Exhibit 10.1
 
KCS Energy, Inc. [kcslogo.jpg]

 

 
PERFORMANCE SHARE AWARD CERTIFICATE
 
THIS IS TO CERTIFY that KCS Energy, Inc., a Delaware corporation (the
“Company”), has offered you (the “Participant”) the opportunity to receive
Common Stock of the Company, contingent upon satisfaction of certain performance
criteria (“Performance Shares”). If the minimum performance criteria are
satisfied at the end of the Performance Period, the Performance Shares will be
paid to you in the form of restricted stock (“Bonus Stock”) under the Company’s
2005 Employee and Directors Stock Plan (the “Plan”), as follows:
 
Name of Participant:
     
   
Address of Participant:
     
 
 
 
 
Target Number
 
of Performance Shares:
 
   
Performance Period:
January 1, 2006 through December 31, 2008
   
Offer Grant Date:
 
   
Offer Expiration Date:
15 Days after the Offer Grant Date

 
By your signature and the signature of the Company’s representative below, you
and the Company agree to be bound by all of the terms and conditions of the
Performance Share Award Agreement, which is attached hereto as Annex I and the
Plan (both incorporated herein by this reference as if set forth in full in this
document). By executing this Certificate, you hereby irrevocably elect to accept
the Performance Share Award rights granted pursuant to this Certificate and the
related Performance Share Award Agreement and, contingent on satisfaction of the
performance criteria in the Performance Share Award Agreement, to receive some
or all of the shares of Bonus Stock of KCS Energy, Inc. designated above subject
to the terms and restrictions of the Plan, this Certificate and the Award
Agreement.
 

PARTICIPANT:
 
KCS ENERGY, INC.
                                 
By:
 
, an individual
   
James W. Christmas, Chairman and Chief Executive Officer
         
Dated:
   
Dated:
 

 
 

KCS Energy, Inc. Performance Share Award Certificate   

 

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ANNEX I

logo [kcslogo.jpg]

 

KCS ENERGY, INC.
2005 EMPLOYEE AND DIRECTORS STOCK PLAN
PERFORMANCE SHARE AWARD AGREEMENT

This Performance Share Award Agreement (this “Agreement”), is made and entered
into on the execution date of the Performance Share Award Certificate to which
it is attached (the “Certificate”), by and between KCS Energy, Inc., a Delaware
corporation (the “Company”), and the individual (“Participant”) named in the
Certificate.
 
Pursuant to the KCS Energy, Inc. 2005 Employee and Directors Stock Plan (the
“Plan”), the Administrator of the Plan has authorized the grant to Participant
of the right to earn Performance Shares payable in the form of restricted stock
(“Bonus Stock”) of the Company’s Common Stock (the “Award”), upon the terms and
subject to the conditions set forth in the Certificate, this Agreement and in
the Plan. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Plan.
 
NOW, THEREFORE, in consideration of the premises and the benefits to be derived
from the mutual observance of the covenants and promises contained herein and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
 
1.     Basis for Award. This Award is made pursuant to the Plan for valid
consideration provided to the Company by the Participant. By your execution of
the Certificate, you agree to accept the Performance Share Award rights granted
pursuant to the Certificate and this Performance Share Award Agreement and,
contingent on satisfaction of the performance criteria in this Performance Share
Award Agreement, to receive some or all of the shares of Bonus Stock of KCS
Energy, Inc. designated in the Certificate subject to the terms and restrictions
of the Plan, the Certificate and this Performance Share Award Agreement. If the
minimum performance criteria are not satisfied at the end of the Performance
Period, your Performance Shares will be forfeited.
 
2.     Performance Share Award. Pursuant to the Plan and subject further to the
terms and conditions herein set forth, the Company and Participant enter into
this Agreement pursuant to which Participant may earn between 0% and 200% of the
target number of Performance Shares specified in the Certificate. Each
Performance Share represents the value of one share of the common stock of the
Company. Upon the Company's achievement of pre-determined objectives
(“Performance Criteria) for the Performance Period specified in the certificate,
the Company will pay out to Employee some or all of the Performance Shares in
the form of Bonus Stock as hereinafter described. If the minimum Performance
Criteria are not satisfied at the end of the Performance Period, your
Performance Shares will be forfeited. This Award shall be administered by the
Administrator of the Stock Plan, currently the Compensation Committee (the
“Committee”) of the Board of Directors (the “Board”) of the Company, and shall
operate on the basis of the designated Performance Period. The Committee is
authorized to interpret the Performance Criteria and from time to time may adopt
such rules, regulations, definitions and forms consistent with the provisions of
the Performance Criteria as it may deem advisable to carry out the Performance
Criteria.
 
3.    Vesting of Performance Share Awards. The Performance Share Awards will be
paid in the form of Bonus Stock if the Performance Criteria are determined to be
satisfied at the end of the Performance Period and the Participant has been
continuously employed by the Company or a subsidiary through the end of the
Performance Period. If the minimum Performance Criteria are not satisfied, the
Performance Share Award will be forfeited at the end of the Performance Period.
Any such Bonus Stock that is granted at the end of the Performance Period will
be subject to additional forfeiture and transfer restrictions during the
one-year period that begins after the end of the Performance Period. The
restrictions on transfer shall lapse and the Bonus Stock shall become 100%
vested if the participant
 
 
 

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continues to be employed by the Company or a subsidiary for the additional
one-year period after the end of the Performance Period.
 
4.     Calculation of Performance Share Awards. The potential range of
Performance Share Awards for the designated Performance Period shall be
determined and calculated as follows:
 
(a)     The Performance Share Award shall be based upon the Company’s Total
Stockholder Return as compared to the Total Stockholder Return of the Company’s
Peer Group during the Performance Period. For this purpose, Total Stockholder
Return will equal a percentage equal to the Change in Stock Value divided by the
Beginning Stock Value as described further below. The percentage of the Target
Number of Performance Shares specified in the Certificate that will be granted
as Bonus Stock will be determined based on the Company’s Total Stockholder
Return in comparison to the Total Stockholder Return of the Company’s Peer
Group.
 
(b)     The percentage of the Target Number of Performance Shares that is used
to determine the Bonus Stock shall be determined based on the following
schedule:
 
 
 
Company’s Percentile Rank in Peer Group
Percentage of Target Number of
 Performance Shares to be
Granted as Bonus Stock
Less than 33rd Percentile Rank
0%
   
Minimum Threshold - Percentile Rank is equal to
or greater than 33rd percentile, but less than 54th
percentile
50%
 
   
Target - Percentile Rank is equal to or greater
than 54th percentile, but less than 80th percentile
100%
 
   
Maximum - Percentile Rank is equal to or greater
 than 80th percentile
200%
 

 
(c)     Notwithstanding Section 4(b), no Bonus Stock will be payable unless the
Total Stockholder Return during the Performance Period equals or exceeds six
percent (6%) per annum.
 
(d)    For purposes of this Section 4:
 
1.     “Beginning Stock Value” shall mean $100, invested in common stock at the
average closing price on the New York Stock Exchange, American Stock Exchange or
Nasdaq, as the case may be, of one share of common stock during each trading day
in the 30 calendar day period immediately preceding the first day of the
Performance Period.
 
2.     “Change in Stock Value” shall mean the Ending Stock Value minus the
Beginning Stock Value.
 
3.     “Ending Stock Value” shall mean the average closing price on the New York
Stock Exchange, American Stock Exchange or Nasdaq, as the case may be, of one
share of common stock during each trading day in the 30 calendar day period
immediately preceding the last day of the Performance Period, multiplied by the
sum of the number of shares represented by the Beginning Stock Value initial
$100 investment plus such additional shares resulting from all dividends paid on
common stock during the Performance Period being treated as though they are
reinvested on the applicable ex-dividend dates at the applicable closing price
on such dates. Shares used in determining Total Stockholder Return shall be
appropriately adjusted for stock splits and stock dividends during the
Performance Period.
 
 

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5.     Peer Companies. For the Performance Period, the following companies are
the Peer Companies to be used to determine the Company’s Percentile Rank based
on Total Stockholder Return:
 
(a)     Comstock Resources (CRK)
 
(b)     Encore Acquisition (EAC)
 
(c)     Energy Partners Limited (EPL)
 
(d)     Meridian Resource (TMR)
 
(e)     Penn Virginia (PVA)
 
(f)     St. Mary Land & Exploration (SM)
 
(g)     Stone Energy Corporation (SGY)
 
(h)     Swift Energy Company (SFY)
 
(i)         Whiting Petroleum Company (WLL)
 
(j)      Petrohawk Energy Corporation (HAWK)
 
In the event that a company in the Peer Group is no longer in existence or does
not have a class of common stock that is listed on the New York Stock Exchange,
American Stock Exchange or Nasdaq on the last day of the Performance Period,
such company shall be removed from the Peer Group; the Committee may, in its
sole discretion, replace such company with another company of its choosing or
reduce the size of the Peer Group. The Committee also may, in its sole
discretion, remove or replace with another company of its choosing or reduce the
size of the Peer Group in the event a company in the Peer Group merges with or
is acquired by another company, including another Peer Group company.
 
6.     Payout of Award. The payment of Bonus Stock in settlement of Performance
Share Awards earned for the Performance Period will only be issued to
Participant as soon as practicable following the Committee’s formal review and
certification of the actual Total Stockholder Return and Percentile Rank
performance results of the Company and the Peer Group for the Performance
Period.
 
7.     Payments in Event of Termination.
 
(a)     In the event Participant terminates employment with the Company for any
reason (other than an event described in Section 7(b) hereof) prior to the end
of the Performance Period and the date of payment of a Performance Share Award,
no Bonus Stock shall be due hereunder. Any unvested Performance Share Award
shall be forfeited and shall be added to the share reserve under the Stock Plan.
 
(b)     Notwithstanding the provisions of Section 7(a), in the event Participant
terminates employment with the Company prior to the last day of a Performance
Period on account of death, Disability or Retirement or a Change in Control
Termination, the Participant (or the Participant’s beneficiary or estate in the
event of the Participant’s death) will be entitled to a fully vested Prorated
Award without regard to any requirement that the participant continue to be
employed through the one year period following the last day of the Performance
Period. A “Change in Control Termination” means an involuntary termination of a
participant’s employment by the Company, other than for Cause, that occurs
following a Change in Control during either the Performance Period or the one
year vesting period following the end of the Performance Period.

(c)     For purposes of determining the percentage of the Target Number of
Performance Shares that is used to determine a Prorated Award, the prorated
actual performance will be
 
 

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used for any full calendar year completed by the Participant and for the
remaining period it shall be assumed that the Company’s Percentile Rank is equal
to or greater than 54th percentile, but less than 80th percentile and that the
Participant is entitled to Bonus Stock equal to 100% of the Target Grant Level
for any calendar year portion of the Performance Period in which Participant is
employed for less than the full calendar year. For example, in 2007 a Change in
Control Termination occurs. The Percentile Rank for 2006 will be determined
based on 2006 Total Stockholder Return and the percentage of the Target Grant
Level that is used to determine the Bonus Stock will be determined based on 2006
Percentile Rank multiplied by 1/3. The remaining percentage of the Target Grant
Level that is used to determine the Bonus Stock will be calculated based on 100%
of the Target Grant Level multiplied by 2/3.
 
(d)     If a Change in Control Termination occurs during the one-year vesting
period that begins after the end of the Performance Period, then the Bonus Stock
shall become fully vested and will not be subject to restrictions on transfer.
 
8.     Compliance with Laws and Regulations. The issuance and transfer of Common
Stock shall be subject to compliance by the Company and Participant with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company’s Common
Stock may be listed at the time of such issuance or transfer.
 
9.     Tax Withholding.
 
(a)     Participant agrees that, no later than the first to occur of (i) the
date as of which the restrictions on the Bonus Stock shares shall lapse or (ii)
the date required by Section 5(b) below, Participant shall pay to the Company
(in cash or to the extent permitted by the Administrator, by tendering Company
Stock held by the Participant, including Bonus Stock held in escrow that becomes
vested (“Share Withholding”), with a Fair Market Value on the date the Bonus
Stock vests equal to the amount of Participant’s minimum statutory tax
withholding liability, or to the extent permitted by the Administrator, a
combination thereof) any federal, state or local taxes of any kind required by
law to be withheld, if any, with respect to the Bonus Stock for which the
restrictions shall lapse. The Company shall, to the extent permitted by law,
have the right to deduct from any payment of any kind otherwise due to
Participant any federal, state or local taxes of any kind required by law to be
withheld with respect to the shares of such Company Stock. Payment of the tax
withholding by a Participant who is an officer, director or other “insider”
subject to Section 16(b) of the Exchange Act by tendering Company Stock or in
the form of Share Withholding is subject to pre-approval by the Administrator,
in its sole discretion, in a manner that complies with the specificity
requirements of Rule 16b-3 under the Exchange Act. The information required to
comply with the specificity requirements of Rule 16b-3 under the Exchange Act
shall include the name of the Participant involved in the transaction, the
nature of the transaction, the number of shares to be acquired or disposed of by
the Participant and the material terms of the Award involved in the transaction.
 
(b)     Participant may elect, within thirty (30) days of the transfer by the
Company to the Participant of the Bonus Stock, to include in gross income for
federal income tax purposes an amount equal to the Fair Market Value of the
Bonus Stock granted hereunder pursuant to Section 83(b) of the Internal Revenue
Code of 1986, as amended. In connection with any such Section 83(b) election,
Participant shall pay to the Company, or make such other arrangements
satisfactory to the Administrator to pay to the Company based on the Fair Market
Value of the Bonus Stock on the transfer date (after the Committee
certification), any federal, state or local taxes required by law to be withheld
with respect to such Shares at the time of such election. If Participant fails
to make such payments, the Company shall, to the extent permitted by law, have
the right to deduct from any payment of any kind otherwise due to Participant
any federal, state or local taxes required by law to be withheld with respect to
such Bonus Stock.
 
10.     No Right to Continued Service. Nothing in this Agreement shall be deemed
by implication or otherwise to impose any limitation on any right of the Company
to terminate the Participant’s service at any time. In the event Participant’s
employment with the Company is terminated by the Company, by Participant or as a
result of Participant’s death or disability (unless the acceleration provisions
of Section 3 are applicable), no unvested shares of Common Stock shall become
vested after such termination of employment.
 
 

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11.     Representations and Warranties of Participant. Participant represents
and warrants to the Company that:
 
(k)     Agrees to Terms of the Plan. Participant has received a copy of the Plan
and has read and understands the terms of the Plan, the Certificate and this
Agreement, and agrees to be bound by their terms and conditions. Participant
acknowledges that there may be adverse tax consequences upon the vesting of
Bonus Stock or disposition of the shares of Common Stock once vested, and that
Participant should consult a tax advisor prior to such time.
 
(l)     SEC Rule 144. Participant understands that Rule 144 promulgated under
the Securities Act may indefinitely restrict transfer of the Common Stock
awarded as Bonus Stock so long as Participant remains an “affiliate” of the
Company or if “current public information” about the Company (as defined in Rule
144) is not publicly available.
 
12.     Compliance with U.S. Federal Securities Laws. Participant understands
and acknowledges that notwithstanding any other provision of the Agreement to
the contrary, the vesting and holding of the Common Stock awarded as Bonus Stock
is expressly conditioned upon compliance with the Securities Act and all
applicable federal and state securities laws. Participant agrees to cooperate
with the Company to ensure compliance with such laws.
 
13.     Forfeiture of Unvested Stock. Unless otherwise provided in an employment
agreement the terms of which have been approved by the Administrator, if
unvested Common Stock (“Unvested Shares”) standing in the name of Participant on
the books of the Company does not become vested on or before the expiration of
the period during which the applicable vesting conditions must occur, such
Unvested Shares shall be automatically forfeited and cancelled as outstanding
shares of Common Stock immediately upon the occurrence of the event or time
period after which such Unvested Shares may no longer become vested.
 
14.     Restrictions on Unvested Shares.
 
(m)     Deposit of the Unvested Shares. Participant shall deposit all of the
Unvested Shares with the Company to hold until the Unvested Shares become
vested, at which time such vested shares shall no longer constitute Unvested
Shares. Participant shall execute and deliver to the Company, concurrently with
the execution of this Agreement blank stock powers for use in connection with
the transfer to the Company or its designee of Unvested Shares that do not
become vested. The Company will deliver to Participant the Stock Certificate for
the shares of Common Stock that become vested upon vesting of such shares.
 
(n)     Restriction on Transfer of Unvested Shares. Participant shall not
transfer, assign, grant a lien or security interest in, pledge, hypothecate,
encumber or otherwise dispose of any of the Unvested Shares, except as permitted
by this Agreement.
 
15.     Adjustments. The number of Performance Shares and Unvested Shares
attributable to Bonus Stock shall be automatically adjusted to reflect any stock
split, stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchanges of shares or other similar event affecting the
Company’s outstanding Common Stock subsequent to the date of this Agreement. If
Participant becomes entitled to receive any additional shares of Common Stock or
other securities (“Additional Securities”) in respect of the Unvested Shares,
the total number of Unvested Shares shall be equal to the sum of (i) the initial
Unvested Shares; and, (ii) the number of Additional Securities issued or
issuable in respect of the initial Unvested Shares and any Additional Securities
previously issued to Participant.
 
16.     Restrictive Legends and Stop-Transfer Orders.
 
(o)     Legends. Participant understands and agrees that the Company will place
the legends set forth below or similar legends on any stock certificate(s)
evidencing the Common Stock, together with any other legends that may be
required by state or U.S. Federal securities
 

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laws, the Company’s Certificate of Incorporation or Bylaws, any other agreement
between Participant and the Company or any agreement between Participant and any
third party:
 
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON PUBLIC RESALE AND TRANSFER, AS SET FORTH IN A PERFORMANCE SHARE AWARD
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES. SUCH
PUBLIC SALE AND TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE
SHARES.
 
(p)     Stop-Transfer Instructions. Participant agrees that, to ensure
compliance with the restrictions imposed by this Agreement, the Company may
issue appropriate “stop-transfer” instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
 
(q)     Refusal to Transfer. The Company will not be required (i) to transfer on
its books any shares of Common Stock that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such shares, or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such shares have been so
transferred.
 
17.     Modification. This Agreement may not be modified except in writing
signed by both parties.
 
18.     Plan. Except as otherwise provided herein, or unless the context clearly
indicates otherwise, capitalized terms herein which are defined in the Plan have
the same definitions as provided in the Plan. The terms and provisions of the
Plan are incorporated herein by reference, and the Participant hereby
acknowledges receiving a copy of the Plan. In the event of a conflict or
inconsistency between the terms and provisions of the Plan and the provisions of
this Agreement, the Plan shall govern and control.
 
19.     Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Plan
Administrator for review. The resolution of such a dispute by the Plan
Administrator shall be final and binding on the Company and Participant.
 
20.     Entire Agreement. The Plan and the Certificate are incorporated herein
by reference. This Agreement, the Certificate and the Plan constitute the entire
agreement of the parties and supersede all prior undertakings and agreements
with respect to the subject matter hereof. If any inconsistency should exist
between the nondiscretionary terms and conditions of this Agreement, the
Certificate and the Plan, the Plan shall govern and control.
 
21.     Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated on the signature page hereof
or to such other address as such party may designate in writing from time to
time to the Company. All notices shall be deemed to have been given or delivered
upon: (a) personal delivery; (b) three (3) days after deposit in the United
States mail by certified or registered mail (return receipt requested); (c) one
(1) business day after deposit with any return receipt express courier
(prepaid); or (d) one (1) business day after transmission by facsimile or
telecopier.
 
22.     Successors and Assigns. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Participant and
Participant’s heirs, executors, administrators, legal representatives,
successors and assigns.
 
 

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23.     Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
conflict of law principles. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
 
24.     Acceptance. Participant hereby acknowledges receipt of a copy of the
Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Award subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Award or disposition of the
Bonus Stock and that Participant should consult a tax advisor prior to such
exercise or disposition.
 
25.     Prohibitions on Transfer and Hedging. Rights to acquire shares of Common
Stock under this Agreement shall not be transferable by the Participant except
by will or by the laws of descent and distribution. Notwithstanding the
foregoing, the Participant may, by delivering written notice to the Company in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the Participant, shall thereafter be entitled to any Bonus Stock to
which the Participant would otherwise be entitled to under this Agreement.
During the period that this Award is outstanding or Bonus Stock awarded
hereunder is subject to restrictions, Participant covenants and agrees not to
engage in any short sale, pledge, transfer, hedging or other derivative
transaction involving the future right to Bonus Stock under this Agreement and
hereby acknowledges that any violation of this covenant will result in a
forfeiture of the Bonus Stock and the Company’s right to recover any profits
recognized directly or indirectly in connection with such restricted
transactions.
 
 
 

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EXHIBIT A

KCS Energy, Inc. 2005 Employee and Directors Stock Plan