TAX MATTERS AGREEMENT

This Agreement is made this day of October, 2003, by and between Employers
Reinsurance Corporation, a Missouri corporation ("Seller"), Scottish Holdings,
Inc., a Delaware corporation ("Acquiror"), and Scottish Re Group Limited (f/k/a
Scottish Annuity & Life Holdings, Ltd.), a holding company organized under the
laws of the Cayman Islands ("Parent").

                             PRELIMINARY STATEMENTS

A. Seller owns all of the issued and outstanding Capital Stock of ERC Life
Reinsurance Corporation, a Missouri-domiciled insurance company ("Company").

B. Pursuant to the Stock Purchase Agreement dated as of October __, 2003, by and
among Seller, Acquiror, and Parent (the "Purchase Agreement"), and subject to
the terms and conditions set forth therein, Seller wishes to sell to Acquiror,
and Acquiror wishes to purchase, 95% of the outstanding shares of the Capital
Stock of the Company ( the "Transferred Shares").

C. Pursuant to the Purchase Agreement, Acquiror has agreed, on the terms and
subject to the conditions set forth therein, to purchase (the "Purchase") the
Transferred Shares from Seller on the Closing Date.

D. The parties to this Agreement desire to make certain representations,
warranties, and covenants with respect to Tax matters and to allocate the
liability for certain Taxes that may be owed to or asserted by any Governmental
Authority.


<PAGE>

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises,
covenants, and conditions contained in this Agreement, the parties to this
Agreement agree as follows:

     Section 1. Definitions.

          (a) Unless otherwise indicated, all capitalized terms used herein
shall have the same meaning as in the Purchase Agreement.

          (b) For purposes of this Agreement:

          "Acquiror's Post-2003 Taxes" has the meaning set forth in Section
4(c).

          "Acquiror's 2003 Taxes" has the meaning set forth in Section 4(a).

          "Affiliated Group" means an affiliated group, as that term is defined
by Section 1504(a) of the Code.

          "Closing Agreement" means a written and legally binding agreement with
a Governmental Authority relating to Taxes.

          "Closing Tax Liabilities" shall mean the gross amount of any Taxes
that are specifically accrued or reflected as a liability on the Final Balance
Sheet, or otherwise specifically taken into account in determining any amount
shown on the Final Balance Sheet.

          "Controlling Party" has the meaning set forth in Section 8(f).

          "Final Determination" means with respect to any Tax issue (a) a
decision, judgment, decree or other order by any court of competent
jurisdiction, which decision,


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judgment, decree or other order has become final and not subject to further
appeal, (b) a Closing Agreement (whether or not entered into under Section 7121
of the Code) or any other binding settlement agreement (with the Internal
Revenue Service or a similar Governmental Authority) entered into in connection
with or in contemplation of an administrative or judicial proceeding, or (c) the
completion of the highest level of administrative proceedings by a Governmental
Authority if a judicial contest is not or is no longer available.

          "GE" shall mean the General Electric Company.

          "Independent Reviewer" shall mean an accounting firm or law firm
mutually selected by Seller and Acquiror or, if Seller and Acquiror cannot
agree, then Seller and Acquiror shall each designate separately a firm and those
two firms shall select a third firm to be the Independent Reviewer.

          "Non-Controlling Party" has the meaning set forth in Section
8(f)(i)(A).

          "Post-2003 Tax Return Statement" has the meaning set forth in Section
4(d).

          "Post-2003 Tax Return" has the meaning set forth in Section 4(c).

          "Post-2003 Straddle Period" has the meaning set forth in Section 4(c).

          "Pre-2004 Tax Period" has the meaning set forth in Section 4(a).

          "Pre-2004 Tax Return" has the meaning set forth in Section 4(a).


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<PAGE>

          "Seller's Consolidated Group" means GE and each corporation that is a
member of the Affiliated Group of which GE is the common parent corporation,
which members of such Affiliated Group file a consolidated Tax Return with GE.

          "Seller's Post-2003 Taxes" has the meaning set forth in Section 4(c).

          "Seller's Pre-2004 Taxes" has the meaning set forth in Section 4(a).

          "Straddle Period" means any Tax period that begins on or prior to the
Closing Date and ends after the Closing Date.

          "Tax Claim" has the meaning set forth in Section 2.

          "Tax Detriment" means (i) an increase in Liability for Taxes or (ii) a
reduction of (A) a refund for Taxes or (B) any other favorable Tax attribute.

          "Tax Indemnifying Party" means a party that pursuant to this Agreement
is required to pay or indemnify another Person against Losses relating to Taxes.

          "Tax Indemnitee" means a party that pursuant to this Agreement is
entitled to indemnification against Losses relating to Taxes.

          "Tax Return" means any return, report, claim, certificate, form,
statement, disclosure, declaration, election, information return, estimate or
other document (including any related or supporting information attached and any
amended materials provided with respect to any of the foregoing) supplied to, or
filed with, a Governmental Authority in connection with the determination,
assessment or collection of any Tax or the administration of any laws,
regulations


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<PAGE>

or administrative requirements relating to any Tax, including where permitted or
required any Tax return filed on a consolidated, combined, unitary or other
similar basis.

          "Tax Ruling" means a written ruling of a Governmental Authority
relating to Taxes.

          "Tax Sharing Agreement" means any written or unwritten agreement,
indemnity or other arrangement for the allocation or payment of Tax liabilities
or payment for Tax benefits that may exist between the Company and any Person
(other than any indemnity provided pursuant to this Agreement).

          "Transfer Taxes" has the meaning set forth in Section 15.

          "2003 Straddle Period" has the meaning set forth in Section 4(a).

          "2003 Tax Return Statement" has the meaning set forth in Section 4(b).

          (c) Unless the context otherwise requires, references in this
Agreement to any Person include the successors and assigns of such Person.

          Section 2. Representations of Seller. Seller represents and warrants
to Acquiror that, except with respect to GE consolidated Tax Returns (other than
the portion of such Tax Returns relating to the Company) and subject to the
exceptions stated in the Schedules attached to this Agreement, and further
subject to other exceptions that are not individually or in the aggregate
material:


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<PAGE>

          (a) (i) the Company has in the manner prescribed by Law prepared and
timely filed, or caused to be prepared and timely filed, with the appropriate
Governmental Authorities all Tax Returns required to be filed by the Company
taking into account any valid extension of time to file granted to or obtained
on behalf of the Company, and (ii) the Company's Tax Returns, in all respects,
are true and complete and have accurately disclosed all liability for Taxes of
the Company required to be shown thereon for the periods covered thereby;

          (b) (i) the Company has in the manner prescribed by Law timely paid
(or there has been paid on its behalf) all Taxes due and payable by the Company,
and (ii) any Tax deficiencies or assessments asserted in writing against the
Company by any Governmental Authority have either been paid or settled, or (iii)
such clause (i) or clause (ii) amounts have been reflected in accordance with
SAP on the Company's balance sheet as of June 30, 2003;

          (c) no written claim has been made after December 31, 1997 by a
Governmental Authority in a jurisdiction where the Company does not file Tax
Returns that the Company is or may be subject to taxation by that jurisdiction;

          (d) except with respect to GE consolidated Tax Returns (including the
portion of such Tax Returns relating to the Company), no extension of the
applicable statute of limitations for the period of assessment or collection of
any Tax is in effect with respect to the Company or has been requested in
writing by the Company;

          (e) no separate Tax Returns of the Company have been audited or
examined by the appropriate federal, state, local or foreign Governmental
Authority;


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<PAGE>

          (f) no written notice has been received of any actions, suits,
investigations, audits, claims, administrative or court proceedings, or
assessments ("Tax Claims") pending, proposed or threatened with respect to Taxes
of the Company;

          (g) there are no Tax Rulings, requests for Tax Rulings, or Closing
Agreements relating to the Company or Seller that could affect the Company's
liability for Taxes or the Company's Tax attributes for any Tax period (or
portion thereof) that ends after the Closing Date;

          (h) (i) from and after January 1, 1997 through December 31, 2000, the
Company was a member of Seller's Consolidated Group, and the Company is not and
has not been includible in any other consolidated Tax Return for any Tax period
for which the statute of limitations has not expired; and (ii) except with
respect to any liability arising under Treasury Regulation Section 1.1502-6 that
directly results from the Company being a member of Seller's Consolidated Group,
the Company will not have as of the Closing Date any liability for Taxes of any
Person other than the Company (A) as a transferee or successor, (B) by contract
(including any Tax Sharing Agreements) or (C) otherwise;

          (i) the Company has complied within the time and in the manner
required by Law with all the applicable requirements of Code Sections 908(a),
941(a)(5), 952(a)(3), 995(b)(1)(F)(ii) and 999 relating to participation in or
cooperation with an international boycott;

          (j) the Company has not been at any time a member of any partnership
or joint venture or the holder of a beneficial interest in any trust (other than
any trust described in


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<PAGE>

N.Y. Insurance Department Regulation 114 (N.Y. Comp. Codes R. & Regs., tit. 11,
sec. 126) or any similar trust) for any period for which the statute of
limitations for any Tax has not expired;

          (k) the Company or any Person on behalf of the Company (i) has not
agreed to and is not required to make any adjustments pursuant to Sections
481(a) or 807(f) of the Code (or any predecessor provision) or any similar
provision of foreign, state or local Law by reason of a change in accounting
method initiated by any such entity, (ii) has no knowledge that any Governmental
Authority has proposed in writing any such adjustment or change in accounting
method, and (iii) has not made any written application pending with any
Governmental Authority requesting permission for any change in accounting method
that relates to the business or operations of the Company;

          (l) there are no Tax liens upon any property or assets of the
Companies except liens for current Taxes not yet due;

          (m) the Company has not (i) entered into a gain recognition agreement
under Section 367 of the Code or (ii) engaged in an installment sale or Code
Section 355 transaction that may result, in each case, in the recognition of
taxable income by the Company with respect to such agreement or transaction for
any Tax period (or portion thereof) ending after the Closing Date;

          (n) no power of attorney currently in force has been granted with
respect to any matter relating to the Taxes of the Company;


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<PAGE>

          (o) except as required by applicable Law, since December 31, 2002, the
Company has not: (i) made or changed any election concerning any Taxes, (ii)
changed an annual accounting period or adopted or changed any accounting method,
(iii) filed any amended Tax Return, (iv) settled any Tax Claim or assessment or
(v) surrendered any right to claim a refund of any Taxes, in each case, to the
extent such action would affect the Taxes of the Company following the Closing
Date;

          (p) neither Seller nor the Company is a party to any agreement or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code;

          (q) the Company does not have an unrecaptured overall foreign loss
within the meaning of Section 904(f) of the Code;

          (r) the Company has not participated, within the meaning of Treasury
Regulation Section 1.6011-4(c), in (i) any "reportable transaction" within the
meaning of Section 6011 of the Code and the Treasury Regulations thereunder,
(ii) any "confidential corporate tax shelter" within the meaning of Section 6111
of the Code and the Treasury Regulations thereunder, or (iii) any "potentially
abusive tax shelter" within the meaning of Section 6112 of the Code and the
Treasury Regulations thereunder;

          (s) Seller has previously delivered with respect to the Company for
the three (3) year period prior to the Closing Date (i) correct and complete
copies of all federal and state income and franchise Tax Returns filed by the
Company or Seller with respect to the Company


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<PAGE>

and (ii) correct and complete copies of all (A) reports, statements or other
written information relating to any written Tax Claim received by the Company or
Seller from any Governmental Authority and all written materials provided by the
Company or Seller to any Governmental Authority in connection with such Tax
Claim, and (B) statements of deficiencies assessed against or agreed to by the
Company or Seller with respect to Taxes.

          (t) the Company satisfies the definition of a "life insurance company"
for purposes of the Code and all reinsurance contracts entered into by the
Company are insurance contracts for federal income Tax purposes;

          (u) the Company does not have an existing policyholder surplus account
as defined in Code Section 815;

          (v) none of the Company's contracts are subject to or otherwise
intended to qualify under Sections 72, 101, 130, 401, 403, 408, 457, 817, 817A,
7702 and 7702A of the Code; and

          (w) the insurance reserves of the Company set forth in the Tax Returns
filed by or including the Company have been determined based on information
received from ceding companies or estimates intended to result in substantial
compliance with Section 807 and Section 846 of the Code, as applicable.

          Section 3. Representation of Acquiror. Acquiror represents and
warrants to the Seller as of the date hereof (and on the Closing Date) that
Acquiror: (a) intends to cause the Company to continue in effect the existing
reinsurance business of the Company as it relates to


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<PAGE>

the Company's in-force reinsurance contracts as of the Closing Date, and (b) has
(and will have on the Closing Date) no plan or intention (i) to cause the
Company to redeem the outstanding shares of the Capital Stock of the Company
retained by Seller or otherwise take any action to cause Seller to own less than
5% of the Capital Stock of the Company following the Closing, or ii) to cause or
permit the Company to sell or otherwise dispose of any substantial portion of
its assets, except that (A) the Company may retrocede up to an aggregate 50% of
the Company's existing business to an Affiliate of the Company on a proportional
basis in transactions in which the Company receives arm's-length ceding
commissions, (B) the Company may pay ordinary dividends (that is, dividends
that, when paid by an insurance company subject to Missouri regulation, do not
require notice of extraordinary dividends under Mo. Rev. Stat. Section 382.210
as in effect on the date hereof), and (C) the Company may sell or otherwise
dispose of assets in the Company's ordinary course of business (determined
without taking into account what may constitute the ordinary course of business
for Acquiror or its other Affiliates).

          Section 4. Filing of Tax Returns.

          (a) Seller will file or cause to be filed (within the time and in the
manner required by applicable Law) all Tax Returns of or on behalf of the
Company for all Tax periods ending on or before December 31, 2003 (the "Pre-2004
Tax Periods" and "Pre-2004 Tax Returns"). Seller will pay or will cause to be
paid (within the time and in the manner required by applicable Law) any Taxes
shown as due on such Tax Returns or otherwise imposed with respect to any
Pre-2004 Tax Period, except for (i) any such Taxes paid prior to Closing, (ii)
the gross amount of any Closing Tax Liabilities, and (iii) Acquiror's 2003 Taxes
(as defined below) and


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<PAGE>

any other Taxes for which Acquiror is required to indemnify and hold harmless
the Seller Indemnified Parties pursuant to Section 6 ("Seller's Pre-2004
Taxes"). With respect to any Pre-2004 Tax Period that includes any Tax period
ending after the Closing Date (a "2003 Straddle Period"), Acquiror shall be
liable to Seller for any Taxes allocated to the portion of such 2003 Straddle
Period beginning on the first day after the Closing Date and ending on December
31, 2003 as provided in Section 4(e) of this Agreement ("Acquiror's 2003
Taxes").

          (b) Promptly, but no later than 30 days after the Closing Date,
Acquiror will provide (or cause to be provided) to Seller the authority required
by Law to: (i) prepare and file such Pre-2004 Tax Returns, (ii) obtain any
extension for the due date of such Pre-2004 Tax Returns, and (iii) pay any Taxes
shown as due on the Pre-2004 Tax Returns. Not later than 90 days prior to the
due date (including extensions) for any such Pre-2004 Tax Return, Acquiror will
provide (or cause to be provided) to Seller any necessary information relating
to the Company to prepare such Pre-2004 Tax Returns. Acquiror will prepare (or
cause to be prepared) such information in a manner consistent with past
practice, and Seller will prepare such Pre-2004 Tax Returns in a manner
consistent with past practice; provided, however, that Seller shall not take any
position, with respect to any such Tax Return filed after the date of this
Agreement, for which there is no substantial authority within the meaning of
Section 6662 of the Code. At least thirty (30) days prior to the filing of any
Pre-2004 Tax Return which includes any Acquiror's 2003 Taxes or which may
reasonably be expected to result in a material Tax Detriment with respect to
Acquiror or the Company following the Closing Date, Seller shall furnish to
Acquiror for Acquiror's review and comment a copy of such completed Pre-2004 Tax
Return (or, in the case of a Pre-2004 Tax Return that is filed on a
consolidated, unified, or combined basis, a


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<PAGE>

pro-forma copy of the Company's Pre-2004 Tax Return prepared on a separate
company basis), together with a statement setting forth the amount of Acquiror's
2003 Taxes properly taking into account any and all relevant estimated or other
payments of any Tax related thereto by either such party (the "2003 Tax Return
Statement"). Seller and Acquiror agree to consult and resolve in good faith any
dispute arising as a result of the review of such Pre-2004 Tax Return and the
2003 Tax Return Statement. If the parties are unable to resolve a dispute
concerning any such Pre-2004 Tax Return within ten (10) days following the
delivery of such Tax Return, the parties shall use the dispute resolution
process provided in Section 4(f) of this Agreement.

          (c) Except as described in Section 4(a), Acquiror or the Company will
file or cause to be filed (within the time and in the manner required by
applicable Law) all necessary Tax Returns with respect to the Company for all
Tax periods (the "Post-2003 Tax Returns"). Acquiror will pay or cause to be paid
(within the time and in the manner required by applicable Law) any Taxes shown
as due on such Post-2003 Tax Returns; provided, however, with respect to any
Post-2003 Tax Return that includes any Tax period beginning on or before the
Closing Date (the "Post-2003 Straddle Period"), Seller shall be liable to
Acquiror for any Taxes allocated to the portion of such Post-2003 Straddle
Period beginning on the first day of such Tax period and ending on the Closing
Date as provided in Section 4(e) of this Agreement ("Seller's Post-2003 Taxes";
all other Taxes related to any Post-2003 Tax Return are hereinafter referred to
as "Acquiror's Post-2003 Taxes").

          (d) Acquiror will prepare (or cause to be prepared) all Post-2003 Tax
Returns that include any Seller's Post-2003 Taxes in a manner consistent with
past practice. At least


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<PAGE>

thirty (30) days prior to the filing of any Post-2003 Tax Return which includes
any Seller's Post-2003 Taxes, Acquiror shall furnish to Seller for Seller's
review and comment a copy of such completed Post-2003 Tax Return (or, in the
case of a Post-2003 Tax Return that is filed on a consolidated, unified, or
combined basis, a pro-forma copy of the Company's Post-2003 Tax Return prepared
on a separate company basis), together with a statement setting forth the amount
Seller is responsible for hereunder, properly taking into account any and all
relevant estimated or other payments of any Tax related thereto by either such
party (the "Post-2003 Tax Return Statement"). Seller and Acquiror agree to
consult and resolve in good faith any dispute arising as a result of the review
of any such Post-2003 Tax Return and the Post-2003 Tax Return Statement. In the
event the parties are unable to resolve a dispute concerning any Post-2003 Tax
Return within ten (10) days following the delivery of such Tax Return, the
parties shall use the dispute resolution process provided in Section 4(f) of
this Agreement.

          (e) For purposes of this Agreement, income, deductions, and other
items in respect of any 2003 Straddle Period or Post-2003 Straddle Period (each
a "Straddle Period") will be allocated between the pre-Closing portion of such
Straddle Period and the post-Closing portion of such Straddle Period based on an
actual closing of the books of the Company on the Closing Date; provided that
(i) if the Closing Date occurs on a date other than the last day of a calendar
month, then income, deductions, and other items for such month (other than
amounts attributable to transactions not in the ordinary course of business)
will be prorated on a daily basis, and (ii) if the Closing Date occurs on a date
other than the last day of a calendar year, then (A) any item of income,
deduction or expense accrued for Tax purposes during the pre-Closing portion of
a Straddle Period and actually paid or received prior to the end of such
Straddle Period


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<PAGE>

or that would have been paid or received prior to the end of such Straddle
Period in the ordinary course of business will be treated as if it had actually
been paid or received on or before the Closing Date, and (B) any accounting
adjustment ordinarily made at the end of the calendar year will be prorated on a
daily basis throughout the applicable period. Any amounts attributable to
transactions not in the ordinary course of business occurring on or prior to
Closing will be allocated to the final pre-Closing Tax period of a Straddle
Period, and any amounts attributable to transactions not in the ordinary course
of business occurring after the Closing will be allocated to the post-Closing
Tax period of such Straddle Period (other than any amounts or items attributable
to any transaction specifically required by the Purchase Agreement or this
Agreement to occur on or prior to the Closing Date, or any transaction that is
carried out at the request of Seller (or any Affiliate thereof other than the
Company), which amount or items will be allocated to the pre-Closing Tax period
of such Straddle Period).

          (f) In the event the parties are unable to resolve any dispute within
ten (10) days following the delivery of any Pre-2004 Tax Return or Post-2003 Tax
Return to the non-filing party, the parties shall jointly request the
Independent Reviewer to resolve any issue in dispute as promptly as possible.
Notwithstanding any provision of this Agreement to the contrary, the Independent
Reviewer shall make a determination with respect to any disputed issue at least
five (5) days prior to the due date (including extensions) for the filing of the
Tax Return in question. If the Independent Reviewer fails to do so, then the
filing party may file such Tax Return on the due date (including extensions)
thereof without such determination having been made and without the non-filing
party's consent. Notwithstanding the filing of such Tax Return, the Independent
Reviewer shall make a determination with respect to any disputed issue,


                                       15
<PAGE>

and the amount of Taxes for which the non-filing party is responsible hereunder
shall be as determined by the Independent Reviewer. The decision of the
Independent Reviewer will be binding on the parties, and the filing party will
bear any penalties, interest and Losses resulting from the permanent reduction
or elimination of any Tax attributes to the extent resulting from a difference
between such decision and the Tax Return as filed. The fees and expenses of the
Independent Reviewer shall be paid one-half by Acquiror and one-half by Seller.

          (g) Not later than 3 Business Days before the due date for the payment
of Taxes with respect to any Tax Return that includes a Straddle Period, and
notwithstanding any dispute as to any 2003 Tax Return Statement or Post-2003 Tax
Return Statement (the "Tax Return Statements"), as the case may be, the
non-filing party shall pay to the filing party an amount equal to the Taxes
shown on such Tax Return Statement (as adjusted in accordance with any
determination made by the Independent Reviewer prior to the date on which such
payments are due) as being the responsibility of the non-filing party hereunder.
If Seller or Acquiror disputes the amount shown on the Tax Return Statement and
if the Independent Reviewer determines after the filing of any Tax Return
relating to such disputed Tax Return Statement that the amount shown on the Tax
Return Statement as being the responsibility of Seller or Acquiror, as the case
may be, differs from the correct amount of Tax that is the responsibility of
Seller or Acquiror, Acquiror shall pay to Seller, or Seller shall pay to
Acquiror, the amount necessary to reflect the Independent Reviewer's
determination.

          (h) Subject to the exceptions provided in the next sentence, Seller
will have the exclusive right to file any amended Tax Returns with respect to
the Tax liability of the


                                       16
<PAGE>

Company for any Tax period ending on or before December 31, 2003.
Notwithstanding any other provision of this Agreement to the contrary, without
the prior written consent of Acquiror (which shall not be unreasonably
withheld), in no event shall Seller amend any Tax Returns in a way that would
materially increase the Taxes of or cause a material Tax Detriment to the
Company or Acquiror (or any Affiliate thereof other than the Company) for any
Tax period (or portion thereof in the case of a Straddle Period) beginning after
the Closing Date. Notwithstanding any other provision of this Agreement to the
contrary and solely for purposes of this paragraph (h), "material(ly)" shall
mean a Tax effect of $50,000 or more; for clarity, the meaning given to
"material(ly)" in this paragraph (h) shall not have any effect in construing any
other provision of this Agreement or the Transaction Agreements.

          (i) Notwithstanding any other provision of this Agreement to the
contrary, Acquiror and Company shall (to the extent allowed by Law) have the
right to carry back any losses, Tax credits or any other Tax attributes of the
Company or Acquiror (or any Affiliate thereof other than the Company) to Tax
periods that ended on or before the Closing Date and any Tax refunds or any
other Tax-related benefits resulting from or generated by such carryback shall
be solely for Acquiror's account; provided that (1) except for any carryback
arising out of a Tax adjustment corresponding or relating to a Loss indemnified
by Acquiror, no such carryback will be permitted to any Tax period for which the
Company was included in a GE consolidated Tax Return and (2) any such refund or
benefit shall be paid back to Seller if it is subsequently determined that it
was not valid and attributable to such carryback.


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<PAGE>

          Section 5. Indemnification by Seller.

          (a) Seller will indemnify and hold harmless Acquiror Indemnified
Parties from and against, and reimburse each such Person for, any Losses
(including any resulting Tax Detriments that have resulted in Losses) with
respect to the following items: (i) Seller's Pre-2004 Taxes; (ii) Seller's
Post-2003 Taxes; (iii) any Taxes imposed by any Governmental Authority on any
other corporation with which the Company filed a Tax Return on a combined,
consolidated, or unitary basis for any Tax period (or portion thereof) ending on
or before the Closing Date (including any such income Taxes for which the
Company would be severally liable pursuant to the provisions of Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or foreign
law); (iv) any Taxes incurred by any Acquiror Indemnified Party resulting from,
arising out of or based upon the inaccuracy or breach of any representations or
warranties made by Seller in this Agreement, to the extent such representations
and warranties survive the Closing (including any provision of the Purchase
Agreement included by reference in this Agreement pursuant to Section 19 of this
Agreement); (v) any Taxes incurred by any Acquiror Indemnified Party resulting
from, arising out of or based upon any breach of any of Seller's covenants or
agreements contained in this Agreement (including any provision of the Purchase
Agreement included by reference in this Agreement pursuant to Section 19 of this
Agreement); (vi) any Taxes incurred by the Company as a transferee, successor or
by contract but only to the extent such Taxes relate to a transaction entered
into by the Company, or a contract entered into by the Company, in each case, on
or before the Closing Date; (vii) any Taxes incurred by the Acquiror as a
transferee but only to the extent such Taxes result from a finding of fraudulent
conveyance relating to the transactions contemplated by the Purchase Agreement;
and (viii) any Transfer Taxes allocated to Seller under Section 15 of this
Agreement.


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<PAGE>

          (b) Acquiror will notify Seller within 30 days after receipt of any
communication to or by Acquiror, the Company, or any of their Affiliates from or
with any Governmental Authority concerning Taxes for which indemnification may
be claimed from Seller pursuant to the provisions of this Section 5. In
addition, Acquiror will notify Seller at least 15 days prior to the date on
which any one of Acquiror, the Company, or their Affiliates intends to make a
payment of any Taxes for which indemnification may be claimed from Seller
pursuant to the provisions of this Section 5. Seller will notify Acquiror within
30 days after receipt of any communication to or by Seller or any Affiliate of
Seller from or with any Governmental Authority concerning Taxes owed by the
Company or any Taxes for which indemnification may be claimed from Acquiror
pursuant to the provisions of Section 6. In addition, Seller will notify
Acquiror at least 15 days prior to the date on which Seller or any Affiliate of
Seller intends to make a payment of any Taxes for which indemnification may be
claimed from Acquiror pursuant to the provisions of Section 6. The failure by a
party to notify another pursuant to this Section 5(b) will not constitute a
waiver of any claim to indemnification under this Agreement unless the Tax
Indemnifying Party is materially prejudiced by such failure, and in such event
only to the extent that the Tax Indemnifying Party is prejudiced by such
failure.

          (c) Notwithstanding anything in this Agreement to the contrary, Seller
will not be required to indemnify, defend or hold harmless any Acquiror
Indemnified Party against, or reimburse any Acquiror Indemnified Party for, any
Losses described in Section 5(a) of this Agreement (i) with respect to any
individual claim unless such claim for a Loss involves a Loss in excess of
$10,000 (nor shall such item be applied to or considered for purposes of
calculating


                                       19
<PAGE>

the aggregate amount referred to in subparagraph (ii) of this Section 5(c)), and
(ii) until the aggregate amount of Acquiror Indemnified Parties' Losses
described in Section 5(a) (after giving effect to subparagraph (i) of this
Section 5(c)) exceeds the aggregate amount of the Closing Tax Liabilities plus
$50,000, after which Seller will be obligated for all Losses described in
Section 5(a) in excess of such sum of the aggregate amount of the Closing Tax
Liabilities plus $50,000; but only if such Losses constitute Losses for which
Seller is required to indemnify the Acquiror Indemnified Parties after giving
effect to subparagraph (i) of this Section 5(c).

          Section 6. Indemnification by Acquiror.

          (a) Acquiror will indemnify and hold harmless the Seller Indemnified
Parties from and against, and reimburse each such Person for, any Losses with
respect to the following items: (i) Acquiror's Post-2003 Taxes; (ii) Acquiror's
2003 Taxes, if any, including any Taxes imposed in respect of any transactions
not in the ordinary course of business occurring after the Closing (other than
any transaction specifically required by the Purchase Agreement or this
Agreement to occur on or prior to the Closing Date, or any transaction that is
carried out at the request of Seller (or any affiliate thereof other than the
Company)); (iii) Losses resulting from, arising out of or based upon: (A) the
inaccuracy or breach of any representation or warranty made by Acquiror in this
Agreement (including any representations or warranties made pursuant to Section
3 or in any provision of the Purchase Agreement included by reference in this
Agreement pursuant to Section 19), or (B) any breach or failure by Acquiror or
any of its Affiliates to perform any of its covenants or agreements under this
Agreement (including any covenant or agreements made pursuant to Section 7 or
Section 13 or in any provision of the


                                       20
<PAGE>

Purchase Agreement included by reference in this Agreement pursuant to Section
19); and (iv) any Transfer Taxes allocated to Acquiror under Section 15 of this
Agreement.

          (b) Notwithstanding anything in this Agreement to the contrary,
Acquiror will not be required to indemnify, defend or hold harmless any Seller
Indemnified Party against, or reimburse any Seller Indemnified Party for, any
Losses described in Section 6(a) of this Agreement (i) with respect to any
individual claim unless such claim for a Loss involves a Loss in excess of
$10,000 (nor shall such item be applied to or considered for purposes of
calculating the aggregate amount referred to in subparagraph (ii) of this
Section 6(b)), and (ii) until the aggregate amount of Seller Indemnified
Parties' Losses described in Section 6(a) (after giving effect to subparagraph
(i) of this Section 6(b)) exceeds $50,000, after which Acquiror will be
obligated for all Losses described in Section 6(a) in excess of $50,000; but
only if such Losses constitute Losses for which Acquiror is required to
indemnify the Seller Indemnified Parties after giving effect to subparagraph (i)
of this Section 6(b).

          Section 7. Elections. Neither Acquiror nor any Affiliate of Acquiror
will cause or permit any election to be made under Section 338 of the Code, or
any other similar provision of Law, in respect of any of the transactions
contemplated by the Purchase Agreement unless Acquiror obtains the express prior
written consent of Seller, which consent may be withheld in the sole and
absolute discretion of Seller.


                                       21
<PAGE>

          Section 8. Tax Claims and Control.

          (a) With respect to any Losses for which a Tax Indemnifying Party is
or may be liable pursuant to Section 5 or 6, such Tax Indemnifying Party shall
have the right to participate in any Tax Claim through counsel chosen by such
Tax Indemnifying Party (at the expense of such Tax Indemnifying Party) by
providing written notice to the Tax Indemnitee within ten (10) Business Days of
the receipt of the notice required under Section 5(b) of this Agreement.

          (b) A Tax Indemnifying Party will have the exclusive right to control
any Tax Claim (i) for which such Tax Indemnifying Party is solely liable under
this Agreement, (ii) that does not result in the creation of a material Tax
Detriment with respect to the Tax Indemnitee that is not indemnified by a Tax
Indemnifying Party, and (iii) with respect to which such Tax Indemnifying Party
has acknowledged in writing its liability.

          (c) In the event of a Tax Claim that involves issues (i) relating to a
potential adjustment for which a Tax Indemnifying Party has liability and (ii)
that are required to be dealt with in a proceeding that also involves separate
issues relating to a potential adjustment for which any Tax Indemnitee would be
liable and not indemnified by a Tax Indemnifying Party, (A) the Tax Indemnifying
Party shall have the right at its expense to control the Tax Claim but only with
respect to the former issues and (B) the Tax Indemnitee shall have the right at
its expense to control the Tax Claim but only with respect to the latter issues.


                                       22
<PAGE>

          (d) With respect to a Tax Claim involving an issue for which both (i)
Seller or its Affiliates or (ii) Acquiror or any Acquiror Affiliate could be
liable (and not indemnified by a Tax Indemnifying Party) or otherwise bear the
burden of any Tax liability or Tax Detriment relating to such issue, each party
may participate in the Tax Claim, and the Tax Claim may be controlled by that
party which would bear the burden of the greater portion of the sum of the Tax
effects of the adjustment and the present value of the Tax effects of any
corresponding adjustments that may reasonably be anticipated for future Tax
periods. The principle set forth in the immediately preceding sentence shall
govern also for purposes of deciding any issue that must be decided jointly
(including choice of judicial forum) in situations in which separate issues are
otherwise controlled under Section 8(c) of this agreement by Seller or Acquiror.

          (e) So long as a Tax Indemnifying Party, at such Person's cost and
expense, (i) has chosen to participate in the defense of, and assumed full
responsibility for, all indemnified Losses by the Tax Indemnitee with respect to
the Tax Claim, (ii) is reasonably contesting such Tax Claim in good faith, by
appropriate proceedings, and (iii) has taken such action (including the posting
of a bond, deposit or other security) as may be necessary to prevent any action
to foreclose a lien against or attachment of the property of the Tax Indemnitee
for payment of such Tax Claim, a Tax Indemnitee shall not pay or settle any such
Tax Claim. Notwithstanding compliance by a Tax Indemnifying Party with the
preceding sentence, a Tax Indemnitee shall have the right to pay or settle any
such Tax Claim, but in such event it shall waive any right to indemnity by a Tax
Indemnifying Party for such Tax Claim. If within thirty (30) days after the
receipt of a Tax Indemnitee's notice of a Tax Claim of indemnity hereunder, a
Tax Indemnifying Party does not notify the Tax Indemnitee that it elects (at a
Tax Indemnifying Party's cost and


                                       23
<PAGE>

expense) to participate in the defense thereof and assume full responsibility
for all indemnified Losses with respect thereto, or gives such notice and
thereafter fails to participate in the contest of such Tax Claim in good faith
or to prevent action to foreclose a lien against or attachment of a Tax
Indemnitee's property as contemplated above, the Tax Indemnitee shall have the
right to contest, settle, or compromise such Tax Claim and the Tax Indemnitee
shall not thereby waive any right to indemnity for such Tax Claim under this
Agreement.

          (f) In the case of any Tax Claim, the party that is controlling a Tax
Claim pursuant to this Section 8 (the "Controlling Party") shall:

          (1) in the case of any material correspondence or filing submitted to
     a Governmental Authority that relates to the merits of such Tax Claim: (A)
     provide the other party (the "Non-Controlling Party") reasonably in advance
     of submission, but subject to applicable time constraints imposed by such
     Governmental Authority, with a draft copy of the portion of such
     correspondence or filing that relates to such Tax Claim; (B) incorporate,
     subject to applicable time constraints imposed by such Governmental
     Authority, the Non-Controlling Party's reasonable comments and changes on
     such draft copy of such correspondence or filing; and (C) provide the
     Non-Controlling Party with a final copy of the portion of such
     correspondence or filing that relates to such Tax Claim; and

          (2) provide the Non-Controlling Party with notice reasonably in
     advance of, and the Non-Controlling Party shall have the right to attend
     (but not participate in) any meetings with a Governmental Authority
     (including meetings with examiners) or


                                       24
<PAGE>

     hearings or proceedings before any Governmental Authority to the extent
     they relate to such Tax Claim.

          (g) The failure of Tax Indemnitee to promptly notify the Tax
Indemnifying Party of any matter relating to a particular Tax for a Tax period
or to take any action specified in this Section 8 shall not relieve the Tax
Indemnifying Party of any liability and/or obligation which it may have under
this Agreement with respect to such Tax unless the Tax Indemnifying Party is
materially prejudiced by such failure, and in such event only to the extent that
the Tax Indemnifying Party is prejudiced by such failure, and in no event shall
such failure relieve the Tax Indemnifying Party of any other liability and/or
obligation which it may have to a Tax Indemnitee.

          Section 9. Refunds.

          (a) Seller will be entitled to any refunds (including interest paid
therewith) in respect of any Tax liability of the Company in respect of Seller's
Pre-2004 Taxes or Seller's Post-2003 Taxes, and, if received or realized by
Acquiror, the Company, or any of their Affiliates, such refunds (including
interest) shall be paid over promptly to Seller; provided, however, that
Acquiror shall be entitled to (i) all such refunds to the extent such refunds
are reflected as assets on the Final Balance Sheet (or otherwise taken into
account in determining any amount shown on the Final Balance Sheet) and (ii)
subject to the limitations set forth in Section 4(i), any Tax refund (or
equivalent benefit to the Company through a reduction in Tax liability) for a
Tax period (or portion thereof) ending on or before the Closing Date resulting
from the carryback of a loss, Tax credit or other Tax attribute of the Company
from a Tax period


                                       25
<PAGE>

(or portion thereof) ending after the Closing Date, and any refund described in
clause (i) or clause (ii) (including interest paid therewith), if received or
realized by Seller, shall be paid over promptly to Acquiror. Nothing in this
Section 9(a) will preclude the Company from making any election under Section
172(b) of the Code or any comparable provision of Law for any Tax period
beginning on or after the Closing Date.

          (b) Except as provided in Section 9(a), Acquiror will be entitled to
any refunds (including interest paid therewith) in respect of any Tax liability
of the Company.

          Section 10. INTENTIONALLY OMITTED

          Section 11. Tax Sharing Agreements and Powers of Attorney. On or
before the Closing Date, Seller and its Affiliates shall ensure that, as of the
Closing Date, no Tax Sharing Agreement or power of attorney with respect to the
Company is in force or effect with respect to Taxes and that there shall be no
liability of the Company or Acquiror after the Closing Date under any such Tax
Sharing Agreement, except to the extent that any such item is reflected on the
Final Balance Sheet.

          Section 12. Interest. In the event that any payment required to be
made under this Agreement is made after the date on which such payment is due,
interest will accrue on such amount from (but not including) the due date of the
payment to (and including) the date such payment is actually made at the
Interest Rate.


                                       26
<PAGE>

          Section 13. Prohibited Actions.

          (a) Acquiror shall not cause or permit the Company, prior to January
31, 2004, (i) to Transfer or otherwise cease to own (or to enter into any
agreement to Transfer or otherwise cease to own) the 50,000 shares of Class B
Preferred Stock of GE Investments, Inc. (the "GEI Preferred Stock") owned by the
Company on the date hereof or (ii) to declare or pay any dividend or other
distribution. No such Transfer or cessation of ownership or declaration or
payment of any dividend or other distribution shall be made effective prior to
January 31, 2004. This Section 13(a) does not prohibit (x) sale of the GEI
Preferred Stock after January 31, 2004 if there has been no agreement prior to
January 31, 2004 to sell or otherwise cease to own such stock and such sale is
not made effective prior to January 31, 2004, or (y) declaration or payment of
dividends or other distributions after January 31, 2004 if there have been no
declarations of dividends or other distributions prior to January 31, 2004 and
neither the declaration nor the payment is made effective prior to January 31,
2004.

          (b) Neither Seller nor Acquiror shall cause or permit its personnel or
its Affiliates to take any action that would trigger gain recognition under the
gain recognition agreements under Section 367 of the Code described on Schedule
2(m) to this Agreement. Acquiror shall cause the Company to comply with the
annual certification requirements arising from such gain recognition agreements.

          Section 14. Tax Cooperation.

          (a) Seller and Acquiror will furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information and assistance
relating to the Transferred Shares or the Company (including in each case access
to books and records) as is


                                       27
<PAGE>

reasonably necessary for the filing of all Tax Returns, the making or
implementing of any election related to Taxes, the preparation for or response
to any Tax Claim by a Governmental Authority, and the prosecution or defense of
any Tax Claim. Seller and Acquiror will cooperate with each other in the conduct
of any Tax Claim and all other Tax matters relating to the Company and each will
execute and deliver such powers of attorney and other documents as are necessary
to carry out the intent of this Agreement provided, however, that such
cooperation shall not unreasonably interfere with the business or operations of
Seller, Acquiror, the Company or any of their Affiliates. Subject to Sections 5
and 6 of this Agreement, the party requesting cooperation under this Section 14
will reimburse the other party for any actual expenses incurred in furnishing
such cooperation.

          (b) Unless there has previously been (i) a Final Determination to the
contrary or (ii) an opinion issued by mutually agreed counsel to the effect that
the specific deduction, claim, or credit taken in a pre-Closing Tax period, or
any other pre-Closing Tax period position described below, is not supported by
substantial authority within the meaning of Section 6662 of the Code, none of
Acquiror, Seller, or their respective Affiliates will (A) claim as a Tax credit
or deduction for any Tax period (including the post-Closing portion of any
Straddle Period) ending after the Closing Date any specific Tax credit taken or
item deducted by the Company in any Tax period (including the pre-Closing
portion of any Straddle Period) ending on or before the Closing Date or (B)
claim a specific item of income is properly includible in any Tax period
(including the pre-Closing portion of any Straddle Period) ending on or before
the Closing Date in a manner inconsistent with any position taken by the Company
with respect to the timing of such item of income.


                                       28
<PAGE>

          (c) Seller and Acquiror will report to the other any communication
from or with any Governmental Authority that relates in any way to the
characterization of the Purchase or any related transaction. Notwithstanding any
such communication, Seller and Acquiror covenant and agree to (and to cause any
Affiliate to) continue to comply with Section 14(b).

          Section 15. Transfer and Similar Taxes.

          (a) All stock transfer, real estate transfer, documentary, stamp,
registration, filing, sales, use, recording, ad valorem, and other similar Taxes
("Transfer Taxes") arising out of, or directly attributable to, the transfer of
the Transferred Shares at or prior to Closing and incurred by any of the parties
thereto will be borne and paid equally by Seller and Acquiror. Seller and
Acquiror will use reasonable best efforts to secure any available exemptions
from any such Taxes and to cooperate in providing any information and
documentation that may be necessary to obtain such exemptions.

          (b) Except as provided in Section 15(a), (i) if any Transfer Tax (A)
is imposed on the Company in connection with any transaction that occurs prior
to Closing, is specifically required by the Purchase Agreement or this Agreement
to occur on or prior to the Closing Date, or is carried out at the request of
Seller (or any Affiliate thereof other than the Company), (B) is not paid prior
to Closing, and (C) is not a Closing Tax Liability, then such Transfer Tax will
be borne and paid by Seller, and (ii) if any Transfer Tax is imposed on a party
other than the Company, then such Transfer Tax will be borne and paid by the
Person incurring such Transfer Tax under the provisions of the relevant Law
imposing such Transfer Tax.


                                       29
<PAGE>

          Section 16. Tax Indemnity Payments. All amounts payable or to be paid
to Acquiror Indemnified Parties or the Seller Indemnified Parties under Sections
5 and 6 of this Agreement ("Tax Indemnity Payments") will be paid in immediately
available funds within thirty (30) Business Days after the later of (i) receipt
of a written request from the party entitled to such Tax Indemnity Payment which
reasonably demonstrates to the party receiving such request that the party
providing such request is entitled to such payment under the terms of this
Agreement and (ii) the day of payment of the amount that is the subject of the
Tax Indemnity Payment by the party entitled to receive the Tax Indemnity
Payment. All such Tax Indemnity Payments will be made to the accounts and in the
manner specified in such written notice. Any claim for indemnification under
Section 5 in respect of any Losses suffered by the Company will be made only by,
and any corresponding Tax Indemnity Payment will be paid only to, Acquiror. In
no event will such claim be made by, or such Tax Indemnity Payment be paid to,
the Company. The parties agree that all Tax Indemnity Payments and any indemnity
payments made pursuant to the Purchase Agreement shall be treated as adjustments
to the Purchase Price to the extent allowed by Law.

          Section 17. Survival. Notwithstanding any provision in the Transaction
Agreements to the contrary, the covenants, agreements, representations and
warranties of the parties contained in this Agreement will survive the Closing
until 60 days following the expiration of any relevant statute of limitations
period on assessment.

          Section 18. Assignment. This Agreement may be assigned only in the
same manner as provided in Section 11.07 of the Purchase Agreement.


                                       30
<PAGE>

          Section 19. Additional Provisions. Provisions of the Purchase
Agreement that apply to this Agreement (and are hereby incorporated by reference
notwithstanding anything in Section 7.01 of the Purchase Agreement to the
contrary) include only Sections 5.02 (Access to Information), 5.03 (Maintenance,
Transfer and Preservation of Books and Records), 5.04 (Confidentiality), 5.18
(Further Action), 5.20 (Joint and Several Obligations), 9.01 (Termination), 9.02
(Notice of Termination), 9.03 (Effect of Termination), 10.05 (Additional
Indemnification Provisions), 10.06 (Mitigation), 11.03 (Notices), 11.04 (Public
Announcements), 11.05 (Severability), 11.06 (Entire Agreement), 11.07
(Assignment), 11.08 (No Third-Party Beneficiaries), 11.09 (Amendment), 11.11
(Dispute Resolution), 11.12 (Governing Law; Submission to Jurisdiction;
Waivers), 11.13 (Rules of Construction), and 11.14 (Counterparts).

          Section 20. After-Tax Basis.

          (a) The specific rules set forth in paragraphs (b), (c), (d) and (e)
below illustrate (without limiting) the application of Section 10.05 of the
Purchase Agreement and Section 19 of this Agreement.

          (b) If (i) any deduction or loss claimed on any Tax Return filed by
the Company for a pre-Closing Tax period (including the pre-Closing portion of
any Straddle Period) is disallowed, (ii) any Acquiror Indemnified Party incurs a
Loss indemnified by Seller as the result of such disallowance, and (iii) there
is a corresponding deduction or loss allowable on a Tax Return filed by the
Company for a Tax period (including the post-Closing portion of any Straddle
Period) ending after the Closing Date, then Acquiror will pay to Seller an
amount equal


                                       31
<PAGE>

to 35% of such deduction or loss (or any portion of such deduction or loss)
following the Tax period in which such deduction or loss (or such portion
thereof) is allowable to reduce the Tax liability of Acquiror, the Company or
any of their Affiliates taking into account all of the respective Tax attributes
of Acquiror, the Company, and their Affiliates and assuming that the deduction
or loss is used only after all such Tax attributes. If any such corresponding
deduction or loss (or such portion thereof) is allowable on an original Tax
Return filed after the date hereof, then any payment of the amount due to Seller
under this paragraph (b) will be due within 15 days after such Tax Return is
filed, but shall be repaid to Acquiror (with interest at the interest rate
applicable to underpayments of Tax) if there is subsequently a Final
Determination that such deduction or loss (or such portion thereof) was not
valid. If such corresponding deduction or loss (or such portion thereof) is
allowable on any other Tax Return (including any amended Tax Return), then the
payment due to Seller under this paragraph (b) will be due within 15 days after
there are Final Determinations that such corresponding deduction or loss (or
such portion thereof), and any refunds due to such deduction or loss (or such
portion thereof) or any carryback of such corresponding deduction or loss (or
such portion thereof), are allowable.

          (c) If (i) any Seller Indemnified Party incurs a Loss indemnified
under this Agreement by Acquiror, (ii) there is a corresponding deduction or
loss allowable on a Tax Return filed by the Company for a Tax period (including
the pre-Closing portion of any Straddle Period) ending on or before the Closing
Date, and (iii) such deduction or loss (or any portion of such deduction or
loss) is allowable to reduce the Tax liability of Seller, the Company or any of
their respective Affiliates in such Tax period, or due to any carryback arising
as a consequence of such deduction or loss or such portion thereof in any prior
Tax period (including any prior Tax


                                       32
<PAGE>

period for which the Company was included in a GE consolidated Tax Return),
taking into account in each case all of the respective Tax attributes of Seller,
the Company and their Affiliates and assuming that the deduction or loss (or
such portion thereof) is used only after all such Tax attributes, then Seller
will pay Acquiror 35% of such deduction or loss (or such portion thereof). If
any such corresponding deduction or loss (or such portion thereof) is allowable
on an original Tax Return filed after the date hereof, then any payment of the
amount due to Acquiror under this paragraph (c) will be due within 15 days after
such Tax Return is filed, but shall be repaid to Seller (with interest at the
interest rate applicable to underpayments of Tax) if there is subsequently a
Final Determination that such deduction or loss (or such portion thereof) was
not valid. If such corresponding deduction or loss (or such portion thereof) is
allowable on any other Tax Return (including any amended Tax Return), then the
payment due to Acquiror under this paragraph (c) will be due within 15 days
after there are Final Determinations that such corresponding deduction or loss
(or such portion thereof), and any refunds due to such deduction or loss (or
such portion thereof) or any carryback of such corresponding deduction or loss
(or such portion thereof), are allowable.

          (d) If Seller has made a Tax Indemnity Payment to Acquiror and,
notwithstanding the final sentence of Section 16 of this Agreement, a Final
Determination has required Acquiror to treat such Tax Indemnity Payment as
taxable income resulting in additional Tax payable by Acquiror, Seller shall
make an additional Tax Indemnity Payment to Acquiror under the gross-up rule of
Section 10.05 of the Purchase Agreement.


                                       33
<PAGE>

          (e) If Acquiror has made a Tax Indemnity Payment to Seller (including
a Tax Indemnity Payment in respect of any Loss to which paragraph (c) of this
Section 20 applies) and, pursuant to the final sentence of Section 16 of this
Agreement, Seller treats such Tax Indemnity Payment as taxable income resulting
in additional Tax payable by Seller, Acquiror shall make an additional Tax
Indemnity Payment to Seller under the gross-up rule of Section 10.05 of the
Purchase Agreement.

          Section 21. Exclusive Remedies. Except with respect to intentional
fraud, Seller and Acquiror acknowledge and agree that, following the Closing,
the indemnification provisions of Sections 5 and 6 hereof shall be the sole and
exclusive post-Closing remedies of Seller and Acquiror, respectively, for any
breach of the representations and warranties in this Agreement and for any
breach of any covenants or agreements that, by their terms, were to have been
performed or complied with prior to Closing.


                                       34
<PAGE>

          IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year first above written.


                                   EMPLOYERS REINSURANCE CORPORATION


                                   By:
                                      -----------------------------------------
                                      Name:
                                      Title:


                                   SCOTTISH HOLDINGS, INC.


                                   By:
                                      -----------------------------------------
                                       Name:
                                       Title:


                                   SCOTTISH  RE GROUP LIMITED


                                   By:
                                      -----------------------------------------
                                       Name:
                                       Title:


                                       35
<PAGE>

                                  Schedule 2(a)

Certain voluntary adjustments have been or will be submitted to the Internal
Revenue Service for tax years 1997 through 2000 (years in which the Company was
included in the consolidated tax return of General Electric Company) in
connection with the Subpart F and related foreign operations resulting from the
Company's ownership of controlled foreign corporations.

An amended return for the 2001 tax year is anticipated to be filed for the
Company prior to closing. Such amended return is not expected to change the
Company's 2001 tax liability after credits, as the tax amount before foreign tax
credits will increase with an offsetting increase to foreign tax credits.

An amended return for the 2002 tax year is anticipated to be filed for the
Company prior to closing in order to include the annual certifications under
three gain recognition agreements (see Schedule 2(g)) relating to transfers made
by the Company in 2000. Such amended return is not expected to change the
Company's 2002 tax liability after credits.


<PAGE>

                                  Schedule 2(b)

The Company qualified as a life insurance company for federal income tax
purposes for the 2001 tax year. As such, the Company filed a separate Form 1120L
U.S. Life Insurance Company Income Tax Return for 2001 and was no longer
eligible to be included as a member in the GE consolidated tax return. However,
the Company made its 2001 estimated tax payments on a consolidated basis with GE
as parent. Estimated payments made for the 2001 tax year that were paid by GE,
as parent of the GE affiliated group, attributable to the Company, were
allocated to ERC Life in the 2001 consolidated tax return as filed by GE for
that year pursuant to Treasury Regulation ss.1.1502-5. The IRS initially
assessed the Company a penalty for late payment of estimated tax in the amount
of $132,083.05 under Internal Revenue Code Section 6665 for the period April 15,
2001 to June 15, 2001, on the basis that it did not credit the Company with the
appropriate portion of the 2001 consolidated estimated tax payments apportioned
to the Company by GE on the consolidated 2001 GE tax return. Accordingly, the
IRS reduced the amount of credits against tax that ERC Life otherwise would have
in a written notice dated February, 2003. In oral conversations and via written
notice dated September 15, 2003 from the IRS showing no balance due, the IRS
appears to have eliminated the penalty and fully reinstated any credits the
Company has against future taxes. The Company is in the process of verifying
that conclusion with the IRS and believes the misapplication of estimated tax
payments for 2001 has been fully resolved.


<PAGE>

                               Schedule 2(e)/2(f)

An examination of the Company's federal excise taxes under Internal Revenue Code
Section 4371 for the years 1999 through 2002 is scheduled to commence in
October, 2003. This results from a claim for refund of federal excise taxes in
the amount of $250,174 relating to 1999 through 2002 filed January 27, 2003.
(See Schedule 2(o)).

The New York Department of Taxation and Finance has conducted a desk examination
of the Company's 1998 New York tax return. As a result of this examination, the
Company paid an additional $4,845 in tax, along with $967 in interest, on July
23, 2002.

The Illinois Department of Revenue conducted an examination of the unitary
income and replacement tax returns for the years 1996 through 2000, which return
included the Company. There was no adjustment to the tax liability attributable
to the Company's inclusion in the Illinois unitary returns for those years as a
result of the examination.

As a result of an examination completed in 2001 by the New Hampshire Department
of Revenue Administration, the Company, as a member of the GE consolidated tax
return affiliated group for the years 1997-2000, was required to be included in
combined group New Hampshire tax return filing for 1997-2000. The Company had
previously filed a separate New Hampshire tax return for those years. There was
no adjustment of tax due attributable to the Company as a result of the New
Hampshire Department of Revenue Administration examination.


<PAGE>

                                  Schedule 2(g)

Under Treasury Regulation ss.1.367(a)-8, the Company, as Transferor, is party to
a gain recognition agreement for the following transfers of stock of controlled
foreign corporations, all of which occurred in 2000. In such agreements, the
Company agreed that, if prior to the close of 2005, the fifth taxable year
following 2000, the taxable year of the initial transfer, the respective
transferee disposes of the transferred assets in any manner not in the ordinary
course of business, or is deemed to have disposed of the transferred property,
it will include an amount on its tax return for the year of the triggering event
equal to the gain realized but not recognized upon the initial transfer.

The stock of the controlled foreign corporations, which constituted the property
transferred in connection with the gain recognition agreements, as well as the
stock of the transferees, are currently owned by affiliates of the Seller.


Property Transferred                                Transferee
--------------------                                ----------

100% of the outstanding shares of                   GE Frankona Reinsurance Ltd
Eagle Star Reinsurance Company Ltd

100% of the outstanding shares of                   GE Frankona Reinsurance Ltd.
ERC Frankona Reinsurance (II) Ltd.

99% of the outstanding shares of                    GE Frankona Beteiligungs-
ERC Frankona Ruckversicherungs-Aktien-              Ruckversicherungs
Gesellschaft                                        Aktiengesellschaft


<PAGE>

                                  Schedule 2(m)

See Schedule 2(g) and attached copies of gain recognition agreements under
Treasury Regulation ss.1.367(a)-8 wherein Company is the Transferor.


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                                  Schedule 2(o)

A claim for refund of the Company's federal excise taxes under Internal Revenue
Code Section 4371 for the years 1999 through 2002 in the amount of $250,174 was
filed January 27, 2003. See Schedule 2(e).

An amended return for the 2001 tax year is anticipated to be filed for the
Company prior to closing. Such amended return is not expected to change the
Company's 2001 tax liability after credits, as the tax amount before foreign tax
credits will increase with an offsetting increase to foreign tax credits.

An amended return for the 2002 tax year is anticipated to be filed for the
Company prior to closing in order to include the annual certifications under 3
gain recognition agreements relating to transfers made by the Company in 2002.
Such amended return is not expected to change the Company's 2002 tax liability
after credits.