<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 17, 1996
KCS ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11698 22-2889587
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification No.)
379 Thornall Street
Edison, New Jersey 08837
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 632-1770
Not applicable
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
KCS Energy, Inc. has previously announced (see Exhibits 99.1 and 99.2
previously filed with this report) that it entered into a letter of intent on
October 17,1996 and a Stock Purchase Agreement on November 14, 1996 to acquire
all of the outstanding stock of Medallion.
On January 3, 1996, the Company announced it had completed the
acquisition of Medallion for a total purchase price of approximately $210
million (adjusted at closing to reflect Medallion's operations subsequent to
the July 1, 1996 effective date) in cash and warrants to purchase 435,000
shares of common stock of the Company. The warrants have a four-year term and
an exercise price of $45 per share. The cash portion of the purchase price was
funded with $55.5 million under the Company's existing revolving credit
facility (with Canadian Imperial Bank of Commerce and Bank One, Texas, National
Association and) and $105 million under a new revolving credit agreement with a
group of banks (led by Canadian Imperial Bank of Commerce) entered into in
connection with the acquisition and paid the balance of the purchase price with
available cash.
Financial statements of Medallion through June 30, 1996 and certain pro
forma financial information through June 30, 1996 reflecting the combined
operations of the Company and Medallion have been previously filed with this
report. Financial statements of Medallion and pro forma information through
September 30, 1996 have also been previously filed with this report and revised
pro forma information is being filed herewith. These statements and the pro
forma information are also reflected in a Registration Statement on Amendment
No. 2 to Form S-3 that is being filed with the Securities and Exchange
Commission on the date hereof.
1
<PAGE> 3
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information.
2
<PAGE> 4
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information is derived from the
historical financial statements of KCS Energy, Inc., the InterCoast Entities
(Medallion) and the Sawyer Canyon Properties included elsewhere in this
report.
The unaudited Pro Forma Statement of Consolidated Income for the year ended
December 31, 1995 reflects (i) the Company's Rocky Mountain Acquisition and
Michigan Acquisition, (ii) the sale of the Senior Notes, (iii) the Medallion
Acquisition (which includes Medallion's acquisition of the Sawyer Canyon
Properties in April 1996) and (iv) the Offerings and the application of the
estimated net proceeds therefrom as if each transaction had occurred on January
1, 1995.
The unaudited Pro Forma Statement of Consolidated Income for the nine
months ended September 30, 1996 reflects the Medallion Acquisition (which
includes Medallion's acquisition of the Sawyer Canyon Properties in April 1996),
the Offerings and the application of the estimated net proceeds therefrom as if
each transaction had occurred on January 1, 1995.
The unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1996
reflects the Medallion Acquisition, the Offerings and the application of the
estimated net proceeds therefrom as if each transaction had occurred on
September 30, 1996.
The unaudited pro forma financial data should be read in conjunction
with the notes thereto and the Consolidated Financial Statements of the Company
(including the notes thereto) previously filed with the Securities and
Exchange Commission. The unaudited pro forma financial data does 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 gas production declines, changes in prices received
for crude oil and gas, future acquisitions and dispositions of reserves,
changes in estimates of reserves and of the future net revenues therefrom and
other factors.
3
<PAGE> 5
KCS ENERGY, INC.
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KCS
ACQUISITIONS
AND NOTE KCS MEDALLION
KCS OFFERING PRO FORMA MEDALLION MEDALLION PRO FORMA
HISTORICAL ADJUSTMENTS COMBINED HISTORICAL ACQUISITIONS COMBINED
----------- ------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue.............................. $ 449,965 $ 15,035(a) $ 465,000 $ 73,460 $ 72,881(a) $ 146,341
Operating costs and expenses:
Cost of natural gas sales........... 356,186 -- 356,186 24,361 57,216(a) 81,577
Other operating and administrative
expenses.......................... 18,669 4,769(a) 23,438 17,210 4,024(a) 21,234
Depreciation, depletion and
amortization...................... 39,209 5,207(b) 44,416 21,705 -- 21,705
----------- ---------- --------- ---------- ----------- ---------
Operating costs and expenses........ 414,064 9,976 424,040 63,276 61,240 124,516
----------- ---------- --------- ---------- ----------- ---------
Operating income.................. 35,901 5,059 40,960 10,184 11,641 21,825
Interest and other income, net....... 3,713 -- 3,713 -- -- --
Interest expense..................... (7,732) (11,108)(c) (18,840) -- -- --
----------- ---------- --------- ---------- ----------- ---------
Income before income taxes
(benefit)........................... 31,882 (6,049) 25,833 10,184 11,641 21,825
Federal and state income taxes
(benefit)........................... 10,576 (2,117)(e) 8,459 3,638 4,074(e) 7,712
----------- ---------- --------- ---------- ----------- ---------
Net income (loss)............... $ 21,306 $ (3,932) $ 17,374 $ 6,546 $ 7,567 $ 14,113
=========== ========== ========= ========== =========== =========
Earnings per share................... $ 1.81
===========
Average shares outstanding........... 11,760,701
===========
<CAPTION>
ACQUISITION
AND OTHER PRO FORMA
ADJUSTMENTS AS ADJUSTED
------------ ------------
<S> <C> <C>
Revenue.............................. $ -- $ 611,341
Operating costs and expenses:
Cost of natural gas sales........... -- 437,763
Other operating and administrative
expenses.......................... -- 44,672
Depreciation, depletion and
amortization...................... 611(b) 66,732
---------- ----------
Operating costs and expenses........ 611 549,167
---------- ----------
Operating income.................. (611) 62,174
Interest and other income, net....... -- 3,713
Interest expense..................... (7,530)(d) (26,370)
---------- ----------
Income before income taxes
(benefit)........................... (8,141) 39,517
Federal and state income taxes
(benefit)........................... (2,849)(e) 13,322
---------- ----------
Net income (loss)............... $ (5,292) $ 26,195
========== ==========
Earnings per share................... $ 1.77
==========
Average shares outstanding........... 3,000,000 14,760,701
========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
4
<PAGE> 6
KCS ENERGY, INC.
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MEDALLION ACQUISITION
KCS MEDALLION SAWYER CANYON PRO FORMA AND OTHER PRO FORMA
HISTORICAL HISTORICAL PROPERTIES(F) COMBINED ADJUSTMENTS AS ADJUSTED
----------- ----------- ---------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue............................... $ 316,604 $ 160,508 $ 3,740 $ 164,248 $ -- $ 480,852
Operating costs and expenses:
Cost of natural gas sales........... 231,063 106,546 -- 106,546 -- 337,609
Other operating and administrative
expenses.......................... 19,427 15,883 645 16,528 -- 35,955
Depreciation, depletion and
amortization...................... 33,933 20,360 -- 20,360 84(g) 54,377
----------- ----------- ----------- ----------- ----------- -----------
Operating costs and expenses........ 284,423 142,789 645 143,434 84 427,941
----------- ----------- ----------- ----------- ----------- -----------
Operating income.................. 32,181 17,719 3,095 20,814 (84) 52,911
Interest and other income, net........ 4,850 -- -- -- -- 4,850
Interest expense...................... (13,858) (992) -- (992) (3,750)(h) (18,600)
----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes
(benefit)........................... 23,173 16,727 3,095 19,822 (3,834) 39,161
Federal and state income taxes
(benefit)........................... 8,367 5,973 1,083(i) 7,056 (1,342)(i) 14,081
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............ $ 14,806 $ 10,754 $ 2,012 $ 12,766 $ (2,492) $ 25,080
=========== =========== =========== =========== =========== ===========
Earnings per share.................... $ 1.25 $ 1.68
=========== ===========
Average shares outstanding............ 11,886,434 3,000,000 14,886,434
=========== =========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
5
<PAGE> 7
KCS ENERGY, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION
KCS MEDALLION AND OTHER PRO FORMA OFFERING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
---------- ---------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 53,597 $ 3,542 $ (50,030) (m) $ 7,109 $ -- $ 7,109
Trade accounts receivable, net.... 39,146 29,740 -- 68,886 -- 68,886
Fuel inventories.................. 884 -- -- 884 -- 884
Other current assets.............. 5,055 2,332 -- 7,387 -- 7,387
-------- -------- --------- -------- --------- --------
Current assets.................. 98,682 35,614 (50,030) 84,266 -- 84,266
Property, plant and equipment, net:
Oil and gas properties, net....... 206,308 199,427 (5,152) (j) 400,583 -- 400,583
Natural gas transportation
systems, net.................... 22,296 2,950 2,050 (j) 27,296 -- 27,296
Other property, plant and
equipment....................... 2,979 1,174 (674) (j) 3,479 -- 3,479
-------- -------- --------- -------- --------- --------
Property, plant and equipment,
net........................... 231,583 203,551 (3,776) 431,358 -- 431,358
-------- -------- --------- -------- --------- --------
Investments and other assets........ 10,887 5,066 (3,266) (j) 12,687 -- 12,687
-------- -------- --------- -------- --------- --------
$341,152 $244,231 $ (57,072) $528,311 $ -- $ 528,311
======== ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................. $ 34,680 $ 21,461 $ -- $ 56,141 $ -- $ 56,141
Accrued liabilities............... 7,032 4,187 -- 11,219 -- 11,219
-------- -------- --------- -------- --------- --------
Current liabilities............. 41,712 25,648 -- 67,360 -- 67,360
Deferred credits and other
liabilities....................... 33,298 31,866 (31,866) (j) 33,298 -- 33,298
Long-term debt...................... 149,830 52,402 104,111 (k)(m) 306,343 (101,706) (n) 204,637
Stockholders' equity:
Preferred stock................... -- -- -- -- -- --
Common stock...................... 125 3 (3) (j) 125 30 (n) 155
Additional paid-in capital........ 25,997 100,769 (95,771) (l) 30,995 101,676 (n) 132,671
Retained earnings................. 93,578 33,543 (33,543) (j) 93,578 -- 93,578
Less treasury stock............... (3,388) -- -- (3,388) -- (3,388)
-------- -------- --------- -------- --------- --------
Total stockholders'
equity.................... 116,312 134,315 (129,317) 121,310 101,706 223,016
-------- -------- --------- -------- --------- --------
$341,152 $244,231 $ (57,072) $528,311 $ -- $ 528,311
======== ======== ========= ======== ========= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
6
<PAGE> 8
KCS ENERGY, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
The accompanying pro forma financial statements have been prepared to
reflect certain adjustments to the historical consolidated financial statements
of the Company.
Unaudited Pro Forma Statement of Consolidated Income for the Year Ended December
31, 1995:
(a) Adjustments to reflect revenues, cost of sales and other operating
expenses from January 1, 1995, until the dates of the Rocky Mountain
Acquisition and the Michigan Acquisition by the Company, the Sawyer Canyon
and other acquisitions of Medallion, and the Medallion Acquisition by the
Company.
(b) Adjustments to reflect depreciation, depletion and amortization
expense calculated using the future gross revenue method applied to the
adjusted basis of the acquired properties and entities using the purchase
method of accounting.
(c) Adjustment to reflect additional interest expense calculated,
assuming the Company's As Adjusted debt balance at December 31, 1995
($170,529), was outstanding for the entire year, including amortization of
deferred financing cost.
(d) Adjustment to reflect incremental interest expense under the Bank
Credit Facilities ($15,488) to fund the $206,543 cash payment for the
Medallion Acquisition, and to reflect the interest expense savings ($7,958)
a result of the application of the estimated net proceeds of $101,706 from
the Offerings (approximately $107,625 in gross proceeds net of $5,919 in
estimated underwriting discount and expenses assuming an offering price of
$35.875 per share).
(e) Adjustments to the provision for income taxes related to the above
adjustments.
Unaudited Pro Forma Statement of Consolidated Income for the Nine Months ended
September 30, 1996:
(f) Reflects results of operations for the Sawyer Canyon Properties
for the three months ended March 31, 1996, prior to their acquisition by
Medallion on April 1, 1996.
(g) Adjustment to reflect depreciation, depletion and amortization
expense calculated using the future gross revenue method applied to the
adjusted basis of the Medallion Acquisition using the purchase method of
accounting.
(h) Adjustment to reflect interest expense savings ($1,915) based on
the assumption that the September 30, 1996 debt balance had been
outstanding for the entire nine-month period, to reflect incremental
interest expense under the Bank Credit Facilities ($11,616) to fund the
$206,543 cash payment for the Medallion Acquisition, and to reflect the
interest expense savings ($5,951) as a result of the application of the
estimated net proceeds of $101,706 from the Offerings.
(i) Adjustment to the provision for income taxes related to the above
adjustments.
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1996:
(j) Adjustment to (i) eliminate the historical basis of certain assets
and liabilities of Medallion and (ii) reflect the adjusted basis of these
items using the purchase method of accounting. (See detail of the purchase
price and related allocation to assets and liabilities in the table below.)
(k) Adjustment to reflect the elimination of the historical debt of
Medallion of $52,402 and additional debt under the Bank Credit Facilities
of $206,543 used to fund a portion of the Medallion Acquisition.
(l) Adjustment to reflect the elimination of the historical paid-in
capital of Medallion and the issuance of warrants to purchase 435,000
shares of Common Stock granted in connection with the Medallion Acquisition
presented at estimated fair value ($4,998).
7
<PAGE> 9
KCS ENERGY, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(m) Reflects the application of $50,030 from cash to reduce long-term
debt.
(n) Adjustment to reflect the application of the estimated net
proceeds of $101,706 from the Offerings to reduce long-term debt.
The following table summarizes elements of the Medallion Acquisition, which was
accounted for by the Company as a purchase transaction:
<TABLE>
<S> <C>
Consideration:
Cash Purchase Price............................................. $209,396
Adjustment to reflect free cash flow from
Medallion's operations subsequent to the effective date of
July 1, 1996 and through September 30, 1996.................. (2,853)
Cash paid to seller............................................. 206,543
Common stock warrants issued to seller.......................... 4,998
Liabilities Assumed:
Current liabilities............................................. 25,648
Assets Acquired:
Current assets.................................................. (35,614)
Other assets.................................................... (1,800)
--------
$199,775
========
</TABLE>
8
<PAGE> 10
(c) Exhibits.
Exhibit No. Exhibits
- ----------- --------
2.2 First Amendment to Stock Purchase Agreement dated December 31,
1996 by and between the Registrant, InterCoast Energy Company and
InterCoast Gas Services Company.
2.3 Second Amendment to Stock Purchase Agreement dated January 2, 1997
by and between the Registrant, InterCoast Energy Company and
Intercoast Gas Service Company.
99.3 Press released dated January 3, 1997.
SIGNATURE
Pursuant to the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Dated: January 9, 1997 KCS ENERGY, INC.
(Registrant)
/s/ HENRY A. JURAND
--------------------------------------
(Signature)
Henry A. Jurand
Vice President, Chief Financial Officer
and Secretary
9
<PAGE> 11
INDEX TO EXHIBITS
Exhibit No. Exhibits
- ----------- --------
2.2 First Amendment to Stock Purchase Agreement dated December 31,
1996 by and between the Registrant, InterCoast Energy Company
and InterCoast Gas Services Company.
2.3 Second Amendment to Stock Purchase Agreement dated January 2,
1997 by and between the Registrant, InterCoast Energy Company
and InterCoast Gas Service Company.
99.3 Press released dated January 3, 1997.
<PAGE> 1
EXHIBIT 2.2
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("First
Amendment"), is made as of the 31st day of December, 1996, by and among
InterCoast Energy Company, a Delaware corporation, InterCoast Gas Services
Company, a Delaware corporation, and KCS Energy, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties hereto have entered into that certain Stock
Purchase Agreement dated as of November 14, 1996 (the "Stock Purchase
Agreement"); and
WHEREAS, the parties desire to amend the Stock Purchase
Agreement, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and for other
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Except as otherwise set forth in this First Amendment,
defined terms used herein shall have the respective meanings ascribed thereto
in the Stock Purchase Agreement.
2. Section 8.1(b) of the Stock Purchase Agreement is hereby
modified and amended by deleting from that section the words "December 31,
1996" and substituting the words "January 9, 1997."
3. Section 3.21(d) of the Stock Purchase Agreement is hereby
modified and amended to read in its entirety as follows:
"The United States consolidated corporate income returns and
estimates of the MEC Group have been or will be timely filed with the
Internal Revenue Service for each taxable period ending on or before
December 31, 1995 (taking into account all extensions permitted by
applicable law). All such returns are, in all material respects,
correct and complete. Any amount of such taxes, deficiencies, penalties
and interest shown by such returns and estimates properly allocable to
any of the Companies or Subsidiary were previously paid or accrued on
the books of the Companies and Subsidiary or will be paid or accrued on
the books of the Companies or Subsidiary. The United States
consolidated corporate income tax return and estimates of the MEC Group
for the taxable periods ending
<PAGE> 2
December 31, 1996 and December 31, 1997 have been or will be timely
filed (taking into account all extensions permitted by applicable law)
with the Internal Revenue Service, and any consolidated, combined or
unitary income tax return required to be filed by the MEC Group for the
taxable periods ending December 31, 1996 and December 31, 1997 have been
or will be timely filed (taking into account all extensions permitted by
applicable law). Such returns for the taxable year ending December 31,
1996 will include the income, deductions and credits of the Companies
and Subsidiary for calendar year 1996; such returns for the taxable year
ending December 31, 1997 will include the income, deductions and credits
of the Companies and Subsidiary for the period January 1, 1997 through
and including the Closing Date, including the amount of taxable income
resulting from the Section 338(h)(10) Election.
4. Section 9.3(a)(iv) and (v) are hereby modified and amended
by deleting from those sections the phrase "the Straddle Year" each time that
such phrase appears and substituting the phrase "calendar year 1996" in each
such case.
5. Section 9.3(b)(i) is hereby modified and amended by
inserting into that section the phrase "calendar year 1996 and" immediately
prior to the phrase "the Straddle Year" contained therein.
6. This First Amendment shall be governed by and enforced in
accordance with the internal laws of the State of Delaware.
7. This First Amendment may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8. Except as expressly amended hereby, the Stock Purchase
Agreement remains in full force and effect and the rights and obligations of
the parties shall be as set forth therein.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this FIRST
AMENDMENT as of the date first set forth above.
InterCoast Energy Company,
a Delaware corporation
By:
--------------------------------------
Name: Dennis Melstad
Title: President
InterCoast Gas Services Company,
a Delaware corporation
By:
--------------------------------------
Name: Dennis Melstad
Title: President
KCS Energy, Inc.,
a Delaware corporation
By:
--------------------------------------
Name: James W. Christmas
Title: President and Chief
Executive Officer
- 3 -
<PAGE> 1
EXHIBIT 2.3
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
This SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT ("Second Amendment"),
is made as of the 2nd day of January, 1997, by and among InterCoast Energy
Company, a Delaware corporation, InterCoast Gas Services Company, a Delaware
corporation and KCS Energy, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties hereto have entered into that certain Stock
Purchase Agreement dated as of November 14, 1996, as amended by the First
Amendment thereto dated as of December 31, 1996 (the "Stock Purchase
Agreement"); and
WHEREAS, the parties desire to further amend the Stock Purchase
Agreement, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and for other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Except as otherwise set forth in this Second Amendment,
defined terms used herein shall have the respective meanings ascribed thereto
in the Stock Purchase Agreement.
2. The parties agree that, notwithstanding the provisions of
Section 1.3(a)(i) of the Stock Purchase Agreement to the contrary, the
Purchaser shall pay (by wire transfer of immediately available funds to the
bank or banks and to the account or accounts thereat which the Shareholders
have previously specified by written notice to the Purchaser) to the
Shareholders at the Closing an amount equal to the difference between (i)
$210,015,000 (being the agreed upon amended cash portion of the Purchase
Price), as adjusted by $619,037 in accordance with the provisions of Sections 9
and 10 of this Second Amendment (such adjusted cash portion of the Purchase
Price being equal to $209,395,963) and (ii) $15,276,000 (the "Estimated
Difference"), being the amount by which the parties have estimated in good
faith that the Threshold Amount will exceed the amount of the Intercompany
Payables immediately prior to the Reclassification as of the Closing Date; and
Section 1.6(g) of the Stock Purchase Agreement is hereby modified and amended
to read in its entirety as follows:
"(g) Within ten days after the determination of the Final
Closing Date Statement, the Shareholders shall pay to Purchaser the
difference, if positive, between (i) the difference between the
Threshold Amount and the Estimated Difference and (ii) the amount of
Intercompany Payables on the Final Closing Date Statement, or Purchaser
shall pay to the Shareholders the difference, if positive, between (x)
the amount of Intercompany Payables on the Final Closing Date Statement
and (y) the difference between the Threshold Amount and the
<PAGE> 2
Estimated Difference, in either event with interest at the Agreed Rate
(as hereinafter defined) on the amount of the payment for the period
from the Closing Date to the date of payment."
The parties also agree that the sixth sentence of Section 1.6(b) is hereby
modified and amended to insert the following phrase after the words "Interim
Period" in clause (i) of such sentence: "which is includable in any
consolidated, combined or unitary income tax return which includes the MEC
Selling Group and the Companies and Subsidiary for the Interim Period".
3. Section 3.13 of the Stock Purchase Agreement is hereby
modified and amended to add a new clause (g) thereto which shall read in its
entirety as follows:
"(g) Certain Environmental Matters.
(i) No Hydrocarbons have been stored in the underground
storage tank referred to under item number 2 of Attachment I to
the Environmental Liabilities Notice (as hereafter defined).
(ii) To the extent they constitute Environmental
Liabilities, the defects referred to in the report by American
Environmental Research Inc. dated May 3, 1993, that are referred
to under item number 3 of Attachment I to the Environmental
Liabilities Notice have been remediated.
(iii) To the extent they constitute Environmental
Liabilities, the defects referred to in the report by American
Environmental Research Inc. dated July 25, 1993, that are
referred to under item number 5 of Attachment I to the
Environmental Liabilities Notice have been remediated.
(iv) To the extent they constitute Environmental
Liabilities, the defects referred to in the report by EDC
Environmental Corporation dated December 1996, that are referred
to as defects "d" and "e" of such report under item number 8 of
Attachment I to the Environmental Liabilities Notice have been
remediated and/or repaired.
(v) SPCC plans for each of the Properties listed under
the following item numbers of Schedule B to the Environmental
Liabilities Notice have been implemented: 1, 3 through 5, 7, 9,
11 through 17, and 19.
(vi) SPCC plans are not required with respect to
Properties listed under item numbers 2 and 10 of Schedule B to
the Environmental Liabilities Notice.
2
<PAGE> 3
(vii) Copies of the SPCC plan and SARA Tier II reports
referred to under item numbers 6 and 18 of Schedule B to the
Environmental Liabilities Notice, respectively, are in existence
and have been furnished to Purchaser.
(viii) The Property referred to under item number 8 of
Schedule B to the Environmental Liabilities Notice has been
sold."
4. The last sentence of Section 9.2(b) of the Stock Purchase
Agreement is hereby modified and amended to read in its entirety as follows:
"The provisions of this Section 9.2(b) shall not apply to Losses or
Environmental Liabilities referred to in clause (i) of Section 10.3."
5. Clause (i) of Section 10.3 of the Stock Purchase Agreement
is hereby modified and amended to read in its entirety as follows:
(i) 90% of all Losses and Environmental Liabilities arising
from or incurred in connection with the claim disclosed as item 17 on
Schedule 3.8 or any of the facts, circumstances or conditions referred
to in any of the following reports: 1) Environmental Site Assessment,
Rancho San Francisco Lease, Newhall-Potrero Oil Field, Los Angeles,
California by Smith-Gutcher & Associates, Inc. dated August 1993; 2)
Environmental Lease Inspection by EDC Environmental Corporation dated
December 1996; 3) Final Report, Phase II-Preliminary Site Investigation,
Newhall-Potrero Field, Santa Clarita, California by Dames & Moore dated
June 5, 1990; 4) Phase 1 Assessment, Rancho San Francisco Oil Lease,
Near Newhall, California by Woodward-Clyde Consultants dated May 1,
1991; 5) Preliminary Groundwater Quality Investigation at the Former Gas
Plant Site, The Rancho San Francisco Oil Lease, Newhall, California by
Woodward-Clyde Consultants dated June 1991; or 6) Preliminary Risk
Assessment and Development of Soil Target Cleanup Levels for a Former
Gas Plant Site, Oryx Energy Company, Newhall, California by Woodward-
Clyde Consultants dated February 14, 1991, in each case to the extent
such reports relate to the Rancho San Francisco or Ferguson leases in
Newhall, California (except for matters related to the Notice to Comply
dated May 10, 1995 from South Coast Air Quality Management District
("SCAQMD") or the Facility Permit to Operate (I.D. No. 100844), as
amended, issued by SCAQMD),"
3
<PAGE> 4
6. The last sentence of the introductory paragraph of Section
10.6 (immediately preceding Section 10.6(a)) is hereby modified and amended to
read in its entirety as follows:
"Shareholders' obligations with respect to Environmental Matters and
Environmental Liabilities referred to in clause (i) of Section 10.3
shall be governed by Section 10.3 rather than this Section 10.6 except
to the extent contemplated by Section 10.3."
7. Subject to consummation of the Closing, Shareholders
hereby release Purchaser from any liability with respect to and waive any
rights Shareholders may have pursuant to the Stock Purchase Agreement or
otherwise relating either to (i) the alleged breaches of representations,
warranties and agreements described in the Shareholders' notice to Purchaser
dated December 19, 1996 (the "Notice") or (ii) any other breaches of
representations, warranties or agreements in the Stock Purchase Agreement that
may be attributable directly or indirectly to the litigation described in the
Notice or the settlement thereof.
8. The letter agreement (the "Section 29 Agreement") dated
October 17, 1996 among ICE, InterCoast Global Marketing, Inc. ("IGM") and
Purchaser (which letter agreement relates to an option (the "Option") under an
assignment (the "Assignment") executed in connection with a Purchase and Sale
Agreement dated April 12, 1996 between IOG and IGM) is hereby terminated, and
no party thereto shall have any liability or obligation to any other party
arising out of or with respect to the Section 29 Agreement or arising out of
the termination thereof. The termination of the Section 29 Agreement shall not
affect the right of IOG to exercise the Option hereafter in accordance with its
terms.
9. Reference is made to the Title Defect Notice dated
December 10, 1996, from Purchaser to Shareholders (the "December Title Defect
Notice"). As of the date hereof, Purchaser has not given any other Title
Defect Notice to Shareholders. This Section 9 shall constitute Shareholders'
Response Notice with respect to all of the Title Defects asserted in the
December Title Defect Notice. Shareholders and Purchaser hereby agree as
follows:
(i) The Title Defects asserted under each of item numbers 1,
12, 13, 21, 22 and 23 of the December Title Defect Notice have been
resolved as to all Properties with respect to which Purchaser could
assert such Title Defects and shall be deemed conclusively to be
Permitted Encumbrances, and the Purchase Price shall not be reduced on
account thereof.
(ii) Without admitting the existence of such asserted Title
Defects and/or agreeing with the Defect Amounts asserted with respect
thereto, Shareholders elect to attempt to cure or resolve the Title
Defects asserted under the following item numbers of the December Title
Defect Notice: 2, 4, 5, 18, 19, 24 and 26.
4
<PAGE> 5
(iii) The parties agree that the Title Defects asserted under
item number 11 of the December Title Defect Notice are not Title Defects
as to all Properties with respect to which Purchaser could assert such
Title Defects, subject to Purchaser's verification during the Cure
Period that Shareholders have accurately determined that the payout
referred to in such item 11 will not occur prior to January 1, 2001, in
accordance with its terms, based on the Netherland, Sewell and
Associates Inc. December 31, 1995 estimated total proved reserves for
the interests acquired from SAS Exploration and applying IOG's "A96A"
(acquisition escalated) price deck and with the actual initial December
31, 1995 payout balance which is estimated to be approximately
$4,750,047.
(iv) The Title Defects asserted under each of the following
item numbers of the December Title Defect Notice have been resolved and
shall be deemed conclusively to be Permitted Encumbrances, and the
Purchase Price shall be reduced on account thereof by the amount set
forth opposite such item number:
<TABLE>
<CAPTION>
Item Number Amount
----------- ------
<S> <C>
3 $11,560
6 1,405
7 32,828
8 4,777
9 13,235
10 2,202
14 2,532
15 51,286
16 14,229
17 8,843
20 78,987
28 2,153
--------
Total $224,037
========
</TABLE>
5
<PAGE> 6
(v) The Title Defects asserted under item number 25 of the
December Title Defect Notice have been resolved and shall be deemed
conclusively to be Permitted Encumbrances, and the Purchase Price shall
not be reduced on account thereof. Shareholders agree to cause IGM to
execute and deliver to Purchaser such instruments, in form reasonably
acceptable to Shareholders and Purchaser, as Purchaser may reasonably
request in order to further evidence IOG's presently existing security
interest in the production from the wells referred to under such item
number (the "Section 29 Production") and the revenues and proceeds
attributable to such production. Shareholders shall use their best
efforts to obtain all necessary consents from the required lenders to
allow IGM to grant to IOG a security interest in the assets described on
Schedule I hereto, provided, however, that Shareholders shall not be
required to pay any consideration in connection with seeking such
consents. Upon obtaining such consents, Shareholders shall cause IGM to
execute and deliver such documents as are reasonably required to grant
such security interest; provided, however, that IGM shall not be
required to grant such security interest if the granting thereof would
adversely affect income tax credits to be received by IGM on account of
the Section 29 Production.
(vi) Without admitting the existence of such asserted Title
Defect and/or agreeing with the Defect Amount asserted with respect
thereto, Shareholders elect to attempt to cure the Title Defect asserted
under item number 27 of the December Title Defect Notice. In this
regard, Purchaser agrees to put in place a nation-wide Bureau of Indian
Affairs bond, but shall have no obligation to post any other type of
bond.
10. Reference is made to the Notification for Environmental
Liabilities dated December 9, 1996, from Purchaser to Shareholders and the
attachments and schedules thereto (the "Environmental Liabilities Notice"). As
of the date hereof, Purchaser has not given any other notice of Environmental
Liabilities to Shareholders. This Section 10 and Section 5 above resolve all
Environmental Liabilities asserted in the Environmental Liabilities Notice.
Shareholders and Purchaser hereby agree as follows:
(i) Item number 1 of Attachment I to the Environmental
Liabilities Notice is hereby withdrawn from the Environmental
Liabilities Notice.
(ii) The Environmental Liabilities asserted under item numbers
2, 9 and 10 of Attachment I to the Environmental Liabilities Notice and
Schedules A and B to the Environmental Liabilities Notice have been
resolved, and the Purchase Price shall not be reduced on account
thereof.
(iii) The Environmental Liabilities asserted under each of the
following item numbers of Attachment I to the Environmental Liabilities
Notice have been resolved, and the Purchase Price shall be reduced on
account thereof by the amount set forth opposite such item number:
6
<PAGE> 7
<TABLE>
<CAPTION>
Item Number Amount
----------- ------
<S> <C>
3 $ 7,500
4 250,000
5 15,000
6 17,500
7 30,000
8 75,000
--------
Total $395,000
========
</TABLE>
11. This Second Amendment shall be governed by and enforced in
accordance with the internal laws of the State of Delaware.
12. This Second Amendment may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13. Except as expressly amended hereby, the Stock Purchase
Agreement remains in full force and effect and the rights and obligations of
the parties shall be as set forth therein.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this SECOND
AMENDMENT as of the date first set forth above.
InterCoast Energy Company,
a Delaware corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
InterCoast Gas Services Company,
a Delaware corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
KCS Energy, Inc.,
a Delaware corporation
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
8
<PAGE> 1
EXHIBIT 99.3
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Henry A. Jurand For General Info: Marianne Stewart 212-661-8030
VP & CFO For Analyst Info: Christina Howard 212-661-8030
(908) 632-1770 For Media Info: Judith Sylk-Siegel 212-661-8030
FOR IMMEDIATE RELEASE
Friday, January 3, 1997
KCS ENERGY, INC. COMPLETES ACQUISITION OF
THE OIL AND GAS OPERATIONS OF MIDAMERICAN ENERGY
HOUSTON, TX, JANUARY 3, 1997 -- KCS Energy, Inc. (NYSE: KCS) today announced it
has completed the acquisition of InterCoast Oil and Gas Company (formerly known
as Medallion Production Company and renamed KCS Medallion Resources, Inc.), the
Tulsa, Oklahoma-based oil and gas exploration and production subsidiary and two
gas marketing subsidiaries of MidAmerican Energy Holdings Company, for a total
purchase price of approximately $210 million in cash and 435,000 warrants to
purchase KCS common stock. The warrants have a four-year term and an exercise
price of $45 per share. The cash portion of the purchase price at closing was
adjusted to reflect activity subsequent to the July 1, 1996 effective date.
KCS President and Chief Executive Officer James W. Christmas said, "The
completion of this acquisition is a major step forward for KCS. It not only
doubles our total oil and gas production and proved reserves, it also increases
our cash flow by more than 50 percent and significantly expands our management
and technical team. We look foward enthusiastically to 1997 and to further
growth in production, reserves and cash flow."
KCS is an independent energy company primarily engaged in the
acquisition, exploration, development and production of natural gas and crude
oil. The Company also operates natural gas transportation and marketing
businesses.
###
