<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
KCS ENERGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FREDERICK DWYER
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
------------------------------------------------------------------------
(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:
5555 SAN FELIPE
HOUSTON, TEXAS 77056
(713) 877-8006
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, 1999, at the Marathon Oil Tower, 5555 San Felipe, Houston,
Texas at 9:00 a.m. local time for the following purposes:
1. To elect three directors to serve until the Annual Meeting of
Stockholders in 2002;
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 April 20, 1999,
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
FREDERICK DWYER
Secretary
April 30, 1999
------------------------
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.
5555 SAN FELIPE
HOUSTON, TEXAS 77056
(713) 877-8006
PROXY STATEMENT
The Proxy Statement and the accompanying Proxy Card are being mailed to
stockholders, commencing April 30, 1999, 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, 1999, 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 April 20, 1999, there were outstanding 29,260,210 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 1,147 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 April 20, 1999, 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 April 20, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NO. OF SHARES OF % OF CLASS
BENEFICIAL OWNER COMMON STOCK OUTSTANDING
------------------- ---------------- -----------
<S> <C> <C>
State Street Research & Management Company.............. 3,533,100 12.07%
One Financial Center
Boston, MA 02111
Stewart B. Kean......................................... 2,772,595(1)(2) 9.48%
P.O. Box 1
Elizabeth, NJ 07207
Dimensional Fund Advisors, Inc.......................... 1,997,166 6.83%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Crabbe Huson, Group, Inc. .............................. 1,811,031 6.19%
121 S.W. Morrison, Suite 1400
Portland, OR 97204
Merrill Lynch & Co., Inc. .............................. 1,616,900 5.53%
800 Scudders Mill Road
Plainsboro, NJ 08536
</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 April 20, 1999:
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY(1) PERCENT OF CLASS
--------------- ----------------
<S> <C> <C>
Stewart B. Kean.................................... 2,782,595(2)(3) 9.42%
James W. Christmas................................. 1,100,632(2)(4) 3.64%
Joel D. Siegel..................................... 200,248(2)(5) *
Harry Lee Stout.................................... 96,998(2) *
Christopher A. Viggiano............................ 52,248(2) *
James E. Murphy, Jr. .............................. 35,844(2) *
Robert G. Raynolds................................. 25,797(2)(6) *
William N. Hahne................................... 24,500(2) *
G. Stanton Geary................................... 13,114(2) *
9 Directors and Officers as a group................ 4,331,976(2) 14.33%
</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 April 20, 1999, of 572,500 and 50,000
shares for Messrs. Christmas and Stout, respectively and for 10,000 shares
to each of Messrs. Kean, Siegel, Viggiano, Murphy and Hahne, 7,080 shares
for Mr. Geary and 6,000 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.
(6) Includes 3,504 shares held in trusts established for the benefit of Mr.
Raynolds' children, the beneficial ownership of which is disclaimed.
(c) The Corporation has not issued nor has outstanding any Preferred Stock.
2
<PAGE> 5
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 James W. Christmas, Joel D. Siegel
and Christopher A. Viggiano as directors of the Corporation for three-year terms
expiring at the Annual Meeting of Stockholders in the year 2002 or until their
successors are elected or appointed. Messrs. Christmas, Siegel, and Viggiano 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 any 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>
JAMES W. CHRISTMAS, 51............ Mr. Christmas has served as director, President and Chief
Member, Executive Executive Officer of the Corporation since 1988. Mr.
Committee Christmas' term expires in 1999 and if re-elected, his new
term will expire in 2002.
JOEL D. SIEGEL, 57................ Mr. Siegel has served as director since 1988. He is an
Member, Executive and attorney-at-law and has been president of the law firm of
Compensation Committees Orloff, Lowenbach, Stifelman & Siegel, P.A., Roseland, NJ,
since 1975. Mr. Seigel's term expires in 1999 and if
re-elected, his new term will expire in 2002.
CHRISTOPHER A. VIGGIANO, 45....... 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 December 1991.
He is a Certified Public Accountant. Mr. Viggiano's term
expires in 1999 and if re-elected, his new term will expire
in 2002.
STEWART B. KEAN, 64............... 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., 42.......... Mr. Murphy has served as director since 1988. He leads his
Member, Compensation own 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 Potomac, Maryland, he also advises
corporations and industry groups on strategic planning,
governmental relations and grassroots lobbying projects. Mr.
Murphy's term expires in 2000.
G. STANTON GEARY, 64.............. 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 2001.
ROBERT G. RAYNOLDS, 47............ Mr. Raynolds has served as director since 1995. He has been
Member, Audit Committee 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 2001.
</TABLE>
RELATIONSHIPS: Mr. Raynolds is Mr. Kean's nephew. During 1998, 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.
3
<PAGE> 6
INFORMATION CONCERNING THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES
The Board of Directors held a total of ten meetings during 1998. During
1998, each director attended all of the meetings of the Board of Directors and
all meetings of the committees of which he is a member.
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.
Each committee met two times during 1998.
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. Incentive compensation based
upon 1996 performance was paid in 1997. Similarly, incentive compensation based
upon 1997 performance was paid in 1998. With the exception of the Mid-Continent
division, no incentive compensation was paid to the executive officers in 1999
as 1998 performance objectives were not achieved. No payments were made under
the Performance Unit Plan in 1999.
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 11 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
A salary freeze for senior management for 1999 was implemented as part of
the Corporation's cost reduction initiative program.
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 1998, 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. Because the 1998 performance objectives were not achieved,
Mr. Christmas was not paid a bonus in 1999.
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 such measures as finding and development
costs, earnings, cash flow and increase in PV-10 value of 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
and 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 of operations as compared to the targeted results. If the
targeted results are reached, the value of each performance unit is $100.
The Performance Unit Plan is based primarily on the same criteria as the
annual incentive plan, but reflecting three-year cumulative performance
objectives. The grant of performance units for 1999 has been deferred.
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. The Committee
considers individual and overall 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 1999 salary freeze for senior management which was
implemented as part of the Corporation's cost reduction initiative program, Mr.
Christmas did not receive a base pay increase.
5
<PAGE> 8
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
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 during 1998:
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
William N. Hahne............ Senior Vice President and Chief 47
Operating Officer of KCS
Paul S. Samett.............. Senior Vice President and Chief 44
Financial Officer of KCS
Harry Lee Stout............. President, KCS Energy Marketing, Inc. 51
and KCS Energy Services, Inc.
</TABLE>
William N. Hahne was named Senior Vice President and Chief Operating
Officer of KCS in April 1998. He is a Registered Petroleum Engineer and has 26
years experience with various major independent exploration and production
companies including Unocal Corporation, Union Texas Petroleum Corporation,
NERCO, The Louisiana Land and Exploration Company ("LL&E") and Burlington
Resources Inc. Prior to joining KCS, Mr. Hahne held various positions including
Worldwide Operations Vice President for LL&E from October 1993 to October 1997
and Vice President of International & Onshore for Burlington Resources Inc. from
October 1997 to April 1998.
Paul S. Samett was named Senior Vice President and Chief Financial Officer
of KCS in April 1998. Prior to joining KCS, Mr. Samett was a Principal at
Eastlakes Capital Consulting Group from August 1997 to April 1998 and Senior
Vice President, Chief Financial Officer, Treasurer and a director of The Tokai
Bank's U.S. commercial finance company from August 1993 to August 1997. Prior to
joining Tokai Bank, Mr. Samett was a Controller and Vice President -- Finance
with U.S. West Capital Corporation (now a part of NationsBank) and an accountant
and consultant at the senior manager level with Arthur Andersen & Co. He is a
Certified Public Accountant. As a result of the Corporation closing its New
Jersey corporate office effective May 1, 1999 and transferring all functions to
its Houston facility, Mr. Samett's last day of employment with KCS was April 2,
1999.
Harry Lee Stout has served as President of KCS Energy Marketing, Inc. since
August 1991. He was named 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.
6
<PAGE> 9
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 combined annual salary and
bonus is greater than $100,000 for 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h)
LONG-TERM COMPENSATION AWARDS
--------------------------------------
RESTRICTED OPTIONS/ PERFORMANCE
CALENDAR PERFORMANCE OTHER ANNUAL STOCK & CASH SARS UNIT PLAN
NAME AND POSITION YEAR SALARY($) AWARD($) COMPENSATION($) AWARDS($) AWARDS(#) AWARDS($)
----------------- -------- --------- ----------- --------------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
James W. Christmas....... 1998 338,000 -- -- -- 50,000 --
President and Chief 1997 325,000 86,775 -- -- 80,000 --
Executive Officer 1996 310,000 250,000 -- -- -- --
William N. Hahne......... 1998 159,200 -- -- -- 140,000 --
Senior Vice President
and Chief Operating
Officer
Paul S. Samett........... 1998 124,200 -- -- -- 70,000 --
Senior Vice President
and Chief Financial
Officer
Harry Lee Stout.......... 1998 170,000 -- 60,000 --
President, KCS Energy 1997 165,000 35,000 -- -- 20,000 --
Marketing, Inc. 1996 156,700 42,750 -- -- -- --
and KCS Energy
Services, Inc.
<CAPTION>
(a) (i)
ALL OTHER
NAME AND POSITION COMPENSATION($)
----------------- ---------------
<S> <C>
James W. Christmas....... 9,653
President and Chief 9,327
Executive Officer 13,787
William N. Hahne......... 1,062
Senior Vice President
and Chief Operating
Officer
Paul S. Samett........... --
Senior Vice President
and Chief Financial
Officer
Harry Lee Stout.......... 9,643
President, KCS Energy 9,261
Marketing, Inc. 13,787
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. No
performance awards were paid in March 1999 for performance during 1998.
Awards were paid to all recipients based on attainment of specific goals
including profitability and growth of the Corporation and its various
operating segments.
(2) 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
notes to the table entitled "Option/SAR Grants on Last Fiscal Year."
(3) No awards were paid under the Performance Unit Plan in 1998, 1997 and 1996.
(4) 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.
(5) Mr. Hahne and Mr. Samett joined the Company in April 1998.
7
<PAGE> 10
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
APPRECIATES APPRECIATES
FROM EXERCISE FROM EXERCISE
OPTIONS/ % OF TOTAL PRICE PRICE
SARS GRANTED EXERCISE EXPIRATION 5% ANNUALLY 10% ANNUALLY
NAME AND POSITION GRANTED IN FY 98 PRICE DATE THROUGH 2008 THROUGH 2008
----------------- -------- ---------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders' Stock
Appreciation................. N/A N/A N/A N/A $173,233,708 $439,008,227
James W. Christmas............. 50,000 6% $17.375 2/25/08 $ 546,352 $ 1,384,564
President and Chief Executive
Officer
William N. Hahne............... 40,000 4% $ 15.00 4/13/08 $ 377,337 $ 956,245
Senior Vice President and 100,000 11% $ 5.375 9/24/08 $ 338,031 $ 856,637
Chief Operating Officer
Paul S. Samett................. 20,000 2% $ 14.75 4/2/99 $ -- $ --
Senior Vice President and 50,000 6% $ 5.375 4/2/99 $ -- $ --
Chief Financial Officer
Harry Lee Stout................ 10,000 1% $17.375 2/25/08 $ 109,270 $ 276,913
President, KCS Energy 50,000 6% $ 5.375 9/24/08 $ 169,015 $ 428,318
Marketing, Inc.,and KCS
Energy Services, Inc.
</TABLE>
- ---------------
NOTES:
(1) All Options were granted under the KCS Energy, Inc. 1992 Stock Plan.
(2) The exercise price for all options granted during fiscal 1998 is equal to
the fair market value of the Common Stock on the date of the grant. 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.
(3) Paul S. Samett's expiration date represents his last day of employment at
KCS Energy, Inc. resulting from the relocation of KCS' corporate office to
Houston, Texas. As a result, Mr. Samett's options were forfeited.
8
<PAGE> 11
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/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 98-END (#) SARS @ FY 98-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............. 120,000 $1,293,780 540,000 130,000 $494,880 $ --
President and Chief Executive
Officer
William N. Hahne............... -- $ -- -- 140,000 $ -- $ --
Senior Vice President, and
Chief Operating Officer
Paul S. Samett................. -- $ -- -- -- $ -- $ --
Senior Vice President and
Chief Financial Officer
Harry Lee Stout................ -- $ -- 42,500 32,500 $ -- $ --
President, KCS Energy
Marketing, 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
becomes exercisable in equal installments over a period of four years from
the date of grant.
(3) Market value of underlying securities at December 31, 1998 ($3.00 per
share), minus the exercise price.
9
<PAGE> 12
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 98-00 $25,000 $100,000 $175,000
President and Chief Executive
Officer
William N. Hahne................... 1,000 FY 98-00 $25,000 $100,000 $175,000
Senior Vice President and Chief
Operating Officer
Paul S. Samett..................... 500 FY 98-00 $ -- $ -- $ --
Senior Vice President and Chief
Financial Officer
Harry Lee Stout.................... 500 FY 98-00 $12,500 $ 50,000 $ 87,500
President, KCS Energy Marketing,
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 for
corporate executives and growth in subsidiary operating income 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 earnings are achieved. The potential
payments indicated in column (d) are the awards payable if the minimum
approved three-year earnings are achieved. The potential payments indicated
in column (f) are the maximum awards payable if three-year cumulative
earnings significantly exceed the target amount.
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
1998. 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
1998. KCS also reimburses directors for expenses they incur in attending board
and committee meetings.
There was no other compensation paid or distributed in 1998 to any of the
directors who are not executive officers of KCS, except for a non-preferential
discount of $3,188, $2,419, $2,225 and $450 on the purchase of shares of KCS
Common Stock through the KCS Employee Stock Purchase Program by Mr. Viggiano
(6,000 shares), Mr. Raynolds (3,175 shares), Mr. Siegel (6,000 shares), and Mr.
Murphy (1,000 shares), respectively.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP, 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 1999.
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.
10
<PAGE> 13
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, Apache Corporation, Burlington
Resources Inc., Cabot Oil & Gas Corporation, Devon Energy Corporation, Forest
Oil Corp., Helmerich & Payne, Inc., Kelley Oil & Gas Corporation, 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. and Wiser Oil Company) for the last five fiscal
years. American Exploration Company (merged with Louis Dreyfus in October 1997),
Arch Petroleum (merged with Pogo Producing Company in August 1998), Louisiana
Land and Exploration Company (merged with Burlington Resources, Inc. in October
1997) and Wainoco Oil Corporation (divested its oil and gas properties in 1997)
were deleted from 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, 1994 and that all dividends were reinvested.
[5 Year Cumulative Stockholder Total Return Performance Graph]
<TABLE>
<CAPTION>
CUSTOMER SELECTED STOCK
KCS ENERGY INC LIST NYSE MARKET INDEX
-------------- ----------------------- -----------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 60.97 89.13 98.06
'1995' 56.70 104.98 127.15
'1996' 135.87 147.73 153.16
'1997' 158.25 138.12 201.50
'1998' 23.06 95.14 239.77
</TABLE>
ANNUAL REPORT
Included with this Proxy Statement is the Annual Report to Stockholders for
1998 which includes the Form 10-K as filed with the Securities and Exchange
Commission. 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 19 through 26
and the consolidated financial statements of the Corporation on pages 29 through
48 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.
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.
11
<PAGE> 14
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 2000 Annual
Meeting, it must be received by the Secretary of the Corporation at 5555 San
Felipe, Suite 1200, Houston Texas 77056, not later than February 17, 2000, 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 2000 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 1996, 1997
and 1998.
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
Frederick Dwyer
Secretary
Houston, Texas
April 30, 1999
12
<PAGE> 15
KCS ENERGY, INC.
ANNUAL MEETING OF STOCKHOLDERS -- MAY 27, 1999
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<CAPTION>
<S> <C>
WITH-
FOR HOLD EXCEPT
THIS PROXY IS SOLICITED ON BEHALF OF 1. Election of the Board's nominees [ ] [ ] [ ]
THE BOARD OF DIRECTORS for Director
The undersigned hereby appoints James W. Christmas and Frederick
Dwyer, and each of them, attorneys and proxies, with power of substi- JAMES W. CHRISTMAS, JOEL D. SIEGEL
tution in each of them, to vote for and on behalf of the undersigned AND CHRISTOPHER A. VIGGIANO
at the Annual Meeting of Stockholders of the Corporation to be held on
May 27, 1999 and at any adjournment thereof, upon matters properly INSTRUCTION: To withhold authority to vote for an
coming before the meeting, as set forth in the related Notice of Meeting individual nominee, check the box labeled "Except" and
and Proxy Statement, both of which have been received by the undersigned. write that nominee's name in the space provided below.
The proxies are instructed to vote as follows:
------------------------------------------------------
(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 [arrow graphic] [ ]
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 be sure to sign and date Date Please sign exactly as your name appears herein.
this Proxy in the box below. Give full title if an Attorney, Executor,
- ------------------------------------------------------------ Administrator, Trustee, Guardian, etc.
For an account in the name of two or more persons,
- ---Stockholder sign above---Co-holder (if any) sign above--- each should sign, or if one signs, he should attach
evidence of his authority.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[up arrow graphic] DETACH ABOVE CARD, SIGN, DATE AND MAIL [up arrow graphic]
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
- --------------------------------------------------------------------------------
