<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
KCS ENERGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
KCS ENERGY, INC.
PRINCIPAL EXECUTIVE OFFICE:
379 THORNALL STREET
EDISON, NEW JERSEY 08837
(732) 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 27, 1998, 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 2001;
2. 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 30, 1998,
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
KATHRYN M. KINNAMON
Assistant Secretary
April 17, 1998
------------------------
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
(732) 632-1770
PROXY STATEMENT
The Proxy Statement and the accompanying Proxy Card are being mailed to
stockholders, commencing April 17, 1998, 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 27, 1998, 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 30, 1998, there were outstanding 29,458,214 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 1,102 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 30, 1998, 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 30, 1998:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NO. OF SHARES OF % OF CLASS
BENEFICIAL OWNER COMMON STOCK OUTSTANDING
------------------- ---------------- -----------
<S> <C> <C>
Stewart B. Kean......................................... 2,744,735(1)(2) 9.32%
P.O. Box 1
Elizabeth, NJ 07207
Warburg Pincus Counsellors.............................. 1,986,000 6.74%
466 Lexington Avenue
New York, NY 10017
Crabbe Huson Group, Inc................................. 1,672,5000 5.68%
121 Southwest Morrison, Suite 1400
Portland, OR 97204
</TABLE>
- ---------------
(1) Includes shares that are allocated to the beneficial owner's account under
401(k) plans.
(2) Includes 1,025,648 shares held under certain family trusts, as to which Mr.
Kean shares voting and investment power.
<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 30, 1998:
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY(1) PERCENT OF CLASS
--------------- ----------------
<S> <C> <C>
Stewart B. Kean.................................... 2,752,735(2)(3) 9.34%
James W. Christmas................................. 1,027,112(2)(4) 3.41%
Joel D. Siegel..................................... 191,388(2)(5) *
C. R. "Bob" Devine................................. 122,042(2) *
Harry Lee Stout.................................... 59,276(2) *
Christopher A. Viggiano............................ 43,388(2) *
James E. Murphy, Jr. .............................. 30,884(2) *
G. Stanton Geary................................... 10,254(2) *
Robert G. Raynolds................................. 7,662(2) *
9 Directors and Officers as a group................ 4,244,741(2) 14.07%
</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 30, 1998, of 620,000, 32,500,
and 27,500 shares for Messrs. Christmas, Devine and Stout, respectively, and
for 8,000 shares to each of Messrs. Kean, Siegel, Viggiano and Murphy, 5,080
shares for Mr. Geary and 4,000 shares for Mr. Raynolds and (ii) are
allocated to the beneficial owner's account under the Corporation's 401(k)
plan.
(3) Includes 1,025,648 shares held under certain family trusts, as to which Mr.
Kean shares voting and investment power.
(4) Includes 36,000 shares held in trusts established for the benefit of Mr.
Christmas' children, the beneficial ownership of which is disclaimed.
(5) Includes 16,000 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 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 G. Stanton Geary and Robert G.
Raynolds as directors of the Corporation for three-year terms expiring at the
Annual Meeting of Stockholders in 2001 or until their successors are elected or
appointed. Messrs. Geary and Raynolds are presently serving as directors of the
Corporation.
2
<PAGE> 5
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 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>
G. STANTON GEARY, 63.............. Mr. Geary has served as director since 1988. He is
Member, Audit Committee proprietor of Gemini Associates, Pomfret, CT, a venture
capital consulting firm, and was business manager of the
Rectory School, Pomfret, CT from 1987 through 1997. Mr.
Geary's term expires in 1998 and if re-elected, his new term
will expire in 2001.
ROBERT G. RAYNOLDS, 46............ 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. Raynolds' term expires in
1998 and if re-elected, his new term will expire in 2001.
STEWART B. KEAN, 63............... Mr. Kean has served as Chairman of the Board of Directors
Chairman, Member, since 1988. Mr. Kean 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
President of the Liberty Hall Foundation. Mr. Kean's term
expires in 2000.
JAMES E. MURPHY, JR., 41.......... Mr. Murphy has served as director since 1988. He heads a
Member, Compensation political and governmental relations consulting firm
Committee offering strategic planning and management consulting
services to Republican candidates nationwide, with extensive
experience at the presidential, state and congressional
levels. Based in Gaithersburg, MD, he also advises
corporations and industry groups on strategic planning,
governmental relations and grassroots lobbying projects. Mr.
Murphy's term expires in 2000.
JAMES W. CHRISTMAS, 50............ Mr. Christmas has served as President, Chief Executive
Member, Executive Officer and director of the Corporation since 1988. Mr.
Committee Christmas' term expires in 1999.
JOEL D. SIEGEL, 56................ Mr. Siegel has served as director since 1988. He is an
Member, Executive and attorney with and is President of Orloff, Lowenbach,
Compensation Committees Stifelman & Siegel, P.A., Roseland, NJ, since 1975. Mr.
Seigel's term expires in 1999.
CHRISTOPHER A. VIGGIANO, 44....... Mr. Viggiano has served as director since 1988. He has been
Member, Audit and President, Chairman of the Board and majority owner of
Compensation Committees O'Bryan Glass Corp., Queens, NY since December 1991, and
served as Vice President and a member of the board of
directors of O'Bryan Glass Corp. from 1985 to 1991. He is a
Certified Public Accountant. Mr. Viggiano's term expires in
1999.
</TABLE>
RELATIONSHIPS: Mr. Raynolds is Mr. Kean's nephew. During 1997, 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 ten meetings during 1997. Each
director, following his election, attended all 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 Compensation Committees each met two times during 1997. The
Executive Committee did not meet during 1997.
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 eight 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 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, stock grants 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. Similarly, incentive
compensation based upon 1997 performance was paid in 1998.
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 page 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.
BASE PAY
Effective January 1, 1997, the Company granted base salary increases to its
entire senior executive group of approximately 5.4%. This included a base pay
increase to Mr. Christmas of 4.8% ($15,000), increasing his
4
<PAGE> 7
base pay to $325,000. The base pay increases, while subjectively determined,
considered increases in the cost of living, as well as the individual's current
performance, experience, scope of responsibilities and the competitive
environment for comparable positions within the industry.
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 50% to 80% of annual base pay, depending on the executive's position.
For 1997, 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 27% of his 1997 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 earnings per share, growth in cash flow per
share and growth in proved 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. 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
actual results as compared to the targeted results. If the targeted results are
reached, the value of each performance unit is $100.
For executives of the parent corporation, the Performance Unit Plan is
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 1998, the Corporation granted 1,000 performance units to Mr.
Christmas and 500 performance units to each of the other three highest-paid
executives with the exception of Mr. Jurand, who retired at the end of 1997. The
number of units 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 1998-2000 period.
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, at the Committee's discretion.
The Corporation uses annual grants of stock options to closely align
executives' financial interests with those of stockholders. In February 1998,
the Committee awarded 50,000 stock options to Mr. Christmas and 10,000 each to
Messrs. Devine and Stout. The number of options was determined subjectively, not
by the application of any formula or other mathematical process. The Committee
considered individual and overall
5
<PAGE> 8
Corporation or subsidiary performance 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 applies to other
executives; that is, to maintain base salary at or slightly below market, with
emphasis placed on incentive compensation.
In keeping with the policy to limit base salary increases to reflect
primarily increases in the cost of living, Mr. Christmas received a base pay
increase of 4.8% to $325,000, maintaining Mr. Christmas' base salary in line
with, but still below, that of the peer group.
In March 1998, Mr. Christmas was paid an $86,775 annual incentive bonus,
representing approximately 27% of calendar year base pay. While earnings per
share and cash flow per share were below the target level, oil and gas reserve
increases exceeded the level of performance the Committee established for 1997.
The Committee also considered other factors, including the integration of the
Medallion Acquisition and the successful completion of both a public equity and
debt financing which strengthened the Corporation's financial position.
In February 1998, the Committee granted Mr. Christmas 50,000 stock options
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 ending December 31, 2000.
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 served as executive officers of the Corporation at the
discretion of the Board of Directors throughout 1997:
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
Henry A. Jurand............. Senior Vice President, Chief Financial 48
Officer and Secretary of KCS
C. R. "Bob" Devine.......... Vice President, Oil and Gas Operations 51
of KCS, and President, KCS Resources,
Inc., the Corporation's Gulf
Coast-based oil and gas subsidiary
Harry Lee Stout............. President, KCS Energy Services, Inc., 50
KCS Energy Marketing, Inc., and KCS
Michigan Resources, Inc., the
Corporation's volumetric production
payment 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. Mr. Jurand retired effective December
31, 1997.
C. R. "Bob" Devine. Mr. Devine was named Vice President, Oil and Gas
Operations of the Corporation in December 1992 and President of KCS Resources,
Inc., a subsidiary engaged in oil and gas exploration and production, in
December 1993. 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. since August 1991. He was named President of KCS Michigan
Resources, Inc. in November 1995 and President of KCS Energy Services, Inc. in
September 1996. He also served as President of the Corporation's natural gas
marketing and transportation subsidiaries from August 1991 until the
discontinuation of these operations in 1997.
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 combined total annual salary and
bonus is greater than $100,000 for 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h)
LONG-TERM COMPENSATION AWARDS
--------------------------------------
RESTRICTED OPTIONS/ PERFORMANCE
CALENDAR PERFORMANCE OTHER ANNUAL STOCK & CASH SARS UNIT PLAN
NAME AND POSITION YEAR SALARY($) AWARD($) COMPENSATION($) AWARDS($) AWARDS(#) AWARDS($)
----------------- -------- --------- ----------- --------------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
James W. Christmas........ 1997 325,000 86,775 -- -- 80,000 --
President and Chief 1996 310,000 250,000 -- -- -- --
Executive Officer 1995 298,000 50,000 -- -- 80,000 87,500
Henry A. Jurand........... 1997 170,000 -- -- -- 40,000 --
Senior Vice President, 1996 160,000 100,000 -- -- -- --
Chief Financial Officer 1995 149,800 50,000 -- -- 30,000 43,750
and Secretary
C.R. "Bob" Devine......... 1997 200,000 34,000 -- -- 20,000 --
Vice President, Oil 1996 190,000 20,000 -- -- -- --
and Gas Operations, 1995 183,000 20,000 -- 48,500 30,000 43,750
and President,
KCS Resources, Inc.
Harry Lee Stout........... 1997 165,000 35,000 -- -- 20,000 --
President, KCS Energy 1996 156,700 42,750 -- -- -- --
Marketing, Inc., 1995 156,700 10,000 -- -- 30,000 8,000
KCS Michigan Resources,
Inc. and KCS Energy
Services, Inc.
<CAPTION>
(a) (i)
ALL OTHER
NAME AND POSITION COMPENSATION($)
----------------- ---------------
<S> <C>
James W. Christmas........ 9,327
President and Chief 13,787
Executive Officer 11,169
Henry A. Jurand........... 9,402
Senior Vice President, 13,787
Chief Financial Officer 11,154
and Secretary
C.R. "Bob" Devine......... 9,295
Vice President, Oil 13,787
and Gas Operations, 11,169
and President,
KCS Resources, Inc.
Harry Lee Stout........... 9,261
President, KCS Energy 13,787
Marketing, Inc., 11,169
KCS Michigan Resources,
Inc. and KCS Energy
Services, Inc.
</TABLE>
- ---------------
NOTES:
(1) The amounts set forth in column (d) represent performance awards which were
paid in March 1998 and March 1997 for performance during 1997 and 1996, and
in December 1995 for performance during the fiscal year ended September 30,
1995. Awards were paid to all recipients based on attainment of and growth
of the Corporation and its various operating divisions.
(2) The amount set forth in column (f) for Mr. Devine reflects a restricted cash
award of $30,000 and 16,800 shares of restricted stock, both vesting
one-third each year on December 2, 1993, 1994 and 1995.
(3) 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. See the
table entitled "Option/SAR Grants in Last Fiscal Year."
(4) Effective in 1996 the Performance Unit Plan Award amounts set forth in
column (h) were 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 1995-1997 and the 1994-1996 periods, no
awards were paid in March 1998 and March 1997. In December 1995, performance
units were awarded for performance during the previous three fiscal years
ended September 30. See the table entitled "Long-Term Incentive
Plan -- Awards in Last Fiscal Year."
(5) 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 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
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
POTENTIAL REALIZABLE VALUE
@ ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM
-------------------------------
IF STOCK PRICE IF STOCK PRICE
AT $27.28 AT $43.45
OPTIONS/ % OF TOTAL IN 2007 TO 2007
SARS GRANTED EXERCISE EXPIRATION -------------- --------------
NAME AND POSITION GRANTED IN FY 97 PRICE DATE 5% 10%
----------------- --------------- ----------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders' Stock N/A N/A N/A N/A $310,312,384 $786,392,508
Appreciation.................
James W. Christmas............. 80,000 23% $16.75 2/26/07 $ 842,719 $ 2,135,615
President and Chief Executive
Officer
Henry A. Jurand................ 40,000 11% $16.75 12/31/97 $ -- $ --
Senior Vice President, Chief
Financial Officer and
Secretary
C.R. "Bob" Devine.............. 20,000 6% $16.75 2/26/07 $ 210,680 $ 533,904
Vice President, Oil and Gas
Operations, and President,
KCS Resources, Inc.
Harry Lee Stout................ 20,000 6% $16.75 2/26/07 $ 210,680 $ 533,904
President, KCS Energy
Marketing, Inc., KCS Michigan
Resources, Inc. and KCS
Energy Services, Inc.
</TABLE>
- ---------------
NOTES:
(1) All options are granted under the KCS Energy, Inc. 1992 Stock Plan.
(2) The exercise price for all options granted during 1997 is equal to the fair
market value of the Common Stock on the date of the grant, February 26,
1997. The options granted become exercisable in one-fourth increments at the
end of each year following the date of the grant. Exercise rights and
expiration dates may be affected by the death, retirement, termination of
employment or disability of an optionee.
9
<PAGE> 12
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 AT FY 97-END(#) SARS AT FY 97-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............. -- $ -- 600,000 140,000 $10,299,700 $1,160,000
President and Chief Executive
Officer
Henry A. Jurand................ 69,200 $1,023,419 -- -- $ -- $ --
Senior Vice President, Chief
Financial Officer and
Secretary
C.R. "Bob" Devine.............. 63,900 $ 771,734 27,500 45,000 $ 335,000 $ 428,750
Vice President, Oil and Gas
Operations, and President,
KCS Resources, Inc.
Harry Lee Stout................ 45,000 $ 572,578 22,500 42,500 $ 277,969 $ 395,000
President, KCS Energy
Marketing, Inc., KCS Michigan
Resources, Inc. and KCS
Energy Services, Inc.
</TABLE>
- ---------------
NOTES:
(1) Market value of underlying securities at exercise minus the exercise price.
(2) Options granted to these executives under the Corporation's stock plan
become exercisable in equal installments over a period of four years from
the date of grant.
(3) Market value of underlying securities at December 31, 1997 ($20.75 per
share), minus the exercise price.
10
<PAGE> 13
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
(A) (D) (E) (F)
(B) (C) ESTIMATED FUTURE PAYOUTS
NUMBER OF PERFORMANCE -------------------------------
NAME AND POSITION PERFORMANCE UNITS PERIOD THRESHOLD TARGET MAXIMUM
----------------- ----------------- ----------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
James W. Christmas................. 1,000 FY 97-99 $25,000 $100,000 $175,000
President and Chief Executive
Officer
Henry A. Jurand.................... 500 FY 97-99 -- -- --
Senior Vice President, Chief
Financial Officer and Secretary
C.R. "Bob" Devine.................. 500 FY 97-99 12,500 50,000 87,500
Vice President, Oil and Gas
Operations, and President, KCS
Resources, Inc.
Harry Lee Stout.................... 500 FY 97-99 12,500 50,000 87,500
President, KCS Energy Marketing,
Inc., KCS Michigan Resources,
Inc. and KCS Energy Services,
Inc.
</TABLE>
- ---------------
NOTES:
(1) The KCS Performance Unit Plan is designed to promote the profitable growth
of the Corporation through awards of performance units which become cash
awards at the end of a period of years, currently three years. The
Compensation Committee of the Board of Directors establishes separate
performance criteria for each executive. Performance criteria consider
attainment of certain financial goals and are based on reasonable accounting
measures, including but not limited to, growth in earnings per share, cash
flow and proved oil and gas reserves for corporate executives and growth in
subsidiary operating income, cash flow and proved oil and gas reserves for
subsidiary executives. The value of each performance unit could range from
$0 to $175 depending on the attainment of performance criteria.
(2) The awards described above provide for the payments indicated in column (e)
if targeted three-year cumulative targets are achieved. The potential
payments indicated in column (d) are the awards payable if the minimum
approved three-year targets are achieved. The potential payments indicated
in column (f) are the maximum awards payable if three-year cumulative
targets are exceeded.
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
1997. 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
1997. KCS also reimburses directors for expenses they incur in attending board
and committee meetings.
There was no other compensation paid or distributed in 1997 to any of the
directors who are not executive officers of KCS, except for a non-preferential
discount of $12,075, $8,185, and $1,025 on the purchase of shares of KCS Common
Stock through the KCS Employee Stock Purchase Program by Mr. Kean (6,000
shares), Mr. Siegel (6,000 shares) and Mr. Raynolds (500 shares), respectively.
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. 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 1998.
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 will be available to respond to appropriate questions raised at the Meeting
or submitted in writing before the Meeting.
11
<PAGE> 14
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., Helmerich & Payne,
Inc., Kelley Oil & Gas Corporation, Louisiana Land & Exploration Company,
Mitchell Energy & Development Corp., Noble Affiliates, Inc., Nuevo Energy
Company, Patina Oil and Gas, Plains Resources, Inc., Pogo Producing Company,
Snyder Oil Corporation, Tom Brown, Inc., Wainoco Oil Corporation and Wiser Oil
Company) for the last five fiscal years. In October 1997, American Exploration
Company merged into Louis Dreyfus Natural Gas and Louisiana Land and Exploration
Company merged with Burlington Resoures, Inc. Gerrity Oil & Gas Co. (merged with
certain assets of Snyder Oil Corporation to form Patina Oil and Gas Corporation
in May 1996), Mesa Inc. and Parker & Parsely Petroleum Company (Mesa Inc. and
Parker & Parsely Petroleum Company merged in August 1997 to form Pioneer Natural
Resources Corp.) were deleted from the Peer Group. Patina Oil & Gas Corporation
and Tom Brown, Inc. were added to the Peer Group. The graph assumes that the
value of the investment in the Corporation's Common Stock and each index was
$100 at January 1, 1993, and that all dividends were reinvested.
FIVE-YEAR CUMULATIVE STOCKHOLDER TOTAL RETURN
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD KCS ENERGY PEER GROUP BROAD
(FISCAL YEAR COVERED) INC MARKET
<S> <C> <C> <C>
I 100.00 100.00 100.00
1993 252.30 119.45 113.45
1994 153.83 106.22 111.33
1995 143.05 125.03 144.36
1996 342.80 174.26 173.90
1997 399.27 171.58 228.78
</TABLE>
ANNUAL REPORT
Included with this Proxy Statement is the Annual Report for 1997.
Stockholders are referred to this report for financial and other information on
the activities of the Corporation. Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 17 through 23 and the
consolidated financial statements of the Corporation on pages 25 through 43 of
the Annual Report are incorporated herein by reference. The remainder 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 CORPORATE SECRETARY, KCS ENERGY, INC., 379 THORNALL
STREET, EDISON, NJ 08837.
12
<PAGE> 15
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.
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 1999 Annual
Meeting, it must be received by the Secretary of the Corporation at 379 Thornall
Street, Edison, NJ 08837, not later than January 27, 1999, 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 the requirements of the
Securities and Exchange Commission in order to be eligible for inclusion in the
Corporation's 1999 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
10% 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 10% 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 10% beneficial owners complied with all filing requirements
applicable to them with respect to transactions during 1995, 1996 and 1997.
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
Kathryn M. Kinnamon
Assistant Secretary
Edison, New Jersey
April 17, 1998
13
<PAGE> 16
KCS ENERGY, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 27, 1998
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints James W. Christmas and Frederick Dwyer, 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 27, 1998 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:
1. Election of the Board's nominees With-
for Director For hold Except
/ / / / / /
G. STANTON GEARY
ROBERT G. RAYNOLDS
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")
2. To take action upon any other business as may properly come before the
meeting.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. ---------------------> / /
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY, THIS
PROXY WILL BE VOTED FOR THE BOARD'S NOMINEES.
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 be sure to sign and date this Proxy in the box below. Date
---------------
- ---------------------- -----------------------------
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 ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- -------------------------------------------------------------------------------
