MCRAE INDUSTRIES INC
SPLIT DOLLAR LIFE INSURANCE ARRANGEMENT
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>3
<FILENAME>g78971exv10w10.htm
<DESCRIPTION>SPLIT DOLLAR LIFE INSURANCE ARRANGEMENT
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<TITLE>Split Dollar Life Insurance Arrangement</TITLE>
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<P align="center"><FONT size="2"><B>Exhibit&nbsp;10.10</B>
</FONT>

<P align="center"><FONT size="2"><B>Split Dollar Insurance Arrangement</B>
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<P align="left"><FONT size="2">As part of the compensation paid to the Company&#146;s former President, Branson
J. McRae, the Company entered into a split dollar insurance arrangement with
Mr.&nbsp;McRae pursuant to which the Company agreed to pay the annual premiums on
several life insurance policies, with a total face amount of $5&nbsp;million,
covering the lives of Mr.&nbsp;McRae and his wife, Mrs.&nbsp;Lorraine H. McRae. Under
the terms of this arrangement, Mr.&nbsp;McRae was entitled to name the owners of
the policies and upon the death of both of Mr. and Mrs.&nbsp;McRae the Company is
entitled to a portion of the death benefits payable under the policies not
to exceed the greater of (i)&nbsp;the cash surrender value of the policies and
(2)&nbsp;the cumulative premiums paid by the Company on the policies. Mr.&nbsp;McRae
died in February 1997. Mrs.&nbsp;McRae is currently 80&nbsp;years old. Mr. and Mrs.
McRae&#146;s four children, including D. Gary McRae and James W. McRae, each of
whom is a director and executive officer of the Company, were named the
initial owners and beneficiaries of the policies. In November 1998 ownership
of each of the policies was transferred to a partnership of which each of
Mr. and Mrs.&nbsp;McRae&#146;s children is a partner and D. Gary McRae and James W.
McRae are the Managing Partners, and such partnership was named the
beneficiary of each of the policies. The annual premiums on these policies
total approximately $211,000. The Company has paid total premiums of
$2,219,983 on these policies, which amount, together with any future
premiums paid by the Company on the policies, will be repaid to the Company
upon Mrs.&nbsp;McRae&#146;s death.
</FONT>
<P align="left"><FONT size="2">Attached, as Annex A is a copy of a Split Dollar Insurance Agreement dated
June&nbsp;2, 1994, which formalizes the split dollar insurance arrangement with
respect to one of the subject insurance policies. The Company is not in
possession of any other written documentation formalizing the arrangement.
The owner of the subject insurance policies, however, has confirmed its
agreement with the foregoing description of the split dollar insurance
arrangement and has agreed to be bound by its terms. The Company will
formalize the split dollar insurance arrangement through a written agreement
in the near future.
</FONT>
<P align="left"><FONT size="2">The next premiums payable on the policies will come due in February 2003.
Prior to paying any such premiums the Company will review whether making any
such payments would be prohibited by Section&nbsp;402 of the Sarbanes-Oxley Act
of 2002, which restricts the Company&#146;s ability to make loans to or for any
director or executive officer.
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<P align="right"><FONT size="2">51</FONT>

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<P align="center"><FONT size="2"><B>ANNEX A</B>
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<P align="left"><FONT size="2"><B>SPLIT DOLLAR INSURANCE AGREEMENT</B>
</FONT>

<P align="left"><FONT size="2"><B>(COLLATERAL ASSIGNMENT METHOD)</B>
</FONT>

<P align="left"><FONT size="2">THIS AGREEMENT is entered into this 2nd day of June 1994, by and between McRae
Industries, Inc., a North Carolina corporation (hereinafter called &#147;Employer&#148;),
and Gail McRae Hutchinson, Sandra McRae Harris, Daniel Gary McRae, and James
William McRae (hereinafter called &#147;Owner&#148;).
</FONT>
<P align="left"><FONT size="2">WHEREAS, Branson Jackson McRae is a valued Employee of the Employer, and
Employer wishes to provide additional inducement for Employee&#146;s continued
employment, and as additional compensation, Employer wishes to assist Employee
with a personal life insurance program by entering into a Split Dollar
Insurance Agreement.
</FONT>
<P align="left"><FONT size="2">NOW, THEREFORE, Employer and Owner agree as follows:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">1.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The life insurance policy with which this Agreement deals is Policy
Number LL1723788 (hereinafter called &#147;Policy&#148;), issued by Hartford Life
(hereinafter called &#147;Insurer&#148;) on the life of Branson Jackson McRae, and
Lorraine Hamilton McRae in the face amount of $2,000,000.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">2.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Gail McRae Hutchinson, Sandra McRae Harris, Daniel Gary McRae, and James
William McRae shall be the Owner of the policy, and may exercise all
ownership rights granted to the Owner by the terms of the Policy. It is
the express intention of the parties to reserve to the Owner all rights in
the policy granted by the terms of the Policy, including, but not limited
to, the right to borrow against the policy, the right to assign the
Owner&#146;s interest in the Policy, the right to change the beneficiary of the
Policy, the right to exercise settlement options, and the right to
surrender or cancel the Policy (in whole or in part). The Employer shall
not have nor exercise any right in and to the Policy, which could, in any
way, endanger, defeat or impair any of the rights of the Owner in the
Policy. The only rights in and to the Policy granted to the Employer
shall be its security interest in the cash value of the policy, as
defined, and its right to receive a portion of the death benefit of the
Policy, as provided in this Agreement. The Employer shall not assign any
of its rights in the Policy to anyone other than the Owner (or the owner&#146;s
transferee, if the Owner has transferred his/her rights in the Policy).</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">3.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Premiums on the Policy shall be paid by the Employer and shall be repaid
to the Employer as provided in this Agreement.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">4.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Owner has, contemporaneously with the adoption of this agreement,
assigned the Policy to the Employer as collateral, under a form of
Collateral Assignment. The Employer&#146;s interest in the Policy shall be
specifically limited to the following rights in the cash value and to a
portion of the death benefit:</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The right to be repaid its cumulative premiums paid or, if less, the net
cash surrender value of the Policy, in the event the Policy is totally
surrendered or cancelled by the Owner, or the right to receive the
surrender proceeds, to the extent of its cumulative premiums paid, in the
event the Policy is partially surrendered or cancelled by the Owner, as
provided in Paragraph&nbsp;5 below.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The right to be repaid its cumulative premiums paid upon the death of the
Employee, as provided in Paragraph&nbsp;6 below.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The right to be repaid its cumulative premiums paid or, if less, the net
cash surrender value of the Policy, or to receive ownership of the Policy,
in the event of the termination of this Agreement, as provided in
Paragraphs 8 and 9 below.</FONT></TD>
</TR>
</TABLE>
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        <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The right to be repaid a portion of its cumulative premiums paid if a
Policy loan or partial surrender made by the Owner in any year causes the
net cash surrender value of the Policy to be a sum less than the
Employer&#146;s cumulative premiums paid. In such case, the Owner will use a
portion of any Policy loan proceeds or partial withdrawal to reduce the
cumulative premiums paid by the Employer so as to cause the net cash
surrender value to be equal to or greater than the Employer&#146;s cumulative
premiums paid. As used in this agreement, the term &#147;net cash surrender
value&#148; means the cash surrender value of the Policy, less the amount of
any then existing loans or withdrawals against the Policy obtained by the
Owner pursuant to this paragraph.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">5.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Owner shall have the sole right to surrender or cancel the Policy (in
whole or in part). In the event of a total surrender or cancellation by
the Owner, the Employer shall be entitled to receive the then outstanding
balance of its cumulative premiums paid, or, if less, the net cash
surrender value of the Policy.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">6.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Upon the death of the Employee, the Employer shall be entitled to receive
a portion of the death benefit provided under the Policy equal to the then
outstanding balance of its cumulative premiums paid. The balance of the
death benefit provided under the Policy, if designated by the Owner, in
the manner and in the amounts provided by the beneficiary designation of
the Policy.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">7.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">This Agreement may be terminated, subject to the provisions of Paragraphs
8 and 9 below, by either party, with or without consent of the other
party, by giving notice in writing to the other party.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">8.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In the event of termination of this Agreement as provided in Paragraph&nbsp;7
above, the Owner shall repay to the Employer, within sixty (60&nbsp;days) of
the date of termination, the then outstanding balance of its cumulative
premiums paid, or if less, the net cash surrender value of the Policy.
Upon receipt of this amount, the Employer shall execute an appropriate
release of its Collateral Assignment of the Policy.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">9.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">If the Owner fails to repay the Employer the amount specified in
Paragraph&nbsp;8 above within sixty (60)&nbsp;days of the date of termination of the
Agreement, the Owner shall execute any and all instruments that may be
required to vest ownership of the Policy in the Employer. Thereafter,
Owner shall have no further interest in the Policy or in this Agreement.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">10.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Owner shall have the sole right to borrow against the Policy, and the
Employer shall have no right to obtain loans against the Policy, directly
or indirectly, from the insurer or any other person, or pledge or assign
the Policy as security for any loan.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">11.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In the event the Owner shall transfer all interest in the Policy to a
transferee, then all of the Owner&#146;s interest in the Policy and in this
Agreement shall be vested in the transferee, who shall become a
substituted party, and the Owner shall have no further interest in the
Policy or in this Agreement.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">12.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Insurer shall in no way be bound by, or be deemed to have notice of,
the provisions of this Agreement.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">13.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">This Split Dollar Agreement may not be amended, altered or modified,
except by a written instrument signed by each of the parties.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">14.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Any notice, consent or demand required or permitted to be given under the
provisions of this Split Dollar Agreement by one party to another shall be
in writing, shall be signed by the party, and shall be given either by
delivery to the other party personally, or by mailing, by United States
Certified mail, postage prepaid, to the other party, addressed to the
Party&#146;s last known address as shown on the records of the Employer. The
date of mailing shall be deemed the date of such mailed notice, consent or
demand.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">15.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">This Agreement shall bind the Employer, the Owner and the Owner&#146;s heirs,
personal representatives, successors, and transferees, and any Policy
beneficiary.</FONT></TD>
</TR>
</TABLE>
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        <TD width="1%" align="left" nowrap><FONT size="2">16.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">This plan is intended to qualify as a life insurance employee benefit
plan as described in Revenue Ruling 64-328.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">17.</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">This Split Dollar Agreement, and the rights of the parties hereunder,
shall be governed by and construed pursuant to the laws of the State of
North Carolina.</FONT></TD>
</TR>
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<P align="left"><FONT size="2">IN WITNESS WHEREOF, the parties have executed this Agreement effective the day
and year first above written.
</FONT>
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        <TD colspan="3" valign="top" align="left"><FONT size="2">OWNER:</FONT></TD>
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/s/
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Gail McRae Hutchison&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ &nbsp;&nbsp;Sandra McRae Harris</FONT></TD>
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/s/
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Daniel Gary McRae&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/&nbsp;&nbsp; James William McRae</FONT></TD>
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        <TD align="left" valign="top"><FONT size="2">EMPLOYER:</FONT></TD>
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        <TD align="left" valign="top"><FONT size="2">McRAE INDUSTRIES, INC.</FONT></TD>
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BY:
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;/s/&nbsp;&nbsp;James W. McRae &nbsp;&nbsp;(Secretary)</FONT></TD>
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