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                              TERMINATION AGREEMENT

         TERMINATION AGREEMENT dated as of March 1, 2000, by and between
SELECTIVE INSURANCE COMPANY OF AMERICA (the "Company"), a New Jersey
corporation, having an office at 40 Wantage Avenue, Branchville, New Jersey
07826, and EDUARD PULKSTENIS, (the "Executive"), having an address at 9 DeJager
Dr., Augusta, New Jersey 07822.

                              W I T N E S S E T H:

         WHEREAS, the Company recognizes the Executive to be a valuable
management employee of the Company; and

         WHEREAS, the Company recognizes that a change in control of Selective
Insurance Group, Inc., the Company's parent corporation ("Selective"), could
occur in the future, and that it is of importance to the Company and to
Selective and its stockholders to provide for the continuity of management and
its uninterrupted attention and dedication to the business affairs of the
Company; and

         WHEREAS, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to encourage the continued
attention and dedication of principal members of the Company's management to
their assigned duties in circumstances arising from the possibility of a change
in control of Selective; and

         WHEREAS, the Company has determined that an arrangement of the type set
forth herein will serve the purpose of attracting desirable persons for
executive positions with the Company, will induce the Executive to remain with
the Company, and will enhance the Executive's ability to assess and advise the
Board as to whether any proposal involving a change in the control would be in
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the best interests of the Company, Selective and its shareholders and to take
such other action regarding such proposal without being influenced by the
prospects of his own future employment with the Company; and

         WHEREAS, the Company and the Executive wish to set forth their
agreements as to the subject and procedures contemplated hereunder
acknowledging, however, that this Agreement supplements any employment agreement
that may be in effect from time to time between the Executive and the Company
and sets forth the severance benefits which the Company agrees will be provided
to the Executive in the event the Executive's employment with the Company is
terminated subsequent to a change of control of Selective under the
circumstances hereinbelow described.

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and the Executive hereby agree as follows:

         1.       TERM OF AGREEMENT.

         The term of this Agreement (the "Term") shall commence on the date
hereof and shall continue in effect until March 1,2001, provided, however, that
commencing on March 1, 2001, and each March 1 thereafter (each such March 1
being hereinafter referred to as an "Extension Date"), the Term shall
automatically be extended for one (1) additional year, unless at least twelve
(12) months prior to an Extension Date, the Company or the Executive shall have
given written notice in the manner hereinafter prescribed that the Term shall
not be extended as of the next Extension Date; and, provided further, that if a
"Change in Control" of Selective, as defined in Section 2 hereof, shall have
occurred during the term, as the same may be extended, this Agreement shall
terminate on the last day of the twelve (12) month period commencing on the date
that such Change in Control shall have occurred. Notwithstanding anything in
this Section 1 to the contrary, this Agreement shall terminate if the Executive
or the Company terminates the Executive's employment prior to the date on which
a Change in Control shall occur.



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         2.       CHANGE IN CONTROL.

         (a)      For the purposes of this Agreement, a "change in control of
Selective" (a "Change in Control") shall mean the occurrence of an event of a
nature that would be required to be reported in response to Item 1(a) of a
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") provided, however, that a Change in Control shall, in any event,
conclusively be deemed to have occurred upon the first to occur of any one of
the following events:

                           (i) The acquisition by any person or group,
                  including, without limitation, any current shareholder or
                  shareholders of Selective, of securities of Selective
                  resulting in such person's or group's owning of record or
                  beneficially twenty-five percent (25%) or more, of any class
                  of voting securities of Selective;

                           (ii) The acquisition by any person or group,
                  including, without limitation, any current shareholder or
                  shareholders of Selective, of securities of Selective
                  resulting in such person's or group's owning of record or
                  beneficially twenty percent (20%) or more, but less than
                  twenty-five percent (25%), of any class of voting securities
                  of Selective, if the Board adopts a resolution that such
                  acquisition constitutes a Change in Control;

                           (iii) The sale or disposition of all or substantially
                  all of the assets of Selective;

                           (iv) The reorganization, recapitalization, merger,
                  consolidation or other business combination involving
                  Selective the result of which is the


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                  ownership by the shareholders of Selective of less than eighty
                  percent (80%) of those voting securities of the resulting or
                  acquiring entity having the power to elect a majority of the
                  board of directors of such entity; or

                           (v) A change in the membership in the Board of
                  Directors of Selective (the "Selective Board") which, taken in
                  conjunction with any other prior or concurrent changes,
                  results in twenty percent (20%) or more of the Selective
                  Board's membership being persons not nominated by Selective's
                  management or Selective's Board as set forth in Selective's
                  then most recent proxy statement, excluding changes resulting
                  from substitutions by Selective's Board because of retirement
                  or death of a director or directors, removal of a director or
                  directors by Selective's Board or resignation of a director or
                  directors due to demonstrated disability or incapacity.

         (b)      Notwithstanding anything in the foregoing Section 2(a) to the
contrary, no Change in Control shall be deemed to have occurred for the purposes
of this Agreement by virtue of any transaction which results in the Executive,
or a group of persons which includes the Executive, acquiring, directly or
indirectly, voting securities of Selective.

         (c)      For the purpose of Section 2(a) the following definitions
shall apply:

                           (i) the terms "person" and "beneficial owner" shall
                  have the meanings set forth in Regulation 13D under the
                  Exchange Act, as such Regulation exists on the date hereof;



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                           (ii) the term "voting security" shall include any
                  security that has, or may have upon an event of default or in
                  respect to any transaction, a right to vote on any matter upon
                  which the holder of any class of common stock of Selective
                  would have a right to vote;

                           (iii) the term "group" shall have the meaning set
                  forth in Section 13(d)(3) of the Exchange Act; and

                           (iv) the term "substantially all of the assets of
                  Selective" shall mean more than fifty percent (50%) of
                  Selective's assets on a consolidated basis, as shown in
                  Selective's most recent audited balance sheet.

         3.       CONTINUATION OF EMPLOYMENT.

         Notwithstanding any termination date as may be specified in any
employment agreement in effect from time to time between the Company and the
Executive, in the event of a Change in Control, the Company agrees to continue
to employ the Executive, and, subject to the provisions of Section 4 hereof, the
Executive agrees to continue in the employ of the Company, in the capacity in
which the Executive was serving, and with the duties, responsibilities and
status of the Executive immediately prior to such Change in Control or in such
other capacity as shall be agreeable to the Executive, for a term commencing on
the date on which the Change in Control shall have occurred and ending three (3)
years after the date on which the Change in Control shall have occurred.
Commencing on the date three (3) years after the date on which the Change in
Control shall have occurred and each anniversary date of the Change in Control
thereafter (each such date being hereinafter referred to as a "Renewal Date"),
the term of the Executive's employment shall automatically be renewed for one
(1) additional year unless at least twelve (12) months prior to a Renewal Date
the Company or the Executive shall have given


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written notice in the manner hereinafter prescribed that such employment shall
not be renewed as of such Renewal Date. The provisions of this Section 3 shall
survive any termination of this Agreement pursuant to Section 1 hereof after a
Change in Control and shall continue in full force and effect.

         4.       TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL.

                  The Executive shall be entitled to the benefits provided in
Section 5 hereof upon the termination of his employment during the term of this
Agreement, as the same may be extended, after a Change in Control has occurred,
unless such termination is: (a) due to the Executive's death or Retirement, (b)
by the Company for Cause or Disability, or (c) by the Executive other than for
Good Reason (as such foregoing capitalized terms are hereinafter defined).

                           (i) Termination by the Executive or by the Company of
                  the Executive's employment based on "Retirement" shall mean
                  termination: (A) at such age as shall be established by the
                  Board prior to a Change in Control for mandatory or normal
                  retirement of Company executives in general, which shall not
                  be less than age 65, or (B) at any other retirement age set by
                  mutual agreement of the Company and the Executive and approved
                  by the Board.

                           (ii) Termination by the Company of the Executive's
                  employment based on "Disability" shall mean termination
                  because of the Executive's physical injury or physical or
                  mental illness which causes him to be absent from his duties
                  with the Company on a full-time basis for a continuous period
                  in excess of the greater of: (A) the period of disability
                  constituting permanent disability as specified under the
                  Company's long-term


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                  disability insurance coverage applicable to the Executive
                  prior to a Change in Control or (B) six (6) calendar months,
                  unless within thirty (30) days after Notice of Termination (as
                  hereinafter defined) is thereafter given the Executive shall
                  have returned to the full-time performance of his duties.

                           (iii) Termination by the Company of the Executive's
                  employment based on "Cause" shall mean termination upon: (A)
                  the Executive's conviction of a felony (as evidenced by a
                  binding and final judgment, order or decree of a court of
                  competent jurisdiction, in effect after exhaustion or lapse of
                  all rights of appeal), (B) the continued willful failure by
                  the Executive to perform substantially his duties with the
                  Company (other than any such failure resulting from his
                  incapacity due to physical injury or physical or mental
                  illness) for a period of thirty (30) days after a demand for
                  substantial performance is delivered to the Executive by the
                  Board of Directors of the Company which specifically
                  identifies the manner in which the Board of Directors believes
                  that the Executive has not substantially performed his duties,
                  or (C) willful misconduct in the performance of the
                  Executive's duties and obligations to the Company which
                  constitute common law fraud or other gross malfeasance of
                  duty; provided, however, that no termination for Cause
                  pursuant to clauses (B) or (C) shall occur unless and until
                  there shall have been delivered to the Executive a copy of a


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                  resolution duly adopted by the affirmative vote of not less
                  than sixty-six and two thirds percent (66 2/3%) of the entire
                  membership of the Board, excluding the Executive, at a meeting
                  of the Board called and held for the purpose (after reasonable
                  notice to the Executive and an opportunity for the Executive,
                  together with his counsel, to be heard before the Board),
                  finding that in good faith opinion of the Board the Executive
                  was guilty of the conduct set forth in such clause (B) or (C)
                  and specifying the particulars thereof in reasonable detail.
                  For purposes of this clause (iii), no act, or failure to act,
                  on the part of the Executive shall be considered "willful"
                  unless done or omitted to be done by the Executive in bad
                  faith and without reasonable belief that his action or
                  omission was in, or not opposed to, the best interests of the
                  Company. Any act, or failure to act, based upon authority
                  given pursuant to a resolution duly adopted by the Board or
                  based upon the advice of counsel for the Company shall be
                  conclusively presumed to have been done or omitted to have
                  been done by the Executive in good faith and in the best
                  interests of the Company.

                           (iv) Termination by the Executive of his employment
                  for "Good Reason" shall mean (A) termination by the Executive
                  based on: (1) any reduction in his base salary below the
                  annualized rate in effect on the date preceding the date on
                  which a Change in Control shall have occurred or the Company's
                  failure to increase (within 12 months of the


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                  Executive's last increase in base salary) the Executive's base
                  salary after a Change in Control in an amount which at least
                  equals, on a percentage basis, changes in the Consumer Price
                  Index, all items, for New Jersey in the preceding twelve (12)
                  months; or (2) a failure by the Company to continue in effect,
                  or the material reduction of any of Executive's benefits
                  under, any Plan (as hereinafter defined) in which the
                  Executive was participating on the date preceding the date on
                  which a Change in Control shall have occurred (or Plans
                  providing the Executive with at least substantially similar
                  benefits) other than as a result of the normal expiration of
                  any such Plan in accordance with its terms as in effect on the
                  date preceding the date on which a Change in Control shall
                  have occurred, or the taking of any action, or the failure to
                  act, by the Company which would adversely affect the
                  Executive's continued participation in any of such Plans on at
                  least as favorable a basis to him as was the case on the date
                  preceding the date on which a Change in Control shall have
                  occurred or which would materially reduce the Executive's
                  benefits in the future under any such Plans or deprive the
                  Executive of any material benefit enjoyed by him at the time
                  of the Change in Control; or (3) without the Executive's
                  express prior written consent, the assignment to the Executive
                  of any duties inconsistent with his positions, duties,
                  responsibilities and status with the Company immediately prior
                  to a Change in


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                  Control, or any diminution in the Executive's responsibilities
                  as an executive of the Company as compared with those he had
                  as an executive of the Company immediately prior to a Change
                  in Control, or any change in the Executive's titles or office
                  as in effect immediately prior to a Change in Control, or any
                  removal of the Executive from, or failure to re-elect him to,
                  any of such positions, except in connection with the
                  termination of the Executive's employment for Cause,
                  Disability or Retirement or as a result of the Executive's
                  death or by his termination of his employment other than for
                  Good Reason; or (4) without the Executive's express prior
                  written consent, the imposition of a requirement by the
                  Company that the Executive be based anywhere other than where
                  the Executive's office is located on the date preceding the
                  date on which a Change in Control shall have occurred; or (5)
                  without the Executive's express prior written consent, any
                  reduction in the number of paid vacation days to which the
                  Executive was entitled as of the date preceding the date on
                  which a Change in Control shall have occurred; or (6) a
                  failure by the Company to provide the Executive with office,
                  secretarial, computer and other support services and
                  facilities consistent with his position in the Company and
                  substantially equivalent to those available to the Executive
                  on the date preceding the date on which a Change in Control
                  shall have occurred; or (7) the failure by the Company


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                  to obtain from any successor to the business of the Company,
                  as set forth in Section 13, the assent to this Agreement, as
                  described in such Section 13; or (8) subsequent to a Change in
                  Control, any purported termination of the Executive's
                  employment which is not effected pursuant to a Notice of
                  Termination (as hereinafter defined) satisfying the
                  requirements of Section 4(v) (and, if applicable, Section
                  4(iii)), and for purposes of this Agreement no such purported
                  termination shall be effective; or (9) any breach by the
                  Company of any of the terms and conditions of any employment
                  agreement between the Company and the Executive or any
                  agreement between the Company and the Executive providing for
                  incentive compensation, stock options, stock appreciation
                  rights, stock bonuses, pension benefits, group insurance or
                  any similar benefits; or (10) any requirement by the Company
                  that the Executive be absent from Executive's office on
                  business travel or otherwise more than forty-five (45) days in
                  any calendar year or for more than fourteen (14) consecutive
                  days at any time, or (B) a voluntary termination by the
                  Executive upon Notice of Termination given by the Executive to
                  the Company no later than six (6) months after the occurrence
                  of a Change in Control, provided that Executive shall not
                  thereafter violate the provisions of any agreement between the
                  Executive and the Company relating to nondisclosure of
                  confidential information or noncompetition with the


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                  Company. For purposes of this Agreement, a "Plan" shall mean
                  any plan, contract, authorization or arrangement, whether or
                  not set forth in any formal written documents, providing for
                  compensation, incentive compensation, non-qualified
                  supplemental retirement benefits, stock options (whether or
                  not in tandem with stock appreciation rights), stock
                  appreciation rights, long-term incentives, stock bonuses or
                  restricted stock grants or any employee benefit plan such as a
                  pension, retirement, profit sharing, medical, disability,
                  accident, life insurance plan or a relocation plan or policy
                  or any other plan, program, policy or arrangement of the
                  Company intended to benefit the Executive or employees of the
                  Company generally.

                           (v) Any termination of the Executive's employment by
                  the Company or by the Executive shall be communicated by a
                  Notice of Termination to the other party hereto. For purposes
                  of this Agreement, a "Notice of Termination" shall mean a
                  written notice given in the manner hereinafter prescribed
                  which shall indicate the specific termination provision in
                  this Agreement relied upon and shall set forth in reasonable
                  detail the facts and circumstances claimed to provide a basis
                  for termination of the Executive's employment under the
                  provision so indicated and shall specify the date of
                  termination in accordance with this Agreement.

                           (vi) "Date of Termination" following a Change in
                  Control shall mean: (A) if the employment is to be terminated
                  by the Company


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                  for Disability, thirty (30) days after Notice of Termination
                  is given (provided that the Executive shall not have returned
                  to the performance of the Executive's duties on a full-time
                  basis during such thirty (30) day period), or (B) if the
                  employment is to be terminated by either party for any other
                  reason, the date on which Notice of Termination is given.

                           (vii) In the event of dispute as to the Executive's
                  termination under Section 4(iv) the matter shall be forthwith
                  submitted to binding arbitration as hereinafter provided.

         5.       PAYMENT OF BENEFITS.

         (a)      If an event has occurred pursuant to Section 4 hereof which
entitles the Executive to the benefits and rights set forth in this Section 5,
the Executive shall receive from the Company, or from the Escrow Agent (as
hereinafter defined), as the case may be, within five (5) days following the
Date of Termination (except as otherwise provided) all of the following
benefits, other than those benefits which he specifically elects by written
notice to the Company or to the Escrow Agent, as the case may be, not to
receive:

                           (i) earned but unpaid base salary through the Date of
                  Termination at the rate in effect immediately prior to the
                  time a Notice of Termination is given plus any incentive
                  compensation, benefits or awards (including both the cash and
                  stock components) which pursuant to the terms of any Plans
                  have been accrued, earned or have become payable, but which
                  have not yet been paid to the Executive (including any amounts
                  which previously had been deferred at the Executive's
                  request); and



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                           (ii) as severance pay and in lieu of any further
                  salary for periods subsequent to the Date of Termination
                  (including any payments of salary provided for by any
                  employment agreement with the Company), an amount in cash
                  equal to the Executive's "annualized includible compensation
                  for the base period" (as defined in Section 280G(d)(1) of the
                  Internal Revenue Code of 1986, as amended (the "Code")),
                  multiplied by a factor of 2.99.

         (b)      If an event has occurred pursuant to Section 4 hereof which
entitles the Executive to the benefits and rights set forth in this Section 5,
the Executive shall be entitled to the benefits of any stock options, stock
appreciation rights, restricted stock grants, stock bonuses or other benefits
theretofore granted by the Company to the Executive under any Plan, whether or
not provided for in any agreement with the Company, provided, however, that,
except to the extent requiring approval of Selective's stockholders, (i) all
unvested stock options, stock appreciation rights, restricted stock grants,
stock bonuses, long-term incentives and similar benefits shall be deemed to be
vested in full on the Date of Termination, notwithstanding any provision to the
contrary or any provision requiring any act or acts by the Executive in any
agreement with the Company or Selective or any Plan, and (ii) to the extent that
any such stock options, stock appreciation rights, restricted stock grants,
stock bonuses, long-term incentives or similar benefits shall require by its
terms the exercise thereof by the Executive, the last date to exercise the same
shall, notwithstanding any provision to the contrary in any agreement or any
Plan, shall be the later to occur of (A) the last date provided for such
exercise in any agreement or Plan evidencing any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits or (B) the close of business on the date which
shall be one hundred twenty (120) days after the Date of


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Termination and (iii) if the vesting pursuant hereto of any such stock options,
stock appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits shall have the effect of subjecting the Executive
to liability under Section 16(b) of the Exchange Act or any similar provision of
law, the vesting date thereof shall be deemed to be the first day after the
Termination Date on which such vesting may occur without subjecting the
Executive to such liability.

         (c)      If an event has occurred pursuant to Section 4 hereof which
entitles the Executive to the benefits and rights set forth in this Section 5,
the Company shall maintain in full force and effect, for the continued benefit
of the Executive and his dependents for a period terminating on the earliest of:
(i) one (1) year after the Date of Termination or (ii) the commencement date of
equivalent benefits from a new employer, all insured and self-insured employee
welfare benefit Plans in which the Executive was entitled to participate
immediately prior to the Date of Termination, provided that the Executive's
continued participation is not barred under the general terms and provisions of
such Plans. In the event that the Executive's participation in any such Plan is
barred by its terms, the Company, at its sole cost and expense, shall arrange to
have issued for the benefit of the Executive and his dependents individual
policies of insurance providing benefits substantially similar (on an after-tax
basis) to those which the Executive otherwise would have been entitled to
receive under such Plans pursuant to this Section 5(c). If, at the end of one
(1) year after the Termination Date, the Executive has not previously received
or is not receiving equivalent benefits from a new employer, or is not otherwise
receiving such benefits, the Company shall arrange, at its sole cost and
expense, to enable him to convert his and his dependents' coverage under such
Plans to individual policies or programs upon the same terms as employees of the
Company may apply for such conversions upon termination of employment.



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         (d)      Except as specifically provided in Section 5(c) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by the Executive as the result of employment by another employer after
the Date of Termination, or otherwise. The Executive shall not be required to
mitigate any amounts payable or benefits provided under this Agreement by
seeking or accepting other employment.

         (e)      The rights and benefits provided herein shall be in addition
to, and not (except as provided in this Agreement) to the exclusion of, any
other rights and benefits that may be available to the Executive in regard to or
arising out of the termination of the Executive's employment, including claims
for breach of contract or for violation of relevant employment, worker's
compensation or employee benefits laws. The prosecution or enforcement of rights
granted by this Agreement or the election to take benefits under this Agreement
shall in no manner constitute an election of rights or remedies by the Executive
other than in respect of this Agreement.

         (f)      Notwithstanding anything in this Agreement to the contrary, if
any of the payments or benefits provided for in this Agreement, together with
any other payments or benefits which the Executive has the right to receive from
the Company (including, without limitation, any amounts payable under any
employment contract with the Company), would constitute a "parachute payment"
(as defined in Section 280G(b)(2) of the Code), the payments and benefits due to
the Executive shall be reduced, in such order of priority and amount as the
Executive shall elect, to the largest amount as will result in no portion of
such payments being subject to the excise tax imposed by Section 4999 of the
Code. Notwithstanding anything in the foregoing to the contrary, any dispute or
controversy regarding whether any payments under this Agreement must be reduced
pursuant to this Section 5(f) shall be conclusively settled by an independent
accounting firm acceptable to each of the parties hereto, or, if no firm is
acceptable to


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both parties hereto, each of the Executive and the Company shall select an
accounting firm acceptable to it, and such accounting firms shall together
designate an independent accounting firm to settle such dispute or controversy,
and such settlement shall be binding upon both parties, provided, however, that
any accounting firm designated to settle any dispute or controversy hereunder
shall not have been previously retained by either party for a period of a least
two (2) years subsequent to the date of this settlement of such dispute or
controversy. The Company or the Escrow Agent, as the case may be, may withhold
from any benefits payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental regulation or
ruling.

         (g)      In the event that a court of competent jurisdiction shall
determine that any portion of the payment and benefits paid to the Executive
pursuant to this Agreement shall have constituted a "parachute payment" (as
defined in Section 280G(b)(2) of the Code) and subject to an excise tax under
Section 4999(a) of the Code, the Company shall pay to the Executive in cash such
additional amount as is necessary so that the total amount received by the
Executive under this Agreement, after payment of any applicable taxes on such
total amount (including, without limitation, federal, state or local income
taxes, any taxes imposed by Section 4999(a) of the Code and any taxes in respect
of any amount payable to the Executive under this Section 5(g)) shall not be
less than the net after tax amount that the Executive would have been entitled
to receive under this Agreement had such excise tax under Section 4999(a) not
been imposed. The Company shall pay such additional amount to the Executive
within thirty (30) days after the Executive gives written notice to the Company
that such determination has been made by a court of competent jurisdiction.

         6.       ESCROW OF BENEFITS.

         (a)      At any time after the occurrence of a Change in Control, the
Company shall, upon the written request of the


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Executive, promptly deliver to a bank or other institution acceptable to the
Executive, as escrow agent (the "Escrow Agent"), an amount of cash or
certificates of deposit, treasury bills or irrevocable letters of credit
adequate to fully fund the obligations of the Company under this Agreement.

         (b)      The escrow agreement or arrangement between the Company and
the Escrow Agent shall provide that amounts payable to the Executive under this
Agreement shall be paid by the Escrow Agent to the Executive five (5) days after
written demand therefore by the Executive to the Escrow Agent, with a copy to
the Company, certifying that such amounts are due and payable under this
Agreement because of the occurrence of an event specified under Section 4
hereof. Such escrow agreement or arrangements shall also provide that if the
Company shall, prior to payment by the Escrow Agent, object in writing to the
Escrow Agent, with a copy to the Executive, as to the payment of any amounts
demanded by the Executive under this Agreement, certifying that such amounts are
not due and payable to the Executive because an event specified in Section 4
hereof has not occurred, such dispute shall be resolved by binding arbitration
as hereinafter set forth.

         (c)      Such escrow agreement or arrangements shall further provide
that any dispute described in Section 6(b) hereof shall be forthwith submitted
to binding arbitration as hereinafter provided.

         7.       ARBITRATION.

         Any disputes arising under Section 4(iv) or Section 6(b) hereof shall
be forthwith submitted to binding arbitration by three (3) arbitrators in
Newark, New Jersey, under the expedited rules of the American Arbitration
Association then obtaining. One such arbitrator shall be selected by each of the
Company and the Executive, and the two arbitrators so selected shall select the
third arbitrator. Selection of all three arbitrators shall be made within thirty
(30) days after the date the dispute arose. Such arbitration shall be limited
solely to a determination of whether or not an event has occurred pursuant to
Section 4 of this


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Agreement which entitles the Executive to the benefits and rights set forth in
Section 5 of this Agreement. The written decision of the arbitrators shall be
rendered within ninety (90) days after selection of the third arbitrator. The
decision of the arbitrators shall be final and binding on the Company and the
Executive and may be entered by either party in any court having jurisdiction.

         8.       ENFORCEMENT OF RIGHTS.

         The Company, and any survivor of any business combination with the
Company causing rights to accrue to the Executive under this Agreement, shall
pay all the Executive's legal, accounting and arbitration fees and expenses and
costs as they become due, which the Executive may become obligated to pay in
obtaining, enforcing, retaining or defending any right or benefit provided by
this Agreement, whether in respect of any enforcement undertaken or demand made
by the Executive that is successful or in respect of any enforcement undertaken
or demand made in good faith by the Executive that is not successful. If
judgment is rendered against any of such persons, it will pay the Executive,
unless expressly included in the judgment, prejudgment interest from the date of
the Notice of Termination at the prime rate being charged by Midlantic National
Bank on the date of the Notice of Termination.

         9.       EXECUTIVE'S COMMITMENT.

         The Executive agrees that subsequent to his period of employment with
the Company, he will not at any time communicate or disclose to any unauthorized
person, without the written consent of the Company, any proprietary or
confidential information concerning the business affairs, products or customers
of the Company which, if disclosed, would have a material adverse effect upon
the business or operations of the Company and its subsidiaries, taken as a
whole; it being understood, however, that the obligations of this Section 9
shall not apply to the extent that the aforesaid matters: (a) are disclosed in
circumstances where the Executive is legally required to do so or (b) become


                                      -19-
<PAGE>   20
generally known to and available for use by the public otherwise than by the
Executive's wrongful act or omission.

         10.      SEVERABILITY.

         If any one or more of the provisions (or any part thereof) of this
Agreement would be, invalid, illegal or unenforceable in any respect under
applicable law, then such provision (or any part thereof) shall be deemed
modified to the extent necessary to render it valid while most nearly preserving
its original intent; no provision (or any part thereof) of this Agreement shall
be affected by another provision (or any part thereof) of this Agreement being
held invalid.

         11.      NOTICE.

         For the purposes of this Agreement, notices, requests, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given: (i) when delivered personally, or (ii)
three (3) days after having been mailed by registered or certified mail, return
receipt requested, or (iii) one (1) day after having been sent by telegraph or
mailed by express mail or other overnight courier service, postage, telegraph,
courier and registry fees, as the case may be, prepaid and addressed to the
addresses set forth in the first paragraph of this Agreement or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt. All notices to the Company shall be directed to the attention of the
President of the Company.

         12.      MERGER; AMENDMENT; WAIVER.

         (a)      This Agreement supersedes all other agreements, arrangements
and understandings, and merges all negotiations and discussions, with respect to
the subject matter hereof; provided, however, that this Agreement shall not,
except to the extent specifically provided herein, supersede or limit the
rights, duties or obligations that the Executive may have under any written
employment agreement with the Company.



                                      -20-
<PAGE>   21
         (b)      This Agreement may be amended or modified only by a writing
signed by both parties. No further agreement between the parties shall be deemed
to supersede, amend or modify this Agreement unless a statement to that effect
is made in such future agreement or the enforcement of such agreement would give
rise to conflicting obligations between the Executive on the one hand and the
Company, its successor or other bound party on the other hand; in the latter
case, however, this Agreement shall be deemed to be superseded, amended or
modified only to the extent necessary to avoid such conflict.

         (c)      The waiver of the non-performance of any obligation under this
Agreement shall apply to that non-performance only and shall not constitute a
waiver, modification or amendment of this provision giving rise to such
obligation.

         13.      SUCCESSORS; BINDING AGREEMENT.

         (a)      The Company will require any successor (whether direct or
indirect, by merger, consolidation or other combination other than a sale of
assets) to the business of the Company, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall constitute Good Reason for termination by the Executive of his
employment, and, if a Change in Control shall have occurred, the Executive shall
be entitled to the benefits set forth in Section 5 of this Agreement, except
that for purposes of implementing the foregoing, the date. On which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, the "Company" shall mean the Company as hereinbefore defined,
and any successor and assign to its business as aforesaid which executes and
delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.



                                      -21-
<PAGE>   22
         (b)      This Agreement shall inure to the benefit of and be
enforceable by the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees of the Executive. If the
Executive should die while any amount would still be payable to him hereunder if
he had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee or other designee or, if there be no such designee, to his
estate.

         14.      GOVERNING LAW.

         This Agreement is being made in the State of New Jersey and shall be
governed by, and interpreted and construed with reference to, the laws of New
Jersey.

         15.      HEADINGS.

         Headings in this Agreement are for convenience of reference only and
shall not be used to construe or interpret this Agreement.

         16.      COUNTERPARTS.

         This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

         IN WITNESS WHEREOF, the parties hereunder have executed this Agreement
as of the date first above written.

                            SELECTIVE INSURANCE COMPANY OF AMERICA

                            BY:
                                 -------------------------
                                 GREGORY E. MURPHY,
                                 PRESIDENT AND
                                 CHIEF EXECUTIVE OFFICER



                                 -------------------------
                                   EDUARD PULKSTENIS


                                      -22-
<PAGE>   23
         In consideration of the covenants of the Executive hereinabove set
forth, Selective hereby guarantees to the Executive the full performance by the
Company of all of its obligations under the foregoing Termination Agreement.

                            SELECTIVE INSURANCE GROUP, INC.

                            BY:
                                 -------------------------
                                 GREGORY E. MURPHY,
                                 PRESIDENT AND
                                 CHIEF EXECUTIVE OFFICER



                                      -23-