<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
KCS Energy, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(4) Date filed:
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<PAGE> 2
KCS ENERGY, INC.
PRINCIPAL EXECUTIVE OFFICE:
379 THORNALL STREET
EDISON, NEW JERSEY 08837
(908) 632-1770
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of KCS Energy, Inc. (the "Meeting") will
be held on May 14, 1997, in the ballroom of the Somerset Marriott, 110 Davidson
Avenue, Somerset, New Jersey at 10:00 a.m. local time for the following
purposes:
1. To elect two directors to serve until the Annual Meeting of
Stockholders in 2000;
2. To approve an amendment to the KCS Energy, Inc. 1992 Stock Plan,
increasing the shares of common stock available to be issued under
the plan; and
3. To take action upon any other business as may properly come before
the Meeting, or any adjournment thereof.
The Board of Directors has fixed the close of business on March 19, 1997,
as the record date for the determination of the stockholders entitled to notice
of and to vote at the Meeting or any adjournment thereof.
By Order of the Board of Directors
HENRY A. JURAND
Secretary
April 7, 1997
------------------------
IMPORTANT
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE TO ENSURE ITS ARRIVAL IN
TIME FOR THE MEETING. PLEASE USE THE ACCOMPANYING POSTAGE-PAID ENVELOPE.
<PAGE> 3
KCS ENERGY, INC.
379 THORNALL STREET
EDISON, NEW JERSEY 08837
(908) 632-1770
PROXY STATEMENT
The Proxy Statement and the accompanying Proxy Card are being mailed to
stockholders, commencing April 7, 1997, in connection with the solicitation by
the Board of Directors of KCS Energy, Inc. (the "Corporation" or "KCS") of
proxies to be used at the Annual Meeting (the "Meeting") of the stockholders of
the Corporation to be held on May 14, 1997, at the hour and place set forth in
the Notice of Annual Meeting accompanying this Proxy Statement.
PERSONS MAKING THE SOLICITATION
This solicitation is made on behalf of the Board of Directors of the
Corporation. The cost of soliciting these proxies will be borne by the
Corporation, including reimbursement paid to brokerage firms and other
custodians, nominees and fiduciaries for reasonable costs incurred in forwarding
the proxy materials to and solicitation of proxies from the beneficial owners of
shares held by such persons. The solicitation will be initially by mail and it
may later be decided to make further solicitations by mail, telephone, telex,
facsimile or personal call by directors, officers and employees of the
Corporation and its subsidiaries, or by use of an independent proxy solicitor.
VOTING SECURITIES AND OWNERSHIP THEREOF BY CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of March 1, 1997, there were outstanding 14,604,272 shares of the
Corporation's Common Stock, which is the only class of capital stock entitled to
vote at the Meeting. These shares were held by 1,175 holders of record. Each
holder of Common Stock is entitled to one vote for each share held. As stated in
the Notice of Annual Meeting, holders of record of the Common Stock at the close
of business on March 19, 1997, will be entitled to vote at the Meeting or any
adjournment thereof.
(a) Under the rules of the Securities and Exchange Commission, for the
purpose of the following table, a beneficial owner of a security includes any
person who, directly or indirectly, has or shares voting power and/or investment
power with respect to such security. To the knowledge of the Corporation, the
following persons owned beneficially more than 5% of the outstanding Common
Stock of the Corporation as of March 1, 1997:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NO. OF SHARES OF % OF CLASS
BENEFICIAL OWNER COMMON STOCK OUTSTANDING
-------------------------------------------------------- ---------------- -----------
<S> <C> <C>
Stewart B. Kean......................................... 1,376,649(1)(2) 9.43%
P.O. Box 1
Elizabeth, NJ 07207
Metropolitan Life Insurance Company..................... 1,347,800(3) 9.23%
One Madison Avenue
New York, New York 10010
Warburg Pincus Counsellors.............................. 798,300 5.47%
466 Lexington Avenue
New York, NY 10017
</TABLE>
- ---------------
(1) Includes shares that are allocated to the beneficial owner's account under
401(k) plans.
(2) Includes 512,824 shares held under certain family trusts as to which Mr.
Kean shares voting and investment power.
(3) Includes 1,336,700 shares (or 9.15%) owned by an affiliate of Metropolitan
Life Insurance Company, State Street Research and Management Company, One
Financial Center, 30th Floor, Boston, Massachusetts 02111, the beneficial
ownership of which is disclaimed.
<PAGE> 4
(b) The following information pertains to KCS Common Stock beneficially
owned, directly or indirectly, by each director and executive officer and by all
directors and executive officers of KCS as a group as of March 1, 1997:
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY(1) PERCENT OF CLASS
--------------- ----------------
<S> <C> <C>
Stewart B. Kean.................................... 1,379,649(2)(3) 9.44%
James W. Christmas................................. 503,250(2)(4) 3.38%
Joel D. Siegel..................................... 91,429(2)(5) *
C. R. "Bob" Devine................................. 86,720(2) *
Harry Lee Stout.................................... 36,278(2) *
Henry A. Jurand.................................... 33,475(2) *
Christopher A. Viggiano............................ 27,829(2) *
James E. Murphy, Jr................................ 14,177(2) *
G. Stanton Geary................................... 7,062(2) *
Robert G. Raynolds................................. 2,315(2) *
*10 Directors and Officers as a group............... 2,182,184 14.59%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, beneficial owner has sole voting and investment
power.
(2) Includes shares that (i) may be purchased as a result of options granted
that are exercisable within 60 days of March 1, 1997 for 270,000; 25,000;
22,500 and 16,250 shares to Messrs. Christmas, Devine, Stout and Jurand,
respectively and for 3,000 shares to each of Messrs. Kean, Siegel, Viggiano,
Murphy and Geary and 1,000 shares for Mr. Raynolds and (ii) are allocated to
the beneficial owner's account under the Corporation's 401(k) plan.
(3) Includes 512,824 shares held under certain family trusts as to which Mr.
Kean shares voting and investment power.
(4) Includes 18,000 shares held in trusts established for the benefit of Mr.
Christmas' children, the beneficial ownership of which is disclaimed.
(5) Includes 8,000 shares held in trusts established for the benefit of Mr.
Siegel's children, the beneficial ownership of which is disclaimed.
In December 1994, the Board of Directors adopted a policy requiring minimum
levels of ownership of the Corporation's common stock by directors and officers
of the Corporation and its subsidiaries. Within four years of appointment as
officer/director, officers and directors are required to be beneficial owners of
Common Stock with a market value equivalent as follows: directors -- four times
their annual retainer; president and chief executive officer -- four times his
annual base pay; vice presidents of KCS and presidents of its
subsidiaries -- two and one-half times their annual base pay; and subsidiary
vice presidents -- one-half of their annual base pay.
(c) The Corporation has not issued nor has outstanding any Preferred Stock.
ELECTION OF DIRECTORS
The By-Laws of the Corporation provide that the Board of Directors shall
consist of a minimum of three and a maximum of twelve directors. The Board of
Directors has fixed at seven the number of directors of the Corporation. The
Corporation's By-Laws also provide that the Board of Directors shall be divided
into three classes with directors in each class serving three-year terms.
It is the intention of the persons named in the enclosed proxy, in the
absence of a contrary direction, to vote for Stewart B. Kean and James E.
Murphy, Jr. as directors of the Corporation for three-year terms
2
<PAGE> 5
expiring at the Annual Meeting of Stockholders in the year 2000 or until their
successors are elected or appointed. Messrs. Kean and Murphy are presently
serving as directors of the Corporation.
Should any nominee become unable or refuse to accept nomination or election
as a director, it is intended that the persons named as proxies will vote for
the election of such other person for such office as the Board of Directors may
recommend in the place of such nominee. The Board of Directors knows of no
reason why either of the nominees might be unable or refuse to accept nomination
or election. Information is set forth below regarding the principal occupation
of each nominee and each of the other directors of the Corporation who will
continue in office after the Meeting.
<TABLE>
<CAPTION>
NAME, AGE PRINCIPAL OCCUPATION
AND POSITION DURING LAST FIVE YEARS
- ---------------------------- ---------------------------------------------------------------
<S> <C>
STEWART B. KEAN, 62......... Mr. Kean has served as Chairman of the Board of Directors since
Chairman, Member, 1988. Mr. Kean has served as president of Utility Propane
Executive Committee Company, a former subsidiary, from 1965 to 1989. He is past
president of the National LP Gas Association and past president
of the World LP Gas Forum. He currently serves as a member of
the Council of the World LP Gas Forum. Mr. Kean's term expires
in 1997 and if re-elected, his new term will expire in 2000.
JAMES E. MURPHY, JR., 40.... Mr. Murphy has served as director since 1988. He heads a
Member, Compensation political and governmental relations consulting firm offering
Committee strategic planning and management consulting services to
Republican candidates nationwide, with extensive experience at
the presidential, state and congressional levels. Based in
Gaithersburg, Maryland, he also advises corporations and
industry groups on strategic planning, governmental relations
and grassroots lobbying projects. Mr. Murphy's term expires in
1997 and if re-elected, his new term will expire in 2000.
G. STANTON GEARY, 62........ Mr. Geary has served as director since 1988. He is proprietor
Member, Audit Committee of Gemini Associates, Pomfret, CT, a venture capital consulting
firm, and is business manager of the Rectory School, Pomfret,
CT. Mr. Geary's term expires in 1998.
ROBERT G. RAYNOLDS, 45...... Mr. Raynolds has served as director since 1995. Mr. Raynolds
Member, Audit Committee has been an independent consulting geologist for several major
and independent oil and gas companies from 1992 until the
present and was a geologist with Amoco Production Company from
1983 until 1992. Mr. Raynold's term expires in 1998.
JAMES W. CHRISTMAS, 49...... Mr. Christmas has served as director, president and chief
Member, Executive executive officer of the Corporation since 1988. Mr. Christmas'
Committee term expires in 1999.
JOEL D. SIEGEL, 55.......... Mr. Siegel has served as director since 1988. He is an attorney
Member, Executive and with and is president of Orloff, Lowenbach, Stifelman & Siegel,
Compensation Committees P.A., Roseland, NJ, since 1975. Mr. Seigel's term expires in
1999.
CHRISTOPHER A. VIGGIANO, Mr. Viggiano has served as director since 1988. He is
43........................ president, majority owner and chairman of the board of O'Bryan
Member, Audit and Glass Corp., Queens, NY. He is a Certified Public Accountant.
Compensation Committees Mr. Viggiano's term expires in 1999. WW]
</TABLE>
RELATIONSHIPS: Mr. Raynolds is Mr. Kean's nephew. During 1996, the
Corporation retained as outside general counsel the law firm of Orloff,
Lowenbach, Stifelman & Siegel, P.A., of which Joel D. Siegel, a KCS director, is
a member. It is the opinion of management that the professional fees charged are
comparable to the fees of other law firms of similar size and expertise.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Board of Directors held a total of nine meetings during 1996. Each
director, following his election, attended at least 75% of the meetings of the
Board of Directors and all meetings of the committees of which he is a member.
3
<PAGE> 6
The Board of Directors has the following committees; (i) an Executive
Committee composed of Messrs. Kean, Christmas and Siegel; (ii) an Audit
Committee composed of Messrs. Geary, Raynolds and Viggiano; and (iii) a
Compensation Committee composed of Messrs. Murphy, Siegel and Viggiano. The
Executive Committee performs the duties of the Board of Directors during
intervals between regular Board meetings. The Audit Committee recommends the
appointment of independent auditors, reviews the results of audit engagements
and fees, and reviews the adequacy of internal controls. The Compensation
Committee makes recommendations as to the compensation and certain benefits to
be paid to officers and key employees of the Corporation. The Corporation has no
nominating committee.
The Audit and Executive Committees each met two times during 1996. The
Compensation Committee met once during 1996.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
composed of three non-employee directors of the Corporation. The Committee is
charged with determining the compensation for the senior executives of KCS and
its subsidiaries (approximately 6 persons), including the granting of awards to
such executives under the various incentive compensation programs maintained by
the Corporation. The Committee reviews individual performance and the
performance of the Corporation and each operating subsidiary.
COMPENSATION PHILOSOPHY AND POLICIES
The objective of the KCS executive compensation program is to motivate and
reward senior executives who are responsible for realizing financial and
strategic objectives which are integral to the Corporation's success and the
resultant enhancement of stockholder value. The Corporation's program is
intended to enable the Corporation to attract, retain, motivate and reward
executive talent of the highest caliber. The program is also intended to be
competitive with companies which are competitors of KCS.
The Corporation intentionally pays annual base salaries to senior
executives which are at or slightly below the competitive market. The base
salaries are supplemented by an annual cash incentive bonus plan (described
below), which is based upon performance. The Corporation's philosophy is to have
a major portion of total compensation based upon long-term results, emphasizing
increased stockholder value. To this end, the Corporation utilizes stock
options, restricted stock and performance units. The Committee establishes
targets for incentive-based compensation which the Committee believes are
difficult to achieve, and will be achieved only 50% of the time. No incentive
based compensation was paid during 1996 because the Corporation changed its
fiscal year end from September 30 to December 31. Consequently, results of
operations for 1996 were not determined prior to the end of the calendar year.
Incentive compensation based upon 1996 performance was paid in 1997 as discussed
below.
The Committee relies upon compensation comparisons with other companies in
the industry in order to determine the competitiveness of its executive
compensation program. Most of the competing companies surveyed are included in
the performance graph comparing Five-Year Cumulative Stockholder Total Return
(see pages 11 and 12 of this proxy statement). From time to time, the Committee
engages independent compensation experts to assist the Committee in its
information gathering and compensation package design functions.
Once the competitiveness and effectiveness of the Corporation's programs
are evaluated, and the results of operations for the prior year are available,
the Committee establishes base pay and annual and long-term incentive
compensation targets. In determining salary adjustments and incentive payments
for the executives (other than Mr. Christmas), the Committee also considers
recommendations made by Mr. Christmas.
4
<PAGE> 7
BASE PAY
Effective January 1, 1996, the Company granted base salary increases to its
entire senior executive group of approximately 3.7%. This included a base pay
increase to Mr. Christmas of $12,000 (4.0%), increasing his base pay to
$310,000. The base pay increases, while subjectively determined, were primarily
related to cost of living increases. However, the individual's current
performance, experience, scope of responsibilities and the competitive
environment for comparable positions within the industry were also considered.
ANNUAL INCENTIVE AWARDS
The Corporation's annual cash incentive bonus program is designed to reward
executives for the achievement of annual performance objectives. Each subsidiary
and the Corporation as a whole are given performance targets. The bonus of each
executive is expressed as a percentage of annual base pay, usually between 30%
and 45%, depending on the executive's position. For results in excess of the
target, the annual cash incentive award increases, up to maximum levels which
are set at from 50% to 80% of annual base pay, depending on the executive's
position. For 1996, Mr. Christmas was entitled to 45% of base pay if the
Corporation achieved its target, and a maximum of 80% of base pay depending upon
results in excess of the target. As discussed below, Mr. Christmas was paid a
bonus of approximately 80% of his 1996 calendar year base pay.
The target established for each executive is related primarily to results
of operations for that executive's direct employer. That is, an executive
employed by a subsidiary is given an incentive target related to that
subsidiary's performance. Executives employed by KCS Energy, Inc., the parent
corporation, are given a target based upon total company performance.
Performance criteria are chosen for their potential contribution to the creation
of stockholder value, and include in addition to earnings per share, growth in
cash flow per share and growth in oil and gas reserves.
LONG-TERM INCENTIVE
The Corporation uses stock options, restricted stock and performance units
to reward executives, based upon the long-term performance of the Corporation or
the subsidiary by which the executive is employed, as the case may be. For
performance units, three-year targets are set. The target award level for each
executive is based on the scope and complexity of that executive's position in
the organization. The value of each performance unit ranges from $0 to $175,
depending on the results of operations as compared to the targeted results. If
the targeted results are reached, the value of each performance unit is $100.
For executives of the Corporation itself, the performance unit plan is
targeted based on cumulative growth in earnings per share, cash flow per share
and proved oil and gas reserves for the three years beginning with the year the
performance units are granted. If that cumulative target is reached, the
performance units will have a value of $100 each. Performance criteria for
executives employed by subsidiaries are established based upon appropriate
targets relevant to each subsidiary. In this way, the performance unit program
rewards executives of subsidiaries for their contribution to the long-term
success of the Corporation, based upon the performance of their direct employer.
In February 1997, the Corporation granted 1,000 performance units to Mr.
Christmas and 500 performance units to each of the other four highest paid
executives. This number was determined subjectively, and did not result from the
application of any formula or other mathematical process. The performance period
for these units is the 1997-1999 period. No performance units were granted in
calendar 1996.
Under the Corporation's 1992 Stock Plan, officers and key employees of the
Corporation are eligible to receive grants of stock options, restricted stock
and bonus stock. Restricted stock and bonus stock are used primarily in
rewarding and motivating employees below the executive level for their
contribution to the long-term success of the Corporation; however, grants may
also be made to executives, in the Committee's discretion.
The Corporation uses annual grants of stock options to closely align
executives' financial interests with those of stockholders. In February 1997,
subject to approval of the stockholders of the amendment to increase
5
<PAGE> 8
the number of shares available under the Corporation's 1992 Stock Plan, the
Committee awarded 40,000 stock options to Mr. Christmas, 20,000 to Mr. Jurand
and 10,000 each to Messrs. Devine and Stout. In calendar 1996, no options were
granted. The number of options was determined subjectively, not by the
application of any formula or other mathematical process. The Committee
considered individual and overall Corporation or subsidiary performances in
determining the final number of options granted. All options granted to date
have been non-qualified stock options at fair market value as of the date of
grant, and generally vest either one-third or one-fourth per year beginning one
year after the grant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee applies the same philosophy in determining the compensation
of the chief executive officer, Mr. Christmas, as it does with the rest of the
executive officer group. That is, to maintain base salary at or slightly below
market, with emphasis placed on incentive compensation.
In keeping with the policy to limit normal base salary increases to account
primarily for increases in the cost of living, Mr. Christmas received a base pay
increase of 4.0% to $310,000, maintaining Mr. Christmas' base salary in line
with, but still below, the indicated salary based on peer group comparisons.
In March 1997, Mr. Christmas was paid a $250,000 annual incentive bonus,
representing 80% of calendar year base pay. While earnings per share were
somewhat below the target level, cash flow per share was above the target and
oil and gas reserves were above the maximum level of performance the Committee
established for 1996. The Committee also considered other factors, including the
completion of a major oil and gas company acquisition, and the associated
financing, which significantly expanded and diversified the Corporation's asset
base and strengthened its financial position.
In February 1997, the Committee granted Mr. Christmas 40,000 stock options,
subject to approval of the stockholders of the amendment to increase the number
of shares available under the Corporation's 1992 Stock Plan. The Committee also
granted Mr. Christmas 1,000 performance units under the Corporation's
performance unit plan, which ties into the achievement of long-term strategic
initiatives. The targeted goal under the performance unit plan for Mr. Christmas
is based on cumulative growth in earnings per share, cash flow per share and
proved oil and gas reserves for the three years ended December 31, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Joel D. Siegel, Chair of the Committee, is a member of the law firm of
Orloff, Lowenbach, Stifelman & Siegel, P.A., general legal counsel to the
Corporation.
COMPENSATION COMMITTEE MEMBERS
Joel D. Siegel, Chair
James E. Murphy, Jr.
Christopher A. Viggiano
6
<PAGE> 9
EXECUTIVE OFFICERS
In addition to Mr. Christmas who is also a director of the Corporation, the
following persons are executive officers of the Corporation, each of whom serves
at the discretion of the Board of Directors:
<TABLE>
<CAPTION>
NAME POSITION AGE
- ------------------------- -------------------------------------------
<S> <C> <C>
Henry A. Jurand.......... Senior Vice President, Chief Financial 47
Officer and Secretary of KCS
C. R. "Bob" Devine....... Vice President, Oil and Gas Operations 50
of KCS and President, KCS Resources,
Inc., the Corporation's Gulf
Coast-based oil and gas subsidiary
Harry Lee Stout.......... President, KCS Energy Marketing, Inc., 49
KCS Michigan Resources, Inc., KCS
Pipeline Systems, Inc., and KCS Energy
Services, Inc., the Corporation's
marketing, transportation and
volumetric production payment
subsidiaries
William E. Warnock, President, KCS Medallion Resources, Inc.
Jr..................... (formerly InterCoast Oil and Gas 44
Company), President, GED Energy
Services, Inc., and Vice Chairman,
Medallion Gas Services, Inc., the
Corporation's Mid-Continent-based oil
and gas subsidiaries
</TABLE>
Henry A. Jurand. Mr. Jurand was named senior vice president effective
March 1997 and served as vice president of KCS from September 1990, as chief
financial officer since January 1996, as treasurer from March 1991 to December
1995 and as secretary since February 1992.
C. R. "Bob" Devine. Mr. Devine was named vice president of oil and gas
operations of KCS in December 1992 and president of KCS Resources, Inc., the KCS
subsidiary engaged in Onshore Gulf Coast oil and gas exploration and production,
in December 1993. He has served as principal operating officer of KCS' Onshore
Gulf Coast oil and gas operations since 1988. He has been employed by KCS and
its predecessor companies since 1974.
Harry Lee Stout. Mr. Stout has served as president of KCS Energy
Marketing, Inc., and KCS Pipeline Systems, Inc., the KCS subsidiaries engaged in
natural gas marketing and transportation, since joining KCS in August 1991. He
was named president, KCS Michigan Resources, Inc., in November 1995 and
president, KCS Energy Services, Inc., in September 1996.
William E. Warnock, Jr. Mr. Warnock was named president, KCS Medallion
Resources, Inc. (formerly InterCoast Oil and Gas Company), president, GED Energy
Services, Inc. and vice chairman, Medallion Gas Services, Inc. on January 2,
1997, effective with the closing of the acquisition of those entities. Mr.
Warnock joined InterCoast in 1992 as its president and chief operating officer.
Prior to joining InterCoast, he co-founded Medallion Petroleum, Inc. in 1985 and
served as its president.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following tables and discussion, based on December 31 year-end periods,
summarize the compensation of the chief executive officer of the Corporation and
each executive officer of the Corporation whose total annual salary and bonus
was greater than $100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) (I)
LONG TERM COMPENSATION AWARDS
------------------------------------
RESTRICTED OPTIONS/ PERFORMANCE
CALENDAR PERFORMANCE OTHER ANNUAL STOCK & CASH SARS UNIT PLAN ALL OTHER
NAME AND POSITION YEAR SALARY($) AWARD($) COMPENSATION($) AWARDS($) AWARDS(#) AWARDS($) COMPENSATION($)
- ----------------------- -------- --------- ----------- --------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James W. Christmas..... 1996 310,000 250,000 -- -- -- -- 13,787
President and Chief 1995 298,000 50,000 -- -- 40,000 87,500 11,169
Executive Officer 1994 285,600 67,300 -- -- 40,000 87,500 13,296
Henry A. Jurand........ 1996 160,000 100,000 -- -- -- -- 13,787
Senior Vice 1995 149,800 50,000 -- -- 15,000 43,750 11,154
President,
Chief Financial 1994 143,300 23,950 -- -- 10,000 43,750 12,702
Officer
and Secretary
C.R. "Bob" Devine...... 1996 190,000 20,000 -- -- -- -- 13,787
Vice President, Oil 1995 183,000 20,000 -- 48,500 15,000 43,750 11,169
and Gas Operations, 1994 175,000 32,600 -- 50,950 20,000 43,750 13,609
and President,
KCS Resources, Inc.
Harry Lee Stout........ 1996 156,700 42,750 -- -- -- -- 13,787
President, KCS Energy 1995 156,700 10,000 -- -- 15,000 8,000 11,169
Marketing, Inc., KCS 1994 150,000 9,125 -- -- 15,000 4,950 12,111
Pipline
Systems, Inc., KCS
Michigan Resources,
Inc. and KCS Energy
Services, Inc.
</TABLE>
- ---------------
(1) The amounts set forth in column (c) for Mr. Christmas include directors fees
of $600 paid in 1994.
(2) The amounts set forth in column (d) represent performance awards which were
paid in March 1997 for performance during 1996 and in December 1994 and 1995
for the performance during the previous fiscal years ended September 30.
Awards were paid to all recipients based on attainment of specific goals
including profitablity and growth of the Corporation and its various
operating segments.
(3) The amount set forth in column (f) for Mr. Devine reflects a restricted cash
award of $30,000 and 8,400 shares of restricted stock, both vesting
one-third each year on December 2, 1993, 1994 and 1995.
(4) The amounts set forth in column (g) represent the number of stock options
granted in the year under the KCS Energy, Inc. 1992 Stock Plan.
(5) Effective in 1996, the Performance Unit Plan award amounts set forth in
column (h) are awarded pursuant to the KCS Performance Unit Plan in March
for performance during the previous three years. Since the minimum target
results were not achieved for the 1994-1996 period, no awards were paid in
March 1997. Prior to 1996, the awards were made in December 1995 and 1994
for performance during the previous three fiscal years ended September 30.
(6) Amounts shown in column (i) represent amounts contributed by the Corporation
as 50% matching contributions for up to the first 6% of base salary
contributed by the named individual to the KCS Savings and Investment Plan
and the pro rata share of the Corporation's discretionary profit sharing
contribution for each fiscal year made on behalf of the named individual to
the KCS Savings and Investment Plan.
8
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No Option/SARs were granted during 1996 because the Corporation changed its
fiscal year end from September 30 to December 31. Consequently, results of
operations for 1996, which are an element used in the determination of the grant
of Options/SARs, were not determined prior to the end of the calendar year.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES TABLE
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/
SHARES @ FY 96-END(#) SARS @ FY 96-END($)(3)
ACQUIRED VALUE ---------------------------- ---------------------------
NAME AND POSITION ON EXERCISE REALIZED(1) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James W. Christmas.......... 0 $ 0 270,000 60,000 $8,039,700 $ 1,243,750
President and Chief
Executive Officer
Henry A. Jurand............. 38,000 $ 740,928 25,850 18,750 $ 574,556 $ 396,719
Senior Vice President,
Chief Financial Officer
and Secretary
C.R. "Bob" Devine........... 0 $ 0 31,950 26,250 $ 589,331 $ 536,094
Vice President, Oil and
Gas Operations, and
President, KCS Resources,
Inc.
Harry Lee Stout............. 22,600 $ 482,188 22,500 22,500 $ 392,344 $ 466,406
President, KCS Energy
Marketing, Inc., KCS
Pipeline Systems, Inc.,
KCS Michigan Resources,
Inc. and KCS Energy
Services, Inc.
</TABLE>
- ---------------
(1) Market Value of underlying securities at exercise minus the exercise price.
(2) Options granted to these executives under the Company's stock plan become
exercisable in equal installments over a period of three or four years from
the date of grant.
(3) Market value of underlying securities at December 31, 1996 ($35.875 per
share), minus the exercise price.
9
<PAGE> 12
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
No performance units were granted during 1996 because the Corporation
changed its fiscal year end from September 30 to December 31. Consequently,
results of operations for 1996, which are an element used in the determination
of the grant of performance units, were not determined prior to the end of the
calendar year.
EMPLOYEE'S RETIREMENT PLAN OF KCS
On September 26, 1991, the Corporation's Board of Directors amended the
Employee's Retirement Plan of KCS (the "Plan") to freeze the accrual of future
benefits effective October 31, 1991. The Board of Directors then took action to
terminate the Plan effective September 30, 1995. The Company filed all required
standard termination applications with both the Internal Revenue Service and the
Pension Benefit Guaranty Corporation. In July 1996, the Company completed the
termination of the Plan and satisfied all obligations thereunder.
COMPENSATION OF DIRECTORS
Directors who are not executive officers of KCS were paid an annual
retainer of $20,000 (paid one-half in cash and one-half in Common Stock) in
1996. Directors who are not executive officers were paid $1,500 for each meeting
of the Board of Directors and $1,000 for each committee meeting attended during
1996. KCS also reimburses directors for expenses they incur in attending board
and committee meetings.
There was no compensation, not covered above, paid or distributed in 1996
to any of the directors who are not executive officers of KCS, except for a
non-preferential discount of $6,562 on the purchase of 3,000 shares of KCS
Common Stock through the KCS Employee Stock Purchase Program by Mr. Kean.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP, 1345 Avenue of the Americas, New York, NY 10105,
independent certified public accountants, have been auditors of the Corporation
since its inception on June 1, 1988, and prior to that time, were auditors of
NUI Corporation, the former parent company of the Corporation's subsidiaries.
They have been selected by the Board of Directors, upon recommendation of its
Audit Committee, to serve as independent public accountants for the Corporation
and its subsidiaries for 1997.
It is expected that representatives of Arthur Andersen, LLP will be present
at the Meeting with the opportunity to make a statement if they desire to do so
and also will be available to respond to appropriate questions raised at the
meeting or submitted in writing before the Meeting.
PERFORMANCE GRAPH
The following performance graph compares the performance of the
Corporation's Common Stock to the New York Stock Exchange ("NYSE") Market Value
Index and to a Peer Group (which includes, American Exploration Company, Apache
Corporation, Arch Petroleum Inc., Burlington Resources Inc., Cabot Oil & Gas
Corporation, Devon Energy Corporation, Forest Oil Corp., Gerrity Oil & Gas Co.,
Helmerich & Payne, Inc., Kelley Oil & Gas Corporation, Louisiana Land &
Exploration Company, Mesa Inc., Mitchell Energy & Development Corp., Noble
Affiliates, Inc., Nuevo Energy Company, Parker & Parsely Petroleum Company,
Plains Resources, Inc., Pogo Producing Company, Snyder Oil Corporation, Wainoco
Oil Corporation and Wiser Oil Company) for the last five fiscal years. Dekalb
Energy Corporation (acquired by Apache Corporation in May 1995), Maxus Energy
Corporation (acquired by YPF Sociedad Anonima in June 1995), Plains Petroleum
Company (acquired by Barrett Resources in July 1995), Presidio Oil Company
(acquired by Tom Brown, Inc. in December 1996) and Gerrity Oil and Gas Co.
(merged with certain assets of Snyder Oil Corporation to form Pantina Oil and
Gas Corporation in May 1996) were deleted from the Peer Group. In February 1995,
Kelley Oil Corporation merged with Kelley Partners to form Kelley Oil & Gas
Corporation. The graph assumes that the value of the investment in the
Corporation's Common Stock and each index was $100 at January 1, 1992 and that
all dividends were reinvested.
10
<PAGE> 13
FIVE-YEAR CUMULATIVE STOCKHOLDER TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) KCS ENERGY INC PEER GROUP BROAD MARKET
<S> <C> <C> <C>
1991 100 100 100
1992 493.78 117.9 104.7
1993 1245.83 142.63 118.88
1994 759.61 125.51 116.57
1995 706.36 145.33 151.15
1996 1692.7 202.48 182.08
</TABLE>
PROPOSAL TO AMEND THE KCS ENERGY, INC. 1992 STOCK PLAN
Based on the recommendation of the Compensation Committee, the Board has
adopted, subject to the approval of the stockholders at the Meeting an amendment
to the KCS Energy, Inc. 1992 Stock Plan (the "Stock Plan"), increasing the total
number of authorized shares of Common Stock issuable under the Stock Plan from
600,000 to 1,100,000. To effectuate the change, Section 1.3.1 of the Stock Plan
would be amended to read as follows:
"1.3.1 The aggregate number of shares of Common Stock with respect to
which Options, SARs, Restricted Stock or Bonus Stock may be granted under
the Plan shall not exceed 1,100,000 shares of Common Stock, subject to
adjustment in accordance with Section 6.1 hereof."
MANAGEMENT'S RECOMMENDATION: In the Opinion of the Board of Directors,
increasing the total shares issuable under the Stock Plan will directly enhance
the recruitment and retention of highly-qualified key employees and maintain the
commonality of interest between these key employees and the stockholders. The
Board of Directors recommends a vote FOR the amendment to the Stock Plan.
ANNUAL REPORT
Included with this Proxy Statement is the Annual Report for 1996.
Stockholders are referred to this report for financial and other information
about the activities of the Corporation. Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 18 through 23 and the
consolidated financial statements of the Corporation on pages 25 through 45 of
the Annual Report are incorporated herein by reference. The rest of the Annual
Report is not to be considered a part of this Proxy Statement.
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION (FORM 10-K) TO A
BENEFICIAL OWNER OF ITS SHARES UPON RECEIPT OF A WRITTEN REQUEST FROM SUCH
PERSON. PLEASE WRITE TO HENRY A. JURAND, SECRETARY, KCS ENERGY, INC., 379
THORNALL STREET, EDISON, NJ 08837.
11
<PAGE> 14
REVOCABILITY OF PROXY
The form of proxy enclosed is for use at the Meeting if a stockholder will
be unable to attend in person. The proxy may be revoked by a stockholder at any
time before it is exercised. All shares represented by valid proxies received
prior to the Meeting, pursuant to this solicitation and not revoked before they
are exercised, will be voted. Pursuant to Delaware statutes, the presence at any
meeting of any stockholder who has given a proxy shall not revoke such proxy
unless the stockholder shall file written notice of such revocation with the
secretary of the Meeting prior to the voting of such proxy.
VOTE REQUIRED
The number of affirmative votes necessary for the election of directors is
a plurality of the shares of the Corporation's Common Stock present or
represented by proxy and voted at the Meeting.
The number of affirmative votes necessary for approval of the amendment of
the KCS Energy, Inc. 1992 Stock Plan is a majority of the shares of the
Corporation's Common Stock present or presented by proxy and voted at the
Meeting.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. Should a stockholder intend to present a proposal at the 1998 Annual
Meeting, it must be received by the Secretary of the Corporation at 379 Thornall
Street, Edison, NJ 08837, by not later than December 2, 1997, in order to be
eligible for inclusion in the Corporation's proxy statement and form of proxy
relating to that meeting. Such proposals must meet all of the requirements of
the Securities and Exchange Commission to be eligible for inclusion in the
Corporation's 1998 Proxy materials. Among such requirements, at the time of
submission of the proposal, the submitting stockholder must be the record or
beneficial owner of 1% or $1,000 in market value of the Corporation's Common
Stock for at least one year.
SECURITIES EXCHANGE ACT COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's executive officers and directors and persons who own more than
ten percent of a registered class of the Corporation's equity securities to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission and the New York Stock Exchange. Executive
officers, directors and greater than ten percent stockholders are required by
Securities and Exchange Commission regulation to furnish the Corporation with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Corporation's review of the copies of such Forms it has
received, the Corporation believes that all its executive officers, directors
and greater than ten percent beneficial owners complied with all filing
requirements applicable to them with respect to transactions during 1994, 1995
and 1996.
OTHER BUSINESS
Management does not intend to present and does not have any reason to
believe that others will present at the Meeting any item of business other than
those set forth herein. However, if other matters are properly presented for a
vote, the proxies will be voted upon such matters in accordance with the
judgment of the person acting under the proxy.
By Order of the Board of Directors
Henry A. Jurand
Secretary
Edison, New Jersey
April 7, 1997
12
<PAGE> 15
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
KCS ENERGY, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 14, 1997
The undersigned hereby appoints James W. Christmas and Henry A. Jurand,
and each of them, attorneys and proxies, with power of substitution in each of
them, to vote for and on behalf of the undersigned at the Annual Meeting of
Stockholders of the Corporation to be held on May 14, 1997 and at any
adjournment thereof, upon matters properly coming before the meeting, as set
forth in the related Notice of Meeting and Proxy Statement, both of which have
been received by the undersigned. The proxies are instructed to vote as follows:
With-
For hold Except
1. Election of the Board's nominees [ ] [ ] [ ]
for Director
STEWART B. KEAN
JAMES E. MURPHY, JR.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, CHECK THE
BOX LABELED "EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- -------------------------------------------------------------------------------
(the Board of Directors recommends a vote "FOR")
For Against Abstain
2. To approve the amendment to the [ ] [ ] [ ]
KCS Energy, Inc. 1992 Stock Plan,
increasing the shares of common
stock available to be issued under
the plan.
(the Board of Directors recommends a vote "FOR")
3. To take action upon any other business as may properly come before the
meeting.
Yes No
DO YOU INTEND TO ATTEND THIS MEETING? [ ] [ ]
UNLESS OTHERWISE SPECIFIED IN THE SQUARES ON THE SPACE PROVIDED IN THIS
PROXY, THIS PROXY WILL BE VOTED FOR THE BOARD'S NOMINEES.
--------------------------
Date
Please be sure to sign and date
this Proxy in the box below.
- --------------------------------------------------------------------------
- ------Stockholder sign above----------Co-holder (if any) sign above-------
- --------------------------------------------------------------------------
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
KCS ENERGY, INC.
Please sign this proxy and return it promptly whether or not you expect to
attend the meeting. You may nevertheless vote in person if you attend.
Please sign exactly as your name appears herein. Give full title if an
Attorney, Executor, Administrator, Trustee, Guardian, etc.
For an account in the name of two or more persons, each should sign, or if one
signs, he should attach evidence of his authority.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
