KCS ENERGY INC, S-4, 1996-04-18

KCS ENERGY INC
S-4, 1996-04-18
PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1996

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

KCS ENERGY, INC.
(AND CERTAIN SUBSIDIARIES IDENTIFIED IN FOOTNOTE (*) BELOW)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
6719
1311
DELAWARE 4924 22-2889587
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)

HENRY A. JURAND
379 THORNALL STREET 379 THORNALL STREET
EDISON, NEW JERSEY 08837 EDISON, NEW JERSEY 08837
(908) 632-1770 (908) 632-1770
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (NAME, ADDRESS, INCLUDING ZIP CODE, AND
NUMBER, INCLUDING TELEPHONE
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE NUMBER, INCLUDING AREA CODE, OF AGENT FOR
OFFICES) SERVICE)
</TABLE>

Copies to:

<TABLE>
<S> <C>
DIANA M. HUDSON T. MARK KELLY
JOHN B. CLUTTERBUCK VINSON & ELKINS L.L.P.
MAYOR, DAY, CALDWELL & KEETON, L.L.P. 2300 FIRST CITY TOWER
700 LOUISIANA, SUITE 1900 1001 FANNIN
HOUSTON, TEXAS 77002-2778 HOUSTON, TEXAS 77002-6760
(713) 225-7000 (713) 758-4592
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

CALCULATION OF REGISTRATION FEE

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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
11% Senior Notes due 2003........ $150,000,000 100% $150,000,000 $51,725
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Guarantees(2).................... -- -- -- --
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</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.

(2) Guarantees by subsidiaries of the Registrant of the payment of the principal
and interest on the 11% Senior Notes. Pursuant to Rule 457(n), no additional
registration fee is required.
---------------------
(*) The following subsidiaries of KCS Energy, Inc. are co-registrants
incorporated in the states and having the I.R.S. Employer Identification
Numbers indicated: (i) KCS Resources, Inc., a Delaware corporation
(76-0413329), (ii) KCS Michigan Resources, Inc., a Delaware corporation
(76-0482274), (iii) KCS Pipeline Systems, Inc., a Delaware corporation
(76-0413321), (iv) KCS Energy Marketing, Inc., a New Jersey corporation
(22-2287499), (v) Enercorp Gas Marketing, Inc., a Delaware corporation (76-
0420837), (vi) KCS Power Marketing, Inc., a Delaware corporation
(22-3361864), (vii) KCS Energy Risk Management, Inc., a Delaware corporation
(22-3013587), (viii) National Enerdrill Corporation, a New Jersey
corporation (22-9196560) and (ix) Proliq, Inc., a New Jersey corporation
(22-1516527).
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

KCS ENERGY, INC.

CROSS REFERENCE SHEET

BETWEEN ITEMS IN PART I OF THE REGISTRATION STATEMENT
(FORM S-4) AND PROSPECTUS PURSUANT TO ITEM 501(B)

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<CAPTION>
ITEM OF FORM S-4 LOCATION IN PROSPECTUS
----------------------------------------------------- ---------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page of
Prospectus; Available
Information; Incorporation of
Certain Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. Outside Front Cover Page of
Prospectus; Prospectus Summary;
Risk Factors
4. Terms of the Transaction............................. Outside Front Cover Page of
Prospectus; Prospectus Summary;
Risk Factors; Private Placement;
Use of Proceeds; The Exchange
Offer; Description of the Notes;
Registration Rights Agreement;
Transfer Restrictions on Old
Notes; Book Entry; Delivery and
Form; Certain Federal Income Tax
Considerations; Plan of
Distribution
5. Pro Forma Financial Information...................... *
6. Material Contracts with the Company Being Acquired... *
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters...... *
8. Interests of Named Experts and Counsel............... *
9. Disclosure of Commission Position on Indemnification
For Securities Act Liabilities..................... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.......... *
11. Incorporation of Certain Information by Reference.... *
12. Information with Respect to S-2 or S-3 Registrants... Available Information;
Incorporation of Certain
Documents by Reference;
Prospectus Summary; Risk Factors;
The Company; Private Placement;
Use of Proceeds; Capitalization;
Pro Forma Financial Information;
Selected Financial Information;
Financial Statements
13. Incorporation of Certain Information by Reference.... Incorporation of Certain
Documents by Reference
14. Information with Respect to Registrants other than
S-3 or S-2 Registrants............................. *
</TABLE>
<PAGE> 3

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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............ *
16. Information with Respect to S-2 or S-3 Companies..... *
17. Information with Respect to Companies other than S-3
or S-2 Companies................................... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................ *
19. Information if Proxies, Consents or Authorizations
are not to be Solicited in an Exchange Offer....... *
</TABLE>

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* Not applicable or answer is negative.
<PAGE> 4

***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED APRIL 18, 1996

PROSPECTUS
KCS ENERGY, INC.
OFFER TO EXCHANGE
11% SENIOR NOTES DUE 2003, SERIES B
FOR ALL OUTSTANDING 11% SENIOR NOTES DUE 2003, SERIES A

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996, UNLESS EXTENDED

------------------------

KCS Energy, Inc., a Delaware corporation (the "Parent"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying letter of transmittal (the "Letter of Transmittal," and
together with this Prospectus, the "Exchange Offer"), to exchange $1,000
principal amount of its 11% Senior Notes due 2003, Series B (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement (as defined herein)
of which this Prospectus constitutes a part, for each $1,000 principal amount of
its outstanding 11% Senior Notes due 2003, Series A (the "Old Notes"), of which
$150,000,000 principal amount is outstanding. The form and terms of the Exchange
Notes are identical in all material respects to the form and terms of the Old
Notes except for certain transfer restrictions and registration rights relating
to the Old Notes. The Exchange Notes will evidence the same debt as the Old
Notes and will be issued under and be entitled to the benefits of the Indenture
(as defined herein). The Exchange Notes and the Old Notes are collectively
referred to herein as the "Notes."

The Exchange Notes will be senior unsecured obligations of the Parent
ranking pari passu in right of payment with all existing and future senior
Indebtedness (as defined herein) of the Parent and senior to all future
Subordinated Indebtedness (as defined herein) of the Parent. The Exchange Notes
will be unconditionally guaranteed (the "Subsidiary Guarantees") on a senior
unsecured basis by each of the Parent's current and certain of the Parent's
future subsidiaries (the "Subsidiary Guarantors"), and the Subsidiary Guarantees
will rank pari passu in right of payment with all existing and future senior
unsecured Indebtedness of the Subsidiary Guarantors. The Exchange Notes and
Subsidiary Guarantees will be effectively subordinated to secured Indebtedness
of the Parent and the Subsidiary Guarantors, respectively, with respect to the
assets securing such Indebtedness, including Indebtedness of certain Subsidiary
Guarantors under the Bank Credit Facilities (as defined herein) that is secured
by liens on substantially all of the assets of such Subsidiary Guarantors and
guaranteed by the Parent. As of March 31, 1996, approximately $27.3 million of
Indebtedness was outstanding under the Bank Credit Facilities, not including
$11.1 million reserved pursuant to existing letters of credit. See "Description
of the Notes."

The Parent will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1996, unless the Exchange Offer is
extended. See "The Exchange Offer -- Expiration Date; Extensions; Amendment."
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the business day prior to the Expiration Date (as defined herein),
unless previously accepted for exchange. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being tendered for exchange.
However, the Exchange Offer is subject to certain conditions which may be waived
by the Parent and to the terms and provisions of the Registration Rights
Agreement (as defined herein). Old Notes may be tendered only in denominations
of $1,000 principal amount and integral multiples thereof. The Parent has agreed
to pay the expenses of the Exchange Offer. See "The Exchange Offer."

(Cover continued on next page.)
------------------------

SEE "RISK FACTORS" ON PAGE 14 OF THIS PROSPECTUS FOR A DESCRIPTION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 5

The Exchange Notes will bear interest at the rate of 11% per annum, payable
semi-annually on January 15 and July 15 of each year, commencing July 15, 1996.
Holders of Exchange Notes of record on July 1, 1996 will receive interest on
July 15, 1996 from the date of issuance of the Exchange Notes, plus an amount
equal to the accrued interest on the Old Notes from the date of issuance of the
Old Notes, January 25, 1996, to the date of exchange thereof. Interest on the
Old Notes accepted for exchange will cease to accrue upon issuance of the
Exchange Notes.

The Old Notes were sold by the Parent on January 25, 1996 to the Initial
Purchasers (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchasers only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and to a limited number of institutional "accredited investors" (as defined
in Rule 501(a)(1),(2),(3) or (7) under the Securities Act), each of whom agreed
to comply with certain transfer restrictions and other conditions. Accordingly,
the Old Notes may not be offered, resold or otherwise transferred in the United
States unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy the
obligations of the Parent under the Registration Rights Agreement entered into
with the Initial Purchasers in connection with the offering of the Old Notes.
See "The Exchange Offer" and "Registration Rights Agreement."

Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "SEC") to third parties, the Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the respective holders thereof (other than a "Restricted Holder,"
being (i) a broker-dealer who purchased Old Notes exchanged for such Exchange
Notes directly from the Parent to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Parent within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Parent that such conditions have been met. See "The Exchange Offer -- General."
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. A broker-dealer that delivers
such a prospectus to purchasers in connection with such resales will be subject
to certain of the civil liability provisions under the Securities Act and will
be bound by the provisions of the Registration Rights Agreement (including
certain indemnification rights and obligations). This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Parent has agreed that
it will make this Prospectus and any amendment or supplement to this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of six months after consummation of the Exchange Offer. See "Plan of
Distribution."

The Parent will not receive any proceeds from the Exchange Offer.

The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or as to the ability of or
price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including, among others, prevailing interest rates, the Company's
operating results and the market for similar securities. The Company does not
intend to apply for listing of the Exchange Notes on any securities exchange.
Smith Barney Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Nomura
Securities International, Inc. and PaineWebber Incorporated (together, the
"Initial Purchasers") have informed the Company that they currently intend to
make a market for the Exchange Notes. However, they are not so obligated, and
any such market making may be discontinued at any time without notice.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or as to the liquidity of or the trading
market for the Exchange Notes.

2
<PAGE> 6

The Exchange Notes will be available initially only in book-entry form. The
Parent expects that the Exchange Notes issued pursuant to this Exchange Offer
will be issued in the form of a Global Note (as defined herein), which will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary"
or "DTC") and registered in its name or in the name of Cede & Co., its nominee.
Beneficial interests in the Global Note representing the Exchange Notes will be
shown on, and transfers thereof will be effected through, records maintained by
the Depositary and its participants. After the initial issuance of the Global
Note, Exchange Notes in certificated form will be issued in exchange for the
Global Note only on the terms set forth in the Indenture. See "Book-Entry;
Delivery and Form."

THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE PARENT ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.

TABLE OF CONTENTS

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PAGE NO.
<S> <C>
Available Information.............................................................. 4
Incorporation of Certain Documents by Reference.................................... 4
Prospectus Summary................................................................. 5
Risk Factors....................................................................... 14
The Company........................................................................ 20
Private Placement.................................................................. 21
Use of Proceeds.................................................................... 21
Capitalization..................................................................... 22
Pro Forma Financial Information.................................................... 23
Pro Forma Condensed Statement of Consolidated Income............................... 24
Pro Forma Condensed Consolidated Balance Sheet..................................... 25
Notes to Unaudited Pro Forma Condensed Statement of Consolidated Income............ 26
Selected Financial Information..................................................... 27
The Exchange Offer................................................................. 28
Description of the Notes........................................................... 35
Registration Rights Agreement...................................................... 62
Transfer Restrictions on Old Notes................................................. 63
Book Entry; Delivery and Form...................................................... 64
Certain Federal Income Tax Considerations.......................................... 66
Plan of Distribution............................................................... 68
Legal Matters...................................................................... 68
Accountants........................................................................ 68
Reserve Engineers.................................................................. 69
Glossary of Oil and Gas Terms...................................................... 70
Financial Statements............................................................... F-1
</TABLE>

3
<PAGE> 7

AVAILABLE INFORMATION

The Parent is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information, with the SEC.
Such reports, proxy statements and other information filed by the Parent may be
inspected and copied at the public reference facilities maintained by the SEC,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549; and at the
following regional offices of the SEC: 7 World Trade Center, Suite 1300, New
York, New York 10048; and CitiCorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, at prescribed rates. The Parent's common stock ("Common
Stock") is traded on the New York Stock Exchange. The Parent's reports, proxy
statements and other information concerning the Parent can be inspected and
copied at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005. While any Notes that are "restricted securities" within the
meaning of Rule 144(a)(3) under the Exchange Act remain outstanding, the Parent
will make available, upon request, to any holder and any prospective purchaser
of Notes, the information required pursuant to Rule 144A(d)(4) under the
Securities Act during any period in which the Parent is not subject to Section
13 or 15(d) of the Exchange Act. Any such request should be directed to the
Secretary of the Parent, 379 Thornall Street, Edison, New Jersey 08837,
telephone number (908) 632-1770.

This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Parent with the SEC under the
Securities Act. As permitted by the rules and regulations of the SEC, this
Prospectus does not contain all of the information contained in the Registration
Statement and the exhibits and schedules thereto and reference is hereby made to
the Registration Statement and the exhibits and schedules thereto for further
information with respect to the Parent and the securities offered hereby.
Statements contained herein concerning the provisions of any documents filed as
an exhibit to the Registration Statement or otherwise filed with the SEC are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Parent hereby incorporates by reference into this Prospectus the
following documents or information filed with the SEC: (i) the Parent's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995, (ii) the
Parent's Transition Report on Form 10-K for the transition period from October
1, 1995 to December 31, 1995 (including annual report for the fiscal year ended
December 31, 1995) (the "Form 10-K"); (iii) the Parent's Current Report on Form
8-K dated January 25, 1996 (the "Form 8-K") relating to the issuance and sale of
the Old Notes; and (iv) all documents filed by the Parent pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this
Prospectus and prior to the termination of the offering made hereby. Any
statement contained herein or in any documents incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purpose of this Prospectus to the extent that a subsequent statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The term "Consolidated Financial Statements" refers to the Consolidated
Financial Statements and the notes thereto incorporated by reference from the
Form 10-K and the term "Management's Discussion and Analysis" refers to the
Management's Discussion and Analysis of Financial Condition and Results of
Operations incorporated by reference from the Form 10-K.

THIS PROSPECTUS IS ACCOMPANIED BY A COPY OF THE FORM 10-K.

THIS PROSPECTUS MAY INCORPORATE DOCUMENTS BY REFERENCE FILED BY THE PARENT
ON OR AFTER THE DATE OF THIS PROSPECTUS WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR
ORAL REQUEST FROM THE SECRETARY OF THE PARENT AT ITS PRINCIPAL EXECUTIVE OFFICES
LOCATED AT 379 THORNALL STREET, EDISON, NEW JERSEY 08837, TELEPHONE NUMBER (908)
632-1770. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE
EXPIRATION DATE, ANY REQUEST SHOULD BE MADE BY , 1996.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PARENT OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY (AS DEFINED HEREIN) SINCE
THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

4
<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus
and in the documents incorporated herein by reference. Unless the context
otherwise requires, "Company" refers to KCS Energy, Inc. and its consolidated
subsidiaries, and "Parent" refers only to KCS Energy, Inc. See "Glossary of Oil
and Gas Terms" for definitions of certain terms used herein.

THE COMPANY

The Company's operations to date have been focused on properties in the
Gulf Coast region. The Company's recently completed Rocky Mountain Acquisition
(as defined) has expanded the Company's operations into certain major producing
basins in Wyoming, Colorado and Montana. At December 31, 1995, the Company had
working interests in 901 producing wells (413 of which it operates). The Company
augments its working interest ownership of properties with a volumetric
production payment program that covers properties located primarily in the
offshore Gulf Coast region and, with the recent Michigan Acquisition (as
defined), in the Niagaran Reef trend in Michigan. At December 31, 1995,
approximately 76% of the Company's proved reserves were natural gas,
approximately 78% of total proved reserves were classified as proved developed,
and the average reserve life (based on 1995 pro forma production) was estimated
to be 7.2 years.

The Company's largest single producing field is the Bob West Field in south
Texas, which accounted for approximately 34% of the Company's production during
1995 from its interests in 48 wells (18 of which it operates). Substantially all
of the Company's natural gas sold from the Bob West Field is covered by a
take-or-pay contract with Tennessee Gas Pipeline Company that runs through
January 1999 and is currently the subject of litigation. (See "Risk
Factors -- Tennessee Gas Litigation" and Note 7 to Consolidated Financial
Statements.)

The Company also operates a natural gas transportation business and an
energy marketing and services business, which together contributed less than 5%
of the Company's operating income during 1995. The natural gas transportation
business consists of approximately 500 miles of pipelines, including a 150-mile
intrastate pipeline system and related gathering lines located between Houston
and Dallas, Texas and 16 natural gas gathering systems in Texas, Montana and
Louisiana. Through its energy marketing and services business, the Company buys
and resells natural gas directly to industrial and commercial end users and also
offers energy supply, transportation and risk management services.

BUSINESS STRATEGY

The Company has grown through a balanced strategy of reserve acquisitions
and exploratory and development drilling. The Company plans to continue to
broaden its reserve base and increase production and cash flow through (i) the
acquisition of attractively priced producing properties that also provide
additional development or exploratory potential, (ii) the acquisition of natural
gas and crude oil reserves through its volumetric production payment program,
(iii) the exploitation and development of its existing asset base, and (iv) the
pursuit of a balanced exploration program that includes a number of
high-potential opportunities.

5
<PAGE> 9

To implement its strategy, the Company intends to take advantage of several
key strengths, including (i) a high quality, diversified reserve base, (ii) a
significant inventory of attractive development and exploratory drilling
opportunities within the Company's large property base and undeveloped acreage
position, (iii) established relationships with a broad base of industry partners
that continually provide the Company with opportunities to participate in a
diverse group of exploration prospects without expending the resources that
would be required to develop comparable prospects internally, (iv) a streamlined
administrative and operating cost structure that emphasizes a lean staff and
extensive arrangements with independent contractors, and (v) a volumetric
production payment program.

A volumetric production payment is comparable to a term royalty interest in
oil and gas properties and gives the Company a priority right to a specified
volume of oil and gas reserves scheduled to be produced and delivered over a
stated time period. Although specific terms of the Company's volumetric
production payments vary, the Company is generally entitled to receive delivery
of its scheduled oil and gas volumes at agreed delivery points, free of
development and lease operating expenses and, in certain cases, free of state
severance taxes. The Company believes its volumetric production payment program
diversifies its reserve base and achieves attractive rates of return while
minimizing the Company's exposure to certain development, operating and reserve
volume risks because, among other things, reserve volumes scheduled to be
received pursuant to a volumetric production payment typically are substantially
less than the estimated proved reserves underlying such payment.

ACQUISITION ACTIVITIES

In November 1995, the Company completed a $33 million acquisition of
interests in 531 gross (301 net) wells (321 of which it operates) in six
producing basins, primarily in Wyoming, Colorado and Montana (the "Rocky
Mountain Acquisition"). These properties added proved reserves of approximately
41 Bcf of natural gas and 4.3 MMbbls of oil to the Company's reserve base. This
acquisition provides the Company with an existing operation and infrastructure
in a new geographic area with high percentage working interests in properties
that the Company believes contain a significant number of development drilling,
workover and recompletion opportunities, as well as additional exploratory
opportunities. Approximately one half of the natural gas production from the
acquired properties is subject to multi-year contracts with local utility
companies at prices that are currently in excess of spot market prices. The
Company has budgeted $10 million for development drilling and other enhancement
activities on these properties in 1996.

In December 1995, the Company acquired reserves in the northern and
southern Niagaran Reef trend in Michigan for $31 million, including a volumetric
production payment covering certain reserves, escalating working interests in
related properties and participation rights and an overriding royalty interest
in the exploration program discussed below (collectively, the "Michigan
Acquisition"). The volumetric production payment covers reserves totaling 13.7
Bcf of natural gas and 1.1 MMbbls of oil to be delivered according to a
pre-determined schedule through January 31, 2006, with approximately 16% of
these volumes to be delivered in 1996. These reserves will be produced from 89
wells located in the Niagaran Reef trend operated by a subsidiary of Hawkins Oil
and Gas, Inc. ("Hawkins"). The operator will bear all development and lease
operating expenses attributable to these reserves. The separately acquired
working interests add 3.1 Bcf of natural gas and 219 Mbbls of oil to the
Company's proved reserves. The Company also acquired the right to participate in
a three-year exploration program and an overriding royalty interest covering
150,000 gross (56,250 net) acres in the center of the Niagaran Reef trend and to
use 17,000 miles of proprietary seismic data in the area.

EXPLORATION AND DEVELOPMENT ACTIVITIES

The Company has participated in several significant discoveries, including
the Bob West Field, the Langham Creek Area and the Laurel Ridge Field, all in
the onshore Gulf Coast region. The Bob West Field was discovered in 1989 and
through December 31, 1995 had produced cumulative gross natural gas reserves of
approximately 247.1 Bcf. The Bob West Field is one of the largest natural gas
discoveries in Texas in the past twenty years and represents approximately 17%
of the Company's proved reserves. During the three years ended December 31,
1995, the Company participated in the drilling of 40 wells in this field with a
100%

6
<PAGE> 10

success rate. The Langham Creek Area, where the Company made a discovery in
1994, represents approximately 4% of the Company's proved reserves. To date, the
Company has participated in the drilling of eight wells in this field with a
100% success rate and is currently drilling a ninth well. Two discovery wells
were drilled by the Company in the Laurel Ridge Field, the most recent of which
was completed in December 1995.

The Company's 1996 budget for exploration activities is approximately $15
million. These activities will continue to be focused primarily on properties in
the onshore Gulf Coast region, where the Company plans to participate in the
drilling of approximately 30 wells and continue significant 3-D and 2-D seismic
data acquisition and analysis. In addition, the Company intends to further
analyze the undeveloped acreage it acquired in the Rocky Mountain Acquisition
for possible exploration prospects as well as to participate in the exploration
program in Michigan. The Company's policy is to commit no more than one-third of
its operating cash flow to exploration activities and generally no more than
$750,000 to any single well. During the last three years, the Company
participated in the drilling of 58 exploratory wells with a 50% success rate.

The 1996 budget for development activities is approximately $22 million.
The Company has identified approximately 85 development well locations and at
least 70 recompletion opportunities, which it believes will be substantially
completed by 1998, subject to the availability of capital resources. The
majority of future development work will focus primarily on the properties
acquired in the Rocky Mountain Acquisition, the Langham Creek Area discovery
(where the Company has a 6,260 gross 2,755 net) acreage position) and the Laurel
Ridge Field discovery (where the Company has a 3,656 gross 1,279 net) acreage
position).

THE PRIVATE PLACEMENT AND USE OF PROCEEDS

The Old Notes were sold by the Company on January 25, 1996 to the Initial
Purchasers and were thereupon offered and sold by the Initial Purchasers only to
certain qualified buyers. The net proceeds to the Company from the sale of the
Old Notes were approximately $145 million after deducting expenses of the
offering. These proceeds were utilized by the Company to reduce by $120 million
the outstanding indebtedness under the Bank Credit Facilities and to repay a $25
million note sold to a third party in November 1995. See "Private Placement" and
"Capitalization."

THE EXCHANGE OFFER

The Exchange Offer relates to the exchange of up to $150,000,000 principal
amount of Exchange Notes for up to $150,000,000 principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and hence are not entitled to the benefits of the Registration
Rights Agreement relating to the contingent increases in the interest rate
provided for pursuant thereto. The Exchange Notes will evidence the same debt as
the Old Notes and will be issued under and be entitled to the benefits of the
Indenture governing the Old Notes. The Old Notes and the Exchange Notes are
collectively referred to herein as the "Notes." See "Description of Exchange
Notes."

The Exchange Offer............ Each $1,000 principal amount of Exchange Notes
will be issued in exchange for each $1,000
principal amount of outstanding Old Notes. As
of the date hereof, $150,000,000 principal
amount of Old Notes are issued and
outstanding. The Parent will issue the
Exchange Notes to tendering holders of Old
Notes on or promptly after the Expiration
Date.

7
<PAGE> 11

Resale........................ The Company believes that the Exchange Notes
issued pursuant to the Exchange Offer
generally will be freely transferable by the
holders thereof without registration or any
prospectus delivery requirement under the
Securities Act, except for certain Restricted
Holders who may be required to deliver copies
of this Prospectus in connection with any
resale of the Exchange Notes issued in
exchange for such Old Notes. See "The
Exchange Offer -- General" and "Plan of
Distribution."

Expiration Date............... 5:00 p.m., New York City time, on ,
1996, unless the Exchange Offer is extended,
in which case the term "Expiration Date"
means the latest date to which the Exchange
Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."

Interest on the Notes......... The Exchange Notes will bear interest payable
semi-annually on January 15 and July 15 of
each year, commencing July 15, 1996. Holders
of Exchange Notes of record on July 1, 1996
will receive interest on July 15, 1996 from
the date of issuance of the Exchange Notes,
plus an amount equal to the accrued interest
on the Old Notes from the date of issuance of
the Old Notes, January 25, 1996, to the date
of exchange thereof. Consequently, assuming
the Exchange Offer is consummated prior to
the record date in respect of the July 15,
1996 interest payment for the Old Notes,
holders who exchange their Old Notes for
Exchange Notes will receive the same interest
payment on July 15, 1996 that they would have
received had they not accepted the Exchange
Offer. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance
of the Exchange Notes. See "The Exchange
Offer -- Interest on the Exchange Notes."

Procedures for Tendering Old
Notes......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Old
Notes to be exchanged and any other required
documentation to the Exchange Agent at the
address set forth herein and therein or
effect a tender of Old Notes pursuant to the
procedures for book-entry transfer as
provided for herein. See "The Exchange
Offer -- Procedures for Tendering."

Special Procedures for
Beneficial Holders............ Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on the beneficial holder's
behalf. If such beneficial holder wishes to
tender directly, such beneficial holder must,
prior to completing and executing the Letter
of Transmittal and delivering the Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
holder's name or obtain a properly completed
bond power from the registered holder. The
transfer of record ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering."

8
<PAGE> 12

Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes and a properly completed
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date,
or who cannot complete the procedure for
book-entry transfer on a timely basis, may
tender their Old Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures."

Withdrawal Rights............. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the business day prior to the Expiration
Date, unless previously accepted for
exchange. See "The Exchange
Offer -- Withdrawal of Tenders."

Termination of the Exchange
Offer......................... The Parent may terminate the Exchange Offer if
it determines that the Exchange Offer
violates any applicable law or interpretation
of the staff of the SEC. Holders of Old Notes
will have certain rights against the Company
under the Registration Rights Agreement
should the Parent fail to consummate the
Exchange Offer. See "The Exchange
Offer -- Termination" and "Registration
Rights Agreement."

Acceptance of Old Notes and
Delivery of Exchange Notes.... Subject to certain conditions (as summarized
above in "Termination of the Exchange Offer"
and described more fully in "The Exchange
Offer -- Termination"), the Parent will
accept for exchange any and all Old Notes
which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time,
on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer -- General."

Exchange Agent................ Fleet National Bank is serving as exchange
agent (the "Exchange Agent") in connection
with the Exchange Offer. The mailing address
of the Exchange Agent is: Fleet National
Bank, 777 Main Street, MSN CT/MO/0224,
Hartford, Connecticut 06115, Attention:
Corporate Trust Operations. Hand deliveries
and deliveries by overnight courier should be
addressed to Fleet National Bank, 777 Main
Street, MSN CT/MO/0224, Hartford, Connecticut
06115, Attention: Corporate Trust Operations.
For information with respect to the Exchange
Offer, the telephone number for the Exchange
Agent is (860) 986-1271 and the facsimile
number for the Exchange Agent is (860) 986-
7908.

Certain Tax Considerations.... The exchange pursuant to the Exchange Offer
will generally not be a taxable event for
federal income tax purposes. See "Certain
Federal Income Tax Considerations."

Use of Proceeds............... There will be no cash proceeds payable to the
Company from the issuance of the Exchange
Notes pursuant to the Exchange Offer. See
"Use of Proceeds." For a discussion of the
use of the net proceeds received by the
Company from the sale of the Old Notes, see
"Private Placement."

9
<PAGE> 13

TERMS OF THE OLD NOTES AND THE EXCHANGE NOTES

Securities.................... $150,000,000 principal amount of 11% Senior
Notes due 2003.

Maturity Date................. January 15, 2003.

Interest Payment Dates........ Interest on the Notes will be payable
semi-annually on January 15 and July 15 of
each year, commencing July 15, 1996.

Optional Redemption........... The Notes will be redeemable at the option of
the Parent, in whole or in part, at any time
on or after January 15, 2000, at the
redemption prices set forth herein, together
with accrued interest to the date of
redemption. In the event the Parent
consummates a Public Equity Offering on or
prior to January 15, 1999, the Parent may at
its option use all or a portion of the
proceeds from such offering to redeem up to
$35 million principal amount of the Notes at
a redemption price equal to 111% of the
aggregate principal amount thereof, together
with accrued interest to the date of
redemption, provided that at least $115
million in aggregate principal amount of
Notes remain outstanding immediately after
such redemption. See "Description of the
Notes -- Redemption."

Mandatory Redemption.......... None.

Guarantees.................... The Notes will be unconditionally guaranteed on
a senior unsecured basis by each of the
Parent's current and certain of the Parent's
future subsidiaries, and such Subsidiary
Guarantees will rank pari passu in right of
payment with all existing and future senior
unsecured Indebtedness of the Subsidiary
Guarantors. See "Description of the
Notes -- Subsidiary Guarantees of Notes."

Ranking....................... The Notes will be senior unsecured obligations
of the Parent ranking pari passu in right of
payment with all existing and future senior
Indebtedness of the Parent and senior to all
future Subordinated Indebtedness of the
Parent. The Notes and the Subsidiary
Guarantees, however, will be effectively
subordinated to secured Indebtedness of the
Parent and the Subsidiary Guarantors,
respectively, with respect to the assets
securing such Indebtedness, including
Indebtedness of certain Subsidiary Guarantors
under the Bank Credit Facilities which is
secured by liens on substantially all of the
assets of such Subsidiary Guarantors and
guaranteed by the Parent. Certain of the
Subsidiary Guarantors are the primary
obligors under the Bank Credit Facilities,
and as of March 31, 1996, approximately $27.3
million of Indebtedness was outstanding under
the Bank Credit Facilities, not including
$11.1 million reserved pursuant to existing
letters of credit. See "Description of the
Notes -- Ranking."

Change of Control............. Upon the occurrence of a Change of Control,
each holder of Notes will have the right to
require the Parent to purchase all or a
portion of such holder's Notes at a price
equal to 101% of the aggregate principal
amount thereof, together with accrued
interest to the date of purchase. See
"Description of the Notes -- Certain
Covenants -- Change of Control."

10
<PAGE> 14

Certain Covenants............. The Indenture contains certain covenants,
including covenants which limit: (i)
indebtedness; (ii) restricted payments; (iii)
issuances and sales of capital stock of
restricted subsidiaries; (iv) sale/leaseback
transactions; (v) transactions with
affiliates; (vi) liens; (vii) asset sales;
(viii) dividends and other payment
restrictions affecting restricted
subsidiaries; (ix) conduct of business; and
(x) mergers, consolidations and sales of
assets. See "Description of the
Notes -- Certain Covenants" and "-- Merger,
Consolidation and Sale of Assets."

Transfer Restrictions......... The Old Notes have not been registered under
the Securities Act and unless so registered
may not be offered or sold within the United
States to or for the benefit of United States
persons, except pursuant to an exemption
from, or in a transaction not subject to, the
registration requirements of the Securities
Act. See "Transfer Restrictions on Old
Notes." The Exchange Notes would in general
be freely tradeable after the Exchange Offer.
See "The Exchange Offer" and "Plan of
Distribution."

Registration Rights........... Pursuant to a registration rights agreement
(the "Registration Rights Agreement") by and
among the Parent, the Subsidiary Guarantors
and the Initial Purchasers, the Company
agreed (i) to file a registration statement
with the SEC (the "Exchange Offer
Registration Statement") with respect to an
Exchange Offer to exchange the Old Notes for
Exchange Notes within 90 days after the date
of original issuance of the Old Notes (which
was January 25, 1996) and (ii) to use
commercially reasonable best efforts to cause
such registration statement to become
effective under the Securities Act within 120
days after such issue date. The Registration
Statement of which this Prospectus is a part
constitutes such Exchange Offer Registration
Statement. In the event that applicable law
or interpretations of the staff of the SEC do
not permit the Company to file the Exchange
Offer Registration Statement or to effect the
Exchange Offer, or if certain holders of the
Notes notify the Company that they are not
permitted to participate in, or would not
receive freely tradeable Notes pursuant to,
the Exchange Offer, the Company will use
commercially reasonable best efforts to cause
to become effective a registration statement
(the "Shelf Registration Statement") with
respect to the resale of the Notes and to
keep the Shelf Registration Statement
effective until three years after the date of
original issuance of the Notes. The interest
rate on the Notes is subject to increase
under certain circumstances if the Company is
not in compliance with its obligations under
the Registration Rights Agreement. See
"Registration Rights Agreement."

RISK FACTORS

An investment in the Notes involves certain risks that an investor should
carefully evaluate in connection with an investment in the Notes. See "Risk
Factors."

11
<PAGE> 15

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

(DOLLARS IN THOUSANDS)

The following table sets forth selected historical and pro forma financial
information for the Company and should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto, Management's
Discussion and Analysis and the information under "Pro Forma Financial
Information" included elsewhere in this Prospectus.

YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
PRO FORMA AS ADJUSTED
1993 1994 1995 1995(1) 1995(2)
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Oil and gas exploration and production....... $ 40,455 $ 66,076 $ 83,284 $ 95,269 $ 95,269
Energy marketing and services................ 249,017 260,704 359,620 359,620 359,620
Natural gas transportation................... 16,480 19,910 26,722 28,587 28,587
Intercompany................................. (1,663) (4,977) (19,661) (19,661) (19,661)
-------- -------- -------- -------- --------
Total................................. 304,289 341,713 449,965 463,815 463,815
-------- -------- -------- -------- --------
Operating costs and expenses:
Cost of gas sales............................ 253,435 265,076 356,186 356,186 356,186
Other operating and administrative
expenses................................... 15,018 18,285 18,669 22,772 22,772
Depreciation, depletion and amortization..... 8,036 19,740 39,209 43,597 43,597
-------- -------- -------- -------- --------
Total................................. 276,489 303,101 414,064 422,555 422,555
-------- -------- -------- -------- --------
Operating income............................... 27,800 38,612 35,901 41,260 41,260
Interest and other income, net................. 704 1,039 3,713 3,713 3,713
Interest expense............................... (1,983) (2,938) (7,732) (12,660) (17,715)
-------- -------- -------- -------- --------
Income before income taxes..................... 26,521 36,713 31,882 32,313 27,258
-------- -------- -------- -------- --------
Federal and state income taxes................. 7,910 12,556 10,576 10,727 8,957
-------- -------- -------- -------- --------
Net income..................................... $ 18,611 $ 24,157 $ 21,306 $ 21,586 $ 18,301
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(3)(4)(5)................................ $ 35,836 $ 58,352 $ 75,110 $ 84,857 $ 84,857
Capital expenditures........................... $ 48,455 $ 74,953 $128,699 $ 128,699 $ 128,699
Ratio of EBITDA to interest expense(4)(5)...... 18.1x 19.9x 9.7x 6.7x 4.8x
Ratio of earnings to fixed charges(6).......... 13.49x 12.93x 5.05x 3.52x 2.52x
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------
AS
ACTUAL ADJUSTED(7)
-------- -------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $ 5,846 $ 5,846
Working capital............................................................ 3,653 3,653
Oil and gas properties, net................................................ 204,958 204,958
Total assets(8)............................................................ 360,609 365,609
Long-term debt............................................................. 165,529 170,529
Total stockholders' equity................................................. 101,576 101,576
</TABLE>

- ---------------

(1) Gives effect to the Rocky Mountain and Michigan Acquisitions. See "Pro Forma
Financial Information."

(2) Gives effect to the sale of the Old Notes and the application of the net
proceeds therefrom. See "Private Placement" and "Pro Forma Financial
Information."

(3) EBITDA represents operating income before depletion, depreciation,
amortization, interest expense, and interest and other income. EBITDA is not
intended to represent cash flow and does not represent the measure of cash
available to the Company. EBITDA is not a generally accepted accounting
principle measure, although it does provide additional information for
evaluating the Company's ability to make payments on the Notes. EBITDA is
also not intended to be an alternative to net income as a measure of
operating results.

(4) If the amounts representing the difference between the Tennessee Gas
Contract price and the $3.00 per MMBtu interim agreement price were excluded
from revenue for the year ended December 31, 1994, EBITDA for that period
would have been $45.9 million and the ratio of EDITBA to interest expense
would have been 15.6x. See "Risk Factors -- Tennessee Gas Litigation" and
Management's Discussion and Analysis.

(5) If the amounts representing the difference between the Tennessee Gas
Contract price and the $3.00 per MMBtu interim agreement price were excluded
from revenue for the year ended December 31, 1995, EBITDA for that period
would have been $34.9 million and the ratio of EBITDA to interest expense
would have been 4.5x; and pro forma for the acquisitions EBITDA for 1995
would have been $44.6 million and the ratio of EBITDA to interest expense
would have been 3.5x; and the 1995 ratio of EBITDA to interest expense as
adjusted for the sale of Notes would have been 2.5x. See "Risk
Factors -- Tennessee Gas Litigation" and Management's Discussion and
Analysis.

(6) Income before income taxes plus fixed charges divided by fixed charges.
Fixed charges consist of interest expense and a portion of rent considered
to represent interest cost.

(7) Gives effect to the sale of the Old Notes and the application of the net
proceeds therefrom. See "Private Placement" and "Capitalization."

(8) Includes an approximately $56 million net receivable from Tennessee Gas at
December 31, 1995 that is the subject of litigation. See "Risk
Factors -- Tennessee Gas Litigation" and Management's Discussion and
Analysis.

12
<PAGE> 16

SUMMARY HISTORICAL OIL AND GAS RESERVE AND OPERATING DATA

The following table sets forth summary information with respect to
estimates of the Company's proved oil and gas reserves, for each of the years in
the three year period ended December 31, 1995. For additional information
relating to the Company's oil and gas reserves and operating data, see
Management's Discussion and Analysis and the notes to the Consolidated Financial
Statements.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
RESERVE DATA:
Proved developed reserves:
Oil (Mbbls)................................................ 1,579 1,336 3,808
Natural gas (MMcf)......................................... 61,016 74,215 121,987
Total (MMcfe)........................................... 70,490 82,231 144,835
Proved undeveloped reserves:
Oil (Mbbls)................................................ 999 983 3,709
Natural gas (MMcf)......................................... 8,724 14,969 18,976
Total (MMcfe)........................................... 14,718 20,867 41,230
Total proved reserves:
Oil (Mbbls)................................................ 2,578 2,319 7,517
Natural gas (MMcf)......................................... 69,740 89,184 140,963
Total (MMcfe)........................................... 85,208 103,098 186,065
Estimated future net revenue before income taxes($000)(1).... $285,278 $307,533 $405,049
Present value of future net revenues before income
taxes($000)(2)............................................. $210,923 $248,217 $291,085
Standardized measure of discounted future net cash
flows($000)(3)............................................. $160,884 $179,660 $231,763
Reserve replacement percentage............................... 412.8% 242.3% 508.6%
Reserve life (in years)(4)................................... 10.6 8.2 7.2
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
NET PRODUCTION DATA:
Oil (Mbbls)..................................................... 179 211 196
Natural gas (MMcf):
Tennessee Gas Contract........................................ 4,472 6,851 6,924
Other......................................................... 2,505 4,453 12,205
------- ------- -------
Total...................................................... 6,977 11,304 19,129
Total (MMcfe)................................................... 8,051 12,570 20,305
OTHER DATA:
Average sales prices:
Oil ($ per Bbl)............................................... $ 17.57 $ 15.16 $ 17.28
Natural gas ($ per Mcf):
Tennessee Gas Contract..................................... 7.09 7.49 7.90
Other...................................................... 2.02 1.81 1.62
Average.................................................... 5.27 5.54 4.29
Average lifting cost ($ per Mcfe)............................... 0.62 0.56 0.33
</TABLE>

- ---------------

(1) Reflects future cash inflows less future production and development costs.

(2) Reflects estimated future net revenue before income taxes discounted at 10%
annually.

(3) Reflects present value of future net revenue before income taxes, less
future income taxes discounted at 10%.

(4) Reserve life at December 31, 1995 reflects 1995 pro forma production.

13
<PAGE> 17

RISK FACTORS

In addition to the other information set forth elsewhere in this Prospectus
and the documents incorporated herein by reference, the following factors should
be carefully evaluated in connection with an investment in the Notes.

TENNESSEE GAS LITIGATION

The Company, as one of the sellers, is involved in certain litigation with
Tennessee Gas Pipeline Company ("Tennessee Gas"), as the buyer, regarding a
natural gas purchase contract covering certain producing acreage units within
the Bob West Field (the "Tennessee Gas Contract") that runs through January
1999. The Tennessee Gas Contract provides that Tennessee Gas will take or pay
for 85% of the sellers' delivery capacity from wells within these units at
certain defined prices. These prices are currently greatly in excess of spot
market prices ($8.17 per MMBtu during December 1995, plus reimbursement for
severance taxes, compared to average spot market prices for natural gas of $2.02
per MMBtu during that month). Although Tennessee Gas contested, among other
things, both the volume and price provisions of this contract, the Texas Supreme
Court recently upheld the price provision and remanded the case to the trial
court to determine whether the volumes of natural gas that have been delivered
to Tennessee Gas were produced and delivered in good faith and were not
unreasonably disproportionate to a normal or otherwise comparable prior output
or to the expectation of the parties. Pending a final resolution of the
litigation and pursuant to a series of interim agreements between the parties in
effect since October 1994, Tennessee Gas has been purchasing monthly not less
than 85% of the natural gas delivery capacity, if available, and paying $3.00
per MMBtu. The excess of $3.00 per MMBtu over the market price for natural gas
delivered since August 1, 1995 (but not for the earlier deliveries covered by
the interim agreements) is refundable to Tennessee Gas to the extent required by
a final judgment against the Company. The acceptance of the $3.00 per MMBtu does
not constitute any waiver by the Company of its claim for the full contract
price for all natural gas taken by Tennessee Gas. The latest interim agreement
is in effect through the earlier of issuance of mandate from the Texas Supreme
Court or April 30, 1996, unless extended by the parties.

As of December 31, 1995, the Company had recorded cumulative revenue of
approximately $155 million for natural gas sold under the Tennessee Gas Contract
based on the prices as defined in the contract, of which approximately $112
million (approximately $61 million of which has actually been received by the
Company) is at issue in the litigation. In accordance with the provisions of
such contract, the Company continues to accrue an accounts receivable amount
(which includes interest as provided for in the contract) due from Tennessee Gas
that reflects the difference between the amount that Tennessee Gas has paid for
natural gas under the interim agreements between the parties and the price that
would have been paid pursuant to the terms of the Tennessee Gas Contract. At
December 31, 1995, such receivable (which includes accrued interest income and
is net of deferred severance taxes and other payables) was $56.4 million. The
Company anticipates this amount will continue to increase. If Tennessee Gas
ultimately prevails in this litigation, and depending on the amount of natural
gas for which the courts determine that Tennessee Gas should have paid the spot
market price rather than the contract price, the Company could be required (i)
to write off a portion or all of its account receivable that is attributable to
Tennessee Gas and (ii) to return a portion or all of the disputed amounts
received (plus interest if it is awarded by the courts) to Tennessee Gas.

If the outcome of the litigation requires the Company to repay significant
amounts to Tennessee Gas, the Company's liquidity and cash flow could be
materially and adversely affected. In such event, there can be no assurance that
the Company would be able to generate sufficient funds to repay (or finance a
repayment of) the amounts due to Tennessee Gas and continue to pay the principal
of and interest on the Notes.

If Tennessee Gas ultimately prevails in the litigation, the award of a
significant judgment against the Company could result in a default and lead to
the acceleration of the Company's indebtedness under the Bank Credit Facilities
and the Indenture.

The natural gas dedicated to the Tennessee Gas Contract is produced from
the Bob West Field. The PV-10 attributable to the Company's proved reserves in
the Bob West Field has been calculated based in part on the contract price with
Tennessee Gas and with the assumption that 85% of the Company's delivery

14
<PAGE> 18

capacity from the specified units in the field will be sold at such price during
the life of the contract. At December 31, 1995, the PV-10 for the Bob West Field
was $115.2 million. If calculated using the $3.00 per MMBtu price in effect
pursuant to the interim agreements between the parties to the litigation instead
of the contract price, the PV-10 for the Bob West Field would have been $37.5
million. If calculated using December 31, 1995 spot market prices of $2.05 per
MMBtu instead of the contract price, the PV-10 for the Bob West Field would have
been $27.0 million. See Management's Discussion and Analysis and Note 7 to the
Consolidated Financial Statements.

CERTAIN PROVISIONS OF THE TENNESSEE GAS CONTRACT

Tennessee Gas has the right under the Tennessee Gas Contract, except as
modified by the interim agreements discussed above, to elect not to take natural
gas for any period of a contract year and to defer payment for its decision not
to take such natural gas until the end of the contract year (defined as January
31 of each year). A decision by Tennessee Gas not to take natural gas for a
significant period of time would result in the Company's natural gas production
subject to the Tennessee Gas Contract being shut-in for the relevant period and
could materially and adversely affect the Company's cash flow within a contract
year.

SUBSTANTIAL INDEBTEDNESS AND RESTRICTIONS

At March 31, 1996, the Company had approximately $177.3 million of
outstanding indebtedness (including the Old Notes) and $11.1 million reserved
pursuant to existing letters of credit under its Bank Credit Facilities. The
Company may incur additional indebtedness under the Bank Credit Facilities. The
Company's level of indebtedness will have several important effects on its
future operations. A significant portion of the Company's cash flow from
operations must be dedicated to the payment of interest on its indebtedness and
will not be available for other purposes. The covenants contained in the Bank
Credit Facilities and the Indenture will require the Company to meet certain
financial tests. Other restrictions will limit its ability to borrow additional
funds or to dispose of assets and may affect the Company's flexibility in
planning for and reacting to changes in its business, including possible
acquisition activities. The Company's ability to obtain additional financing in
the future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes may also be restricted. There can be no
assurance that the Company will be able to remain in compliance with the
financial ratios prescribed under the Bank Credit Facilities. Failure to do so
would result in a default and could lead to the acceleration of the Company's
indebtedness under the Bank Credit Facilities and the Indenture. Moreover, if
the Company's revenues were to decrease as a result of lower oil and gas prices,
decreased production or otherwise, the borrowing base under the Bank Credit
Facilities could be reduced and could lead to the acceleration of the Company's
indebtedness under the Bank Credit Facilities and the Indenture. See
Management's Discussion and Analysis and "Description of the Notes -- Certain
Covenants."

This level of indebtedness and the resulting restrictions on the Company
may pose substantial risks to holders of the Notes, including the possibility
that the Company might not generate sufficient cash flow to pay the principal of
and interest on the Notes.

HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION

The Notes are the direct obligation of the Parent, a holding company whose
primary assets are the capital stock of its subsidiaries. As a result, the
Company's cash flow and consequent ability to service its debt will be dependent
upon the earnings and cash flow of its subsidiaries and the distribution of that
cash to the Parent. The Bank Credit Facilities impose certain limitations on the
ability of subsidiaries of the Parent to declare dividends or make distributions
or advances to the Parent in the event of default.

Apart from the Old Notes, all of the Company's existing indebtedness has
been incurred through the Bank Credit Facilities. The indebtedness under the
Bank Credit Facilities is at the subsidiary level, and is secured by
substantially all the assets of such subsidiaries. The lenders under the Bank
Credit Facilities have claims with respect to the assets constituting collateral
for the Bank Credit Facilities that are prior to the claims of holders of the
Notes. See Management's Discussion and Analysis. In the event of a default on
the

15
<PAGE> 19

Notes, or a bankruptcy, liquidation or reorganization of the Company, such
assets will be available to satisfy obligations under the Bank Credit Facilities
before any payment therefrom could be made on the Notes. Accordingly, the Notes
and the Subsidiary Guarantees will be effectively subordinated to claims of the
lenders under the Bank Credit Facilities to the extent of such pledged
collateral. As of March 31, 1996, the total debt outstanding under the Bank
Credit Facilities was $27.3 million, and an additional $11.1 million was
reserved pursuant to existing letters of credit.

EFFECTS OF CHANGING OIL AND GAS PRICES

The Company's future financial condition and results of operations are
highly dependent on the demand and prices received for the Company's oil and gas
production and on the costs of acquiring, developing and producing reserves. Oil
and gas prices have historically been volatile and are expected by the Company
to continue to be volatile in the future. Prices for oil and gas are subject to
wide fluctuation in response to relatively minor changes in the supply of and
demand for oil and gas, market uncertainty and a variety of additional factors
that are beyond the Company's control. These factors include political
conditions in the Middle East and elsewhere, the foreign supply of oil and gas,
the price of foreign imports, the level of consumer product demand, weather
conditions, domestic and foreign government regulations and taxes, the price and
availability of alternative fuels and overall economic conditions. Declines in
oil and gas prices may adversely affect the Company's cash flow, liquidity and
profitability. Lower oil and gas prices also may reduce the amount of the
Company's oil and gas that can be produced economically. It is impossible to
predict future oil and gas price movements with any certainty.

ESTIMATES OF RESERVES AND FUTURE NET CASH FLOWS

There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves, including many factors beyond the Company's
control. This Prospectus (including the documents incorporated herein by
reference) include independent engineering estimates of the Company's oil and
gas reserves and future net cash flows that are based on the reports of four
different firms. Petroleum engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
manner. Estimates of economically recoverable oil and gas reserves and of future
net cash flow necessarily depend upon a number of variable factors and
assumptions, such as historical production from the area compared with
production from other producing areas, the assumed effects of regulation by
governmental agencies, assumptions concerning future oil and gas prices, future
operating costs, severance and excise taxes, development costs and workover and
remedial costs, all of which may in fact vary considerably from actual results.
For these reasons, estimates of the economically recoverable quantities of oil
and gas attributable to any particular group of properties, classifications of
such reserves based on risk of recovery and estimates of the future net cash
flows expected therefrom prepared by different engineers or by the same
engineers at different times may vary significantly. Actual production, revenues
and expenditures with respect to the Company's reserves likely will vary from
estimates, and such variances may be material. In addition, the Company's
reserves and future cash flows may be subject to revisions, based upon
production history, results of future development, oil and gas prices,
performance of counterparties under agreements to which the Company is a party,
operating and development costs and other factors.

The PV-10 values referred to in this Prospectus (including the documents
incorporated herein by reference) should not be construed as the current market
value of the estimated oil and gas reserves attributable to the Company's
properties. In accordance with applicable requirements of the SEC, PV-10 is
generally based on prices and costs as of the date of the estimate, whereas
actual future prices and costs may be materially higher or lower. Actual future
net cash flows also will be affected by factors such as the amount and timing of
actual production, supply and demand for oil and gas, curtailments or increases
in consumption by natural gas purchasers and changes in governmental regulations
or taxation. The timing of actual future net cash flows from proved reserves,
and thus their actual present value, will be affected by the timing of both the
production and the incurrence of expenses in connection with development and
production of oil and gas properties. In addition, the 10% discount factor,
which is required by the SEC to be used to calculate PV-10 for reporting
purposes, is not necessarily the most appropriate discount factor based on
interest rates in effect

16
<PAGE> 20

from time to time and risks associated with the Company and its properties or
the oil and gas industry in general.

RESERVE REPLACEMENT RISKS; SUBSTANTIAL CAPITAL REQUIREMENTS

The Company's prospects for future growth and profitability will depend
predominately on its ability to replace present reserves through exploratory
drilling and acquisitions as well as on its ability to successfully develop
additional reserves. The decision to purchase, explore or develop an interest or
property will depend in part on the evaluation of data obtained through
geophysical and geological analyses and engineering studies, the results of
which are often inconclusive or subject to varying interpretations. There can be
no assurance that the Company's acquisition and exploration activities or
planned development projects will result in significant additional reserves or
that the Company will have continuing success at drilling productive wells.

The Company has made, and likely will continue to make, substantial capital
expenditures in connection with the acquisition, exploration and development of
oil and gas properties. Historically, the Company has funded its capital
expenditures with funds from operations and long-term debt financing. The
Company anticipates that the net proceeds of the sale of the Notes, together
with its cash flow from operations and the availability of credit under the Bank
Credit Facilities, will be sufficient to meet the capital expenditures budgeted
for drilling and acquisition activities in 1996. Future cash flows and the
availability of credit are subject to a number of variables, such as the level
of production from existing wells, prices of oil and gas and the Company's
success in locating and producing new reserves. If revenues were to decrease as
a result of lower oil and gas prices, decreased production or otherwise, and the
Company had no availability under its Bank Credit Facilities, the Company could
be limited in its ability to replace its reserves or to maintain production at
current levels, resulting in a decrease in production and revenue over time. If
the Company's cash flow from operations and availability under its Bank Credit
Facilities are not sufficient to satisfy its capital expenditure requirements,
there can be no assurance that additional debt or equity financing will be
available to meet these requirements.

COMPETITION

The oil and gas industry is highly competitive. The Company competes in the
areas of reserve acquisitions and the exploration, development, production and
marketing of oil and gas, as well as contracting for equipment and securing
personnel, with major oil and gas companies, other independent oil and gas
concerns and individual producers and operators. Many of these competitors have
financial and other resources which substantially exceed those available to the
Company.

CHANGE OF CONTROL

The Indenture provides that upon the occurrence of a Change of Control, the
Company will be required to make an offer to purchase any or all of the
outstanding Notes at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any. In the event of such a Change
of Control, there can be no assurance that the Company would have sufficient
funds available to purchase any Notes tendered or that such repurchase would not
be prohibited by the terms of the Bank Credit Facilities or other senior
Indebtedness. See "Description of the Notes -- Certain Covenants -- Change of
Control."

DRILLING, MARKETING AND ACQUISITION RISKS

Drilling activities are subject to many risks, including the risk that no
commercially productive reservoirs will be encountered, and there can be no
assurance that new wells drilled by the Company will be productive or that the
Company will recover all or any portion of its investment. Drilling for oil and
gas may involve unprofitable efforts, not only from non-productive wells, but
from wells that are productive but do not produce sufficient net revenues to
return a profit after drilling, operating, and other costs. The cost of
drilling, completing and operating wells is often uncertain. The Company's
drilling operations may be curtailed, delayed or canceled as a result of
numerous factors, many of which are beyond the Company's control,

17
<PAGE> 21

including title problems, weather conditions, compliance with governmental
requirements and shortages or delays in the delivery of equipment and services.

The Company's ability to market its oil and gas production at commercially
acceptable prices is dependent on, among other factors, the availability and
capacity of gathering systems and pipelines, federal and state regulation of
production and transportation, general economic conditions, and changes in
supply and in demand.

Acquisitions of producing oil and gas properties and volumetric production
payments have been an important element of the Company's success, and the
Company will continue to seek acquisitions in the future. Even though the
Company performs a review (including a limited review of title and other
records) of the major properties it seeks to acquire that it believes is
consistent with industry practices, such reviews are inherently incomplete and
it is generally not feasible for the Company to review in-depth every property
and all records. Even an in-depth review may not reveal existing or potential
problems or permit the Company to become familiar enough with the properties to
assess fully their deficiencies and capabilities, and the Company often assumes
environmental and other liabilities in connection with acquired properties.

OPERATING HAZARDS AND UNINSURED RISKS

The Company's operations are subject to numerous risks inherent in the oil
and gas industry, including the risks of fire, explosions, blow-outs, pipe
failure, abnormally pressured formations and environmental accidents such as oil
spills, natural gas leaks, ruptures or discharges of toxic gases, the occurrence
of any of which could result in substantial losses to the Company due to injury
or loss of life, severe damage to or destruction of property, natural resources
and equipment, pollution or other environmental damage, clean-up
responsibilities, regulatory investigation and penalties and suspension of
operations. The Company's operations may be materially curtailed, delayed or
canceled as a result of numerous factors, including the presence of
unanticipated pressure or irregularities in formations, accidents, title
problems, weather conditions, compliance with governmental requirements and
shortages or delays in the delivery of equipment. In accordance with customary
industry practice, the Company maintains insurance against some, but not all, of
the risks described above. There can be no assurance that the levels of
insurance maintained by the Company will be adequate to cover any losses or
liabilities. The Company cannot predict the continued availability of insurance,
or availability at commercially acceptable premium levels.

GOVERNMENT REGULATION

The Company's business is subject to certain federal, state and local laws
and regulations relating to the drilling for and production, transportation and
marketing of oil and gas, as well as environmental and safety matters. Such laws
and regulations have generally become more stringent in recent years, often
imposing greater liability on an increasing number of parties. Because the
requirements imposed by such laws and regulations are frequently changed, the
Company is unable to predict the effect or cost of compliance with such
requirements or their effects on oil and gas use or prices. In addition,
legislative proposals are frequently introduced in Congress and state
legislatures which, if enacted, might significantly affect the oil and gas
industry. In view of the many uncertainties which exist with respect to any
legislative proposals, the effect on the Company of any legislation which might
be enacted cannot be predicted.

ABSENCE OF A PUBLIC MARKET FOR THE EXCHANGE NOTES

The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or, the ability or price at
which the holders of Exchange Notes would be able to sell their Exchange Notes.
Future trading prices of the Exchange Notes will depend on many factors,
including, among others, prevailing interest rates, the Company's operating
results and the market for similar securities. The Company does not intend to
apply for listing of the Exchange Notes on any securities exchange. The
investment banking firms that are the Initial Purchasers have informed the
Company that they currently intend to make a market for the Exchange Notes.
However, they are not so obligated, and any such market making may be
discontinued at any time

18
<PAGE> 22

without notice. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act and may be limited
during the Exchange Offer or the pendency of the Shelf Registration Statement.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or as to the liquidity of or the trading
market for the Exchange Notes.

CONSEQUENCES OF FAILURE TO EXCHANGE

Untendered Old Notes not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain subject to the existing restrictions upon transfer of
such Old Notes. See "Transfer Restrictions on Old Notes." Because the Company
anticipates that most holders of Old Notes will elect to exchange such Old Notes
for Exchange Notes due to the general lack of restrictions on the resale of
Exchange Notes under the Securities Act, the Company anticipates that the
liquidity of the market for any Old Notes remaining after the consummation of
the Exchange Offer may be substantially limited. Additionally, holders (other
than Restricted Holders) of any Old Notes not tendered in the Exchange Offer
prior to the Expiration Date will not be entitled to require the Company to file
the Shelf Registration Statement and the stated interest rate on such Old Notes
will remain at its initial level of 11%. See "Registration Rights Agreement."

19
<PAGE> 23

THE COMPANY

KCS Energy, Inc. is an independent energy company primarily engaged in the
acquisition, exploration, development and production of natural gas and crude
oil. The Company was formed in 1988 in connection with the spin-off of the
non-utility operations of NUI Corporation, a New Jersey-based natural gas
distribution company that had been engaged in the oil and gas exploration and
production business since the late 1960s. As a result of the spin-off from NUI
Corporation in 1988, the Company was involved in several unrelated businesses
including propane distribution, data processing, natural gas marketing and oil
and gas exploration and production. In the course of the two years following the
spin-off, the Company sold both the propane distribution company and the data
processing company, as well as other non-strategic assets, and invested the net
proceeds in its core energy business. Since December 1990, the Company has
increased its proved oil and gas reserves 395%, a compound annual rate of 49%,
to 186.1 Bcfe at December 31, 1995. During this five-year period, the Company
also increased production 392%, a compound annual rate of 49%, and replaced 400%
of its production, primarily through a combination of development drilling and
acquisition activities. As of December 31, 1995, the Company's PV-10 was $291.1
million.

The Company's operations to date have been focused on properties in the
Gulf Coast region. The Company's recently completed Rocky Mountain Acquisition
has expanded the Company's operations into certain major producing basins in
Wyoming, Colorado and Montana. At December 31, 1995, the Company had working
interests in 901 producing wells (413 of which it operates). The Company
augments its working interest ownership of properties with a volumetric
production payment program that covers properties located primarily in the
offshore Gulf Coast region and, with the recent Michigan Acquisition, in the
Niagaran Reef trend in Michigan. At December 31, 1995, approximately 76% of the
Company's proved reserves were natural gas, approximately 78% of total proved
reserves were classified as proved developed, and the average reserve life
(based on fiscal 1995 pro forma production) was estimated to be 7.2 years.

The Company's largest single producing field is the Bob West Field in south
Texas, which accounted for approximately 34% of the Company's production during
1995 from its interests in 48 wells (18 of which it operates). Substantially all
of the Company's natural gas sold from the Bob West Field is covered by a take-
or-pay contract with Tennessee Gas that runs through January 1999 and is
currently the subject of litigation. (See "Risk Factors -- Tennessee Gas
Litigation," and Note 7 to Consolidated Financial Statements.)

The Company's principal operating offices are located at 5555 San Felipe,
Suite 1200, Houston, Texas 77056 and its telephone number is (713) 877-8006. The
Company's executive offices are located at 379 Thornall Street, Edison, New
Jersey 08837 and its telephone number is (908) 632-1770.

20
<PAGE> 24

PRIVATE PLACEMENT

On January 25, 1996, the Company completed the private sale to the Initial
Purchasers of $150,000,000 principal amount of the Old Notes at a price of
97.25% of the principal amount thereof in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Initial
Purchasers thereupon offered and resold the Old Notes only to qualified
institutional buyers and a limited number of institutional accredited investors
at an initial price to such purchasers of 100% of the principal amount thereof.
The net proceeds to the Company were approximately $145 million after deducting
expenses of the offering. These net proceeds from the offering were utilized by
the Company to reduce by $120 million the outstanding indebtedness under the
Company's current bank credit facilities described in Management's Discussion
and Analysis (the "Bank Credit Facilities") and to repay a $25 million note sold
to a third party in November 1995.

USE OF PROCEEDS

The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange a like
principal amount of Old Notes, the terms of which are identical in all material
respects to the Exchange Notes. The Old Notes surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any change in capitalization
of the Company.

21
<PAGE> 25

CAPITALIZATION

The following table sets forth as of December 31, 1995 (i) the
capitalization of the Company, and (ii) the as adjusted capitalization to give
effect to the sale of the Old Notes on January 25, 1996, the receipt of the net
proceeds therefrom (after deducting offering expenses totaling $5.0 million) and
the application of such net proceeds as set forth under "Private Placement." The
table should be read in conjunction with Management's Discussion and Analysis
and the Consolidated Financial Statements.

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt................................... $ -- $ --
Long-term debt:
Master Note Facility.............................................. 76,255 4,655
Receivables Facility.............................................. 26,900 15,500
VPP Facility...................................................... 38,000 1,000
Note Financing(1)................................................. 24,374 --
11% Notes due 2003(1)............................................. -- 149,374
-------- --------
Total long-term debt...................................... 165,529 170,529
Stockholders' equity:
Preferred stock; authorized 5,000,000 shares, none issued......... -- --
Common stock, par value $0.01 per share; authorized 50,000,000
shares, 12,379,885 shares issued............................... 124 124
Additional paid-in capital(1)..................................... 24,910 24,910
Retained earnings................................................. 79,814 79,814
Less treasury stock, 892,748 shares at cost....................... (3,272) (3,272)
-------- --------
Total stockholders' equity................................ 101,576 101,576
-------- --------
Total capitalization...................................... $267,105 $ 272,105
======== ========
</TABLE>

- ---------------

(1) Includes $626,000 debt discount associated with the warrants issued in
conjunction with the Note Financing.

22
<PAGE> 26

PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information is derived from the
historical financial statements of the Company incorporated by reference herein.
See "Incorporation of Certain Documents by Reference."

The unaudited Pro Forma Condensed Statement of Consolidated Income for the
year ended December 31, 1995 reflects the Rocky Mountain and Michigan
Acquisitions as if such transactions had occurred on January 1, 1995. The
unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1995
reflects the sale of the Old Notes and the application of the net proceeds
therefrom, as if such transaction had occurred on December 31, 1995. The
unaudited pro forma financial data should be read in conjunction with the notes
thereto and the Consolidated Financial Statements.

The unaudited pro forma financial data do not purport to be indicative of
the financial position or results of operations that would actually have
occurred if the transactions described had occurred as presented in such
statements or that may be obtained in the future. In addition, future results
may vary significantly from the results reflected in such statements due to
normal crude oil and natural gas production declines, changes in prices received
for crude oil and natural gas, future acquisitions and dispositions of reserves,
changes in estimates of reserves and of the future net revenues therefrom and
other factors.

23
<PAGE> 27

KCS ENERGY, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
---------------------------
ROCKY PRO FORMA OFFERING AS
HISTORICAL MOUNTAIN MICHIGAN COMBINED ADJUSTMENTS ADJUSTED
---------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue.................... $ 449,965 $ 5,619 $ 8,231(a) $ 463,815 $ $ 463,815
Operating costs and
expenses
Cost of gas sales........ 356,186 356,186 356,186
Other operating and
administrative
expenses.............. 18,669 2,848 605 22,772 22,772
650(b)
Depreciation, depletion
and amortization...... 39,209 1,606(c) 2,782(c) 43,597 43,597
---------- ---------- ---------- ---------- ---------- ----------
Operating costs and
expenses............ 414,064 5,104 3,387 422,555 422,555
---------- ---------- ---------- ---------- ---------- ----------
Operating income...... 35,901 515 4,844 41,260 41,260
Interest and other income,
net...................... 3,713 3,713 3,713
Interest expense........... (7,732) (2,541)(d) (2,387)(d) (12,660) (5,055)(e) (17,715)
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes (benefit).......... 31,882 (2,026) 2,457 32,313 (5,055) 27,258
Federal and state income
taxes (benefit).......... 10,576 (709)(f) 860(f) 10,727 (1,770)(f) 8,957
---------- ---------- ---------- ---------- ---------- ----------
Net income
(loss)......... $ 21,306 $ (1,317) $ 1,597 $ 21,586 $ (3,285) $ 18,301
========== ========== ========== ========== ========== ==========
Earnings per share of
common stock and common
stock equivalents........ $ 1.81 $ (.11) $ .14 $ 1.84 $ (.28) $ 1.56
========== ========== ========== ========== ========== ==========
Average shares of common
stock and common stock
equivalents
outstanding.............. 11,760,701 11,760,701 11,760,701 11,760,701 11,760,701 11,760,701
</TABLE>

See accompanying notes to pro forma condensed consolidated financial statements.

24
<PAGE> 28

KCS ENERGY, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
OFFERING AS
HISTORICAL ADJUSTMENTS ADJUSTED
-------- ------ --------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 5,846 $ $ 5,846
Trade accounts receivable, net............................ 58,052 58,052
Fuel inventories.......................................... 782 782
Other current assets...................................... 3,374 3,374
-------- ------ --------
Current assets.................................... 68,054 68,054
-------- ------ --------
Property, plant and equipment
Oil and gas properties, full cost method, net............. 204,958 204,958
Natural gas transportation systems, net................... 22,345 22,345
Other property, plant and equipment, net.................. 2,013 2,013
-------- ------ --------
Property, plant and equipment, net................ 229,316 229,316
-------- ------ --------
Other assets
Receivable from Tennessee Gas............................. 56,437 56,437
Investments and other assets.............................. 6,802 5,000(g) 11,802
-------- ------ --------
Other assets...................................... 63,239 5,000 68,239
-------- ------ --------
$360,609 $5,000 $365,609
======== ====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 59,475 $ $ 59,475
Accrued liabilities....................................... 4,926 4,926
-------- ------ --------
Current liabilities............................... 64,401 64,401
-------- ------ --------
Deferred credits and other liabilities...................... 29,103 29,103
Long-term debt.............................................. 165,529 5,000(g) 170,529
Stockholders' equity
Preferred Stock; authorized 5,000,000 shares, none
issued................................................. -- --
Common Stock, par value $0.01 per share; authorized
50,000,000 shares, issued 12,379,885................... 124 124
Additional paid-in capital................................ 24,910 24,910
Retained earnings......................................... 79,814 79,814
Less treasury stock, 892,748 shares, at cost.............. (3,272) (3,272)
-------- ------ --------
Total stockholders' equity........................ 101,576 101,576
-------- ------ --------
$360,609 $5,000 $365,609
======== ====== ========
</TABLE>

See accompanying notes to pro forma condensed consolidated financial statements.

25
<PAGE> 29

KCS ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

The accompanying pro forma financial statements of the Company have been
prepared to reflect certain adjustments to the historical consolidated financial
statements of the Company. The unaudited Pro Forma Condensed Statement of
Consolidated Income for the year ended December 31, 1995 reflects the Rocky
Mountain and Michigan Acquisitions as if such transactions had occurred on
January 1, 1995. The unaudited Pro Forma Condensed Consolidated Balance Sheet as
of December 31, 1995 reflects the sale of the Old Notes and the application of
the net proceeds therefrom, as if such transaction had occurred on December 31,
1995.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED INCOME:

a. Pro forma revenue for the volumetric production payment acquired in the
Michigan Acquisition was calculated using the scheduled volumes to be
delivered in the first year of the volumetric production payment
agreement and the prices that would have been in effect during the pro
forma period presented.

b. Adjustment to reflect general and administrative expenses associated
with the Rocky Mountain properties.

c. Adjustment to reflect additional depreciation, depletion and
amortization expense calculated using the future gross revenue method
after giving effect to the Rocky Mountain and Michigan Acquisitions.

d. Adjustment to reflect incremental interest expense on additional
borrowings made to fund the Rocky Mountain and Michigan Acquisitions
calculated using the rates that would have been in effect under the
borrowing facility used to finance the acquisition.

e. Adjustment to (i) eliminate historical interest expense on additional
borrowings made to fund the Rocky Mountain and Michigan Acquisitions and
(ii) reflect incremental interest expense related to the sale of the
Notes.

f. Adjustment to the provision for income taxes related to the above
adjustments.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET:

g. Adjustment to reflect the sale of the Old Notes and application of the
net proceeds therefrom and related debt issuance costs to be amortized.

26
<PAGE> 30

SELECTED FINANCIAL INFORMATION

The historical financial data presented below for and as of the end of the
five years ended December 31, 1995 are derived from the Company's audited
financial statements. Such financial statements were audited by Arthur Andersen
LLP. The information in this table should be read in conjunction with
Management's Discussion and Analysis and the Consolidated Financial Statements,
including the notes thereto, incorporated by reference in this Prospectus. See
"Incorporation of Certain Documents by Reference."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Oil and gas exploration and production.......... $ 9,573 $ 13,505 $ 40,455 $ 66,076 $ 83,284
Energy marketing and services................... 100,700 131,071 249,017 260,704 359,620
Natural gas transportation...................... 7,391 12,955 16,480 19,910 26,722
Intercompany.................................... (437) (3,252) (1,663) (4,977) (19,661)
-------- -------- -------- -------- --------
Total.................................... 117,227 154,279 304,289 341,713 449,965
-------- -------- -------- -------- --------
Operating costs and expenses:
Cost of gas sales............................... 100,072 133,590 253,435 265,076 356,186
Other operating and administrative expenses..... 10,017 10,806 15,018 18,285 18,669
Depreciation, depletion and amortization........ 3,227 3,800 8,036 19,740 39,209
-------- -------- -------- -------- --------
Total.................................... 113,316 148,196 276,489 303,101 414,064
-------- -------- -------- -------- --------
Operating income.................................. 3,911 6,083 27,800 38,612 35,901
Interest and other income, net.................... 787 757 704 1,039 3,713
Interest expense.................................. (1,239) (1,297) (1,983) (2,938) (7,732)
-------- -------- -------- -------- --------
Income before income taxes........................ 3,459 5,543 26,521 36,713 31,882
-------- -------- -------- -------- --------
Federal and state income taxes.................... 885 1,533 7,910 12,556 10,576
-------- -------- -------- -------- --------
Net income........................................ $ 2,574 $ 4,010 $ 18,611 $ 24,157 $ 21,306
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(1)(2)(3)................................... $ 7,138 $ 9,883 $ 35,836 $ 58,352 $ 75,110
Capital expenditures.............................. $ 8,559 $ 13,868 $ 48,455 $ 74,953 $128,699
Ratio of EBITDA to interest expense(2)(3)......... 5.8x 7.6x 18.1x 19.9x 9.7x
Ratio of earnings to fixed charges(4)............. 3.51x 4.86x 13.49x 12.93x 5.05x
Ratio of total debt to EBITDA(2)(3)............... 2.2x 2.2x 1.1x 1.1x 2.2x
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents......................... $ 1,914 $ 4,292 $ 5,369 $ 988 $ 5,846
Working capital................................... 4,002 5,967 10,367 2,646 3,653
Oil and gas properties, net....................... 19,028 30,827 70,477 125,621 204,958
Total assets(5)................................... 72,077 88,220 165,990 214,423 360,609
Long-term debt.................................... 15,707 21,637 36,289 61,970 165,529
Total stockholders' equity........................ 26,317 30,233 59,765 80,668 101,576
</TABLE>

- ---------------

(1) EBITDA represents operating income before depletion, depreciation,
amortization, interest expense, and interest and other income. EBITDA is not
intended to represent cash flow and does not represent the measure of cash
available to the Company. EBITDA is not a generally accepted accounting
principle measure, although it does provide additional information for
evaluating the Company's ability to make payment on the Notes. EBITDA is
also not intended to be an alternative to net income as a measure of
operating results.

(2) If the amounts representing the difference between the Tennessee Gas
Contract price and the $3.00 per MMBtu interim agreement price were excluded
from revenue for the year ended December 31, 1994, EBITDA for that period
would have been $45.9 million and the ratio of EDITBA to interest expense
would have been 15.6x and the ratio of total debt to EBITDA would have been
1.4x. See "Risk Factors -- Tennessee Gas Litigation" and Management's
Discussion and Analysis.

(3) If the amounts representing the difference between the Tennessee Gas
Contract price and the $3.00 per MMBtu interim agreement price were excluded
from revenue for the year ended December 31, 1995, EBITDA for that period
would have been $34.9 million and the ratio of EBITDA to interest expense
would have been 4.5 and the ratio of total debt to EBITDA would have been
4.8x. See "Risk Factors -- Tennessee Gas Litigation" and Management's
Discussion and Analysis.

(4) Income before income taxes plus fixed charges divided by fixed charges.
Fixed charges consist of interest expense and a portion of rent considered
to represent interest cost.

(5) Includes an approximately $56 million net receivable from Tennessee Gas at
December 31, 1995 that is the subject of litigation. See "Risk
Factors -- Tennessee Gas Litigation" and Management's Discussion and
Analysis.

27
<PAGE> 31

THE EXCHANGE OFFER

GENERAL

In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Rights Agreement. The Exchange Notes are being offered hereunder in order to
satisfy the obligations of the Company under the Registration Rights Agreement.
See "Registration Rights Agreement."

For each $1,000 principal amount of Old Notes surrendered to the Parent
pursuant to the Exchange Offer, the holder of such Old Notes will receive $1,000
principal amount of Exchange Notes. Upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, the
Parent will accept all Old Notes properly tendered prior to 5:00 p.m., New York
City time, on the Expiration Date. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer in integral multiples of $1,000 principal
amount.

Under existing interpretations of the staff of the SEC, the Exchange Notes
would in general be freely transferable after the Exchange Offer without further
registration under the Securities Act by the respective holders thereof (other
than a "Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holders is
not participating in, and has no arrangement with any person to participate in,
the distribution (within the meaning of the Securities Act) of such Exchange
Notes. Eligible holders wishing to accept the Exchange Offer must represent to
the Parent that such conditions have been met. Any holder of Old Notes who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the Exchange Notes could not rely on such interpretation by the staff of the
SEC and must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.

Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Parent nor a broker-dealer
tendering Old Notes acquired directly from the Parent for its own account, (ii)
any Exchange Notes to be received by it are being acquired in the ordinary
course of its business and (iii) it is not participating in, and it has no
arrangement with any person to participate in, the distribution (within the
meaning of the Securities Act) of the Exchange Notes. In addition, in connection
with any resales of Exchange Notes, any broker-dealer (a "Participating
Broker-Dealer") who acquired Old Notes for its own account as a result of
market-making activities or other trading activities must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The staff of the SEC has
taken the position in no-action letters issued to third parties that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of Old Notes) with this Prospectus, as it may be amended
or supplemented from time to time. Under the Registration Rights Agreement, the
Company is required to allow Participating Broker-Dealers to use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such Exchange Notes. See "Plan of Distribution."

The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Parent having exchanged Exchange Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Parent having exchanged, pursuant to
the Exchange Offer, Exchange Notes for all Old Notes that have been tendered and
not withdrawn on the date that is 30 days following the commencement of the
Exchange Offer. In such event, holders of Old Notes seeking liquidity in their
investment would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act.

28
<PAGE> 32

As of the date of this Prospectus, $150,000,000 principal amount of Old
Notes are issued and outstanding. In connection with the issuance of the Old
Notes, the Parent arranged for the Old Notes to be eligible for trading in the
Private Offering, Resale and Trading through Automated Linkages (PORTAL) Market,
the National Association of Securities Dealers' screen based, automated market
trading of securities eligible for resale under Rule 144A.

The Parent shall be deemed to have accepted for exchange validly tendered
Old Notes when, as and if the Parent has given oral or written notice thereof to
the Exchange Agent. See "-- Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purpose of receiving
Exchange Notes from the Parent and delivering Exchange Notes to such holders. If
any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."

This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of April , 1996.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "Expiration Date" shall mean , 1996 unless the
Parent, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Parent will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Parent is extending the
Exchange Offer for a specified period of time. The Parent reserves the right (i)
to delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "--Termination" shall
have occurred and shall not have been waived by the Parent (if permitted to be
waived by the Parent), by giving oral or written notice of such delay, extension
or termination to the Exchange Agent, and (ii) to amend the terms of the
Exchange Offer in any manner deemed by it to be advantageous to the holders of
the Old Notes. Any such delay in acceptance, extension, termination or amendment
will be followed as promptly as practicable by oral or written notice thereof.
If the Exchange Offer is amended in a manner determined by the Parent to
constitute a material change, the Parent will promptly disclose such amendment
in a manner reasonably calculated to inform the holders of the Old Notes of such
amendment. Without limiting the manner in which the Parent may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the Exchange Offer, the Parent shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release to the Dow Jones News Service.

INTEREST ON THE EXCHANGE NOTES

The Exchange Notes will bear interest payable semi-annually on January 15
and July 15 of each year, commencing July 15, 1996. Holders of Exchange Notes of
record on July 1, 1996 will receive interest on July 15, 1996 from the date of
issuance of the Exchange Notes, plus an amount equal to the accrued interest on
the Old Notes from the date of issuance of the Old Notes, January 25, 1996, to
the date of exchange thereof. Consequently, assuming the Exchange Offer is
consummated prior to the record date in respect of the July 15, 1996 interest
payment for the Old Notes, holders who exchange their Old Notes for Exchange
Notes will receive the same interest payment on July 15, 1996 that they would
have received had they not accepted the Exchange Offer. Interest on the Old
Notes accepted for exchange will cease to accrue upon issuance of the Exchange
Notes.

29
<PAGE> 33

PROCEDURES FOR TENDERING

To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. The tender by a holder of Old
Notes will constitute an agreement between such holder and the Parent in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal. Delivery of all documents must be made to the
Exchange Agent at its address set forth herein. Holders may also request that
their respective brokers, dealers, commercial banks, trust companies or nominees
effect such tender for such holders. The method of delivery of Old Notes and the
Letter of Transmittal and all other required documents to the Exchange Agent is
at the election and risk of the holders. Instead of delivery by mail, it is
recommended that holders use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Old Notes should be sent to the Parent. Only a holder of Old
Notes may tender such Old Notes in the Exchange Offer. The term "holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Parent or any other person who has obtained a
properly completed stock power from the registered holder.

Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on behalf of the registered holder. If such
beneficial holder wishes to tender directly, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering his Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
If the Letter of Transmittal is signed by the record holder(s) of the Old Notes
tendered thereby, the signature must correspond with the name(s) written on the
face of the Old Notes without alteration, enlargement or any change whatsoever.
If the Letter of Transmittal is signed by a participant in DTC, the signature
must correspond with the name as it appears on the security position listing as
the holder of the Old Notes. Signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution")
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder (or by a participant in DTC whose name appears on a security position
listing as the owner) who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
and the Exchange Notes are being issued directly to such registered holder (or
deposited into the participant's account at DTC) or (ii) for the account of an
Eligible Institution. If the Letter of Transmittal is signed by a person other
than the registered holder of any Old Notes listed therein, such Old Notes must
be endorsed or accompanied by appropriate bond powers which authorize such
person to tender the Old Notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders appears on the Old
Notes. If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Parent,
evidence satisfactory to the Parent of their authority to so act must be
submitted with the Letter of Transmittal.

A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC) or a Notice of Guaranteed Delivery from an
Eligible Institution is received by the Exchange Agent. Issuances of Exchange
Notes in exchange for Old Notes tendered pursuant to a Notice of Guaranteed
Delivery by an Eligible Institution will be made only against delivery of the
Letter of Transmittal (and any other required documents) and the tendered Old
Notes (or a timely confirmation received of a book-entry transfer of Old Notes
into the Exchange Agent's account at DTC) with the Exchange Agent.

30
<PAGE> 34

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Parent in its sole discretion, which determination will be final and
binding. The Parent reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Parent's acceptance of which would,
in the opinion of the Parent or its counsel, be unlawful. The Parent also
reserves the absolute right to waive any conditions of the Exchange Offer or
defects or irregularities in tender as to particular Old Notes. The Parent's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Parent shall determine.
Neither the Parent, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date. In addition, the Parent reserves the right in its sole
discretion to (i) purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date, or, as set forth under
"-- Termination," to terminate the Exchange Offer and (ii) to the extent
permitted by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.

BOOK-ENTRY TRANSFER

The Exchange Agent will establish an account with respect to the Old Notes
at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal, with any required
signature guarantees and any other required documents, must in any case be
transmitted to and received by the Exchange Agent on or prior to the Expiration
Date at one of its addresses set forth below under "-- Exchange Agent", or the
guaranteed delivery procedure described below must be complied with. DELIVERY OF
DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All
references in this Prospectus to deposit or delivery of Old Notes shall be
deemed to include DTC's book-entry delivery method.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis, may effect a tender if: (i) the tender is made by or through an
Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
registration number or numbers of such Old Notes (if applicable), and the total
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five business days after the Expiration
Date, the Letter of Transmittal, together with the Old Notes in proper form for
transfer (or a confirmation of a book-entry transfer into the Exchange Agent's
account at DTC) and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange Agent; and (iii)
such properly completed and executed Letter of Transmittal, together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of such a book-entry transfer) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
five business days after the Expiration Date.

31
<PAGE> 35

TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL

The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.

Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.

Old Notes tendered in exchange for Exchange Notes (or a timely confirmation
of a book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) must be received by the Exchange Agent, with the Letter of Transmittal and
any other required documents, by the Expiration Date or within the time periods
set forth above pursuant to a Notice of Guaranteed Delivery from an Eligible
Institution. Each holder tendering the Old Notes for exchange sells, assigns and
transfers the Old Notes to the Exchange Agent, as agent of the Parent, and
irrevocably constitutes and appoints the Exchange Agent as the holder's agent
and attorney-in-fact to cause the Old Notes to be transferred and exchanged. The
holder warrants that it has full power and authority to tender, exchange, sell,
assign and transfer the Old Notes and to acquire the Exchange Notes issuable
upon the exchange of such tendered Old Notes, that the Exchange Agent, as agent
of the Company, will acquire good and unencumbered title to the tendered Old
Notes, free and clear of all liens, restrictions, charges and encumbrances, and
that the Old Notes tendered for exchange are not subject to any adverse claims
when accepted by the Exchange Agent, as agent of the Parent. The holder also
warrants and agrees that it will, upon request, execute and deliver any
additional documents deemed by the Company or the Exchange Agent to be necessary
or desirable to complete the exchange, sale, assignment and transfer of the Old
Notes. All authority conferred or agreed to be conferred in the Letter of
Transmittal by the holder will survive the death, incapacity or dissolution of
the holder and any obligation of the holder shall be binding upon the heirs,
personal representatives, successors and assigns of such holder.

WITHDRAWAL OF TENDERS

Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Parent. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including, if applicable, the registration number
or numbers and total principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor and (v) if applicable because the Old Notes have been
tendered pursuant to the book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different than that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Parent,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.

32
<PAGE> 36

TERMINATION

Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange any Old Notes not theretofore accepted for
exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of the
SEC.

If the Parent determines that it may terminate the Exchange Offer, as set
forth above, the Parent may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Parent will disclose such change by means of a supplement to
this Prospectus that will be distributed to each registered holder of Old Notes,
and the Parent will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period. Holders of Old Notes will have
certain rights against the Company under the Registration Rights Agreement
should the Parent fail to consummate the Exchange Offer. See "Registration
Rights Agreement."

EXCHANGE AGENT

Fleet National Bank of Connecticut has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:

By Mail:

Fleet National Bank
777 Main Street
MSN CT/MO/0224
Hartford, Connecticut 06115
Attention: Corporate Trust Operations

By Hand or Overnight Courier:

Fleet National Bank
777 Main Street
MSN CT/MO/0224
Hartford, Connecticut 06115
Attention: Corporate Trust Operations

Facsimile Transmission: (860) 986-7908
Confirm by Telephone: (860) 986-1271

FEES AND EXPENSES

The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable out-
of-pocket expenses in connection therewith. The Company may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.

33
<PAGE> 37

The other expenses incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company. The Company will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange
Offer. If, however, Exchange Notes or Old Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.

ACCOUNTING TREATMENT

No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be amortized by the Company over the term of the Exchange Notes under
generally accepted accounting principles.

34
<PAGE> 38

DESCRIPTION OF THE NOTES

The Exchange Notes will be issued and the Old Notes were issued under an
indenture (the "Indenture") dated as of January 15, 1996 among the Company, as
issuer, Enercorp Gas Marketing, Inc., KCS Resources, Inc., KCS Michigan
Resources, Inc., KCS Pipeline Systems, Inc., KCS Energy Marketing, Inc., KCS
Power Marketing, Inc., KCS Energy Risk Management, Inc., National Enerdrill
Corporation and Proliq, Inc., as Subsidiary Guarantors, and Fleet National Bank,
as trustee (the "Trustee"). Old Notes were issued under the Indenture on January
25, 1996 in an aggregate principal amount of $150 million. References to the
Notes include the Old Notes and the Exchange Notes unless the context otherwise
requires. The Indenture is subject to and governed by the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The following summary of certain
provisions of the Indenture and of the Registration Rights Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Indenture, including the definitions
of certain terms contained therein and those terms that are made a part of the
Indenture by reference to the Trust Indenture Act and of the Registration Rights
Agreement, respectively. Copies of the Indenture and the Registration Rights
Agreement are filed as exhibits to the Form 8-K. See "Incorporation of Certain
Documents by Reference." Capitalized terms not otherwise defined below or
elsewhere in this Prospectus have the meanings given to them in the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "-- Certain Definitions."

As used in this "Description of the Notes," the term "Company" refers only
to KCS Energy, Inc.

GENERAL

The Notes will be senior unsecured obligations of the Company limited to
$150 million aggregate principal amount. The Notes will be issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. Principal of, premium, if any, and interest on the Notes will
be payable, and the Notes will be transferable, at the office or agency of the
Company in the City of New York maintained for such purposes, which initially
will be the corporate trust office or agency of the Trustee maintained at
Shawmut Trust Company, c/o First Chicago Trust Company of New York, 14 Wall
Street, 8th Floor, Window #2, New York, New York 10005. In addition, in the
event the Notes do not remain in book-entry form, interest may be paid, at the
option of the Company, by check mailed to the registered holders of the Notes at
their respective addresses as shown on the Note Register, subject to the right
of any holder of Notes in the principal amount of $500,000 or more to request
payment by wire transfer. No service charge will be made for any transfer,
exchange or redemption of the Notes, but the Company or the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be payable in connection therewith.

The obligations of the Company under the Notes will be guaranteed on a
senior unsecured basis by the Subsidiary Guarantors. See "-- Subsidiary
Guarantees of Notes."

Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.

MATURITY, INTEREST AND PRINCIPAL PAYMENTS

The Notes will mature on January 15, 2003. Interest on the Notes will
accrue from January 25, 1996 at the rate of 11% per annum and will be payable
semiannually in cash on January 15 and July 15 of each year, commencing July 15,
1996, to the Persons in whose name the Notes are registered in the Note Register
at the close of business on the January 1 or July 1 next preceding such interest
payment date. Holders of Exchange Notes of record on July 1, 1996 will receive
interest on July 15, 1996 from the date of issuance of the Exchange Notes, plus
an amount equal to the accrued interest on the Old Notes from the date of
issuance of the Old Notes, January 25, 1996, to the date of exchange thereof.
The interest rate on the Notes is subject to increase if the Company fails to
satisfy certain provisions of the Registration Rights Agreement. See
"Registration Rights Agreement." Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.

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<PAGE> 39

REDEMPTION

Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after January 15, 2000, upon not
less than 30 or more than 60 days' notice, at the redemption prices (expressed
as percentages of principal amount) set forth below, plus accrued and unpaid
interest, if any, to the date of redemption (subject to the right of Holders of
record on the relevant record date to receive interest due on an interest
payment date that is on or prior to the date of redemption), if redeemed during
the 12-month period beginning on January 15 of the years indicated below:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---------------------------------------------------------- ----------
<S> <C>
2000...................................................... 105.50%
2001...................................................... 102.75%
2002 and thereafter....................................... 100.00%
</TABLE>

In the event that less than all of the Notes are to be redeemed, the particular
Notes (or any portion thereof that is an integral multiple of $1,000) to be
redeemed shall be selected not less than 30 nor more than 60 days prior to the
date of redemption by the Trustee, from the outstanding Notes not previously
called for redemption, pro rata, by lot or by any other method the Trustee shall
deem fair and appropriate.

Notwithstanding the foregoing, at any time on or prior to January 15, 1999,
up to $35 million in aggregate principal amount of Notes will be redeemable, at
the option of the Company, from the Net Cash Proceeds of a Public Equity
Offering, at a redemption price equal to 111% of the principal amount thereof,
together with accrued and unpaid interest to the date of redemption, provided
that at least $115 million in aggregate principal amount of Notes remains
outstanding immediately after such redemption and that such redemption occurs
within 60 days following the closing of such Public Equity Offering.

Offers to Purchase. As described below, (a) upon the occurrence of a Change
of Control, the Company will be obligated to make an offer to purchase all
outstanding Notes at a purchase price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
purchase and (b) upon certain sales or other dispositions of assets, the Company
may be obligated to make offers to purchase Notes with a portion of the Net
Available Proceeds of such sales or other dispositions at a purchase price equal
to 100% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase. See "-- Certain Covenants -- Change
of Control" and "-- Limitation on Asset Sales."

RANKING

The Notes will be senior unsecured obligations of the Company and will rank
pari passu in right of payment with all existing and future senior Indebtedness
of the Company, and senior in right of payment to all future Subordinated
Indebtedness of the Company. At March 31, 1996, excluding the Old Notes and the
Company's guaranties of the Bank Credit Facilities, the Company had no senior
Indebtedness outstanding. See "Capitalization." The Notes and the Subsidiary
Guarantees, however, will be effectively subordinated to secured Indebtedness of
the Company and the Subsidiary Guarantors, respectively, with respect to the
assets securing such Indebtedness, including Indebtedness of certain of the
Subsidiary Guarantors under the Bank Credit Facilities which is secured by liens
on substantially all of the assets of such Subsidiary Guarantors and guaranteed
by the Company. As of March 31, 1996, approximately $27.3 million of
Indebtedness was outstanding under the Bank Credit Facilities, not including
$11.1 million reserved pursuant to existing letters of credit. See
"Capitalization" and Management's Discussion and Analysis. Subject to certain
limitations, the Company and its Subsidiaries may incur additional Indebtedness
in the future. See "-- Certain Covenants -- Limitation on Indebtedness and
Disqualified Capital Stock."

SUBSIDIARY GUARANTEES OF NOTES

Each Subsidiary Guarantor has agreed to unconditionally guarantee, jointly
and severally, to each Holder and the Trustee, the full and prompt performance
of the Company's obligations under the Indenture and the Notes, including the
payment of principal of, premium, if any, and interest on the Notes pursuant to
its

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<PAGE> 40

Subsidiary Guarantee. The initial Subsidiary Guarantors are currently all of the
Company's subsidiaries. In addition to the initial Subsidiary Guarantors, the
Company is obligated under the Indenture to cause each Restricted Subsidiary
that becomes, or comes into existence as, a Restricted Subsidiary after the date
of the Indenture and has assets, businesses, divisions, real property or
equipment with a fair market value (as determined in good faith by the Board of
Directors of the Company) in excess of $1 million to execute and deliver a
supplement to the Indenture pursuant to which such Restricted Subsidiary will
guarantee the payment of the Notes on the same terms and conditions as the
Subsidiary Guarantees by the initial Subsidiary Guarantors.

The Subsidiary Guarantees will be senior unsecured obligations of each
respective Subsidiary Guarantor and will rank pari passu in right of payment
with all existing and future senior Indebtedness of such Subsidiary Guarantor.
However, the Subsidiary Guarantees will be effectively subordinated to secured
Indebtedness of the Subsidiary Guarantors, with respect to the assets securing
such Indebtedness, including Indebtedness of certain Subsidiary Guarantors under
the Bank Credit Facilities which is secured by liens on substantially all of
their assets.

The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Subsidiary Guarantor that makes a
payment or distribution under a Subsidiary Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in a pro rata amount based on
the Adjusted Net Assets of each Subsidiary Guarantor.

Each Subsidiary Guarantor may consolidate with or merge into or sell or
otherwise dispose of all or substantially all of its properties and assets to
the Company or another Subsidiary Guarantor without limitation, except to the
extent any such transaction is subject to the "Merger, Consolidation and Sale of
Assets" covenant of the Indenture. Each Subsidiary Guarantor may consolidate
with or merge into or sell all or substantially all of its properties and assets
to a Person other than the Company or another Subsidiary Guarantor (whether or
not affiliated with the Subsidiary Guarantor), provided that (a) if the
surviving Person is not the Subsidiary Guarantor, the surviving Person agrees to
assume such Subsidiary Guarantor's Subsidiary Guarantee and all its obligations
pursuant to the Indenture (except to the extent the following paragraph would
result in the release of such Subsidiary Guarantee) and (b) such transaction
does not (i) violate any of the covenants described below under "-- Certain
Covenants" or (ii) result in a Default or Event of Default immediately
thereafter that is continuing.

Upon the sale or other disposition (by merger or otherwise) of a Subsidiary
Guarantor (or all or substantially all of its properties and assets) to a Person
other than the Company or another Subsidiary Guarantor and pursuant to a
transaction that is otherwise in compliance with the Indenture (including as
described in the foregoing paragraph), such Subsidiary Guarantor shall be deemed
released from its Subsidiary Guarantee and the related obligations set forth in
the Indenture; provided, however, that any such termination shall occur only to
the extent that all obligations of such Subsidiary Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, other Indebtedness of the Company or any Restricted
Subsidiary shall also terminate or be released upon such sale or other
disposition. Each Subsidiary Guarantor that is designated as an Unrestricted
Subsidiary in accordance with the Indenture shall be released from its
Subsidiary Guarantee and related obligations set forth in the Indenture for so
long as it remains an Unrestricted Subsidiary.

Separate financial statements of the Subsidiary Guarantors have not been
provided because the Subsidiary Guarantors are jointly and severally liable for
the obligations of the Company under the Notes and the aggregate assets,
earnings and equity of the Subsidiary Guarantors are substantially equivalent to
the consolidated assets, earnings and equity of the Company.

37
<PAGE> 41

CERTAIN COVENANTS

The Indenture contains, among others, the covenants described below.

Limitation on Indebtedness and Disqualified Capital Stock. (a) The Company
will not, and will not permit any of its Restricted Subsidiaries to, create,
incur, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of (collectively, "incur") any Indebtedness (including
any Acquired Indebtedness but excluding any Permitted Indebtedness) or any
Disqualified Capital Stock, unless, on a pro forma basis after giving effect to
such incurrence and the application of the proceeds therefrom, the Consolidated
EBITDA Coverage Ratio for the four full quarters immediately preceding such
event, taken as one period, would have been equal to or greater than 2.5 to 1.0.

(b) The Company will not incur any Indebtedness that is expressly
subordinated to any other Indebtedness of the Company unless such Indebtedness,
by its terms or the terms of any agreement or instrument pursuant to which such
Indebtedness is issued or outstanding, is also expressly made subordinate to the
Notes at least to the extent it is subordinated to such other Indebtedness.

Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:

(i) declare or pay any dividend on, or make any other distribution to
holders of, any shares of Capital Stock of the Company (other than
dividends or distributions payable solely in shares of Qualified Capital
Stock of the Company or in options, warrants or other rights to purchase
Qualified Capital Stock of the Company);

(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Affiliate thereof (other than any
Restricted Subsidiary) or any options, warrants or other rights to acquire
such Capital Stock;

(iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, scheduled sinking fund payment or maturity, any Subordinated
Indebtedness, except in any case out of the net cash proceeds of Permitted
Refinancing Indebtedness; or

(iv) make any Restricted Investment;

(such payments or other actions described in clauses (i) through (iv) being
collectively referred to as "Restricted Payments"), unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the amount determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution),

(1) no Default or Event of Default shall have occurred and be
continuing,

(2) the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in accordance with paragraph (a) of the
"-- Limitation on Indebtedness and Disqualified Capital Stock" covenant,
and

(3) the aggregate amount of all Restricted Payments declared or made
after the date of the Indenture shall not exceed the sum (without
duplication) of the following:

(A) 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning on October 1, 1995 and
ending on the last day of the Company's last fiscal quarter ending prior
to the date of such proposed Restricted Payment (or, if such
Consolidated Net Income is a loss, minus 100% of such loss), without
giving effect to any reduction in such Consolidated Net Income resulting
from a write-off of any account receivable, or similar non-cash charge,
arising under the Tennessee Gas Contract,

(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Restricted Subsidiaries) of shares of Qualified

38
<PAGE> 42

Capital Stock of the Company or any options, warrants or rights to
purchase such shares of Qualified Capital Stock of the Company,

(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Restricted
Subsidiaries) upon the exercise of any options, warrants or rights to
purchase shares of Qualified Capital Stock of the Company,

(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Restricted Subsidiaries) of Indebtedness or shares of Disqualified
Capital Stock that have been converted into or exchanged for Qualified
Capital Stock of the Company, together with the aggregate cash received
by the Company at the time of such conversion or exchange,

(E) to the extent not otherwise included in Consolidated Net
Income, the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or a Restricted
Subsidiary after the date of the Indenture from any Unrestricted
Subsidiary or from the redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary (valued in each case as provided in the definition
of Investment), not to exceed in the case of any Unrestricted Subsidiary
the total amount of Investments (other than Permitted Investments) in
such Unrestricted Subsidiary made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary after the date of the
Indenture, and

(F) $10 million.

(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (in the case of clauses
(ii) and (iii) below) no Default or Event of Default shall have occurred and be
continuing:

(i) the payment of any dividend on any Capital Stock of the Company
within 60 days after the date of declaration thereof, if at such
declaration date such declaration complied with the provisions of paragraph
(a) above (and such payment shall be deemed to have been paid on such date
of declaration for purposes of any calculation required by the provisions
of paragraph (a) above);

(ii) the repurchase, redemption or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or any Restricted
Subsidiary, in exchange for, or out of the aggregate Net Cash Proceeds
from, a substantially concurrent issuance and sale (other than to a
Restricted Subsidiary) of shares of Qualified Capital Stock of the Company;
and

(iii) the purchase, redemption, repayment, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness in
exchange for, or out of the aggregate Net Cash Proceeds from, a
substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of Qualified Capital Stock of the Company.

The actions described in clauses (i), (ii) and (iii) of this paragraph (b) shall
be Restricted Payments that shall be permitted to be made in accordance with
this paragraph (b) but shall reduce the amount that would otherwise be available
for Restricted Payments under clause (3) of paragraph (a), provided that any
dividend paid pursuant to clause (i) of this paragraph (b) shall reduce the
amount that would otherwise be available under clause (3) of paragraph (a) when
declared, but not also when subsequently paid pursuant to such clause (i).

Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries. The Company (i) will not permit any Restricted Subsidiary to issue
or sell any Capital Stock to any Person other than the Company or another
Restricted Subsidiary and (ii) will not permit any Person other than the Company
or a Restricted Subsidiary to own any Capital Stock of any Restricted
Subsidiary.

39
<PAGE> 43

Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
assume, guarantee or otherwise become liable with respect to any Sale/Leaseback
Transaction unless the Company or such Restricted Subsidiary, as the case may
be, would be able to incur Indebtedness (not including the incurrence of
Permitted Indebtedness) in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction pursuant to paragraph (a) of the
"Limitation on Indebtedness and Disqualified Capital Stock" covenant, the
Company or such Restricted Subsidiary receives proceeds from such Sale/Leaseback
Transaction at least equal to the fair market value of the property or assets
subject thereto (as determined in good faith by the Company's Board of
Directors, whose determination in good faith and evidenced by a board resolution
will be conclusive) and the Company applies an amount in cash equal to the Net
Available Proceeds of the Sale/Leaseback Transaction in accordance with the
provisions of the "Limitation on Asset Sales" covenant as if such Sale/Leaseback
Transaction were an Asset Sale.

Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets or property
or the rendering of any services) with, or for the benefit of, any Affiliate of
the Company (other than the Company or a Restricted Subsidiary), unless (i) such
transaction or series of transactions is on terms that are no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than those that
would be available in a comparable arm's length transaction with unrelated third
parties, (ii) with respect to any one transaction or series of transactions
involving aggregate payments in excess of $1 million, the Company delivers an
Officers' Certificate to the Trustee certifying that such transaction or series
of transactions complies with clause (i) above and that such transaction or
series of transactions has been approved by a majority of the Disinterested
Directors of the Company, and (iii) with respect to any one transaction or
series of transactions involving aggregate payments in excess of $10 million,
the Officers' Certificate referred to in clause (ii) above also certifies that
the Company has obtained a written opinion from an independent nationally
recognized investment banking firm or appraisal firm specializing or having a
speciality in the type and subject matter of the transaction or series of
transactions at issue, which opinion shall be to the effect set forth in clause
(i) above or shall state that such transaction or series of transactions is fair
from a financial point of view to the Company or such Restricted Subsidiary;
provided, however, that the foregoing restriction shall not apply to (w) loans
or advances to officers, directors and employees of the Company or any
Restricted Subsidiary made in the ordinary course of business and consistent
with past practices of the Company and its Restricted Subsidiaries in an
aggregate amount not to exceed $1 million outstanding at any one time, (x)
indemnities of officers, directors and employees of the Company or any
Restricted Subsidiary permitted by bylaw or statutory provisions, (y) the
payment of reasonable and customary regular fees to directors of the Company or
any of its Restricted Subsidiaries who are not employees of the Company or any
Affiliate and (z) the Company's employee compensation and other benefit
arrangements.

Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume, affirm
or suffer to exist or become effective any Lien of any kind, except for
Permitted Liens, upon any of their respective property or assets, whether now
owned or acquired after the date of the Indenture, or any income, profits or
proceeds therefrom, to secure (a) any Indebtedness of the Company or such
Restricted Subsidiary (if it is not also a Subsidiary Guarantor), unless prior
to, or contemporaneously therewith, the Notes are equally and ratably secured,
or (b) any Indebtedness of any Subsidiary Guarantor, unless prior to, or
contemporaneously therewith, the Subsidiary Guarantees are equally and ratably
secured; provided, however, that if such Indebtedness is expressly subordinated
to the Notes or the Subsidiary Guarantees, the Lien securing such Indebtedness
will be subordinated and junior to the Lien securing the Notes or the Subsidiary
Guarantees, as the case may be, with the same relative priority as such
Indebtedness has with respect to the Notes or the Subsidiary Guarantees. The
foregoing covenant will not apply to any Lien securing Acquired Indebtedness,
provided that any such Lien extends only to the property or assets that were
subject to such Lien prior to the related acquisition by the Company or such
Restricted Subsidiary and was not created, incurred or assumed in contemplation
of such transaction. The incurrence of additional secured Indebtedness by the
Company and its Restricted Subsidiaries is subject to further

40
<PAGE> 44

limitations on the incurrence of Indebtedness as described under "-- Limitation
on Indebtedness and Disqualified Capital Stock."

Change of Control. Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase all of the then outstanding
Notes (a "Change of Control Offer"), and shall purchase, on a Business Day (the
"Change of Control Purchase Date") not more than 60 nor less than 30 days
following such Change of Control, all of the then outstanding Notes validly
tendered pursuant to such Change of Control Offer, at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth Business Day
prior to the Change of Control Purchase Date.

In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, give notice to the Trustee
and each Holder a notice of the Change of Control Offer, which notice shall
govern the terms of the Change of Control Offer and shall state, among other
things, the procedures that Holders must follow to accept the Change of Control
Offer.

The occurrence of a Change of Control may result in the lenders under the
Bank Credit Facilities having the right to require the Company to repay all
Indebtedness outstanding under the Bank Credit Facilities. There can be no
assurance that the Company will have adequate resources to repay or refinance
all Indebtedness owing under the Bank Credit Facilities or to fund the purchase
of the Notes upon a Change of Control.

The Company will not be required to make a Change of Control Offer upon a
Change of Control if another Person makes the Change of Control Offer at the
same purchase price, at the same times and otherwise in substantial compliance
with the requirements applicable to a Change of Control Offer to be made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.

The Company intends to comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder, if applicable, in the
event that a Change of Control occurs and the Company is required to purchase
Notes as described above. The existence of a Holder's right to require, subject
to certain conditions, the Company to repurchase its Notes upon a Change of
Control may deter a third party from acquiring the Company in a transaction that
constitutes, or results in, a Change of Control.

Limitation on Asset Sales. (a) The Company will not, and will not permit
any Restricted Subsidiary to, engage in any Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
and properties sold or otherwise disposed of pursuant to the Asset Sale (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a Board Resolution), (ii) at least 85% of the
consideration received by the Company or the Restricted Subsidiary, as the case
may be, in respect of such Asset Sale consists of cash, Cash Equivalents or
properties used in the Oil and Gas Business of the Company or its Restricted
Subsidiaries and (iii) the Company delivers to the Trustee an Officers'
Certificate certifying that such Asset Sale complies with clauses (i) and (ii).
The amount (without duplication) of any Indebtedness (other than Subordinated
Indebtedness) of the Company or such Restricted Subsidiary that is expressly
assumed by the transferee in such Asset Sale and with respect to which the
Company or such Restricted Subsidiary, as the case may be, is unconditionally
released by the holder of such Indebtedness, shall be deemed to be cash or Cash
Equivalents for purposes of clause (ii) and shall also be deemed to constitute a
repayment of, and a permanent reduction in, the amount of such Indebtedness for
purposes of the following paragraph.

(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or such Restricted Subsidiary may either, no later than 360 days
after such Asset Sale, (i) apply all or any of the Net Available Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Restricted Subsidiary, provided, in each case, that the related
loan commitment (if any) is thereby permanently reduced by the amount of such
Indebtedness so repaid, or (ii) invest all or any part of the Net

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<PAGE> 45

Available Proceeds thereof in properties and assets that will be used in the Oil
and Gas Business of the Company or its Restricted Subsidiaries, as the case may
be. The amount of such Net Available Proceeds not applied or invested as
provided in this paragraph will constitute "Excess Proceeds."

(c) When the aggregate amount of Excess Proceeds equals or exceeds $10
million, the Company will be required to make an offer to purchase, from all
Holders of the Notes, an aggregate principal amount of Notes equal to such
Excess Proceeds as follows:

(i) The Company will make an offer to purchase (a "Net Proceeds
Offer") from all Holders of the Notes in accordance with the procedures set
forth in the Indenture the maximum principal amount (expressed as a
multiple of $1,000) of Notes that may be purchased out of the amount (the
"Payment Amount") of such Excess Proceeds.

(ii) The offer price for the Notes will be payable in cash in an
amount equal to 100% of the principal amount of the Notes tendered pursuant
to a Net Proceeds Offer, plus accrued and unpaid interest, if any, to the
date such Net Proceeds Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the Indenture. To the extent
that the aggregate Offered Price of the Notes tendered pursuant to a Net
Proceeds Offer is less than the Payment Amount relating thereto (such
shortfall constituting a "Net Proceeds Deficiency"), the Company may use
such Net Proceeds Deficiency, or a portion thereof, for general corporate
purposes, subject to the limitations of the "Limitation on Restricted
Payments" covenant.

(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by Holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis.

(iv) Upon completion of such Net Proceeds Offer, the amount of Excess
Proceeds shall be reset to zero.

The Company will not permit any Restricted Subsidiary to enter into or suffer to
exist any agreement that would place any restriction of any kind (other than
pursuant to law or regulation) on the ability of the Company to make a Net
Proceeds Offer following any Asset Sale. The Company intends to comply with Rule
14e-1 under the Exchange Act, and any other securities laws and regulations
thereunder, if applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.

Limitation on Guarantees by Subsidiary Guarantors. The Company will not
permit any Subsidiary Guarantor to guarantee the payment of any Subordinated
Indebtedness of the Company unless such guarantee shall be subordinated to such
Subsidiary Guarantor's Subsidiary Guarantee at least to the same extent as such
Subordinated Indebtedness is subordinated to the Notes; provided, however, that
this covenant will not be applicable to any guarantee of any Subsidiary
Guarantor that (i) existed at the time such Person became a Subsidiary of the
Company and (ii) was not incurred in connection with, or in contemplation of,
such Person becoming a Subsidiary of the Company.

Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or suffer to exist or allow to
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary (a) to pay dividends, in cash or otherwise,
or make any other distributions on its Capital Stock, or make payments on any
Indebtedness owed, to the Company or any other Restricted Subsidiary, (b) to
make loans or advances to the Company or any other Restricted Subsidiary or (c)
to transfer any of its property or assets to the Company or any other Restricted
Subsidiary (any such restrictions being collectively referred to herein as a
"Payment Restriction"), except for such encumbrances or restrictions existing
under or by reason of (i) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Company or any
Restricted Subsidiary, or customary restrictions in licenses relating to the
property covered thereby and entered into in the ordinary course of business,
(ii) any instrument governing Indebtedness of a Person acquired by the Company
or any Restricted Subsidiary at the time of such acquisition, which encumbrance
or restriction is not applicable to any other Person, other than the Person, or
the property or assets of the Person, so acquired, provided that such
Indebtedness was not incurred in

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anticipation of such acquisition or (iii) the Bank Credit Facilities as in
effect on the date of the Indenture or any agreement that amends, modifies,
supplements, restates, extends, renews, refinances or replaces the Bank Credit
Facilities, provided that the terms and conditions of any Payment Restrictions
thereunder are not materially less favorable to the Holders of the Notes than
those under the Bank Credit Facilities as in effect on the date of the
Indenture.

Limitation on Conduct of Business. The Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in the conduct of any
business other than the Oil and Gas Business.

Reports. The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company will also be required (a) to file with the Trustee (with exhibits), and
provide to each Holder of Notes (without exhibits), without cost to such Holder,
copies of such reports and documents within 15 days after the date on which the
Company files such reports and documents with the Commission or the date on
which the Company would be required to file such reports and documents if the
Company were so required and (b) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the Exchange
Act, to supply at its cost copies of such reports and documents (including any
exhibits thereto) to any Holder of Notes promptly upon written request.

Future Designation of Restricted and Unrestricted Subsidiaries. The
foregoing covenants (including calculation of financial ratios and the
determination of limitations on the incurrence of Indebtedness and Liens) may be
affected by the designation by the Company of any existing or future Subsidiary
of the Company as an Unrestricted Subsidiary. The definition of "Unrestricted
Subsidiary" set forth under the caption "-- Certain Definitions" describes the
circumstances under which a Subsidiary of the Company may be designated as an
Unrestricted Subsidiary by the Board of Directors of the Company.

MERGER, CONSOLIDATION AND SALE OF ASSETS

The Company will not, in any single transaction or series of related
transactions, merge or consolidate with or into any other Person, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any Person or group of Affiliated Persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or group of Affiliated Persons, unless at
the time and after giving effect thereto (i) either (A) if the transaction is a
merger or consolidation, the Company shall be the surviving Person of such
merger or consolidation, or (B) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or to which the
properties and assets of the Company or its Restricted Subsidiaries, as the case
may be, are sold, assigned, conveyed, transferred, leased or otherwise disposed
of (any such surviving Person or transferee Person being the "Surviving Entity")
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall, in
either case, expressly assume by a supplemental indenture to the Indenture
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture, and, in each
case, the Indenture shall remain in full force and effect; (ii) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any Indebtedness not previously
an obligation of Company or any of its Restricted Subsidiaries which becomes an
obligation of the Company or any of its Restricted Subsidiaries in connection
with or as a result of such transaction as having been incurred at the time of
such transaction), no Default or Event of Default shall have occurred and be
continuing; (iii) except in the case of the consolidation or merger of any
Restricted Subsidiary with or into the Company, immediately after giving effect
to such transaction or transactions on a pro forma basis, the Consolidated Net
Worth of the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) is at least equal to the

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<PAGE> 47

Consolidated Net Worth of the Company immediately before such transaction or
transactions; (iv) except in the case of the consolidation or merger of the
Company with or into a Restricted Subsidiary or any Restricted Subsidiary with
or into the Company or another Restricted Subsidiary, immediately before and
immediately after giving effect to such transaction or transactions on a pro
forma basis (assuming that the transaction or transactions occurred on the first
day of the period of four fiscal quarters ending immediately prior to the
consummation of such transaction or transactions, with the appropriate
adjustments with respect to the transaction or transactions being included in
such pro forma calculation), the Company (or the Surviving Entity if the Company
is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of the "-- Limitation on Indebtedness and Disqualified Capital
Stock" covenant; (v) if the Company is not the continuing obligor under the
Indenture, then each Subsidiary Guarantor, unless it is the Surviving Entity,
shall have by supplemental indenture to the Indenture confirmed that its
Subsidiary Guarantee of the Notes shall apply to the Surviving Entity's
obligations under the Indenture and the Notes; (vi) if any of the properties or
assets of the Company or any of its Restricted Subsidiaries would upon such
transaction or series of related transactions become subject to any Lien (other
than a Permitted Lien), the creation and imposition of such Lien shall have been
in compliance with the "Limitation on Liens" covenant; and (vii) the Company (or
the Surviving Entity if the Company is not the continuing obligor under the
Indenture) shall have delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, (a) an Officers' Certificate stating that such
consolidation, merger, transfer, lease or other disposition and any supplemental
indenture in respect thereto comply with the requirements under the Indenture
and (b) an Opinion of Counsel stating that the requirements of clause (i) of
this paragraph have been satisfied.

Upon any consolidation or merger or any sale, assignment, lease,
conveyance, transfer or other disposition of all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis in accordance with the foregoing, in which the Company is not
the continuing corporation, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture with the same effect as if the Surviving Entity had been named as
the Company therein, and thereafter the Company, except in the case of a lease,
will be discharged from all obligations and covenants under the Indenture and
the Notes and may be liquidated and dissolved.

EVENTS OF DEFAULT

The following are "Events of Default" under the Indenture:

(i) default in the payment of the principal of or premium, if any, on
any of the Notes, whether such payment is due at Stated Maturity, upon
redemption, upon repurchase pursuant to a Change of Control Offer or a Net
Proceeds Offer, upon acceleration or otherwise; or

(ii) default in the payment of any installment of interest on any of
the Notes, when due, and the continuance of such default for a period of 30
days; or

(iii) default in the performance or breach of the provisions of the
"Merger, Consolidation and Sale of Assets" section of the Indenture, the
failure to make or consummate a Change of Control Offer in accordance with
the provisions of the "Change of Control" covenant or the failure to make
or consummate a Net Proceeds Offer in accordance with the provisions of the
"Limitation on Asset Sales" covenant; or

(iv) the Company or any Subsidiary Guarantor shall fail to perform or
observe any other term, covenant or agreement contained in the Notes, any
Subsidiary Guarantee or the Indenture (other than a default specified in
(i), (ii) or (iii) above) for a period of 45 days after written notice of
such failure stating that it is a "notice of default" under the Indenture
and requiring the Company or such Subsidiary Guarantor to remedy the same
shall have been given (x) to the Company by the Trustee or (y) to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding; or

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<PAGE> 48

(v) the occurrence and continuation beyond any applicable grace period
of any default in the payment of the principal of, premium, if any, or
interest on any Indebtedness of the Company (other than the Notes) or any
Subsidiary Guarantor or any other Restricted Subsidiary for money borrowed
when due, or any other default resulting in acceleration of any
Indebtedness of the Company or any Subsidiary Guarantor or any other
Restricted Subsidiary for money borrowed, provided that the aggregate
principal amount of such Indebtedness shall exceed $2.5 million and
provided, further, that if any such default is cured or waived or any such
acceleration rescinded, or such Indebtedness is repaid, within a period of
10 days from the continuation of such default beyond the applicable grace
period or the occurrence of such acceleration, as the case may be, such
Event of Default under the Indenture and any consequential acceleration of
the Notes shall be automatically rescinded, so long as such rescission does
not conflict with any judgment or decree; or

(vi) any Subsidiary Guarantee shall for any reason cease to be, or be
asserted by the Company or any Subsidiary Guarantor, as applicable, not to
be, in full force and effect (except pursuant to the release of any such
Subsidiary Guarantee in accordance with the Indenture); or

(vii) final judgments or orders rendered against the Company or any
Subsidiary Guarantor or any other Restricted Subsidiary that are
unsatisfied and that require the payment in money, either individually or
in an aggregate amount, that is more than $2.5 million over the coverage
under applicable insurance policies and either (A) commencement by any
creditor of an enforcement proceeding upon such judgment (other than a
judgment that is stayed by reason of pending appeal or otherwise) or (B)
the occurrence of a 60-day period during which a stay of such judgment or
order, by reason of pending appeal or otherwise, was not in effect; or

(viii) the entry of a decree or order by a court having jurisdiction
in the premises (A) for relief in respect of the Company or any Subsidiary
Guarantor or any other Restricted Subsidiary in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) adjudging the Company or any
Subsidiary Guarantor or any other Restricted Subsidiary bankrupt or
insolvent, or approving a petition seeking reorganization, arrangement,
adjustment or composition of the Company or any Subsidiary Guarantor or any
other Restricted Subsidiary under any applicable federal or state law, or
appointing under any such law a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Subsidiary Guarantor or any other Restricted Subsidiary or of a substantial
part of its consolidated assets, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days; or

(ix) the commencement by the Company or any Subsidiary Guarantor or
any other Restricted Subsidiary of a voluntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law or any other case or proceeding to be adjudicated bankrupt or
insolvent, or the consent by the Company or any Subsidiary Guarantor or any
other Restricted Subsidiary to the entry of a decree or order for relief in
respect thereof in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by the Company or any Subsidiary
Guarantor or any other Restricted Subsidiary of a petition or consent
seeking reorganization or relief under any applicable federal or state law,
or the consent by it under any such law to the filing of any such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or other similar official)
of the Company or any Subsidiary Guarantor or any other Restricted
Subsidiary or of any substantial part of its consolidated assets, or the
making by it of an assignment for the benefit of creditors under any such
law, or the admission by it in writing of its inability to pay its debts
generally as they become due or taking of corporate action by the Company
or any Subsidiary Guarantor or any other Restricted Subsidiary in
furtherance of any such action.

If an Event of Default (other than as specified in clause (viii) or (ix)
above) shall occur and be continuing, the Trustee, by written notice to the
Company, or the Holders of at least 25% in aggregate

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<PAGE> 49

principal amount of the Notes then outstanding, by written notice to the Trustee
and the Company, may, and the Trustee upon the request of the Holders of not
less than 25% in aggregate principal amount of the Notes then outstanding shall,
declare the principal of, premium, if any, and accrued and unpaid interest on
all of the Notes due and payable immediately, upon which declaration all amounts
payable in respect of the Notes shall be immediately due and payable. If an
Event of Default specified in clause (viii) or (ix) above occurs and is
continuing, then the principal of, premium, if any, and accrued and unpaid
interest on all of the Notes shall become and be immediately due and payable
without any declaration, notice or other act on the part of the Trustee or any
Holder of Notes.

After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company, the Subsidiary Guarantors
and the Trustee, may rescind and annul such declaration if (a) the Company or
any Subsidiary Guarantor has paid or deposited with the Trustee a sum sufficient
to pay (i) all sums paid or advanced by the Trustee under the Indenture and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue interest on all Notes, (iii) the
principal of and premium, if any, on any Notes which have become due otherwise
than by such declaration of acceleration and interest thereon at the rate borne
by the Notes, and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest and overdue principal at the rate borne by the
Notes (without duplication of any amount paid or deposited pursuant to clause
(ii) or (iii)); (b) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and (c) all Events of Default,
other than the non-payment of principal of, premium, if any, or interest on the
Notes that has become due solely by such declaration of acceleration, have been
cured or waived.

No Holder will have any right to institute any proceeding with respect to
the Indenture or any remedy thereunder, unless such Holder has notified the
Trustee of a continuing Event of Default and the Holders of at least 25% in
aggregate principal amount of the outstanding Notes have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee under the Notes and the Indenture, the Trustee has failed to institute
such proceeding within 60 days after receipt of such notice and the Trustee,
within such 60-day period, has not received directions inconsistent with such
written request by Holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations will not apply, however, to a suit
instituted by the Holder of a Note for the enforcement of the payment of the
principal of, premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.

During the existence of an Event of Default, the Trustee will be required
to exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default shall occur and be continuing, the Trustee will not
be under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee under the Indenture.

If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each Holder notice of the Default or
Event of Default within 60 days after the occurrence thereof. Except in the case
of a Default or an Event of Default in payment of principal of, premium, if any,
or interest on any Notes, the Trustee may withhold the notice to the Holders of
the Notes if the Trustee determines in good faith that withholding the notice is
in the interest of the Holders of the Notes.

The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within 10 days of any Default or Event of
Default.

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<PAGE> 50

LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE

The Company may, at its option and at any time, terminate the obligations
of the Company and the Subsidiary Guarantors with respect to the outstanding
Notes (such action being a "legal defeasance"). Such legal defeasance means that
the Company and the Subsidiary Guarantors shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Notes and to
have been discharged from all their other obligations with respect to the Notes
and the Subsidiary Guarantees, except for, among other things, (i) the rights of
Holders of outstanding Notes to receive payment in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (ii) the
Company's obligations to replace any temporary Notes, register the transfer or
exchange of any Notes, replace mutilated, destroyed, lost or stolen Notes and
maintain an office or agency for payments in respect of the Notes, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and (iv) the
defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company and
each Subsidiary Guarantor with respect to certain covenants that are set forth
in the Indenture, some of which are described under "-- Certain Covenants"
above, and any omission to comply with such obligations shall not constitute a
Default or an Event of Default with respect to the Notes (such action being a
"covenant defeasance").

In order to exercise either legal defeasance or covenant defeasance, (i)
the Company or any Subsidiary Guarantor must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders of the Notes, cash in United
States dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes to
redemption or maturity; (ii) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such legal defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such legal defeasance or covenant defeasance had not
occurred (in the case of legal defeasance, such opinion must refer to and be
based upon a published ruling of the Internal Revenue Service or a change in
applicable federal income tax laws); (iii) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit or insofar as
clauses (viii) and (ix) under the first paragraph of "Events of Default" are
concerned, at any time during the period ending on the 91st day after the date
of deposit; (iv) such legal defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest under the Indenture or the Trust
Indenture Act with respect to any securities of the Company or any Subsidiary
Guarantor; (v) such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument to which the Company or any Subsidiary Guarantor is a party or by
which it is bound; and (vi) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory to the Trustee,
which, taken together, state that all conditions precedent under the Indenture
to either legal defeasance or covenant defeasance, as the case may be, have been
complied with.

SATISFACTION AND DISCHARGE

The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen, mutilated or destroyed Notes which have been replaced or
paid and Notes for whose payment money or certain United States government
obligations have theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust) have been delivered to the Trustee for cancellation or (b) all Notes
not theretofore delivered to the Trustee for cancellation have become due and
payable or will become due and payable at their Stated Maturity within one year,
or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the serving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to

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<PAGE> 51

pay and discharge the entire Indebtedness on the Notes not theretofore delivered
to the Trustee for cancellation, for principal of, premium, if any, and interest
on the Notes to the date of deposit (in the case of Notes which have become due
and payable) or to the Stated Maturity or Redemption Date, as the case may be,
together with instructions from the Company irrevocably directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as the case
may be; (ii) the Company has paid all other sums payable under the Indenture by
the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel which, taken together, state that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.

AMENDMENTS AND WAIVERS

From time to time, the Company, the Subsidiary Guarantors and the Trustee
may, without the consent of the Holders of the Notes, amend or supplement the
Indenture or the Notes for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act,
adding or releasing any Subsidiary Guarantor pursuant to the terms of the
Indenture, or making any change that does not materially adversely affect the
rights of any Holder of Notes. Other amendments and modifications of the
Indenture or the Notes may be made by the Company, the Subsidiary Guarantors and
the Trustee with the consent of the Holders of not less than a majority of the
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of, premium, if any, or interest on any Note, (c) change the
coin or currency of payment of principal of, premium, if any, or interest on,
any Note, (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note, (e) reduce the above-stated percentage
of aggregate principal amount of outstanding Notes necessary to modify or amend
the Indenture, (f) reduce the percentage of aggregate principal amount of
outstanding Notes necessary for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults, (g) modify any provisions of
the Indenture relating to the modification and amendment of the Indenture or the
waiver of past defaults or covenants, except as otherwise specified, (h) change
the ranking of the Notes or the Subsidiary Guarantees in a manner adverse to the
Holders or expressly subordinate in right of payment the Notes or the Subsidiary
Guarantees to any other Indebtedness or (i) amend, change or modify the
obligation of the Company to make and consummate a Change of Control Offer in
the event of a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale or modify any of the provisions or definitions
with respect thereto.

The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the Holders of all Notes, waive any past
default under the Indenture, except a default in the payment of principal of,
premium, if any, or interest on the Notes, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the Holder of each Note outstanding.

THE TRUSTEE

Fleet National Bank serves as trustee under the Indenture.

The Indenture (including provisions of the Trust Indenture Act incorporated
by reference therein) contains limitations on the rights of the Trustee
thereunder, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Indenture permits the
Trustee to engage in other transactions; provided, however, if it acquires any
conflicting interest (as defined in the Trust Indenture Act) it must eliminate
such conflict or resign.

GOVERNING LAW

The Indenture, the Notes and the Subsidiary Guarantees are governed by the
laws of the State of New York, without regard to the principles of conflicts of
law.

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CERTAIN DEFINITIONS

"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Restricted Subsidiary or (b) assumed in connection
with acquisitions of properties or assets from such Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition). Acquired Indebtedness
shall be deemed to be incurred on the date the acquired Person becomes a
Restricted Subsidiary or the date of the related acquisition of properties or
assets from such Person.

"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (a) the sum of (i) discounted future net revenue
from proved oil and gas reserves of the Company and its Restricted Subsidiaries
calculated in accordance with Commission guidelines (but utilizing the price
then being paid under the Tennessee Gas Contract, in lieu of the price specified
therein, when calculating revenue from such reserves attributable to the
Tennessee Gas Contract) before any state or federal income taxes, as estimated
by independent petroleum engineers in a reserve report prepared as of the end of
the Company's most recently completed fiscal year, as increased by, as of the
date of determination, the estimated discounted future net revenue from (A)
estimated proved oil and gas reserves of the Company and its Restricted
Subsidiaries attributable to any acquisition consummated since the date of such
year-end reserve report and (B) estimated oil and gas reserves of the Company
and its Restricted Subsidiaries attributable to extensions, discoveries and
other additions and upward revisions of estimates of proved oil and gas reserves
due to exploration, development or exploitation, production or other activities
conducted or otherwise occurring since the date of such year-end reserve report
which would, in accordance with standard industry practice, result in such
additions or revisions, in each case calculated in accordance with Commission
guidelines (utilizing the prices utilized in such year-end reserve report), and
decreased by, as of the date of determination, the discounted future net revenue
from (C) estimated proved oil and gas reserves of the Company and its Restricted
Subsidiaries produced or disposed of since the date of such year-end reserve
report and (D) reductions in the estimated oil and gas reserves of the Company
and its Restricted Subsidiaries since the date of such year-end reserve report
attributable to downward revisions of estimates of proved oil and gas reserves
due to exploration, development or exploitation, production or other activities
conducted or otherwise occurring since the date of such year-end reserve report
which would, in accordance with standard industry practice, result in such
revisions, in each case calculated in accordance with Commission guidelines
(utilizing the prices utilized in such year-end reserve report); provided that,
in the case of each of the determinations made pursuant to clauses (A) through
(D), such increases and decreases shall be as estimated by the Company's
engineers, except that such increases and decreases in the discounted future net
revenue shall be confirmed in writing by independent petroleum engineers in the
event of a Material Change; (ii) the capitalized costs that are attributable to
oil and gas properties of the Company and its Restricted Subsidiaries to which
no proved oil and gas reserves are attributable, based on the Company's books
and records as of a date no earlier than the date of the Company's latest annual
or quarterly financial statements; (iii) the Net Working Capital (exclusive of
any account receivable arising under the Tennessee Gas Contract in excess of
that portion that the purchaser is then paying) on a date no earlier than the
date of the Company's latest annual or quarterly financial statements; and (iv)
to the extent not included in clause (iii) above, the greater of (I) the net
book value on a date no earlier than the date of the Company's latest annual or
quarterly financial statements or (II) the appraised value, as estimated by
independent appraisers, of other tangible assets (exclusive of any account
receivable arising under the Tennessee Gas Contract in excess of that portion
that the purchaser is then paying) of the Company and its Restricted
Subsidiaries, as of a date no earlier than the date of the Company's latest
audited financial statements, minus (b) the sum of (i) minority interests, (ii)
any gas balancing liabilities of the Company and its Restricted Subsidiaries
reflected in the Company's latest audited financial statements, (iii) the
discounted future net revenue, calculated in accordance with Commission
guidelines (utilizing the prices utilized in the Company's year-end reserve
report), attributable to reserves which are required to be delivered to third
parties to fully satisfy the obligations of the Company and its Restricted
Subsidiaries with respect to Volumetric Production Payments on the schedules
specified with respect thereto, (iv) the discounted future net revenue,
calculated in accordance with Commission guidelines, attributable to reserves
subject to Dollar-Denominated Production Payments which, based on the estimates
of production included in determining the discounted future net revenue
specified in clause (a)(i) above

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(utilizing the same prices utilized in the Company's year-end reserve report),
would be necessary to fully satisfy the payment obligations of the Company and
its Restricted Subsidiaries with respect to Dollar-Denominated Production
Payments on the schedules specified with respect thereto, and (v) the discounted
future net revenue, calculated in accordance with Commission guidelines
(utilizing the same prices utilized in the Company's year-end reserve report),
attributable to reserves subject to participation interests, overriding royalty
interests or other interests of third parties, pursuant to participation,
partnership, vendor financing or other agreements then in effect, or which
otherwise are required to be delivered to third parties. If the Company changes
its method of accounting from the full cost method to the successful efforts
method or a similar method of accounting, Adjusted Consolidated Net Tangible
Assets will continue to be calculated as if the Company was still using the full
cost method of accounting.

"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
amount by which the fair value of the properties and assets of such Subsidiary
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such
date.

"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of this definition, beneficial ownership of 10% or more of the voting
common equity (on a fully diluted basis) or options or warrants to purchase such
equity (but only if exercisable at the date of determination or within 60 days
thereof) of a Person shall be deemed to constitute control of such Person.

"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including, without limitation, by means of a merger or
consolidation) (collectively, for purposes of this definition, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (a) any
Capital Stock of any Restricted Subsidiary held by the Company or any Restricted
Subsidiary, (b) all or substantially all of the properties and assets of any
division or line of business of the Company or any of its Restricted
Subsidiaries or (c) any other properties or assets of the Company or any of its
Restricted Subsidiaries other than (i) a transfer of cash, Cash Equivalents,
hydrocarbons or other mineral products in the ordinary course of business or
(ii) any lease, abandonment, disposition, relinquishment or farm-out of any oil
and gas properties in the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" also shall not include (i) any transfer of
properties or assets (including Capital Stock) that is governed by, and made in
accordance with, the provisions described under "-- Merger, Consolidation and
Sale of Assets"; (ii) any transfer of properties or assets to an Unrestricted
Subsidiary, if permitted under the "Limitation on Restricted Payments" covenant;
or (iii) any transfer of properties or assets (including Capital Stock) having a
fair market value of less than $2 million.

"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable and at any date as of which the
amount thereof is to be determined, the present value of the total net amount of
rent required to be paid by such Person under the lease during the primary term
thereof, without giving effect to any renewals at the option of the lessee,
discounted from the respective due dates thereof to such date of determination
at a rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with a like term in accordance with GAAP. As used
in the preceding sentence, the "net amount of rent" under any lease for any such
period shall mean the sum of rental and other payments required to be paid with
respect to such period by the lessee thereunder, excluding any amounts required
to be paid by such lessee on account of maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges. In the case of any lease
which is terminable by the lessee upon payment of a penalty, such net amount of
rent shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.

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"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund or mandatory redemption payment
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.

"Bank Credit Facilities" means (i) that certain Amended and Restated Credit
Agreement dated effective as of March 15, 1994, as amended, among KCS Resources,
Inc., KCS Pipeline Systems, Inc., Bank One, Texas, National Association, CIBC,
Inc., a Canadian Chartered Bank, and Den norske Bank, (ii) that certain Loan
Agreement dated as of January 11, 1995, as amended, among KCS Energy Marketing,
Inc., as borrower, KCS Energy Inc. and Proliq, Inc., as guarantors, and Canadian
Imperial Bank of Commerce, and (iii) that certain Amended and Restated Credit
Agreement, dated as of November 28, 1995 between KCS Energy Marketing, Inc., KCS
Michigan Resources, Inc., Comerica Bank-Texas and Den Norske Bank, in each case
as the same may be amended, modified, supplemented, extended, restated,
replaced, renewed or refinanced from time to time in one or more credit
agreements, loan agreements, instruments or similar agreements, as such may be
further amended, modified, supplemented, extended, restated, replaced, renewed
or refinanced.

"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights or other equivalents in the equity interests
(however designated) in such Person, and any rights (other than debt securities
convertible into an equity interest), warrants or options exercisable for,
exchangeable for or convertible into such an equity interest in such Person.

"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.

"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of 180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of the
United States or the District of Columbia and rated at least A-l by S&P or at
least P-l by Moody's; (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any commercial bank meeting the specifications of clause (ii)
above; (v) overnight bank deposits and bankers acceptances at any commercial
bank meeting the qualifications specified in clause (ii) above; (vi) deposits
available for withdrawal on demand with any commercial bank not meeting the
qualifications specified in clause (ii) above but which is a lending bank under
any of the Bank Credit Facilities, provided all such deposits do not exceed $5
million in the aggregate at any one time; (vii) demand and time deposits and
certificates of deposit with any commercial bank organized in the United States
not meeting the qualifications specified in clause (ii) above, provided that
such deposits and certificates support bond, letter of credit and other similar
types of obligations incurred in the ordinary course of business; and (viii)
investments in money market or other mutual funds substantially all of whose
assets comprise securities of the types described in clauses (i) through (v)
above.

"Change of Control" means the occurrence of any event or series of events
by which: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50% of
the total Voting Stock of the Company; (b) the Company consolidates with or
merges into another Person or any Person consolidates with, or merges into, the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is changed into or exchanged for cash, securities or
other property, other than any such transaction where (i) the outstanding Voting
Stock of the Company is changed

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into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (ii) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving or resulting Person immediately
after such transaction; (c) the Company, either individually or in conjunction
with one or more Restricted Subsidiaries, sells, assigns, conveys, transfers,
leases or otherwise disposes of, or the Restricted Subsidiaries sell, assign,
convey, transfer, lease or otherwise dispose of, all or substantially all of the
properties and assets of the Company and such Restricted Subsidiaries, taken as
a whole (either in one transaction or a series of related transactions),
including Capital Stock of the Restricted Subsidiaries, to any Person (other
than the Company or a Restricted Subsidiary); (d) during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office; or (e) the liquidation or dissolution of the Company.

"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.

"Consolidated EBITDA Coverage Ratio" means, for any period, the ratio on a
pro forma basis of (a) the sum of Consolidated Net Income, Consolidated Interest
Expense, Consolidated Income Tax Expense and Consolidated Non-cash Charges
deducted in computing Consolidated Net Income, in each case, for such period, of
the Company and its Restricted Subsidiaries on a consolidated basis, all
determined in accordance with GAAP, decreased (to the extent included in
determining Consolidated Net Income) by the sum of (x) the amount of deferred
revenues that are amortized during such period and are attributable to reserves
that are subject to Volumetric Production Payments and (y) amounts recorded in
accordance with GAAP as repayments of principal and interest pursuant to
Dollar-Denominated Production Payments, to (b) the sum of such Consolidated
Interest Expense for such period; provided, however, that (i) the Consolidated
EBITDA Coverage Ratio shall be calculated on a pro forma basis assuming that (A)
the Indebtedness to be incurred (and all other Indebtedness incurred after the
first day of such period of four full fiscal quarters referred to in the
covenant described in paragraph (a) under "-- Certain Covenants -- Limitation on
Indebtedness and Disqualified Capital Stock" through and including the date of
determination), and (if applicable) the application of the net proceeds
therefrom (and from any other such Indebtedness), including to refinance other
Indebtedness, had been incurred on the first day of such four-quarter period
and, in the case of Acquired Indebtedness, on the assumption that the related
transaction (whether by means of purchase, merger or otherwise) also had
occurred on such date with the appropriate adjustments with respect to such
acquisition being included in such pro forma calculation and (B) any acquisition
or disposition by the Company or any Restricted Subsidiary of any properties or
assets outside the ordinary course of business, or any repayment of any
principal amount of any Indebtedness of the Company or any Restricted Subsidiary
prior to the Stated Maturity thereof, in either case since the first day of such
period of four full fiscal quarters through and including the date of
determination, had been consummated on such first day of such four-quarter
period, (ii) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness required to be computed on a pro
forma basis in accordance with the covenant described in paragraph (a) under
"-- Certain Covenants -- Limitation on Indebtedness and Disqualified Capital
Stock" and (A) bearing a floating interest rate shall be computed as if the rate
in effect on the date of computation had been the applicable rate for the entire
period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the Company, a fixed
or floating rate of interest, shall be computed by applying, at the option of
the Company, either the fixed or floating rate, (iii) in making such
computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit facility required to be computed on a pro
forma basis in accordance with the covenant described in paragraph (a) under
"-- Certain Covenants -- Limitation on Indebtedness and Disqualified Capital
Stock" shall be computed based upon the average daily balance of such
Indebtedness during the applicable period, provided that such average daily
balance shall be reduced by the amount of any repayment

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of Indebtedness under a revolving credit facility during the applicable period,
which repayment permanently reduced the commitments or amounts available to be
reborrowed under such facility, (iv) notwithstanding clauses (ii) and (iii) of
this proviso, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate per annum
resulting after giving effect to the operation of such agreements, (v) in making
such calculation, Consolidated Interest Expense shall exclude interest
attributable to Dollar-Denominated Production Payments, and (vi) if after the
first day of the period referred to in clause (a) of this definition the Company
has permanently retired any Indebtedness out of the Net Cash Proceeds of the
issuance and sale of shares of Qualified Capital Stock of the Company within 30
days of such issuance and sale, Consolidated Interest Expense shall be
calculated on a pro forma basis as if such Indebtedness had been retired on the
first day of such period.

"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes (including state franchise taxes
accounted for as income taxes in accordance with GAAP) of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, but adjusted to give effect to the exclusion from revenues
during such period under the Tennessee Gas Contract in excess of that portion of
such revenues the purchaser has been paying during such period.

"Consolidated Interest Expense" means, for any period, without duplication,
the sum of (i) the interest expense of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, (a) any amortization of debt discount,
(b) the net cost under Interest Rate Protection Obligations (including any
amortization of discounts), (c) the interest portion of any deferred payment
obligation constituting Indebtedness, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and (e) all accrued interest, in each case to the extent attributable
to such period, (ii) to the extent any Indebtedness of any Person (other than
the Company or a Restricted Subsidiary) is guaranteed by the Company or any
Restricted Subsidiary, the aggregate amount of interest paid (to the extent not
accrued in a prior period) or accrued by such other Person during such period
attributable to any such Indebtedness, in each case to the extent attributable
to that period, (iii) the aggregate amount of the interest component of
Capitalized Lease Obligations paid (to the extent not accrued in a prior
period), accrued or scheduled to be paid or accrued by the Company and its
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP and (iv) the aggregate amount of dividends paid (to the
extent not accrued in a prior period) or accrued on Preferred Stock or
Disqualified Capital Stock of the Company and its Restricted Subsidiaries, to
the extent such Preferred Stock or Disqualified Capital Stock is owned by
Persons other than Restricted Subsidiaries, less, to the extent included in any
of clauses (i) through (iv), amortization of capitalized debt issuance costs of
the Company and its Restricted Subsidiaries during such period.

"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto), (b)
net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) the net income (or net loss) of any Person
(other than the Company or any of its Restricted Subsidiaries), in which the
Company or any of its Restricted Subsidiaries has an ownership interest, except
to the extent of the amount of dividends or other distributions actually paid to
the Company or any of its Restricted Subsidiaries in cash by such other Person
during such period (regardless of whether such cash dividends or distributions
is attributable to net income (or net loss) of such Person during such period or
during any prior period), (d) net income (or net loss) of any Person combined
with the Company or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(e) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (f) income
resulting from transfers of assets received by the Company or any Restricted
Subsidiary from an

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Unrestricted Subsidiary, (g) any write-downs of non-current assets, provided,
however, that any ceiling limitation writedowns under Commission guidelines
shall be treated as capitalized costs, as if such writedowns had not occurred
and (h) net income resulting from the recognition of revenues during such period
under the Tennessee Gas Contract in excess of that portion of such revenues the
purchaser has been paying during such period.

"Consolidated Net Worth" means, at any date, the consolidated stockholders'
equity of the Company less the amount of such stockholders' equity attributable
to Disqualified Capital Stock or treasury stock of the Company and its
Restricted Subsidiaries, as determined in accordance with GAAP.

"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses of the Company
and its Restricted Subsidiaries reducing Consolidated Net Income for such
period, determined on a consolidated basis in accordance with GAAP (excluding
any such non-cash charge for which an accrual of or reserve for cash charges for
any future period is required and adjusted to give effect to the exclusion from
revenues during such period under the Tennessee Gas Contract in excess of that
portion of such revenues the purchaser has been paying during such period.

"Default" means any event, act or condition that is, or after notice or
passage of time or both would become, an Event of Default.

"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors of the Company is
required to deliver a resolution of the Board of Directors under the Indenture,
a member of the Board of Directors of the Company who does not have any material
direct or indirect financial interest (other than an interest arising solely
from the beneficial ownership of Capital Stock of the Company) in or with
respect to such transaction or series of transactions.

"Disqualified Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is, or upon the happening of an event or passage of
time would be, required to be redeemed or repurchased prior to the final Stated
Maturity of the Notes or is redeemable at the option of the holder thereof at
any time prior to such final Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to such final Stated
Maturity. For purposes of the covenant described in paragraph (a) under
"-- Certain Covenants -- Limitation on Indebtedness and Disqualified Capital
Stock" covenant, Disqualified Capital Stock shall be valued at the greater of
its voluntary or involuntary maximum fixed redemption or repurchase price plus
accrued and unpaid dividends. For such purposes, the "maximum fixed redemption
or repurchase price" of any Disqualified Capital Stock which does not have a
fixed redemption or repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were redeemed or repurchased on the date of determination, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Disqualified Capital Stock; provided, however,
that if such Disqualified Capital Stock is not at the date of determination
permitted or required to be redeemed or repurchased, the "maximum fixed
redemption or repurchase price" shall be the book value of such Disqualified
Capital Stock.

"Dollar-Denominated Production Payments" means production payment
obligations of the Company or a Restricted Subsidiary recorded as liabilities in
accordance with GAAP, together with all undertakings and obligations in
connection therewith.

"Event of Default" has the meaning set forth above under the caption
"Events of Default."

"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
applicable as of the date of the Indenture.

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The term "guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down under letters of credit. When used as a verb,
"guarantee" has a corresponding meaning.

"Holder" means a Person in whose name a Note is registered in the Note
Register.

"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person, contingent or otherwise, for borrowed money or
for the deferred purchase price of property or services (excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business) and all liabilities of such Person incurred in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Capital Stock of such Person, or any warrants, rights or options
to acquire such Capital Stock, outstanding on the date of the Indenture or
thereafter, if, and to the extent, any of the foregoing would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
(b) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, (c) all Indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade accounts payable arising in the ordinary
course of business, (d) all Capitalized Lease Obligations of such Person, (e)
all Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
the amount of the obligation so secured), (f) all guarantees by such Person of
Indebtedness referred to in this definition (including, with respect to any
Production Payment, any warranties or guaranties of production or payment by
such Person with respect to such Production Payment but excluding other
contractual obligations of such Person with respect to such Production Payment)
and (g) all obligations of such Person under or in respect of currency exchange
contracts, oil and natural gas price hedging arrangements and Interest Rate
Protection Obligations. Subject to clause (f) of the first sentence of this
definition, neither Dollar-Denominated Production Payments nor Volumetric
Production Payments shall be deemed to be Indebtedness. In addition,
Disqualified Capital Stock shall not be deemed to be Indebtedness.

"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements or arrangements designed to protect
against or manage such Person's and any of its Subsidiaries exposure to
fluctuations in interest rates.

"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or capital
contribution to (by means of any transfer of cash or other property or assets to
others or any payment for property, assets or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities (including derivatives) or
evidences of Indebtedness issued by, any other Person. In addition, the fair
market value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be
deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude (a) extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or

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otherwise in the ordinary course of business, (b) Interest Rate Protection
Obligations entered into in the ordinary course of business or as required by
any Permitted Indebtedness or any Indebtedness incurred in compliance with the
"Limitation on Indebtedness and Disqualified Capital Stock" covenant, but only
to the extent that the notional amounts of such Interest Rate Protection
Obligations do not exceed 105% of the aggregate principal amount of such
Indebtedness to which such Interest Rate Protection Obligations relate and (c)
endorsements of negotiable instruments and documents in the ordinary course of
business.

"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar type
of encumbrance (including, without limitation, any agreement to give or grant
any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any property of any kind. A Person shall be deemed to own subject to
a Lien any property which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.

"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 10% during a fiscal quarter
in the estimated discounted future net cash flows from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (a) (i) of the definition of Adjusted Consolidated Net
Tangible Assets; provided, however, that the following will be excluded from the
calculation of Material Change: (i) any acquisitions during the quarter of oil
and gas reserves that have been estimated by a nationally recognized firm of
independent petroleum engineers and on which a report or reports exist and (ii)
any disposition of properties existing at the beginning of such quarter that
have been disposed of as provided in the "Limitation on Asset Sales" covenant.

"Maturity" means, with respect to any Note, the date on which any principal
of such Note becomes due and payable as therein or in the Indenture provided,
whether at the Stated Maturity with respect to such principal or by declaration
of acceleration, call for redemption or purchase or otherwise.

"Moody's" means Moody's Investors Service, Inc. and its successors.

"Net Available Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the assets subject to the
Asset Sale or having a Lien thereon and (iv) appropriate amounts to be provided
by the Company or any Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP consistently applied against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an Officers
Certificate delivered to the Trustee; provided, however, that any amounts
remaining after adjustments, revaluations or liquidations of such reserves shall
constitute Net Available Proceeds.

"Net Cash Proceeds," with respect to any issuance or sale of Qualified
Capital Stock or other securities, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
and expenses actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.

"Net Working Capital" means (i) all current assets of the Company and its
Restricted Subsidiaries, minus (ii) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
and its Restricted Subsidiaries prepared on a consolidated basis in accordance
with GAAP.

"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Restricted Subsidiary incurred in connection
with the acquisition by the Company or such Restricted

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Subsidiary of any property or assets and as to which (a) the holders of such
Indebtedness agree that they will look solely to the property or assets so
acquired and securing such Indebtedness for payment on or in respect of such
Indebtedness, and neither the Company nor any Subsidiary (other than an
Unrestricted Subsidiary) (i) provides credit support, including any undertaking,
agreement or instrument which would constitute Indebtedness or (ii) is directly
or indirectly liable for such Indebtedness, and (b) no default with respect to
such Indebtedness would permit (after notice or passage of time or both),
according to the terms thereof, any holder of any Indebtedness of the Company or
a Restricted Subsidiary to declare a default on such Indebtedness or cause the
payment thereof to be accelerated or payable prior to its Stated Maturity.

"Note Register" means the register maintained by or for the Company in
which the Company shall provide for the registration of the Notes and the
transfer of the Notes.

"Oil and Gas Business" means (i) the acquisition, exploration, development,
operation and disposition of interests in oil, gas and other hydrocarbon
properties, (ii) the gathering, marketing, treating, processing, storage,
refining, selling and transporting of any production from such interests or
properties, (iii) any business relating to or arising from exploration for or
development, production, treatment, processing, storage, refining,
transportation or marketing of oil, gas and other minerals and products produced
in association therewith, and (iv) any activity necessary, appropriate or
incidental to the activities described in the foregoing clauses (i) through
(iii) of this definition.

"Permitted Indebtedness" means any of the following:

(i) Indebtedness under the Bank Credit Facilities in an aggregate
principal amount at any one time outstanding not to exceed the greater of
$75 million or 15% of Adjusted Consolidated Net Tangible Assets (the
"Maximum Credit Amount"), plus all interest and fees under such facilities
and any guarantee of any such Indebtedness;

(ii) Indebtedness under the Notes and any Exchange Notes issued in
exchange for Notes of an equal principal amount;

(iii) Indebtedness outstanding or in effect on the date of the
Indenture (and not repaid or defeased with the proceeds of the offering of
the Notes);

(iv) obligations pursuant to Interest Rate Protection Obligations, but
only to the extent such obligations do not exceed 105% of the aggregate
principal amount of the Indebtedness covered by such Interest Rate
Protection Obligations; obligations under currency exchange contracts
entered into in the ordinary course of business; hedging arrangements
entered into in the ordinary course of business for the purpose of
protecting production, purchases and resales against fluctuations in oil or
natural gas prices; and any guarantee of any of the foregoing;

(v) the Subsidiary Guarantees of the Notes (and any assumption of the
obligations guaranteed thereby);

(vi) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or any other
Restricted Subsidiary;

(vii) Permitted Refinancing Indebtedness and any guarantee thereof;

(viii) Non-Recourse Indebtedness;

(ix) Indebtedness in respect of bid, performance or surety bonds
issued for the account of the Company or any Restricted Subsidiary in the
ordinary course of business, including guaranties and letters of credit
supporting such bid, performance or surety obligations (in each case other
than for an obligation for money borrowed); and

(x) any additional Indebtedness in an aggregate principal amount not
in excess of $15 million at any one time outstanding and any guarantee
thereof.

"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or any of its Restricted
Subsidiaries; (iii) Investments in an amount not to

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exceed $3 million at any one time outstanding; (iv) Investments by the Company
or any of its Restricted Subsidiaries in another Person, if as a result of such
Investment (A) such other Person becomes a Restricted Subsidiary or (B) such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all of its properties and assets to, the Company or a
Restricted Subsidiary; (v) entry into operating agreements, joint ventures,
partnership agreements, working interests, royalty interests, mineral leases,
processing agreements, farm-out agreements, contracts for the sale,
transportation or exchange of oil and natural gas, unitization agreements,
pooling arrangements, area of mutual interest agreements or other similar or
customary agreements, transactions, properties, interests or arrangements, and
Investments and expenditures in connection therewith or pursuant thereto, in
each case made or entered into in the ordinary course of the Oil and Gas
Business, excluding, however, Investments in corporations; (vi) entry into any
hedging arrangements in the ordinary course of business for the purpose of
protecting the Company's or any Restricted Subsidiary's production, purchases
and resales against fluctuations in oil or natural gas prices; (vii) Investments
permitted under the "Limitation on Asset Sales" covenant or the "Limitation on
Transactions with Affiliates" covenant; (viii) entry into any currency exchange
contract in the ordinary course of business; or (ix) Investments in stock,
obligations or securities received in settlement of debts owing to the Company
or any Restricted Subsidiary as a result of bankruptcy or insolvency proceedings
or upon the foreclosure, perfection or enforcement of any Lien in favor of the
Company or any Restricted Subsidiary, in each case as to debt owing to the
Company or any Restricted Subsidiary that arose in the ordinary course of
business of the Company or any such Restricted Subsidiary.

"Permitted Liens" means the following types of Liens:

(a) Liens existing as of the date of the Indenture (except to the
extent such Liens secure Indebtedness that is repaid or defeased with
proceeds of the offering of the Notes);

(b) Liens securing the Notes or the Subsidiary Guarantees;

(d) Liens securing Indebtedness under the Bank Credit Facilities that
constitutes Permitted Indebtedness pursuant to clause (i) of the definition
of "Permitted Indebtedness";

(e) Liens for taxes, assessments and governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;

(f) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;

(g) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds,
bids, government contracts and leases, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money but including lessee or operator obligations
under statutes, governmental regulations or instruments related to the
ownership, exploration and production of oil, gas and minerals on state,
Federal or foreign lands or waters);

(h) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the
period within which such proceeding may be initiated shall not have
expired;

(i) easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Restricted
Subsidiaries;

(j) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;

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(k) purchase money Liens; provided, however, that (i) the related
purchase money Indebtedness shall not be secured by any property or assets
of the Company or any Restricted Subsidiary other than the property or
assets so acquired and any proceeds therefrom and (ii) the Lien securing
such Indebtedness shall be created within 90 days of such acquisition;

(l) Liens securing obligations under hedging agreements that the
Company or any Restricted Subsidiary enters into in the ordinary course of
business for the purpose of protecting its production, purchases and
resales against fluctuations in oil or natural gas prices;

(m) Liens upon specific items of inventory or other goods of any
Person securing such Person's obligations in respect of bankers acceptances
issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;

(n) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property or
assets relating to such letters of credit and products and proceeds
thereof;

(o) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets;

(p) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;

(q) Liens securing Interest Rate Protection Obligations which Interest
Rate Protection Obligations relate to Indebtedness that is secured by Liens
otherwise permitted under the Indenture;

(r) Liens on, or related to, properties or assets to secure all or
part of the costs incurred in the ordinary course of business for the
exploration, drilling, development or operation thereof;

(s) Liens on pipeline or pipeline facilities which arise by operation
of law;

(t) Liens arising under operating agreements, joint venture
agreements, partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements and other agreements which
are customary in the Oil and Gas Business;

(u) Liens reserved in oil and gas mineral leases for bonus or rental
payments or for compliance with the terms of such leases;

(v) Liens constituting survey exceptions, encumbrances, easements, or
reservations of, or rights to others for, rights-of-way, zoning or other
restrictions as to the use of real properties, and minor defects of title
which, in the case of any of the foregoing, were not incurred or created to
secure the payment of borrowed money or the deferred purchase price of
property, assets or services, and in the aggregate do not materially
adversely affect the value of properties and assets of the Company and the
Restricted Subsidiaries, taken as a whole, or materially impair the use of
such properties and assets for the purposes for which such properties and
assets are held by the Company or any Restricted Subsidiaries; and

(w) Liens securing Non-Recourse Indebtedness; provided, however, that
the related Non-Recourse Indebtedness shall not be secured by any property
or assets of the Company or any Restricted Subsidiary other than the
property and assets acquired by the Company with the proceeds of such
Non-Recourse Indebtedness.

Notwithstanding anything in clauses (a) through (w) of this definition, the term
"Permitted Liens" does not include any Liens resulting from the creation,
incurrence, issuance, assumption or guarantee of any Production Payments other
than Production Payments that are created, incurred, issued, assumed or
guaranteed in connection with the financing of, and within 30 days after, the
acquisition of the properties or assets that are subject thereto.

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"Permitted Refinancing Indebtedness" means Indebtedness of the Company or a
Restricted Subsidiary, the net proceeds of which are used to renew, extend,
refinance, refund or repurchase (including, without limitation, pursuant to a
Change of Control Offer or Net Proceeds Offer) outstanding Indebtedness of the
Company or any Restricted Subsidiary, provided that (a) if the Indebtedness
(including the Notes) being renewed, extended, refinanced, refunded or
repurchased is pari passu with or subordinated in right of payment to either the
Notes or the Subsidiary Guarantees, then such Indebtedness is pari passu with or
subordinated in right of payment to the Notes or the Subsidiary Guarantees, as
the case may be, at least to the same extent as the Indebtedness being renewed,
extended, refinanced, refunded or repurchased, (b) such Indebtedness has a
Stated Maturity for its final scheduled principal payment that is no earlier
than the Stated Maturity for the final scheduled principal payment of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased and
(c) such Indebtedness has an Average Life at the time such Indebtedness is
incurred that is equal to or greater than the Average Life of the Indebtedness
being renewed, extended, refinanced, refunded or repurchased; provided, further,
that such Indebtedness is in an aggregate principal amount (or, if such
Indebtedness is issued at a price less than the principal amount thereof, the
aggregate amount of gross proceeds therefrom is) not in excess of the aggregate
principal amount then outstanding of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased (or if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased was issued at a price less than
the principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees and expenses incurred by the Company or such Restricted
Subsidiary in connection therewith.

"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued after
the date of the Indenture, including, without limitation, all classes and series
of preferred or preference stock of such Person.

"Production Payments" means, collectively, Dollar-Denominated Production
Payments and Volumetric Production Payments.

"Public Equity Offering" means an offer and sale of Common Stock of the
Company pursuant to a registration statement that has been declared effective by
the Commission pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of the Company).

"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Capital Stock.

"Restricted Investment" means (without duplication) (i) the designation of
a Subsidiary as an Unrestricted Subsidiary in the manner described in the
definition of "Unrestricted Subsidiary" and (ii) any Investment other than a
Permitted Investment.

"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of the Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of the Indenture.

"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.

"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which properties or assets are sold or transferred by the Company or
a Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or one of its Restricted Subsidiaries.

"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument evidencing
or governing such Indebtedness as the fixed date on which the principal of such
Indebtedness or such installment of interest is due and payable.

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"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor which is expressly subordinated in right of payment to the
Notes or the Subsidiary Guarantees, as the case may be.

"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions).

"Subsidiary Guarantee" means any guarantee of the Notes by any Subsidiary
Guarantor in accordance with the provisions described under "-- Subsidiary
Guarantees of Notes.

"Subsidiary Guarantor" means (i) Enercorp Gas Marketing, Inc., (ii) KCS
Resources, Inc., (iii) KCS Michigan Resources, Inc., (iv) KCS Pipeline Systems,
Inc., (v) KCS Energy Marketing, Inc., (vi) KCS Power Marketing, Inc., (vii) KCS
Energy Risk Management, Inc., (viii) National Enerdrill Corporation, (ix)
Proliq, Inc., (x) each of the Company's other Restricted Subsidiaries, if any,
executing a supplemental indenture in which such Subsidiary agrees to be bound
by the terms of the Indenture and (xi) any Person that becomes a successor
guarantor of the Notes in compliance with the provisions described under
"-- Subsidiary Guarantees of Notes.

"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary by the
Board of Directors of the Company as provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company as an Unrestricted Subsidiary so long as (a)
neither the Company nor any Restricted Subsidiary is directly or indirectly
liable pursuant to the terms of any Indebtedness of such Subsidiary; (b) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity; (c) such designation as an Unrestricted Subsidiary would be
permitted under the "Limitation on Restricted Payments" covenant; and (d) such
designation shall not result in the creation or imposition of any Lien on any of
the properties or assets of the Company or any Restricted Subsidiary (other than
any Permitted Lien or any Lien the creation or imposition of which shall have
been in compliance with the "Limitation on Liens" covenant); provided, however,
that with respect to clause (a), the Company or a Restricted Subsidiary may be
liable for Indebtedness of an Unrestricted Subsidiary if (x) such liability
constituted a Permitted Investment or a Restricted Payment permitted by the
"Limitation on Restricted Payments" covenant, in each case at the time of
incurrence, or (y) the liability would be a Permitted Investment at the time of
designation of such Subsidiary as an Unrestricted Subsidiary. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing a Board Resolution with the Trustee giving effect to such
designation. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving
effect to such designation on a pro forma basis, (i) no Default or Event of
Default shall have occurred and be continuing, (ii) the Company could incur
$1.00 of additional Indebtedness (not including the incurrence of Permitted
Indebtedness) under the first paragraph of the "Limitation on Indebtedness and
Disqualified Capital Stock" covenant and (iii) if any of the properties and
assets of the Company or any of its Restricted Subsidiaries would upon such
designation become subject to any Lien (other than a Permitted Lien), the
creation or imposition of such Lien shall have been in compliance with the
"Limitation on Liens" covenant.

"Volumetric Production Payments" means production payment obligations of
the Company or a Restricted Subsidiary recorded as deferred revenue in
accordance with GAAP, together with all undertakings and obligations in
connection therewith.

"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).

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REGISTRATION RIGHTS AGREEMENT

Pursuant to the Registration Rights Agreement, the Company agreed to file
with the SEC the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to an offer to exchange the Old Notes for
the Exchange Notes. The Registration Statement of which this Prospectus is a
part constitutes such Exchange Offer Registration Statement, and pursuant to the
Exchange Offer described herein the Parent is offering to the holders of Notes
who are able to make certain representations the opportunity to exchange their
Old Notes for Exchange Notes. If (i) the Company is not permitted to file the
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or interpretation
of the staff of the SEC or (ii) any holder of Old Notes notifies the Company
within the specified time period that (A) due to a change in law or policy it is
not entitled to participate in the Exchange Offer, (B) due to a change in law or
policy it may not resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available for
such resales by such holder or (C) it is a broker-dealer and owns Old Notes
acquired directly from the Parent or an affiliate of the Parent, the Company
will file with the SEC the Shelf Registration Statement to cover resales of the
Transfer Restricted Notes (as defined) by the holders thereof. The Company will
use commercially reasonable best efforts to cause the applicable registration
statement to be declared effective within specified periods by the SEC. For
purposes of the foregoing, "Transfer Restricted Notes" means each Note until (i)
the date on which such Note has been exchanged by a person other than a
broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of an Old Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Securities Act.

Under existing SEC staff interpretations, the Transfer Restricted Notes
would, in general, be freely transferable after the Exchange Offer without
further registration under the Securities Act, provided that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act will be delivered upon resale by such
broker-dealers in connection with resales of Exchange Notes. The Company has
agreed, for a period of six months after consummation of the Exchange Offer, to
make available a prospectus meeting the requirements of the Securities Act to
any broker-dealer for use in connection with any resale of Exchange Notes
acquired in the Exchange Offer (other than a resale of any unsold allotment from
the original sale of the Old Notes). A broker-dealer which delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).

The Registration Rights Agreement provides that: (i) unless the Exchange
Offer would not be permitted by applicable law or SEC policy, the Company will
file an Exchange Offer Registration Statement with the SEC on or prior to 90
days after the date of original issuance of the Notes (the "Closing Date," which
was January 25, 1996), (ii) unless the Exchange Offer would not be permitted by
applicable law or SEC policy, the Company will use its commercially reasonable
best efforts to have the Exchange Offer Registration Statement declared
effective by the SEC on or prior to 120 days after the Closing Date, (iii)
unless the Exchange Offer would not be permitted by applicable law or SEC
policy, the Company will commence the Exchange Offer and use commercially
reasonable best efforts to issue, on or prior to 30 business days after the date
on which the Exchange Offer Registration Statement was declared effective by the
SEC, Exchange Notes in exchange for all Old Notes tendered prior thereto in the
Exchange Offer and (iv) if obligated to file the Shelf Registration Statement,
the Company will file prior to the later of (x) 90 days after the Closing Date
or (y) 30 days after such filing obligation arises and use its commercially
reasonable best efforts to cause the Shelf Registration Statement to be declared
effective by the SEC on or prior to 90 days after such obligation arises;
provided that if the Company has not consummated the Exchange Offer within 180
days of the Closing Date, then the Company will file the Shelf Registration
Statement with the SEC on or prior to the 181st day

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after the Closing Date and use its commercially reasonable best efforts to cause
the Shelf Registration Statement to be declared effective within 60 days after
such filing. The Company shall use its commercially reasonable best efforts to
keep such Shelf Registration Statement continuously effective, supplemented and
amended until the third anniversary of the Closing Date or such shorter period
that will terminate when all the Transfer Restricted Notes covered by the Shelf
Registration Statement have been sold pursuant thereto. If (i) the Company fails
to file any of the registration statements required by the Registration Rights
Agreement on or before the date specified for such filing, (ii) any of such
registration statements are not declared effective by the SEC on or prior to the
date specified for such effectiveness (the "Effectiveness Target Date"), (iii)
the Company fails to consummate the Exchange Offer within 30 business days of
the Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (iv) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter, subject to certain
exceptions, ceases to be effective or usable in connection with the Exchange
Offer or resales of Transfer Restricted Notes, as the case may be, during the
periods specified in the Registration Rights Agreement (each such event referred
to in clauses (i) through (iv) above, a "Registration Default"), then the
interest rate on Transfer Restricted Notes will increase ("Additional
Interest"), with respect to the first 90-day period immediately following the
occurrence of such Registration Default by 0.50% per annum and will increase by
an additional 0.50% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of 2%
per annum with respect to all Registration Defaults. Following the cure of all
Registration Defaults, the accrual of Additional Interest will cease and the
interest rate will revert to the original rate.

TRANSFER RESTRICTIONS ON OLD NOTES

The Old Notes have not been registered under the Securities Act and they
may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
Accordingly, the Old Notes were offered and sold only (A) to "Qualified
Institutional Buyers" (as defined in Rule 144A under the Securities Act) in
compliance with Rule 144A and (B) to a limited number of other institutional
"Accredited Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that, prior to their purchase of any Old Notes, delivered to the
Initial Purchasers a letter containing certain representations and agreements.

Each purchaser of Old Notes was deemed to have represented and agreed as
follows:

1. It is purchasing the Old Notes for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is (A) a Qualified Institutional Buyer, and is aware
that the sale to it is being made in reliance on Rule 144A or (B) an
Accredited Investor.

2. It acknowledges that the Old Notes have not been registered under
the Securities Act and that none of the Old Notes may be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except as set forth below.

3. It shall not resell or otherwise transfer any of such Old Notes
within three years after the original issuance of the Old Notes except (A)
to the Parent or any of its subsidiaries, (B) inside the United States to a
Qualified Institutional Buyer in compliance with Rule 144A, (C) inside the
United States to an Accredited Investor that, prior to such transfer,
furnishes to the Trustee a signed letter containing certain representations
and agreements (the form of which letter can be obtained from such
Trustee), (D) outside the United States to foreign purchasers in offshore
transactions meeting the requirements of Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (F) pursuant to an
effective registration statement under the Securities Act. As used herein,
the terms "offshore transaction," "United States" and "U.S. person" have
the respective meanings given to them in Regulation S.

4. It agrees that it will give to each person to whom it transfers the
Old Notes notice of any restrictions on transfer of such Old Notes.

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<PAGE> 67

5. It understands that all of the Old Notes will bear a legend
substantially to the following effect unless otherwise agreed by the
Parent, the Trustee and the holder thereof:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES TO FOREIGN PURCHASERS
IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION,
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO
THEM IN REGULATION S.

6. It acknowledges that the Trustee will not be required to accept for
registration of transfer any Old Notes acquired by it, except upon
presentation of evidence satisfactory to the Parent and the Trustee that
the restrictions set forth herein have been complied with.

7. It acknowledges that the Parent, the Trustee, the Initial
Purchasers and others will rely upon the truth and accuracy of the
foregoing acknowledgements, representations or agreements and agrees that
if any of the acknowledgements, representations or agreements deemed to
have been made by its purchase of the Old Notes are no longer accurate, it
shall promptly notify the Parent, the Trustee and the Initial Purchasers.
If it is acquiring the Old Notes as a fiduciary or agent for one or more
investor accounts, it represents that it has sole investment discretion
with respect to each such account and it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of
each account.

Any Old Notes not exchanged in the Exchange Offer for Exchange Notes will
continue to be subject to the transfer restrictions described above.

BOOK ENTRY; DELIVERY AND FORM

The Exchange Notes initially will be represented by a single, permanent
global certificate in definitive, fully registered form (the "Global Note"). The
Global Note will be deposited with, or on behalf of, DTC and registered in the
name of a nominee of DTC.

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<PAGE> 68

THE GLOBAL NOTE

The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Note, DTC or its custodian will credit, on its
internal system, the principal amount of Exchange Notes of the individual
beneficial interests represented by such Global Note to the respective accounts
for persons who have accounts with DTC and (ii) ownership of beneficial
interests in the Global Note will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Ownership of beneficial interests in the Global Note will be limited to persons
who have accounts with DTC ("participants") or persons who interests through
participants. Owners of beneficial interests in the Global Note will hold their
interests directly through DTC, if they are participants in such system, or
indirectly through organizations which are participants in such system.

So long as DTC or its nominee is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by the Global Note for all
purposes under the Indenture. No beneficial owner of an interest in the Global
Note will be able to transfer that interest except in accordance with DTC's
procedures.

Payments of the principal of, premium, if any, and interest on, the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee, the Exchange Agent or any
paying agent of the Company will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.

The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in immediately available funds.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the Global Note.

DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Old Notes for exchange
for Exchange Notes) only at the direction of one or more participants to whose
account the interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants have given such direction. However, if there is an
Event of Default under the Indenture, DTC will exchange the Global Note for
certificated Notes in registered form ("Certificated Securities"), which it will
distribute to its participants.

DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.

65
<PAGE> 69

Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Initial Purchasers, the
Trustee or the Exchange Agent will have any responsibility for the performance
by DTC or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.

CERTIFICATED SECURITIES

If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Parent within
90 days, or at the Parent's election at any time, Certificated Securities will
be issued in exchange for the Global Note.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain federal income tax consequences
associated with the Exchange Offer, and also with respect to the acquisition,
ownership, and disposition of the Exchange Notes. The following summary does not
discuss all of the aspects of federal income taxation that may be relevant to a
prospective holder of Exchange Notes in light of his or her particular
circumstances, or to certain types of holders which are subject to special
treatment under the federal income tax laws (including persons who hold Exchange
Notes as part of a conversion, straddle or hedge, dealers in securities,
insurance companies, tax exempt organizations, financial institutions,
broker-dealers and S corporations). Further, the summary pertains only to
holders that are citizens or residents of the United States, or any political
subdivision thereof, or estates or trusts the income of which is subject to
United States federal income taxation regardless of its source. In addition,
this summary does not describe any tax consequences under state, local, or
foreign tax laws.

The discussion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time by legislative, judicial or administrative action. Any such
changes may be applied retroactively in a manner that could adversely affect
holders of Exchange Notes. The Company has not sought and will not seek any
rulings or opinions from the IRS or counsel with respect to the matters
discussed below. There can be no assurance that the IRS will not take positions
concerning the tax consequences of the valuation, purchase, ownership or
disposition of the Exchange Notes which are different from those discussed
herein.

THIS SUMMARY DOES NOT PURPORT TO COVER ALL THE POSSIBLE TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, AND IS NOT
INTENDED AS TAX ADVICE. PROSPECTIVE PURCHASERS OF EXCHANGE NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES THAT MAY BE SPECIFIC TO THEM OF ACQUIRING, OWNING AND DISPOSING OF
EXCHANGE NOTES, AS WELL AS THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS.

EXCHANGE OFFER

Under federal income tax law, a holder of Old Notes will not recognize gain
or loss upon an exchange of the Old Notes for Exchange Notes pursuant to the
Exchange Offer. A holder's basis and holding period for the Exchange Notes
received pursuant to the Exchange Offer will be the same as such holder's basis
and holding period for the Old Notes exchanged therefor.

Each exchanging holder should consult with his or her individual tax
advisor as to any foreign, state and local tax consequences of the Exchange
Offer as well as to the effect of his or her particular facts and circumstances
on the matters discussed herein.

66
<PAGE> 70

TAXATION OF QUALIFIED STATED INTEREST ON EXCHANGE NOTES

Absent some special circumstances that may be particular to a holder,
qualified stated interest paid on an Exchange Note will be taxable to a holder
as ordinary interest income at the time it accrues or is received, in accordance
the holder's regular method of accounting for federal income tax purposes.

The Company will annually furnish to certain record holders of the Exchange
Notes and to the IRS information with respect to qualified stated interest paid
during the calendar year as may be required under applicable regulations.

SALE OR OTHER TAXABLE DISPOSITION OF EXCHANGE NOTES

The sale, redemption, or other taxable disposition of an Exchange Note will
result in the recognition of gain or loss to the holder in an amount equal to
the difference between (a) the amount of cash and fair market value of property
received (except to the extent attributable to the payment of accrued qualified
stated interest) in exchange therefor and (b) the holder's adjusted tax basis in
such Exchange Note.

A holder's initial tax basis in an Exchange Note purchased by such holder
will be equal to the portion of the issue price allocable to the Exchange Notes,
as discussed above. The holder's initial tax basis in an Exchange Note will be
increased by the amount of any original issue discount included in gross income
with respect to such Exchange Note to the date of disposition.

Any gain or loss on the sale, redemption, or other taxable disposition of
an Exchange Note will be capital gain or loss, assuming the owner of the
Exchange Note holds such security as a "capital asset" (generally property held
for investment) within the meaning of Section 1221 of the Code. Any capital gain
or loss will be long-term capital gain or loss if the Exchange Note is held for
more than one year and otherwise will be short-term capital gain or loss.
Payments on such disposition for accrued qualified stated interest not
previously included in income will be treated as ordinary interest income.

If the Exchange Offer is not consummated within the required period of time
(and in certain other circumstances), then Additional Interest may become
payable with respect to the Notes. See "Registration Rights Agreement." This
rate increase should not result in a deemed taxable exchange of the Notes.

PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE OR DATE

The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquired Old Notes either (a) other than at the time of
original issuance or (b) at the time of original issuance other than at the
issue price, including those provisions of the Code relating to the treatment of
"market discount," "acquisition premium" and "amortizable bond premium." Any
such purchaser should consult his or her tax advisor as to the consequences to
him or her of the acquisition, ownership, and disposition of Notes.

BACKUP WITHHOLDING

The backup withholding rules require a payor to deduct and withhold a tax
if (a) the payee fails to furnish a taxpayer identification number ("TIN") to
the payor, (b) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (c) the payee has failed to report properly the receipt of
"reportable payments" and the IRS has notified the payor that withholding is
required, or (d) there has been a failure of the payee to certify under the
penalty of perjury that a payee is not subject to withholding under Section 3406
of the Code. As a result, if any one of the events discussed above occurs with
respect to a holder of Notes, the Company, its paying agent or other withholding
agent will be required to withhold a tax equal to 31% of any "reportable
payment" made in connection with the Notes of such holder. A "reportable
payment" includes, among other things, amounts paid in respect of interest or
original issue discount and amounts paid through brokers in retirement of
securities. Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a refund or credit against such holder's
federal income tax, provided, that the required information is furnished to the
IRS. Certain holders (including, among others, corporations and certain
tax-exempt organizations) are not subject to the backup withholding rules.

67
<PAGE> 71

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale for a period of six
months after consummation of the Exchange Offer, or such shorter period as will
terminate when all Old Notes acquired by broker-dealers for their own accounts
as a result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).

The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. For a period of six months after consummation of the Exchange Offer, or
such shorter period as will terminate when all Old Notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for Exchange Notes and resold by
such broker-dealers, the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed in the Registration Rights Agreement to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act.

LEGAL MATTERS

The validity of the issuance of the Notes offered hereby will be passed
upon for the Company by Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas.

ACCOUNTANTS

The consolidated financial statements and schedules incorporated by
reference in this Prospectus and registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference in reliance upon
the authority of said firm as experts in giving said reports.

The statements of revenues and direct operating expenses for the oil and
gas properties of Natural Gas Processing Co. sold to KCS Resources, Inc. for the
years ended June 30, 1994 and 1995 have been included herein in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

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<PAGE> 72

RESERVE ENGINEERS

Information set forth in this Prospectus and the documents incorporated
herein by reference relating to the Company's estimated proved oil and gas
reserves not attributable to its volumetric production payment program at
December 31, 1995, the related calculations of future net production revenues
and the net present value thereof have been derived from independent petroleum
engineering reports (prepared principally by R.A. Lenser and Associates, Inc. &
H.J. Gruy and Associates, Inc.), and all such information has been included in
reliance on the authority of such firms as experts regarding the matters
contained in their reports.

The Company utilizes independent petroleum engineering reports with respect
to reserves underlying the Company's volumetric production payment program to
support its own analysis of the reserves underlying the volumetric production
payments, the proved reserves, related future net revenues and PV-10 that the
Company reports. This information is not derived from such independent reserve
engineers' reports, but rather is taken directly from the amounts contracted for
pursuant to the agreements relating to each volumetric production payment.

69
<PAGE> 73

GLOSSARY OF OIL AND GAS TERMS

The following are abbreviations and definitions of terms used throughout
this Prospectus and the documents incorporated herein by reference.

Bbl. Barrel of 42 U.S. gallons of crude oil or other liquid hydrocarbons.

Bcf. Billion cubic feet.

Bcfe. Billion feet of gas equivalent.

Btu. British thermal unit, which is the quantity of heat required to raise
the temperature of one-pound of water from 58.5 to 59.5 degrees Fahrenheit.

Completion. Installation of permanent equipment for the production of crude
oil or natural gas.

Condensate. Hydrocarbon mixture that becomes liquid and separates from
natural gas when the natural gas is produced. Similar to crude oil.

Development location. A location on which a development well can be
drilled.

Development well. A well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon known to be productive in an
attempt to recover proved undeveloped reserves.

Dry hole. A well found to be incapable of producing either oil or gas in
sufficient quantities to justify completion as an oil or gas well.

Estimated future net revenues. Revenues from production of oil and gas, net
of all production-related taxes, lease operating expenses and capital costs.

Exploratory well. A well drilled to find and produce oil or gas in an
unproved area, to find a new reservoir in a field which contains other
productive oil or gas reservoirs, or to extend a known reservoir.

Gas equivalent. Cubic feet of natural gas equivalent, determined using the
ratio of one Bbl of crude oil, condensate or natural gas liquids to six Mcf of
natural gas.

Gross acres or gross wells. An acre or well in which a working interest is
owned.

Mbbl. One thousand barrels of crude oil or other liquid hydrocarbons.

MMbbl. One million barrels of crude oil or other liquid hydrocarbons.

MBtu. One thousand Btus.

MMBtu. One million Btus.

Mcf. One thousand cubic feet.

Mcfe. One thousand cubic feet of gas equivalent.

MMcf. One million cubic feet.

MMcfe. One million cubic feet of gas equivalent.

Net acres or net wells. The sum of the fractional working interests net to
the Company owned in gross acres or gross wells.

Net production. Production after royalties and production due others.

NGLs. Natural gas liquids, such as ethane, propane, iso-butane, normal
butane and natural gasoline that can be extracted from natural gas.

Overriding royalty interest. An interest in an oil and gas property
entitling the owner to a share of oil or gas production, free of costs of
production.

PDP. Proved developed producing.

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<PAGE> 74

Pre-tax present value of estimated future net revenues ("PV-10"). Estimated
future net revenues before income taxes except where permitted by SEC
guidelines, with no price or cost escalation or de-escalation, in accordance
with guidelines promulgated by the SEC and discounted using an annual discount
rate of 10%.

Productive well. A well that is producing oil or gas or that is capable of
production.

Proved developed reserves. Reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.

Proved reserves. The estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.

Proved undeveloped reserves. Reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells where a relatively
major expenditure is required for recompletion.

Recompletion. The completion for production of an existing wellbore in
another formation from that in which the well has previously been completed.

Reserve life is calculated by dividing year-end reserves by total
production in that year.

Reserve replacement costs. Total costs incurred for exploration and
development, divided by reserves added from all sources, including reserve
discoveries, extensions and improved recovery additions, net revisions to
reserve estimates and purchases of reserves-in-place. This calculation is often
used as a measure of the efficiency of an oil and gas company's exploration and
development expenditures.

Reserve replacement ratio is calculated by dividing the net total reserves
added in a specific year through drilling, acquisitions, and revisions by total
production in that year.

Undeveloped acreage. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and gas regardless of whether such acreage contains proved reserves.

Working interest. The operating interest which gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
the production.

Workover. Operations on a producing well to restore or increase production.

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<PAGE> 75

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Rocky Mountain Properties
Report of Independent Public Accountants............................................. F-2
Statements of Revenues and Direct Operating Expenses for the Oil and Gas Properties
of Natural Gas Processing Co. sold to KCS Resources, Inc. for the years ended June
30, 1994 and 1995................................................................. F-3
Notes to Statements of Revenues and Direct Operating Expenses for the Oil and Gas
Properties of Natural Gas Processing Co. sold to KCS Resources, Inc. ............. F-4
Statements of Revenues and Direct Operating Expenses for the Oil and Gas Properties
of Natural Gas Processing Co. sold to KCS Resources, Inc. for the three months
ended September 30, 1994 and 1995 (unaudited)..................................... F-6
</TABLE>

F-1
<PAGE> 76

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To KCS Resources, Inc.:

We have audited the accompanying Statements of Revenues and Direct
Operating Expenses for the Oil and Gas Properties of Natural Gas Processing Co.
Sold to KCS Resources, Inc. for the years ended June 30, 1994 and 1995. These
financial statements are the responsibility of the management of KCS Resources,
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statements of Revenues and Direct
Operating Expenses for the Oil and Gas Properties of Natural Gas Processing Co.
Sold to KCS Resources, Inc. are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying statements were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission for
inclusion in Form S-4 of KCS Energy, Inc. and are not intended to be a complete
financial presentation of the properties described above.

In our opinion, the statements referred to above present fairly, in all
material respects, the Revenues and Direct Operating Expenses for the Oil and
Gas Properties of Natural Gas Processing Co. Sold to KCS Resources, Inc. for the
years ended June 30, 1994 and 1995, in conformity with generally accepted
accounting principles.

KPMG PEAT MARWICK LLP

Billings, Montana
October 6, 1995

F-2
<PAGE> 77

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE OIL AND GAS PROPERTIES OF NATURAL
GAS PROCESSING CO. SOLD TO KCS RESOURCES, INC.
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1994 1995
------ ------
<S> <C> <C>
Revenues:
Oil and gas sales to unaffiliated enterprises............................ $4,355 $4,177
Oil and gas sales to Natural Gas Processing Co's other operations........ 1,316 1,492
Gathering system and contract operating.................................. 1,951 1,865
------ ------
Total revenues................................................... 7,622 7,534
------ ------
Direct operating expenses:
Production............................................................... 2,761 2,748
Gathering system and contract operating.................................. 1,618 1,209
------ ------
Total direct operating expenses.................................. 4,379 3,957
------ ------
Excess of Revenues Over Direct Operating Expenses.......................... $3,243 $3,577
====== ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE> 78

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE OIL AND GAS PROPERTIES OF NATURAL GAS PROCESSING CO.
SOLD TO KCS RESOURCES, INC.

(1) THE PROPERTIES

Effective July 1, 1995 Natural Gas Processing Co. (NGP) sold certain oil
and gas properties and gas gathering systems (the properties) located in
Montana, Wyoming, New Mexico and Colorado to KCS Resources, Inc. (KCS) for $33
million.

(2) BASIS FOR PRESENTATION

During the periods presented, the above properties were not accounted for
or operated as a separate entity by NGP. Certain costs, such as depreciation,
depletion and amortization; general and administrative expenses; and corporate
income taxes were not allocated to the individual properties. Accordingly, full
separate financial statements prepared in accordance with generally accepted
accounting principles do not exist.

Revenues and direct operating expenses included in the accompanying
statements represent NGP's net working interest in the properties and NGP's
revenue and direct operating expenses from the gas gathering systems operations.
The amounts are presented on the accrual basis of accounting. Depreciation,
depletion and amortization, allocated general and administrative expenses and
corporate income taxes have been excluded.

(3) COMMITMENTS AND CONTINGENCIES

Pursuant to the terms of the Purchase and Sale Agreement dated September 8,
1995, any claims, litigation or disputes pending as of the effective date or any
matters arising in connection with ownership of the properties prior to the
effective date are retained by NGP.

(4) CAPITAL EXPENDITURES (UNAUDITED)

Direct operating expenses do not include oil and gas property acquisition,
exploration and development expenditures capitalizable under the full cost
method of accounting related to the properties which amounted to $2,298,900 and
$2,172,463 for the years ended June 30, 1994 and 1995, respectively.

F-4
<PAGE> 79

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE OIL AND GAS PROPERTIES OF NATURAL GAS PROCESSING CO.
SOLD TO KCS RESOURCES, INC.

(5) SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)

The following data which is presented pursuant to FASB Statement No. 69 is
based on estimates of year-end oil and gas reserve quantities and forecasts of
future development costs and production schedules. These estimates and forecasts
are inherently imprecise and subject to substantial revision as a result of
changes in estimates or remaining volumes, prices, costs, and production rates:

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

<TABLE>
<CAPTION>
JUNE 30,
----------------------
1994 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Future Cash inflows................................................... $138,444 $132,775
Future costs:
Production.......................................................... 43,365 40,617
Development......................................................... 11,900 11,431
-------- --------
Net cash flows........................................................ 83,179 80,727
Discount for estimated timing of future cash flows.................... 36,888 35,457
-------- --------
Total....................................................... $ 46,291 $ 45,270
======== ========
</TABLE>

CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
1994 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Beginning of year..................................................... $ 42,993 $ 46,291
Sales, net of production costs........................................ (2,910) (2,921)
Net change in prices, net of production costs......................... (821) (3,432)
Extensions, discoveries and improved recovery, less related costs..... 2,242 234
Development costs incurred during the period.......................... 488 469
Accretion of discount................................................. 4,299 4,629
-------- --------
End of year........................................................... $ 46,291 $ 45,270
======== ========
</TABLE>

RESERVE INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------
1994 1995
---------------- ----------------
GAS OIL GAS OIL
MMCF MBBL MMCF MBBL
------ ----- ------ -----
<S> <C> <C> <C> <C>
Proved developed and undeveloped reserves
Balance, beginning of year.............................. 41,741 4,426 42,358 4,494
Production.............................................. (1,696) (172) (1,936) (174)
Discoveries, extensions, and improved recovery.......... 2,313 240 512 --
------ ----- ------ -----
Balance, end of year.................................... 42,358 4,494 40,934 4,320
====== ===== ====== =====
Proved developed reserves
Balance, end of year.................................... 31,789 1,756 29,853 1,582
====== ===== ====== =====
</TABLE>

F-5
<PAGE> 80

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE OIL AND GAS PROPERTIES OF NATURAL GAS PROCESSING CO.
SOLD TO KCS RESOURCES, INC.
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30,
------------------
1994 1995
------ ------
<S> <C> <C>
Revenues.................................................................. $1,681 $1,389
Direct Operating Expenses................................................. 676 652
------ ------
Excess of Revenues Over Direct Operating Expenses......................... $1,005 $ 737
====== ======
</TABLE>

F-6
<PAGE> 81

PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation -- a "derivative action"),
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
rights to which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Paragraph (b) of Article IX of the Parent's Certificate of Incorporation
provides:

Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the
legal representative, is or was a director or officer, of the corporation
or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or
in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and
such indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his
or her heirs, executors and administrators; provided, however, that, except
as provided in this paragraph (b), the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this paragraph (b) shall be a contract right
and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation
Law requires, the payment of such expenses incurred by a director or
officer of the Corporation (and not in any other capacity in which service
was or is rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that
such director or officer is not entitled to be indemnified under this
Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification
of officers and directors.

In addition, the Parent's Certificate of Incorporation provides for claims
for indemnification to be brought against the Parent, waives certain defenses to
such claims, acknowledges that indemnification, shall not be deemed exclusive of
any other right which any such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, by-law, agreement, vote
of stockholders or disinterested directors

II-1
<PAGE> 82

or otherwise, and authorizes the Parent to purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture, or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.

The Parent maintains directors' and officers' liability insurance.

Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
payments of unlawful dividends or unlawful stock repurchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. Paragraph (a) of Article IX of the Parent's Certificate of
Incorporation provides for such limitation of liability.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<C> <S>
4.1 -- Registration Rights Agreement, dated January 25, 1996, between the
Registrant, certain of its subsidiaries, Smith Barney Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, Nomura
Securities International Inc. and PaineWebber Incorporated
(incorporated herein by reference to Exhibit 10 the Registrant's
Current Report on Form 8-K dated January 25, 1996).
4.2 -- Indenture dated as of January 15, 1996 between the Registrant,
certain of its subsidiaries and Fleet National Bank of Connecticut,
Trustee (incorporated herein by reference to Exhibit 4 to the
Registrant's Current Report on Form 8-K dated January 25, 1996).
4.3 -- Form of 11% Senior Note, Series B due 2003 (included in Exhibit 4.2).
5 * -- Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
10.1 -- Performance Unit Plan filed as Exhibit 10B of Registrant's Form 10
filed with the SEC May 13, 1988 and incorporated by reference herein.
10.2 -- 1988 KCS Group, Inc. Employee Stock Purchase Program filed as Exhibit
4.1 to Form S-8 Registration Statement No. 33-24147 filed with the
SEC on September 1, 1988 and incorporated by reference herein.
10.3 -- Amendments to 1988 KCS Energy, Inc. Employee Stock Purchase Program
filed as Exhibit 4.2 to Form S-8 Registration Statement No. 33-63982
filed with SEC June 8, 1993 and incorporated by reference herein.
10.4 -- 1988 Stock Plan filed as Exhibit 10A of Registrant's Form 10 filed
with SEC May 13, 1988 and as Exhibit 4.1 to Form S-8 Registration
Statement No. 33-25707 filed with the SEC on November 21, 1988 and
incorporated by reference herein.
10.5 -- KCS Group, Inc. Savings and Investment Plan filed as Exhibit 4.1 to
Form S-8 Registration Statement No. 33-28899 filed with the SEC on
May 16, 1989 and incorporated by reference herein.
10.6 -- Stock Purchase Agreement by and among KCS Group, Inc., Alfonso Izzi,
AJI Corporation, and Computil Corporation dated February 15, 1989,
filed as Exhibit 10(v) of Registrant's Form 10-K Report for Fiscal
1989 and incorporated by reference herein.
10.7 -- Assets Sale and Purchase Agreement between Utility Propane Company
and Amerigas, Inc. dated August 3, 1989 filed as Exhibit A to the KCS
Proxy Statement regarding a special meeting of stockholders filed
with the SEC on September 6, 1989 and incorporated by reference
herein.
</TABLE>

II-2
<PAGE> 83

<TABLE>
<C> <S>
10.8 -- Credit Agreement dated as of March 14, 1991 by and among The Lenape
Resources Corporation, Enercorp Gas Transmission Systems, Inc.,
Enercorp Pipeline, LTD. and Bank One, Texas, National Association
filed as Exhibit 10.13 of Registrant's Form 10-K Report for Fiscal
1991 and incorporated by reference herein.
10.9 -- First Amendment dated May 18, 1993 to Credit Agreement dated as of
March 14, 1991 by and among The Lenape Resources Corporation,
Enercorp Gas Transmission Systems, Inc., Enercorp Pipeline, Ltd. and
Bank One, Texas, National Association filed as Exhibit 10.9 of
Registrant's Form 10-K Report for Fiscal 1993 and incorporated by
reference herein.
10.10 -- Guaranty Agreement dated as of March 14, 1991 made jointly and
severally by KCS Group, Inc. and Enercorp in favor of Bank One,
Texas, National Association filed as Exhibit 10.14 of Registrant's
Form 10-K Report for Fiscal 1991 and incorporated by reference
herein.
10.11 -- First Amendment dated May 18, 1993 to Guaranty Agreement dated as of
March 18, 1991 made jointly and severally by KCS Energy, Inc.
(formerly known as KCS Group, Inc.) and Enercorp in favor of Bank
One, Texas, National Association filed as Exhibit 10.11 of
Registrant's Form 10-K Report for Fiscal 1993 and incorporated by
reference herein.
10.12 -- Loan and Security Agreement dated September 27, 1991 by and between
First Fidelity Bank, National Association, New Jersey and Energy
Marketing Exchange, as Borrower and KCS Group, Inc. and Proliq, Inc.
as Guarantors filed as Exhibit 10.15 of Registrant's Form 10-K Report
for Fiscal 1991 and incorporated by reference herein.
10.13 -- Modification Agreement dated March 31, 1993 to Loan and Security
Agreement dated September 27, 1991 by and between First Fidelity
Bank, National Association, New Jersey and KCS Energy Marketing, Inc.
(formerly known as Energy Marketing Exchange, Inc.) as Borrower and
KCS Energy, Inc. and Proliq, Inc. as Guarantors filed as Exhibit
10.13 of Registrant's Form 10-K Report for Fiscal 1993 and
incorporated by reference herein.
10.14 -- Partial Assignment and Bill of Sale between Esenjay Petroleum
Corporation and The Lenape Resources Corporation filed as Exhibit
10.16 of Registrant's Form 10-K Report for Fiscal 1991 and
incorporated by reference herein.
10.15 -- Severance and Settlement Agreement with Stewart B. Kean filed as
Exhibit 10.17 of Registrant's Form 10-K for Fiscal 1991 and
incorporated by reference herein.
10.16 -- 1992 Stock Plan filed as Exhibit 4.1 to Form S-8 Registration
Statement No. 33-45923 with the SEC on February 24, 1992 and
incorporated by reference herein.
10.17 -- Amended and Restated Credit Agreement dated as of March 15, 1994 by
and among KCS Resources, Inc. (the surviving corporation of the
merger of The Lenape Resources Corporation), KCS Pipeline Systems,
Inc. (the surviving corporation of the merger of Enercorp Gas
Transmission Systems, Inc.) and Bank One, Texas, National Association
filed as Exhibit 10.17 of Registrant's Form 10-K Report for Fiscal
1994 and incorporated by reference herein.
10.18 -- Amended and Restated Guaranty Agreement dated as of March 15, 1994
made by KCS Energy, Inc. (formerly KCS Group, Inc.) in favor of Bank
One, Texas, National Association filed as Exhibit 10.18 of
Registrant's Form 10-K Report for Fiscal 1994 and incorporated by
reference herein.
</TABLE>

II-3
<PAGE> 84

<TABLE>
<C> <S>
10.19 -- Modification Agreement dated March 31, 1994 to Loan and Security
Agreement dated September 27, 1991 as modified by a modification
agreement dated April 1, 1992 and by a modification agreement dated
as of March 31, 1993 by and between First Fidelity Bank, National
Association and KCS Energy Marketing, Inc. (formerly known as Energy
Marketing Exchange, Inc.) as Borrower and KCS Energy, Inc. and
Proliq, Inc. as Guarantors filed as Exhibit 10.19 of Registrant's
Form 10-K Report for Fiscal 1994 and incorporated by reference
herein.
10.20 -- First Amendment dated September 29, 1994 to Amended and Restated
Credit Agreement by and among KCS Resources, Inc. (the surviving
corporation of the merger of the Lenape Resources Corporation), KCS
Pipeline Systems, Inc. (the surviving corporation of the merger of
Enercorp Gas Transmission Systems, Inc.) and Bank One, Texas,
National Association, and CIBC, Inc. filed as Exhibit 10.20 of
Registrant's Form 10-K Report for Fiscal 1994 and incorporated by
reference herein.
10.21 -- First Amendment dated September 29, 1994 to Amended and Restated
Guaranty Agreement made by KCS Energy, Inc. in favor of Bank One,
Texas, National Association, and CIBC, Inc. filed as Exhibit 10.21 of
Registrant's Form 10-K Report for Fiscal 1994 and incorporated by
reference herein.
10.22 -- Purchase and Sale Agreement dated September 8, 1995 by and between
Natural Gas Processing Co., a Wyoming corporation, and KCS Resources,
Inc., a Delaware corporation filed with the SEC as Exhibit 2.1 to
Registrant's Form 8-K on November 22, 1995 and incorporated by
reference herein.
10.23 -- Loan Agreement dated January 11, 1995 among KCS Energy Marketing,
Inc. as Borrower; KCS Energy, Inc. and Proliq, Inc., each as a
Guarantor; and Canadian Imperial Bank of Commerce, as Lender filed as
Exhibit 10.3 of Registrant's Form 10-Q for the quarterly period ended
December 31, 1994 and incorporated by reference herein.
10.24 -- Security Agreement dated January 11, 1995 among KCS Energy Marketing,
Inc., KCS Energy, Inc., and Canadian Imperial Bank of Commerce filed
as Exhibit 10.4 of Registrant's Form 10-Q for the quarterly period
ended December 31, 1994 and incorporated by reference herein.
10.25 -- Please and Security Agreement dated January 11, 1995 between Proliq,
Inc., and Canadian Imperial Bank of Commerce filed as Exhibit 10.5 of
Registrant's Form 10-Q for the quarterly period ended December 31,
1994 and incorporated by reference herein.
10.26 -- Credit Agreement dated January 12, 1995 between KCS Energy Marketing,
Inc. and Comerica Bank - Texas filed as Exhibit 10.1 of Registrant's
Form 10-Q for the quarterly period ended December 31, 1994 and
incorporated by reference herein.
10.27 -- Guaranty Agreement dated January 12, 1995 by KCS Energy Inc. and
Proliq, Inc. in favor of Comerica Bank - Texas filed ass Exhibit 10.2
of Registrant's Form 10-Q for the quarterly period ended December 31,
1994 and incorporated by reference herein.
10.28 -- Second Amendment dated December 22, 1994 to Amended and Restated
Credit Agreement by and among KCS Resources, Inc., KCS Pipeline
Systems, Inc. and Bank One, Texas, National Association and CIBC,
Inc. filed as Exhibit 10.28 of Registrant's Form 10-K Report for the
period ended September 30, 1995 and incorporated by reference herein.
</TABLE>

II-4
<PAGE> 85

<TABLE>
<C> <S>
10.29 -- Third Amendment dated March 15, 1995 to Amended and Restated Credit
Agreement by and among KCS Resources, Inc. KCS Pipeline Systems, Inc.
as Borrowers; KCS Energy, Inc. as Guarantor; and Bank One, Texas,
National Association and CIBC, Inc. filed as Exhibit 10.29 of
Registrant's Form 10-K Report for the period ended September 30, 1995
and incorporated by reference herein.
10.30 -- First Amendment dated July 1, 1995 to Loan Agreement by and among KCS
Energy Marketing, Inc. as Borrower; KCS Energy, Inc. and Proliq, Inc.
as Guarantors; and Canadian Imperial Bank of Commerce filed as
Exhibit 10.30 of Registrant's Form 10-K Report for the period ended
September 30, 1995 and incorporated by reference herein.
10.31 -- Purchase and Sale Agreement dated as of November 30, 1995 between the
Company and Hawkins Oil of Michigan, Inc. (formerly Savoy Oil & Gas,
Inc.), Conveyance of Production Payment dated as of November 30,
1995, Production and Delivery Agreement dated as of November 30,
1995, Option Agreement dated as of November 30, 1995, Drilling
Participation Agreement dated December 7, 1995, Assignment and Bill
of Sale (Working Interests) filed as Exhibits 2.1 through 2.6 to
Registrant's Form 8-K on December 22, 1995 and incorporated by
reference herein.
10.32 -- Purchase and Sale Agreement dated September 8, 1995 by and between
Natural Gas Processing Co., a Wyoming corporation, and KCS Resources,
Inc., a Delaware corporation, filed as Exhibit 2.1 to Registrant's
Form 8-K on November 22, 1995 and incorporated by reference herein.
23.1* -- Consent of Arthur Andersen LLP.
23.2* -- Consent of KPMG Peat Marwick LLP.
23.3* -- Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (included in Exhibit
5).
23.4* -- Consent of R.A. Lenser and Associates, Inc.
23.5* -- Consent of H.J. Gruy and Associates, Inc.
24 * -- Powers of Attorney (included on signature pages contained in the
initial filing of this Registration Statement).
25 * -- Statement of Eligibility of Fleet National Bank.
99.1* -- Form of Letter of Transmittal.
</TABLE>

- ---------------

* Filed herewith.

ITEM 22. UNDERTAKINGS.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling

II-5
<PAGE> 86

person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.

II-6
<PAGE> 87

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Edison and the State of
New Jersey, on the 17th day of April, 1996.

KCS ENERGY, INC.

By: /s/ HENRY A. JURAND
--------------------------------------
Name: Henry A. Jurand
Title: Vice President, Chief Financial
Officer and Secretary

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James W. Christmas and Henry A. Jurand, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 17th day of April, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>

/s/ JAMES W. CHRISTMAS President & Chief Executive April 17, 1996
- --------------------------------------------- Officer and Director
James W. Christmas (Principal Executive
Officer)

/s/ HENRY A. JURAND Vice President, Chief April 17, 1996
- --------------------------------------------- Financial Officer and
Henry A. Jurand Secretary (Principal
Financial Officer and
Principal Accounting
Officer)

/s/ STEWART B. KEAN Chairman and Director April 17, 1996
- ---------------------------------------------
Stewart B. Kean

/s/ ROBERT G. RAYNOLDS Director April 17, 1996
- ---------------------------------------------
Robert G. Raynolds

/s/ G. STANTON GEARY Director April 17, 1996
- ---------------------------------------------
G. Stanton Geary

/s/ JAMES E. MURPHY, JR. Director April 17, 1996
- ---------------------------------------------
James E. Murphy, Jr.

/s/ JOEL D. SIEGEL Director April 17, 1996
- ---------------------------------------------
Joel D. Siegel

CHRISTOPHER A. VIGGIANO Director April 17, 1996
- ---------------------------------------------
Christopher A. Viggiano
</TABLE>

II-7
<PAGE> 88

SIGNATURES

KCS RESOURCES, INC.

By: /s/ HENRY A. JURAND
-------------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>

/s/ JAMES W. CHRISTMAS Chairman, CEO and Director April 17, 1996
- --------------------------------------------- (Principal Executive
James W. Christmas Officer)

/s/ HENRY A. JURAND Vice President and Director April 17, 1996
- --------------------------------------------- (Principal Financial
Henry A. Jurand Officer)

/s/ RONALD WILSON Vice President (Principal April 17, 1996
- --------------------------------------------- Accounting Officer)
Ronald Wilson

/s/ C. R. DEVINE President, COO and Director April 17, 1996
- ---------------------------------------------
C. R. Devine

</TABLE>

II-8
<PAGE> 89

SIGNATURES

KCS MICHIGAN RESOURCES, INC.

By: /s/ HENRY A. JURAND
-------------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ HARRY LEE STOUT President (Principal April 17, 1996
- --------------------------------------------- Executive Officer)
Harry Lee Stout

/s/ HENRY A. JURAND Vice President (Principal April 17, 1996
- --------------------------------------------- Financial Officer)
Henry A. Jurand

/s/ RONALD WILSON Vice President (Principal April 17, 1996
- --------------------------------------------- Accounting Officer)
Ronald Wilson

/s/ JAMES W. CHRISTMAS Director April 17, 1996
- ---------------------------------------------
James W. Christmas
</TABLE>

II-9
<PAGE> 90

SIGNATURES

KCS PIPELINE SYSTEMS, INC.

By: /s/ HENRY A. JURAND
--------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<C> <S> <C>
/s/ JAMES W. CHRISTMAS Chairman, CEO and Director April 17, 1996
- --------------------------------------------- (Principal Executive
James W. Christmas Officer)

/s/ HENRY A. JURAND Vice President and Director April 17, 1996
- --------------------------------------------- (Principal Financial
Henry A. Jurand Officer and Principal
Accounting Officer)

/s/ HARRY LEE STOUT President, COO and Director April 17, 1996
- ---------------------------------------------
Harry Lee Stout
</TABLE>

II-10

<PAGE> 91

SIGNATURES

KCS ENERGY MARKETING, INC.

By: /s/ HENRY A. JURAND
--------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

/s/ HENRY A. JURAND Vice President and Director April 17, 1996
- --------------------------------------------- (Principal Financial
Henry A. Jurand Officer and Principal
Accounting Officer)

/s/ HARRY LEE STOUT President, COO and Director April 17, 1996
- ---------------------------------------------
Harry Lee Stout
</TABLE>

II-11

<PAGE> 92

SIGNATURES

ENERCORP GAS MARKETING, INC.

By: /s/ HENRY A. JURAND
-------------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ HARRY LEE STOUT President and Director April 17, 1996
- --------------------------------------------- (Principal Executive
Harry Lee Stout Officer)

/s/ HENRY A. JURAND Vice President and Director April 17, 1996
- --------------------------------------------- (Principal Financial
Henry A. Jurand Officer and Principal
Accounting Officer)

/s/ JAMES W. CHRISTMAS Director April 17, 1996
- ---------------------------------------------
James W. Christmas
</TABLE>

II-17
<PAGE> 93

SIGNATURES

KCS POWER MARKETING, INC.

By: /s/ HENRY A. JURAND
--------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

/s/ HENRY A. JURAND Vice President and Director April 17, 1996
- --------------------------------------------- (Principal Financial
Henry A. Jurand Officer and Principal
Accounting Officer)

/s/ THOMAS F. WITHKA President, COO and Director April 17, 1996
- ---------------------------------------------
Thomas F. Withka
</TABLE>

II-13

<PAGE> 94

SIGNATURES

KCS ENERGY RISK MANAGEMENT, INC.

By: /s/ HENRY A. JURAND
-------------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ DAVID R. PRUNER President and Director April 17, 1996
- --------------------------------------------- (Principal Executive
David R. Pruner Officer)

/s/ HENRY A. JURAND Vice President and Director April 17, 1996
- --------------------------------------------- (Principal Financial
Henry A. Jurand Officer and Principal
Accounting Officer)
</TABLE>

II-14
<PAGE> 95

SIGNATURES

NATIONAL ENERDRILL CORPORATION

By: /s/ HENRY A. JURAND
-------------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ JAMES W. CHRISTMAS President and Director April 17, 1996
- --------------------------------------------- (Principal Executive
James W. Christmas Officer)

/s/ HENRY A. JURAND Vice President (Principal April 17, 1996
- --------------------------------------------- Financial Officer and
Henry A. Jurand Principal Accounting
Officer)

/s/ C. R. DEVINE Director April 17, 1996
- ---------------------------------------------
C. R. Devine
</TABLE>

II-15
<PAGE> 96

SIGNATURES

PROLIQ, INC.

By: /s/ HENRY A. JURAND
------------------------------------
Name: Henry A. Jurand
Title: Vice President and Secretary

POWER OF ATTORNEY

/s/ HENRY A. JURAND Vice President and Director April 17, 1996
- --------------------------------------------- (Principal Financial
Henry A. Jurand Officer and Principal
Accounting Officer)
</TABLE>

II-16
<PAGE> 97

EXHIBIT INDEX

5 -- Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.

23.1 -- Consent of Arthur Andersen LLP.

23.2 -- Consent of KPMG Peat Marwick LLP.

23.4 -- Consent of R.A. Lenser and Associates, Inc.

23.5 -- Consent of H.J. Gruy and Associates, Inc.

25 -- Statement of Eligibility of Fleet National Bank.

99.1 -- Form of Letter of Transmittal.

<PAGE> 1

EXHIBIT 5

[Mayor, Day, Caldwell & Keeton, L.L.P. Letterhead]

April 17, 1996

Board of Directors
KCS Energy, Inc.
379 Thornall Street
Edison, NJ 08837

RE: 11% Senior Notes due 2003, Series B

Gentlemen:

Reference is made to (i) the proposed issuance under the Securities
Act of 1993 (the "Securities Act") by KCS Energy, Inc., a Delaware corporation
(the "Company"), of up to $150,000,000 aggregate principal amount of its 11%
Senior Notes due 2003, Series B and the guarantee of such notes by certain
subsidiaries of the Company (the "Debt Securities") in exchange for its
outstanding 11% Senior Notes due 2003, Series A (the "Old Notes") and (ii) the
Company's Registration Statement on Form S-4 (the "Registration Statement")
with respect to such Debt Securities to be filed with the Securities and
Exchange Commission under the Securities Act. The Debt Securities are to be
issued in accordance with resolutions of the Company's Board of Directors duly
adopted on April 8, 1996 and under and pursuant to the provisions of the
Indenture dated as of January 15, 1996 between the Company, certain of its
subsidiaries and Fleet National Bank of Connecticut (now Fleet National Bank),
as trustee (the "Trustee") (such Indenture being hereinafter called the
"Indenture").

We have examined the Indenture, the global note and the certificated
notes being issued under the Indenture, and such statutes, corporate records
and documents, certificates of corporate and public officials and such other
instruments and documents as we have deemed necessary or appropriate for the
purposes of the opinions expressed herein.

Based upon the foregoing and subject to the qualifications,
limitations, assumptions and other statements set forth herein, we are of the
opinion that:

(1) the Company is a validly existing corporation under the laws of
the State of Delaware; and

<PAGE> 2
KCS Energy, Inc.
April 17, 1996
Page 2

(2) the Debt Securities when issued in exchange for the Old Notes will
be validly issued and will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms
(subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors' rights
generally from time to time in effect and subject to general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law).

The opinion expressed in paragraph (2) assumes that with respect to
Debt Securities issued under the Indenture (i) the Trustee is qualified to act
as Trustee under the Indenture (ii) the Trustee has duly executed and delivered
the Indenture, (iii) the Indenture has been duly authorized and validly
executed and delivered by the Company to the Trustee, (iv) the Indenture has
been duly qualified under the Trust Indenture Act of 1939, as amended, and (v)
such Debt Securities have been duly executed, authenticated, issued and
delivered in accordance with the provisions of the Indenture upon exchange for
the Old Notes as provided for therein.

Except as otherwise stated below, the opinions expressed herein are
based upon, and limited to, the laws of the State of Texas and the United
States and the Delaware General Corporation Law, and to case decisions reported
as of this date under such laws, and to facts known to us on this date, and we
do not undertake to provide any opinion as to any matter or to advise any
person with respect to any events or changes occurring subsequent to the date
of this letter. Our opinions as to the legality, validity, binding nature and
enforceability of the Debt Securities are based upon, and limited to, the laws
of the State of New York and the United States. The opinions expressed in this
letter are provided as legal opinions only and not as any guaranties or
warranties of the matters discussed herein, and such opinions are strictly
limited to the matters stated herein, and no other opinions may be implied.
This opinion letter is intended solely for your benefit. Without our prior
written consent, the opinions expressed herein may not be published or relied
upon by you other than in connection with the Registration Statement or the
transactions contemplated therein, or published or relied upon by any other
person in connection with any matter or in any manner whatsoever.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement.

Sincerely,

MAYOR, DAY, CALDWELL & KEETON, L.L.P.

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated December 7, 1995
and February 29, 1996 included in KCS Energy, Inc.'s Forms 10-K for the year
ended September 30, 1995 and for the year ended December 31, 1995,
respectively, and to all references to our Firm included in or made a part of
this Registration Statement.

ARTHUR ANDERSEN LLP

New York, New York
April 17, 1996

<PAGE> 1
EXHIBIT 23.2
[KPMG PEAT MARWICK LLP LETTERHEAD]

The Board of Directors
KCS Resources, Inc.

We consent to the inclusion of our report dated October 6, 1995, with respect
to the Statements of Revenues and Direct Operating Expenses for the Oil and Gas
Properties of Natural Gas Processing Co. Sold to KCS Resources, Inc., for the
years ended June 30, 1995 and 1994, and to the reference to our firm under the
heading "Experts," which appear in the Form S-4 of KCS Energy, Inc. to be filed
April 17, 1996.

/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP

Billings, Montana
April 16, 1996

<PAGE> 1
EXHIBIT 23.4

CONSENT

INDEPENDENT PETROLEUM ENGINEERS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of information from our reserve report dated
February 12, 1996 relating to the oil and gas reserves of KCS Energy, Inc. at
January 1, 1996. We also consent to the references to us under the heading
"Reserve Engineers" in such Prospectus.

R.A. LENSER & ASSOCIATES, INC.

/s/ RONALD A. LENSER
--------------------------------
Ronald A. Lenser
Registered Professional Engineer
PE No. 30558

Houston, Texas
April 11, 1996

<PAGE> 1
EXHIBIT 23.5

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of information from our reserve report dated
March 4, 1996 relating to the oil and gas reserves of KCS Energy, Inc. at
January 1, 1996. We also consent to the references to us under the heading
"Reserve Engineers" in such Prospectus.

/s/ H.J. GRUY AND ASSOCIATES, INC.
H.J. GRUY AND ASSOCIATES, INC.

Houston, Texas
April 11, 1996

<PAGE> 1
EXHIBIT 25

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

----------

FORM T-1

----------

STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE

----------

/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)

FLEET NATIONAL BANK OF CONNECTICUT
---------------------------------------------------------
(Exact name of trustee as specified in its charter)

<TABLE>
<S> <C>
Not applicable 06-0850628
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)

777 Main Street, Hartford, Connecticut 06115
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>

Patricia Beaudry, 777 Main Street, Hartford, CT 203-728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)

KCS Energy, Inc.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 06-1209796
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

379 Thornall Street
Edison, New Jersey 08837
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>

KCS Energy, Inc. 11% Senior Notes due 2003
------------------------------------------------------------------
(Title of the indenture securities)

<PAGE> 2

Item 1. General Information.

Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority to
which it is subject,

The Comptroller of the Currency,
Washington, D.C.

Federal Reserve Bank of Boston
Boston, Massachusetts

Federal Deposit Insurance Corporation
Washington, D.C.

(b) Whether it is authorized to exercise
corporate trust powers:

The trustee is so authorized.

Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.

None with respect to the trustee.

Item 16. List of exhibits.

List below all exhibits filed as a part of this statement of
eligibility and qualification.

(1) A copy of the Articles of Association of the trustee as
now in effect.

(2) A copy of the Certificate of Authority of the trustee
to do business.

(3) A copy of the Certification of Fiduciary Powers of the
trustee.

(4) A copy of the By-Laws of the trustee as now in effect.

(5) Consent of the trustee required by Section 321(b)
of the Act.

(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.

<PAGE> 3

NOTES

In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.

<PAGE> 4

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank of Connecticut, a national banking
association organized and existing under the laws of the United States, has
duly caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Hartford, and State of Connecticut, on the 9th day of June, 1995.

FLEET NATIONAL BANK OF CONNECTICUT,
AS TRUSTEE

By: /s/ Susan C. Merker
-------------------------
Its Assistant Vice President

<PAGE> 5

EXHIBIT 1

ARTICLES OF ASSOCIATION

FLEET NATIONAL BANK OF CONNECTICUT

FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Shawmut Bank
Connecticut, National Association".

SECOND. The main office of the Association shall be in Hartford, County of
Hartford, State of Connecticut. The general business of the Association shall
be conducted at its main office and its branches.

THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.

FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.

FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three milliion
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.

No holder of shares of the capital stock of any class of the corporation shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.

<PAGE> 6

The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:

a. The number of shares constituting that series and the distinctive
designation of that series;

b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which dates or dates, and whether they shall be
payable in preference to, or in anther relation to, the dividends payable to
any other class or classes or series of stock;

c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;

d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;

e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;

f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;

g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;

h. The right shares of that series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Association and whether such
rights shall be in preference to, or in another relation to, the comparable
rights of any other class or classes or series of stock; and

i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.

Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resloution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of prefeffed
stock and by the provisions of any applicable law.

Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.

Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, after payment shall have been made to the
holders of preferred stock of the full amount of dividends to which they shall
be entitled pursuant to the resolution or resolutions providing for the issue
of any other series of preferred stock, the holders of common stock shall be
entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.

Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.

The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.

<PAGE> 7

SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.

The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.

SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.

EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.

NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.

TENTH. (A) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer employee or
agent of another corporation of a partnership, joint venture, limited liability
company, trust, or other enterprise, including service with respect to an
empolyee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.

(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the
Association. With respect to proceedings to enforce a claimant's rights to
indemnification, the Association shall indemnify any such claimant in
connection with such a proceeding only as provided in subsection (d) herof.

(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.

(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.

(e) Non-Exclusivity of Rights. The rights to indeminification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.

(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.

ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.

I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.

Secretary/Assistant Secretary
- --------------------------------------------------

Dated at , as of .
--------------------------------------- --------------------

Revision of January 11, 1993

<PAGE> 8

EXHIBIT 2

[LOGO]

- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------

Washington, D.C. 20219

CERTIFICATE

I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:

(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.

(2) "Fleet National Bank of Connecticut", Hartford, Connecticut,
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.

IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
28th day of December, 1995.

/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency

<PAGE> 9
EXHIBIT 3

[LOGO]

Washington, D.C. 20219

Certification of Fiduciary Powers

I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank of Connecticut",
Hartford, Connecticut, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.

IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
28th day of December, 1995.

/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency

489
<PAGE> 10

EXHIBIT 4

AMENDED AND RESTATED BY-LAWS OF

FLEET NATIONAL BANK OF CONNECTICUT

ARTICLE I

MEETINGS OF SHAREHOLDERS

Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.

If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
of which special notice shall be given in accordance with the provisions of
law, and of these bylaws.

Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.

Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the share
holders shall be mailed, postage prepaid, at least ten (10) days before the
date of the meeting to each shareholder of record entitled to vote thereat at
his address as shown upon the books of the Association; but any failure to mail
such notice to any shareholder or any irregularity therein, shall not affect
the validity of such meeting or of any of the proceedings therat. Notice of a
special meeting shall also state the purpose of the meeting.

Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.

Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cahsier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.

<PAGE> 11

Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor or more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names or more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.

Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meetings by written consent of the shareholders.

ARTICLE II

DIRECTORS

Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.

Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.

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<PAGE> 12

Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.

Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.

Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.

Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.

Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.

Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.

Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such meeting shall constitute presence in person
at such a meeting.

Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.

Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.

Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.

ARTICLE III

COMMITTEES OF THE BOARD

Section 1. Executive Committee. The board of directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee with full voting powers not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee of or, in his absence, a member of the Committee
chosen by a majority of the members present shall preside at meetings of the
Executive Committee.

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<PAGE> 13
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts. All acts done and powers and authority conferred by
the Executive Committee, from time to time, within the scope of its authority,
shall be deemed to be, and may be certified as being, the acts of and under the
authority of the Board.

Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board may determine from time to time.

Section 3. Audit Committee. The Board shall appoint from its memebers and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.

The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls,including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.

The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.

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<PAGE> 14

Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.

Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.

Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.

Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.

Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.

Section 9. Quorum. A majority of a Committee fo the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place instead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.

Section 10. Record. The committes of the Board of Directors hall keeep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.

Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.

Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.

ARTICLE IV

WAIVER OF NOTICE OF MEETINGS

Section 1. Waiver. Whenever notice is required to be given to any shareholder
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.

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ARTICLE V

OFFICERS AND AGENTS

Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, and Auditor, a Controller, one or more Trust Officers and
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.

Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.

Section 3. President. The president shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.

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<PAGE> 16

Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.

Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.

Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.

Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.

Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.

ARTICLE VI

TRUST DEPARTMENT

Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.

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ARTICLE VII

BRANCH OFFICES

Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.

Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.

ARTICLE VIII

SIGNATURE POWERS

Section 1. Authorization. The power of officers, empolyees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.

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<PAGE> 18

ARTICLE IX

STOCK CERTIFICATES AND TRANSFERS

Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.

Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to tiem by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.

Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.

Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.

Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.

ARTICLE X

THE CORPORATE SEAL

Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.

ARTICLE XI

BUSINESS HOURS

Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business each day, except Saturdays,
Sundays and days recognized by the laws of the State of Rhode Island as legal
holidays, for such hours as the President, or such other officer as the Board
of Directors shall from time to time designate, may determine as to each
office to conform to local custom and convenience, provided that any one or
more of the main and branch offices or certain departments thereof may be open
for such hours as the President, or such other officer as the Board of
Directors shall from time to time designate, may determine as to each office or
department on any legal holiday on which work is not prohibited by law, and
provided further that any one or more of the main and branch offices or certain
departments thereof may be ordered closed or open on any day for such hours as
to each office or department as the President, or such other officer as the
Board of Directors shall from time to time designate, subject to applicable
laws and regulations, may determine when such action may be required by reason
of disaster or other emergency condition.

ARTICLE IX

CHANGES IN BY-LAWS

Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.

A true copy

Attest:

Secretary/Assistant Secretary
- ---------------------------------------

Dated at , as of .
--------------------------------------- ----------------------

Revision of January 11, 1993

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<PAGE> 19
EXHIBIT 5

CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939

The undersigned, as Trustee under the Indenture to be entered into between
Newcourt Receivables Asset Trust and Fleet National Bank of Connecticut,
as Trustee, does hereby consent that, pursuant to Section 321(b) of the Trust
Indenture Act of 1939, reports of examinations with respect to the undersigned
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.

FLEET NATIONAL BANK OF CONNECTICUT,
as Trustee

By /s/ Susan C. Merker
-------------------------------
Its: Assistant Vice President

Dated: March 8, 1996

<PAGE> 20

EXHIBIT 6

<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036

Federal Deposit Insurance Corporation
OMB Number: 3064-0052

Office of the Comptroller of the Currency
OMB Number: 1557-0081

FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------

Please refer to page i, / 1 /
[LOGO] Table of Contents, for
the required disclosure
of estimated burden.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE> 21
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(951231)
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1995 -----------
(RCRI 9999)

This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).

This report form is to be filed by banks with branches and consolidation
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.

- --------------------------------------------------------------------------------

NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.

-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report

of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.

/s/ GIRO DEROSA
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Re

port

January 25, 1996
- --------------------------------------------------------------------------------
Date of Signature

The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.

We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.

/s/ GUNNAR S. OVERSTROM
- --------------------------------------------------------------------------------
Director (Trustee)

/s/ JOEL B. ALVORD
- --------------------------------------------------------------------------------
Director (Trustee)

/s/ DAVID L. EYLES
- --------------------------------------------------------------------------------
Director (Trustee)

- --------------------------------------------------------------------------------

<PAGE> 22

FOR BANKS SUBMITTING HARD COPY REPORT FORMS:

STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Feserve District Bank.

STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Crofton, MD 21114.

NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Crofton, MD 21114.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___
FDIC Certificate Number | 1 | 0 | 5 | 8 | 2 | |
______________________ CALL NO. 190 31 12-31-95
(RCRI 9050)
CERT: 02499 10582 STBK 09-0590

FLEET NATIONAL BANK OF CONNECTICUT
777 MAIN STREET
HARTFORD, CT 06115
| |
___ ___

Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>

<PAGE> 23
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________

TABLE OF CONTENTS

SIGNATURE PAGE Cover

REPORT OF INCOME

Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-3
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8

REPORT OF CONDITION

Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities.................................................RC-4,5
Schedule RC-C--Loans and Lease Fianancing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities.......................................RC-9,10
Schedule RC-F--Only Assets.................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBF's.................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items..................................RC-14,15
Schedule RC-M--Memoranda................................................RC-16,17
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-18,19
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-20,21
Schedule RC-R--Risk-Based Captial.......................................RC-22,23
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Conditions and Income....................................................RC-24
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)

<PAGE> 24

DISCLOSURE OF ESTIMATED BURDEN

The estimated average burden associated with this information collection is
30.7 hours per respondent and is estimated to vary from 15 to 200 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs. Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:

Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551

Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219

Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429

For information or assistance, national and state nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800)688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115 Page RI-1
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>

<PAGE> 25

Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|

Consolidated Report of Income
for the period January 1, 1995 - December 31, 1995

All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.
file
Schedule RI--Income Statement ________
| 1480 |
|________|
_______________________________________________________________________________________________ ___________|________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate ................................................... | 4011 382,429 | 1.a.(1)(a)
(b) Loans to depository institutions ............................................... | 4019 732 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ............ | 4024 309 | 1.a.(1)(c)
(d) Commercial and industrial loans ................................................ | 4012 466,509 | 1.a.(1)(d)
(e) Acceptances of other banks ..................................................... | 4026 70 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................. | 4054 813 | 1.a.(1)(f)(1)
(2) Other ...................................................................... | 4055 52,452 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ......................... | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ........................................................ | 4503 240 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations ..................................................... | 4504 2,486 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ............................................ | 4058 59,226 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... | 4059 0 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases ..................................................................... | 4505 1,015 | 1.b.(1)
(2) Tax-exempt leases .................................................................. | 4307 0 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ................................................................ | 4105 7 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... | 4106 4,751 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations .... | 4027 187,576 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................. | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities .......................................................... | 4507 3 | 1.d.(2)(b)
(3) Other domestic debt securities ..................................................... | 3657 78,170 | 1.d.(3)
(4) Foreign debt securities ............................................................ | 3658 223 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) .......................... | 3659 6,646 | 1.d.(5)
e. Interest income from assets held in trading accounts ................................... | 4069 0 | 1.e.
______________________

____________
(1) Includes interest income on time certificates of deposit not held for trading.
</TABLE>

<PAGE> 26

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 11,399 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,255,056 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,111 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 25,029 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 49,772 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 102,210 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 120,235 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 38,926 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 213,972 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other money borrowed ............................... | 4185 134,947 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 833 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 19,159 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 713,194 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 541,862 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 5,258 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 84,978 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 65,848 | 5.b.
c. Trading gains (losses) and fees from foreign exchange transactions .. | 4075 1,436 | 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 0 | 5.d.
e. Other gains (losses) and fees from trading assets and liabilities ... | 4077 1,422 | 5.e.
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 59,418 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 54,976 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 268,078 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | (6) | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 300 | 6.b.
| ////////////////// |___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 277,219 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 88,758 | 7.b.
c. Other noninterest expense* .......................................... | 4092 390,919 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 756,896 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 48,080 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 20,832 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 27,248 | 10.
_________________________________________________

____________
*Describe on Schedule RI-E--Explanations.
</TABLE>

<PAGE> 27
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |
___________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 27,248 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION> __________
______|__I481__|
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 0 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 0 | M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above ........ | 4309 0 | M.3.
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Taxable equivalent adjustment to "Income (loss) before income taxes and extraordinary | ////////////////// |
items and other adjustments" (item 8 above) ..................................................... | 1244 1,837 | M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 5,002 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(included in schedule RI, items 5.c and 5.e): | //// Bil Mil Thou |
a. Interest rate esposures ...................................................................... | 8757 1,442 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 1,416 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (13,220)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (6,842)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 0 | M.9.c.

____________
*Describe on Schedule RI-E--Explanations.
</TABLE>

<PAGE> 28
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital

Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1994, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,236,358 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,236,358 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 27,248 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 125,000 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 11,330 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 97,000 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 32,197 | 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 30,000 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 1,342,473 | 14.
______________________

____________
*Describe on Schedule RI-E--Explanations.
</TABLE>

<TABLE>
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses

Part I. Charge-offs and Recoveries on Loans and Leases

| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 73,797 | 4661 17,780 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 73 | 4665 97 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 11,164 | 4617 5,987 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 412 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 3,932 | 4667 2,290 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 1,131 | 4628 269 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 0 | 4668 0 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 91,234 | 4605 26,835 | 9.
___________________________________________

</TABLE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued

Part I. Continued

Memoranda

_________________________________ ________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 1,891 | 5410 1,411 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 6,020 | 3583 2,428 | M.5.a.
b. Secured by farmLand ................................................... | 3584 104 | 3585 5 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 1,696 | 5412 65 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 19,988 | 5414 4,864 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 5,613 | 3589 1,633 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 40,376 | 3591 8,785 | M.5.e.
|_________________________________________|

Part II. Changes in Allowance for Loan and Lease Losses
_____________________

Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
1. Balance originally reported in the December 31, 1994, Reports of Condition and Income ......... | 3124 283,800 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 26,835 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 91,234 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 5,258 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 42,284 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 266,943 | 6.
|____________________|
____________
*Describe on Schedule RI-E--Explanations.

Schedule RI-C--Applicable Income Taxes by Taxing Authority

Schedule RI-C is to be reported with the December Report of Income.
| I489 | <-
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 17,383 | 1.
2. State and local................................................................................ | 4790 3,449 | 2.
3. Foreign ....................................................................................... | 4795 0 | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 20,832 | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | (69,592)| ////////////////// | 5.
__________________________________________________

</TABLE>

<PAGE> 29

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-D--Income from International Operations

For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.

Part I. Estimated Income from International Operations

__________
| I492 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
<TABLE>
<CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>

<PAGE> 30

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Explanations

Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.

Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 |______________________________________________________________________________| 4461 33,165 | 1.d.
___________ REIMBURSEMENT FROM AFFILIATES
e. | TEXT 4462 |______________________________________________________________________________| 4462 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 23,094 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 |______________________________________________________________________________| 4464 166,229 | 2.e.
___________ MERGER & RESTRUCTURING CHARGES
f. | TEXT 4467 |______________________________________________________________________________| 4467 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 |______________________________________________________________________________| 4496 | 6.a.
___________
b. | TEXT 4497 |______________________________________________________________________________| 4497 | 6.b.
_____________
______________________
</TABLE>

<PAGE> 31

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________ CAPITAL CONTRIBUTION FROM THE PARENT COMPANY
a. | TEXT 4498 |______________________________________________________________________________| 4498 30,000 | 7.a.
___________
b. | TEXT 4499 |______________________________________________________________________________| 4499 | 7.b.
_____________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4521 | ADJUSTMENT DUE TO BARCLAY'S ACQUISITION
|______________________________________________________________________________| 4521 41,743 | 8.a.
_____________ SCC TRANSFER
b. | TEXT 4522 |______________________________________________________________________________| 4522 541 | 8.b.
_____________
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | <-
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>

<PAGE> 32

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for December 31, 1995

All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.

Schedule RC--Balance Sheet
__________
| C400 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 1,363,000 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 50,200 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 3,197 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 4,048,366 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 205,800 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 11,528,458 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 266,943 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (it

em 4.a minus 4.b and 4.c) ..................................... | 2125 11,261,515 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 840 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 163,677 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 684 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 7,330 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 310,314 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 714,575 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 18,129,498 | 12.
______________________

____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>

<PAGE> 33

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... | RCON 2200 10,797,121 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 3,401,997 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 7,395,124 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 431,872 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 431,872 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 2,699,716 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 40,059 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 304,843 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 814 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With original maturity of one year or less ............................................ | RCFD 2332 1,557,198 | 16.a.
b. With original maturity of more than one year .......................................... | RCFD 2333 131,588 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 9,173 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 7,330 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 440,000 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 367,311 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 16,787,025 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 955,984 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 238,795 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 3,207 | 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 1,342,473 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 18,129,498 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1994 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)

____________
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
</TABLE>

<PAGE> 34

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 | <-
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 257,049 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 56,466 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 200,583 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 722,819 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 722,819 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 51,241 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 0 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 51,241 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 382,091 | 0090 382,091 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 1,413,200 | 0010 1,413,200 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 722,619 | M.1.
______________________
</TABLE>

Schedule RC-B--Securities
Exclude assets held in trading accounts.
<TABLE>
_______
| C410 |

___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 994,774 | 1287 987,179 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 335,490 | 1298 335,336 | 2.b.
_____________________________________________________________________________________

_____________
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home
Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing
Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>

<PAGE> 35

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued

_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ////////// ////// |
a. General obligations ......... | 1676 0 |1677 0 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 47 |1686 52 | 1690 0 | 1691 0 | 3.b.
c. Industrial development ...... | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations ........| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 917 | 1702 917 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 0 |1705 0 | 1706 1,459,829 | 1707 1,468,551 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 0 |1710 0 | 1711 4,961 | 1713 5,044 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 83,871 | 1717 85,311 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 320,670 | 1736 318,092 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities | 1737 0 |1738 0 | 1739 717,383 | 1741 723,027 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 2,900 |1743 2,900 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 8,471 | 1748 8,471 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 116,438 | 1753 116,438 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 3,197 | 1771 3,202 | 1772 4,042,804 | 1773 4,048,366 | 7.
____________ |__________________________________________________________________________________|
1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.

</TABLE>
14

<PAGE> 36

<CAPTION>
___________
Memoranda | C412 | <-
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,835,053 | M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual status):| ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 341,085 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 145,034 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,473,872 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 785,951 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 3,745,942 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 177,962 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 2,750 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 180,712 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 3,926,654 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2)(5) (to be | ////////////////// |
completed by all banks ........................................................................ | 5519 0 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale. | ////////////////// |
or transfer ................................................................................... | 1778 3,221,535 | m.7.
8. High-Risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items.2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
____________
(2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete supplemental Schedule RC-J.
(5) For commercial banks, the debt securities included in Memorandum item 6 will also have been reported in Memorandum item
2.b. above. For savings bank, the debt securities included in Memorandum item 6 will also have been reported in supplemental
Schedule. RC-J, part I, item 4. Savings banks should note that available-for-sale cash debt securities are reported at fair
value in Memorandum item 6 and at amortized cost in Schedule RC-J.

</TABLE>

<PAGE> 37

City, State Zip: HARTFORD, CT 06115
<TABLE>
<CAPTION>
Schedule RC-C--Loans and Lease Financing Receivables

Part I. Loans and Leases

____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 4,366,800 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 57,923 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 584 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 380,335 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 2,632,460 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 212,499 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 63,227 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 1,019,772 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 8,656 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 8,656 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 0 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 0 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 0 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 962 | 1590 962 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 5,421,227 | 1763 5,421,227 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 0 | 1764 0 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 1,096 | 1756 1,096| 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 572,541 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 31,493 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans) . | 2011 541,048 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 34,682 | 2107 34,682 | 8.
9. Other loans ............................................................ | 1563 1,134,145 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured) . | ////////////////// | 1545 43,527 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,090,618 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 7,046 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 7,046 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 18,697 | 2123 18,697 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a) . | 2122 11,528,458 | 2122 11,528,458 | 12.
___________________________________________
</TABLE>

<PAGE> 38

Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 34,952 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 627,991 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 91,775 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 883,482 | M.3.a.(3)
(4) Over five years ................................................. | 0357 1,974,606 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 3,577,854 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 3,811,759 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 809,284 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 3,175,427 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 107,097 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 7,903,567 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 11,481,421 | M.3.c.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 54,772 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// |_____________________
residential properties (included in Schedule RC-C, part I, item | ////////////////// | RCON Bil Mil Thou |
| ////////////////// |____________________
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 918,495 | M.6.
___________________________________________

_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.

Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________

_________
17 | C420 |
__________________________________________________________________________________________________ _______________|________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices ........................................ | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 840 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 0 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 840 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES _________________________
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 814 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 814 | 15.
___________________________
</TABLE>

<PAGE> 39

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-9
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities

Part I. Deposits in Domestic Offices
__________
| C425 | <-
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 2,628,372 | 2240 2,505,998 | 2346 7,107,737 | 1.
2. U.S. Government ...................................... | 2202 53,678 | 2280 53,432 | 2520 120 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 163,019 | 2290 132,660 | 2530 133,788 | 3.
4. Commercial banks in the U.S. ......................... | 2206 554,474 | 2310 554,474 | ////////////////// | 4.
a. U.S. branches and agencies of foreign banks ....... | ////////////////// | ////////////////// | 2347 0 | 4.a.
b. Other commercial banks in the U.S. ................ | ////////////////// | ////////////////// | 2348 500 | 4.b.
5. Other depository institutions in the U.S. ............ | 2207 101,483 | 2312 101,483 | 2349 0 | 5.
6. Banks in foreign countries ........................... | 2213 1,730 | 2320 1,730 | ////////////////// | 6.
a. Foreign branches of other U.S. banks .............. | ////////////////// | ////////////////// | 2367 0 | 6.a.
b. Other banks in foreign countries .................. | ////////////////// | ////////////////// | 2373 0 | 6.b.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 1,023 | 2300 1,023 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 51,197 | 2330 51,197 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 3,554,976 | 2210 3,401,997 | 2385 7,242,145 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 888,500 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,195,257 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 0 | M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,195,257 | M.1.c.(2)
d. Total deposits denominated in foreign currencies ............................................ | 3776 0 | M.1.d.
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 226,852 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 1,491,520 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 1,862,085 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 2,386,133 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 1,502,407 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 152,979 | M.3.
______________________
</TABLE>

<PAGE> 40

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-10
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued

Part I. Continued

Memoranda (continued)
_________________________________________________________________________________________________________________________________
| Deposit Totals for FDIC Insurance Assessments ______________________ |
| Dollar Amounts in Thousands | RCON Bil Mil Thou | |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
| 4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C) |/////////////////// | |
| (must equal Schedule RC, item 13.a) ......................................................... | 2200 10,797,121 | M.4. |
| | ////////////////// | |
| a. Total demand deposits (must equal item 9, column B) ...................................... | 2210 3,401,997 | M.4.a.|
| b. Total time and savings deposits(1) (must equal item 9, column A plus item 9, column C | ////////////////// | |
| minus item 9, column B) .................................................................. | 2350 7,395,124 | M.4.b.|
______________________

| ____________ |
| (1) For FDIC insurance assessment purposes, "total time and savings deposits" consists of nontransaction accounts and all |
| transaction accounts other than demand deposits. |
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more | ////////////////// |
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing | ////////////////// |
frequency of:(1) | ////////////////// |
a. Three months or less ....................................................................... | 0359 326,126 | M.5.a.
b. Over three months through 12 months (but not over 12 months) ............................... | 3644 1,116,701 | M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1) | ////////////////// |
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 2761 377,758 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | 2762 268,933 | M.6.a.(2)
(3) Over one year through five years ....................................................... | 2763 852,593 | M.6.a.(3)
(4) Over five years ........................................................................ | 2765 3,123 | M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of | ////////////////// |
Memorandum items 6.a.(1) through 6.a.(4)) .............................................. | 2767 1,502,407 | M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing frequency of:| ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4568 0 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4569 0 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4571 0 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | 4572 0 | M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of | ////////////////// |
Memorandum items 6.b.(1) through 6.b.(4)) .............................................. | 4573 0 | M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5) | ////////////////// |
and 6.b.(5)) (must equal Memorandum item 2.c. above) ....................................... | 6645 1,502,407 | M.6.c.
______________________

_____________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>

<PAGE> 41

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-11
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued

Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)

______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 401,872 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 30,000 | 2.
3. Foreign banks (including U.S. branches and | ////////////////// |
agencies of foreign banks, including their IBFs) .............................................. | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 431,872 | 7.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 56,906 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 158,056 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 18,275 | 3.
4. Other (itemize amounts that exceed 25% of this item) ......................................... | RCFD 2168 481,338 | 4.
_____________ ___________________________
a. | TEXT 3549 |____________________________________________________| RCFD 3549 | | /////////////////////// | 4.a.
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 714,575 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 44,239 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 300,519 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 0 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize amounts that exceed 25% of this item) ......................................... | RCFD 2938 22,553 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 367,311 | 5.
___________________________

____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>

<PAGE> 42

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-12
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 | <-
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 7,330 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 7,330 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 205,800 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 2,739,775 | 4.
5. Other borrowed money ............................................................................ | 3190 1,688,786 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 381,872 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 18,079,498 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 16,355,152 | 9.
______________________

</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 987,429 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 335,336 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 47 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 1,469,468 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 5,044 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 85,311 | 13.b.(1)
(2) Other pass-through securities ........................................................... | 2253 318,092 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 723,027 | 14.
15. Foreign debt securities ........................................................................ | 3160 2,900 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 8,471 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 116,438 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 4,051,563 | 17.
______________________

</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)

______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 N/A | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>

<PAGE> 43

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-13
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-I--Selected Assets and Liabilities of IBFs

To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 | <-
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) .................. | 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ...................................................................................... | 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) ..... | 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ...................................... | 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ........................................................................ | 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ...... | 2381 N/A | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 | <-
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions ............................... | RCFD 3381 16,087 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ....... | RCFD 3382 2,872,045 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... | RCFD 3383 49 | 3.
4. a. Other debt securities(2) .............................................................. | RCFD 3647 1,101,314 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . | RCFD 3648 117,774 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices | /////////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs ...................... | RCFD 3365 160,423 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ....................................................................... | RCON 3360 11,541,536 | 6.a.(1)
(2) Loans secured by real estate ...................................................... | RCON 3385 4,433,576 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... | RCON 3386 2,734 | 6.a.(3)
(4) Commercial and industrial loans ................................................... | RCON 3387 5,556,473 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... | RCON 3388 600,686 | 6.a.(5)
| /////////////////////// |
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. | RCFN 3360 0 | 6.b.
7. Trading assets ........................................................................... | RCFD 3401 5,753 | 7.
8. Lease financing receivables (net of unearned income) ..................................... | RCFD 3484 8,921 | 8.
9. Total assets (4) ......................................................................... | RCFD 3368 17,423,900 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............. | RCON 3485 167,144 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................. | RCON 3486 1,426,084 | 11.a.
b. Other savings deposits ................................................................ | RCON 3487 1,882,740 | 11.b.
c. Time certificates of deposit of $100,000 or more ...................................... | RCON 3345 1,601,542 | 11.c.
d. All other time deposits ............................................................... | RCON 3469 2,363,615 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. | RCFN 3404 451,941 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs .............. | RCFD 3353 3,225,979 | 13.
14. Other borrowed money ..................................................................... | RCFD 3355 1,839,039 | 14.
___________________________

_____________
(1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
(4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized
cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
</TABLE>

<PAGE> 44

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items

Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 454,277| 1.a.
b. Credit card lines .......................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 55,329 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 17,337 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 6,446,592 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 1,024,104 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 1,074 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 121,267 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 0 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 38,963 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 0 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold | ////////////////// |
for Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 62,825 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 56,528 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 0 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 0 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 0 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives ) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.

b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________

13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital" | 5591 0 | 13.

_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________

</TABLE>

<PAGE> 45

<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-15
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|

Schedule RC-L -- Continued

_____________
| C461 | <-
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
___________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Future contracts .............. | 0 | 0 | 0 | 0 | 14.a.
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
b. Forward contracts ............. | 60,000 | 0 | 0 | 0 | 14.b.
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
c. Exchange-traded option contracts| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
| RCFD 8701 | RCFD 8702 0 | RCFD 8703 | RCFD 8704 |
(2) Purchased options ........ | 0 | 0 | 0 | 0 | 14.c.(2)
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 70,250 | 0 | 0 | 0 | 14.d.(1)
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
(2) Purchased options ........ | 370,250 | 0 | 0 | 0 | 14.d.(2)
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
e. Swaps ............................ | 3,537,871 | 0 | 0 | 0 | 14.e.
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 191,500 | 0 | 0 | 0 | 15.
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
a. Contracts marked to market ... | 0 | 0 | 0 | 0 | 16.a.
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
b. Contracts not marked to market | 3,846,871 | 0 | 0 | 0 | 16.b.
| RCF 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
___________________________________________________________________________________|
</TABLE>

25
<PAGE> 46

Schedule RC-L -- Continued

<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in thousands |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
___________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 840 | 8734 0 | 8735 0 | 8736 0 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 814 | 8738 0 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 0 | 8742 0 | 8743 0 | 8744 0 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 0 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 4,117 | 8750 0 | 8751 0 | 8752 0 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 51,811 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|

______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 4,666,515 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 77,235 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addresses (domicile) included in Schedule RC-L, items 2 and 3, above ............... | 3377 419,235 | M.4.
5. To be completed for the September report only: | ////////////////// |
Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles ............................................. | 2741 N/A | M.5.a.
b. Credit cards and related plans .............................................................. | 2742 N/A | M.5.b.
c. All other consumer installment credit (Including mobile home loans) ......................... | 2743 N/A | M.5.c.

26
</TABLE>
<PAGE> 47

<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-17
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal |
shareholders and their related interests ..................................................... | 6164 6,676 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (Including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 4 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 21,759 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 12,023 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 1,173,885 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 50,802 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 1,913,154 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 3,879,382 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 7,330 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 0 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 26,116 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 3,834 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 280,364 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 310,314 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 0 | 7.
______________________

- ------------
(1) Do not report federal funds sold and securities purchased under agreements to resell with other
commercial banks in the U.S. in this item.

</TABLE>
27

<PAGE> 48

<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATINAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|

Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 0 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 517 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 0 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 167 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 684 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 0 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 0 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 0 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 0 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in itmes 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 0 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 0 | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 0 | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>

<PAGE> 49

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-19
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets

The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | <-
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 74,980 | 1246 18,839 | 1247 36,031 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 0 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ////////////////// | ////////////////// | ////////////////// |
acceptances of other banks: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ////////////////// | ////////////////// | ////////////////// |
institutions ................................. | 5377 0 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 0 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ////////////////// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 17 | 1597 0 | 1583 2 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 16,064 | 1252 1,062 | 1253 26,685 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 0 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ////////////////// | ////////////////// | ////////////////// |
other personal expenditures: | ////////////////// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 592 | 5384 162 | 5385 149 | 5.a.
b. Other (includes single payment, installment, | ////////////////// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 17,822 | 5387 1,880 | 5388 1,749 | 5.b.
6. Loans to foreign governments and official | ////////////////// | ////////////////// | ////////////////// |
institutions .................................... | 5389 0 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 4,902 | 5460 435 | 5461 1,118 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 57 | 1258 0 | 1259 0 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 0 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ////////////////// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 0 | 3506 0 | 3507 0 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================

Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.

________________________________________________________________
10. Loans and leases reported in items 1 | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
through 8 above which are wholly or partially | ////////////////// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 1,479 | 5613 321 | 5614 251 | 10.
a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 1,252 | 5616 248 | 5617 225 | 10.a.
________________________________________________________________
</TABLE>

<PAGE> 50

nts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ////////////////// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ////////////////// | /////////////////// | ///////////////// |
reported in Schedule RC-C, part I, Memorandum | ////////////////// | /////////////////// | ///////////////// |
item 2) ......................................... | 1658 0 | 1659 0 | 1661 1,578 | M.1.
2. Loans to finance commercial real estate, | ////////////////// | /////////////////// | ///////////////// |
construction, and land development activities | ////////////////// | /////////////////// | ///////////////// |
(not secured by real estate) included in | ////////////////// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 4,511 | 6559 0 | 6560 1,403 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ////////////////// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 2,261 | 2769 268 | 3492 378 | M.3.a.
b. Secured by farmland .......................... | 3493 0 | 3494 0 | 3495 139 | M.3.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ////////////////// | ////////////////// | ////////////////// |
1-4 family residential properties and | ////////////////// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 4,446 | 5399 2,091 | 5400 2,628 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ////////////////// | ////////////////// | ////////////////// |
residential properties ................... | 5401 39,576 | 5402 12,419 | 5403 10,421 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ////////////////// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 1,336 | 3500 175 | 3501 520 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 27,361 | 3503 3,886 | 3504 21,945 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// |
commodity and equity contracts: | ////////////////// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 0 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ////////////////// | ////////////////// |
positive replacement cost .................... | 3529 0 | 3530 0 | M.4.b.
___________________________________________
</TABLE>

<PAGE> 51

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-21
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION> ______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 N/A | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 0 | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 0 | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 N/A | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 182,201 | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 0 | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 0 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 8,343 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 0 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 0 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.a) ...................................................................... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.b) ...................................................................... | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 0 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________

_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 292,130 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________

______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>

<PAGE> 52

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued

Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collections were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 2,235 | 11.c.
____________________

Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
________________________________________________________________________________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less .................................... | 2702 6,065,796 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) ..........................|RCON 3779________N/A | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 .................................. | 2710 4,731,325 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 .............|RCON 2722______7,493 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.

Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits that the ____________YES_______NO__
estimated described above ............................................................... |RCON 6861| |///| x | M.2.a.

____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.

_____________________________________________________________________________________________________________________________
| C477 | <-
Person to whom questions about the Reports of Condition and Income should be directed: __________

PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)

</TABLE>

<PAGE> 53

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-23
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Risk-Based Capital

This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1994, must complete items 2 through 9 and Memorandum item 1 and 2. Banks with assets of less than
$1 billion must complete items 1 and 2 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed
____________
only by banks with total assets of less than $1 billion. Indicate in the appropriate | C480 | <-
_____|__________|
box at the right whether the bank has total capital greater than or equal to eight percent | YES NO |
____________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
| and Intermediate | Limited- |
Item 2 is to be completed by all banks. | Term Preferred | Life Capital |
| Stock | Instruments |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | ////////////////// | ////////////////// |
weighted average maturity of at least five years) with a remaining | ////////////////// | ////////////////// |
maturity of: | ////////////////// | ////////////////// |
a. One year or less ...................................................... | 3780 0 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 0 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 0 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 440,000 | 3791 0 | 2.f.
___________________________________________

3. Not applicable

___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memorandum item 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
4. Assets and credit equivalent amounts of off-balance sheet items assigned | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 995,941 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 615,688 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 0 | 4.b.
___________________________________________

______________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in column A.
</TABLE>

<PAGE> 54

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 12/31/95 ST-BK: 09-0590
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 21,803 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 2,925,314 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 50,397 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 2,913,084 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 62,727 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 10,920,564 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 3,386,096 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 4,047 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 18,396,441 | ////////////////// | 9.
___________________________________________

Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards ...................................................................| 8764 4,957| M.1.
|___________________|

| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|____Tril____________|_____Tril___________|____Tril____________|
2. Notional principal amounts of <C> <C> <C> <C>
a. Interest rate contracts ................. | 3809 1,233,650 | 8766 2,389,471 | 8767 0 | M.2.a.
b. Foreign exchange contracts .............. | 3812 0 | 8769 0 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 0 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 0 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|______________________________________________________________|

_________________
1) Do not report in column B the risk-weighted amount of assets reported in column A.
2) Include the difference between the fair value and the amortized cost of available-for-sale securities in item 8 and report
the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or
portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables as well as
any portion of the allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital.
3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.

</TABLE>

THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- -------------------------------------------------------------------------------------------------------------------------------
| OMB No. For OCC: 1557-0081
Name and address of Bank | OMB No. For FDIC: 3064-0052
| OMB No. For Federal Reserve: 7100-0036
| Expiration Date: 3/31/96
|
PLACE LABEL HERE |
| SPECIAL REPORT
| (Dollar Amounts in Thousands)
|
|___________________________________________________________________
| CLOSE OF BUSINESS| FDIC Certificate Number | |
| DATE | | C-700 | <-
| 12/31/95 | |0|2|4|9|9 | |
__________________________________________________________________________________________________________________________________
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- ----------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to
their executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions of credit were made during the period, insert "none"
against subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See
Sections 215.2 and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation 0) for the definitions
of "executive officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to directors and
principal shareholders who are not executive officers.
________________________________________________________________________________________________________________________________

________________________________________________________________________________________________________________________________

________________________________________________________________________________________________________________________________
SIGNATURE OF TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
|
________________________________________________________________________________________________________________________________
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
|
ROBERT P. DUFF VICE PRESIDENT | (203) 986-2474
|
________________________________________________________________________________________________________________________________
FDIC 8040/53 (6-95)

</TABLE>

<PAGE> 1

EXHIBIT 99.1

KCS ENERGY, INC.

LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING 11% SENIOR NOTES DUE 2003, SERIES A
IN EXCHANGE FOR
11% SENIOR NOTES DUE 2003, SERIES B

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996, UNLESS EXTENDED (THE "EXPIRATION DATE")

OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE

DELIVER TO THE EXCHANGE AGENT:

FLEET NATIONAL BANK

<TABLE>
<S> <C>
By Hand/Overnight Courier: By Mail:
Fleet National Bank Fleet National Bank
777 Main Street 777 Main Street
MSN CT/MO/0224 MSN CT/MO/0224
Hartford, Connecticut 06115 Hartford, Connecticut 06115
Attention: Corporate Trust Operations Attention: Corporate Trust Operations
</TABLE>

By Facsimile:
(860) 986-7908

Confirm by Telephone:
(860) 986-1271
------------------------

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.

The undersigned hereby acknowledges receipt and review of the Prospectus
dated , 1996 (the "Prospectus") of KCS Energy, Inc. (the "Company")
and this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange its 11% Senior
Notes due 2003, Series B (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which the Prospectus is a part, for a like principal
amount of its issued and outstanding 11% Senior Notes due 2003, Series A (the
"Old Notes"). Capitalized terms used but not defined herein have the respective
meaning given to them in the Prospectus.

The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The Company
shall notify the holders of the Old Notes of any extension by oral or written
notice and will mail to the record holders of Old Notes an announcement thereof,
each prior to 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.

This Letter of Transmittal is to be used by a holder of Old Notes either if
original Old Notes, if available, are to be forwarded herewith or if delivery of
Old Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer -- Procedures for Tendering" and "Book-Entry
Transfer." Holders of Old Notes whose Old Notes are not immediately available,
or who are unable to deliver their Old Notes and all other documents required by
this Letter of Transmittal to the Exchange Agent on or prior to the Expiration
Date, or who are unable to complete the procedure for book-entry transfer on a
timely basis, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures." See Instruction 1. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.

The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the
<PAGE> 2

undersigned desires to take with respect to the Exchange Offer. Holders who wish
to tender their Old Notes must complete this Letter of Transmittal in its
entirety.

PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.

THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.

List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal amounts
on a separate signed schedule and affix the list to this Letter of Transmittal.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- -----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S) EXACTLY AS NAME(S)
APPEAR(S) ON OLD NOTES
(PLEASE FILL IN, IF BLANK) OLD NOTE(S) TENDERED
- -----------------------------------------------------------------------------------------------------------

AGGREGATE PRINCIPAL PRINCIPAL
REGISTERED AMOUNT REPRESENTED BY AMOUNT
NUMBER(S)* NOTE(S) TENDERED**
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the
entire aggregate principal amount represented by such Old Notes. All tenders must be in integral
multiples of $1,000.
- -----------------------------------------------------------------------------------------------------------
</TABLE>

/ / CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.

/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):

Name of Tendering Institution:..................................................

Account Number:.................................................................

Transaction Code Number:........................................................

/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):

Name(s) of Registered holder(s) of Old Notes:...................................

Date of Execution of Notice of Guaranteed Delivery:.............................

Window Ticket Number (if available):............................................

Name of Eligible Institution that Guaranteed Delivery:..........................

Account Number (if delivered by book-entry transfer):...........................

/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:

Name:...........................................................................

Address:........................................................................
<PAGE> 3

SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent, the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of the Exchange
Offer. The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.

The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Company.

The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC") that
the Exchange Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof (other than (i) a broker-dealer who purchased Old Notes exchanged for
such Exchange Notes directly from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act or (ii) any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders are
not participating in, and have no arrangement with any person to participate in,
the distribution of such Exchange Notes. The undersigned specifically
represent(s) to the Company that (i) any Exchange Notes acquired in exchange for
Old Notes tendered hereby are being acquired in the ordinary course of business
of the person receiving such Exchange Notes, whether or not the undersigned,
(ii) the undersigned is not participating in, and has no arrangement with any
person to participate in, the distribution of Exchange Notes, and (iii) neither
the undersigned nor any such other person is an "affiliate" (as defined in Rule
405 under the Securities Act) of the Company or a broker-dealer tendering Old
Notes acquired directly from the Company for its own account.

If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account pursuant to
the Exchange Offer, the undersigned acknowledges that it or such other person
will deliver a prospectus in connection with any resale of such Exchange Notes.
The undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the SEC in certain
no-action letters and, in the absence of an exemption therefrom, must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Notes, in
which case the registration statement must contain the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the SEC, and (ii) a broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).

The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.

For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.

All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
<PAGE> 4

The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer--Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.

Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the Exchange Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Issuance Instructions"
and "Special Delivery Instructions" to transfer any Old Notes from the name of
the registered holder(s) thereof if the Company does not accept for exchange any
of the Old Notes so tendered for exchange.

SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)

To be completed ONLY (i) if Old Notes in a principal amount not tendered,
or Exchange Notes issued in exchange for Old Notes accepted for exchange, are
to be issued in the name of someone other than the undersigned, or (ii) if Old
Notes tendered by book-entry transfer which are not exchanged are to be
returned by credit to an account maintained by at the Book-Entry Transfer
Facility. Issue Exchange Notes and/or Old Notes to:

Name:
..............................................................................
(Please Type or Print)

..............................................................................

Address:......................................................................
..............................................................................
(include Zip Code)

..............................................................................
(Tax Identification or Social Security No.)

(Complete Substitute Form W-9)

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)

To be completed ONLY if Old Notes in the principal amount not tendered, or
Exchange Notes issued in exchange for Old Notes accepted for exchange, are to
be mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature.

Mail or deliver Exchange Notes and/or Old Notes to:

Name:
..............................................................................
(Please Type or Print)

..............................................................................

Address:......................................................................
..............................................................................
(include Zip Code)

..............................................................................
(Tax Identification or Social Security No.)

/ / Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:

Book-Entry Transfer Facility Account Number:
<PAGE> 5

------------------------------------------------------------

IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)

X...........................................................

X...........................................................
(Signature(s) of Registered Holders of Old Notes)

Dated:......................................., 1996

(The above lines must be signed by the registered holder(s)
of Old Notes as name(s) appear(s) on the Old Notes or on a
security position listing, or by person(s) authorized to
become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Old Notes to
which this Letter of Transmittal relate are held of record
by two or more joint holders, then all such holders must
sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person
acting in a fiduciary or representative capacity, then such
person must (i) set forth his or her full title below and
(ii) unless waived by the Company, submit evidence
satisfactory to the Company of such person's authority so to
act. See Instruction 5 regarding the completion of this
Letter of Transmittal, printed below.)

Name(s):....................................................
(Please Type or Print)

Capacity:...................................................

Address:....................................................

............................................................
(Include Zip Code)

Area Code and Telephone Number:.............................

------------------------------------------------------------

MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)

Certain signatures must be Guaranteed by an Eligible
Institution.

Signature(s) Guaranteed by an Eligible Institution:.........
(Authorized Signature)

............................................................
(Title)

............................................................
(Name of Firm)

............................................................
(Address, Include Zip Code)

............................................................
(Area Code and Telephone Number)

Dated:................................................, 1996

------------------------------------------------------------
<PAGE> 6

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFER

1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Notes, this Letter
of Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Old Notes should be sent to the Company.

2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot complete
the procedure for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through a firm which is a member of a registered national securities exchange or
of the National Association of Securities Dealers Inc., a commercial bank or a
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution"); (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number(s) of such Old Notes and the
total principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five business days after the
Expiration Date, this Letter of Transmittal (or facsimile hereof) together with
the Old Notes in proper form for transfer (or a Book-Entry Confirmation) and any
other documents required hereby, must be deposited by the Eligible Institution
with the Exchange Agent within five business days after the Expiration Date; and
(iii) the certificates for all physically tendered shares of Old Notes, in
proper form for transfer (or Book-Entry Confirmation, as the case may be) and
all other documents required hereby are received by the Exchange Agent within
five business days after the Expiration Date.

Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.

See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.

3. Tender by Holder. Only a holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder.

4. Partial Tenders. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering holder should fill in the principal amount tendered
in the third column of the box entitled "Description of Old Notes Tendered"
above. The entire principal amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, then Old Notes for the
principal amount of Old Notes not tendered and Exchange Notes issued in exchange
for any Old Notes accepted will be sent to the holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Old Notes are accepted for exchange.

5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever. If this Letter
of Transmittal (or facsimile hereof) is signed by a participant in the
Book-Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the holder of the Old Notes.

If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any
<PAGE> 7

tendered Old Notes, nor provide a separate bond power. In any other case, such
holder must either properly endorse the Old Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.

If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered holder or holders appears on the Old Notes.

If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.

Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.

No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered Old
Notes) and the Exchange Notes are to be issued directly to such registered
holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility,
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal (or facsimile hereof) must
be guaranteed by an Eligible Institution.

6. Special Registration and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which Exchange Notes or substitute Old
Notes for principal amounts not tendered or not accepted for exchange are to be
issued or sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.

7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.

EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.

8. Tax Identification Number. Federal income tax law requires that a holder
of any Old Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual is his or her social security number. If
the Company is not provided with the correct TIN, the holder may be subject to a
$50 penalty imposed by Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained.) Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.

To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.

The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.

9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The
<PAGE> 8

Company also reserves the absolute right to waive any conditions of the Exchange
Offer or defects or irregularities in tenders as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(includes this Letter of Transmittal and the instructions hereto) shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with regard to tenders of Old Notes nor shall any of them incur any liability
for failure to give such notification.

10. Waiver of Conditions. The Company reserves the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
Prospectus.

11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.

12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.

13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.

14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."

IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION TIME.

(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
PAYER'S NAME: KCS ENERGY, INC.

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN Social Security Number
IN THE BOX AT RIGHT AND CERTIFY
BY SIGNING AND DATING BELOW. OR Employer Identification Number

FORM W-9 --------------------------------------
---------------------------------------------------------------------------
PART 3 --
PART II -- Certification -- Under penalties of
DEPARTMENT OF THE TREASURY perjury, I certify that: Awaiting TIN / /
INTERNAL REVENUE SERVICE
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am
PAYER'S REQUEST FOR TAXPAYER waiting for a number to be issued to me) and Please complete the
IDENTIFICATION NUMBER (TIN) (2) I am not subject to backup withholding Certificate of Awaiting
either because I have not been notified by Taxpayer Identification
the Internal Revenue Service ("IRS") that I Number below.
am subject to backup withholding as a result
of failure to report all interest or dividends,
or the IRS has notified me that I am no longer
subject to backup withholding.

---------------------------------------------------------------------------

Certification Instructions -- You must cross out item (2) in Part 2 above
if you have been notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross
out item (2).

SIGNATURE DATE , 199
------------------------------- ------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 9

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9

- --------------------------------------------------------------------------------

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to be appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b)I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within 60 days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.

, 199
- -------------------------------------------- --------------------
Signature Date

- --------------------------------------------------------------------------------

CERTIFICATE FOR FOREIGN RECORD HOLDERS

Under penalties of perjury, I certify that I am not a United States citizen or
resident (or I am signing for a foreign corporation, partnership, estate or
trust).

, 199
- -------------------------------------------- --------------------
Signature Date

- --------------------------------------------------------------------------------