you may contact the California  Department of Insurance with your complaint
     and seek assistance from the governmental agency that regulates insurance.


     To contact the Department, write or call:

         Consumer Affairs Division
         California Department of Insurance
         300 South Spring Street
         Los Angeles, CA 90013

         Telephone number: 1-800-927-HELP


<PAGE>

--------------------------------------------------------------------------------
                       California Life and Health Insurance
                             Guarantee Association Act
                          Summary Document and Disclaimer
--------------------------------------------------------------------------------

Residents of  California  who purchase  life and health  insurance and annuities
should know that the insurance  companies  licensed in this state to write these
types of  insurance  are  members of the  California  Life and Health  Insurance
Guarantee Association  ("CLHIGA").  The purpose of this Association is to assure
that policyholders will be protected,  within limits, in the unlikely event that
a member insurer becomes  financially  unable to meet its  obligations.  If this
should happen, the Guarantee  Association will assess its other member insurance
companies  for the money to pay the claims of insured  persons  who live in this
state  and,  in some  cases,  to keep  coverage  in force.  The  valuable  extra
protection  provided  through the Association is not unlimited,  as noted in the
box below, and is not a substitute for consumers' care in selecting insurers.

--------------------------------------------------------------------------------

The California Life and Health Insurance  Guarantee  Association may not provide
coverage  for this  policy.  If  coverage  is  provided,  it may be  subject  to
substantial  limitations  or  exclusions,  and require  continued  residency  in
California.  You should not rely on coverage by the  Association in selecting an
insurance company or in selecting an insurance policy.

Coverage  is NOT  provided  for your  policy  or any  portion  of it that is not
guaranteed  by the  insurer or for which you have  assumed  the risk,  such as a
variable contract sold by prospectus.

Insurance companies or their agents are required by law to give or send you this
notice. However, insurance companies and their agents are prohibited by law from
using the existence of the Guarantee  Association  to induce you to purchase any
kind of insurance policy.

Policyholders  with additional  questions  should first contact their insurer or
agent or may then contact:

        Executive Director            or        Allegra Willison, Staff Counsel
California Life and Health Insurance          California Department of Insurance
      Guarantee Association                     45 Fremont Street, 24th Floor
         P.O. Box 70069                            San Francisco, CA 9410
     Los Angeles, CA 90070

--------------------------------------------------------------------------------

The  state  law that  provides  for  this  safety-net  coverage  is  called  the
California Life and Health  Guarantee  Association Act. Below is a brief summary
of this law's coverages,  exclusions and limits. This summary does not cover all
provisions  of the  law;  nor  does  it in any way  change  anyone's  rights  or
obligations under the Act or the rights or obligations of the Association.

COVERAGE

Generally,  individuals  will be  protected  by the  California  Life and Health
Insurance  Guarantee  Association  if they live in this state and hold a life or
health insurance  contract,  or an annuity, or if they are insured under a group
insurance  contract,  issued by a member insurer.  The beneficiaries,  payees or
assignees of insured persons are protected as well, even if they live in another
state.

<PAGE>


EXCLUSIONS FROM COVERAGE

However,  persons  holding  such  policies are not  protected by this  Guarantee
Association if:

     Their  insurer  was not  authorized  to do  business  in this state when it
     issued the policy or  contract;  Their  policy was issued by a health  care
     service plan (HMO, Blue Cross, Blue Shield), a charitable  organization,  a
     fraternal  benefit  society,  a  mandatory  state  pooling  plan,  a mutual
     assessment  company,  an  insurance  exchange,  or a grants  and  annuities
     society;  They are eligible for protection under the laws of another state.
     This may occur when the insolvent insurer was incorporated in another state
     whose guarantee association protects insureds who live outside that state.

The Guarantee Association also does not provide coverage for:

     Unallocated  annuity contracts;  that is, contracts which are not issued to
     and owned by an individual  and which  guarantee  rights to group  contract
     holders,  not  individuals;  Employer and association  plans, to the extent
     they are self-funded or uninsured;  Any policy or portion of a policy which
     is not  guaranteed by the insurer or for which the  individual  has assumed
     the risk,  such as a variable  contract sold by  prospectus;  Any policy of
     reinsurance  unless an  assumption  certificate  was issued;  Interest rate
     yields that exceed an average rate; Any portion of a contract that provides
     dividends or experience rating credits.

LIMITS ON AMOUNT OF COVERAGE

The Act limits the Association to pay benefits as follows:

LIFE AND ANNUITY BENEFITS

     80% of what the insurance  company would owe under a life policy or annuity
     contract up to $100,000 in cash surrender values, $100,000 in present value
     of annuities,  or $250,000 in life insurance death  benefits.  A maximum of
     $250,000 for any one insured life no matter how many policies and contracts
     there were with the same company,  even if the policies provided  different
     types of coverages.

HEALTH BENEFITS

     A maximum  of  $200,000  of the  contractual  obligations  that the  health
     insurance company would owe were it not insolvent. The maximum may increase
     or decrease  annually  based upon changes in the health care cost component
     of the consumer price index.

PREMIUM SURCHARGE

Member  insurers are required to recoup  assessments  paid to the Association by
way of a surcharge on premiums  charged for health  insurance  policies to which
the Act applies.


<PAGE>


                                   POLICY DATA


GROUP POLICY NUMBER                       908496-A

INITIAL MONTHLY PREMIUM RATE:

       LONG TERM DISABILITY               32%  of  the  first   $11,999  of  the
       INSURANCE                          Predisability Earnings of each insured
                                          Member

MINIMUM PARTICIPATION NUMBER              10 insured Members

MINIMUM PARTICIPATION PERCENTAGE          100% of eligible Members


<PAGE>


                                TABLE OF CONTENTS

SECTION ONE - COVERAGE PROVISIONS .........................................    1

Part 1   BECOMING INSURED .................................................    1

Part 2   LONG TERM DISABILITY INSURING CLAUSE .............................    2

Part 3   SCHEDULE OF LONG TERM DISABILITY INSURANCE .......................    2

A.       ELIMINATION PERIOD ...............................................    2

B        MAXIMUM BENEFIT PERIOD ...........................................    2

C        AMOUNT OF LTD BENEFIT.............................................    4

Part 4   EXCLUSIONS AND LIMITATIONS .......................................    4

Part 5   DEFINITION OF DISABILITY..........................................    5

Part 6   DEFINITION OF PREDISABILITY EARNINGS ............................     7

Part 7   DEFINITION OF INCOME FROM OTHER SOURCES .........................     7

Part 8   OTHER BENEFITS AND PROVISIONS ...................................    10

A        RETURN TO WORK PROVISION ........................................    10

B        SURVIVORS BENEFIT ...............................................    10

C        WAIVER OF PREMIUM ...............................................    10

D        BENEFITS AFTER INSURANCE ENDS OR IS CHANGED .....................    10

Part 9   WHEN INSURANCE ENDS .............................................    11

Part 10. BECOMING INSURED AGAIN AFTER INSURANCE ENDS .....................    11

Part 11. CLAIMS PROVISIONS AND PROCEDURES FOR LTD BENEFITS ...............    12

Part 12. TIME LIMITS ON LEGAL ACTIONS ....................................    14

Part 13. INCONTESTABLE CLAUSES ...........................................    14

Part 14. ALLOCATION OF AUTHORITY .........................................    15

Part 15. ASSIGNMENT NOT PERMITTED ........................................    15

Part 16. GENERAL DEFINITIONS .............................................    15


<PAGE>


SECTION TWO - POLICYHOLDER PROVISIONS ....................................    17

Part 1. PREMIUMS .........................................................    17

Part 2. CERTIFICATES .....................................................    18

Part 3. RECORDS AND REPORTS ..............................................    18

Part 4. MISSTATEMENT OF AGE ..............................................    19

Part 5. ENTIRE CONTRACT; CHANGES .........................................    19

Part 6. EFFECT ON WORKER'S COMPENSATION ..................................    19


<PAGE>


                             INDEX OF DEFINED TERMS


ACTIVE WORK ...............................................................    2
ACTIVELY AT WORK ..........................................................    2
CONTRIBUTORY ..............................................................   16
CPI-W .....................................................................    7
DISABILITY ................................................................    5
DISABLED ..................................................................    5
ELIMINATION PERIOD ........................................................    2
EMPLOYER ..................................................................   15
EVIDENCE OF INSURABILITY ..................................................   15
GROUP POLICY ..............................................................   15
HOSPITAL ..................................................................    5
INCOME FROM OTHER SOURCES .................................................    7
INDEXED PREDISABILITY EARNINGS ............................................    6
INSURANCE .................................................................   15
LONG TERM DISABILITY INSURANCE ............................................   15
LTD BENEFIT ............................................................... 4,15
MAXIMUM BENEFIT PERIOD ....................................................    2
MAXIMUM LTD BENEFIT .......................................................    4
MEMBER ....................................................................    1
MENTAL DISORDER ...........................................................    5
MINIMUM LTD BENEFIT .......................................................    4
NONCONTRIBUTORY ...........................................................   16
PHYSICIAN .................................................................    5
PREDISABILITY EARNINGS ....................................................    7
PREEXISTING CONDITION .....................................................    4
PRIOR PLAN ................................................................   15
RESIDUALLY DISABLED .......................................................    6
TOTALLY DISABLED ..........................................................    6
WAR .......................................................................    4


<PAGE>


SECTION ONE - COVERAGE PROVISIONS


                            Part 1. BECOMING INSURED

To become insured you must meet each of the requirements of A through E plus the
Active Work requirement.

A.   DEFlNITION OF MEMBER

     You must be a Member. You are a MEMBER if you are all of the following:

     1.  An active employee of the Employer, other than a temporary or seasonal
         employee or a full time member of the armed forces of any country.

     2.  Regularly scheduled to work at least 21 hours each week.

     3.  A citizen or resident of the United States or Canada.

B.   ELIGIBILITY FOR INSURANCE

     1.  For each Member with Predisability Earnings of $2,000 or more

         You must be eligible for  Insurance.  You are eligible for Insurance on
         the  effective  date of the  Group  Policy  if you are a Member on that
         date. Otherwise, you will become eligible for Insurance on the date you
         become a Member.

     2.  For all other Members

         You must be eligible for  Insurance.  You are eligible for Insurance on
         the  effective  date of the  Group  Policy  if you are a Member on that
         date.  Otherwise,  you will become  eligible for Insurance on the first
         day after 90 consecutive days as a Member.

C.       APPLICATION FOR INSURANCE

         Your  Insurance  is  Noncontributory.  No  application for Insurance is
         required.

D.       EVIDENCE OF INSURABILITY

         Your  Insurance is  Noncontributory;  Evidence Of  Insurability  is not
         required to become insured.

E.       EFFECTIVE DATE OF INSURANCE

         Your Insurance will become  effective on the date you become  eligible,
         if you meet the Active Work requirement on that date.

F.       ACTIVE WORK REQUIREMENT

         You must meet an Active Work requirement to become insured.

         You  automatically  meet the Active Work  requirement  on the date your
         Insurance is scheduled to become  effective unless you were Disabled on
         the day before  that date.  If you were  Disabled on the day before the
         scheduled effective date of your Insurance,  the effective date of your
         Insurance  will be delayed  until the first day after you  complete one
         full day of Active Work as a Member.


Printed                              -1-                                908496-A
01/30/95                                                              LTD Policy


<PAGE>

         For purposes of this Active Work  requirement,  you are Disabled if you
         are currently unable,  as a result of your sickness,  accidental bodily
         injury, or pregnancy, to perform the substantial and material duties of
         your own occupation.

         ACTIVE WORK and  ACTIVELY AT WORK mean  performing  the usual duties of
         your job at the Employer's usual place of business.

         This  Active  Work  requirement  also  applies to any  increase in your
         Insurance.

         Continuity  of coverage  provision  for each Member  insured  under the
         Prior Plan who fails to meet the Active Work  requirement  of the Group
         Policy:

         If you are a Member  who was  insured  under the Prior Plan on the last
         day  before  the  effective  date of the Group  Policy,  you can become
         insured  under the  Group  Policy  on the  effective  date of the Group
         Policy  without  meeting  the Active  Work  requirement.  However,  the
         benefits  we pay for a new  period of  Disability  beginning  after you
         become  insured under the Group Policy,  but before you meet the Active
         Work  requirement,  will be the benefits payable under the Group Policy
         or the benefits  which would have been payable  under the Prior Plan if
         the Prior Plan had remained in force,  whichever  are less,  reduced by
         any benefits payable under the Prior Plan.


                  Part 2. LONG TERM DISABILITY INSURING CLAUSE

Subject  to all the  terms of the  Group  Policy,  we will  pay the LTD  Benefit
described in Part 3 upon  receipt of  satisfactory  written  proof that you have
become Disabled while insured under the Group Policy.


               Part 3. SCHEDULE OF LONG TERM DISABILITY INSURANCE


You must read each section to  understand  when LTD Benefits are payable and how
LTD Benefits are calculated.

A.       ELIMINATION PERIOD

         ELIMINATION  PERIOD  means the length of time you must be  continuously
         Disabled before LTD Benefits become payable.

         Your  Elimination  Period  is the  first  90  days of  each  period  of
         continuous Disability.

         Your Elimination Period begins on the date you become Disabled.  No LTD
         Benefits are ever payable for the Elimination Period.

         Temporary Recovery during the Elimination Period:

         For purposes of serving the Elimination Period, all separate periods of
         Disability  from the same cause or causes  will be added  together  and
         treated as one period of continuous Disability. However, you must serve
         the full 90 day  Elimination  Period within a period of 105 consecutive
         days.

         For purposes of this  provision,  a period of Temporary  Recovery means
         any time when we do not consider you Disabled as defined in Part 5.

B.       MAXIMUM BENEFIT PERIOD

         MAXIMUM  BENEFIT  PERIOD means the longest period of time for which LTD
         Benefits  are  payable  for any one  period of  continuous  Disability,
         whether from one or more causes.


Printed                                 -2-                             908496-A
01/30/95                                                              LTD Policy


<PAGE>

Your  Maximum  Benefit  Period is equal to the period  shown below or the period
which lasts until your Normal  Retirement  Age under the 1983  amendments to the
federal Social Security Act, whichever is longer.

         Your Maximum Benefit Period is determined as follows:

         Your Age When                 Your Maximum
         Disability  Begins            Benefit  Period

         58 or younger ..............  To age 65
         59 .........................  To age 65 or 5 years, whichever is longer
         60 .........................  5 years
         61 .........................  4 years
         62 .........................  3 years 6 months
         63 .........................  3 years
         64 .........................  2 years 6  months 
         65 .........................  2 years
         66 .........................  1 year 9 months
         67 .........................  1 year 6 months
         68 .........................  1 year 3 months 
         69 or older ................  1 year

Your Normal  Retirement  Age under the 1983  amendments  to the  federal  Social
Security Act is determined by the year of your birth, as follows

         Year of Birth                  Normal Retirement Age

         Before 1938 ................   Age 65
         1938 .......................   Age 65 and 2 months
         1939 .......................   Age 65 and 4 months
         1940 .......................   Age 65 and 6 months
         1941 .......................   Age 65 and 8 months
         1942 .......................   Age 65 and 10 months
         1943 through 1954 ..........   Age 66 
         1955 .......................   Age 66 and 2 months
         1956 .......................   Age 66 and 4 months
         1957 .......................   Age 66 and 6 months
         1958 .......................   Age 66 and 8 months
         1959 .......................   Age 66 and 10 months
         After 1959..................   Age 67

Your Maximum Benefit Period begins at the end of the Elimination Period.  During
the Maximum  Benefit  Period,  LTD  Benefits are paid at the end of each monthly
period for which you qualify for LTD  Benefits.  LTD Benefits  will stop at your
death or at any time  during  the  Maximum  Benefit  Period  when you no  longer
qualify  for LTD  Benefits.  LTD  Benefits  will stop at the end of the  Maximum
Benefit Period even if you are still Disabled.

Temporary Recovery during the Maximum Benefit Period:

For purposes of continuing LTD Benefits during the Maximum  Benefit Period,  any
two periods of Disability  from the same cause or causes will be added  together
and treated as one period of  continuous  Disability  if they are separated by a
period of  Temporary  Recovery of less than 180 days.  Thus,  a new  Elimination
Period will not be required, the Predisability Earnings used to compute your LTD
Benefit will not change,  and the Maximum  Benefit Period will be the balance of
the Maximum  Benefit  Period  remaining  unused  before the period of  Temporary
Recovery.

Printed                                 -3-                             908496-A
01/30/95                                                              LTD Policy


<PAGE>


         No LTD Benefits will be payable  under this  provision  after  benefits
         become  payable  to you  under  any other  group  long term  disability
         insurance  policy.  This rule  prevents  double  coverage if you become
         insured under another  policy while you are working  during a period of
         Temporary Recovery.

         For purposes of this  provision,  a period of Temporary  Recovery means
         any time when we do not consider you Disabled as defined in Part 5.

C.       AMOUNT OF LTD BENEFIT

         Your  monthly LTD BENEFIT  equals your  Maximum LTD Benefit  reduced by
         your Income From Other Sources.

         Your MAXIMUM LTD BENEFIT equals A or B, whichever is less, where:

         A =  66 2/3% of your Predisability Earnings

         B =  $8,000

         Your  monthly  LTD  Benefit  during  a  period  of  Disability  will be
         determined  by your  Maximum  LTD Benefit in effect on your last day of
         Active Work before you become Disabled.

         The  MINIMUM LTD  BENEFIT is $100 or 10% of your  Maximum LTD  Benefit,
         whichever is greater.

         Predisability Earnings are defined in Part 6.

         Income From Other Sources is defined in Part 7.


                       Part 4. EXCLUSIONS AND LIMITATIONS

A.       RISKS NOT COVERED

         1.  WAR: You are  not covered for a disability caused or contributed to
             by war or any act of war

             WAR  means   declared  or   undeclared   war,   whether   civil  or
             international, and any substantial armed conflict between organized
             forces of a military nature.

         2.  INTENTIONALLY  SELF-INFLICTED  INJURY:  You  are  not covered for a
             disability  caused  or  contributed  to  by  an intentionally self-
             inflicted injury.

         3.  PREEXISTING CONDITION: You are not covered for a disability caused
             or contributed to by a Preexisting Condition or medical or surgical
             treatment of a Preexisting Condition unless, on the date you become
             Disabled, you have been continuously insured under the Group Policy
             for at least 12 months.

             PREEXISTING  CONDITION  means a mental or  physical  condition  for
             which you have done any of the following at any time during  the 90
             day period just before the effective date of your  Insurance  under
             the Group Policy:

             a.       Consulted a Physician.

             b.       Received medical treatment or services.

             c.       Taken prescribed drugs or medications.

Printed                                -4-                              908496-A
01/30/95                                                              LTD Policy


<PAGE>


            Continuity of coverage provision for each Member insured  under  the
            Prior Plan:

            This  Preexisting   Condition  exclusion  will  not  apply  to  your
            Disability from a Preexisting  Condition if all of the following are
            true:

            a.  You were insured under the Prior Plan on the last day before the
                effective date of the Group Policy.

            b.  You were continuously insured under the Group  Policy  from  the
                effective date of the Group Policy through the  date  you became
                Disabled from the Preexisting Condition.

            c.  Benefits  would have been payable under the Prior  Plan  if  the
                Prior Plan had remained in force,  taking into consideration the
                preexisting condition exclusion or limitation, if  any,  of  the
                Prior Plan.

            However,  the LTD Benefit we pay will be the benefit  payable  under
            the Group Policy or the benefit  which would have been payable under
            the Prior Plan if the Prior Plan had remained in force, whichever is
            less.

B.       LIMITATIONS

         1. REGULAR CARE OF A PHYSICIAN: No LTD Benefits  will  be  paid for any
            period of Disability when you are not under the  regular  care  of a
            Physician.

            PHYSICIAN  means  a  licensed  medical   professional,   other  than
            yourself,  diagnosing  and  treating  you  within  the  scope of the
            license.

         2. MENTAL DISORDER: Payment of LTD Benefits is  limited  to  24  months
            for each period of Disability caused or contributed  to  by a Mental
            Disorder. However, if you are a resident patient  in  a  Hospital at
            the end of the 24 months, this limitation will not  apply  while you
            remain continuously confined.

            MENTAL DISORDER means a mental, emotional, or behavioral disorder.

            HOSPITAL  means a  legally  operated  hospital  providing  full-time
            medical care and treatment  under the direction of a full-time staff
            of licensed  physicians (M.D. or D.O.).  Rest homes,  nursing homes,
            convalescent  homes,  homes for the aged, and  facilities  primarily
            affording  custodial,  educational,  or rehabilitative  care are not
            Hospitals.

         3. WORK EARNINGS: No LTD Benefits will be paid for any period when your
            work earnings exceed 80% of your Indexed Predisability Earnings.


                         Part 5. DEFINITION OF DISABILITY

You will be considered DISABLED during the Elimination Period if you are Totally
Disabled as defined below, and you are not working at all.


Printed                                 -5-                             908496-A
01/30/95                                                              LTD Policy


<PAGE>


You will be considered  Disabled  during the Maximum  Benefit  Period if you are
either Totally Disabled or Residually Disabled, as defined below:

TOTALLY DISABLED:

1.       You  are   only   required  to   be  Totally  Disabled  from  your  own
         occupation during the Elimination Period and the first 60 months of the
         Maximum Benefit Period.

         You are Totally  Disabled from your own occupation if you are currently
         unable,  as a result of your sickness,  accidental  bodily  injury,  or
         pregnancy,  to perform the  substantial and material duties of your own
         occupation, and you are not working at all.

2.       You must be Totally Disabled from all occupations  after  the  first 60
         months of the Maximum Benefit Period.

         You are Totally  Disabled  from all  occupations  if you are  currently
         unable,  as a result of your sickness,  accidental  bodily  injury,  or
         pregnancy,  to  perform  the  substantial  and  material  duties of any
         occupation for which you are reasonably fitted by education,  training,
         and experience, and you are not working at all.

RESIDUALLY DISABLED:

1.       You are Residually  Disabled during the first 60 months of  the Maximum
         Benefit  Period  if  you are  currently  unable,  as  a  result of your
         sickness,  accidental  bodily  injury,  or  pregnancy  to  perform  the
         substantial and material  duties of your own  occupation,  and you
         satisfy one of the  following conditions:

         a.  You are  working  in your  own  occupation,  and you are  currently
             unable, as a result of your sickness,  accidental bodily injury, or
             pregnancy, to earn more than  80%  of  your  Indexed  Predisability
             Earnings.

         b.  You are working in another occupation or specialty, and your actual
             work  earnings  do  not  exceed  80%  of your Indexed Predisability
             Earnings.

2.       You are  Residually  Disabled  after the first 60 months of the Maximum
         Benefit Period  if you are working in your own occupation or any  other
         occupation or specialty, and  you  are currently unable, as a result of
         your sickness,  accidental bodily  injury,  or  pregnancy, to earn more
         than 80% of your Indexed  Predisability  Earnings  from  work  in  that
         occupation  or  any  other  occupation  for  which  you are  reasonably
         fitted by education, training, and experience.

The Return To Work  Provision in Part 8A explains the effect your work  earnings
will have on the amount of your LTD Benefit.  No LTD  Benefits  will be paid for
any  period  when your  earnings  from work in your own  occupation  or  another
specialty or occupation exceed 80% of your Indexed Predisability Earnings.

You will not be considered Disabled solely because of the loss or restriction of
your license to engage in your own occupation.

INDEXED  PREDISABILITY  EARNINGS  used for  purposes  of the  income  protection
guarantee in the definition of Disability means an amount determined as follows:

Until you have been Disabled for one year, your Indexed  Predisability  Earnings
will  equal your  Predisability  Earnings  on your last full day of Active  Work
before you became Disabled. Thereafter, we will increase the


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amount of your Indexed  Predisability  Earnings on each  anniversary of the date
you became  Disabled.  Increases  are  compounded,  and there is no limit on the
number of  increases.  The  amount of each  increase  to the  amount of  Indexed
Predisability  Earnings in effect during the prior year of Disability will equal
A or B, whichever is less, where:

A =     10%  of  your Indexed  Predisability  Earnings  during the prior year of
        Disability

B =     The rate of increase in the Consumer Price Index (CPI-W during the prior
        calendar year multiplied by  your Indexed  Predisability  Earning during
        the prior year of Disability

There will never be a decrease in your Indexed Predisability  Earnings,  even if
there is a drop in the Consumer Price Index (CPI-W).

CPI-W means the Consumer Price Index for Urban Wage Earners and Clerical Workers
published by the United States Department of Labor. If the index is discontinued
or changed, we may use another nationally published index which is comparable to
the CPI-W.


                  Part 6. DEFINITION OF PREDISABILITY EARNINGS

PREDISABILITY  EARNINGS  means your monthly  rate of earnings  from the Employer
including  commissions,  bonuses,  and tax deferred  contributions you make to a
qualified  plan  sponsored by the Employer,  but excluding  overtime pay and any
other extra  compensation.  The following rules apply to the computation of your
monthly rate of earnings:

Commissions:  Your  monthly  rate of earnings on any date  includes  the average
monthly  commissions  paid to you by the Employer during the prior calendar year
(or during the period you were a Member, if you were not a Member throughout the
prior calendar year).

Bonuses:  Your monthly rate of earnings on any date includes the average monthly
bonus paid to you by the  Employer  during the prior  three  calendar  years (or
during  the period you were a Member,  if you were not a Member  throughout  the
prior three calendar years).

Weekly Pay: Weekly earnings are multiplied by 4.333 to find your monthly rate of
earnings.

Hourly Pay:  Your hourly pay rate is  multiplied  by the number of hours you are
regularly  scheduled to work each month (but not more than 40 hours per week) to
find your monthly rate of earnings.  If you do not have regular work hours, your
monthly  rate of  earrings  on any date will be based on the  average  number of
hours you worked during the prior calendar year (or during the period you were a
Member,  if you were not a Member  throughout the prior calendar year),  but not
more than 40 hours per week.


                 Part 7. DEFINITION OF INCOME FROM OTHER SOURCES

Income From Other Sources is used to reduce your LTD Benefit and is explained in
the following definition, exceptions, and rules.

A.       DEFINITION OF INCOME FROM OTHER SOURCES

         INCOME FROM OTHER SOURCES means:

         1. Any sick pay or other salary  continuation (other than vacation pay)
            paid to you by the Employer which,  when added to the amount of your
            Maximum LTD Benefit, exceeds 100% of your Predisability Earnings.

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         2. The amount  determined from the Return To Work Provision in Part 8A,
            if you work while you are Disabled. Part 8A explains the effect your
            work earnings will have on the amount of your LTD Benefit.

         3. Any amount you  receive  or are  eligible  to receive as a result of
            your disability under any worker's  compensation law or  similar law
            including  amounts   for   partial   or  total  disability,  whether
            permanent, temporary, or vocational.

         4. Any  amount  you,  your  spouse,  or your  children  receive  or are
            eligible to receive because of your  disability or retirement  under
            the   Federal  Social  Security  Act, the Canada  Pension Plan,  the
            Quebec Pension Plan, or any similar  plan  or act. Early  retirement
            benefits  payable  prior  to  normal retirement  age  under the plan
            or act will not be used to reduce  the  amount  of  your LTD Benefit
            unless they are actually received.

            Benefits your spouse or children  receive or are eligible to receive
            because of your  disability  will be  considered  Income  From Other
            Sources  regardless  of  marital  status,   custody,   or  place  of
            residence.

         5. The amount you receive or are  eligible  to receive  because of your
            disability  under any group  insurance  coverage,  other  than group
            credit insurance or group mortgage disability insurance.

         6. The amount you receive or are  eligible  to receive  because of your
            disability  under any  state  unemployment  compensation  disability
            benefit law or state disability income benefit law.

         7.  Any  disability  or  retirement  benefits  paid  to you  under  the
             Employer's  defined  benefit retirement plan, except:

             a.   Any lump sum distribution of your entire interest in the plan.

             b.   Any amount which is attributable to  your contributions to the
                  plan.

             c.   Any amount which you could have received upon  termination  of
                  employment without being disabled or retired.

         8.  Any amount  received by  compromise,  settlement,  or  other method
             as a result of a claim for any of the above.

B.       EXCEPTIONS TO INCOME FROM OTHER SOURCES

         The  following  will  not  be  used  to  reduce  the amount of your LTD
         Benefit:

         1. Any cost of  living  increase  in any  Income  From  Other  Sources,
            provided   that  the  increase   becomes  effective  while  you  are
            Disabled and whil you are eligible to receive  the Income From Other
            Sources. (This  exception  does  not  apply to  any increase in your
            earnings from any work.)

         2. Any  amount  received  as  reimbursement  for  hospital, medical, or
            surgical expense.

         3. Any amount which  represents  reasonable  attorney's  fees  incurred
            in connection  with the claim for Income From Other Sources.

         4. Benefits from any individual disability insurance policy.

         5. Any amount you receive from the following types of retirement plans:
            A defined  contribution  (money  purchase) retirement plan, a profit
            sharing plan, a thrift or  savings  plan,  a  deferred  compensation
            plan, a 401(k) plan,  an  Individual Retirement Account (IRA), a Tax
            Sheltered

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            Annuity  (TSA), a stock  ownership  plan, a Keogh (HR-10) Plan, or a
            retirement  plan  under  a  Professional  Service  Corporation  with
            respect to principals or shareholders.

         6. Any benefits under the Federal Social  Security  Act received by, or
            on behalf of, your dependent child age 18 or over.

C.       RULES FOR INCOME FROM OTHER SOURCES

         1. Monthly Equivalents

            Each month your LTD Benefit will be reduced by the Income From Other
            Sources for the same monthly  period,  even if you actually  receive
            the Income From Other Sources in another month.

            If you receive any Income From Other Sources periodically other than
            monthly,  we will  determine  the  monthly  equivalent  and use that
            amount to reduce your LTD Benefit.

            If you receive any Income From Other  Sources in a lump sum, we will
            prorate  the lump sum over the period of time for which the lump sum
            was paid and use that  amount  to  reduce  your LTD  Benefit.  If no
            period of time is stated,  we will  determine the maximum  period of
            time to which the lump sum is fairly  attributable  and  prorate the
            lump sum over that period of time.

            Each month we will  determine  the amount of your LTD Benefit  using
            the Income From Other Sources for the same monthly  period,  even if
            you actually receive the Income From Other Sources in another month.

         2. Your Duty To Pursue Income From Other Sources

            You must  pursue  Income  From  Other  Sources  for which you may be
            eligible.  We may ask for written  documentation  of your pursuit of
            Income From Other Sources.  You must provide it within 60 days after
            we mail you our request.  Otherwise, we may reduce your LTD Benefits
            by the amount we  estimate  you would be  eligible  to receive  upon
            proper pursuit of the Income From Other Sources.

         3. Income From Other Sources Which Is Pending

            If you are actively  pursuing a claim for Income From Other Sources,
            we will not deduct that Income From Other  Sources  until it becomes
            payable.  You must  notify us of the amount of the Income From Other
            Sources  when it is  received.  You must repay us for any  resulting
            overpayment of your claim.

         4. Overpayment Of Claim

            We will  notify you of the amount of any  overpayment  of your claim
            under any group  disability  insurance policy issued by us. You must
            immediately  repay us the  amount of the  overpayment.  You will not
            receive any LTD Benefits  until we have been repaid in full.  In the
            meantime,  any LTD Benefits becoming payable,  including the Minimum
            LTD   Benefit,   will  be  applied  to  reduce  the  amount  of  the
            overpayment.  We may charge you  interest  at the legal rate for any
            overpayment  which is not repaid  within 30 days after we first mail
            you notice of the amount of the overpayment.


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<PAGE>


                      Part 8 OTHER BENEFITS AND PROVISIONS

A.       RETURN TO WORK PROVISION

         This  provision  is  designed to give you an  incentive  to work to the
         extent of your ability while you are Disabled.

         If you work while you are Disabled, the amount of your LTD Benefit will
         only be reduced as follows:

         1. Income Protection Plus:

         During  the  first 12  months  of LTD  Benefit  payments  while you are
         working,  the Income  From Other  Sources  used to reduce the amount of
         your LTD Benefit will  include the amount,  if any, by which the sum of
         your Maximum LTD Benefit plus your earnings from work you perform while
         you are Disabled exceeds 100% of your Indexed Predisability Earnings.

         2. 50% Return To Work Benefit:

         After  the  first 12  months  of LTD  Benefit  payments  while  you are
         working,  the Income  From Other  Sources  used to reduce the amount of
         your LTD Benefit will include one-half the amount of your earnings from
         work you perform while you are Disabled, but only if your work earnings
         exceed 20% of your Indexed Predisability Earnings.

B.       SURVIVORS BENEFIT

         If you die while LTD  Benefits  are  payable to you, we will pay a lump
         sum Survivors Benefit. The following rules will apply:

         1. The Survivors  Benefit will  equal  three  times  the amount of your
            Maximum LTD Benefit.

         2. Any Survivors Benefit payable will  first  be  applied to reduce the
            amount  of  any  outstanding  overpayment  of  your  claim  for  LTD
            Benefits.

         3. The Survivors  Benefit will be paid to your surviving spouse. If you
            are not survived by a  spouse, the Survivors Benefit will be paid in
            equal shares to your  surviving children. If you are not survived by
            a spouse or any children, the Survivors Benefit will be paid to your
            estate.

C.       WAIVER OF PREMIUM

         Your Long Term Disability  Insurance in effect when you become Disabled
         will be continued  without  payment of premiums  while LTD Benefits are
         payable.

         If a period of  continuous  Disability is extended by a new cause while
         LTD Benefits are payable,  LTD Benefits will continue  while you remain
         Disabled (subject to the terms of the Group Policy), but not beyond the
         end of the original Maximum Benefit Period.

D.       BENEFITS AFTER INSURANCE ENDS OR IS CHANGED

         Your  right  to  receive  LTD  Benefits  for  a  period  of  continuous
         Disability  which begins  while you are insured  under the Group Policy
         will not be affected by:

         1. The  termination  of  the  Group  Policy  alter  the date you become
            Disabled.

         2. The termination of your Insurance while the Group Policy remains  in
            force.


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<PAGE>


         3. The  termination  of  this Insurance  for   your  classification  of
            employees of the Employer.

         4. Any amendment to the Group Policy approved after the date you become
            Disabled.


                           Part 9. WHEN INSURANCE ENDS

Your Insurance  will end automatically on the earliest of the following dates:

1.       The date you cease to be a Member as defined in Part 1A.

2.       The  date  you  become  a full  time  member of the armed forces of any
         country.

3.       The  date  the  Group  Policy  terminates  or  is  amended to terminate
         coverage for your classification of employees.

4.       The date you cease to  be  Actively  At  Work for the  Employer on your
         regular  work days for any reason,  including  temporary  layoff or the
         elimination  of  your  job.  However,  your Insurance will be continued
         (unless it ends under  any  of  the above items)  during the  following
         periods while you are absent from Active Work:

         a. While you are receiving full salary (including sick pay and vacation
            pay) from  the  Employer,  but not beyond the date you are laid off,
            the date your  job  is eliminated, the effective date of a severance
            agreement, or  the  date  your  job  is  terminated  by  you  or the
            Employer.

         b. During the Elimination Period and while LTD Benefits are payable.

         c. During  the  first  30  days  of  a leave of absence approved by the
            Employer.

         d. For up  to 17 weeks  during a period  of  family  or  medical  leave
            approved by  the Employer in accordance with the Employer's  uniform
            family and medical leave policy patterned after  the  federal Family
            and Medical Leave Act of 1993 or applicable state law.


              Part 10. BECOMING INSURED AGAIN AFTER INSURANCE ENDS

You may become insured again under the Group Policy after your  Insurance  ends.
The general rule is that you may become insured again on the same basis as a new
Member,  as provided in Part 1. However,  the  following  special rules apply to
becoming insured again under the Group Policy after your Insurance ends:

1.       If your  Insurance ends because you cease to be a Member or because you
         cease to be Actively At  Work  for  the  Employer on your  regular work
         days, you will  not be  required  to satisfy  the  eligibility  waiting
         period shown in Part 1B again if you  qualify as a Member and return to
         Active  Work for the Employer within 90 days after your Insurance ends.

2.       If your  Insurance ends  because  you  become a full time member of the
         armed forces of the United  States, you will not be required to satisfy
         the eligibility waiting period shown in Part 1B again if you qualify as
         a Member and  return to Active  Work for  the  Employer  within 90 days
         after you leave active military service.

3.       If you are immediately eligible for Insurance under rule 1 or 2 and you
         apply for Insurance within 31 days  after you become eligible, you will
         not be required to provide  satisfactory  Evidence  Of  Insurability to
         become insured  again for a Maximum  LTD  Benefit  up  to the amount in
         effect  when your Insurance ended.


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<PAGE>


Your Insurance will become  effective  again on the date determined from Part 1,
and will not be  retroactive to the date your  Insurance  ended.  Your Insurance
will be subject to the Preexisting  Condition exclusion or limitation in Part 4,
if any, as follows:

1.      If you  become  insured  again more than 90  days  after  your Insurance
        ends, the Preexisting  Condition provision  will  apply to any condition
        which is a Preexisting Condition on the date you become insured again.

2.      If you become insured again  within 90 days  after  your Insurance ends,
        the  Preexisting  Condition  provision will apply to any condition which
        was a  Preexisting  Condition  at the  start  of  the  prior  period  of
        Insurance.  For this purpose only,  the two periods of Insurance will be
        treated as one period of  continuous  Insurance  and the period when you
        were not insured  will be ignored.  (The same  principles  will apply if
        your  Insurance  ends two or more times and each time you become insured
        again within 90 days.  The three or more  periods of  Insurance  will be
        added together for purposes of the  Preexisting  Condition  exclusion or
        limitation).

Note:  After LTD Benefits for a period of Disability  end, your  Insurance  will
continue without any interruption if you are a Member and immediately  return to
Active Work for the Employer.  This Part 10 will not apply since your  Insurance
continues while you are receiving LTD Benefits.


           Part 11. CLAIMS PROVISIONS AND PROCEDURES FOR LTD BENEFITS

A.       PAYMENT OF BENEFITS; TIME OF PAYMENT

         LTD Benefits will be paid to you. Any LTD Benefit  remaining  unpaid at
         your  death  will  be paid  to the  person  or  persons  receiving  the
         Survivors Benefit or to your estate.

         All benefits payable under the Group Policy will be paid within 60 days
         after we receive  satisfactory written proof of loss in connection with
         the claim for  benefits.  All accrued LTD  Benefits  payable  under the
         Group Policy will be paid not less  frequently  than monthly during the
         continuance of the period for which benefits are payable.  Any benefits
         remaining  unpaid  at the  end of that  period  will be paid as soon as
         possible  after the receipt of  satisfactory  written  proof of loss in
         connection with the claim for benefits.

B.       TIME LIMITS FOR FILING A CLAIM

         You must  claim  LTD  Benefits  within  120 days  after  the end of the
         Elimination Period or as soon thereafter as reasonably possible and, in
         any case, within one year after the end of that 120 day period.  Claims
         not filed  within  these time  limits will be denied and no LTD Benefit
         will be paid.  These  limits will not apply  during any period when you
         lacked the legal capacity to file a claim.

C.       FILING A CLAIM

         All claims  for LTD  Benefits  should be  submitted  on our forms.  You
         should   obtain  claim  forms  from  the   Policyholder   or  the  Plan
         Administrator.

         You may also  request  claim  forms from us. If we fail to provide  you
         with claim forms  within 15 days of your  request,  you may submit your
         claim in a letter stating the occurrence,  character, and extent of the
         event for which the claim is made.


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<PAGE>


D.       PROOF OF LOSS

         No LTD  Benefits  will be paid unless you provide us with  satisfactory
         written  proof of loss at your expense.  If your claim is approved,  no
         LTD Benefits  will be continued  beyond the end of the period for which
         you have  provided us with  satisfactory  written proof of loss at your
         expense.

         You must submit the following documents at your expense:

         1.  A completed claim statement signed by you.

         2.  A completed claim statement signed by the Policyholder.

         3.  A completed claim statement signed by your treating Physician.

         4.  Your  written  authorization  for  us  to  obtain  the  records and
             information  (including  tax  returns)  needed  to  determine  your
             eligibility for LTD Benefits.

         5.  Such other documents as we may reasonably require, including copies
             of your tax returns.  

         We will require you to submit additional documentation of your claim at
         your  expense  at  reasonable  intervals  while you are  receiving  LTD
         Benefits.

E.       INVESTIGATION OF YOUR CLAIM

         We have the  right  at any time to  conduct  an  investigation  of your
         claim.

F.       INDEPENDENT EXAMINATION

         We have the right to have you  examined  at our  expense at  reasonable
         intervals  while you are claiming LTD Benefits.  Any such  examinations
         will be conducted by one or more  Physicians or vocational  specialists
         of our choice.

         We have the right to defer or suspend  payment of LTD  Benefits  if you
         fail to attend an  examination  or fail to  cooperate  with the  person
         conducting the examination. In such a case LTD Benefits may be resumed,
         provided that the required  examination occurs within a reasonable time
         and LTD Benefits are otherwise payable.

G.       NOTICE OF DECISION ON CLAIM

         You will  receive a written  decision on your claim within a reasonable
         period of time after we receive your claim.

         If we deny all or any part of your  claim,  you will  receive a written
         notice of denial containing:

         1.  The reasons for the denial.

         2.  Reference to the provisions of the Group Policy on which the denial
             is based.

         3.  A description of any additional information  or  documentation  you
             must  submit  to  obtain  benefits  and  an explanation of why such
             information or documentation is required.

         4.  Notice of your right to a review of the denial.

         5.  A description of the review procedure.


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         If you do not receive a written  decision on your claim  within 60 days
         after  your  claim is  received,  you will have an  immediate  right to
         request a review under the review procedure,  as if your claim had been
         denied.

H.       REVIEW PROCEDURE

         You have a right to a review of any  denial by us of all or any part of
         your claim.  To obtain a review,  you should send a written request for
         review to us within 60 days alter you receive notice of the denial.  No
         special form is required.

         As a part  of your  request  for  review,  you may  submit  issues  and
         comments in writing and provide additional  documentation in support of
         your claim. You may review pertinent  documents related to your request
         for review.

         We will review your claim  promptly  after  receiving  your request for
         review.  You will receive written notice of our decision within 60 days
         alter  your  request  for  review is  received,  or within  120 days if
         special  circumstances  require an extension.  The written decision you
         receive will include the reasons for the decision and  reference to the
         provisions of the Group Policy on which the decision is based.

         You may  authorize  another  person  to act for you under  this  review
         procedure.


                      Part 12. TIME LIMITS ON LEGAL ACTIONS

No action at law or in equity may be brought to recover  under the Group  Policy
until 60 days after written proof of loss has been provided to us.


                         Part 13. INCONTESTABLE CLAUSES

A.       INCONTESTABLE CLAUSE FOR YOUR INSURANCE

         Any statement you make to obtain Insurance is a representation  and not
         a warranty.  No misrepresentation by you will be used to reduce or deny
         your claim or to deny the validity of your Insurance  unless all of the
         following are true:

         1.  Your Insurance would not have been  approved  if  we  had known the
             truth.

         2.  Your misrepresentation is contained in a written  instrument signed
             by you.

         3.  You  have  been  given  a copy of the written instrument containing
             your misrepresentation.

         After your Insurance has been in effect for two years,  we will not use
         a misrepresentation  by you to reduce or deny your claim or to deny the
         validity   of   your   Insurance,    unless   it   was   a   fraudulent
         misrepresentation made with actual intent to deceive.

B.       INCONTESTABLE CLAUSE FOR GROUP POLICY

         Any statement made by the  Policyholder to obtain the Group Policy is a
         representation  and  not  a  warranty.   No  misrepresentation  by  the
         Policyholder  will be used to deny a claim or to deny the  validity  of
         the Group Policy unless all of the following are true:

         1.  The  Group  Policy would not have been issued by us if we had known
             the truth.

         2.  The  misrepresentation  is contained in a written instrument signed
             by the Policyholder.

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         3.  A  copy   of   the   written  instrument  has  been  given  to  the
             Policyholder.

         The  validity of the Group  Policy will not be  contested  after it has
         been in effect for two years,  except for  non-payment of premiums or a
         fraudulent misrepresentation made with actual intent to deceive.

                        Part 14. ALLOCATION OF AUTHORITY

Except for those functions which the Group Policy  specifically  reserves to the
Employer,  we have the full and exclusive  authority to administer claims and to
interpret   the  Group  Policy  and  resolve  all   questions   arising  in  the
administration, interpretation, and application of the Group Policy.

Our authority includes, but is not limited to, the following:

1.       The right to resolve all matters when a review has been requested.

2.       The  right  to  establish  and  enforce  rules  and  procedures for the
         administration of the Group Policy and any claim under it.

3.       The  right  to  determine  (a) your eligibility for Insurance, (b) your
         entitlement to benefits, and (c) the amount of the benefits payable  to
         you.


                        Part 15. ASSIGNMENT NOT PERMITTED

Your Certificate is not assignable. The Insurance provided and benefits  payable
are not assignable.

                          Part 16. GENERAL DEFINITIONS

EMPLOYER  means  Pacific  Capital  Bancorp  and  First  National Bank of Central
California.

GROUP POLICY means our group policy number 908496-A issued to the Policyholder.

PRIOR PLAN means the Employer's group long term disability  insurance program in
effect  on  December  31, 1994  under  Standard  Insurance Company policy number
484382.

LONG TERM DISABILITY  INSURANCE means your disability  insurance under the Group
Policy.

INSURANCE means your Long Term Disability Insurance under the Group Policy.

LTD BENEFIT means the monthly Long Term Disability  Insurance benefit payable to
you according to the terms of the Group Policy.

Providing  EVIDENCE OF INSURABILITY,  if required,  means you must do all of the
following:

1.       Complete and sign our health and medical history form.

2.       Sign  our  form  authorizing us to obtain information about your health
         and other insurance coverage

3.       Provide any  additional  information about your insurability reasonably
         required  by  us  and  undergo  a physical  examination and testing, if
         required by us.


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All required information must be provided to us at your expense.

CONTRIBUTORY  Insurance  means  you  pay  all or a  part  of the  cost  of  your
Insurance. If your Insurance is Contributory, the Employer determines the amount
of your contribution toward the cost of your Insurance.

NONCONTRIBUTORY  Insurance  means  the  Employer  pays the  entire  cost of your
Insurance.

















































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<PAGE>


SECTION TWO - POLICYHOLDER PROVISIONS


                                Part 1. PREMIUMS

A.       PREMIUM CHARGES

         The premium charge on each premium due date will be an aggregate amount
         based on the sum of the premiums due for all Members then insured under
         the Group Policy.  The premium due with respect to each insured  Member
         is  determined by  multiplying  the Member's  applicable  Predisability
         Earnings  by the  premium  rate then in effect,  as noted on the Policy
         Data page.

B.       CONTRIBUTIONS FROM MEMBERS

         Insurance is Noncontributory;  the Policyholder pays the entire cost of
         Insurance.

C.       CHANGES IN PREMIUM RATES

         1.  Premium  rates  may  be  changed  at any time upon mutual agreement
             between the Policyholder and us.

         2.  If the number of insured  Members  changes  by 25% or more,  we may
             change any one  or more of the premium  rates on  any  Premium  Due
             Date,  but not more than once in any twelve month period.

         3.  We may change any one or more of the premium rates at any time when
             a change in any law or governmental  regulation  affects the amount
             payable by us under this Group Policy.  Any such change in  premium
             rates  will  reflect  only  the change in our obligations under the
             Group Policy.

         4.  Except as provided  in 1, 2,  and 3, above,  we will not change the
             premium  rates during the Initial  Policy Term or more than once in
             any  Contract  Year thereafter. The Initial Policy Term is shown on
             the  cover  of  this  Group  Policy.  Contract Years are successive
             twelve   month  periods computed from the end of the Initial Policy
             Term.

         We will give the Policyholder prior written notice of any change in the
         premium rates at least 31 days before the Premium Due Date on which the
         change will be effective.

D.       PAYMENT OF PREMIUMS

         All premiums are due on the Premium Due Dates shown on the cover of the
         Group Policy.

         Each  premium is payable by the  Policyholder  on or before the Premium
         Due Date direct to us at our Home  Office.  The payment of each premium
         as it becomes due will  maintain this Group Policy in force through the
         date immediately preceding the next Premium Due Date.

E.       TERMINATION OF GROUP POLICY BY THE POLICYHOLDER

         The  Policyholder  may terminate the Group Policy at any time by giving
         prior written notice to us. The effective date of the termination  will
         be the later of (1) the date specified in the notice,  and (2) the date
         we receive the notice. No coverage under the Group Policy will continue
         and no premium  charges  will accrue  after the  effective  date of the
         termination of the Group Policy.


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F.       TERMINATION OF GROUP POLICY BY US

         We may terminate the Group Policy as follows:

         1. On any  Premium  Due Date if the number of  persons  insured is less
            than  the  Minimum  Participation  Number or  less than the  Minimum
            Participation Percentage.

         2. On any Premium Due Date if we, in our sole judgement, determine that
            the Policyholder has:

            a.    Failed to promptly furnish any necessary information requested
                  by us; or

            b.    Failed to perform any other obligations relating to this Group
                  Policy.

         We will give the  Policyholder at least 31 days prior written notice of
         any such termination of the Group Policy.

G.       GRACE PERIOD

         The Group  Policy has a 31 day Grace  Period for each premium due after
         the first  premium.  If a premium is not paid on or before the  Premium
         Due Date,  the premium may be paid  during the  following  31 day Grace
         Period.  The Group Policy will remain in force during the Grace Period,
         and the Policyholder is liable to us for the payment of the premium for
         that period.

H.       TERMINATION OF GROUP POLICY FOR NONPAYMENT OF PREMIUMS

         If the required premium is not paid during the Grace Period,  the Group
         Policy will terminate  automatically at 12:01 AM. on the date following
         the end of the Grace Period. 

         The  Policyholder  is liable for the  payment of the  premiums  for the
         coverage continued during the Grace Period.

I.       PREMIUM ADJUSTMENTS

         Premium  adjustments  involving  a return of  unearned  premiums to the
         Policyholder  will be limited to the twelve  month  period  immediately
         preceding  the date we receive a request  for  premium  adjustment  and
         evidence that an adjustment should be made.

                              Part 2. CERTIFICATES

We will issue  Certificates  to the  Policyholder  showing the insured  Member's
coverage under this Group Policy. The Policyholder will distribute a Certificate
to each insured Member.

                           Part 3. RECORDS AND REPORTS

The Policyholder must furnish on our forms all information  reasonably necessary
to the administration of the Group Policy when required by us. We have the right
at all  reasonable  times to  inspect  the  payrolls  and other  records  of the
Policyholder which relate to Insurance under this Group Policy.

Clerical error by the Policyholder will not:

1.       Cause a Member to become insured.

2.       Invalidate Insurance otherwise validly in force.


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3.       Continue Insurance otherwise validly terminated.


                           Part 4. MISSTATEMENT OF AGE

If the age of a Member has been misstated,  we will make an equitable adjustment
of the premiums or benefits,  or both. The adjustment will be based on either or
both of the following factors:

1.       The amount of the Member's Insurance based on the Member's correct age.

2.       The  difference  between the premiums paid and the premiums which would
         have been paid if the Member's age had been correctly stated.


                        Part 5. ENTIRE CONTRACT; CHANGES

The Group Policy and the application of the Policyholder, if any, constitute the
entire contract between the parties.

This Group  Policy  may be changed in whole or in part.  No change in this Group
Policy will be valid  unless it is  approved in writing by one of our  executive
officers and delivered to the  Policyholder  for attachment to the Group Policy.
No agent  has  authority  to  change  this  Group  Policy or to waive any of its
provisions.


                     Part 6. EFFECT ON WORKER'S COMPENSATION

The coverage  provided  under the Group Policy is not a substitute  for worker's
compensation  insurance  and does not relieve the Employer of any  obligation to
provide worker's compensation insurance.


















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