ex10-4.htm


    Exhibit
10.4

    


    


    LACLEDE
GAS COMPANY

    Incentive
Compensation Plan II

    (Effective
as of January 1, 2005)

    


    


    I.           Establishment
and Purposes

    


    In order to give officers and
managerial employees of the Company an increased incentive to outstanding
performance, to reward such performance, and to attract and retain highly
qualified persons as officers and for managerial positions, there was
established the Laclede Gas Company Incentive Compensation Plan, which amounts
earned and vested thereunder as of December 31, 2004 are not subject to Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) (“Plan
I”).   As a result of the enactment of Code Section 409A, the
Company adopted as of the effective date hereof this Laclede Gas Company
Incentive Compensation Plan II (“Plan II”), which governs benefits earned and
vested on January 1, 2005 and thereafter.  Effective as of January 1,
2005, no additional Share Units shall be awarded under Plan I.  Unless
otherwise stated, all references herein to the “Plan” shall mean this “Plan
II.”

    


    II.           Definitions

    


    The following terms, as used in the
Plan, shall have the meaning set forth below:

    


     
“Company” -- The Laclede Gas Company

    


     
“Employee” -- an officer or managerial employee of the Company.

    


     
“Laclede” -- The Laclede Group, Inc.

    


    “Share
Unit” -- an incentive compensation unit.  No stock certificate will be
issued for a Share Unit.  No voting power resides in a Share
Unit.

    


    “Dividend
Equivalent” -- an amount in cash equivalent to the cash dividend paid on each
share of Laclede’s common stock.

    


    “Aggregate
Annual Dividend Equivalent” -- an amount computed, at the time of the award of a
Share Unit, at the then current annual cash dividend rate on Laclede’s common
stock.

    


    “Awardee”
-- an Employee awarded a Share Unit.

    


    “Spouse”
-- a spouse is that person who on the date of the Awardee’s death is lawfully
married to the Awardee.


    
      
         


      

      
        1

         


      

      
         


      

    


    “Consolidated
Retained Earnings” -- consolidated retained earnings as stated in Laclede’s
annual report to stockholders for the fiscal year next preceding the date of any
calculation pursuant to Section VI hereof.

    


    “Consolidated
Earnings” -- consolidated earnings (or loss) applicable to common stock as
stated in Laclede’s annual report to stockholders for the fiscal year next
preceding the date of any calculation hereunder, subject to any adjustments
thereto pursuant to Paragraph VI hereof.

    


    “Disability”
-- disability is when the Employee is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months; or the Employee is, by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period
of not less than three months under an accident and health plan covering
employees of the Company, whether it be offered through the Company or an
affiliate of the Company.

    


    “Deferred
Compensation” -- an amount, allocable to each Share Unit outstanding at the end
of a fiscal year, equal to the per common share net increase, or decrease in
Consolidated retained Earnings for that fiscal year.  However, no
Deferred Compensation Credits shall accrue on Share Units held by an Awardee
after the fiscal year in which his employment has terminated due to Retirement,
Disability, death or the election of the Awardee following a hostile Change in
Control.

    


    “Change
of Control” -- When any person, as such term is used in Sections 13(d) and
14(d)(2) of the Securities Act of 1934, as amended, becomes a beneficial owner,
directly or indirectly, of Laclede’s securities representing more than fifty
percent (50%) of the combined voting power of Laclede’s then outstanding
securities, or when any such person becomes a beneficial owner, directly or
indirectly, of at least thirty percent (30%) and no more than fifty percent
(50%) of such securities and a majority of the outside members of Laclede’s
Board of Directors decides that a de facto Change in Control has
occurred.  Change in Control approved by a majority of the outside
members of Laclede’s Board of Directors as constituted immediately prior to the
Change in Control is hereinafter referred to as a friendly Change in Control and
a Change in Control not approved by a majority of the outside members of
Laclede’s Board of Directors as constituted immediately prior to the Change in
Control is heretofore and hereinafter referred to as a hostile Change in
Control.


    
      
         


      

      
        2

         


      

      
         


      

    


    “Retirement”
-- the Awardee’s termination of employment with the Company on or after the
attainment of age 55.

    


    


    III.           Eligibility

    


    No Awardee whose employment with the
Company shall be terminated other than by Retirement, Disability, death or at
his election following a hostile Change in Control or who shall engage in any
business which is competitive with the public utility business of the Company
shall be eligible to receive any payments under the Plan.  All
Deferred Compensation accrued prior to such termination or such competitive
activity shall be forfeited.  It is intended that the Plan constitute
an unfunded deferred compensation arrangement for the benefit of a select group
of management or highly compensated employees (and other service providers) of
the Company and its designated subsidiaries and affiliates for purposes of the
federal income tax laws and the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”) and all documents, agreements or instruments made or given
pursuant to the Plan shall be interpreted so as to effect such
intent.  

    


    IV.           Administration

    


    The Compensation Committee of Laclede’s
Board of Directors shall have authority to recommend to the Board from time to
time the award of Share Units to selected Employees.  Upon such
recommendation, the Board of Directors, exclusive of any Directors who are
eligible to participate in the Plan, may award Share Units to any or all such
Employees.  The Board of Directors shall otherwise administer the Plan
in all respects, and any decision of the Board with respect to any question
arising as to the Employees selected for awards, the amount and form of awards
and interpretations of the Plan shall be final, conclusive, and
binding.

    


    V.           Payment
of Dividend Equivalents

    


    When Laclede pays a cash dividend on
its common stock, it shall, subject to the provisions of Section III, pay a
Dividend Equivalent to each Awardee for each Share Unit held on the date of such
payment.  Dividend Equivalents will be paid to each Awardee until his
death. Upon the death of an Awardee leaving a Spouse surviving, Dividend
Equivalents shall be paid to such Spouse for life, after which no such Dividend
Equivalents shall be payable with respect to such Awardee.

    


    Notwithstanding the provisions of the
final two sentences of the immediately preceding unnumbered paragraph of this
Section V, with respect to awards that are made on or after January 1, 2005 or
that were made prior to such date but are unvested as of such date, an Awardee
who separates from service on account of his or her Retirement before attaining
the age of 65 years (other than by reason of death or Disability, or following a
hostile Change of Control) shall not be entitled to post-Retirement Dividend
Equivalents payable at any time after such Awardee’s Retirement, unless the
Awardee


    
      
         


      

      
        3

         


      

      
         


      

    


    remains
employed by the Company for at least the following respective periods (based on
the Awardee’s age at the date of the award of the Share Units in question)
subsequent to the date upon which the Share Units are awarded:

    


    
      
        	
                 

                 

                     Age
      at Date of Award

              	 
      	
                Number
      of Years of Service

                Required
      Following the

                Date
      of Such Award

              
	 
      	 
      	 
      
	
                     61
      and older

              	 
      	
                2
      years

              
	
                  
      t least 55, but less than 61

              	 
      	
                4
      years

              
	
                     less
      than 55

              	 
      	
                5
      years

              


      

    

    


    VI.           Calculation
and Payment of Deferred Compensation

    


    Each year, the Company shall, subject
to the provisions of Section III, credit or debit the applicable Deferred
Compensation amount to each Awardee for each Share Unit held during such year;
provided that with regard to Share Units that are made on or after January 1,
2005 or that were made prior to such date but are unvested as of such date, the
Deferred Compensation amount reflecting the change in Consolidated Retained
Earnings for the first fiscal year taken into account in computing the Deferred
Compensation amount shall in no event be less than zero.  The
calculation of Deferred Compensation shall be subject to the power of Laclede’s
Board of Directors from time to time to (i) adjust the amount of Consolidated
Retained Earnings to reflect events or transactions which have a significant
relation to the efforts and performance of any or all Awardees, or (ii) exclude
from the computation of Consolidated Retained Earnings all or any portion of
Consolidated Earnings deemed to reflect events or transactions (including the
effect of weather conditions) which have no significant relation to the efforts
and performance of any or all Awardees.  The aggregate of the annual
Deferred Compensation amounts, if any, credited to an Awardee shall accrue
interest at a rate equal to the prime rate charged by US Bank National
Association at the time such interest accrues (or such other reasonable rate as
the Board of Directors determines), but only from and not before the date of
Retirement, Disability, death or the election of the Awardee to terminate
employment following a hostile Change in Control, and shall be payable in ten
equal annual installments to the Awardee or, if he dies before all such payments
have been made, to his surviving beneficiaries designated in writing, and filed
with the Company, or if none, then to his estate.  Except as may be
provided below, payments shall commence on the first day of the fifth month
following the month in which the earlier of the Awardee’s Retirement,
Disability, death or the election of the Awardee to terminate employment
following a hostile Change in Control occurs.


    
      
         


      

      
        4

         


      

      
         


      

    


    


    Notwithstanding any of the other
provisions of this Section VI, with respect to awards that are made on or after
January 1, 2005 or that were made prior to such date but are unvested as of such
date, an Awardee who separates from service on account of his or her Retirement
before attaining the age of 65 years (other than by reason of death or
Disability, or following a hostile Change of Control) shall not be entitled to
post-Retirement Deferred Compensation payable at any time after such Awardee’s
Retirement, unless the Awardee remains employed by the Company for at least the
following respective periods (based on the Awardee’s age at the date of the
award of the Share Units in question) subsequent to the date upon which the
Share Units are awarded.

    


    
      
        	
                 

                 

                     Age
      at Date of Award

              	 
      	
                Number
      of Years of Service

                Required
      Following the

                Date
      of Such Award

              
	 
      	 
      	 
      
	
                     61
      and older

              	 
      	
                2
      years

              
	
                     at
      least 55, but less than 61

              	 
      	
                4
      years

              
	
                     less
      than 55

              	 
      	
                5
      years

              


      

    

    


    Notwithstanding any provision of this
Section VI to the contrary, if the Company determines that an Awardee is a
“specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and
regulations and other guidance issued thereunder, then payment of Deferred
Compensation shall be paid no earlier than the first day of the seventh month
following the month of the Awardee’s separation from service (with the first
such payment being a lump sum equal to the aggregate benefit the Awardee would
have received during such period if no such payment delay had been imposed,
together with interest on such delayed amount during the period of such
restriction at a rate, per annum, equal to the applicable federal short-term
rate (compounded monthly) in effect under Section 1274(d) of the Code at the
time of such termination of employment).  This Section 4.3 shall not
apply to any benefit payable on account of an Awardee’s death.  All
references in the Plan II to “termination of employment” shall mean a
“separation from service” as defined in Final Treasury Regulation 1.409A-1(h),
including the default presumptions thereof.

     

    For purposes of this Plan, an Awardee
shall not be deemed to have incurred a separation from service from if he or she
is employed by any successor of the Company (or with any Affiliate of the
Company, or Affiliate of such successor); whereby “Affiliate” shall mean
(i) any person or entity that directly or indirectly controls, is
controlled by or is under common control with the applicable entity and/or
(ii) to the extent provided by the Company, any person or entity in which
such entity has a significant interest.  The term “control”
(including, with correlative meaning, the terms “controlled by” and “under
common control with”), as applied to any person or entity, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership
of voting or other securities, by contract or otherwise; provided, however, with respect
to any deferred compensation subject to Section 409A of the Code, the term
“Affiliate” shall mean any member of the applicable entity’s control group
within the meaning of

     


    
      
         


      

      
        5

         


      

      
         


      

    


    Final
Treasury Regulation Section 1.409A-1(h)(3), as such may be modified or amended
from time to time, by applying the “at least 50 percent” provisions
thereof.

     

    


    VII.           Adjustments

    


    In the event of any stock dividend or
stock split, the Board of Directors shall increase proportionately each
Awardee’s Share Units.  In the event of any combination of shares,
reclassification of shares, or other similar change in capitalization, or any
distribution other than cash dividends to holders of shares of Laclede common
stock, the Board of Directors shall make such adjustments, in the light of the
change in distributions, as it deems equitable both to the Awardees and the
Company, in the number and type of share Units outstanding and in the
calculation of Deferred Compensation amounts.

    


    VIII.        
Nonassignability

    


    All Share Units awarded and all
Dividend Equivalents and Deferred Compensation payable hereunder shall be
nonassignable.  Neither any Share Unit awarded hereunder nor any
Dividend Equivalents or Deferred Compensation amounts payable hereunder shall be
subject to the debts or obligations of any person entitled thereto, nor, except
as provided herein, may any Share Units or the proceeds therefrom, voluntarily
or involuntarily, be transferred or assigned to, or availed of by, any person
other than the Awardee.

    


    IX.           Effective
Date and Termination

    


    The Plan shall be effective as of
January 1, 2005.  The Board of Directors shall have the right at any
time and from time to time to discontinue and reinstate the Plan in whole or in
part or amend the Plan provided that no share unit previously awarded nor any
deferred compensation amount theretofore accrued shall be diminished or
forfeited by any discontinuance, reinstatement, or amendment of the Plan except
pursuant to the forfeiture provision in Section III.  Notwithstanding
the above, the Plan may not be terminated and payments accelerated contrary to
the provisions of Section 409A of the Code including, without limitation, Final
Treasury Regulation Section 1.409A-3(j)(4)(ix) with reference to Final Treasury
Regulation Section 1.409A-1(g).

    


    X.           Limitations

    


    The Board of Directors shall not award,
in any fiscal year, Share Units yielding Aggregate Annual Dividend Equivalents
which would reduce Consolidated Earnings by more than 1⁄2%.  The Board
of Directors also shall not award, in any fiscal year, Share Units yielding
Aggregate Annual Dividend Equivalents which, with Aggregate Annual Dividend
Equivalents on outstanding Share Units plus any Deferred Compensation payments
made in the next preceding fiscal year, would reduce Consolidated Earnings by
more than 2 1⁄2%.  The Board of Directors shall not award to any
Employee a number of


    
      
         


      

      
        6

         


      

      
         


      

    


    Share
Units which would cause the Aggregate Annual Dividend Equivalents on Share Units
held by him to exceed 25% of his then current annual salary from the
Company.

    


    XI.           General

    


    Payments made to any Awardee shall
constitute special incentive compensation and will not be taken into account in
determining the amount of any pension under any pension or retirement plan of
the Company and will not affect the amount of any life insurance coverage
available to beneficiaries under any group life insurance plan of the
Company.

    


    XII.         Effect
of Change in Control

    


    In the event of any Change in Control,
the regular quarterly Dividend Equivalent payments shall continue to be made to
each eligible Awardee until his death and thereafter to his surviving spouse
(until such spouse’s death), and each quarterly Dividend Equivalent payment
shall be no less than the amount determined by applying the highest quarterly
Dividend Rate applicable to the Company’s common stock during the twelve (12)
months preceding such Change in Control, multiplied by not less than the number
of Share Units each Awardee had immediately preceding such Change in
Control.  If a Change in Control occurs, then the annual Deferred
Compensation to be credited to each Awardee shall be no less than the per common
share change in the Company’s Consolidated Retained Earnings during the lower of
the last two (2) full fiscal years preceding such Change in Control applied to
the number of the Awardee’s Share Units existing immediately before such Change
in Control.

    


    XIII.        Miscellaneous

    


    (a)           Any
claim for benefits under this Plan shall be submitted to the Plan administrator
(the “Plan Administrator”).  If the Plan Administrator denies the
claim for benefits, in whole or in part, the Plan Administrator shall notify the
claimant of the adverse benefit determination no later than ninety (90)
days after receipt of the claim by the Plan, unless the Plan Administrator
determines that special circumstances require an extension of time, which may
not exceed a further ninety (90) days, for processing the claim and so
notifies the claimant in writing prior to the termination of the initial 90 day
period.  In the event that a claim for benefits under this Plan has
been denied by the Plan Administrator, the decision shall be subject to review
by the Company upon written request of the claimant made to the Plan
Administrator within sixty (60) days of receipt by the claimant of notice
of such denial.  Upon request and free of charge, the Company shall
provide the claimant with reasonably access to all pertinent information,
documents and records with respect to the claim.  The decision of the
Company upon review shall be in writing and shall state the reasons for the
decision and the provisions of this Plan on which the decision is
based.  Such decision shall be made within sixty (60) days after
the Company’s receipt of written request for such review unless a hearing is
necessitated to determine the facts and circumstances, in which event a decision
shall be rendered as soon as possible, but not later than one hundred and
twenty (120) days after receipt of the


    
      
         


      

      
        7

         


      

      
         


      

    


    claimant’s
written request for review.  The decision of the Company upon review
shall be final and binding on all persons.

    


    (b)           The
illegality of any provision of this Plan shall not affect the enforceability of
any other provision of this Plan.  The Plan shall be construed in
accordance with and governed by the substantive laws of the State of Missouri
without regard to conflict of law rules.

    


    (c)           All
payments made under the Plan to an Awardee or his or her beneficiary shall be
subject to withholding of such amounts as the Company reasonably may determine
are required to be withheld pursuant to any applicable Federal, state, local, or
foreign law or regulation.

    


    (d)           The
rights of Awardees and their beneficiaries to benefits under the Plan shall be
solely those of unsecured general creditors of the Company.  The Plan
constitutes merely a promise by the Company to make benefit payments in the
future.  The Plan is intended to be unfunded for purposes of the Code
and Title I of ERISA.  Notwithstanding the foregoing, the Company may
contribute to a trust fund under a “rabbi trust” agreement between the Company
and a banking organization or trust company, if such a trust fund is hereafter
established, and payments under the Plan may be made from any such trust
fund.  Any asset acquired or held by the Company in connection with
the Company’s liabilities under the Plan shall not be deemed to be security for
the performance of the Company’s obligations under this Plan.

    


    (e)           Nothing
contained in the Plan or in any documents related to the Plan or to any Share
Units shall confer upon any Awardee any right to continue in the employ of the
Company or constitute any contract or agreement of employment, or interfere in
any way with the right of the Company to reduce such person’s compensation, to
change the position held by such person or to terminate the employment of such
Awardee, with or without cause.

    


    (f)           Notwithstanding
any other provision of the Plan, the Plan is intended to comply with Section
409A of the Code and shall at all times be interpreted in accordance with such
intent that amounts that may become payable to Awardees shall not be taxable to
such Awardees until such amounts are paid in accordance with the terms of the
Plan.  To the extent that any provision of the Plan violates Section
409A of the Code and the Final Treasury Regulations promulgated thereunder such
that amounts would be taxable to an Awardee prior to payment or otherwise
subject to penalties under Section 409A of the Code, such provision shall be
automatically reformed or stricken to preserve the intent
hereof.  Notwithstanding the foregoing, in no event will the Company
or any of its Affiliates have any liability for any failure of the Plan to
satisfy Section 409A of the Code and such parties do not guarantee that the Plan
complies with Section 409A of the Code.

    


    (g)           Notwithstanding
the foregoing, amounts may be paid under the Plan prior to the scheduled payment
dates set forth above, if and to the extent such amounts become


    
      
         


      

      
        8

         


      

      
         


      

    


    subject
to FICA taxes under Code Sections 3101, 3121(a) or 3121(v), and/or withholding
taxes under Code Section 3401 or the corresponding provisions of any state,
local or foreign law as a result of the payment of such FICA taxes; provided, that, such payment
shall not exceed the FICA amount and such other amount required to be withheld
on account of the payment of such FICA amount.  Further, a payment
will be made under the Plan at any time the Plan fails to meet the requirements
of Section 409A of the Code; provided, that, such payment
shall not exceed the amount required to be included in income as a result of the
failure to comply with Section 409A of the Code.

    


    (h)           Notwithstanding
anything herein to the contrary, to the extent, if any, that any payment or
distribution of any portion of the benefit described above (together with any
other benefit under any other plan, policy or arrangement) would trigger any
adverse tax consequences under Section 280G of the Code, or Section 4999 of said
Code, such as loss of deductions to the Company, or the payment of an additional
excise tax by the Awardee, or both, then the benefit hereunder (and to the
extent necessary, under any other plan, policy, or arrangement providing for
“parachute payments” as defined under Code Section 280G) shall be reduced (on a
pro rata basis for all such plans, policies, or arrangements) to $1 less than
that extent, and to no greater extent.  Parachute payments and/or any
cutback amount and any other determination with respect to Code Section 280G
shall be determined by the Company in good faith.

    


    


    



    
      
         


      

      
        9

         


      

      
         


      

    


    DESIGNATION
OF BENEFICIARY FOR CERTAIN BENEFITS UNDER

    


    THE
LACLEDE GAS COMPANY INCENTIVE COMPENSATION PLAN

    


    
      
        
          	 
      	
                       I
      hereby designate that my primary beneficiary under the Incentive
      Compensation Plan II for any "Deferred

                     
  

                
	
                       Compensation”
      amounts payable after my death shall be:

                	 
      
	
                   
      

                   

                	 
      
	
                   

                   
      

                	 
      
	
                   

                   
      

                	 
      
	
                   

                   
      

                	 
      


        

      

    

    


    
      
        	 
      	
                     In
      the event my primary beneficiary is not alive at the time of my death or,
      in the case of a trust, has been

                 

              
	
                     terminated,
      then the remaining “Deferred Compensation” benefits payable under the Plan
      shall be paid to:

              	 
      
	
                 
      

                 

              	 
      
	
                 

                 
      

              	 
      
	
                 

                 
      

              	 
      


      

    

    


    I
understand that the Incentive Compensation Plan II does not allow me to
designate a beneficiary for “Dividend Equivalents” but that they will be paid to
my spouse, if my spouse survives me, for my spouse’s life.

     

    
      	 
      	 
      
	 
      
	 
      	 
      
	
                  
      Date: