KCS Energy, Inc. Annual Performance Incentive Award Plan Summary

Summary

KCS Energy, Inc. has an Annual Performance Incentive Award Plan to reward executive officers and employees for meeting yearly performance goals. The Compensation Committee and Board of Directors set and approve these objectives, which may include production, cost control, profitability, and strategic targets. Executives are assigned incentive award opportunities as a percentage of their base salary, with actual payouts depending on performance. Awards can range from 50% to 200% of the target, and the company retains discretion to adjust bonuses. Payments are typically made in March following the performance year, after financial results are audited.

EX-10.31 3 h33754exv10w31.txt SUMMARY OF ANNUAL INCENTIVE AWARD PLAN EXHIBIT 10.31 ANNUAL PERFORMANCE INCENTIVE AWARD PLAN The following is a description of the KCS Energy, Inc. Annual Performance Incentive Award Plan (the "Plan") provided pursuant to Item 601 (6)(10)(iii)(A) of Regulation S-K, which requires a written description of a compensatory plan when no formal document contains the compensation information. The Plan is designed to reward executive officers and company employees for the achievement of annual performance objectives. The annual performance objectives are reviewed and approved by the Compensation Committee for their potential contribution to the creation of stockholder value and may include such measures as production levels, oil and gas reserve additions, finding and development costs, reserve replacement, lease operating expenses, debt reduction, profitability, cash flow and strategic objectives. All performance objectives are established and recommended by the Chief Executive Officer and Chief Operating Officer and approved by the Board of Directors within 90 days of the start of the calendar year. Executive officers are assigned threshold, target and maximum incentive award opportunities based on the executive's position. Annual award levels are reviewed periodically by Compensation Committee to ensure market competitiveness and adjustments may be made based on the review. Set forth below are the current annual incentive target award levels as a percentage of base salary for the Chief Executive Officer and each of the four other most highly compensated executive officers for 2006. The threshold award level is 50% of the target award level and the maximum award level is 200% of the target award level.

Actual payments made under the Plan between threshold and maximum are dependent on achievement of established performance objectives. The Compensation Committee and the Board of Directors retain discretion to award bonuses below threshold or above the maximum award level. In 2005, the annual performance objectives for the Corporation were based on production levels, finding and development costs, reserve replacement and various strategic objectives. For the Mid-Continent and Gulf Coast divisions, the performance objectives were based on production levels, finding and development costs, reserve replacement, lease operating expenses and specific divisional strategic objectives. In 2006, the annual performance objectives for the Corporation will be based on production levels, finding and development cost, reserve replacement and various strategic objectives. For the Mid-Continent and Gulf Coast divisions, the performance objectives will be based on production levels, finding and development costs, reserve additions, lease operating expenses and specific divisional strategic objectives. After the end of the calendar year, when final reserve and financial data are available, the Compensation Committee determines the extent to which the performance objectives were achieved and approves the amount of the award to be paid to each executive officer, with its determination with respect to the Chairman and Chief Executive Officer being subject to the approval of the independent members of the Board of Directors. Payment of bonuses, if any, is normally made in March after the end of the performance period during which the bonuses were earned and after the audit is complete. Bonuses normally will be paid in cash in a single lump sum, subject to payroll taxes and tax withholding.