EX-10.4


    Exhibit
      10.4

    
 

    SUPPLEMENTAL
      EMPLOYMENT AGREEMENT

     

    WHEREAS,
      Harry Lee Stout (the “Executive”) and KCS Energy, Inc., (the “Company”) are
      parties to an Employment Agreement dated December 1, 2001, (the “2001
      Agreement”) setting forth certain terms and conditions of employment.


     

    WHEREAS,
      the Executive and the Company desire to modify the terms of the 2001 Agreement
      in a manner that benefits both the Executive and the Company. 

     

    ACCORDINGLY,
      The Executive and the Company agree to enter into a Supplemental Employment
      Agreement (the “Amendment”) containing the following terms and
      conditions:

     

    1.     Because
      the Amendment affects the obligations of the parties under Section 3 of the
      2001
      Agreement, this Amendment constitutes a modification of Section 3 of the 2001
      Agreement made in compliance with Section 14.3 of the 2001 Agreement.
      Accordingly, the Executive and the Company agree that this Amendment serves
      to
      modify the provisions set forth in Section 3 of the 2001 Agreement.

     

    2.     Because
      the Amendment affects the obligations of the parties under Section 4 of the
      2001
      Agreement, this Amendment constitutes a modification of Section 4 of the 2001
      Agreement made in compliance with Section 14.3 of the 2001 Agreement.
      Accordingly, the Executive and the Company agree that this Amendment serves
      to
      modify the provisions set forth in Section 4 of the 2001 Agreement.


     

    3.     Because
      the Amendment affects the obligations of the parties under Section 8 of the
      2001
      Agreement, this Amendment constitutes a modification of Section 8 of the 2001
      Agreement made in compliance with Section 14.3 of the 2001 Agreement.
      Accordingly, the Executive and the Company agree that this Amendment serves
      to
      modify the provisions set forth in Section 8 of the 2001 Agreement.


     

    4.     Section
      3
      of the 2001 Agreement is hereby amended by deleting the words “President of KCS
      Energy Services, a subsidiary of the Company” and replacing them with the words
“Senior Vice President, Marketing and Risk Management of the Company.”


     

    5.     Section
      4
      of the 2001 Agreement is amended by adding a new provision designated as Section
      4.2, and by renumbering the provision in the 2001 Agreement previously
      designated as 4.2, so that it is now Section 4.3. The Executive and the Company
      agree that the new provision constituting Section 4.2 provides as
      follows:

     

    4.2 
      Any bonus payable to the Executive pursuant to Section shall be paid by the
      later of (i) the date that is 2-1/2 months after the end of the calendar year
      for which such bonus is determined and (ii) the date that is 2-1/2 months after
      the end of the Company’s taxable year for which such

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    bonus
      is
      determined, or as soon after the later of such dates as administratively
      feasible, but in any event before the end of the calendar year in which the
      later of such dates occurs. The Company and the Executive agree that a Change
      in
      Control should not result in the forfeiture of any bonus payable in accordance
      with Section 4.1. Accordingly, the Company agrees that any bonus payable to
      Executive in accordance with Section 4.1 shall be paid as provided in this
      Section 4.2 if a Change in Control occurs after the end of the applicable year,
      but before the bonus is actually paid. 

     

    6.     The
      Executive and the Company hereby agree that Section 8.4 of the 2001 Agreement
      is
      amended by replacing the provisions found in Section 8.4 of the 2001 Agreement
      and substituting the following terms: 

     

    8.4
       If the Company terminates Executive’s employment other than for Cause,
      death or permanent disability or Executive terminates his employment for Good
      Reason, at any time within 2 years after a Change in Control, then the Company
      shall pay to Executive: (i) an amount equal to two (2) times the greater of
      (a)
      Executive’s annual base salary in effect as of the Termination Date or (b)
      Executive’s annual base salary in effect immediately preceding the Change in
      Control; plus (ii) an amount equal to two (2) times the greater of (a) the
      amount of any cash bonus payable to the Executive for the year in which the
      Termination Date occurs (provided that if the Executive’s bonus for such year
      has not been determined as of the Termination Date, then the amount of the
      bonus
      shall be determined as if the Executive earned 100% of the targeted bonus for
      such year) or (b) the amount of the last annual cash bonus paid to the Executive
      prior to the Change in Control; plus (iii) the amount of any earned but unpaid
      salary as of the Termination Date; plus (iv) the amount of any cash bonus
      payable to the Executive pursuant to Section 4.1
      to the
      extent not paid prior to the Termination Date; plus (v) an amount equal to
      the
      greater of (a) a pro rata amount of the Executive’s targeted bonus for the year
      in which the Termination Date falls or (b) such bonus for such year as may
      be
      determined by the compensation committee or the board of directors of the
      Company in their sole discretion; plus (vi) the amount of any accrued but unpaid
      vacation pay through the Termination Date.  

     

    7.     The
      Executive and the Company hereby agree that Section 8.7 of the 2001 Agreement
      is
      amended by replacing the provisions found in Section 8.7 of the 2001 Agreement
      and substituting the following terms: 

     


    
      
        
        

      

      
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    8.7
       (a)
      Any
      payments due to the Executive pursuant to Section 8.1 shall be made in
      accordance with the timing arrangements under which the Company normally
      compensates its employees.

     

    (b) 
      Any salary and vacation pay amounts due to the Executive pursuant to Section
      8.2
      shall be paid in accordance with the timing arrangements under which the Company
      normally compensates its employees. Any bonus payments due to the Executive
      pursuant to Section 8.2 shall be made by the later of (i) the date that is
      2-1/2
      months after the end of the calendar year in which the Termination Date falls
      and (ii) the date that is 2-1/2 months after the end of the Company’s taxable
      year in which the Termination Date falls, or as soon after the later of such
      dates as administratively feasible, but in any event before the end of the
      calendar year in which the later of such dates occurs.

     

    (c)
       In the event any payments
      to Executive required to be made pursuant to Sections 8.3, 8.4., 8.6, or any
      other provision of this Agreement are
      determined, in
      whole
      or in part,
      to
      constitute “nonqualified deferred compensation” (“NQDC”) within the meaning of
      Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then
      the portion (which may be all) of such
      payments that constitutes NQDC will not be paid before the date which is six
      (6)
      months after the Executive’s “separation from service” (as such term is defined
      in Section 409A of the Code).
      The
      determination of whether and what amount of any
      payments
      to Executive required to be made pursuant to Sections 8.3, 8.4, 8.6, or any
      other provision of this Agreement constitute
      NQDC shall
      be
      made by the board of directors of the Company in consultation with legal
      counsel, and any such determination shall
      be
      final and binding on the Company and the Executive. The Company makes no
      representation as to whether any such payment or any part thereof constitutes
      or
      may constitute NQDC. Neither the Company nor any of its directors, officers,
      employees, agents, or professional advisers shall have any liability to the
      Executive or any other person for any amounts incurred by the Executive or
      such
      other person by reason of the determination made by the board of directors
      of
      the Company pursuant to this Section 8.7(c) or any action taken or omitted
      by
      the board of directors of the Company, the Company or any of the Company’s
      directors, officers, employees, agents, or professional advisers in the course
      of or as a result of making such determination.

     

    (d) 
      Subject to the provisions of Section 8.7(c), any and
      all

     


    
      
        
        

      

      
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    payments
      to Executive required to be made under clause (b) of the last sentence of
      Section 8.6 shall be made within five (5) days of Executive’s furnishing the
      Company with evidence of the cost of such insurance, provided that the Executive
      furnishes such evidence within six (6) months after the Termination Date, in
      each case by wire transfer or Company check at Executive’s option.

     

    (e) 
      All payments required to be made to Executive pursuant to this Agreement shall
      be subject to the withholding of such taxes as may be required by law.


     

    8.     This
      Amendment does not modify or otherwise affect any provision of the 2001
      Agreement other
      than as
      expressly set forth in this Amendment, and, except as modified by this
      Amendment, the 2001 Agreement remains in full force and effect. 

     

    
      	 	
              KCS
                Energy, Inc.

            
	 	 
	 	
              By:

            	/s/
              James W. Christmas 
	 	 	 
	 	 	 
	 	 	 
	 	
              Harry
                Lee Stout

            
	 	 
	 	 
	 	/s/
              Harry Lee Stout 


    

     

     

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