Confirmation Regarding Split Dollar Insurance Arr.



 






EXHIBIT 10.1



Confirmation Regarding Split Dollar Insurance Arrangement



     This Confirmation Regarding Split Dollar Insurance Arrangement (this
“Confirmation”) is dated March 17, 2003.


Statement of Purpose



     As part of the benefits provided to its former President, Branson J.
McRae, McRae Industries, Inc., a North Carolina corporation (the “Company”),
entered into a split dollar insurance arrangement (the “Arrangement”) with Mr.
McRae pursuant to which the Company agreed to pay the annual premiums on each
of the life insurance policies listed on Exhibit A, each of which covers the
lives of Mr. McRae and his wife, Mrs. Lorraine H. McRae (the “Policies”). Under
the terms of the Arrangement, Mr. McRae was entitled to name the owners of the
Policies and (1) upon the death of both of Mr. and Mrs. McRae the Company is
entitled to a portion of the death benefits payable under the Policies equal to
the then outstanding balance of its cumulative premiums paid on the Policies
and (2) upon the termination of the Arrangement prior to the death of both Mr.
and Mrs. McRae the owners of the Policies are required to repay to the Company
the then outstanding balance of its cumulative premiums paid, or if less, the
net cash surrender value of the Policies. Mr. McRae died in February 1997.
Mr. and Mrs. McRae’s four children, D. Gary McRae, James W. McRae, Gail McRae
Hutchinson and Sandra McRae Harris (the “McRae Children”), 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 the
McRae Children is a partner, and such partnership was named the beneficiary of
each of the Policies. Attached as Exhibit B is a copy of a Split Dollar
Insurance Agreement dated June 2, 1994 (the “Split Dollar Agreement”)
evidencing the Arrangement with respect to Hartford Life Insurance Company
policy No. LL1723787-13 ($2,000,000 face amount). The Company is not in
possession of any other written agreements evidencing the Arrangement. The
purpose of this Confirmation is to acknowledge and confirm in writing that the
terms of the Arrangement as it applies to each of the Policies are and have
been identical to the terms set forth in the Split Dollar Agreement.


Acknowledgement and Confirmation



     NOW, THEREFORE, the undersigned hereby acknowledge and confirm that the
terms of the Arrangement as it applies to each of the Policies are and have
been identical to the terms set forth in the Split Dollar Agreement.


[Signature Page Follows]



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     IN WITNESS WHEREOF, the parties hereto have executed this Confirmation as
of the date and year first above written.



	 	 	 	 
	 	 	
McRAE INDUSTRIES, INC.
	 
	 	 	By:
	
/s/ D. Gary McRae

	 	 	 
	


	 	 	Name:

	
 D. Gary McRae


	 	 	Title:
	
President


	 
	 	 	
McRAE SIBLINGS PARTENERSHIP
	 
	 	 	By:	
/s/ James W. McRae


	 	 	Name:
	
 James W. McRae


	 	 	Title:
	
Co-Managing Partner


	 
	 	 	
/s/ Lorraine Hamilton McRae


Lorraine Hamilton McRae
	 
	 	 	
/s/ Gail McRae Hutchinson


Gail McRae Hutchinson
	 
	 	 	
/s/ Sandra McRae Harris


Sandra McRae Harris
	 
	 	 	
/s/ Daniel Gary McRae


Daniel Gary McRae
	 
	 	 	
/s/ James William McRae


James William McRae



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Exhibit A



Policies




	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	INSURER	 	INSURED	 	POLICY NUMBER	 	COVERAGE AMOUNT
	
	 	
	 	
	 	

	Prudential
Insurance Company
of America
	 	Lorraine H. McRae	 	 	79 766 180	 	 	$	1,000,000	 
	Prudential
Insurance Company
of America
	 	Lorraine H. McRae	 	 	79 691 098	 	 	$	1,000,000	 
	Prudential
Insurance Company
of America
	 	Lorraine H. McRae	 	 	79 656 139	 	 	$	1,000,000	 
	Hartford Life
	 	Lorraine H. McRae	 	 	LL1723787	 	 	$	2,000,000	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 
	 	Total:
	 	 	 	 	 	 	 	 	 	$	5,000,000	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 



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Exhibit B



Split Dollar Agreement



SPLIT DOLLAR INSURANCE AGREEMENT



(COLLATERAL ASSIGNMENT METHOD)



THIS AGREEMENT is entered into this
2nd day of June 1994, by and between McRae
Industries, Inc., a North Carolina corporation (hereinafter called “Employer”),
and Gail McRae Hutchinson, Sandra McRae Harris, Daniel Gary McRae, and James
William McRae (hereinafter called “Owner”).


WHEREAS, Branson Jackson McRae is a valued Employee of the Employer, and
Employer wishes to provide additional inducement for Employee’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.


NOW, THEREFORE, Employer and Owner agree as follows:




	1.	 	The life insurance policy with which this Agreement deals is Policy
Number LL1723788 (hereinafter called “Policy”), issued by Hartford Life
(hereinafter called “Insurer”) on the life of Branson Jackson McRae, and
Lorraine Hamilton McRae in the face amount of $2,000,000.
	 
	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’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’s
transferee, if the Owner has transferred his/her rights in the Policy).
	 
	3.	 	Premiums on the Policy shall be paid by the Employer and shall be repaid
to the Employer as provided in this Agreement.
	 
	4.	 	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’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:
	 
	(a)	 	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 5 below.



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	(b)	 	The right to be repaid its cumulative premiums paid upon the death of the
Employee, as provided in Paragraph 6 below.
	 
	(c)	 	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.
	 
	(d)	 	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’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’s cumulative
premiums paid. As used in this agreement, the term “net cash surrender
value” 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.
	 
	5.	 	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.
	 
	6.	 	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.
	 
	7.	 	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.
	 
	8.	 	In the event of termination of this Agreement as provided in Paragraph 7
above, the Owner shall repay to the Employer, within sixty (60 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.
	 
	9.	 	If the Owner fails to repay the Employer the amount specified in
Paragraph 8 above within sixty (60) 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.
	 
	10.	 	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.
	 
	11.	 	In the event the Owner shall transfer all interest in the Policy to a
transferee, then all of the Owner’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.



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	12.	 	The Insurer shall in no way be bound by, or be deemed to have notice of,
the provisions of this Agreement.
	 
	13.	 	This Split Dollar Agreement may not be amended, altered or modified,
except by a written instrument signed by each of the parties.
	 
	14.	 	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’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.
	 
	15.	 	This Agreement shall bind the Employer, the Owner and the Owner’s heirs,
personal representatives, successors, and transferees, and any Policy
beneficiary.
	 
	16.	 	This plan is intended to qualify as a life insurance employee benefit
plan as described in Revenue Ruling 64-328.
	 
	17.	 	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.



IN WITNESS WHEREOF, the parties have executed this Agreement effective the day
and year first above written.



	 	 	 
	OWNER:	 	 
	 
	/s/ Gail McRae Hutchinson



Gail McRae Hutchinson	 	
/s/ Sandra McRae Harris



Sandra McRae Harris
	 
	/s/ Daniel Gary McRae



Daniel Gary McRae	 	
/s/ James William McRae



James William McRae





	 	 	 
	
EMPLOYER:
	 
	
McRAE INDUSTRIES, INC.
	 
	BY:	 	
/s/ James W. McRae



James W. McRae

Secretary



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