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                                                                  EXHIBIT 10.13b

         SELECTIVE INSURANCE STOCK OPTION PLAN II

I.       PURPOSE

This Selective Insurance Stock Option Plan II (the "Plan") is intended to
encourage employees of Selective Insurance Group, Inc. (the "Company") and its
subsidiaries to own stock in the Company and to provide incentive to further the
success of the Company.

II.      SHARES SUBJECT TO THE PLAN

There will be reserved for issuance upon the exercise of Options granted under
the Plan 4,200,000 shares of the Company"s Common Stock which may be unissued or
reacquired shares. If any option granted expires or terminates for any reason
without having been exercised in full, the unpurchased shares shall again become
available for the purposes of the Plan.

III.     ADMINISTRATION

The Plan shall be administered by a Compensation Committee (the "Committee")
appointed by the Board of Directors of the Company. The Committee shall consist
of two (2) or more directors of the Company, all of whom shall be both
"Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and "Outside Directors"
as defined for the purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). Subject to the terms and conditions of the Plan,
the Committee shall have the exclusive authority to select the terms and
conditions of Option Agreements (as hereinafter defined) and whether an option
will be granted to an employee as a stock option which qualifies as an incentive
Stock Option under Section 422 of the Code (hereinafter referred to as a
"Qualified Option") or a Stock Option which does not qualify under the Code
(hereinafter referred to as a "Non-Qualified Option"). The Committee shall
determine the number of shares of Common Stock to be acquired by the exercise of
Qualified Options and Non-Qualified Options, the term during which the Qualified
Options and Non-Qualified Options may be exercised and the application or
withdrawal of any restrictions which may be deemed appropriate in its
discretion. (Qualified Options and Non-Qualified Options are sometimes
collectively hereinafter referred to as "Options" or "Stock Options.")

IV.      ELIGIBLE PARTICIPANTS

All employees of the Company and its subsidiaries shall be eligible to
participate in the Plan. No member of the Committee shall be eligible to
participate in this Plan. The Committee shall:

         (a) determine the employees of the Company and its subsidiaries to whom
Qualified Options and Non-Qualified Options may be granted; and

         (b) grant Options, from time to time, to such eligible participants as
it may select.

   V.    TERMS AND CONDITIONS OF OPTIONS

Qualified Options and Non-Qualified Options shall be in such form and on such
terms and conditions as the Committee shall, from time to time, approve subject
to the following terms and conditions:

         (a) The aggregate fair market value (determined at the time the option
is granted) of the shares with respect to which Qualified Options are
exercisable for the first time by a participant during any calendar year shall
not exceed $100,000. To the extent permitted by the Code, Qualified Options
granted in excess of such amount may be deemed or amended to be Non-Qualified
Options.

         (b) The option price per share shall not be less than its fair market
value on the date of such grant.

         (c) The term of the option shall not be more than ten (10) years from
the date such option is granted.

         (d) Qualified Options shall not be transferable, and Non-Qualified
Options shall not be transferable unless expressly authorized by the Committee
in accordance with the provisions of Section V(e) of the Plan, except by will or
by

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the laws of descent and distribution, and during the lifetime of the person to
whom an Option is granted he/she alone may exercise it.

         (e) Notwithstanding anything in the Plan to the contrary, the Committee
may, in its discretion, authorize all or any portion of Non-Qualified Options
granted or to be granted to any participant under the Plan to be on terms which
permit the transfer thereof by such participant to any (i) spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, or any other family member of such participant
to whom the Corporation may lawfully offer and sell Common Stock from time to
time pursuant to the exercise of Non-Qualified Options by the use of a
Registration Statement on Form S-3 or Form S-8 under the Securities Act of 1933,
as amended, (collectively, "Immediate Family Members"), (ii) any trust or trusts
for the exclusive benefit of any Immediate Family Members, and/or (iii) any
entity or entities owned solely by any Immediate Family Members, provided that
(x) there may be no consideration for any such transfer, (y) the stock option
agreement or amendment to the stock option agreement pursuant to which such
transferable options are granted or are otherwise made transferable must be
approved by the Committee and provide for such transferability only in a manner
consistent with the provisions of the Plan, and (z) subsequent transfers of
transferred Non-Qualified Options shall be prohibited except in accordance with
Section V(d) of the Plan. The Committee may in its discretion, impose as a
condition of transferability of any Non-Qualified Options such additional
restrictions and limitations on such Non-Qualified Options and shares of Common
Stock acquired pursuant to the exercise thereof, including, without limitation,
restrictions or limitations on the resale of such shares of Common Stock, as the
Committee shall deem appropriate. Following the transfer of any Non-Qualified
Options, the transferred Non-Qualified Options, shall continue to be subject to
the same terms and conditions as were applicable immediately prior to such
transfer together with any such additional restrictions and limitations as shall
be imposed by the Committee, and the provisions of the Plan shall continue to
apply to such transferred Non-Qualified Options.

         (f) No Qualified Option shall be granted to an employee who, at the
time the option is granted, owns stock representing more than 10 percent of the
total combined voting power of all classes of stock of the employer. This stock
ownership limitation will not apply if the option price is at least 110 percent
of the fair market value (at the time the option is granted) of the stock
subject to the option and the option by its terms is not exercisable more than
five (5) years from the date it is granted.

         (g) Options to purchase no more than 40,000 shares of Common Stock may
be granted (together with related Stock Appreciation Rights under Article XIII
hereof) to any eligible participant during any twelve-month period during the
term of the Plan.

VI.      GRANTS OF COMMON STOCK

The Committee may, in its discretion, at any time or from time to time, make
restricted or unrestricted grants of Common Stock, or grant rights to receive
Common Stock, to eligible participants in the Plan in addition to or in
substitution for Options and/or SARs granted hereunder. The right to receive no
more than 40,000 shares of Common Stock shall be granted to any participant in
the Plan during any twelve-month period during the term of the Plan. Each such
grant to an executive officer of the Company shall be expressly subject to the
attainment of one or more performance-related objectives based on return on
equity, per share earnings, reduction of costs, increase in premiums written or
earned, total return to stockholders, combined ratio or loss and loss expense
ratio of the Company, or a subsidiary or subsidiaries of the Company, as shall
be determined by the Committee at or prior to the date of grant and set forth in
an award agreement.

For purposes of this section, the executive officers of the Company shall
include each person who is an "executive officer" of the Company, as defined in
Rule 3b-7 under the Securities Exchange Act of 1934 and shall, in any event,
include each person who is a "Covered Employee" for the purposes of Section
162(m) under the Internal Revenue Code of 1986, as amended.

Each such grant also shall be subject to such vesting period or other terms,
conditions, restrictions and limitations as shall be determined by the Committee
in its discretion and set forth in an award agreement. The number of shares of
Common Stock available for such grants shall be included in the total number of
shares of Common Stock reserved for issuance under the Plan, and the number of
shares of Common Stock awarded pursuant to such grants shall reduce the number
of shares of Common Stock available for the purposes of the Plan as set forth in
Section II hereof, provided that any such shares of Common Stock that shall be
forfeited because of the failure of any condition or restriction of an award
shall again be available for the purposes of the Plan. Notwithstanding the terms
and conditions set forth in an award agreement, the Committee, in its
discretion, may accelerate the time at which any award may vest due to a change
in circumstances, including but not limited to death, disability, retirement,
financial hardship, or change in control of the Company. In case the number of
outstanding shares of Common Stock of the Company is changed as a result of a
stock dividend, stock split or other readjustments or if the outstanding shares
of Common Stock shall be exchanged for securities of the Company or another
Company by reason of any merger, consolidation or other similar corporate
change, the Committee shall make an appropriate adjustment in the number of
shares subject to each then outstanding grant of Common Stock. No award
agreement shall impose any obligation on the Company to continue to employ any
employee.

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VII.     TERMINATION OF EMPLOYMENT

If an employee shall cease to be employed by the Company for any reason other
than disability or death, then any outstanding Qualified Option granted to such
employee shall terminate three (3) months after the date of termination of
employment, and any outstanding Non-Qualified Option granted to such employee
shall terminate twelve (12) months after the date of termination.

VIII.    DISABILITY

If an employee shall cease to be employed by the Company as a result of
disability, then any Options that are exercisable by the employee at the time
employment ceases may be exercised within twelve (12) months after the date that
such employee's employment ceases.

IX.      DEATH

If an employee's death occurs while employed by the Company, his/her estate,
representative or beneficiary shall have the right to exercise those Options
granted to the employee which were exercisable by him/her at the time of his/her
death at any time within twelve (12) months after the date of his/her death.

X.       CHANGES IN CAPITAL STOCK

In case the number of outstanding shares of Common Stock of the Company is
changed as a result of a stock dividend, stock split or other readjustments or
if the outstanding shares of Common Stock of the Company shall be exchanged for
securities of the Company or another company by reason of any merger,
consolidation or other similar corporate change, the Committee shall make an
appropriate adjustment in the aggregate number of shares which may be subject to
Stock Options granted under the Plan and in the number of shares subject to and
the option price of each then outstanding option.

XI.      EXERCISE OF OPTIONS

An employee electing to exercise an option shall give written notice to the
Company of such election and the number of shares of Common Stock that he/she
has elected to acquire. An employee will have no rights of a stockholder with
respect to shares of Common Stock to be acquired upon the exercise of an option
until the issuance to him/her of said shares.

XII.     OPTION AGREEMENTS

Agreements granting Options under the Plan ("Option Agreements") shall be in
writing duly executed and delivered by or on behalf of the Company and the
optionee and shall contain such terms and conditions as the Committee deems
advisable. If there is any conflict between the terms and conditions of any
Option Agreements and of the Plan, the terms and conditions of the Plan shall
control. Option Agreements shall clearly specify whether Options granted
pursuant to the Plan are either Qualified Options or Non-Qualified Options.

XIII.    PAYMENT

The option price shall be payable upon the exercise of the option and shall be
paid in cash or in shares of Common Stock of the Company. If shares of Common
Stock are tendered as payment of the option price, the value of any such stock
shall be the fair market value per share of Common Stock as of the date of
exercise.

XIV.     STOCK APPRECIATION RIGHTS

A Stock Appreciation Right ("SAR") may be granted in conjunction with any
Qualified Option or any Non-Qualified Option under the Plan. If an SAR is
exercised, the employee shall surrender the related Qualified Option or
Non-Qualified Option or portion thereof.

The SAR shall be subject to the same terms and conditions as the Qualified
Option or Non-Qualified Option in connection with which the SAR was granted.
Upon exercise of the SAR, the employee will receive payment of the amount
determined by subtracting the option exercise price per share of Common Stock
from the fair market value per share of Common Stock on the exercise date and
multiplying this amount by the number of SARs being exercised. Payment of the
amount determined above shall be made in stock, cash or partly in stock and
partly in cash as the Committee shall determine in its absolute discretion at
the time of exercise. The number of SARs granted an employee will be determined
by the Committee in its sole discretion, subject to the limitations set forth in
Article V, Section (f) of the Plan.

XV.      TERM OF PLAN

The Plan shall terminate ten (10) years after the effective date of the Plan,
and no option shall be granted pursuant to the Plan after termination of the
Plan.

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XVI.     CONTINUANCE OF EMPLOYMENT

Neither the Plan nor any Option Agreements shall impose any obligation on the
Company to continue to employ any employee.

XVII.    EFFECTIVE DATE

The Plan shall become effective as of September 1, 1992, subject to the approval
no later than September 1, 1993, by the holders of a majority of the outstanding
shares of Common Stock represented at a duly held meeting of stockholders.

XVIII.   AMENDMENTS

This Plan may be amended by recommendation of the Committee and approval of the
Board of Directors to the extent permitted by law. In no event shall the
Committee amend the Plan to: (a) change the purchase price of the stock, (b)
extend any option date, or (c) extend the termination date of the Plan.

Plan as Amended January 31, 2000

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EXHIBIT 10.16z

                              TERMINATION AGREEMENT

         TERMINATION AGREEMENT dated as of September 27, 1999, 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 RONALD J. ZALESKI (the "Executive"), having an address at 1711
Mesquite Road, Southlake, Texas 76092.

                              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
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 September 27, 2002, provided, however,
that commencing on September 27, 2002 and each September 27 thereafter (each
such September 27 being hereinafter referred to as an "Extension Date"), the
Term shall automatically be extended for one (1) additional year, unless at
least twenty-four (24) 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 twenty-four (24) 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.

         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 ownership by the
                  shareholders of Selective of less than eighty percent (80%) of
                  those voting securities of

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                  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;

                           (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 twenty-four (24) months prior to a Renewal
Date the Company or the Executive shall have given 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 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

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                  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 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 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 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
                  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

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                  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 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 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

                  (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

                                       86
<PAGE>   5
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 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) three (3) years 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
three (3) years 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.

         (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 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 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.

                                       87
<PAGE>   6
         (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 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
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.

         (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.

                                       88
<PAGE>   7
         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.

         (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

                                  --------------------------------
                                      RONALD J. ZALESKI

     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

                                       89

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