Exhibit 10.70

     
 
  EXECUTION VERSION
 
   
 
  June 30, 2008

CONFIDENTIAL
VIA FEDERAL EXPRESS AND ELECTRONIC MAIL
Security Life of Denver Insurance Company
Security Life of Denver International Limited
ING America Insurance Holdings, Inc.
ING North America Insurance Corporation
Attention: David S. Pendergrass
5780 Powers Ferry Road NW
Atlanta, Georgia 30327
     Re:      Ballantyne Re Reinsurance Transaction
Ladies and Gentlemen:
     This letter (this “Letter”) sets forth the right of Scottish Re Group
Limited and each subsidiary of Scottish Re Group Limited that is a party hereto
(collectively, “Scottish Re”), and each of the companies set forth as an
addressee of this Letter (collectively, “ING”) with respect to a recapture,
effective June 30, 2008, from Ballantyne Re plc (“Ballantyne”) of a pro-rata
portion of the business ceded by Scottish Re (U.S.), Inc. (“SRUS”) to Ballantyne
pursuant to that certain Indemnity Reinsurance Agreement, effective as of
April 1, 2006, entered into by and between SRUS and Ballantyne (the “Ballantyne
Reinsurance Agreement”) as well as the other matters included herein.
     Reference also is made to that certain letter, dated March 31, 2008, by and
among Scottish Re and ING (the “ March 31 LOI”). The parties hereto desire to
amend the March 31 LOI in the manner set forth in Section 2 of this Letter.

1.   June 30th Recapture.

  (a)   In accordance with Section 4.2(c) of the Coinsurance Agreement effective
April 1, 2006, as amended and restated effective March 31, 2008 (the “SLD
Coinsurance Agreement”), by and among Security Life of Denver Insurance Company
(“SLD”) and SRUS, SLD hereby irrevocably consents to the voluntary recapture,
effective as of June 30, 2008, of a pro rata portion of the liabilities (other
than liabilities attributable to claims pending as of June 30, 2008 and claims
incurred but not reported as of June 30, 2008) under the Defined Block Business
(as defined in the

 

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      Ballantyne Reinsurance Agreement) arising under the policies that are
included in the Defined Block Business (the “June 30th Ballantyne Recapture” and
the portion of the business so recaptured, the “June 30th Ballantyne Recaptured
Business”). Scottish Re shall ensure that June 30th Excess Reserves (as defined
below) (measured as of June 30, 2008) do not exceed $200,000,000.

  (b)   Pursuant to the Ballantyne Reinsurance Agreement, in consideration for
the June 30th Ballantyne Recapture, Ballantyne has the obligation to pay to
SRUS, in accordance with Section 10.5.1 of the Ballantyne Reinsurance Agreement,
an amount equal to the sum of (i) 92.5% of the Economic Reserves attributable to
the June 30th Ballantyne Recaptured Business, less (ii) the Loss Carryforward
Balance, less (iii) the Recapture Fee (the “June 30th Ballantyne Recapture
Consideration”). SRUS shall withdraw the June 30th Ballantyne Recapture
Consideration from the Reinsurance Trust Account and deposit such amount into
the SRUS Account (as defined in the Ballantyne Reinsurance Agreement).     (c)  
Immediately following the consummation of the June 30th Ballantyne Recapture,
subject to the limitations described in this Letter, Scottish Re and ING shall
execute the following transactions (collectively, the “June 30th Recapture and
Reinsurance Transactions” and together with the June 30th Ballantyne Recapture,
the “June 30th Recapture”) effective as of June 30, 2008, which transactions
shall occur effectively simultaneously but in the following sequence:

  (i)   SLD shall recapture from SRUS the same percentage of the Reinsured
Liabilities (as defined in the SLD Coinsurance Agreement) as the percentage of
the Defined Block Business recaptured by SRUS in the June 30 Ballantyne
Recapture (the “June 30th SLD Recaptured Business”) pursuant to a recapture
agreement and an amendment to the SLD Coinsurance Agreement in exchange for
consideration from SRUS to SLD in an amount equal to the economic reserves
(measured as of June 30, 2008) associated with the June 30th SLD Recaptured
Business as determined in accordance with the methodology used by SLD and
Scottish Re to determine the portion of the U.S. statutory reserves associated
with the business ceded by SLD to Security Life of Denver International Ltd.
(“SLDI”) that SLD maintains in the segregated account (the “ING Re Segregated
Account”) SLD established pursuant to Section 5.25 of the APA (as defined below)
(the economic reserves associated with the June 30th SLD Recaptured Business, as
so calculated, the “June 30th SLD Economic Reserves”). The June 30th SLD
Economic Reserves shall be withdrawn from the SRUS Account and deposited and
maintained in the ING Re Segregated Account on a modified coinsurance and/or
funds withheld coinsurance basis. The assets

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      constituting the June 30th SLD Economic Reserves to be transferred to the
ING Re Segregated Account shall be reasonably acceptable to SLD. With respect to
the excess, if any, of the June 30th Ballantyne Recapture Consideration over the
June 30th SLD Economic Reserves (the “June 30th Excess Ballantyne Recapture
Consideration”), SRUS shall transfer such excess from the SRUS Account as
follows: (i) SRUS shall remit 50% of the June 30th Excess Ballantyne Recapture
Consideration to Ballantyne Re, as a consent fee, for deposit into the economic
reserve subaccount of the Reinsurance Trust Account and (ii) SRUS shall be
entitled to deposit the remainder of the June 30th Excess Ballantyne Recapture
Consideration in any account of SRUS it so chooses and shall be entitled to
retain and apply such amount as it elects in its sole discretion. For purposes
of this Letter, “APA” means the Asset Purchase Agreement, dated as of
October 17, 2004, by and among Scottish Re Group Limited, SRUS, SLD, SLDI and
Scottish Re Life (Bermuda) Limited (“SRLB”);     (ii)   SLD shall cede the
June 30th SLD Recaptured Business to SLDI pursuant to amendments to (a) the
Second Amendment and Restatement (Effective December 31, 2004) to the
Reinsurance Agreement (Effective July 1, 2001) (Agreement Number 0900 2774) and
(b) the Second Amendment and Restatement (Effective December 31, 2004) to the
Reinsurance Agreement (Effective July 1, 2001) (Agreement Number 0900 2962),
each entered into by and between SLD and SLDI, and in accordance with the
security arrangements described below;     (iii)   SLDI shall have the right,
but not the obligation, to cede the June 30th SLD Recaptured Business to SRLB in
accordance with amendments to the Coinsurance/Modified Coinsurance Agreement
(Treaty Number 5040) and the Coinsurance Funds Withheld Agreement (Treaty Number
5041); and     (iv)   SRLB shall cede the June 30th SLD Recaptured Business to
(i) Scottish Annuity & Life Insurance Company (Cayman) Ltd. or Scottish Re
(Dublin) Limited (“SR Dublin”) or (ii) with the consent of ING (such consent not
to be unreasonably withheld), any other affiliate of SRLB.

  (d)   SLDI shall provide or cause the provision of one or more letters of
credit in order to provide SLD with statutory financial statement credit for the
excess of the U.S. statutory reserves associated with the June 30th SLD
Recaptured Business over the June 30th SLD Economic Reserves (the “June 30th
Excess Reserves”) (such letters of credit, the “June 30th Letters of Credit”).
Scottish Re shall bear the costs of the June 30th Letters of Credit by paying to
SLD a facility fee based on the face amount of the

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      June 30th Letters of Credit outstanding as of the end of the preceding
calendar quarter (the “June 30th Recapture Covered Amount”) equal to 0.85% for
calendar year 2008, 1.05% for calendar year 2009 and 1.25% for all calendar
years thereafter (calculated on a per annum basis) multiplied by the June 30th
Recapture Covered Amount (the “June 30 LOC Fee”). If a definitive and binding
agreement for the ING Business Transaction (as defined in the March 31 LOI) is
not executed on or before December 31, 2008, Scottish Re agrees that as of
January 1, 2009, the applicable rate then in effect for the June 30 LOC Fee and
for each calendar year thereafter shall be increased to 1.75% (the “Step-Up
June 30 LOC Rate”). If a definitive and binding agreement for the ING Business
Transaction is executed on or before December 31, 2008 but the ING Business
Transaction is not consummated on or before April 30, 2009, Scottish Re agrees
that as of May 1, 2009, the June 30 LOC Fee then in effect and for all periods
thereafter shall be calculated based on the Step-Up June 30 Rate.     (e)  
Notwithstanding anything to the contrary in this Section 1, if (i) ING
reasonably believes (based upon an adverse change in SRUS’ condition following
the execution of this Letter, taking into account the financial and other
information concerning SRUS disclosed or made available to ING prior to the
execution of this Letter) that, after giving effect to the June 30th Recapture,
(A) SRUS is likely to be declared insolvent by SRUS’ domiciliary insurance
regulator, (B) a conservation, liquidation, rehabilitation, reorganization or
similar proceeding is likely to be commenced against SRUS by its domiciliary
insurance regulator, or (C) SRUS is likely to lose its accreditation as a
reinsurer in New York or Colorado, in each case at any time prior to the date
that is two (2) months following the date on which SLD is required to file its
next statutory financial statement or (ii) the New York Insurance Department or
the Colorado Insurance Division informs ING that the accredited reinsurer status
of SRUS will be revoked or the Delaware Insurance Department informs ING that it
will declare SRUS insolvent or will commence a conservation, liquidation,
rehabilitation, reorganization or similar proceeding against SRUS, then ING
shall be entitled, upon written notice to SRUS, to revoke its consent to the
June 30 Recapture.     (f)   The parties hereto acknowledge and agree that SRUS
intends to report late reported policies to Ballantyne (as addressed in
Section 7.5 of the Ballantyne Reinsurance Agreement) after giving effect to the
June 30th Ballantyne Recapture, and accordingly no portion of such late reported
policies will be recaptured pursuant to the June 30th Ballantyne Recapture, but
SLD will recapture from SRUS a portion of such policies, and such portion will
be reinsured, both as described in clauses (i) through (iv) of Section 1(c) of
this Letter.

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  (g)   For the avoidance of doubt, except as specifically provided herein the
terms and conditions of the March 31 LOI shall not apply to the June 30th
Recapture.

2.   Amendments to March 31 LOI. The parties to the March 31 LOI (including
without limitation SR Dublin) hereby agree to amend the March 31 LOI as set
forth in this Section 2.

  (a)   Section 1(d) of the March 31 LOI is hereby amended by deleting clause
(C) thereto in its entirety, and the existing clauses (D) and (E) of Section
1(d) of the March 31 LOI are hereby re-designated as clauses (C) and (D),
respectively, of Section 1(d).     (b)   Section 3 (“Assignment and Assumption
Transaction”) of the March 31 LOI is hereby amended and restated in its entirety
as follows:

  (a)   The parties agree promptly to effect, following the completion of the
first Recapture and Reinsurance Transaction, an assignment from SRUS to SLD, and
the assumption by SLD, of all of SRUS’ rights and obligations under the
Ballantyne Reinsurance Agreement, the Reinsurance Trust Agreement (as defined in
the Ballantyne Reinsurance Agreement), with the effect that SLD shall be
substituted for SRUS, in SRUS’ name, place and stead, as the ceding company
under the Ballantyne Reinsurance Agreement and as the beneficiary of the
Reinsurance Trust Account so as to effect a novation of the Ballantyne
Reinsurance Agreement, such that SRUS is fully and finally released of all of
its liabilities and obligations under such agreements, the SLD Coinsurance
Agreement and the Control Agreement (as defined in the Ballantyne Reinsurance
Agreement) (the “Assignment and Assumption Transaction”). In furtherance of the
foregoing, Scottish Re and ING shall negotiate definitive documentation and use
their respective reasonable best efforts to obtain all necessary regulatory,
shareholder and third party consents and approvals in order to enter into the
Assignment and Assumption Transaction with an effective date not later than
June 30, 2008.     (b)   ING and Scottish Re hereby agree that the terms of the
Assignment and Assumption Transaction shall provide that SLD shall have the
right to recapture from Ballantyne, at any time and from time to time, a
pro-rata portion of the business reinsured by Ballantyne, but only to the extent
that SLD determines, acting reasonably and in good faith, that it is reasonably
likely that, in the absence of such a recapture, the Security Balance as of any
date of determination will not exceed the Required Balance (both as defined in
the Ballantyne Reinsurance Agreement) as of such date. If SLD recaptures
business from Ballantyne Re as described in the

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      immediately preceding sentence and cedes such business to SLDI (i) SLDI
shall have the right, but not the obligation, to retrocede such business to SRLB
or to another affiliate of Scottish Re selected by Scottish Re and reasonably
acceptable to SLDI on an economic basis consistent with the treatment of the
cessions by SLDI in the Recapture and Reinsurance Transactions effected pursuant
to this Letter, (ii) SLD shall use the recapture payment it receives from
Ballantyne to fund the ING Re Segregated Account for the economic reserves
required to be held therein (and Scottish Re shall not be required to reimburse
SLD for the amount of such deposit), and (iii) if the amount of the recapture
payment SLD receives from Ballantyne exceeds the amount needed to fund the ING
Re Segregated Account with respect to the recaptured business, SLD and SRUS
shall cause the excess to be deposited into a trust account reasonably
satisfactory to SLD and SRUS (except that SRUS or an affiliate it selects shall
be the grantor of such trust) and treated in the same manner as the Excess
Ballantyne Recapture Consideration as described in the third sentence of
Section 1(b)(i) of this Letter. In such case Scottish Re shall bear the costs of
any letters of credit obtained by SLDI to support the business so recaptured in
accordance with this Section 3(b) (such letters of credit, the “Post-Assignment
Letters of Credit”) by paying to SLD a facility fee based on the face amount of
the Post-Assignment Letters of Credit outstanding as of the end of the preceding
calendar quarter (the “Post-Assignment LOC Covered Amount”) equal to 0.85% for
calendar year 2008, 1.05% for calendar year 2009 and 1.25% for all calendar
years thereafter (calculated on a per annum basis) multiplied by the
Post-Assignment LOC Covered Amount. For greater certainty, Scottish Re’s
obligation to pre-fund letter of credit fees as set forth in Section 1(c) of
this Letter, and Scottish Re’s obligation to pay stepped-up letter of credit
fees as set forth in Section 1(d) of this Letter, shall not apply to the
Post-Assignment Letters of Credit.     (c)   ING further agrees to indemnify
Scottish Re, in accordance with the indemnification procedures set forth in the
APA, for any Losses (as defined in the APA) incurred by Scottish Re as a result
of any breach or asserted breach or violation or asserted violation of any
representation, warranty or covenant or other promise or obligation of Scottish
Re made to Ambac UK, Assured UK or any other party (other than ING) in
connection with the Ballantyne Purchaser Facility (as defined in the SLD
Coinsurance Agreement), if and to the extent that such Loss arises out of ING’s
breach of any of its covenants, promises or obligations set forth in the
Ballantyne Reinsurance Agreement, the Reinsurance Trust Agreement or any other
agreement entered into by ING in connection with the Assignment and Assumption
Transaction (in

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      each case taking into account any amendments to such agreements entered
into as a result of the Assignment and Assumption Transaction).

  (d)   Scottish Re hereby acknowledges and agrees that, notwithstanding the
consummation of the Assignment and Assumption Transaction in accordance with
this Section 3, Scottish Re shall continue to administer the business ceded to
Ballantyne in accordance with the terms of the Administrative Services Agreement
(as defined in the APA), except that the Administrative Services Agreement shall
be amended concurrently with the consummation of the Assignment and Assumption
Transaction as may be reasonably necessary in order to take into account the
effects of the Assignment and Assumption Transaction.

  (c)   Except as amended by this Letter, the March 31 LOI remains in full force
and effect, without modification or amendment.

3.   Taxes. Scottish Re shall indemnify ING for any and all Losses related to
Taxes (as defined in the APA) imposed upon ING resulting from the transactions
contemplated under this Letter, but excluding Losses related to any Taxes
(a) resulting from income generated by ING as a result of the transactions
contemplated by this Letter, (b) imposed by a foreign governmental authority or
foreign Tax Authority (as defined in the APA) or (c) resulting from any actions
of ING other than actions taken in accordance with and pursuant to the
definitive agreements executed and performed in connection with the transactions
contemplated by this Letter; provided, however, that such indemnification shall
be subject to Section 9.1(d) and (f) and Section 10.3 of the APA.   4.  
Attorney’s Fees. Scottish Re shall reimburse ING for, or pay on ING’s behalf,
reasonable actual attorneys’ fees and disbursements incurred in connection with
the negotiation, preparation, execution and delivery of this Letter and the
transaction documents contemplated by Section 1 of this Letter (without
duplication of attorney’s fees payable under the March 31 LOI) provided that
such fees and disbursements shall be aggregated with those subject to Section 8
of the March 31 LOI in applying the $1 million limitation set forth therein.  
5.   Conditions to Closing. The closing of the transactions contemplated by
Section 1 of this Letter under the definitive agreements contemplated thereby
will be conditioned on the receipt of all required governmental, regulatory,
shareholder and material third-party consents and the approvals set forth in
Section 9 of this Letter. The conditions to the closing of the transactions
contemplated by the March 31 LOI shall be as set forth in the March 31 LOI.   6.
  Confidentiality. The parties here acknowledge and agree that this Letter and
the transactions contemplated hereby shall be subject to the Confidentiality
Agreement, dated as of December 21, 2007, by and among Scottish Re Group

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    Limited and ING America Holdings Inc. (the “Confidentiality Agreement”).
Notwithstanding the foregoing or anything in this Letter or the Confidentiality
Agreement to the contrary, the parties acknowledge and agree that disclosure of
any of the terms of, or the existence of, this Letter may be made as is
necessary or advisable in communications or filings made with auditors retained
by either party, any state or governmental insurance regulators (whether
domestic or foreign), or the party’s rating agencies, or as may be necessary or
advisable under federal or state securities laws.

7.   Publicity. The parties shall mutually agree upon the form and content of
any public statement that may be made with respect to this Letter or the
transactions contemplated hereby and, except as required by law or regulation,
no such public statement shall be made unless mutually agreed upon by the
parties hereto. The parties agree that statements made by either party to its
respective ratings agencies, state or other governmental regulatory authority
(including on Form 10-K filed with the Securities and Exchange Commission),
holders of a controlling interest in the ownership of such party, or any
third-party subject to a confidentiality agreement with the party making such
public statement will not be deemed a public statement for purposes of this
Letter. For greater certainty, the parties hereto shall be entitled to disclose
this Letter and the transactions contemplated hereby to their respective rating
agencies and on Form 10-K filed with the Securities and Exchange Commission to
the extent required. Any public or private statement by any party with respect
to the terms of this Letter or the transactions contemplated hereby shall be
accurate, complete and not misleading, and any material misstatement or omission
with respect thereto shall be promptly corrected by the appropriate party. No
party shall refer to any other party or any of its affiliates in any of its
advertising or promotional material without the consent of such other party.  
8.   Good Faith. Following the signing of this Letter, each of the parties to
this Letter shall promptly enter into good faith negotiations to prepare and
execute definitive agreements as soon as practicable with respect to, and when
required by, the transactions contemplated herein. The parties shall use their
reasonable best efforts to have the definitive agreements drafted in
substantially final form on or before thirty (30) days from the date of
execution of this Letter. The definitive agreements will include the terms
described in this Letter and such other representations, warranties, covenants,
indemnities, conditions and other terms as are appropriate and agreed to by the
parties hereto.   9.   Consents and Approvals. Commencing upon signing of this
Letter, Scottish Re and ING will use all commercially reasonable efforts, and
will cooperate with each other in good faith, to cause Scottish Re and ING to
obtain all governmental, regulatory and third party consents and approvals
necessary for the consummation of the transactions contemplated herein on an
expedited basis.   10.   Remedies. Each party to this Letter understands and
agrees that the breach or non-fulfillment of any of the covenants, agreements or
promises under this Letter

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    of such party would irreparably injure the other party to this Letter (the
“Non-Breaching Party”), that money damages would not be a sufficient remedy for
any such breach or non-fulfillment, and that, in addition to the Non-Breaching
Party’s remedies available at law for losses, claims, damages, liabilities or
expenses suffered or incurred in connection with such breach or non-fulfillment,
or in equity, the Non-Breaching Party will be entitled to seek specific
performance and injunctive or other equitable relief as a remedy for any such
non-fulfillment or breach.

11.   Assignment; Binding Effect. This Letter may not be assigned by either ING
or Scottish Re without the prior written consent of the other. This Letter shall
be binding upon and inure to the benefit of Scottish Re and ING and their
respective successors and permitted assigns and shall be enforceable in
accordance with its terms against Scottish Re and ING and their respective
successors and permitted assigns.   12.   Governing Law. This Letter shall be
governed by, and construed in accordance with, the laws of the State of New
York.   13.   No Third-Party Beneficiaries. No person other than the parties to
this Letter, their successors and permitted assigns, is intended to be a
beneficiary of this Letter.   14.   Amendment. This Letter shall not be amended
except by a written instrument executed by the parties hereto.   15.   Entire
Understanding. This Letter and the Confidentiality Agreement set forth the
entire understanding of the parties with respect to the matters addressed
herein.   16.   Counterparts. This Letter may be executed in counterparts, each
of which shall be deemed to constitute an original but all of which together
shall constitute one and the same instrument.   17.   Obligations of SR Dublin.
SR Dublin shall be liable pursuant to the terms of this Letter only in respect
of those obligations that are explicitly assumed by it hereunder (including
obligations relating to the March 31 LOI) and shall not be liable for
obligations described as those of Scottish Re (as such term is defined in the
opening paragraph of this Letter).

[Remainder of page intentionally left blank]

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     Please confirm your agreement to the foregoing by signing in the space
provided below and returning to Scottish Re a copy hereof, whereupon this Letter
shall constitute a binding agreement between the parties hereto.
Yours sincerely,
SCOTTISH RE GROUP LIMITED
By:                                                             
Name:
Title:
ACCEPTED AND AGREED:
ING NORTH AMERICA INSURANCE CORPORATION
By:                                                            
Name:
Title:
ING AMERICA INSURANCE HOLDINGS, INC.
By:                                                            
Name:
Title:
SECURITY LIFE OF DENVER INSURANCE COMPANY
By:                                                            
Name:
Title:
SECURITY LIFE OF DENVER INTERNATIONAL LTD.
By:                                                            
Name:
Title:

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SCOTTISH RE (U.S.), INC.
By:                                                            
Name:
Title:
SCOTTISH RE LIFE (BERMUDA) LIMITED
By:                                                            
Name:
Title:
SCOTTISH RE (DUBLIN) LIMITED
By:                                                            
Name:
Title:
SCOTTISH ANNUITY & LIFE INSURANCE COMPANY (CAYMAN) LTD.
By:                                                            
Name:
Title:

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