Exhibit
10.6
SEMPRA
ENERGY
AMENDED
AND RESTATED
EXECUTIVE
LIFE INSURANCE PLAN
Sempra Energy, a California corporation
(“Sempra”), hereby amends and restates the Sempra
Energy Executive Life Insurance Plan (the “Plan”),
which was originally effective June 1, 1998. The Plan was
amended and restated effective as of July 1, 2003.
Sempra hereby amends and restates the
Plan effective as of __________________, except as otherwise
provided herein. This amendment and restatement of the Plan
is intended to comply with the requirements of Sections 409A(a)(2),
(3) and (4) of the Code (as defined below) and the Treasury
Regulations thereunder. Also, the name of the Plan is hereby
amended to be “The Sempra Energy Executive Life Insurance
Plan.”
PURPOSE OF PLAN
The purpose of this Plan is to assist
certain of Sempra’s senior executives to obtain additional
life insurance coverage. In connection with this, the Plan
provides that the Company will make certain life insurance premium
payments on the policies obtained under the terms and conditions of
this Plan. In addition, the Plan provides for a tax gross-up
to offset the income taxes associated with those premium
payments.
ARTICLE
I
DEFINITIONS
Whenever capitalized in this Plan
document, the following terms shall have the meanings set forth
below unless otherwise expressly provided:
1.1
“Board”
shall mean the Board of Directors of the
Company.
1.2
“Code”
means the Internal Revenue Code of 1986,
as amended.
1.3
“Committee”
shall mean the Compensation Committee of
the Board, or such other committee as the Compensation Committee
shall appoint from time to time to administer the Plan.
1.4
“Company”
shall mean Sempra Energy, a California
corporation, and any successor thereto, including any corporation
that is a successor to all or substantially all of the
Company’s assets or business. “Company”
shall also include any corporation or other entity a majority of
whose outstanding voting stock or voting power is owned, directly
or indirectly, by Sempra Energy, Inc.
1.5
“Participant”
shall mean any senior executive of the
Company who is selected to participate in the Plan and who has
satisfied the conditions for Plan participation as set forth in
Section 2.1.
1.6
“Plan”
shall mean this Sempra Energy Executive
Life Insurance Plan, as it may be amended from time to
time.
1.7
“Plan Year”
shall mean the calendar year.
1.8
“Policy”
shall mean the life insurance policy (or
life insurance policies if more than one is required because of
death benefit amounts or otherwise) purchased on a
Participant’s life that is subject to the terms and
conditions of this Plan.
1.9
“ Separation from Service
”, with respect to a Participant (or another Service
Provider) means the Participant’s (or such Service
Provider’s) “separation from service,” as defined
in Treasury Regulation Section 1.409A-1(h).
1.10
“ Service Provider
” means a Participant or any other “service
provider,” as defined in Treasury Regulation Section
1.409A-1(f).
1.11
“ Service Recipient ,”
with respect to a Participant, means the Company and all persons
considered part of the “service recipient,” as defined
in Treasury Regulation Section 1.409A-1(g), as determined from time
to time. As provided in Treasury Regulation Section
1.409A-1(g), the “Service Recipient” shall mean the
person for whom the services are performed and with respect to whom
the legally binding right to compensation arises, and all persons
with whom such person would be considered a single employer under
Section 414(b) or 414(c) of the Code.
1.12
“ Specified Employee ”
means a Service Provider who, as of the date of the Service
Provider’s Separation from Service, is a “ Key
Employee ” of the Service Recipient any stock of which is
publicly traded on an established securities market or otherwise.
For purposes of this definition, a Service Provider is a
“ Key Employee ” if the Service Provider meets
the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the
Code (applied in accordance with the Treasury Regulations
thereunder and disregarding Section 416(i)(5) of the Code) at any
time during the Testing Year. If a Service Provider is a
“ Key Employee ” (as defined above) as of a
Specified Employee Identification Date, the Service Provider shall
be treated as “ Key Employee ” for the entire
twelve (12) month period beginning on the Specified Employee
Effective Date. For purposes of this definition, a Service
Provider’s compensation for a Testing Year shall mean such
Service Provider’s compensation, as determined under Treasury
Regulation Section 1.415(c)-2(a) (and applied as if the Service
Recipient were not using any safe harbor provided in Treasury
Regulation Section 1.415(c)-2(d), were not using any of the
elective special timing rules provided in Treasury Regulation
Section 1.415(c)-2(e), and were not using any of the elective
special rules provided in Treasury Regulation Section
1.415(c)-2(g)). The “Specified Employees” shall
be determined in accordance with Section 409A(a)(2)(B)(i) of the
Code and Treasury Regulation Section 1.409A-1(i).
1.13
“ Specified Employee Effective
Date ” means the first day of the fourth month following
the Specified Employee Identification Date. The Specified
Employee Effective Date may be changed by the Company, in its
discretion, in accordance with Treasury Regulation Section
1.409A-1(i)(4).
1.14
“ Specified Employee
Identification Date ”, for purposes of Treasury
Regulation Section 1.409A-1(i)(3), means December 31. The
“ Specified Employee Identification Date ” shall
apply to all “nonqualified deferred compensation plans”
(as defined in Treasury Regulation Section 1.409A-1(a)) of the
Service Recipient and all affected Service Providers. The
“ Specified Employee Identification Date ” may
be changed by Sempra Energy, in its discretion, in accordance with
Treasury Regulation Section 1.409A-1(i)(3).
1.15
“Tax Gross-Up”
shall mean the tax gross-up amount set
forth in Section 3.4 below.
1.16
“ Testing Year ” means
the twelve (12) month period ending on the Specified Employee
Identification Date, as determined from time to time.
1.17
“Years of
Service” shall mean the
total number of full years of employment in which a Participant has
been employed by the Company. For purposes of this
definition, a year of employment shall be a 365 day period (or 366
day period in the case of a leap year) that, for the first year of
employment, commences on the Participant’s date of hiring and
that, for any subsequent year, commences on an anniversary of that
hiring date. Any partial year of employment shall not be
counted.
ARTICLE
II
ELIGIBILITY
2.1
Eligibility for Participation.
A senior executive
of the Company shall participate in this Plan as a Participant if
either he or she is participating in the Plan as of the effective
date of this amendment and restatement or meets all of the
following requirements:
(1)
Has been designated in writing by the
Committee, in its sole and absolute discretion, as a
Participant;
(2)
Completes and returns to the Committee,
no later than thirty (30) days after he or she receives written
notice of such designation, such administrative and other forms as
the Committee may require for participation;
(3)
Completes such insurance forms, exams,
and questions as the Committee may designate from time to
time;
(4)
Timely completes any other participation
conditions as may be prescribed by the Committee from time to time;
and
If a senior executive fails to meet all
of the above-listed requirements within a reasonable time, as
determined by the Committee in its sole discretion, the Committee
shall provide that executive with written notice within thirty (30)
days of such failure, and that person shall not become a
Participant under this Plan.
2.2
Acquisition of Insurance.
As a
condition of participation in this Plan, the Participant shall be
required to cooperate in applying for and obtaining a
Policy on his or her life. The selection of the Policy
shall be at the sole discretion of the Company. The
Policy shall be issued in the name of the Participant as the sole
and exclusive owner of the Policy, subject to the rights and
interests granted to the Company, as provided in this Plan.
At the sole discretion of the Committee, the Participant may
designate a person or entity other than the Participant as the
owner of the Policy, provided that such owner agrees to be bound to
the terms and conditions of this Plan.
2.3
Additional Life Insurance Coverage.
During the term of
this Plan, the death benefit coverage under the Policy may be
increased from time to time, to reflect increases in the
Participant’s compensation pursuant to the provisions of
Sections 3.1 and 3.2. As a condition of receiving the
benefits of any such increase, the Participant shall be required
to cooperate in applying for and obtaining such additional
coverage. If the Participant does not so cooperate, and such
coverage cannot be obtained because of the Participant’s
failure to cooperate, the Company shall have no obligation under
this Plan to provide such additional coverage. Further, if
the Participant is not insurable at the time such additional
coverage is sought on a guaranteed issue basis, or if simplified or
full medical underwriting is required, on a rated basis that is no
lower than standard, smoker, then the Company shall have no
obligation under this Plan to provide such additional coverage.
The Committee, in its sole discretion, may reduce the minimum
standard referred to in the previous sentence, in its sole
discretion, based on the cost of insurance or otherwise.
ARTICLE
III
BONUS AMOUNTS
3.1
Life Insurance Coverage Prior to
Separation from Service. Subject to Article II above, for each Plan Year of
the Participant’s participation in the Plan and prior to the
Participant’s Separation from Service, the Company shall pay
to the life insurance carrier the premiums on the Policy in
accordance with this Section 3.1, as determined by the Company in
its sole discretion, which Policy shall provide a death benefit
equal to the sum of the following amounts, as those amounts are
determined as of the last day of each Plan Year, as determined by
the Committee in its sole discretion: (i) two (2) times the
Participant’s annual base salary, plus (ii) two (2) times the
Participant’s average annual bonus under the 2003
Executive Incentive Plan, or any successor thereto (the
“Bonus Plan”), including any amount deferred, in the
three (3) highest years in the ten (10) previous years, or
during the Participant’s actual years of employment with the
Company, if less. In determining the amounts described in the
previous sentence for any Plan Year, the Committee shall substitute
the Participant’s target bonus under the Bonus Plan for a
Participant who is in his or her first Plan Year of participation
and has not received any bonus under the Bonus Plan. The
premium for any Plan Year shall be paid by the Company not later
than March 15 of the next following Plan Year; provided, however,
that such premium shall not be paid if the Participant has a
Separation from Service prior to the payment of such premium.
If a Participant’s compensation increases after the
Committee has determined the Participant’s death benefit as
of the last day of the Plan Year, the Participant’s death
benefit under the Policy shall not be adjusted until the last day
of the next following Plan Year and then it will be based on the
Participant’s compensation at that time. These premium
payments shall be treated as a bonus payments to the
Participant.
3.2
Life Insurance Coverage after Separation
from Service with Age and Service. If at the time of
the Participant’s Separation from Service (other than by
reason of the Participant’s death), the Participant has
attained age 62 and has completed at least five Years of Service,
then the Participant shall be entitled to the benefit, if any,
specified in this Section 3.2. Upon such Separation from
Service, the Committee shall have the life insurance carrier who
issued the Policy prepare a life insurance projection for the
Policy, determined as of the January 1 of the Plan Year next
following such Separation from Service based on the following
assumptions: (i) the then current policy charges, (ii) a
crediting rate of 6.5% net of investment management fees (but
before mortality and expense charges, (iii) death benefit coverage
until the Participant’s 100 th birthday equal to
(x)
