Document:

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                                                                  EXHIBIT 10.16g

                              TERMINATION AGREEMENT

         TERMINATION AGREEMENT dated as of May 5, 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 DALE A.
THATCHER (the "Executive"), having an address at 3954 Brockton Drive,
Cincinnati, Ohio 45251.

                              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
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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 May 5, 2003, provided, however, that
commencing on May 5, 2003 and each May 5 thereafter (each such May 5 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

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                  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 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.

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                  (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

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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

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                  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
                  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

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                  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

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                  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

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                  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
                  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

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                  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.

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         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

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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 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

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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

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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.

         (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

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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

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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.

                                      -16-
<PAGE>   17
         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.

         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

                                      -17-
<PAGE>   18
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,
                                 CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

                              __________________________________________________
                              DALE A. THATCHER

                                      -18-
<PAGE>   19
     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,
                                           CHAIRMAN, PRESIDENT AND CHIEF
                                           EXECUTIVE OFFICER

                                      -19-<PAGE>   1

                                                                   Exhibit 10.27

================================================================================

                         SELECTIVE INSURANCE GROUP, INC.

              -----------------------------------------------------
                             Note Purchase Agreement
              -----------------------------------------------------

                             DATED AS OF MAY 4, 2000

             $30,000,000 8.63% SERIES A SENIOR NOTES DUE MAY 4, 2007
             $61,500,000 8.87% SERIES B SENIOR NOTES DUE MAY 4, 2010

================================================================================
<PAGE>   2

                                TABLE OF CONTENTS

1.    PURCHASE AND SALE OF NOTES.....................................1

      1.1.  Issue of Notes...........................................1
      1.2.  The Closing..............................................2
      1.3.  Purchase for Investment..................................2
      1.4.  Source of Funds..........................................3
      1.5.  Failure To Deliver, Failure of Conditions................4
      1.6.  Expenses.................................................4

2.    WARRANTIES AND REPRESENTATIONS.................................5

      2.1.  Nature of Business.......................................5
      2.2.  Financial Statements; Debt; Material Adverse Change......5
      2.3.  Subsidiaries and Affiliates..............................6
      2.4.  Pending Litigation.......................................6
      2.5.  Title to Properties......................................6
      2.6.  Patents, Trademarks, Licenses, etc.......................6
      2.7.  Taxes....................................................7
      2.8.  Full Disclosure..........................................7
      2.9.  Organization and Authority...............................7
      2.10. Restrictions on Company and Subsidiaries.................9
      2.11. Compliance with Law......................................9
      2.12. ERISA....................................................9
      2.13. Certain Laws.............................................11
      2.14. Environmental Compliance.................................11
      2.15. Sale is Legal and Authorized; Obligations
             are Enforceable.........................................12
      2.16. Governmental Consent.....................................12
      2.17. Private Offering.........................................13
      2.18. No Defaults..............................................13
      2.19. Use of Proceeds..........................................13
      2.20. Solvency.................................................14

3.    CLOSING CONDITIONS.............................................14

      3.1.  Opinions of Counsel......................................14
      3.2.  Warranties and Representations True; No Prohibited
              Action.................................................14
      3.3.  Officers' Certificates...................................15
      3.4.  Legality.................................................15
      3.5.  Private Placement Number.................................15
      3.6.  Certificates; Approvals..................................15
      3.7.  Compliance with this Agreement...........................15
      3.8.  Expenses.................................................15
      3.9.  Other Purchasers.........................................16
      3.10. Proceedings Satisfactory.................................16

4.    PURCHASERS' SPECIAL RIGHTS.....................................16

      4.1.  Direct Payment...........................................16
      4.2.  Delivery Expenses........................................16
      4.3.  Issue Taxes..............................................16

5.    PREPAYMENTS; CHANGE OF CONTROL PUT OPTION......................17

      5.1.  Scheduled Required Prepayments and Payment at Maturity...17
      5.2.  Optional Prepayments.....................................17

                                        i
<PAGE>   3

                            TABLE OF CONTENTS(Cont.)

      5.3.  Partial Prepayment Pro Rata..............................18
      5.4.  Notation of Notes on Prepayment..........................18
      5.5.  No Other Optional Prepayments............................18
      5.6.  Offer to Pay upon Change in Control Ratings Event........19

6.    REGISTRATION; SUBSTITUTION OF NOTES............................20

      6.1.  Registration of Notes....................................20
      6.2.  Exchange of Notes........................................20
      6.3.  Replacement of Notes.....................................20

7.    COMPANY BUSINESS COVENANTS.....................................21

      7.1.  Payment of Taxes and Claims..............................21
      7.2.  Maintenance of Properties and Corporate Existence........21
      7.3.  Payment of Notes and Maintenance of Office...............23
      7.4.  Liens....................................................23
      7.5.  Limitation on Indebtedness...............................25
      7.6.  Net Worth Maintenance....................................26
      7.7.  Maintenance of Debt to Capitalization Ratio..............26
      7.8.  Limitation on Subsidiary Indebtedness....................27
      7.9.  Disposition of Assets....................................27
      7.10. Limitation on Sale-Leaseback.............................30
      7.11. Restricted Payments......................................31
      7.12. Merger...................................................32
      7.13. ERISA....................................................32
      7.14. Line of Business.........................................33
      7.15. Transactions with Affiliates.............................33
      7.16. Pro-Rata Offers..........................................34
      7.17. Private Offering.........................................34
      7.18. Tax Consolidation........................................34
      7.19. Pari Passu Ranking.......................................34

8.    INFORMATION AS TO COMPANY......................................34

      8.1.  Financial and Business Information.......................34
      8.2.  Officers' Certificates...................................37
      8.3.  Accountants' Certificates................................38
      8.4.  Inspection...............................................38
      8.5.  Report to NAIC...........................................38

9.    EVENTS OF DEFAULT..............................................38

      9.1.  Nature of Events.........................................38
      9.2.  Default Remedies.........................................40
      9.3.  Annulment of Acceleration of Notes.......................41

10.   INTERPRETATION OF THIS AGREEMENT...............................42

      10.1. Terms Defined............................................42
      10.2. Generally Accepted Accounting Principles.................55
      10.3. Directly or Indirectly...................................55
      10.4. Section Headings and Table of Contents and Construction..55
      10.5. Governing Law............................................56

11.   MISCELLANEOUS..................................................56

      11.1. Communications...........................................56

                                       ii
<PAGE>   4

                            TABLE OF CONTENTS(Cont.)

      11.2. Reproduction of Documents................................56
      11.3. Survival.................................................57
      11.4. Successors and Assigns...................................57
      11.5. Amendment and Waiver.....................................57
      11.6. Payments, When Received..................................58
      11.7. Entire Agreement.........................................59
      11.8. Duplicate Originals, Execution in Counterpart............59

12.   CONFIDENTIAL INFORMATION.......................................59

Annex 1 --  Information as to Purchasers
Annex 2 --  Payment Instructions at Closing
Annex 3 --  Information as to Company
Exhibit A1  --    Form of 8.63% Series A Senior Note Due May 4, 2007
Exhibit A2  --    Form of 8.87% Series B Senior Note Due May 4, 2010
Exhibit B1  --    Form of Company Outside Counsel's Closing Opinion
Exhibit B2  --    Form of Company's General Counsel's Closing Opinion
Exhibit B3  --    Form of Special Counsel's Closing Opinion
Exhibit C   --    Form of Officers' Certificate
Exhibit D   --    Form of Secretary's Certificate

                                       iii
<PAGE>   5

                         SELECTIVE INSURANCE GROUP, INC.

                             NOTE PURCHASE AGREEMENT

             $30,000,000 8.63% Series A Senior Notes Due May 4, 2007
             $61,500,000 8.87% Series B Senior Notes Due May 4, 2010

                                                         Dated as of May 4, 2000

[Insert Name and Address
of each Purchaser]

Ladies and Gentlemen:

      SELECTIVE INSURANCE GROUP, INC. (together with its successors and assigns,
the "Company"), a New Jersey corporation, hereby agrees with you as follows:

1. PURCHASE AND SALE OF NOTES

      1.1. Issue of Notes.

      The Company will authorize the issue of

            (a) Thirty Million Dollars ($30,000,000) in aggregate principal
      amount of its eight and sixty-three hundredths percent (8.63%) Series A
      Senior Notes due May 4, 2007 (the "Series A Notes"). Each Series A Note
      shall:

                  (i) bear interest (computed on the basis of a 360-day year of
            twelve 30-day months) on the unpaid principal balance thereof from
            the date of such Series A Note at the rate of eight and sixty-three
            hundredths percent (8.63%) per annum, payable semi-annually on the
            fourth day of each May and November in each year commencing on the
            later of November 4, 2000 or the payment date next succeeding the
            date of such Series A Note, until the principal amount thereof shall
            be due and payable, and

                  (ii) bear interest, payable on demand, on any overdue
            principal (including any overdue prepayment of principal) and
            Make-Whole Amount, if any, and (to the extent permitted by
            applicable law) on any overdue installment of interest, at a rate
            equal to the lesser of the highest rate allowed by applicable law or
            ten and sixty-three hundredths percent (10.63%) per annum,

                  (iii) mature on May 4, 2007; and

                  (iv) be in the form of the Series A Note set out in Exhibit A1
            hereto.

            (b) Sixty-One Million Five Hundred Thousand Dollars ($61,500,000) in
      aggregate principal amount of its eight and eighty-seven hundredths
      percent (8.87%) Series B Senior Notes due May 4, 2010 (the "Series B
      Notes"). Each Series B Note shall:
<PAGE>   6

                  (i) bear interest (computed on the basis of a 360-day year of
            twelve 30-day months) on the unpaid principal balance thereof from
            the date of such Series B Note at the rate of eight and eighty-seven
            hundredths percent (8.87%) per annum, payable semi-annually on the
            fourth day of each May and November in each year commencing on the
            later of November 4, 2000 or the payment date next succeeding the
            date of such Series B Note, until the principal amount thereof shall
            be due and payable, and

                  (ii) bear interest, payable on demand, on any overdue
            principal (including any overdue prepayment of principal) and
            Make-Whole Amount, if any, and (to the extent permitted by
            applicable law) on any overdue installment of interest, at a rate
            equal to the lesser of the highest rate allowed by applicable law or
            ten and eighty-seven hundredths percent (10.87%) per annum,

                  (iii) mature on May 4, 2010; and

                  (iv) be in the form of the Series B Note set out in Exhibit A2
            hereto.

      The Series A Notes and the Series B Notes are herein referred to
collectively as the "Notes," and individually as a "Note."

      1.2. The Closing.

            (a) Purchase and Sale of Notes. The Company hereby agrees to sell to
      you and you hereby agree to purchase from the Company, in accordance with
      the provisions hereof, the aggregate principal amount of Notes set forth
      below your name on Annex 1 hereto at one hundred percent (100%) of the
      principal amount thereof.

            (b) The Closing. The closing (the "Closing") of the Company's sale
      of Notes shall be held on May 4, 2000 (the "Closing Date") at 10:00 a.m.,
      Hartford, Connecticut time, at the office of your special counsel, Bingham
      Dana LLP, One State Street, Hartford, Connecticut 06103. At the Closing,
      the Company shall deliver to you one or more Notes (as set forth below
      your name on Annex 1 hereto), of the Series and in the denominations
      indicated on Annex 1 hereto, in the aggregate principal amount of your
      purchase, dated the Closing Date and payable to you or payable as
      indicated on Annex 1 hereto, against payment by federal funds wire
      transfer in immediately available funds of the purchase price thereof, as
      directed by the Company on Annex 2 hereto.

            (c) Other Purchasers. Contemporaneously with the execution and
      delivery hereof, the Company is entering into a separate Note Purchase
      Agreement identical (except for the name and signature of the purchaser)
      hereto (this Agreement and such other separate Note Purchase Agreements
      being herein sometimes referred to collectively as the "Note Purchase
      Agreements") with each other purchaser (individually, an "Other
      Purchaser," and collectively, the "Other Purchasers") listed on Annex 1
      hereto, providing for the sale to each Other Purchaser of Notes in the
      aggregate principal amount set forth below its name on such Annex. The
      sales of the Notes to you and to each Other Purchaser are to be separate
      sales.

      1.3. Purchase for Investment.

            You represent to the Company that you are purchasing the Notes
      listed on Annex 1 hereto below your name for your own account for
      investment and with no present intention of distributing or reselling the
      Notes or any part thereof, but without prejudice to your right at all
      times to

                                       2
<PAGE>   7

            (a) sell or otherwise dispose of all or any part of the Notes under
      a registration statement filed under the Securities Act, or in a
      transaction exempt from the registration requirements of such Act, and

            (b) have control over the disposition of all of your assets to the
      fullest extent required by any applicable insurance law.

      It is understood that, in making the representations set out in Section
      2.15(a) hereof and Section 2.16 hereof, the Company is relying, to the
      extent applicable, upon your representation as aforesaid.

      1.4. Source of Funds.

            You represent that at least one of the following statements is an
      accurate representation as to each source of funds (a "Source") to be used
      by you to pay the purchase price of the Notes to be purchased by you
      hereunder:

                  (a) the Source is an "insurance company general account" as
            defined in United States Department of Labor Prohibited Transaction
            Exemption ("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect
            thereof you represent that there is no "employee benefit plan" (as
            defined in section 3(3) of ERISA and section 4975(e)(1) of the IRC,
            treating as a single plan all plans maintained by the same employer
            or employee organization or affiliate thereof) with respect to which
            the amount of the general account reserves and liabilities of all
            contracts held by or on behalf of such plan exceeds 10% of the total
            reserves and liabilities of such general account (exclusive of
            separate account liabilities) plus surplus, as set forth in the
            National Association of Insurance Commissioners' Annual Statement
            filed with your state of domicile and that such acquisition is
            eligible for and satisfies the other requirements of such exemption;
            or

                  (b) if you are an insurance company, the Source does not
            include assets allocated to any separate account maintained by you
            in which any employee benefit plan (or its related trust) has any
            interest, other than a separate account that is maintained solely in
            connection with your fixed contractual obligations under which the
            amounts payable, or credited, to such plan and to any participant or
            beneficiary of such plan (including any annuitant) are not affected
            in any manner by the investment performance of the separate account;
            or

                  (c) the Source is either (i) an insurance company pooled
            separate account, within the meaning of PTE 90-1 (issued January
            29,1990), or (ii) a bank collective investment fund, within the
            meaning of the PTE 91-38 (issued July 12, 1991) and, except as you
            have disclosed to the Company in writing pursuant to this paragraph
            1.4(c), no employee benefit plan or group of plans maintained by the
            same employer or employee organization beneficially owns more than
            10% of all assets allocated to such pooled separate account or
            collective investment fund; or

                  (d) the Source constitutes assets of an "investment fund"
            (within the meaning of part V of PTE 84-14 (the "QPAM Exemption"))
            managed by a "qualified professional asset manager" or "QPAM"
            (within the meaning of part V of the QPAM Exemption), no employee
            benefit plan's assets that are included in such investment fund,
            when combined with the assets of all other employee benefit plans
            established or maintained by the same employer or by an affiliate
            (within the meaning of section V(c)(1) of the QPAM Exemption) of
            such employer or by the same employee organization and managed by
            such QPAM, exceed 20% of the total client assets managed by such
            QPAM, the conditions of part I(c) and (g) of the QPAM Exemption are
            satisfied,

                                       3
<PAGE>   8

            neither the QPAM nor a person controlling or controlled by the QPAM
            (applying the definition of "control" in section V(e) of the QPAM
            Exemption) owns a 5% or more interest in the Company and

                        (i) the identity of such QPAM and

                        (ii) the names of all employee benefit plans whose
                  assets are included in such investment fund

            have been disclosed to the Company in writing pursuant to this
            paragraph 1.4(d); or

                  (e) the Source is a governmental plan; or

                  (f) the Source is one or more employee benefit plans, or a
            separate account or trust fund comprised of one or more employee
            benefit plans, each of which has been identified to the Company in
            writing pursuant to this paragraph 1.4(f); or

                  (g) the Source does not include assets of any employee benefit
            plan, other than a plan exempt from the coverage of ERISA.

                  As used in this Section 1.4, the terms "employee benefit
            plan", "governmental plan" and "separate account" shall have the
            respective meanings assigned to such terms in Section 3 of ERISA.

      1.5. Failure To Deliver, Failure of Conditions.

      If at the Closing the Company fails to tender to you the Notes to be
purchased by you thereat, or if the conditions specified in Section 3 hereof to
be fulfilled at the Closing have not been fulfilled, you may thereupon elect to
be relieved of all further obligations hereunder. Nothing in this Section 1.5
shall operate to relieve the Company from any of its obligations hereunder or to
waive any of your rights against the Company.

      1.6. Expenses.

            (a) Generally. Whether or not the Notes are sold, the Company shall
      promptly (and in any event within thirty (30) days of receiving any
      statement or invoice therefor except with respect to the statements or
      invoices referred to in clause (b) below that are to be paid at Closing)
      pay all fees, expenses and costs relating hereto, including but not
      limited to:

                  (i) the cost of reproducing this Agreement and the Notes;

                  (ii) the reasonable fees and disbursements of your special
            counsel, Bingham Dana LLP;

                  (iii) the cost of delivering to your home office or custodian
            bank, insured to your satisfaction, the Notes purchased by you at
            the Closing;

                  (iv) the fees, expenses and costs incurred complying with each
            of the conditions to closing set forth in Section 3 hereof; and

                  (v) the reasonable expenses relating to the consideration,
            negotiation, preparation or execution of any amendments, waivers or
            consents pursuant to the

                                       4
<PAGE>   9

            provisions hereof, whether or not any such amendments, waivers or
            consents are executed.

            (b) Counsel. Without limiting the generality of the foregoing, it is
      agreed and understood that the Company will pay, at the Closing, the
      statement for fees and disbursements of your special counsel presented at
      the Closing, and the Company will also pay upon receipt of any statement
      thereof each additional statement for fees and disbursements of your
      special counsel rendered within 30 days after the Closing in connection
      with the issuance of the Notes or the matters referred to in Section
      1.6(a)(iv) hereof.

            (c) Survival. The obligations of the Company under this Section 1.6
      shall survive the payment or prepayment of the Notes and the termination
      hereof.

2. WARRANTIES AND REPRESENTATIONS

      To induce you to enter into this Agreement and to purchase the Notes
listed on Annex 1 hereto below your name, the Company warrants and represents,
as of the date hereof as follows:

      2.1. Nature of Business.

      The private placement memorandum (together with all attachments thereto,
including, without limitation, the Company's Annual Report to Shareholders for
the year 1999 and the Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1999) dated April, 2000, and furnished by Merrill, Lynch, Pierce,
Fenner & Smith Incorporated (the aforesaid private placement memorandum with
attachments is herein referred to as the "Placement Memorandum"), correctly
describes the general nature of the business and principal Properties of the
Company and the Subsidiaries as of the date hereof. Copies of the Placement
Memorandum have been previously delivered to you.

      2.2. Financial Statements; Debt; Material Adverse Change.

            (a) Financial Statements. Copies of the following financial
      statements have been delivered to you:

                  (i) the consolidated balance sheets of the Company and the
            Subsidiaries as of December 31, 1998 and December 31, 1999, and the
            related statements of income, shareholders' equity and cash flows
            for the fiscal years ended on such dates, all accompanied by
            opinions thereon by KPMG LLP, independent certified public
            accountants, and

                  (ii) the unaudited consolidated balance sheet, and the related
            statements of income and cash flows of the Company and its
            consolidated Subsidiaries for the fiscal quarter ended March 31,
            2000.

      Each of the above financial statements have been prepared in accordance
      with Generally Accepted Accounting Principles consistently applied, and
      present fairly the financial position of the Company and the Subsidiaries,
      taken as a whole, as of the dates set forth above and the results of their
      operations and cash flows for the periods set forth above. All such
      financial statements include the accounts of all Subsidiaries for the
      respective periods during which a subsidiary relationship has existed.
      Except as set forth on Part 2.2(a) of Annex 3 hereto, all Subsidiaries
      were subsidiaries during all of the periods covered by such financial
      statements.

                                       5
<PAGE>   10

            (b) Debt. Part 2.2(b) of Annex 3 to this Agreement correctly lists
      all outstanding Debt of the Company and each of the Subsidiaries as of the
      date hereof.

            (c) Material Adverse Change. Since December 31, 1999, there has been
      no change in the business, prospects, profits, Properties or condition
      (financial or otherwise) of the Company or any of the Subsidiaries, taken
      as a whole, except changes in the ordinary course of business that, in the
      aggregate, have not had a material adverse effect on the business,
      prospects, profits, Properties or condition (financial or otherwise) of
      the Company and the Subsidiaries, taken as a whole, the ability of the
      Company to perform its obligations set forth herein and in the Notes, or
      the rights and remedies of the holders of the Notes hereunder or under the
      Notes.

      2.3. Subsidiaries and Affiliates.

            (a) Part 2.3 of Annex 3 to this Agreement states

                  (i) the name of each of the Subsidiaries, its jurisdiction of
            incorporation or organization and the percentage of its Voting Stock
            owned by the Company and each other Subsidiary, and

                  (ii) the name of each of the Company's corporate or joint
            venture Affiliates and the nature of the affiliation.

                  (iii) Each of the Company and each Subsidiary has good and
            marketable title to all of the membership interests and shares of
            stock it purports to own of each Subsidiary, free and clear in each
            case of any Lien. All such shares have been duly issued and are
            fully paid and nonassessable.

      2.4. Pending Litigation.

      Except as disclosed in Part 2.4 of Annex 3 hereto and the Placement
Memorandum, there are no proceedings, actions or investigations pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal that, in the aggregate, would have a material adverse effect
on the business, prospects, profits, Properties or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, the ability of
the Company to perform its obligations set forth herein and in the Notes, or the
rights and remedies of the holders of the Notes hereunder or under the Notes.
The Company is not in default with respect to any judgment, order, writ,
injunction, or decree of any court, Governmental Authority or arbitration board
or tribunal that, in the aggregate, would have a material adverse effect on the
business, prospects, profits, Properties or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, the ability of the
Company to perform its obligations set forth herein and in the Notes, or the
rights and remedies of the holders of the Notes hereunder or under the Notes.

      2.5. Title to Properties.

      Each of the Company and the Subsidiaries has good and marketable title to
all of the Property reflected in the most recent balance sheet referred to in
Section 2.2 hereof (except as sold or otherwise disposed of in the ordinary
course of business), free from Liens not otherwise permitted by Section 7.4
hereof.

      2.6. Patents, Trademarks, Licenses, etc

                                       6
<PAGE>   11

      Each of the Company and the Subsidiaries, owns, possesses or has the right
to use all of the patents, trademarks, service marks, trade names, copyrights,
licenses, and rights with respect thereto, necessary for the present and
currently planned future conduct of its business, without any known conflict
with the rights of others.

      2.7. Taxes.

      All tax returns required to be filed by each of the Company, any
Subsidiary and any other Person with which the Company files or has filed a
consolidated return in any jurisdiction have in fact been filed on a timely
basis, and all taxes, assessments, fees and other governmental charges upon each
of the Company, such Subsidiary and any such Person, and upon any of their
respective Properties, income or franchises, that are due and payable have been
paid. Except as set forth on Part 2.7 of Annex 3 to this Agreement, the Company
does not know of any pending additional tax assessment directed particularly
against it, any such Subsidiary or any such Person, the payment of which would
have a material adverse effect on the business, prospects, profits, Properties
or condition (financial or otherwise) of the Company and the Subsidiaries, taken
as a whole, the ability of the Company to perform its obligations set forth
herein and in the Notes, or the rights and remedies of the holders of the Notes
hereunder or under the Notes. All liabilities of the Company and such Persons
with respect to federal income taxes have been finally determined except for the
fiscal years 1995 through 1999, the only years not closed by the completion of
an audit or the expiration of the statute of limitations. The amount of the
liability for taxes reflected in the consolidated balance sheet of the Company
and its consolidated subsidiaries as of December 31, 1999, referred to in
Section 2.2 hereof is an adequate provision for taxes (including without
limitation, any payment due pursuant to any tax sharing agreement) as are or may
become payable by any one or more of the Company and its consolidated
subsidiaries in respect of all tax periods ending on or prior to such date, all
as determined in accordance with, and pursuant to, Generally Accepted Accounting
Principles.

      2.8. Full Disclosure.

      The financial statements referred to in Section 2.2 hereof do not, nor
does this Agreement, the Placement Memorandum or any written statement furnished
by or on behalf of the Company to you in connection with the negotiation of the
sale of the Notes, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. There is no fact that the Company has not disclosed to you in the
Placement Memorandum or in this Agreement that has had or will have a material
adverse effect on the business, prospects, profits, Properties or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
the ability of the Company to perform its obligations set forth herein and in
the Notes, or the rights and remedies of the holders of the Notes hereunder or
under the Notes.

      2.9. Organization and Authority.

            (a) The Company,

                  (i) is a corporation duly incorporated, validly existing and
            in good standing under the laws of the State of New Jersey,

                  (ii) has all legal and corporate power and authority to own
            and operate its Properties and to carry on its business as now
            conducted and as presently proposed to be conducted,

                  (iii) has all licenses, certificates, permits, franchises and
            other governmental authorizations necessary to own and operate its
            Properties and to carry on its business as now conducted and as
            presently proposed to be conducted, including, without limitation
            all licenses and authorizations in all jurisdictions which require
            any Person controlling

                                       7
<PAGE>   12

            one or more insurance companies to be so licensed or authorized,
            except where the failure to have such licenses, certificates,
            permits and authorizations, in the aggregate, would not have a
            material adverse effect on the business, prospects, profits,
            Properties or condition (financial or otherwise) of the Company and
            the Subsidiaries, taken as a whole, the ability of the Company to
            perform its obligations set forth herein and in the Notes, and

                  (iv) has duly qualified or has been duly licensed, and is
            authorized to do business and is in good standing, as a foreign
            corporation, in each State where the failure to be so qualified or
            licensed and authorized and in good standing would have a material
            adverse effect on the business, prospects, profits, Properties or
            condition (financial or otherwise) of the Company and the
            Subsidiaries, taken as a whole, the ability of the Company to
            perform its obligations set forth herein and in the Notes, or the
            rights and remedies of the holders of the Notes hereunder or under
            the Notes.

            (b) Each insurance Subsidiary

                  (i) is a corporation duly incorporated, validly existing and
            in good standing under the laws of its state of incorporation,

                  (ii) is duly qualified and licensed as an insurance company
            and is authorized to transact property and/or casualty insurance
            business in the jurisdiction of its incorporation and in each of the
            jurisdictions set forth on Part 2.9 of Annex 3 hereto, and, with
            respect to the jurisdictions set forth on Part 2.9 of Annex 3, each
            such Subsidiary is in good standing as a nonresident insurance
            company, and

                  (iii) has all legal and corporate power and authority to own
            and operate its Properties and to carry on its business as now
            conducted and as presently proposed to be conducted.

            (c) Each Subsidiary other than insurance Subsidiaries

                  (i) is a corporation duly incorporated, validly existing and
            in good standing under the laws of its state of incorporation,

                  (ii) has all legal and corporate or limited liability company
            power and authority to own and operate its Properties and to carry
            on its business as now conducted and as presently proposed to be
            conducted,

                  (iii) has all licenses, certificates, permits, franchises and
            other governmental authorizations necessary to own and operate its
            Properties and to carry on its business as now conducted and as
            presently proposed to be conducted, except where the failure to have
            such licenses, certificates, permits and authorizations, in the
            aggregate, would not have a material adverse effect on the business,
            prospects, profits, Properties or condition (financial or otherwise)
            of the Company and the Subsidiaries, taken as a whole, the ability
            of the Company to perform its obligations set forth herein and in
            the Notes, or the rights and remedies of the holders of the Notes
            hereunder or under the Notes, and

                  (iv) has duly qualified or has been duly licensed, and is
            authorized to do business and is in good standing, as a foreign
            corporation, in each State where the failure to be so qualified or
            licensed and authorized and in good standing would have a material
            adverse effect on the business, prospects, profits, Properties or
            condition (financial or

                                       8
<PAGE>   13

            otherwise) of the Company and the Subsidiaries, taken as a whole,
            the ability of the Company to perform its obligations set forth
            herein and in the Notes, or the rights and remedies of the holders
            of the Notes hereunder or under the Notes.

      2.10. Restrictions on Company and Subsidiaries.

      Neither the Company nor any Subsidiary:

            (a) is a party to any contract or agreement, or subject to any
      charter or other corporate restriction that materially and adversely
      affects the business, profits, prospects, Properties or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a
      whole, the ability of the Company to perform its obligations as set forth
      herein and in the Notes, or the rights and remedies of the holders of the
      Notes hereunder or under the Notes,

            (b) is a party to any contract or agreement that restricts the right
      or ability of the Company to incur Debt, other than this Agreement and the
      agreements listed on Part 2.10 of Annex 3 hereto, the terms of none of
      which will be violated by the issue of the Notes or the execution and
      delivery of, or compliance with, this Agreement by the Company; and

            (c) has agreed or consented to cause or permit in the future (upon
      the happening of a contingency or otherwise) any of its Property, whether
      now owned or hereafter acquired, to be subject to a Lien not permitted by
      Section 7.4 hereof.

      2.11. Compliance with Law.

      Neither the Company nor any Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, which
violation would have a material adverse effect on the business, prospects,
profits, Properties or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, the ability of the Company to perform its
obligations set forth herein and in the Notes, or the rights and remedies of the
holders of the Notes hereunder or under the Notes.

      2.12. ERISA.

            (a) Relationship of Vested Benefits to Pension Plan Assets. The
      present value of all benefits, determined as of the most recent valuation
      date for such benefits as provided in Section 7.13(c) hereof, vested under
      each Pension Plan does not exceed the value of the assets of such Pension
      Plan allocable to such vested benefits, determined as of such date as
      provided in Section 7.13(c) hereof.

            (b) ERISA Requirements. Each of the Company and the ERISA
      Affiliates,

                  (i) has fulfilled all obligations under the applicable minimum
            funding standards of ERISA and the IRC with respect to each Pension
            Plan subject to such standards and that is not a Multiemployer Plan,

                  (ii) has satisfied all respective contribution obligations in
            respect of each Multiemployer Plan,

                  (iii) is in compliance in all material respects with all other
            applicable provisions of ERISA and the IRC with respect to each
            Pension Plan and each Multiemployer Plan, and

                                       9
<PAGE>   14

(iv)        has not incurred any liability under Title IV of ERISA to the PBGC
            (other than in respect of required insurance premiums, all of which
            that are due having been paid), with respect to any Pension Plan,
            any Multiemployer Plan or any trust established thereunder.

      No Pension Plan, or trust created thereunder subject to section 412 of the
      IRC or section 403 of ERISA, has incurred any accumulated funding
      deficiency (as such term is defined in section 302 of ERISA), whether or
      not waived, as of the last day of the most recently ended plan year of
      such Pension Plan.

            (c) Prohibited Transactions.

                  (i) The purchase of the Notes by you will not constitute a
            "prohibited transaction" (as such term is defined in section 406 of
            ERISA or section 4975 of the IRC) that would subject any Person to
            the penalty or tax on prohibited transactions imposed by section 502
            of ERISA or section 4975 of the IRC, and neither the Company nor any
            ERISA Affiliate has engaged in any "prohibited transaction" with
            respect to any "employee benefit plan" (as such term is hereinafter
            defined) of the Company or any ERISA Affiliate or any trust created
            thereunder, that would subject the Company or such ERISA Affiliate
            to such penalty or tax. The representation by the Company in the
            preceding sentence is made in reliance upon and subject to the
            accuracy of the representations in Section 1.4 hereof as to the
            source of funds used by the Purchasers.

                  (ii) Part 2.12(c) of Annex 3 hereto completely lists all ERISA
            Affiliates and all employee benefit plans with respect to which the
            Company or any "affiliate" (as such term is hereinafter defined) is
            a "party-in-interest" (as such term is hereinafter defined) or in
            respect of which the Notes would constitute an "employer security"
            (as such term is hereinafter defined). As used in this Section
            2.12(c), the terms "employee benefit plan" and "party-in-interest"
            have the respective meanings assigned to them in section 3 of ERISA
            and "affiliate" and "employer security" have the meanings assigned
            to them in section 407(d) of ERISA.

            (d) Reportable Events. No Pension Plan or trust created thereunder
      has been terminated, and there have been no "reportable events" (as such
      term is defined in section 4043 of ERISA), with respect to any Pension
      Plan or trust created thereunder or with respect to any Multiemployer
      Plan, which reportable event or events will or would reasonably be
      expected to result in the termination of such Pension Plan or
      Multiemployer Plan and give rise to a liability of the Company or any
      ERISA Affiliate in respect thereof that would have a material adverse
      effect on the business, prospects, profits, Properties or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a
      whole, the ability of the Company to perform its obligations set forth
      herein and in the Notes, or the rights and remedies of the holders of the
      Notes hereunder or under the Notes.

            (e) Multiemployer Plans. Except as set forth on Part 2.12(e) of
      Annex 3 hereto, neither the Company nor any ERISA Affiliate is an employer
      required to contribute to any Multiemployer Plan. Neither the Company nor
      any ERISA Affiliate has incurred, nor is expected to incur, any withdrawal
      liability (that has not previously been fully satisfied) under ERISA with
      respect to any Multiemployer Plan. None of the Multiemployer Pension Plans
      referred to on Annex 3 have been terminated under section 4041A of ERISA,
      have been placed in reorganization status under Title IV of ERISA, or have
      been determined to be "insolvent" (as such term is defined in section 4245
      of ERISA).

                                       10
<PAGE>   15

            (f) Multiple Employer Pension Plans. Except as forth on Part 2.12(f)
      of Annex 3 hereto, neither the Company nor any ERISA Affiliate is a
      "contributing sponsor" (as such term is defined in section 4001 of ERISA)
      of any Multiple Employer Pension Plan and neither the Company nor any
      ERISA Affiliate has incurred (without fully satisfying the same), or
      reasonably expects to incur, withdrawal liability in respect of any such
      Multiple Employer Pension Plan listed on Part 2.12(f) of Annex 3 hereto,
      which withdrawal liability would have a material adverse effect on the
      business, prospects, profits, Properties or condition (financial or
      otherwise) of the Company the ability of the Company to perform its
      obligations set forth herein and in the Notes, or the rights and remedies
      of the holders of the Notes hereunder or under the Notes.

      2.13. Certain Laws.

            (a) Investment Company Act. Neither the Company nor any Subsidiary
      is, or is directly or indirectly controlled by, or acting on behalf of any
      Person which is, an "investment company" within the meaning of the
      Investment Company Act of 1940, as amended.

            (b) Holding Company Status. Neither the Company nor any Subsidiary
      is a "holding company" or an "affiliate" of a "holding company," or a
      "subsidiary company" of a "holding company," or a "public utility" within
      the meaning of the Public Utility Holding Company Act of 1935, as amended.

      2.14. Environmental Compliance.

      Except as set forth on Part 2.14 of Annex 3 hereto:

            (a) Compliance -- each of the Company and the Subsidiaries is in
      compliance with all Environmental Protection Laws in effect in each
      jurisdiction where it is presently doing business, and in which the
      failure so to comply would be reasonably expected to have a material
      adverse effect on the business, prospects, profits, Properties or
      condition (financial or otherwise) of the Company and the Subsidiaries,
      taken as a whole, the ability of the Company to perform its obligations
      hereunder and in the Notes, or the rights and remedies of the holders of
      the Notes hereunder or under the Notes;

            (b) Liability -- each of the Company and the Subsidiaries is not
      subject to any liability under any Environmental Protection Laws that, in
      the aggregate, would be reasonably expected to have a material adverse
      effect on the business, prospects, profits, Properties or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a
      whole, the ability of the Company to perform its obligations hereunder and
      in the Notes, or the rights and remedies of the holders of the Notes
      hereunder or under the Notes; and

            (c) Notices -- neither the Company nor any Subsidiary has received
      any

                  (i) notice from any Governmental Authority by which any of its
            present or previously-owned or leased real properties has been
            designated, listed, or identified in any manner by any Governmental
            Authority charged with administering or enforcing any Environmental
            Protection Law as a Hazardous Substance disposal or removal site,
            "Super Fund" clean-up site, or candidate for removal or closure
            pursuant to any Environmental Protection Law,

                  (ii) notice of any Lien arising under or in connection with
            any Environmental Protection Law that has attached to any revenues
            of, or to, any of its owned or leased real properties, or

                                       11
<PAGE>   16

                  (iii) summons, citation, notice, directive, letter, or other
            communication, written or oral, from any Governmental Authority
            concerning any intentional or unintentional action or omission by
            the Company or such Subsidiary in connection with its ownership or
            leasing of any real Property resulting in the releasing, spilling,
            leaking, pumping, pouring, emitting, emptying, dumping, or otherwise
            disposing of any Hazardous Substance into the environment resulting
            in any material violation of any Environmental Protection Law,

      in each case where the effect of which would be reasonably expected to
      have a material adverse effect on the business, prospects, profits,
      Properties or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, the ability of the Company to perform its
      obligations hereunder and in the Notes, or the rights and remedies of the
      holders of the Notes hereunder or under the Notes.

      Nothing set forth in this Section 2.14 shall relate or pertain to
liability accruing to any insurance Subsidiary pursuant to any Environmental
Protection Law solely by virtue of an insurance policy issued by such insurance
Subsidiary or solely by virtue of any environmental-related claim that has been
or may be asserted under any such insurance policy; all such liabilities have
been appropriately reserved for by each such insurance Subsidiary in accordance
with applicable Statutory Financial Statement Accounting Procedures and
insurance law. The Company has no knowledge of the assertion of any such claim
the payment of which would have a material adverse effect on the business,
prospects, profits, Properties or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, the ability of the Company to
perform its obligations set forth herein and in the Notes, or the rights and
remedies of the holders of the Notes hereunder or under the Notes.

      2.15. Sale is Legal and Authorized; Obligations are Enforceable.

            (a) Sale is Legal and Authorized. Each of the issue, sale and
      delivery of the Notes by the Company and the execution and delivery of
      this Agreement by the Company and the compliance by the Company with all
      of the provisions of this Agreement and the Notes:

                  (i) is within the corporate powers of the Company; and

                  (ii) is legal and does not conflict with, result in any breach
            in any of the provisions of, constitute a default under, or result
            in the creation of any Lien upon any Property of the Company or any
            Subsidiary under the provisions of, any agreement, charter
            instrument, bylaw or other instrument to which it is a party or by
            which it or any of its Property may be bound.

            (b) Obligations are Enforceable. Each of this Agreement and the
      Notes has been duly authorized by all necessary action on the part of the
      Company, has been executed and delivered by duly authorized officers of
      the Company, and constitutes a legal, valid and binding obligation of the
      Company, enforceable in accordance with its terms, except that the
      enforceability of this Agreement and the Notes may be:

                  (i) limited by applicable bankruptcy, reorganization,
            arrangement, insolvency, moratorium, or other similar laws affecting
            the enforceability of creditors' rights generally; and

                  (ii) subject to the availability of equitable remedies.

      2.16. Governmental Consent.

                                       12
<PAGE>   17

      Neither the nature of the Company or any Subsidiary, or of any of their
respective businesses or Properties, nor any relationship between the Company or
any Subsidiary and any other Person, nor any circumstance in connection with the
offer, issue, sale or delivery of the Notes and the execution and delivery of
this Agreement, is such as to require a consent, approval or authorization of,
or filing, registration or qualification with, any Governmental Authority on the
part of the Company as a condition to the execution and delivery of this
Agreement or the offer, issue, sale or delivery of the Notes.

      2.17. Private Offering.

      Neither the Company nor Merrill Lynch & Company (the only Person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Notes or any similar Security of the
Company, other than employees of the Company) has offered any of the Notes or
any similar Security of the Company for sale to, or solicited offers to buy any
thereof from, or otherwise approached or negotiated with respect thereto with,
any prospective purchaser, other than not more than one hundred twenty five
(125) institutional investors, including you and the Other Purchasers, each of
whom was offered all or a portion of the Notes at private sale for investment.

      2.18. No Defaults.

            (a) The Notes. No event has occurred and no condition exists that,
      upon the issue of the Notes and the execution and delivery of this
      Agreement, would constitute a Default or an Event of Default.

            (b) Charter Instrument, Other Agreements. Neither the Company nor
      any Subsidiary is in violation in any respect of any term of any charter
      instrument, limited liability company agreement or bylaw. Neither the
      Company nor any Subsidiary is in violation in any material respect of any
      term in any agreement or other instrument to which it is a party or by
      which it or any of its Property may be bound, the violation of which would
      have a material adverse effect on the business, prospects, profits,
      Properties or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, the ability of the Company to perform its
      obligations set forth herein and in the Notes, or the rights and remedies
      of the holders of the Notes hereunder or under the Notes.

      2.19. Use of Proceeds.

            (a) Use of Proceeds. The Company will use the net proceeds from the
      sale of the Notes to refinance existing debt and to pay general corporate
      expenses.

            (b) Margin Securities. None of the transactions contemplated in the
      Note Purchase Agreements (including, without limitation, the use of the
      proceeds from the sale of the Notes) violates, will violate or will result
      in a violation of section 7 of the Exchange Act, or any regulations issued
      pursuant thereto, including, without limitation, Regulations T, U and X of
      the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter
      II. The Company does not own, nor with the proceeds of the sale of the
      Notes does it intend to own, carry or purchase, or refinance borrowings
      that were used to own, carry or purchase, any Margin Security, including
      Margin Securities originally issued by the Company. The Note Purchase
      Agreements and the Notes will not be secured by any Margin Security, and
      no Notes are being sold on the basis of any such collateral.

            (c) Absence of Foreign or Enemy Status. The Company is not, an
      "enemy" or an "ally of the enemy" within the meaning of section 2 of the
      Trading with the Enemy Act (50 U.S.C. App.ss.ss.1 et seq.), as amended.
      The Company is not in violation of, and neither the issue and sale of the
      Notes by the Company nor its use of the proceeds thereof as contemplated
      hereby, will

                                       13
<PAGE>   18

      violate, the Trading with the Enemy Act, as amended, or any executive
      orders, proclamations or regulations issued pursuant thereto, including,
      without limitation, regulations administered by the Office of Foreign
      Asset Control of the Department of the Treasury (31 C.F.R., Subtitle B,
      Chapter V).

      2.20. Solvency.

      The fair value of the business and assets of the Company is in excess of
the amount that will be required to pay its liabilities (including, without
limitation, contingent, subordinated, unmatured and unliquidated liabilities on
existing debts, as such liabilities may become absolute and matured), in each
case after giving effect to the transactions contemplated by this Agreement and
the Notes. After giving effect to the transactions contemplated by this
Agreement and the Notes, the Company will not be engaged in any business or
transaction, or about to engage in any business or transaction, for which it has
an unreasonably small capital, and the Company does not have any intent to

            (a) hinder, delay or defraud any entity to which it is, or will
      become, on or after the Closing Date, indebted, or

            (b) to incur debts that would be beyond its ability to pay as they
      mature.

3. CLOSING CONDITIONS

      Your obligation to purchase and pay for the Notes to be delivered to you
at the Closing is subject to the following conditions precedent:

      3.1. Opinions of Counsel.

      You shall have received from

            (a) Drinker Biddle & Shanley LLP, outside counsel for the Company,

            (b) Thornton R. Land, Executive Vice President and General Counsel
      of the Company, and

            (c) Bingham Dana LLP, your special counsel,

      closing opinions, each dated the Closing Date and substantially in the
      respective forms set forth in Exhibit B1, Exhibit B2 and Exhibit B3
      hereto, and as to such other matters as you may reasonably request. The
      Company hereby requests and directs its counsel named in the foregoing
      clause (a) to deliver such closing opinion to you.

      3.2. Warranties and Representations True; No Prohibited Action.

            (a) Warranties and Representations True. The warranties and
      representations of the Company contained in Section 2 hereof shall be true
      on the Closing Date with the same effect as though made on and as of that
      date.

            (b) No Prohibited Action. Except as set forth on Annex 3 hereto, the
      Company shall not have taken any action or permitted any condition to
      exist that would have been prohibited by Section 7.4 through Section 7.18
      hereof, inclusive, had such Sections been binding and effective at all
      times during the period from December 31, 1999 to and including the
      Closing Date.

                                       14
<PAGE>   19

      3.3. Officers' Certificates.

      You shall have received:

            (a) a certificate dated the Closing Date and signed by the President
      or a Vice-President and Senior Vice President, Finance, or the Senior Vice
      President, Investments, of the Company, substantially in the form of
      Exhibit C hereto; and

            (b) a certificate dated the Closing Date and signed by the Secretary
      or an Assistant Secretary of the Company, substantially in the form of
      Exhibit D hereto.

      3.4. Legality.

      The Notes shall on the Closing Date qualify as a legal investment for you
under applicable insurance law (without regard to any "basket" or "leeway"
provisions) and you shall have received from the Company such evidence as you
may reasonably request to establish compliance with this condition.

      3.5. Private Placement Number.

      The Company shall have obtained or caused to be obtained a private
placement number for the Series A Notes and the Series B Notes from the CUSIP
Service Bureau of Standard & Poor's, a division of McGraw-Hill, Inc., and you
shall have been informed of such private placement numbers.

      3.6. Certificates; Approvals.

            (a) Approvals. You shall have received an executed copy, or a copy
      certified by the Secretary or an Assistant Secretary of the Company and
      each Subsidiary, of each license required to conduct business as an
      insurance company in the state that the Company and each Subsidiary,
      respectively, is domiciled.

            (b) Certificates of Incorporation and Authority. You shall have
      received a copy of the certificate of incorporation of the Company
      together with each amendment, if any, thereto, certified by the Secretary
      of State or the Commissioner of Insurance, as the case may be, of the
      state of incorporation of the Company (as of a date reasonably near the
      date of the Closing Date) as being true and correct copies of such
      documents on file in his/her office.

            (c) Good Standing Certificates. You shall have received certificates
      of good standing for the Company and each Subsidiary from the Secretaries
      of State or the Commissioners of Insurance, as the case may be, of each
      state where such Person is incorporated certifying that such Person is in
      good standing in such states.

      3.7. Compliance with this Agreement.

      The Company shall have performed and complied with all agreements and
conditions contained herein that are required to be performed or complied with
by the Company on or prior to the Closing Date, and such performance and
compliance shall remain in effect on the Closing Date.

      3.8. Expenses.

      All fees and disbursements required to be paid pursuant to Section 1.6(b)
hereof shall have been paid in full.

                                       15
<PAGE>   20

      3.9. Other Purchasers.

      None of the Purchasers other than you shall have failed to execute and
deliver a Note Purchase Agreement or to accept delivery of or make payment for
the Notes to be purchased by it on the Closing Date.

      3.10. Proceedings Satisfactory.

      All proceedings taken in connection with the issuance and sale of the
Notes and all documents and papers relating thereto shall be satisfactory to you
and your special counsel. You and your special counsel shall have received
copies of such documents and papers as you or they may reasonably request in
connection therewith or in connection with your special counsel's closing
opinion, all in form and substance reasonably satisfactory to you and your
special counsel.

4. PURCHASERS' SPECIAL RIGHTS

      4.1. Direct Payment.

      Notwithstanding anything to the contrary herein or the Notes, the Company
shall pay all amounts payable with respect to each Note held by an Institutional
Investor (without any presentment of such Notes and without any notation of such
payment being made thereon) by crediting, by federal funds bank wire transfer,
the account of such Institutional Investor in any bank in the United States of
America as may be designated in writing by such Institutional Investor, or in
such other manner as may be reasonably directed or to such other address in the
United States of America as may be reasonably designated in writing by such
Institutional Investor. Your address on Annex 1 hereto shall be deemed to
constitute notice, direction or designation (as appropriate) to the Company with
respect to direct payments as aforesaid. Otherwise, all amounts payable with
respect to each Note shall be made by check mailed and addressed to the
registered holder of each Note at the address shown in the register maintained
by the Company pursuant to Section 6.1 hereof.

      Each holder of Notes agrees that in the event it shall sell or transfer
any Note

            (a) it shall, prior to the delivery of such Note (unless it shall
      have already done so), make a notation thereon of all principal, if any,
      prepaid on such Note and shall also note thereon the date to which
      interest shall have been paid on such Note, and

            (b) it shall promptly notify the Company of the name and address of
      the transferee of any such Note so transferred and the effective date of
      such transfer.

      4.2. Delivery Expenses.

      If any holder of Notes surrenders any Note to the Company pursuant hereto,
the Company shall pay the cost of delivering to or from such holder's home
office or custodian bank from or to the Company, insured to the reasonable
satisfaction of such holder, the surrendered Note and any Note issued in
substitution or replacement for the surrendered Note.

      4.3. Issue Taxes.

      The Company shall pay all taxes in connection with the issuance and sale
of the Notes and in connection with any modification of this Agreement and/or
the Notes and shall save each holder of Notes harmless without limitation as to
time against any and all liabilities with respect to all such taxes. The
obligations of the Company under this Section 4.3 shall survive the payment or
prepayment of the Notes

                                       16
<PAGE>   21

and the termination hereof. Payment of any such taxes in connection with the
exchange or transfer of already issued Notes shall be subject to Section 6.2
hereof.

5. PREPAYMENTS; CHANGE OF CONTROL PUT OPTION

      5.1. Scheduled Required Prepayments and Payment at Maturity.

            (a) Series A Notes. The Company shall pay, and there shall be due
      and payable, Six Million Dollars ($6,000,000) in principal amount of the
      Series A Notes on May 4 in each year beginning on May 4, 2003 and ending
      on May 4, 2007, inclusive (together with the required payments described
      in clause (b) below, each a "Required Principal Payment"). The entire
      remaining principal of the Series A Notes outstanding on May 4, 2007, if
      any, together with interest accrued and unpaid thereon, shall be due and
      payable on May 4, 2007.

            (b) Series B Notes. The Company shall pay, and there shall be due
      and payable, Twelve Million Three Hundred Thousand Dollars ($12,300,000)
      in principal amount of the Series B Notes on May 4 in each year beginning
      on May 4, 2006 and ending on May 4, 2010, inclusive. The entire remaining
      principal of the Series B Notes outstanding on May 4, 2010, if any,
      together with interest accrued and unpaid thereon, shall be due and
      payable on May 4, 2010.

      Each Required Principal Payment in respect of a Note shall be at one
      hundred percent (100%) of the principal amount prepaid on such Note,
      together with interest accrued and unpaid thereon to the date of the
      payment of such Required Principal Payment.

      5.2. Optional Prepayments.

            (a) Optional Prepayments. The Company may, at any time after the
      Closing Date, prepay the principal amount of both (but only both) Series
      of Notes in part, in an amount of not less than One Million Dollars
      ($1,000,000) at any time, or in whole, in each case together with:

                  (i) an amount equal to the sum of the Make-Whole Amounts at
            such time in respect of the principal amount of the Notes of each
            Series being so prepaid; and

                  (ii) interest on such principal amount then being prepaid
            accrued to the prepayment date.

            (b) Notice of Prepayment. The Company will give notice of any
      prepayment of the Notes in accordance with this Section 5.2 to each holder
      of the Notes not less than twenty (20) days or more than sixty (60) days
      before the date fixed for prepayment, specifying:

                  (i) such date;

                  (ii) the Section hereof under which the prepayment is to be
            made;

                  (iii) the principal amount of each Note to be prepaid on such
            date;

                  (iv) the interest to be paid on each such Note, accrued to the
            date fixed for prepayment; and

                  (v) the calculation of an estimated Make-Whole Amount in
            respect of each Note, if any (assuming the date of prepayment was
            the date of such notice), due in

                                       17
<PAGE>   22

            connection with such prepayment, accompanied by a copy of the
            Applicable H.15 used in determining the Make-Whole Discount Rate in
            respect thereof.

      Such notice of prepayment shall also certify all facts that are conditions
      precedent to any such prepayment. Notice of prepayment having been so
      given, the aggregate principal amount of the Notes specified in such
      notice, together with a Make-Whole Amount in respect of the Notes of such
      Series being so prepaid, if any, and accrued interest thereon shall become
      due and payable on the specified prepayment date. Contemporaneously with
      any such prepayment the Company shall deliver to each holder of Notes a
      certificate of a Vice-President, the Treasurer or the President of the
      Company specifying the calculation of the Make-Whole Amount in respect of
      each Series of Notes as of the specified prepayment date, accompanied by a
      copy of the Applicable H.15 used in determining the Make-Whole Discount
      Rate in respect of such Series.

            (c) Effect of Partial Prepayments on Required Payments. Each partial
      prepayment of the principal of the Notes made pursuant to this Section 5.2
      shall be applied against and reduce each of the then remaining Required
      Principal Payments by a percentage equal to the aggregate principal amount
      of the Notes so prepaid divided by the aggregate principal amount of the
      Notes outstanding immediately prior to such prepayment. Such calculation
      shall be made, and such prepayment shall be applied, without regard to the
      Series of any Note.

      5.3. Partial Prepayment Pro Rata.

      If, at the time any required or optional prepayment is due under Section
5.1 or Section 5.2 hereof, there is more than one Note outstanding, the
aggregate principal amount of such required or optional partial prepayment of
the Notes shall be allocated among all the holders of the Notes (without regard
to Series) at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof then outstanding, with
adjustments, to the extent practicable, to equalize for any prior prepayments
not in such proportion. For the purpose of this Section 5.3 only, any Notes
reacquired by the Company shall be deemed to be outstanding for purposes of
allocating required prepayments made pursuant to Section 5.1 hereof and the
Company shall be deemed to be the holder thereof.

      5.4. Notation of Notes on Prepayment.

      Upon any partial prepayment of a Note, such Note may, at the option of the
holder thereof, be

            (a) surrendered to the Company pursuant to Section 6.2 hereof in
      exchange for a new Note of the same Series in a principal amount equal to
      the principal amount remaining unpaid on the surrendered Note,

            (b) made available to the Company for notation thereon of the
      portion of the principal so prepaid, or

            (c) marked by such holder with a notation thereon of the portion of
      the principal so prepaid.

In case the entire principal amount of any Note is prepaid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the prepaid principal amount of any Note.

      5.5. No Other Optional Prepayments.

                                       18
<PAGE>   23

      Except as provided in Section 5.2 hereof or in accordance with an offer
made in compliance with Section 7.16 hereof, the Company may not make any
optional prepayment (whether directly or indirectly by purchase or other
acquisition) in respect of the Notes.

      5.6. Offer to Pay upon Change in Control Ratings Event.

            (a) Notice and Offer. In the event of either:

                  (i) a Change in Control Ratings Event; or

                  (ii) the obtaining of knowledge of a Control Event by any
            Senior Officer of the Company (including, without limitation, via
            the receipt of notice of a Control Event from any holder of Notes);

the Company will, within five (5) Business Days of the occurrence of each of
such events, give written notice of such Change in Control Ratings Event or
Control Event to each holder of Notes in the manner set forth in Section 11.1.
In the event of a Change in Control Ratings Event, such written notice shall
contain, and such written notice shall constitute, an irrevocable offer to
prepay all, but not less than all, of the Notes of each Series held by such
holder (in this case only, "holder" in respect of any Note registered in the
name of a nominee for a disclosed beneficial owner shall mean such beneficial
owner) on a date specified in such notice (the "Control Prepayment Date") that
is not less than 40 days and not more than 60 days after the date of such
notice. If the Control Prepayment Date shall not be specified in such notice,
the Control Prepayment Date shall be the 40th day after the date of such
holder's receipt of such notice.

            (b) Acceptance and Payment. To accept such offered prepayment, a
      holder of Notes shall cause a notice of such acceptance (which notice of
      acceptance may be in respect of one or both Series of Notes held by such
      holder, but which notice need not treat Notes of both Series held by such
      holder in the same manner) to be delivered to the Company, not later than
      10 days before the Control Prepayment Date (it being understood that the
      failure by a holder to respond to such written offer of prepayment by such
      time shall be deemed to constitute a failure to accept such offer). If so
      accepted, such offered prepayment shall be due and payable on the Control
      Prepayment Date, together with interest on the Notes then being prepaid
      accrued to the Control Prepayment Date, but without any Make-Whole Amount.

            (c) Officer's Certificate. Each offer to prepay the Notes pursuant
      to this Section 5.6 shall be accompanied by a certificate, executed by a
      Senior Officer of the Company and dated the date of such offer,
      specifying;

                  (i) the Control Prepayment Date;

                  (ii) that such payment is to be made pursuant to the
            provisions of Section 5.6 of the Note Purchase Agreements;

                  (iii) the principal amount of each such Note offered to be
            prepaid;

                  (iv) the unpaid interest that would be due on each such Note
            offered to be prepaid, accrued to the Control Prepayment Date;

                  (v) that the conditions of this Section 5.6 have been
            fulfilled; and

                  (vi) in reasonable detail, the nature and date or proposed
            date of the Change in Control Ratings Event.

                                       19
<PAGE>   24

            (d) Deferral Pending Change in Control Ratings Event. The obligation
      of the Company to prepay Notes pursuant to the offers accepted in
      accordance with Section 5.6(b) is subject to the occurrence of the Change
      in Control Ratings Event in respect of which such offers and acceptances
      shall have been made. In the event that such Change in Control Ratings
      Event does not occur on the Control Prepayment Date in respect thereof,
      the prepayment shall be deferred until, and shall be made on, the date on
      which such Change in Control Ratings Event occurs. The Company shall keep
      each holder of Notes reasonably and timely informed of

                  (i) any such deferral of the date of prepayment;

                  (ii) the date on which such Change in Control Ratings Event
            and the prepayment are expected to occur; and

                  (iii) any determination by the Company that efforts to effect
            such Change in Control Ratings Event have ceased or been abandoned
            (in which case the offers and acceptances made pursuant to this
            Section 5.6 in respect of such Change in Control Ratings Event shall
            be deemed rescinded).

6. REGISTRATION; SUBSTITUTION OF NOTES

      6.1. Registration of Notes.

      The Company shall cause to be kept at its office, maintained pursuant to
Section 7.3 hereof, a register for the registration and transfer of Notes. The
name and address of each holder of one or more Notes, the series of each Note,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in the register. The Person in whose name any Note
shall be registered shall be deemed and treated as the owner and holder thereof
for all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary.

      6.2. Exchange of Notes.

      Upon surrender of any Note at the office of the Company maintained
pursuant to Section 7.3 hereof duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing, the Company shall execute and deliver,
at the Company's expense (except as provided below), a new Note or Notes of the
same Series in exchange therefor, in denominations of at least One Hundred
Thousand Dollars ($100,000) (except as may be necessary to reflect any principal
amount not evenly divisible by One Hundred Thousand Dollars ($100,000)), in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request, shall be of the same Series as the surrendered Note and
shall be substantially in the form of Exhibit A1 or Exhibit A2 hereto, as the
case may be, corresponding to the Series of the surrendered Note. Each such new
Note shall be dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. The Company may require payment of a
sum sufficient to cover any stamp tax or governmental charge imposed in respect
of any such transfer of Notes.

      6.3. Replacement of Notes.

      Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note and

                                       20
<PAGE>   25

            (a) in the case of loss, theft or destruction, of indemnity
      reasonably satisfactory to it (provided that if the holder of such Note is
      an Institutional Investor, such holder's own agreement of indemnity shall
      be deemed to be satisfactory), or

            (b) in the case of mutilation, upon surrender and cancellation
      thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same Series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.

7. COMPANY BUSINESS COVENANTS

      The Company covenants that on and after the Closing Date and so long as
any of the Notes shall be outstanding:

      7.1. Payment of Taxes and Claims.

      The Company will, and will cause each Subsidiary to, pay before they
become delinquent,

            (a) all taxes, assessments and governmental charges or levies
      imposed upon it or its Property, and

            (b) all claims or demands of materialmen, mechanics, carriers,
      warehousemen, landlords and other like Persons that, if unpaid, might
      result in the creation of a Lien upon its Property,

provided, that items of the foregoing description need not be paid

                  (i) while being contested in good faith and by appropriate
            proceedings as long as adequate book reserves required to be
            established and maintained in accordance with Generally Accepted
            Accounting Principles have been established and maintained and exist
            with respect thereto and

                  (ii) so long as the title of the Company or the Subsidiary, as
            the case may be, to, and its right to use, such Property, is not
            materially adversely affected thereby.

      In the case of any item described in clause (a) or clause (b) above
involving in excess of Two Million Dollars ($2,000,000) in respect of any fiscal
year of the Company, the appropriateness of the proceedings will be supported by
an opinion of the independent counsel responsible for such proceedings and the
adequacy of all reserves of the Company and the Subsidiaries in respect of all
of the items described in clause (a) and clause (b) above will be supported by
an opinion of the independent accountants of the Company (which opinions will be
delivered to the holders of Notes as provided in Section 8.1 hereof).

      For purposes of this Section 7.1, an "item" in any fiscal year of the
Company shall include all amounts claimed by any obligee or payee in respect of
any of the foregoing described liabilities or claims in clause (a) or clause (b)
above.

      7.2. Maintenance of Properties and Corporate Existence.

      The Company shall, and shall cause each Subsidiary to,

                                       21
<PAGE>   26

            (a) Property -- maintain its Property in good condition and make all
      necessary renewals, replacements, additions, betterments and improvements
      thereto;

            (b) Insurance -- maintain, with financially sound and reputable
      insurers accorded a rating by A.M. Best Company of "A-" or better and a
      size rating of VIII or better (or a comparable rating by any comparable
      successor rating agency)(such insurers are hereinafter referred to as
      "Financially Sound/Reputable Insurers"), insurance with respect to its
      Property and business against such casualties and contingencies, of such
      types (including, without limitation, loss or damage, public liability,
      workers compensation, business interruption, larceny, embezzlement or
      other criminal misappropriation) and in such amounts and subject to such
      terms and conditions as are customary in the case of corporations engaged
      in the same or a similar business and similarly situated, provided,
      however, that in lieu of the aforesaid Property and business insurance
      maintained with Financially Sound/Reputable Insurers, the Company or any
      such Subsidiary may maintain a system or systems of self-insurance which
      are in accord with sound financial practices of similarly situated
      corporations of established reputations maintaining similar such systems
      and with respect thereto shall maintain adequate insurance reserves in
      accordance with Generally Accepted Accounting Principles and in accordance
      with sound actuarial and insurance principles, provided further, however,
      that all of such self-insurance shall be effected by insurance policies
      written and issued by one or more insurance Subsidiaries which satisfy the
      criteria of a Financially Sound/Reputable Insurer and shall be subject to
      such insurance Subsidiary's normal reinsurance treaties and agreements;

            (c) Financial Records -- keep true books of records and accounts in
      which full and correct entries shall be made of all its business
      transactions and which will permit the provision of accurate and complete
      financial statements in accordance with Generally Accepted Accounting
      Principles and Statutory Financial Statement Accounting Procedures, as the
      case may be, provided that if such books of records and accounts are
      maintained on a cash basis, this Section 7.2(c) shall be deemed not to be
      contravened if the Company maintains (and makes available to you and the
      other holders of Notes, upon your request, for your inspection) all
      necessary working papers, lists of non-ledger assets, claims registers,
      policy reserve files and other ledgers and records necessary to conform
      such cash basis books of records and accounts to the standards (including,
      without limitation, the accrual standards) required by Generally Accepted
      Accounting Principles and Statutory Financial Statement Accounting
      Procedures, as the case may be;

            (d) Existence and Rights -- do or cause to be done all things
      necessary

                  (i) to preserve and keep in full force and effect its
            existence, rights and franchises and

                  (ii) to maintain each Subsidiary as a Subsidiary,

      except as otherwise permitted by Section 7.9 and Section 7.12 hereof; and

            (e) Compliance with Law -- not be in violation of any law, ordinance
      or governmental rule or regulation to which it is subject and not fail to
      obtain or maintain any license, certificate, permit, franchises or other
      governmental authorization necessary to the ownership of its Properties or
      to the conduct of its business (including, without limitation, its
      property/casualty insurance business), which violation or failure to
      obtain or maintain would materially adversely affect the business,
      prospects, profits, Properties or condition (financial or otherwise) of
      the Company and the Subsidiaries or the ability of the Company to perform
      its obligations set forth in this Agreement and in the Notes, or the
      rights and remedies of the holders of the Notes hereunder or under the
      Notes.

                                       22
<PAGE>   27

      7.3. Payment of Notes and Maintenance of Office.

      The Company will punctually pay, or cause to be paid, the principal and
interest (and Make-Whole Amount, if any) to become due in respect of the Notes
according to the terms of the Notes and will maintain an office at the address
of the Company set forth in Section 11.1 hereof where notices, presentations and
demands in respect hereof or the Notes may be made upon it. Such office will be
maintained at such address until such time as the Company shall notify the
holders of the Notes of any change of location of such office, which will in any
event be located within the United States of America.

      7.4. Liens.

            (a) Negative Pledge. The Company will not, and will not permit any
      Subsidiary to, at any time, cause or permit to exist, or agree or consent
      to cause or permit to exist in the future (upon the happening of a
      contingency or otherwise), any of their Property, whether now owned or
      hereafter acquired, to be subject to a Lien except:

                  (i) Liens in existence on the Closing Date and described on
            Part 7.4 of Annex 3 hereto;

                  (ii) Purchase Money Liens, if, after giving effect thereto and
            to any concurrent transactions, each such Purchase Money Lien
            secures Debt of the Company and/or any Subsidiary in an amount not
            exceeding one-hundred percent (100%) of the cost of acquisition of
            the particular Property to which such Debt relates;

                  (iii) Liens existing on Property of any corporation at the
            time it becomes a Subsidiary, provided that

                        (A) no such Lien shall extend to or cover any Property
                  other than the Property subject to such Lien at the time of
                  any such transaction,

                        (B) the amount of Debt secured by any such Lien shall
                  not exceed the Fair Market Value (as determined in good faith
                  by the Board of Directors or the board of directors of such
                  Subsidiary) of the Property subject thereto, determined at the
                  time of any such transaction,

                        (C) such Lien shall not have been created in
                  contemplation of any such transaction, and

                        (D) after giving effect to such corporation becoming a
                  Subsidiary, no Default or Event of Default would exist;

                  (iv) Liens permitted by the foregoing clause (i) through
            clause (iii), inclusive, of this Section 7.4, securing Debt of the
            Company and/or any Subsidiary that is being renewed, extended or
            refunded, provided that

                        (A) the amount of the Debt secured thereby at the time
                  of such renewal, extension or refunding is not increased, and

                        (B) such Liens are not extended to any Property not
                  subject thereto at the time of such renewal, extension or
                  refunding;

                                       23
<PAGE>   28

                  (v) Liens on Property of a Subsidiary, provided that such
            Liens secure only Debt owing to the Company or a Wholly-Owned
            Subsidiary;

                  (vi) Liens incurred or deposits made in the ordinary course of
            business

                        (A) in connection with worker's compensation,
                  unemployment insurance, social security and other like laws,

                        (B) to secure the performance of letters of credit,
                  bids, tenders, sales contracts, leases, statutory obligations,
                  surety and performance bonds (other than as contemplated in
                  clause (vii)(B) of this Section 7.4(a)) and other similar
                  obligations not incurred in connection with the borrowing of
                  money, the obtaining of advances or the payment of the
                  deferred purchase price of Property,

                        (C) to secure the claims or demands of materialmen,
                  mechanics, carriers, warehousemen, landlords and other like
                  Persons, provided that the payment thereof is not at the time
                  required by Section 7.1 hereof,

                        (D) in the nature of reservations, exceptions,
                  encroachments, easements, rights-of-way, covenants,
                  conditions, restrictions, leases and other similar title
                  exceptions or encumbrances affecting real property, provided
                  that such exceptions and encumbrances do not in the aggregate
                  materially detract from the value of said Properties or
                  materially interfere with the use of such Property in the
                  ordinary conduct of the business of the Company and the
                  Subsidiaries, and

                        (E) in favor of any Governmental Authority resulting
                  from acceptance of progress or partial payments in the
                  ordinary course of business under contracts with such
                  Governmental Authority;

                  (vii) (A) Liens arising from judicial attachments and
            judgments and other similar Liens arising in connection with court
            proceedings, provided that the execution or other enforcement of
            such Liens is effectively stayed and the claims secured thereby are
            being actively contested in good faith and by appropriate
            proceedings; and

                        (B) Liens to secure appeal bonds, supersedeas bonds and
                  other similar Liens arising in connection with court
                  proceedings (including, without limitation, surety bonds and
                  letters of credit) or any other instrument serving a similar
                  purpose,

            so long as the aggregate amount so secured by the Liens described in
            this clause (vii) shall not at any time exceed Ten Million Dollars
            ($10,000,000);

                  (viii) Liens securing taxes, assessments or governmental
            charges or levies, provided that the payment thereof is not at the
            time required by Section 7.1 hereof;

                  (ix) Liens created, incurred or assumed in connection with any
            issuance of industrial revenue, pollution control or development
            bonds by any Governmental Authority, provided that the net proceeds
            from the issuance of such bonds are used to acquire or construct
            fixed assets for use by the Company or one or more Subsidiaries;

                                       24
<PAGE>   29

                  (x) Liens securing Capitalized Lease Obligations of the
            Company and/or any Subsidiary permitted by Section 7.10(a) hereof;
            and

                  (xi) Liens, not otherwise permitted by the provisions of this
            Section 7.4, provided that, after giving effect to the imposition of
            such Lien, the sum, without duplication, of

                        (A) the aggregate amount of Debt of the Company and/or
                  any Subsidiary secured by Liens permitted by Section
                  7.4(a)(ii) hereof, plus

                        (B) the aggregate amount of Debt or other obligations of
                  the Company and/or any Subsidiary secured by Liens permitted
                  only by this Section 7.4(a)(xi), plus

                        (C) the aggregate amount of Unsecured Subsidiary Debt,
                  plus

                        (D) the aggregate amount of Capitalized Lease
                  Obligations of the Company and/or any Subsidiary permitted by
                  Section 7.10(b) hereof,

            shall not exceed fifteen percent (15%) of Consolidated
            Capitalization, in each case determined at the time any such Lien is
            created.

      Nothing in this Section 7.4 shall be construed to permit the incurrence or
      existence of any Debt not otherwise permitted by this Agreement.

            (b) Equal and Ratable Lien; Equitable Lien. In case any Property
      shall be subjected to a Lien in violation of this Section 7.4, the Company
      will forthwith make or cause to be made, to the fullest extent permitted
      by applicable law, provision whereby the Notes will be secured equally and
      ratably with all other obligations secured thereby pursuant to such
      agreements and instruments as shall be approved by the Required Holders,
      and the Company will cause to be delivered to each holder of a Note an
      opinion of independent counsel to the effect that such agreements and
      instruments are enforceable in accordance with their terms, and in any
      such case the Notes shall have the benefit, to the full extent that, and
      with such priority as, the holders of Notes may be entitled under
      applicable law, of an equitable Lien on such Property securing the Notes.
      Such violation of this Section 7.4 will constitute an Event of Default
      hereunder, whether or not any such provision is made pursuant to this
      Section 7.4(b).

            (c) Financing Statements. The Company will not, and will not permit
      any Subsidiary to, at any time, sign or file a financing statement under
      the Uniform Commercial Code of any jurisdiction that names the Company or
      such Subsidiary as debtor, or sign any security agreement authorizing any
      secured party thereunder to file any such financing statement, except, in
      any such case, a financing statement filed or to be filed to perfect or
      protect a security interest that the Company or such Subsidiary is
      entitled to create, assume or incur, or permit to exist, under the
      foregoing provisions of this Section 7.4 or to evidence for informational
      purposes a lessor's interest in Property leased to the Company or any such
      Subsidiary.

            (d) Liens of Subsidiaries. Each Person which becomes a Subsidiary
      after the Closing Date will be deemed to have granted on the date such
      Person becomes a Subsidiary all the Liens in existence on its Property on
      such date.

      7.5. Limitation on Indebtedness.

                                       25
<PAGE>   30

      The Company will not, and will not permit any Subsidiary to, at any time
incur, assume, guarantee or otherwise become liable with respect to, any Debt
(other than Permitted Intercompany Funded Debt), unless, after giving effect to
such transaction and to any concurrent repayment of Debt of the Company, and/or
any Subsidiary,

            (a) (i) Consolidated Debt will not be greater than thirty percent
      (30%) of Consolidated Capitalization, in each case determined at the time
      of such transaction, or

                  (ii) such Debt is a renewal, refunding or extension of Debt of
            the Company and/or any Subsidiary outstanding on the Closing Date or
            initially incurred by the Company or such Subsidiary after the
            Closing Date in accordance with Section 7.5(a)(i) so long as, after
            giving effect to such renewal, refunding or extension

                        (A) the principal amount of such Debt does not exceed
                  the principal amount of the Debt being so renewed, refunded or
                  extended at the time of such renewal, refunding or extension,

                        (B) such Debt does not have a scheduled maturity earlier
                  than, and does not have a weighted average life to maturity
                  (calculated in accordance with accepted financial practice)
                  less than the Debt being so renewed, refunded or extended, and

                        (C) such Debt has the benefit of collateral and
                  guaranties to no greater extent than the Debt being so
                  renewed, refunded or extended, and

            (b) no Default or Event of Default shall then exist.

Each Person which becomes a Subsidiary after the Closing Date will be deemed to
have incurred on the date such Person becomes a Subsidiary all the Debt of such
Person in existence on such date.

      Anything contained in this Agreement to the contrary notwithstanding, the
Company will not at any time incur, assume, guarantee or otherwise become liable
with respect to, any Debt (other than Permitted Intercompany Funded Debt) owing
to a Subsidiary.

      7.6. Net Worth Maintenance.

      The Company will not permit at any time Consolidated Tangible Net Worth to
be less than the sum of

            (a) Three Hundred Fifty Million Dollars ($350,000,000); plus

            (b) an aggregate amount equal to twenty-five percent (25%) of
      Consolidated Net Income (but, in each case, only if a positive number) for
      each completed fiscal year of the Company ended after the date of Closing.

      7.7. Maintenance of Debt to Capitalization Ratio.

      The Company will not at any time permit Consolidated Debt at such time to
exceed forty percent (40%) of Consolidated Capitalization at such time.

                                       26
<PAGE>   31

      7.8. Limitation on Subsidiary Indebtedness.

      The Company will not permit any Subsidiary, at any time, to incur, assume,
guarantee or otherwise become liable with respect to, any Debt, provided that a
Subsidiary may become liable in respect of

            (a) Non-Basket Secured Subsidiary Debt, if, after giving effect to
      such transaction and to any concurrent repayment of Debt of such
      Subsidiary, no Default or Event of Default would exist, and

            (b) Basket Secured Subsidiary Debt and Unsecured Subsidiary Debt,
      provided that, after giving effect to such transaction and to any
      concurrent repayment of Debt of the Company and Subsidiaries, the sum,
      without duplication, of

                  (i) the aggregate amount of Debt of the Company and/or any
            Subsidiary secured by Liens permitted by Section 7.4(a)(ii) hereof,
            plus

                  (ii) the aggregate amount of Debt or other obligations of the
            Company and/or any Subsidiary secured by Liens permitted only by
            Section 7.4(a)(xi) hereof, plus

                  (iii) the aggregate amount of Unsecured Subsidiary Debt, plus

                  (iv) the aggregate amount of Capitalized Lease Obligations of
            the Company and/or any Subsidiary permitted by Section 7.10(b)
            hereof,

      shall not exceed fifteen percent (15%) of Consolidated Capitalization, in
      each case determined at such time and no Default or Event of Default would
      exist.

      Each Person which becomes a Subsidiary after the Closing Date will be
deemed to have incurred on the date such Person becomes a Subsidiary all the
Debt of such Person in existence on such date.

      7.9. Disposition of Assets.

            (a) Disposal of Ownership of a Subsidiary. The Company will not, and
      will not permit any Subsidiary to, at any time, sell or otherwise dispose
      of any shares of the stock (or any options or warrants to purchase stock
      or other Securities exchangeable for or convertible into stock) of a
      Subsidiary (said stock, options, warrants and other Securities herein
      called "Subsidiary Stock"), nor will it permit any Subsidiary to issue,
      sell or otherwise dispose of any shares of its own Subsidiary Stock, if
      the effect of the transaction would be to reduce the proportionate
      interest of the Company and the other Subsidiaries in the outstanding
      Subsidiary Stock of the Subsidiary whose shares are the subject of the
      transaction, provided that the foregoing restrictions do not apply to:

                  (i) the issue of directors' qualifying shares; and

                  (ii) the sale for an Acceptable Consideration of the entire
            Investment (whether represented by stock, debt, claims or otherwise)
            of the Company and its other Subsidiaries in any Subsidiary, if all
            of the following conditions are met:

                        (A) such sale satisfies the requirements of a Transfer
                  under subclause (vi) of clause (b) below;

                                       27
<PAGE>   32

                        (B) in the good faith opinion of the Board of Directors,
                  such sale is in the best interests of the Company; and

                        (C) the Subsidiary being disposed of has no continuing
                  Investment in any other Subsidiary not being simultaneously
                  disposed of or in the Company.

            (b) Disposal of Ownership of Assets. The Company will not, and will
      not permit any Subsidiary to, sell, lease as lessor, transfer or otherwise
      dispose of any asset (collectively, "Transfers"), except

                  (i) a Transfer by a Subsidiary to the Company or another
            Subsidiary,

                  (ii) as provided in Section 7.9(a),

                  (iii) as provided in Section 7.9(c),

                  (iv) as provided in Section 7.10 hereof,

                  (v) as provided in Section 7.12 hereof, or

                  (vi) with respect to a Transfer of an asset for an Acceptable
            Consideration if the conditions specified in subclause (A),
            subclause (B), subclause (C) and subclause (D) below would be
            satisfied with respect to such Transfer:

                        (A) the sum of

                              (I) the current net book value of such asset, plus

                              (II) the aggregate net book value of each other
                        asset Transferred under or pursuant to this subclause
                        (vi) (such net book value being determined at the time
                        of the Transfer of each such other asset) after the
                        fiscal year end of the Company immediately preceding the
                        date of such Transfer, including, without limitation,
                        any Transfer pursuant to clause (a)(ii) above,

                  would not exceed ten percent (10%) of Consolidated Net
                  Tangible Assets determined as of the last day of the then
                  mostly recently ended fiscal year of the Company or, if more
                  recent, as of the date of the then most recently audited
                  consolidated financial statement of the Company and the
                  Subsidiaries;

                        (B) immediately before and after the consummation of
                  such Transfer, and after giving effect thereto, no Default or
                  Event of Default would exist;

                        (C) in the good faith opinion of the Board of Directors,
                  such Transfer is in the best interests of the Company; and

                        (D) immediately after giving effect to such Transfer,
                  the Company would be able to borrow $1.00 of additional Debt
                  without violating Section 7.5 hereof,

                                       28
<PAGE>   33

      provided that, in the case that the Company cannot satisfy subclause (A)
      above with respect to a Transfer of an asset of the Company (but has
      satisfied subclause (B), subclause (C) and subclause (D) above with
      respect to such Transfer), the Company may nonetheless make such Transfer
      of such asset if, but only if, the Company shall have undertaken in a
      writing delivered to each holder of Notes contemporaneously with the
      consummation of such Transfer to apply, within thirty (30) days following
      the consummation of such Transfer, the 10% Excess Proceeds determined in
      respect of such Transfer to either or both

                  (y) the acquisition by the Company of assets to be used in the
            ordinary course of business of the Company or in which the Company
            would otherwise invest in the ordinary course of its business or

                  (z) the prepayment of Senior Debt of the Company owing to
            Persons other than the Company, any Subsidiary or any Affiliate, the
            holders of which Senior Debt shall have received a written offer
            from the Company to prepay a Ratable Portion of the Senior Debt of
            each such holder (without any prepayment premium but including
            accrued and unpaid interest on such Ratable Portion) and shall have
            accepted such offer in writing in accordance with the terms of such
            offer.

      The Company agrees, in connection with its election to pursue clause (z)
      above, to make the written offer of prepayment contemplated therein on or
      prior to the date of consummation of the related Transfer, to deliver such
      offer to each holder of its Senior Debt (including, without limitation,
      the holders of Notes but excluding any such holder which is the Company,
      any Subsidiary or any Affiliate), to limit the terms of such offer to the
      terms contemplated in clause (z) and in this sentence and to require in
      such written offer all acceptances thereof to have been delivered not
      later than twenty-five (25) days following the consummation of such
      Transfer, provided that, in any instance in which the Company may require
      any holder of Senior Debt to accept its Ratable Portion as a prepayment
      therefor, such written offer as to such holder shall be deemed accepted.
      The Ratable Portion of Senior Debt of the Company held by any holder which
      shall have rejected the prepayment offer of the Company pursuant to clause
      (z) above, or shall have failed to have accepted the prepayment offer of
      the Company pursuant to clause (z) above in accordance with the terms
      thereof, shall be applied by the Company as provided in clause (y) above
      on or prior to the thirtieth (30th) day following the consummation of the
      Transfer related thereto. The Company's undertakings in respect of the
      aforesaid writing (including its undertaking to extend an offer to ratably
      prepay its Senior Debt and the obligation of the Company to ratably prepay
      any such Senior Debt, the holders of which shall have accepted or been
      deemed to have accepted such offer) is, and shall be deemed to be, a
      covenant of the Company under this Section 7.9.

            Dispositions of assets constituting Subsidiary Preferred Stock or
      Debt of Subsidiaries shall be subject to clause (d) of this Section 7.9.
      With respect to any Transfer of assets which is part of a series of
      directly related Transfers and which shall occur in the fiscal year
      following the fiscal year in which the first Transfer of such series of
      related Transfers occurred, the determination under this clause (vi) as to
      whether such Transfer exceeds the aforesaid calculation of ten percent
      (10%) of Consolidated Net Tangible Assets shall be made as if such
      Transfer occurred on the date of the first Transfer of such series of
      directly related Transfers and Consolidated Net Tangible Assets at the end
      of the fiscal year in which said first Transfer occurred shall be
      accordingly adjusted to reflect such Transfer for purposes of applying
      this clause (v) to any Transfer of assets occurring subsequent to such
      Transfer.

            (c) Marketable Securities. Anything contained in this Section 7.9 to
      the contrary notwithstanding, Marketable Investment Securities of the
      Company may be Transferred by the Company without any limitation imposed
      by this Section 7.9.

                                       29
<PAGE>   34

            (d) Subsidiary Debt; Preferred Stock. Except as contemplated in
      Section 7.9(a) hereof, the Company will not sell, transfer or otherwise
      dispose of, any Debt of a Subsidiary, and no Subsidiary will sell,
      transfer or otherwise dispose of, any Debt of another Subsidiary, except
      if such sale, transfer or other disposition is to the Company or a
      Wholly-Owned Subsidiary. The Company will not permit any Subsidiary to
      issue or have outstanding any Subsidiary Preferred Stock if such
      Subsidiary Preferred Stock is to be held by a Person other than the
      Company or a Wholly-Owned Subsidiary and, subject to Section 7.9(a)
      hereof, the Company shall not sell, or permit any Subsidiary to sell, any
      Subsidiary Preferred Stock of any Subsidiary to any Person other than to
      the Company or to a Wholly-Owned Subsidiary.

      7.10. Limitation on Sale-Leaseback.

      The Company will not, and will not permit any Subsidiary to, enter into
any Sale and Leaseback Transaction if the lease arising therefrom has an
original term in excess of three (3) years unless either

            (a) the net proceeds arising therefrom have been applied, within
      thirty (30) days following the consummation of such Sale and Leaseback
      Transaction (or are concurrently with the consummation of such Sale and
      Leaseback Transaction being applied) to the prepayment of Senior Debt of
      the Company and the Subsidiaries owing to Persons other than the Company,
      any Subsidiary or any Affiliate, the holders of which Senior Debt shall
      have received a written offer from the Company to prepay a S/L Ratable
      Portion of the Senior Debt of each such holder (without any prepayment
      premium but including accrued and unpaid interest on such S/L Ratable
      Portion) and shall have accepted such offer in writing in accordance with
      the terms of such offer; the Company agrees, in connection with its
      election under this clause (a), to make the written offer of prepayment
      contemplated above on or prior to the date of consummation of the related
      Sale and Leaseback Transaction, to deliver such offer to each holder of
      its Senior Debt (including, without limitation, the holders of Notes but
      excluding any such holder which is the Company, any Subsidiary or any
      Affiliate), to limit the terms of such offer to the terms contemplated in
      this clause (a) and to require in such written offer all acceptances
      thereof to have been delivered not later than twenty-five (25) days
      following the consummation of such Sale and Leaseback Transaction,
      provided that, in any instance in which the Company may require any holder
      of Senior Debt to accept its S/L Ratable Portion as a prepayment therefor,
      such written offer as to such holder shall be deemed accepted; or

            (b) if such proceeds are not applied as provided in Section 7.10(a)
      or if Section 7.10(a) shall have been elected and less than all of such
      proceeds shall have been used to prepay Senior Debt as contemplated in
      Section 7.10(a) as a result of the rejection or deemed rejection of one or
      more offers by the Company to prepay Senior Debt thereunder, and after
      giving effect to such Sale and Leaseback Transaction, the sum, without
      duplication, of

                  (i) the aggregate amount of Debt of the Company and/or any
            Subsidiary secured by Liens permitted by Section 7.4(a)(ii) hereof,

                  (ii) the aggregate amount of Debt or other obligations of the
            Company and/or any Subsidiary secured by Liens permitted only by
            Section 7.4(a)(xi) hereof,

                  (iii) the aggregate amount of Unsecured Subsidiary Debt, plus

                  (iv) the aggregate amount of Capitalized Lease Obligations of
            the Company and/or any Subsidiary permitted by this Section 7.10(b),

      shall not exceed fifteen percent (15%) of Consolidated Capitalization, in
      each case determined at the time of such Sale and Leaseback Transaction.

                                       30
<PAGE>   35

      7.11. Restricted Payments.

            (a) Except as otherwise provided in clause (b) and clause (c) of
      this Section 7.11, the Company will not declare or make any Restricted
      Payment at any time unless

                  (i) immediately after, and after giving effect to, such
            Restricted Payment, the aggregate amount of all Restricted Payments
            declared or made after the Closing Date would not exceed the sum of

                        (A) seventy-five percent (75%) of Consolidated Net
                  Income (or, in case such Consolidated Net Income shall be a
                  deficit, minus 100% of such deficit) for the period commencing
                  on December 31, 1999 and ending on the last day of the fiscal
                  quarter of the Company most recently ended at the time such
                  Restricted Payment is declared or made, inclusive, plus

                        (B) (i) one hundred percent (100%) of the aggregate
                  amount of cash proceeds received by the Company from the sale
                  of shares of Company Common Stock after December 31, 1999;

                        (ii) together with the aggregate principal amount of
            Debt Securities of the Company converted into such shares after
            December 31, 1999 in each case net of reasonable and ordinary
            transaction costs and expenses incurred by the Company in connection
            with such sale or conversion; plus

                        (C) One Hundred Million Dollars ($100,000,000);

                  (ii) at the time of such declaration and immediately before,
            and after giving effect to, such Restricted Payment, no Default or
            Event of Default exists or would exist; and

                  (iii) immediately after giving effect to such Restricted
            Payment, the Company would be able to borrow $1.00 of additional
            Debt without violating Section 7.5 hereof.

            (b) The restrictions set forth in clause (a) of this Section 7.11
      notwithstanding, the Company may make Restricted Payments in the nature of
      cash dividends or mandatory sinking fund or mandatory redemption payments
      required to be paid or made in respect of Company Preferred Stock,
      provided that, at the time of such payment, and after giving effect
      thereto (but without testing such payment under clause (a) of this Section
      7.11), no Default or Event of Default exists and the Company would,
      immediately after giving effect to such payment, be able to borrow $1.00
      of additional Debt without violating Section 7.5 hereof, and provided
      further, that Restricted Payments made pursuant to this clause (b) shall
      be included in the calculation of aggregate Restricted Payments required
      by clause (a) of this Section 7.11 for purposes of determining whether any
      future Restricted Payment is permitted under said clause (a).

            (c) The Company will not declare a dividend payment in respect of
      Company Common Stock which is not payable within ninety (90) days of
      declaration, provided that the foregoing shall not prevent the payment of
      any such dividend within ninety (90) days after the date of declaration
      thereof, if at said date of declaration such payment complied with clause
      (a) of this Section 7.11.

                                       31
<PAGE>   36

      7.12. Merger.

      The Company will not, nor will it permit any Subsidiary to, merge with or
into, consolidate with, or sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to, any other Person or permit any other Person
to merge into or consolidate with it; provided that the foregoing restriction
shall not apply to:

            (a) the merger or consolidation of the Company into or with, or the
      sale by the Company of all or substantially all of its assets to, another
      corporation, if:

                  (i) the corporation that results from such merger or
            consolidation or that purchases all or substantially all of such
            assets (the "Surviving Corporation") is organized under the laws of
            the United States of America or any jurisdiction thereof;

                  (ii) all approvals, consents, authorizations, registrations
            and/or filings in respect of such merger, consolidation or sale
            shall have been obtained and/or made, as the case may be, with all
            appropriate Governmental Authorities in accordance with all
            applicable laws and regulations;

                  (iii) the due and punctual payment of the principal of and
            Make-Whole Amount, if any, and interest on all of the Notes,
            according to their tenor, and the due and punctual performance and
            observance of all the covenants in the Notes and this Agreement to
            be performed or observed by the Company, are expressly assumed by
            the Surviving Corporation pursuant to such agreements and
            instruments as shall be approved by the Required Holders, and the
            Company will cause to be delivered to each holder of Notes an
            opinion of independent counsel to the effect that such agreements
            and instruments are enforceable in accordance with their terms;

                  (iv) immediately prior to, and immediately after the
            consummation of the transaction, and after giving effect thereto,

                        (A) no Default or Event of Default exists or would exist
                  under any provision hereof, and

                        (B) the Surviving Corporation could incur at least $1.00
                  of additional Debt without violating Section 7.5 hereof; and

            (b) a merger of a Subsidiary into, or a consolidation of a
      Subsidiary with, the Company (with the Company being the survivor thereof)
      or a Wholly-Owned Subsidiary (with the Wholly-Owned Subsidiary being the
      survivor thereof) or the sale of all or substantially all of its assets to
      the Company or a Wholly-Owned Subsidiary.

      7.13. ERISA.

            (a) Compliance. The Company will, and will cause each ERISA
      Affiliate to, at all times with respect to each Pension Plan,

                  (i) make timely payment of contributions required to meet the
            minimum funding standard set forth in ERISA or the IRC with respect
            thereto and

                  (ii) comply in all material respects with all other applicable
            provisions of ERISA.

                                       32
<PAGE>   37

            (b) Relationship of Vested Benefits to Pension Plan Assets. The
      Company will not at any time permit the present value of all employee
      benefits vested under each Pension Plan to exceed the assets of such
      Pension Plan allocable to such vested benefits at such time, in each case
      determined pursuant to Section 7.13(c) hereof.

            (c) Valuations. All assumptions and methods used to determine the
      actuarial valuation of vested employee benefits under Pension Plans and
      the present value of assets of Pension Plans will be reasonable in the
      good faith judgment of the Company and will comply with all requirements
      of law.

            (d) Prohibited Actions. The Company will not, and will not permit
      any ERISA Affiliate to:

                  (i) engage in any "prohibited transaction" (as such term is
            defined in section 406 of ERISA or section 4975 of the IRC) that
            would result in the imposition of a material tax or penalty on the
            Company or any ERISA Affiliate;

                  (ii) incur with respect to any Pension Plan any "accumulated
            funding deficiency" (as such term is defined in section 302 of
            ERISA), whether or not waived;

                  (iii) terminate any Pension Plan in a manner that would result
            in

                        (A) the imposition of a Lien on the Property of the
                  Company or any Subsidiary pursuant to section 4068 of ERISA or

                        (B) the creation of any liability under section 4062 of
                  ERISA that would reasonably be expected to have a materially
                  adverse effect on the business, prospects, profits, Properties
                  or condition (financial or otherwise) of the Company and the
                  Subsidiaries the ability of the Company to perform its
                  obligations set forth in this Agreement and in the Notes, or
                  the rights and remedies of the holders of the Notes hereunder
                  or under the Notes;

                  (iv) fail to make any payment required by section 515 of
            ERISA; or

                  (v) incur any withdrawal liability under Title IV of ERISA
            with respect to any Multiemployer Plan or any liability as a result
            of the termination of any Multiemployer Plan.

      7.14. Line of Business.

      The Company will not, and will not permit any Subsidiary to, engage in any
business other than (a) businesses engaged in by the Company and the
Subsidiaries described in Section 2.1 hereof, (b) insurance-related businesses,
services and activities and (c) businesses not referred to in clause (a) or
clause (b) of this Section 7.14 if, but only if, the aggregate amount of assets
of the Company and the Subsidiaries employed to engage in such businesses shall
not at any time exceed ten percent (10%) of Consolidated Total Assets.

      7.15. Transactions with Affiliates.

      The Company will not, and will not permit any Subsidiary to, enter into
any transaction, including, without limitation, the purchase, sale or exchange
of Property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of the Company's
or

                                       33
<PAGE>   38

such Subsidiary's business and upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.

      7.16. Pro-Rata Offers.

      The Company will not, nor will it permit any Subsidiary or any Affiliate
to, directly or indirectly, acquire or make any offer to acquire any Notes
unless the Company or such Subsidiary or Affiliate shall have offered to acquire
Notes, pro rata, from all holders of the Notes and upon the same terms. In case
the Company, any Subsidiary or any Affiliate acquires any Notes, such Notes will
thereafter be cancelled and no Notes will be issued in substitution therefor.
Any Notes so acquired by the Company, any Subsidiary or any Affiliate shall be
deemed not to be outstanding under this Agreement for purposes of voting.

      7.17. Private Offering.

      The Company will not, nor will it permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar Securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.

      7.18. Tax Consolidation.

      The Company shall not file or consent to the filing of any consolidated
income tax return with any Person other than the Subsidiaries.

      7.19. Pari Passu Ranking.

      The Company covenants that its obligations under and in respect of this
Agreement and the Notes do and will rank at least pari passu in right of payment
with all of its other present and future unsecured and unsubordinated Debt.

8. INFORMATION AS TO COMPANY

      8.1. Financial and Business Information.

      The Company shall deliver to each holder of Notes:

            (a) Quarterly Statements -- as soon as practicable after the end of
      each quarterly fiscal period in each fiscal year of the Company, and in
      any event within fifty (50) days thereafter, duplicate copies of:

                  (i) (A) a consolidated balance sheet of the Company and the
            Subsidiaries as at the end of such quarter, and

                        (B) consolidated statements of income, changes in
            shareholders' equity and cash flows of the Company and the
            Subsidiaries, for such quarter and (in the case of the second and
            third quarters) for the portion of the fiscal year ending with such
            quarter, and

      setting forth in the case of clause (A) and clause (B) above in
      comparative form the figures for the corresponding periods in the previous
      fiscal year, all in reasonable detail, prepared in accordance with
      Generally Accepted Accounting Principles, and certified as complete and
      correct, subject to changes resulting from year-end adjustments, by a
      principal financial officer of the Company, provided, however, that
      delivery of copies of the Company's Quarterly Report on Form 10-Q

                                       34
<PAGE>   39

      (without the exhibits thereto, unless requested by such holder) filed with
      the Securities and Exchange Commission within the time period specified
      above shall be deemed to satisfy the requirements of this Section 8.1(a),
      and

                  (ii) such quarterly statements as are filed by any insurance
            Subsidiary with the National Association of Insurance Commissioners
            on the forms provided for by the National Association of Insurance
            Commissioners for such quarter;

            (b) Annual Statements -- as soon as practicable after the end of
      each fiscal year of the Company, and in any event within ninety-five (95)
      days thereafter, four copies of:

                  (i) (A) a consolidated balance sheet of the Company and the
            Subsidiaries, as at the end of such year, and

                        (B) consolidated statements of income, changes in
            shareholders' equity and cash flows of the Company and the
            Subsidiaries, for such year,

      setting forth in each case in comparative form the figures for the
      previous fiscal year, all in reasonable detail and accompanied by, in the
      case of such consolidated statements, an opinion thereon of either of the
      accountants named in Section 2.2 hereof or other independent certified
      public accountants of recognized national standing selected by the
      Company, which opinion shall, without qualification, state that such
      financial statements fairly present the financial condition of the
      companies being reported upon and have been prepared in accordance with
      Generally Accepted Accounting Principles consistently applied (except for
      changes in application in which such accountants concur) and that the
      examination of such accountants in connection with such financial
      statements shall have been made in accordance with generally accepted
      auditing standards; provided; however, that the delivery of Company's
      Annual Report on Form 10-K (without the exhibits thereto, unless requested
      by such holder) for such fiscal year filed with the Securities and
      Exchange Commission within the time period specified above shall be deemed
      to satisfy the requirements of this Section 8.1(b); and

                  (ii) the Statutory Annual Financial Statements of each
            insurance Subsidiary for such year;

            (c) Opinions of Independent Accountants and Counsel -- as soon as
      practicable after the end of each fiscal year of the Company, and in any
      event within ninety-five (95) days thereafter, duplicate copies of all
      opinions of independent accountants and counsel required pursuant to
      Section 7.1 hereof;

            (d) Audit Reports -- promptly upon receipt thereof, a copy of each
      other report submitted to the Board of Directors by independent
      accountants in connection with any audit made by them of the books of the
      Company or any Subsidiary, provided that for so long as any Event of
      Default shall exist, the Company shall deliver, promptly upon receipt
      thereof, a copy of each other report submitted to the Company or any
      Subsidiary by independent accountants in connection with any annual,
      interim or special audit made by them of the books of the Company or any
      Subsidiary;

            (e) SEC and Other Reports -- promptly upon their becoming available
      one copy of each financial statement, report, notice or proxy statement
      sent by the Company or any Subsidiary to stockholders generally, and of
      each regular or periodic report and any registration statement, prospectus
      or written communication (other than transmittal letters and other than
      registration statements on Form S-8) in respect thereof filed by the
      Company or any Subsidiary with, or received by, such Person in connection
      therewith from, the National Association of

                                       35
<PAGE>   40

      Securities Dealers, any securities exchange or the Securities and Exchange
      Commission or any successor agency;

            (f) ERISA -- immediately upon becoming aware of the occurrence of
      any

                  (i) "reportable event" (as such term is defined in section
            4043 of ERISA) or

                  (ii) "prohibited transactions" (as such term is defined in
            section 406 or section 4975 of the IRC)

      in connection with any Pension Plan or any trust created thereunder, in
      both of the cases specified in the foregoing clauses (i) and (ii), where
      the effect of such events or transactions, or events or transactions
      related thereto, would reasonably be expected to have a material adverse
      effect on the business, prospects, profits, Properties or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a
      whole, the ability of the Company to perform its obligations set forth
      herein and in the Notes, or the rights and remedies of the holders of the
      Notes hereunder or under the Notes, a written notice specifying the nature
      thereof, what action the Company is taking or proposes to take with
      respect thereto, and, when known, any action taken by the IRS, the United
      States Department of Labor or the PBGC with respect thereto;

            (g) ERISA Waivers -- prompt written notice of and a description of
      any request pursuant to section 303 of ERISA or section 412 of the IRC
      for, or notice of the granting pursuant to said section 303 or section 412
      of, a waiver in respect of all or part of the minimum funding standard set
      forth in ERISA or the IRC, as the case may be, of any Pension Plan, and,
      in connection with the granting of any such waiver, the amount of any
      waived funding deficiency (as such term is defined in said section 303 or
      said section 412) and the terms of such waiver, in each of the cases
      specified in this clause (g), where the effect of such conditions or
      events or of events or conditions related thereto would reasonably be
      expected to have a material adverse effect on the business, prospects,
      profits, Properties or condition (financial or otherwise) of the Company
      and the Subsidiaries, taken as a whole, the ability of the Company to
      perform its obligations set forth herein and in the Notes, or the rights
      and remedies of the holders of the Notes hereunder or under the Notes;

            (h) Other ERISA Notices -- prompt written notice of and, where
      applicable, a description of

                  (i) any notice from the PBGC in respect of the commencement of
            any proceedings pursuant to section 4042 of ERISA to terminate any
            Pension Plan or for the appointment of a trustee to administer any
            Pension Plan,

                  (ii) any distress termination notice delivered to the PBGC
            under section 4041 of ERISA in respect of any Pension Plan, and any
            determination of the PBGC in respect thereof,

                  (iii) the placement of any Multiemployer Plan in
            reorganization status under Title IV of ERISA,

                  (iv) any Multiemployer Plan becoming "insolvent" (as such term
            is defined in section 4245 of ERISA under Title IV of ERISA),

                                       36
<PAGE>   41

                  (v) the whole or partial withdrawal of the Company or any
            ERISA Affiliate from any Multiemployer Plan and the withdrawal
            liability incurred in connection therewith, and

                  (vi) the withdrawal of the Company or any ERISA Affiliate from
            any Multiple Employer Pension Plan and the withdrawal liability
            under ERISA incurred in connection therewith;

      in each of the cases specified in the foregoing clauses (i) through (vi),
      inclusive, where the effect of such conditions or events or of events or
      conditions related thereto would reasonably be expected to have a material
      adverse effect on the business, prospects, profits, Properties or
      condition (financial or otherwise) of the Company and the Subsidiaries,
      taken as a whole, the ability of the Company to perform its obligations
      set forth herein and in the Notes, or the rights and remedies of the
      holders of the Notes hereunder or under the Notes;

            (i) Notice of Default or Event of Default -- immediately upon
      becoming aware of the existence of any condition or event which
      constitutes a Default or an Event of Default, a written notice specifying
      the nature and period of existence thereof and what action the Company is
      taking or proposes to take with respect thereto;

            (j) Notice of Claimed Default -- immediately upon becoming aware
      that the holder of any Note, or of any evidence of Debt or other Security
      of the Company or any Subsidiary, shall have given notice or taken any
      other action with respect to a claimed Event of Default, Default, event of
      default or default (as the case may be), a written notice specifying the
      notice given or action taken by such holder and the nature of the claimed
      Event of Default, Default, event of default and/or default and what action
      the Company is taking or proposes to take with respect thereto;

            (k) Best's Rating -- promptly upon the Company's or any insurance
      Subsidiary's receipt of a rating from A.M. Best Company (or any nationally
      recognized successor agency which rates the ability of insurance companies
      to comply with their policy obligations) lower than such Person's rating
      (or such Person's comparable rating by such successor agency) as existed
      (or would have existed in the case of such successor rating) on the
      Closing Date, written notice of such lower rating; and

            (l) Requested Information -- with reasonable promptness, such other
      data and information as from time to time may be reasonably requested,
      including, without limitation, information required by 17 C.F.R.
      ss.230.144A, as amended from time to time.

      8.2. Officers' Certificates.

      Each set of financial statements delivered to you or any other
institutional holder of the Notes pursuant to Section 8.1(a) or Section
8.1(b)(i) hereof shall be accompanied by a certificate of the President or a
Vice-President and the Chief Financial Officer or Comptroller of the Company
setting forth:

            (a) Covenant Compliance -- the information (including detailed
      calculations) required in order to establish whether the Company was in
      compliance with the requirements of Section 7 hereof during the period
      covered by the income statement then being furnished; and

            (b) Event of Default -- that the signers have reviewed the relevant
      terms of this Agreement and have made, or caused to be made, under their
      supervision, a review of the transactions and conditions of the Company
      and the Subsidiaries from the beginning of the accounting period covered
      by the income statements being delivered therewith to the date of the

                                       37
<PAGE>   42

      certificate and that such review shall have not disclosed the existence
      during such period of any condition or event which constitutes a Default
      or an Event of Default or, if any such condition or event existed or
      exists, specifying the nature and period of existence thereof and what
      action the Company shall have taken or proposes to take with respect
      thereto.

      8.3. Accountants' Certificates.

      Each set of annual financial statements delivered pursuant to Section
8.1(b)(i) hereof shall, be accompanied by a certificate of the accountants who
certify such financial statements, stating that they have reviewed this
Agreement and stating further, whether, in making their audit, such accountants
have become aware of any condition or event which then constitutes a Default or
an Event of Default in respect of Section 7.4(a)(xi), Section 7.5, Section 7.6,
Section 7.7, Section 7.8, Section 7.9, Section 7.10 or Section 7.11 hereof, and,
if such accountants are aware that any such condition or event then exists,
specifying the nature and period of existence thereof. In making such statements
in respect of Section 7.4(a)(xi) hereof, such accountants may rely on an
officer's certificate of the Company as to the existence of Liens not otherwise
permitted by the provisions of Section 7.4(a)(i) through Section 7.4(a)(x),
inclusive, hereof.

      8.4. Inspection.

      The Company shall permit the representatives of any holder of Notes, at
the expense of such holder or, so long as an Event of Default shall exist, at
the Company's expense, to visit and inspect any of the Properties of the Company
or any Subsidiary, to examine all their respective books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the finances and affairs of the Company
and the Subsidiaries) all at such reasonable times and as often as may be
reasonably requested.

      8.5. Report to NAIC.

      Concurrently with the delivery to you of each annual statement required by
Section 8.1(b)(i) hereof, the Company shall deliver a copy thereof to:
Securities Valuation Office, National Association of Insurance Commissioners,
195 Broadway, New York, New York 10007.

9. EVENTS OF DEFAULT

      9.1. Nature of Events.

      An "Event of Default" shall exist if any of the following occurs and is
continuing:

            (a) Principal or Make-Whole Amount Payments -- the Company shall
      fail to make any payment of principal or Make-Whole Amount on any Note on
      or before the date such payment is due;

            (b) Interest Payments -- the Company shall fail to make any payment
      of interest on any Note on or before five (5) Business Days after the date
      such payment is due;

            (c) Particular Covenant Defaults -- the Company or any Subsidiary
      shall fail to perform or observe any covenant contained in Section 7.4
      through Section 7.12 hereof, inclusive, or in Section 8.1(i) or Section
      8.1(j) hereof;

            (d) Other Defaults -- the Company or any Subsidiary shall fail to
      comply with any other provision hereof not referred to in clause (a),
      clause (b) or clause (c) above, and such failure

                                       38
<PAGE>   43

      continues for more than thirty (30) days after such failure shall first
      become known to any officer of the Company;

            (e) Warranties or Representations -- any warranty, representation or
      other statement by or on behalf of the Company contained herein or in any
      instrument furnished in compliance with or in reference hereto shall have
      been false or misleading in any material respect when made;

            (f) Default on Indebtedness or Other Security -

                  (i) any event shall occur or any condition shall exist in
            respect of Debt or any Security of the Company or any Subsidiary, or
            under any agreement securing or relating to such Debt or Security,
            that immediately or after the expiration of any grace period in
            respect thereof:

                        (A) causes (or permits any one or more of the holders
                  thereof or a trustee therefor to cause) such Debt or Security,
                  or a portion thereof, to become due prior to its stated
                  maturity or prior to its regularly scheduled date or dates of
                  payment

                        (B) permits any one or more of the holders thereof or a
                  trustee therefor to elect any of the directors on the Board of
                  Directors or the board of directors of such Subsidiary; or

                        (C) permits any one or more of the holders thereof or a
                  trustee therefor to require the Company or any Subsidiary to
                  repurchase such Debt or Securities from such holder;

      provided that the aggregate amount of all obligations in respect of such
      Debt and Securities exceeds at such time One Million Dollars ($1,000,000);

            (g) Involuntary Bankruptcy Proceedings --

                  (i) a receiver, liquidator, custodian or trustee of the
            Company, or any Subsidiary, or of all or any of the Property of
            either, shall be appointed by court order and such order remains in
            effect for more than sixty (60) days; or an order for relief shall
            be entered with respect to the Company or any Subsidiary, or the
            Company or any Subsidiary shall be adjudicated a bankrupt or
            insolvent; or

                  (ii) any of the Property of either shall be sequestered by
            court order and such order remains in effect for more than sixty
            (60) days; or

                  (iii) a petition shall be filed against the Company or any
            Subsidiary under any bankruptcy, reorganization, arrangement,
            insolvency, readjustment of debt, dissolution or liquidation law of
            any jurisdiction, whether now or hereafter in effect, and shall not
            be dismissed within sixty (60) days after such filing;

            (h) Voluntary Petitions -- the Company or any Subsidiary shall file
      a petition in voluntary bankruptcy or seeking relief under any provision
      of any bankruptcy, reorganization, arrangement, insolvency, readjustment
      of debt, dissolution or liquidation law of any jurisdiction, whether now
      or hereafter in effect, or shall consent to the filing of any petition
      against it under any such law;

                                       39
<PAGE>   44

            (i) Assignments for Benefit of Creditors, etc. -- the Company or a
      Subsidiary shall make an assignment for the benefit of its creditors, or
      admits in writing its inability, or fails, to pay its debts generally as
      they become due, or shall consent to the appointment of a receiver,
      liquidator or trustee of the Company or a Subsidiary or of all or any part
      of the Property of either; or

            (j) Licenses -- any Material Insurance License held by any insurance
      Subsidiary on the Closing Date or acquired by such insurance Subsidiary
      thereafter,

                  (i) shall be revoked by the state issuing such Material
            Insurance License, or

                  (ii) shall not be reissued or renewed by such state ninety
            (90) days after the expiration thereof; or

            (k) Undischarged Final Judgments -- final judgment or final
      judgments for the payment of money aggregating in excess of One Million
      Dollars ($1,000,000) is or are outstanding against one or more of the
      Company and the Subsidiaries and any one of such judgments shall have been
      outstanding for more than thirty (30) days from the date of its entry and
      shall not have been discharged in full or stayed.

      9.2. Default Remedies.

            (a) Acceleration on Event of Default.

                  (i) If an Event of Default specified in clause (g), (h) and
            (i) of Section 9.1 hereof shall exist, all of the Notes at the time
            outstanding shall automatically become immediately due and payable
            together with interest accrued thereon and, to the extent permitted
            by law, the Make-Whole Amount at such time with respect to the
            principal amount of such Notes, without presentment, demand, protest
            or notice of any kind, all of which are hereby expressly waived,
            and,

                  (ii) If an Event of Default other than those specified in
            clause (g), (h) or (i) of Section 9.1 hereof shall exist, the
            Required Holders may exercise any right, power or remedy permitted
            to such holder or holders by law, and shall have, in particular,
            without limiting the generality of the foregoing, the right to
            declare the entire principal of, and all interest accrued on, all
            the Notes then outstanding to be, and such Notes shall thereupon
            become, forthwith due and payable, without any presentment, demand,
            protest or other notice of any kind, all of which are hereby
            expressly waived, and the Company shall forthwith pay to the holder
            or holders of all the Notes then outstanding the entire principal
            of, and interest accrued on, the Notes and, to the extent permitted
            by law, the Make-Whole Amount at such time with respect to such
            principal amount of such Notes.

            (b) Acceleration on Payment Default. During the existence of an
      Event of Default described in Section 9.1(a) or Section 9.1(b) hereof, and
      irrespective of whether the Notes then outstanding shall have been
      declared to be due and payable pursuant to Section 9.2(a)(ii) hereof, any
      holder of Notes who or which shall have not consented to any waiver with
      respect to such Event of Default may, at his or its option, by notice in
      writing to the Company, declare the Notes then held by such holder to be,
      and such Notes shall thereupon become, forthwith due and payable together
      with all interest accrued thereon, without any presentment, demand,
      protest or other notice of any kind, all of which are hereby expressly
      waived, and the Company shall forthwith pay to such holder the entire
      principal of and interest accrued on such Notes and, to the extent

                                       40
<PAGE>   45

      permitted by law, the Make-Whole Amount at such time with respect to such
      principal amount of such Notes.

            (c) Valuable Rights. The Company acknowledges, and the parties
      hereto agree, that the right of each holder to maintain its investment in
      the Notes free from prepayment by the Company (except as herein
      specifically provided for) is a valuable right and that the provision for
      payment of a Make-Whole Amount by the Company in the event that the Notes
      are prepaid or are accelerated as a result of an Event of Default, is
      intended to provide compensation for the deprivation of such right under
      such circumstances.

            (d) Other Remedies. During the existence of an Event of Default and
      irrespective of whether the Notes then outstanding shall have been
      declared to be due and payable pursuant to Section 9.2(a)(ii) hereof and
      irrespective of whether any holder of Notes then outstanding shall
      otherwise have pursued or be pursuing any other rights or remedies, any
      holder of Notes may proceed to protect and enforce its rights hereunder
      and under such Notes by exercising such remedies as are available to such
      holder in respect thereof under applicable law, either by suit in equity
      or by action at law, or both, whether for specific performance of any
      agreement contained herein or in aid of the exercise of any power granted
      herein, provided that the maturity of such holder's Notes may be
      accelerated only in accordance with Section 9.2(a) and Section 9.2(b)
      hereof.

            (e) Nonwaiver and Expenses. No course of dealing on the part of any
      holder of Notes nor any delay or failure on the part of any holder of
      Notes to exercise any right shall operate as a waiver of such right or
      otherwise prejudice such holder's rights, powers and remedies. If the
      Company shall fail to pay when due any principal of, or Make-Whole Amount
      or interest on, any Note, or shall fail to comply with any other provision
      hereof, the Company shall pay to each holder of Notes, to the extent
      permitted by law, such further amounts as shall be sufficient to cover the
      costs and expenses, including but not limited to reasonable attorneys'
      fees, incurred by such holder in collecting any sums due on such Notes or
      in otherwise assessing, analyzing or enforcing any rights or remedies that
      are or may be available to it.

      9.3. Annulment of Acceleration of Notes.

      If a declaration is made pursuant to Section 9.2(a)(ii) hereof, then and
in every such case, the holders of at least fifty-one percent (51%) in principal
amount of the Notes at the time outstanding (exclusive of Notes then owned by
any one or more of the Company, any Subsidiary and any Affiliate) may, by
written instrument filed with the Company, rescind and annul such declaration,
and the consequences thereof, provided that at the time such declaration is
annulled and rescinded:

            (a) no judgment or decree shall have been entered for the payment of
      any moneys due on or pursuant hereto or the Notes;

            (b) all arrears of interest upon all the Notes and all other sums
      payable hereunder and under the Notes (except any principal of, or
      interest or Make-Whole Amount on, the Notes which shall have become due
      and payable by reason of such declaration under Section 9.2(a)(ii) hereof)
      shall have been duly paid; and

            (c) each and every other Default and Event of Default shall have
      been waived pursuant to Section 11.5 hereof or otherwise made good or
      cured,

and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.

                                       41
<PAGE>   46

10. INTERPRETATION OF THIS AGREEMENT

      10.1. Terms Defined.

      As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:

      Acceptable Consideration -- means, with respect to the Transfer of any
asset of the Company or a Subsidiary, cash consideration, payable at the initial
closing of the transaction in question, in an amount determined by the Board of
Directors, in its good faith opinion, to be not less than the Fair Market Value
of such asset.

      Affiliate -- means, at any time, a Person (other than a Subsidiary)

            (a) that directly or indirectly through one or more intermediaries
      Controls, or is Controlled by, or is under common Control with, the
      Company,

            (b) that beneficially owns or holds ten percent (10%) or more of any
      class of the Voting Stock of the Company, or

            (c) ten percent (10%) or more of the Voting Stock (or in the case of
      a Person that is not a corporation, ten percent (10%) or more of the
      equity interest) of which is beneficially owned or held by the Company or
      a Subsidiary,

at such time.  As used in this definition,

            Control -- means the possession, directly or indirectly, of the
      power to direct or cause the direction of the management and policies of a
      Person, whether through the ownership of voting securities, by contract or
      otherwise.

      Agreement, this -- means this agreement, as it may be amended and restated
from time to time.

      Applicable H.15 -- means, at any time, United States Federal Reserve
Statistical Release H.15(519) or its successor publication most recently
published and available to the public at such time, or if no such successor
publication is available, then any other source of current information in
respect of interest rates on securities of the United States of America that is
generally available and, in the judgment of the Required Holders, provides
information reasonably comparable to the H.15(519) report.

      Basket Secured Subsidiary Debt -- means, at any time, Debt of a Subsidiary
that is secured by a Lien permitted only by Section 7.4(a)(xi) hereof.

      Board of Directors -- means, at any time, the board of directors of the
Company or any committee thereof that, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.

      Business Day -- means, at any time, a day other than a Saturday, a Sunday
or a day on which any bank located in Newark, New Jersey, or any other bank in
the United States of America, which bank shall have been designated by any
holder of Notes to receive payments in respect of the Notes held by such holder,
is required by law (other than a general banking moratorium or holiday for a
period exceeding four (4) consecutive days) to be closed.

      Capitalized Lease Obligation -- means, with respect to a lease for which
the lessee is required to recognize the acquisition of an asset and the
incurrence of a liability in accordance with Generally Accepted Accounting
Principles, the obligation of such lessee in respect of such liability.

                                       42
<PAGE>   47

      Change in Control Ratings Event -- means, at any time, the existence of
both of the following conditions:

            (a) any person (as such term is used in section 13(d) and section
      14(d)(2) of the Exchange Act as in effect on the date of the Closing) or
      related persons constituting a group (as such term is used in Rule 13d-5
      of the Exchange Act as in effect on the date of the Closing) become the
      "beneficial owners" (as such term is used in Rule 13d-3 of the Exchange
      Act as in effect on the date of the Closing), directly or indirectly, of
      more than 50% of the Company's then outstanding Voting Stock (herein
      referred to as the "Acquisition" and the surviving entity resulting from
      the Acquisition shall be referred to as the "Survivor"); and

            (b) Standard & Poor's Rating Group, a Division of McGraw Hill, Inc.
      ("S&P") and Moody's Investors Services, Inc. ("Moody's") shall have failed
      to designate the senior unsecured debt obligations of the Survivor at
      least A- (in the case of S&P) and A3 (in the case of Moody's) within the
      period commencing on the date of the Acquisition and ending either (x) 90
      days after such date or (y) if both Moody's and S&P shall have both
      publicly announced that they are considering the establishment of a rating
      for such senior unsecured debt obligations of the Survivor within said 90
      day period, the first day when either shall have ceased their efforts to
      establish such rating; provided this condition (b) shall be deemed not to
      exist if

                  (i) the Survivor has no senior unsecured debt obligations
            outstanding on the date of the Acquisition, and

                  (ii) within 90 days of the date of the Acquisition A.M. Best
            shall have established a claims payable rating of at least A+ for
            either (A) the Survivor or (B) each insurance company which is a
            Wholly Owned Subsidiary and which, together with all other Wholly
            Owned Subsidiaries which are insurance companies, contributes
            substantially all of the revenue of the Survivor's consolidated
            group.

      Closing -- Section 1.2(b) hereof.

      Closing Date -- Section 1.2(b) hereof.

      Company -- has the meaning specified in the introductory sentence hereof.

      Company Common Stock -- means

            (a) the Common Stock, par value Two Dollars ($2.00) per share, of
      the Company as constituted on the Closing Date and

            (b) on any date after the Closing Date, any stock into which such
      Common Stock shall have been changed or any stock resulting from any
      reclassification of such Common Stock, and all other stock of any class or
      classes (however designated) of the Company the holders of which are
      ordinarily, in the absence of contingencies, entitled to elect corporate
      directors (or Persons performing similar functions).

      Company Preferred Stock -- means any class of capital stock of the Company
which is preferred over any other class of capital stock of the Company as to
the payment of dividends and/or the payment of any amount upon liquidation or
dissolution of such corporation.

      Consolidated Capitalization -- means, at any time, the sum of

            (i) the par value at such time (or value stated on the books of the
      corporation) of the capital stock of the Company and the Subsidiaries plus
      (or minus in the case of a deficit),

                                       43
<PAGE>   48

            (ii) the amount of additional paid-in capital and retained earnings
      (or, in the case of negative retained earnings, minus such negative
      amount) at such time of the Company and the Subsidiaries, plus

            (iii) the aggregate amount of the liability of deferred taxes, if
      any, of the Company and the Subsidiaries at such time, plus

            (iv) the aggregate amount of Funded Debt of the Company and the
      Subsidiaries at such time,

all determined on a consolidated basis in accordance with Generally Accepted
Accounting Principles.

      Consolidated Debt -- means, at any time, the amount of Debt of the Company
and the Subsidiaries, determined at such time on a consolidated basis in
accordance with Generally Accepted Accounting Principles.

      Consolidated Net Income -- means, for any period, net earnings (or loss)
after income taxes of the Company and the Subsidiaries determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles,
but excluding:

            (a) any gain or loss resulting from the sale, conversion or other
      disposition of Capital Assets;

            (b) any extraordinary or nonrecurring gains or losses;

            (c) any gain arising from any reappraisal or write-up of assets;

            (d) any gain or loss during such period resulting from the receipt
      of any proceeds of any insurance policy;

            (e) any earnings of any Person acquired by the Company or any
      Subsidiary through purchase, merger or consolidation or otherwise, or
      earnings of any Person substantially all of whose assets have been
      acquired by the Company or any Subsidiary, for any period prior to the
      date of acquisition;

            (f) net earnings of any Person (other than a Subsidiary) in which
      the Company or any Subsidiary shall have an ownership interest unless such
      net earnings shall have actually been received by the Company or such
      Subsidiary in the form of cash distributions;

            (g) any portion of the net earnings of any Subsidiary that for any
      reason is unavailable for payment of dividends to the Company or any other
      Subsidiary, provided that, if any such Subsidiary shall be an insurance
      Subsidiary, no portion of the net earnings of such insurance Subsidiary
      shall be subject to this clause (g) (and hence excluded from Consolidated
      Net Income) solely by virtue of any insurance statute or regulation that
      restricts the dividends that such insurance Subsidiary may declare without
      regulatory approval to a percentage of its surplus (as defined by such
      statute or regulation) or all or a percentage of its net income (as
      defined by such statute or regulation) for its then current annual fiscal
      period or one or more of its prior 12-month fiscal periods; it being the
      intention of the parties hereto that effect not being given to statutes
      such as ss.17:27A-4c of the N.J. Rev. Stat., as in effect on the Closing
      Date, which requires regulatory approval for the declaration of an
      "extraordinary dividend," as defined in said statute; but it is likewise
      the intent of the parties hereto that full effect be given to

                  (i) all other statutes or regulations that prohibit the
            payment of dividends by insurance Subsidiaries, including, without
            limitation, prohibitions on the payment of

                                       44
<PAGE>   49

            dividends during, or which create a state of, insolvency of an
            insurance Subsidiary or pursuant to an administrative or court order
            or injunction or

                  (ii) restrictions on the payment of dividends set forth in any
            contract, agreement, debenture, certificate or articles of
            incorporation or bylaws to which such insurance Subsidiary is a
            party or which may be applicable to such insurance Subsidiary;

            (h) any portion of the net earnings of the Company or any Subsidiary
      that cannot be freely converted into United States dollars.

            (i) any gain arising from the acquisition of any Securities of the
      Company or any Subsidiary; and

            (j) any income or loss assignable to a minority interest.

As used in this definition,

      Capital Asset -- means, at any time, any asset of the Company or any
Subsidiary other than Marketable Investment Securities.

      Consolidated Net Tangible Assets -- means, at any time, the remainder of

            (a) Consolidated Total Assets, determined at such time, minus

            (b) the total amount of all Intangible Assets of the Company and the
      Subsidiaries (less depreciation, depletion, amortization and other
      properly deductible valuation reserves),

determined on a consolidated basis in accordance with Generally Accepted
Accounting Principles.

      Consolidated Tangible Net Worth -- means, at any time,

            (a) the sum of

                  (i) the par value at such time (or value stated on the books
            of the corporation) of the capital stock of the Company and the
            Subsidiaries plus (or minus in the case of a deficit),

                  (ii) the amount of additional paid-in capital and retained
            earnings (or, in the case of negative retained earnings, minus such
            negative amount) at such time of the Company and the Subsidiaries,
            plus

                  (iii) aggregate amount of net unrealized gains (or minus, in
            the case of a loss) on equity Securities (net of deferred income
            taxes), minus

            (b) the sum, without duplication, of

                  (i) the net book value at such time (after deducting related
            depreciation, obsolescence, amortization, valuation and other proper
            reserves) of all Intangible Assets of the Company and the
            Subsidiaries, plus

                  (ii) except as expressly provided in clause (a)(iii) above,
            the aggregate amount of all write-ups of assets subsequent to the
            Closing Date,

all determined on a consolidated basis in accordance with Generally Accepted
Accounting Principles.

                                       45
<PAGE>   50

      Consolidated Total Assets -- means, at any time, the total amount of all
assets of the Company and the Subsidiaries (less depreciation, depletion,
amortization and other properly deductible valuation reserves), determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles.

      Control Event -- means the execution of any written agreement that, when
fully performed by the parties thereto, would result in a Change in Control
Ratings Event.

      Control Prepayment Date -- Section 5.6(a).

      Current Debt -- with respect to any Person means, at any time:

            (a) its liabilities in respect of borrowed money;

            (b) any liabilities for borrowed money secured by any Lien existing
      on Property owned by such Person (whether or not such liabilities have
      been assumed by such Person);

            (c) Capitalized Lease Obligations;

            (d) the present value of all payments due under any arrangement for
      retention of title or any conditional sale agreement (other than a lease
      giving rise to a Capitalized Lease Obligation) discounted at the implicit
      rate, if known, with respect thereto or, if unknown, at eight percent (8%)
      per annum; and

            (e) Guaranties of obligations described above,

provided that, in each such case, such liabilities are either payable on demand
or within one (1) year from the creation thereof and are not renewable or
extendible at the option of such Person to a date more than one (1) year from
the date of creation thereof. Any such liability which is renewable or
extendible at the option of such Person to a date more than one (1) year from
the date of creation thereof shall be deemed to be Funded Debt. If any
indebtedness in respect of any of the foregoing liabilities is expressed to
mature more than one (1) year from the date of its creation but, as of any date
of determination, has principal due and payable within one (1) year of such date
of determination, "Current Debt" shall not include such principal payable within
such one (1) year period but rather such principal payable within such one (1)
year period shall be deemed to be "Funded Debt."

      The aggregate unpaid balances from time to time outstanding in respect of
any notes receivable, premiums receivable or accounts receivable arising in the
ordinary course of business and discounted or sold by such Person (whether or
not such discounting or sale was with full, limited or no recourse to such
Person), shall be included in Current Debt and shall be deemed to be secured
Current Debt for all purposes under this Agreement if such notes receivable,
premiums receivable or accounts receivable are due within one (1) year from such
time, but notes receivable, premiums receivable or accounts receivable shall be
excluded from Current Debt if such sale or assignment is of delinquent notes
receivable, premiums receivable or accounts receivable to a collection agency or
similar service.

      Debt -- means, with respect to any Person, at any time, without
duplication, all Funded Debt and Current Debt of such Person at such time.

      Default -- means an event or condition the occurrence of which would, with
the lapse of time or the giving of notice or both, become an Event of Default.

      Environmental Protection Law -- means any federal, state, county, regional
or local law, statute, or regulation (including, without limitation, CERCLA,
RCRA and SARA) enacted in connection with or relating to the protection or
regulation of the environment, including, without limitation, those laws,

                                       46
<PAGE>   51

statutes, and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing, or transporting of Hazardous
Substances, and any regulations, issued or promulgated in connection with such
statutes by any Governmental Authority and any orders, decrees or judgments
issued by any court of competent jurisdiction in connection with any of the
foregoing. As used in this definition:

            CERCLA -- means the Comprehensive Environmental Response,
      Compensation, and Liability Act of 1980, as amended from time to time (by
      SARA or otherwise), and all rules and regulations promulgated in
      connection therewith;

            RCRA -- means the Resource Conservation and Recovery Act of 1976, as
      amended, and any rules and regulations issued in connection therewith; and

            SARA -- means the Superfund Amendments and Reauthorization Act of
      1986, as amended from time to time, and all rules and regulations
      promulgated in connection therewith.

      ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

      ERISA Affiliate -- means any corporation or trade or business that

            (i) is a member of the controlled group of corporations (within the
      meaning of Section 414(b) of the IRC) which includes the Company,

            (ii) is under common control (within the meaning of Section 414(c)
      of the IRC with the Company,

            (iii) is a member of an affiliated service group (within the meaning
      of Section 414(m) of the IRC) which includes the Company, or

            (iv) is required to be aggregated with the Company pursuant to U.S.
      Treasury regulations under Section 414(o) of the IRC.

      Event of Default -- Section 9.1 hereof.

      Exchange Act -- means the Security Act of 1934, as amended.

      Fair Market Value -- means, at any time, with respect to any Property, the
sale value of such Property that would be realized in an arm's-length sale at
such time between an informed and willing buyer and an informed and willing
seller, under no compulsion to buy or sell, respectively.

      Financially Sound/Reputable Insurers -- Section 7.2(b) hereof.

      Funded Debt -- means, at any time with respect to any Person, without
duplication,

            (a) its liabilities for borrowed money, other than Current Debt;

            (b) any liabilities for borrowed money secured by any Lien existing
      on Property owned by such Person (whether or not such liabilities have
      been assumed by such Person) other than Current Debt;

            (c) any obligations in respect of any Capitalized Lease Obligation
      of such Person, other than Current Debt;

                                       47
<PAGE>   52

            (d) the present value of all payments due under any arrangement for
      retention of title or any conditional sale agreement (other than a lease
      giving rise to a Capitalized Lease Obligation) discounted at the implicit
      rate, if known, with respect thereto or, if unknown, at eight percent (8%)
      per annum, other than Current Debt; and

            (e) any Guaranty of such Person of any obligation of another Person
      constituting obligations of a type set forth above.

      The aggregate unpaid balances from time to time outstanding in respect of
any notes receivable, premiums receivable or accounts receivable arising in the
ordinary course of business and discounted or sold by such Person (whether or
not such discounting or sale was with full, limited or no recourse to such
Person), shall be included in Funded Debt and shall be deemed to be secured
Funded Debt for all purposes under this Agreement unless such balance is
included in Current Debt at such time (and only to the extent of such inclusion)
or unless such sale or assignment is of delinquent notes receivable, premiums
receivable or accounts receivable to a collection agency or similar service.

      Generally Accepted Accounting Principles -- means generally accepted
accounting principles as set forth from time to time in the opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements of the Financial Accounting Standards Board or in
such opinions and statements of such other entities as shall be approved by a
significant segment of the accounting profession.

      Governmental Authority -- means

            (a) the government of

                  (i) the United States of America and any State or other
            political subdivision thereof, or

                  (ii) any jurisdiction in which the Company or any Subsidiary
            conducts all or any part of its business, or

            (b) any entity exercising executive, legislative, judicial,
      regulatory or administrative functions of, or pertaining to, any such
      government.

      Guaranty -- means with respect to any Person (for the purposes of this
definition, the "Guarantor") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "Primary Obligor") in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:

            (a) to purchase such indebtedness or obligation or any Property or
      assets constituting security therefor;

            (b) to advance or supply funds

                  (i) for the purpose of payment of such indebtedness or
            obligation, or

                  (ii) to maintain working capital or other balance sheet
            condition or any income statement condition of the Primary Obligor
            or otherwise to advance or make available funds for the purchase or
            payment of such indebtedness or obligation;

                                       48
<PAGE>   53

            (c) to lease Property or to purchase Securities or other Property or
      services primarily for the purpose of assuring the owner of such
      indebtedness or obligation of the ability of the Primary Obligor to make
      payment of the indebtedness or obligation; or

            (d) otherwise to assure the owner of the indebtedness or obligation
      of the Primary Obligor against loss in respect thereof.

For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability, it shall be assumed that the
indebtedness or other liabilities that are the subject of such Guaranty are
direct obligations of the issuer of such Guaranty.

      Hazardous Substances -- means any and all pollutants, contaminants, toxic
or hazardous wastes or any other substances that might pose a hazard to health
or safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

      Institutional Investor -- means you, any of your affiliates and any other
holder of Notes that is a bank, trust company, insurance company, fraternal
benefit society, pension fund, investment company, mutual fund or other similar
institutional investor or any portfolio or fund managed by any one or more of
the foregoing.

      Intangible Assets -- means, at any time, the following:

            (a) patents, copyrights, trademarks, trade names, service marks,
      brand names, franchises, goodwill, experimental expenses and other similar
      intangibles;

            (b) unamortized debt discount and expense; and

            (c) all other Property that would be considered to be intangible
      under Generally Accepted Accounting Principles.

      The determination of the amount of the above items in this definition of
"Intangible Assets" shall be for the Company and the Subsidiaries on a
consolidated basis and shall be in accordance with Generally Accepted Accounting
Principles.

      Investment -- means any investment, made in cash or by delivery of
Property, by the Company or any Subsidiary

            (a) in any Person, whether by acquisition of stock, indebtedness or
      other obligation or Security, or by loan, Guaranty, advance or capital
      contribution, or otherwise, or

            (b) in any Property.

      IRC -- means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.

      IRS -- means the Internal Revenue Service and any successor agency.

      Lien -- means any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes, and the filing of

                                       49
<PAGE>   54

any financing statement under the Uniform Commercial Code of any jurisdiction,
or an agreement to give any of the foregoing. The term "Lien" includes
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
(including, with respect to stock, stockholder agreements, voting trust
agreements, buy-back agreements and all similar arrangements) affecting
Property. For the purposes hereof, the Company and each Subsidiary is deemed to
be the owner of any Property that it shall have acquired or holds subject to a
conditional sale agreement, a lease giving rise to a Capitalized Lease
Obligation or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes, and such
retention or vesting is deemed a Lien. The term "Lien" does not include negative
pledge clauses in agreements relating to the borrowing of money.

      Make-Whole Amount -- means, at any time, with respect to a principal
amount of Notes of any Series becoming due in whole or in part, whether by
prepayment or acceleration, the greater of

            (a) Zero Dollars ($0), and

            (b) the remainder of

            (i) the sum of the present values of the then remaining scheduled
      payments of principal and interest that would be payable in respect of
      such principal amount of the Notes of such Series but for the prepayment
      or acceleration of such principal amount of Notes of such Series being
      prepaid or accelerated, minus

            (ii) (A) the aggregate principal amount of the Notes of such Series
      so prepaid or accelerated, plus

                  (B) interest on such principal amount of the Notes of such
            Series accrued during the period beginning on the date of the
            scheduled payment of interest on the Notes of such Series most
            nearly preceding the date such principal amount of Notes of such
            Series is to become due as a result of such prepayment or
            acceleration, and ending on such date such principal amount of Notes
            of such Series is to so become due.

In determining such present values, a discount rate equal to the Make-Whole
Discount Rate divided by two (2), and a discount period of six (6) months of
thirty (30) days each, shall be used.

      Make-Whole Discount Rate -- means, at any time, with respect to a
principal amount of Notes of any Series being prepaid or accelerated,

            (a) the per annum percentage rate (rounded to the nearest three
      decimal places) equal to

                   (i) the annual yield to maturity at such time of the United
            States Treasury obligation listed in the then Applicable H.15 for
            the most recent available day in such Applicable H.15 with a
            Treasury Constant Maturity (as such term is defined in such
            Applicable H.15) equal to the Weighted Average Life to Maturity of
            the principal amount of the Notes of such Series then being prepaid
            or accelerated, or, if no such United States Treasury obligation is
            so listed, then

                  (ii) the annual yield to maturity at such time determined by
            interpolating between

                         (A) the annual yield to maturity of the United States
                  Treasury obligations listed in such Applicable H.15 with a
                  Treasury Constant Maturity (as such term is defined in such
                  Applicable H.15) most nearly equal to and less than

                                       50
<PAGE>   55

                  the Weighted Average Life to Maturity of the principal amount
                  of Notes of such Series then being prepaid or accelerated, and

                        (B) the annual yield to maturity of the United States
                  Treasury obligations listed in such Applicable H.15 with a
                  Treasury Constant Maturity (as such term is defined in such
                  Applicable H.15) most nearly equal to and greater than the
                  Weighted Average Life to Maturity of the principal amount of
                  Notes of such Series then being prepaid or accelerated,

      plus

            (b) fifty one-hundredths percent (0.50%) per annum.

As used in this definition,

            Remaining Dollar-Years -- means, at any time with respect to a
      principal amount of Notes of any Series being prepaid or accelerated, the
      result obtained by

            (a) multiplying

                  (i) an amount equal to the remainder of (1) the amount of
            principal that would have become due on each scheduled payment date
            and at maturity if such prepayment or acceleration had not been
            made, minus (2) the amount of principal on the Notes of such Series
            scheduled to become due on each such date after giving effect to
            such prepayment or acceleration and the application thereof in
            accordance with the provisions of this Agreement, by

                  (ii) the number of years (calculated to the nearest
            one-twelfth) that will elapse between such time and the date each
            such scheduled principal payment or maturity payment is due, and

            (b) calculating the sum of each of the products obtained in the
      preceding subsection (a).

            Weighted Average Life to Maturity -- means, at any time, with
      respect to any Note of any Series, the number of years obtained by
      dividing the then Remaining Dollar-Years at such time of such Note by the
      then outstanding principal amount of such Note.

      Margin Security -- means "margin stock" within the meaning of Regulations
T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II, as amended from time to time.

      Marketable Investment Security -- means, with respect to the Company
and/or any Subsidiary, any debt or equity Security that is publicly traded on a
national securities exchange or quoted in an automated inter-dealer quotation
system in the United States of America and which shall have been purchased in
accordance with the established investment guidelines and procedures of the
Company or such Subsidiary and in accordance with applicable regulatory law and
regulations, as the case may be. Subsidiary Stock and Subsidiary Preferred Stock
shall be excluded from this definition of "Marketable Investment Security."

      Material Insurance License -- means any license issued by a state to any
insurance Subsidiary that permits such insurance Subsidiary to transact
insurance business in such state and in respect of which the premiums written
under the authority of such license account for more than twenty-five percent
(25%) of Aggregate Premiums Written during the then most recently ended fiscal
year of the Company. As used in this definition,

                                       51
<PAGE>   56

            Aggregate Premiums Written -- means, with respect to any fiscal
      period of the Company, the total of all premiums written by insurance
      Subsidiaries during such fiscal period, determined in accordance with
      Statutory Financial Statement Accounting Procedures.

      Multiemployer Plan -- means any multiemployer plan (as defined in section
3(37) of ERISA) in respect of which the Company or any ERISA Affiliate is an
"employer" (as such term is defined in section 3 of ERISA).

      Multiple Employer Pension Plan -- means any employee benefit plan within
the meaning of section 3(3) of ERISA (other than a Multiemployer Pension Plan),
subject to Title IV of ERISA, to which the Company or any ERISA Affiliate and an
employer (as such term is defined in section 3 of ERISA) other than an ERISA
Affiliate or the Company contribute.

      Non-Basket Secured Subsidiary Debt -- means, at any time, Debt secured by
Liens on the Property of a Subsidiary permitted by Section 7.4(a)(i) through
Section 7.4(a)(x) hereof, at such time.

      Note -- Section 1.1 hereof.

      Note Purchase Agreement -- Section 1.2(c) hereof.

      Other Purchaser -- Section 1.2(c) hereof.

      PBGC -- means the Pension Benefit Guaranty Corporation and any successor
corporation or governmental agency.

      Pension Plan -- means, at any time, any "employee pension benefit plan"
(as such term is defined in section 3 of ERISA) maintained at such time by the
Company or any ERISA Affiliate for employees of the Company or such ERISA
Affiliate, excluding any Multiemployer Plan, but including, without limitation,
any Multiple Employer Pension Plan.

      Permitted Intercompany Funded Debt -- means, at any time, any obligation
in respect of a liability of the Company or a Subsidiary described in clause (a)
or (c) of the definition of "Funded Debt" herein that is outstanding at such
time so long as no Default shall have occurred and be continuing at such time:

      (a) by a Subsidiary to the Company;

      (b) by the Company to a Subsidiary; or

      (c) by a Subsidiary to another Subsidiary.

      Person -- means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.

      Placement Memorandum -- Section 2.1 hereof.

      Property -- means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible (including, without
limitation, any improvements or accessions thereto).

      PTE -- Section 1.4(a) hereof.

      Purchase Money Lien -- means a Lien held by any Person (whether or not the
seller of such assets) on Property acquired or constructed by the Company or any
Subsidiary, which Lien secures all or a portion of the related purchase price or
construction costs of such Property, provided that such Purchase

                                       52
<PAGE>   57

Money Lien encumbers only Property purchased after the Closing Date and acquired
with the proceeds of the Debt secured thereby, and provided that such Lien is
not extended to any other Property.

      Purchaser -- means the Persons listed as purchasers of Notes on Annex 1
hereto.

      QPAM -- Section 1.4(d) hereof.

      Ratable Portion -- means, with respect to any Transfer of an asset under
Section 7.9 hereof producing 10% Excess Proceeds and with respect to any holder
of Debt of the Company, the product of (a) the portion of such 10% Excess
Proceeds which the Company has allocated to clause (z) in said Section 7.9 times
(b) a fraction, in which the numerator equals the principal amount of all Debt
of the Company held by such holder and in which the denominator equals the
aggregate amount of all Debt of the Company (excluding therefrom any such Debt
held by the Company, any Subsidiary or any Affiliate). The determinations of the
amounts of Debt of the Company in clause (b) shall be as at the time of the
consummation of such Transfer.

      Required Holders -- means, at any time, the holders of at least sixty-six
and two-third percent (662/3%) in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by any one or more of the Company,
any Subsidiary and any Affiliate), without regard to the Series of such
outstanding Notes.

      Required Principal Payment -- Section 5.1(a) hereof.

      Restricted Payment -- means

            (a) any payment, dividend or other distribution (whether in the form
      of cash or any other Property), direct or indirect, on account of any
      shares of capital stock of the Company, except a dividend payable solely
      in shares of Company Common Stock, and

            (b) any optional or mandatory redemption, retirement, purchase or
      other acquisition, direct or indirect, of any shares of capital stock of
      the Company now or hereafter outstanding, or of any warrants, rights, or
      options to acquire any shares of such capital stock.

      S/L Ratable Portion -- means, with respect to any Sale and Leaseback
Transaction under Section 7.10 hereof and with respect to any holder of Debt of
the Company and the Subsidiaries, the product of

            (a) the net proceeds from such Sale and Leaseback Transaction times

            (b) a fraction, in which the numerator equals the principal amount
      of all Debt of the Company and the Subsidiaries held by such holder and in
      which the denominator equals the aggregate amount of all Debt of the
      Company and the Subsidiaries (excluding therefrom any such Debt held by
      the Company, any Subsidiary or any Affiliate).

The determinations of the amounts of Debt of the Company and the Subsidiaries in
clause (b) shall be as at the time of the consummation of such Sale and
Leaseback Transaction.

      Sale and Leaseback Transactions -- means any transaction or series of
related transactions in which the Company or a Subsidiary sells or transfers any
of its Property to any Person (other than to the Company or to a Subsidiary) and
concurrently with such sale or transfer, or thereafter, rents or leases such
transferred Property or substantially similar Property from any Person.

      Securities Act -- means the Securities Act of 1933, as amended.

      Security -- means "security" as defined by Section 2(1) of the Securities
Act.

                                       53
<PAGE>   58

      Senior Debt -- means the Notes and any Debt of the Company or its
Subsidiaries that by its terms is not in any manner subordinated in right of
payment to any other unsecured Debt of the Company or any Subsidiary.

      Senior Officer -- means, with respect to any Person, any one of the
chairman of the board of directors, the chief executive officer, the chief
operating officer, the chief financial officer and the president of such Person.

      Series -- means any one or more of the series of Notes issued hereunder.

      Series A Notes -- Section 1.1(a) hereof.

      Series B Notes -- Section 1.1(b) hereof.

      Source -- Section 1.4.

      Statutory Annual Financial Statements -- means, with respect to any
insurance Subsidiary, the annual fiscal year-end financial statements required
by the Statutory Financial Statement Accounting Procedures applicable thereto to
be filed with the appropriate regulatory body of the state in which such
insurance Subsidiary is organized and licensed to sell insurance.

      Statutory Financial Statement Accounting Procedures -- with respect to any
Subsidiary that is an insurance company means, at any time, accounting
procedures required by the insurance statutes and regulations of the state in
which such insurance company is organized and licensed to sell insurance.

      Subsidiary -- means, at any time, a corporation of which the Company owns,
directly or indirectly, more than fifty percent (50%) (by number of votes) of
each class of Voting Stock at such time.

      Subsidiary Preferred Stock -- means any class of capital stock of any
Subsidiary which is preferred over any other class of capital stock of the
Subsidiary as to the payment of dividends and/or the payment of any amount upon
liquidation or dissolution of such corporation.

      Subsidiary Stock -- Section 7.9(a) hereof.

      Surviving Corporation -- Section 7.12(a)(i) hereof.

      10% Excess Proceeds -- means, with respect to any Transfer of an asset of
the Company, an amount equal to

            (a) the greater of

                  (i) the entire proceeds of such Transfer (net of reasonable
            and ordinary transaction costs and expenses incurred in connection
            with such Transfer and any outstanding Debt secured by a Purchase
            Money Lien encumbering the asset being so Transferred) or

                  (ii) the net book value in respect of the asset being so
            Transferred determined at the time of such Transfer,

      multiplied by

            (b) (i) the amount of the net book value in respect of the asset
      being so Transferred under clause (b)(vi)(A)(I) of Section 7.9 that when
      aggregated with the aggregate net book values under clause (b)(vi)(A)(II)
      of Section 7.9 hereof would be in excess of ten percent

                                       54
<PAGE>   59

      (10%) of Consolidated Net Tangible Assets determined as of the fiscal-year
      end immediately preceding such Transfer or, if more recent, determined as
      of the date of the then most recently audited consolidated financial
      statement of the Company and the Subsidiaries (it being understood that if
      the aggregate net book values under clause (b)(vi)(A)(II) of Section 7.9
      hereof exceed ten percent (10%) of such Consolidated Net Tangible Assets
      that the amount being determined under this subclause (i) would equal the
      entire net book value of the asset then being Transferred), divided by

                  (ii) the net book value in respect of the asset being so
            Transferred determined at the time of such Transfer.

      Transfers -- Section 7.9(b) hereof.

      Unsecured Subsidiary Debt -- means, at any time, Debt of a Subsidiary not
secured by a Lien on the Property of the Company or a Subsidiary at such time.

      Voting Stock -- means, in the case of a corporation, capital stock of any
class or classes of a corporation the holders of which are ordinarily, in the
absence of contingencies, entitled to elect any of the corporate directors (or
Persons performing similar functions), and in the case of a limited liability
company, membership interests which have the right, directly or indirectly, to
direct or cause the direction of the management or policies of such limited
liability company.

      Wholly-Owned Subsidiary -- means, at any time, any Subsidiary one hundred
percent (100%) of all of the equity membership interests and/or equity
Securities (except directors' qualifying shares) and voting membership interests
and/or voting Securities of which are owned by any one or more of the Company
and the Company's other Wholly-Owned Subsidiaries at such time.

      10.2. Generally Accepted Accounting Principles.

      Where the character or amount of any asset or liability or item of income
or expense, or any consolidation or other accounting computation is required to
be made for any purpose hereunder, it shall be done in accordance with Generally
Accepted Accounting Principles as in effect on the date of, or at the end of the
period covered by, the financial statements from which such asset, liability,
item of income, or item of expense, is derived, or, in the case of any such
computation, as in effect on the date as of which such computation is required
to be determined, provided, that if any term defined herein includes or excludes
amounts, items or concepts that would not be included in or excluded from such
term if such term was defined with reference solely to Generally Accepted
Accounting Principles, such term will be deemed to include or exclude such
amounts, items or concepts as set forth herein.

      10.3. Directly or Indirectly.

      Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any partnership in which such Person is a
general partner.

      10.4. Section Headings and Table of Contents and Construction.

            (a) Section Headings and Table of Contents, etc.. The titles of the
      Sections and the Table of Contents appear as a matter of convenience only,
      do not constitute a part hereof and shall not affect the construction
      hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to
      this Agreement as a whole and not to any particular Section or other
      subdivision.

                                       55
<PAGE>   60

            (b) Construction. Each covenant contained herein shall be construed
      (absent an express contrary provision herein) as being independent of each
      other covenant contained herein, and compliance with any one covenant
      shall not (absent such an express contrary provision) be deemed to excuse
      compliance with one or more other covenants.

      10.5. Governing Law.

      THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW, WITHOUT REGARD TO CHOICE OF
LAW OR ANY OTHER PROVISION THEREOF THAT WOULD PERMIT OR REQUIRE THE APPLICATION
OF THE LAW OF ANY OTHER JURISDICTION.

11. MISCELLANEOUS

      11.1. Communications.

            (a) Method; Address. All communications hereunder or under the Notes
      shall be in writing, shall be hand delivered, deposited into the United
      States mail (registered or certified mail), postage prepaid, or sent by
      overnight courier, and shall be addressed,

                  (i) if to the Company,

                     Wantage Avenue
                     Branchville, New Jersey 07890
                     Attention:  General Counsel

            or at such other address as the Company shall have furnished in
            writing to all holders of the Notes at the time outstanding,

                  (ii) if to any of the holders of the Notes,

                        (A) if such holders are the Purchasers, at their
                  respective addresses set forth on Annex 1 hereto, and further
                  including any parties referred to on such Annex 1 that are
                  required to receive notices in addition to such holders of the
                  Notes, and

                        (B) if such holders are not the Purchasers, at their
                  respective addresses set forth in the register for the
                  registration and transfer of Notes maintained pursuant to
                  Section 7.3 hereof,

            or to any such party at such other address as such party may
            designate by notice duly given in accordance with this Section 11.1
            to the Company (which other address shall be entered in such
            register).

            (b) When Given. Any communication so addressed and deposited in the
      United States mail, postage prepaid, by registered or certified mail (in
      each case, with return receipt requested) shall be deemed to be received
      on the third (3rd) succeeding Business Day after the day of such deposit
      (not including the date of such deposit). Any notice so addressed and
      otherwise delivered shall be deemed to be received when actually received
      at the address of the addressee.

      11.2. Reproduction of Documents.

                                       56
<PAGE>   61

      This Agreement and all documents relating thereto, including, without
limitation,

            (a) consents, waivers and modifications that may hereafter be
      executed,

            (b) documents received by you at the closing of your purchase of the
      Notes (except the Notes themselves), and

            (c) financial statements, certificates and other information
      previously or hereafter furnished to you or any other holder of Notes,

may be reproduced by any holder of Notes by any photographic, photostatic,
microfilm, micro-card, miniature photographic, digital or other similar process
and each holder of Notes may destroy any original document so reproduced. The
Company agrees and stipulates that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such holder of Notes in the regular course of business)
and that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence.

      11.3. Survival.

      All warranties, representations, certifications and covenants made by the
Company herein or in any certificate or other instrument delivered by it or on
its behalf hereunder shall be considered to have been relied upon by you and
shall survive the delivery to you of the Notes regardless of any investigation
made by you or on your behalf. All statements in any such certificate or other
instrument shall constitute warranties and representations by the Company
hereunder.

      11.4. Successors and Assigns.

      This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder, whether or not an express assignment to
such holder of rights hereunder shall have been made by you or your successor or
assign.

      11.5. Amendment and Waiver.

            (a) Requirements. This Agreement may be amended, and the observance
      of any term hereof may be waived, with (and only with) the written consent
      of the Company and the Required Holders; provided that no such amendment
      or waiver of any of the provisions of Section 1 through Section 5 hereof,
      inclusive, or any defined term used therein, shall be effective as to any
      holder of Notes unless consented to by such holder in writing; and
      provided further that no such amendment or waiver shall, without the
      written consent of the holders of all Notes (exclusive of Notes held by
      the Company, any Subsidiary or any Affiliate) at the time outstanding,

                  (i) subject to Section 9.3 hereof, change the amount or time
            of any prepayment or payment of principal or Make-Whole Amount or
            the rate or time of payment of interest,

                  (ii) amend or waive Section 9 hereof,

                  (iii) amend or waive the definition of Required Holders, or

                  (iv) amend or waive this Section 11.5.

                                       57
<PAGE>   62

      The holder of any Note may specify that any such written consent executed
      by it shall be effective only with respect to a portion of the Notes held
      by it (in which case it shall specify, by dollar amount, the aggregate
      principal amount of Notes with respect to which such consent shall be
      effective) and in the event of any such specification such holder shall be
      deemed to have executed such written consent only with respect to the
      portion of the Notes so specified.

            (b) Solicitation of Noteholders.

                  (i) Solicitation. The Company shall not solicit, request or
            negotiate for or with respect to any proposed waiver or amendment of
            any of the provisions hereof or the Notes unless each holder of the
            Notes (irrespective of the amount of Notes then owned by it) shall
            be informed thereof by the Company with sufficient information to
            enable it to make an informed decision with respect thereto.
            Executed or true and correct copies of any waiver or consent
            effected pursuant to the provisions of this Section 11.5 shall be
            delivered by the Company to each holder of outstanding Notes
            forthwith following the date on which the same shall have been
            executed and delivered by all holders of outstanding Notes required
            to consent or agree to such waiver or consent.

                  (ii) Payment. The Company shall not, directly or indirectly,
            pay or cause to be paid any remuneration, whether by way of
            supplemental or additional interest, fee or otherwise, or grant any
            security, to any holder of Notes as consideration for or as an
            inducement to the entering into by any holder of Notes of any waiver
            or amendment of any of the terms and provisions hereof unless such
            remuneration is concurrently paid, or security is concurrently
            granted, on the same terms, ratably to the holders of all Notes then
            outstanding.

                  (iii) Scope of Consent. Any consent made pursuant to this
            Section 11.5 by a holder of Notes that has transferred or has agreed
            to transfer its Notes to the Company, any Subsidiary or any
            Affiliate and has provided or has agreed to provide such written
            consent as a condition to such transfer shall be void and of no
            force and effect except solely as to such holder, and any amendments
            effected or waivers granted or to be effected or granted that would
            not have been or would not be so effected or granted but for such
            consent (and the consents of all other holders of Notes that were
            acquired under the same or similar conditions) shall be void and of
            no force and effect, retroactive to the date such amendment or
            waiver initially took or takes effect, except solely as to such
            holder.

            (c) Binding Effect. (d) Except as provided in Section 11.5(b)
      hereof, any amendment or waiver consented to as provided in this Section
      11.5 shall apply equally to all holders of Notes and shall be binding upon
      them and upon each future holder of any Note and upon the Company whether
      or not such Note shall have been marked to indicate such amendment or
      waiver. No such amendment or waiver shall extend to or affect any
      obligation, covenant, agreement, Default or Event of Default not expressly
      amended or waived or impair any right consequent thereon.

      11.6. Payments, When Received.

            (a) Payments Due on Holidays. If any payment due on, or with respect
      to, any Note shall fall due on a day other than a Business Day, then such
      payment shall be made on the first Business Day following the day on which
      such payment shall have so fallen due; provided that if all or any portion
      of such payment shall consist of a payment of interest, for purposes of
      calculating such interest, such payment shall be deemed to have been
      originally due on such first following Business Day, such interest shall
      accrue and be payable to (but not including) the actual

                                       58
<PAGE>   63

      date of payment, and the amount of the next succeeding interest payment
      shall be adjusted accordingly.

            (b) Payments, When Received. Any payment to be made to the holders
      of Notes hereunder or under the Notes shall be deemed to have been made
      when received by such holder on the Business Day such payment actually
      becomes available to such holder at such holder's bank prior to 11:00 a.m.
      (local time of such bank).

      11.7. Entire Agreement.

      This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.

      11.8. Duplicate Originals, Execution in Counterpart.

      Two or more duplicate originals hereof may be signed by the parties, each
of which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed in one or more counterparts
and shall be effective when at least one counterpart shall have been executed by
each party hereto, and each set of counterparts which, collectively, show
execution by each party hereto shall constitute one duplicate original.

12. CONFIDENTIAL INFORMATION.

      For the purposes of this Section 12, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any Person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 8.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 12, (iii) any other holder of any Note, (iv) any Person to which you
sell or offer to sell such Note or any part thereof or any participation therein
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 12, (v) any Person
from which you offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 12), (vi) any federal or state
regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 12 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to

                                       59
<PAGE>   64

be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 12.

      [Remainder of page intentionally blank; next page is signature page]

                                       60
<PAGE>   65

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   66

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

TIAA-CREF LIFE INSURANCE COMPANY

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   67

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

MINNESOTA LIFE INSURANCE COMPANY

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   68

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

NATIONAL TRAVELERS LIFE COMPANY

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   69

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

MTL INSURANCE COMPANY

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   70

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

UNITY MUTUAL LIFE INSURANCE COMPANY-ANNUITY PORTFOLIO

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   71

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   72

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   73

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   74

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

INTER-STATE ASSURANCE COMPANY/LIFE & CAPITAL

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   75

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

AMERICAN FIDELITY ASSURANCE COMPANY

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   76

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

AMERICAN REPUBLIC INSURANCE COMPANY

By:  Advantus Capital Management, Inc.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   77

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

NORTHERN LIFE INSURANCE COMPANY

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   78

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

RELIASTAR LIFE INSURANCE COMPANY

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   79

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   80

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

SECURITY CONNECTICUT LIFE INSURANCE COMPANY

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   81

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY

By__________________________________
    Name:
    Title:

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   82

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

LUTHERAN BROTHERHOOD

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   83

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

THE OHIO NATIONAL LIFE INSURANCE COMPANY

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   84

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

SECURITY FINANCIAL LIFE INSURANCE CO.

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   85

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

BERKSHIRE LIFE INSURANCE COMPANY

By__________________________________
    Name:
    Title:

                   [Signature Page to Note Purchase Agreement]
<PAGE>   86

      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.

                                    Very truly yours,

                                    SELECTIVE INSURANCE GROUP, INC.

                                    By__________________________________
                                       Name:
                                       Title:

Accepted:

THE UNION CENTRAL LIFE INSURANCE COMPANY

By__________________________________
    Name: Gary Rodmaker
    Title: Second Vice President

                   [Signature Page to Note Purchase Agreement]
<PAGE>   87

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Teachers Insurance and Annuity Association of America
-----------------------------------------------------------------------------------------------
Note Registration Number;         RA-1; $20,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Chase Manhattan Bank
                                  ABA No. 021-000-021
                                  New York, NY
                                  Account of: Teachers Insurance and Annuity Association
                                  Account No.: 900-9-000200
                                  For Further Credit to: G07040
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company:      Selective Insurance Group, Inc.
                                  Description of
                                  Security:             8.63% Series A Senior Notes due May 2007
                                  Security Number:      816300 A@ 6
                                  Due Date and  Application (as among principal, premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Teachers Insurance and Annuity Association of America
Payments                          730 Third Avenue
                                  New York, NY 10017-3206
                                  Attn: Securities Accounting Division
                                  Tel: 212.916.6004
                                  Fax: 212.916.6955
-----------------------------------------------------------------------------------------------
Address for All other Notices     Teachers Insurance and Annuity Association of America
                                  730 Third Avenue
                                  New York, NY 10017-3206
                                  Attn: Securities Division
                                  Tel: 212.916.6578
                                  Fax: 212.916.6582
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Teachers Insurance and Annuity Association of America
Notes
-----------------------------------------------------------------------------------------------
Tax Identification Number         13-1624203
===============================================================================================
</TABLE>

                                   Annex 1-1
<PAGE>   88

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Teachers Insurance and Annuity Association of America
-----------------------------------------------------------------------------------------------
Note Registration Number;         RA-2;  $7,500,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       The Chase Manhattan Bank
                                  ABA #021000021
                                  New York, New York
                                  Account #900-9-000200
                                  For Further Credit to Account Number 607320
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company:      Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.63 % Series A Senior Notes due May 2007
                                  Security Number: 816300 A@ 6
                                  Due Date and Application (as among principal, premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Teachers Insurance and Annuity Association of America
Payments                          730 Third Avenue
                                  New York, New York 10017-3206
                                  Attn: Securities Accounting Division
                                  Tel: 212.916.6004
                                  Fax: 212.916.6955
-----------------------------------------------------------------------------------------------
Address for All other Notices     Teachers Insurance and Annuity Association of America
                                  730 Third Avenue
                                  New York, New York 10017-3206
                                  Attn:  Securities Division
                                  Tel: 212.916.6578
                                  Fax: 212.916.6582
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re elivery of        Teachers Insurance and Annuity Association of America
Notes
-----------------------------------------------------------------------------------------------
Tax Identification Number         13-1624203
===============================================================================================
</TABLE>

                                   Annex 1-2
<PAGE>   89
<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    TIAA-CREF LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  TIAA-CREF Life Insurance Company
-----------------------------------------------------------------------------------------------
Note Registration Number;         RA-3;  $2,500,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       The Chase Manhattan Bank
                                  ABA #021000021
                                  Account #910-2-796068
                                  Account Name: T-C Life PA Select
                                  ISA Code: 400
                                  G/L Account: 06020057
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.63 % Series A Senior Notes due May 2007
                                  Security Number: 816300 A@ 6
                                  Due Date and  Application (as among  principal, premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    TIAA-CREF Life Insurance Company
Payments                          c/o Teachers Insurance and Annuity Association of America
                                  730 Third Avenue
                                  New York, New York 10017-3206
                                  Attn: Securities Accounting Division
                                  Tel: 212.916.6004
                                  Fax: 212.916.6955
-----------------------------------------------------------------------------------------------
Address for All other Notices     TIAA-CREF Life Insurance Company
                                  c/o Teachers Insurance and Annuity Association of America
                                  730 Third Avenue
                                  New York, New York 10017-3206
                                  Attn: Securities Division
                                  Tel: 212.916.6578
                                  Fax: 212.916.6582
-----------------------------------------------------------------------------------------------
Signature Block Information       TIAA-CREF LIFE INSURANCE COMPANY

                                  By:  __________________________________
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Jane J. Dickson
Notes                             Teachers Insurance and Annuity Association of America
-----------------------------------------------------------------------------------------------
Tax Identification Number         13-1624203
===============================================================================================
</TABLE>

                                   Annex 1-3
<PAGE>   90

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    MINNESOTA LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Minnesota Life Insurance Company
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-1; $7,500,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       U.S. Bank Trust N.A.
                                  Minneapolis, Minnesota
                                  ABA #091000022
                                  BNF Minnesota Life Insurance Company
                                  Account #1801-10-00600-4
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal, premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Minnesota Life Insurance Company
Payments                          400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Advantus Capital Management, Inc.
                                  Fax: 651.223.5959
-----------------------------------------------------------------------------------------------
Address for All other Notices     Minnesota Life Insurance Company
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Advantus Capital Management, Inc.
-----------------------------------------------------------------------------------------------
Signature Block Information       Minnesota Life Insurance Company

                                  By:  Advantus Capital Management, Inc.

                                  By:  __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Minnesota Life Insurance Company
Notes                             400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Advantus Capital Management, Inc.
-----------------------------------------------------------------------------------------------
Tax Identification Number         41-0417830
===============================================================================================
</TABLE>

                                   Annex 1-4
<PAGE>   91

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    NATIONAL TRAVELERS LIFE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Var & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-2;  $1,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       U.S. Bank, N.A.
                                  Minneapolis, Minnesota
                                  ABA #091000022

                                  For credit to: U.S. Bank Trust, N.A.
                                                 Account #180121167365
                                                 TSU: 47300050

                                  For further credit to: National Travelers Life Company
                                                         Account #12609110
                                                         Attn: Juleah Foss
                                                               651-244-5958
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    National Travelers Life Company
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attn: Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     National Travelers Life Company
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attn: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       National Travelers Life Company

                                  By: Advantus Capital Management, Inc.

                                  By: __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery of       U.S. Bank Trust, N.A.
Notes                             180 East Fifth Street
                                  St. Paul, MN  55101
                                  Attention: Connie Kemp (SPFT 0901)
-----------------------------------------------------------------------------------------------
Tax Identification Number         42-0432940
===============================================================================================
</TABLE>

                                   Annex 1-5
<PAGE>   92

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    MTL INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  ELL & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-3; $2,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       The Northern Chgo/Trust
                                  ABA #071-000-152

                                  For credit to Account Number:  5186041000

                                  For further credit to: MTL Insurance Company
                                                         Account Number:  26-00621
                                                         Attn: Income Collections
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    MTL Insurance Company
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attn: Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     MTL Insurance Company
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attn: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       MTL Insurance Company

                                  By: Advantus Capital Management, Inc.

                                  By: __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Northern Trust Company of New York
Notes                             40 Broad Street, 8th Floor
                                  New York, NY  10004
                                  Attention: Settlements for Account #26-00621,
                                             MTL Ins. Company
-----------------------------------------------------------------------------------------------
Tax Identification Number         36-1516780
===============================================================================================
</TABLE>

                                   Annex 1-6
<PAGE>   93

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    UNITY MUTUAL LIFE INSURANCE COMPANY-ANNUITY PORTFOLIO
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Trulin & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-4; $1,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Chase NYC
                                  ABA #021-000-021

                                  For credit to: Chase Rochester
                                                 DDA# 0000400044
                                                 Attn: Ms. Roni Norkus (716) 258-7784

                                  For further credit to: Unity Mutual Life Insurance
                                                         Company Annuity Portfolio
                                                         Advantus - 611002310
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among principal, premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Unity Mutual Life Insurance Company-Annuity Portfolio
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attn: Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     Unity Mutual Life Insurance Company Annuity Portfolio
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attn: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       Unity Mutual Life Insurance Company-Annuity Portfolio

                                  By:  Advantus Capital Management, Inc.

                                  By:  __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Chase Manhattan Bank
Notes                             Attn: Ms. Roni Norkus
                                  One Chase Square T-10
                                  Rochester, NY  14643
-----------------------------------------------------------------------------------------------
Tax Identification Number         15-0475585
===============================================================================================
</TABLE>

                                   Annex 1-7
<PAGE>   94

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Farm Bureau General Insurance Company of Michigan
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-5; $1,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Comerica Bank
                                  Detroit, Michigan
                                  ABA #072-000-096

                                  For credit to: Trust Operation - Fixed Income
                                                 Unit Cost Center 98530
                                                 Account Number:  21585-98530

                                  For further credit to:   Farm Bureau General Insurance
                                                           Company of Michigan -
                                                           Account Number:  011000312140
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal, premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Farm Bureau General Insurance Company of Michigan
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     Farm Bureau General Insurance Company of Michigan
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       Farm Bureau General Insurance Company of Michigan

                                  By:  Advantus Capital Management, Inc.

                                  By:  __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Comerica Bank
Notes                             Attn:  Dan Molnar MC 3462
                                  411 West Lafayette
                                  Detroit, MI  48226-3462
                                  Reference:  Farm Bureau General Insurance Company of
                                              Michigan Internal Account Number
                                              011000312140
-----------------------------------------------------------------------------------------------
Tax Identification Number         38-6056228
===============================================================================================
</TABLE>

                                   Annex 1-8
<PAGE>   95

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Farm Bureau Mutual Insurance Company of Michigan
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-6; $1,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Comerica Bank
                                  Detroit, Michigan
                                  ABA #072-000-096

                                  For credit to: Trust Operation - Fixed Income
                                                 Unit Cost Center 98530
                                                 Account Number:  21585-98530

                                  For further credit to: Farm Bureau Mutual Insurance
                                                         Company of Michigan -
                                                         Account Number:  011000312132
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Farm Bureau Mutual Insurance Company of Michigan
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     Farm Bureau Mutual Insurance Company of Michigan
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       Farm Bureau Mutual Insurance Company of Michigan

                                  By: Advantus Capital Management, Inc.

                                  By: __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery  of      Comerica Bank
Notes                             Trust Securities Services MC 3404
                                  411 West Lafayette
                                  Detroit, MI  48275-3404
                                  Reference:  Farm Bureau Mutual Insurance Company of
                                              Michigan Internal Account Number:
                                              011000312132
                                              Attn:  Dan Molnar  313-222-7946
-----------------------------------------------------------------------------------------------
Tax Identification Number         38-1316179
===============================================================================================
</TABLE>

                                   Annex 1-9
<PAGE>   96

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Farm Bureau Life Insurance Company of Michigan
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-7;  $3,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Comerica Bank
                                  Detroit, Michigan
                                  ABA #072-000-096

                                  For credit to: Trust Operation - Fixed Income
                                                 Unit Cost Center 98530
                                                 Account Number: 21585-98530

                                  For further credit to: Farm Bureau Life Insurance
                                                         Company of Michigan -
                                                         Account Number: 011000312124
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Farm Bureau Life Insurance Company of Michigan
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention:  Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     Farm Bureau Life Insurance Company of Michigan
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       Farm Bureau Life Insurance Company of Michigan

                                  By:  Advantus Capital Management, Inc.

                                  By:  __________________________________

-------------------------------------------- ---------------------------------------------------
Instructions re Delivery of       Comerica Bank
Notes                             Attn: Dan Molnar MC 3462
                                  411 West Lafayette
                                  Detroit, MI 48275-3404
                                  Reference: Farm Bureau Life Insurance Company of
                                             Michigan Internal Account Number
                                             011000312124
-----------------------------------------------------------------------------------------------
Tax Identification Number         38-6053670
===============================================================================================
</TABLE>

                                   Annex 1-10
<PAGE>   97

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    INTER-STATE ASSURANCE COMPANY/LIFE & CAPITAL
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Salkeld & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-8; $3,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Deutsche Bank
                                  New York, NY
                                  ABA #021-001-033
                                  Account: 99-911-145
                                  Ref: Inter-State Assurance Company/Life & Capital
                                  Acct. #98954
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Inter-State Assurance Company/Life & Capital
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention:  Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     Inter-State Assurance Company/Life & Capital
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       Inter-State Assurance Company/Life & Capital

                                  By: Advantus Capital Management, Inc.

                                  By: __________________________________

------------------------------------------------------- ----------------------------------------
Instructions re Delivery of       Deutsche Bank
Notes                             16 Wall Street
                                  4th Floor, Window 44
                                  Reference: Inter-State Assurance Company/Life & Capital
                                             (98954)
                                             New York, NY  10005
-----------------------------------------------------------------------------------------------
Tax Identification Number         04-1867050
===============================================================================================
</TABLE>

                                   Annex 1-11
<PAGE>   98

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    AMERICAN FIDELITY ASSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Booth & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-9;  $2,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       First Fidelity Bank, N.A.
                                  5800 N.W. 39th
                                  Oklahoma City, OK  73122-2120
                                  ABA #1030-0269-1

                                  For credit to: American Fidelity Assurance Company
                                                 Account Number: 52010414
                                                 Attn: Tina Swaim & Ron Mitchell

                                  For further credit to: InvesTrust
                                                         Account Number: 52010414
                                                         Attn:  Trust Operations
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    American Fidelity Assurance Company
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     American Fidelity Assurance Company
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       American Fidelity Assurance Company

                                  By:  Advantus Capital Management, Inc.

                                  By:  __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Northern Trust Company of New York
Notes                             40 Broad Street, 8th Floor
                                  New York, NY 10004-2315
                                  Attn: Settlements for Account #1746957
                                        American Fidelity Assurance Company
-----------------------------------------------------------------------------------------------
Tax Identification Number         73-0714500
===============================================================================================
</TABLE>

                                   Annex 1-12
<PAGE>   99

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    AMERICAN REPUBLIC INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  EMSEG & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-10; $1,000,000.00
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Norwest Bank Minnesota, N.A.
                                  ABA #091000019
                                  BNFA=0000840245 (include all 10 digits)
                                  BNF=Trust Clearing Account
                                  FFC Attn:  Income Collections, a/c #20983400

                                  For further credit to: American Republic Insurance Co.
                                                         Account Number: 20983400
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87 % Series B Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and Application (as among principal, premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    American Republic Insurance Company
Payments                          c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Address for All other Notices     American Republic Insurance Company
                                  c/o Advantus Capital Management, Inc.
                                  400 Robert Street North
                                  St. Paul, Minnesota 55101
                                  Attention: Client Administrator
-----------------------------------------------------------------------------------------------
Signature Block Information       American Republic Insurance Company

                                  By: Advantus Capital Management, Inc.

                                  By: __________________________________

-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Norwest Bank  Minnesota, N.A.
Notes                             MAC N9306-050
                                  733 Marquette Ave. 5th Floor
                                  Investors Bldg. Attn: Brandi Pickel
                                  Minneapolis, MN  55479
-----------------------------------------------------------------------------------------------
Tax Identification Number         42-0113630
===============================================================================================
</TABLE>

                                   Annex 1-13
<PAGE>   100

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    NORTHERN LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Northern Life Insurance Company
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-11; $5,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       US Bank N.A./Mpls.
                                  601 2nd Ave.S.
                                  Acct# 160232376105
                                  Bank ABA # 091000022
                                  Attn: Securities Accounting
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    ReliaStar Investment Research, Inc.
Payments                          100 Washington Avenue South, Suite 800
                                  Minneapolis, MN 55401-2121
                                  Fax: 612.372.5368
-----------------------------------------------------------------------------------------------
Address for All other Notices     ReliaStar Investment Research, Inc.
                                  100 Washington Avenue South, Suite 800
                                  Minneapolis, MN 55401-2121
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       ReliaStar Investment Research, Inc.
Notes                             Attn: Bret Brunner
-----------------------------------------------------------------------------------------------
Tax Identification Number         41-1295933
===============================================================================================
</TABLE>

                                   Annex 1-14
<PAGE>   101

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    RELIASTAR LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  ReliaStar Life Insurance Company
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-12;  $3,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       US Bank N.A./Mpls.
                                  601 2nd Ave.S., Mpls, MN
                                  Bank ABA # 091000022
                                  Acct. Name: ReliaStar Life Insurance Co.
                                  Acct# 110240014461
                                  Attn: Securities Accounting

-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Reliastar Investment Research
Payments                          100 Washington Avenue South
                                  Suite 800
                                  Minneapolis, MN 55401-2121
                                  Fax: 612.372.5368
-----------------------------------------------------------------------------------------------
Address for All other Notices     Reliastar Investment Research
                                  100 Washington Avenue South
                                  Suite 800
                                  Minneapolis, MN 55401-2121
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       ReliaStar Investment Research, Inc.
Notes                             Attn: Bret Brunner
-----------------------------------------------------------------------------------------------
Tax Identification Number         41-0451140
===============================================================================================
</TABLE>

                                   Annex 1-15
<PAGE>   102

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Sigler & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-13; $2,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Chase Manhattan Bank
                                  New York, NY
                                  Bank ABA # 021000021
                                  A/C # 900-9-000200
                                  F/F/C #G53095 ReliaStar Life of New York
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: C816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Reliastar Investment Research
Payments                          100 Washington Avenue South
                                  Suite 800
                                  Minneapolis, MN 55401-2121
                                  Fax: 612.372.5368
-----------------------------------------------------------------------------------------------
Address for All other Notices     Reliastar Investment Research
                                  100 Washington Avenue South
                                  Suite 800
                                  Minneapolis, MN 55401-2121
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       ReliaStar Investment Research, Inc.
Notes                             Attn: Bret Brunner
-----------------------------------------------------------------------------------------------
Tax Identification Number         53-0242530
===============================================================================================
</TABLE>

                                   Annex 1-16
<PAGE>   103

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    SECURITY CONNECTICUT LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Sigler & Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-14; $2,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Chase Manhattan Bank
                                  New York, NY
                                  Bank ABA # 021000021
                                  Beneficiary A/C # 900-9-000200
                                  Reference: Sigler & Co.
                                  Tax I.D. # 13-3641527
                                  F/C #G54426
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Reliastar Investment Research
Payments                          100 Washington Avenue South
                                  Suite 800
                                  Minneapolis, MN 55401-2121
                                  Fax: 612.372.5368
-----------------------------------------------------------------------------------------------
Address for All other Notices     Reliastar Investment Research
                                  100 Washington Avenue South
                                  Suite 800
                                  Minneapolis, MN 55401-2121
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       ReliaStar Investment Research, Inc.
Notes                             Attn: Bret Brunner
-----------------------------------------------------------------------------------------------
Tax Identification Number         35-1468921
===============================================================================================
</TABLE>

                                   Annex 1-17
<PAGE>   104

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Woodmen of the World Life Insurance Society
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-15; $10,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       U.S. Bank
                                  ABA No. 104000029
                                  1700 Farnam Street
                                  Omaha, Nebraska 68102
                                  For the Account of WOW
                                  Account No. 1-487-477-7-0730
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Woodmen of the World Life Insurance Society
Payments                          Attn: Securities Department
                                  1700 Farnam Street
                                  Omaha, Nebraska 68102
-----------------------------------------------------------------------------------------------
Address for All other Notices     Woodmen of the World Life Insurance Society
                                  Attn: Securities Department
                                  1700 Farnam Street
                                  Omaha, Nebraska 68102
-----------------------------------------------------------------------------------------------
Other Instructions                2 signature lines
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Woodmen of the World Life Insurance Society
Notes
-----------------------------------------------------------------------------------------------
Tax Identification Number         47-0339250
===============================================================================================
</TABLE>

                                   Annex 1-18
<PAGE>   105

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    LUTHERAN BROTHERHOOD
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Lutheran Brotherhood
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-16; $6,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Norwest Bank Minnesota, N.A.
                                  ABA # 091000019
                                  For Credit to Trust Clearing Account # 0000840245
                                  Attn: Sarah Corcoran
                                  For Credit to: Lutheran Brotherhood
                                  Acct. No.: 12651300
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Lutheran Brotherhood
Payments                          Attn: Investment Accounting/Trading Administrator
                                  625 Fourth Avenue South
                                  10th Floor
                                  Minneapolis, MN 55415
-----------------------------------------------------------------------------------------------
Address for All other Notices     Lutheran Brotherhood
                                  Attn: Investment Division
                                  625 Fourth Avenue South
                                  Minneapolis, MN 55415
                                  Fax: 612.340.5776
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Norwest Bank Minnesota, N.A.
Notes                             733 Marquette Avenue
                                  Attn: Client Services - Sarah Corcoran
                                  5th Floor, Window 1
                                  Investors Building
                                  Minneapolis, MN 55479-0051
                                  Fax: 612.667.0550
                                  with a copy to Lutheran Brotherhood in-house attorney
-----------------------------------------------------------------------------------------------
Tax Identification Number         41-0385700
===============================================================================================
</TABLE>

                                   Annex 1-19
<PAGE>   106

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    THE OHIO NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  The Ohio National Life Insurance Company
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-17; $5,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Firstar, NA (ABA# 042-000013)
                                  5th & Walnut Streets
                                  Cincinnati, OH 45212
                                  For Credit to The Ohio National Life Insurance Company
                                  Account # 910-275-7
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    The Ohio National Life Insurance Company
Payments                          P.O. Box 237
                                  Cincinnati, OH 45210
                                  Attn: Investment Department
-----------------------------------------------------------------------------------------------
Address for All other Notices     The Ohio National Life Insurance Company
                                  P.O. Box 237
                                  Cincinnati, OH 45210
                                  Attn: Investment Department
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       The Ohio National Life Insurance Company
Notes
-----------------------------------------------------------------------------------------------
Tax Identification Number         31-0397080
===============================================================================================
</TABLE>

                                   Annex 1-20
<PAGE>   107

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    SECURITY FINANCIAL LIFE INSURANCE CO.
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Security Financial Life Insurance Co.
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-18; $2,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       National Bank of Commerce
                                  13th and O Streets
                                  Lincoln, Nebraska 68508
                                  ABA No. 104-000-045
                                  Account of: Security Financial Life
                                  Account No.: 40-797-624
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87% Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Security Financial Life Insurance Co.
Payments                          4000 Pine Lake Road
                                  Lincoln, NE 68516
                                  Attn: Investment Division
                                  Fax: 402.434.9599
                                  Phone: 402.434.9500
-----------------------------------------------------------------------------------------------
Address for All other Notices     Security Financial Life Insurance Co.
                                  4000 Pine Lake Road
                                  Lincoln, NE 68516
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Security Financial Life Insurance Co.
Notes
-----------------------------------------------------------------------------------------------
Tax Identification Number         47-0293990
===============================================================================================
</TABLE>

                                   Annex 1-21
<PAGE>   108

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    THE UNION CENTRAL LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Hare & Co.
-----------------------------------------------------------------------------------------------
Note  Registration Number;        RB-19; $2,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Hare BNF / 10C 566
                                  New York, NY
                                  ABA # 021-000-018
                                  Credit:
                                  The Union Central Life Insurance Company
                                  Account # 367614
                                  Attn: P&L Department
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87% Senior Notes due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    The Union Central Life Insurance Company
Payments                          1876 Waycross Road
                                  Cincinnati, OH 45240
                                  Attn: Treasury Department
                                  Fax: 513.674.5275
-----------------------------------------------------------------------------------------------
Address for All other Notices     Summit Investment Partners, Inc.
                                  312 Elm Street
                                  Suite 1212
                                  Cincinnati, OH 45202
                                  Attn: Gary Rodmaker
                                  Fax: 513.632.1610
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       The Bank of New York
Notes                             1 Wall Street - 3rd Floor
                                  Window A
                                  New York, NY 10286
                                  RE: Union Central Life Acct. # 367614
-----------------------------------------------------------------------------------------------
Tax Identification Number         31-0472910
===============================================================================================
</TABLE>

                                   Annex 1-22
<PAGE>   109

                                     ANNEX 1
                          INFORMATION AS TO PURCHASERS

<TABLE>
<CAPTION>
===============================================================================================
Purchaser Name                    BERKSHIRE LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------------------------
<S>                               <C>
Name in Which Note is Registered  Berkshire Life Insurance Company
-----------------------------------------------------------------------------------------------
Note Registration Number;         RB-20; $2,000,000
Principal Amount
-----------------------------------------------------------------------------------------------
Payment on Account of Note

        Method                    Federal Funds Wire Transfer

        Account Information       Berkshire Life Insurance Company
                                  Acct. No. 002-4-020877
                                  The Chase Manhattan Bank, N.A.
                                  ABA# 021000021
-----------------------------------------------------------------------------------------------
Accompanying Information          Name of Company: Selective Insurance Group, Inc.
                                  Description of
                                  Security: 8.87%  Series B Senior  Notes  due May 2010
                                  Security Number: 816300 B* 7
                                  Due Date and  Application (as among  principal,  premium and
                                  interest) of the payment being made:
-----------------------------------------------------------------------------------------------
Address for Notices Related to    Berkshire Life Insurance Company
Payments                          Attn: Securities Department
                                  700 South Street
                                  Pittsfield, MA 01201
                                  Fax: 413.442.9763
                                  Phone: 413.499.4321
-----------------------------------------------------------------------------------------------
Address for All other Notices     Berkshire Life Insurance Company
                                  Attn: Securities Department
                                  700 South Street
                                  Pittsfield, MA 01201
-----------------------------------------------------------------------------------------------
Other Instructions                None
-----------------------------------------------------------------------------------------------
Instructions re Delivery of       Berkshire Life Insurance Company
Notes
-----------------------------------------------------------------------------------------------
Tax Identification Number         04-1083480
===============================================================================================
</TABLE>

                                   Annex 1-23
<PAGE>   110

                                     ANNEX 2
                         PAYMENT INSTRUCTIONS AT CLOSING

Bank: State Street Bank & Trust Company
Address: Boston, Massachusetts
ABA: 011-000-028
Account Name: Selective Insurance Group, Inc.
Address: Branchville, NJ
Account #: 6170-830-1

                                   Annex 2-1
<PAGE>   111

                                    ANNEX 3
                            INFORMATION AS TO COMPANY

                                   Annex 3-2

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