<PAGE>
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:
/ / 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-12
Louisville Gas and Electric Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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>
[LOGO]
March 16, 1995
Dear Louisville Gas and Electric Company shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Louisville Gas and Electric Company, to be held April 25, 1995, at 10:00 a.m.,
E.D.T. at the Hyatt Regency Louisville, 320 W. Jefferson Street, Louisville,
Kentucky.
Business matters to be acted upon at the meeting are the election of three
directors to three-year terms expiring in 1998, approval of the independent
auditors for 1995, and the transaction of any other business properly brought
before the meeting. We will also report on the progress of LG&E, and
shareholders will have the opportunity to present questions of general interest.
We encourage you to read the proxy statement carefully and complete, sign
and return your proxy in the envelope provided, even if you plan to attend the
meeting. Returning your proxy to us will not prevent you from voting in person
at the meeting, or from revoking your proxy and changing your vote at the
meeting, if you are present and choose to do so.
If you plan to attend the Annual Meeting, please fill out the ticket request
attached to the form of proxy and return it with your proxy. An admission card
will be mailed to you prior to the meeting. If you wish to attend the meeting
but do not have a ticket, you will be admitted to the meeting after presenting
personal identification and evidence of ownership.
The directors and officers of LG&E appreciate your continuing interest in
the business of LG&E. We hope you can join us at the meeting.
Sincerely,
[SIGNATURE]
Roger W. Hale
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Louisville Gas and Electric Company
("LG&E"), a Kentucky corporation, will be held at the Hyatt Regency Louisville,
320 West Jefferson Street, Louisville, Kentucky, on Tuesday, April 25, 1995, at
10:00 a.m., E.D.T. for the following purposes:
1. To elect three directors, each for a three-year term expiring in 1998;
2. To approve and ratify the appointment of Arthur Andersen LLP as
independent auditors of LG&E for 1995; and
3. To transact such other business as may properly come before the meeting.
The close of business on February 15, 1995, has been fixed by the Board of
Directors as the record date for determination of shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to attend the meeting. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE
REPLY ENVELOPE AS SOON AS POSSIBLE. Your cooperation in signing and returning
your proxy promptly is greatly appreciated.
By Order of the Board of Directors,
John R. McCall, Secretary
Louisville Gas and Electric Company
220 West Main Street
Louisville, Kentucky 40202
March 16, 1995
<PAGE>
PROXY STATEMENT
--------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 25, 1995
----------------------
The Board of Directors of LG&E hereby solicits your proxy, and asks that you
vote, sign, date and promptly mail the enclosed proxy card for use at the Annual
Meeting of Shareholders to be held April 25, 1995, and at any adjournment of
such meeting. The meeting will be held at the Hyatt Regency Louisville, 320 West
Jefferson Street, Louisville, Kentucky. This proxy statement and the
accompanying proxy were first mailed to shareholders on or about March 16, 1995.
If you plan to attend the meeting, please complete the ticket request form
attached to your proxy and return it promptly. An admission card, which will
expedite your admission to the meeting, will be mailed to you prior to the
meeting. Shareholders who do not have an admission card, including beneficial
owners whose accounts are held by brokers or other institutions, will be
admitted to the meeting upon presentation of personal identification and, in the
case of beneficial owners, proof of ownership.
The outstanding stock of LG&E is divided into three classes: Common Stock,
Preferred Stock (without par value), and Preferred Stock, par value $25 per
share. At the close of business on February 15, 1995, the record date for the
Annual Meeting, the following shares of each were outstanding:
<TABLE>
<S> <C>
Common Stock, without par value....................... 21,294,223 shares
Preferred Stock, par value $25 per share
5% Series......................................... 860,287 shares
7.45% Series...................................... 858,128 shares
Preferred Stock, without par value
$5.875 Series..................................... 250,000 shares
Auction Series A (stated value $100 per share).... 500,000 shares
</TABLE>
All of the outstanding LG&E Common Stock is owned by LG&E Energy Corp. ("LG&E
Energy"). No persons or groups are known by management to be beneficial owners
of more than five percent of LG&E's Preferred Stock. As of February 15, 1995,
all Directors, nominees for director and executive officers of LG&E as a group
beneficially owned 102 shares of LG&E Preferred Stock, which is less than
one-tenth of one percent of the total LG&E Preferred Stock outstanding on that
date.
Owners of record at the close of business on February 15, 1995, of the
Common Stock, the 5% Cumulative Preferred Stock, par value $25 per share (the
"5% Preferred Stock"), and the 7.45% Cumulative Preferred Stock, par value $25
per share (the "7.45% Preferred Stock"), are entitled to one vote per share for
each matter presented at the Annual Meeting or any adjournment thereof, and, in
addition, have cumulative voting rights with respect to the election of
directors. Accordingly, in electing directors, each shareholder is entitled to
as many votes as the number of shares of stock owned multiplied by the number of
directors to be elected, and may cast all such votes for a single nominee or may
distribute them among two or more nominees. The persons named as proxies reserve
the right to cumulate votes represented by proxies which they receive, and to
distribute such votes among one or more of the nominees at their discretion.
You may revoke your proxy at any time before it is voted by giving written
notice of its revocation to the Secretary of LG&E, by delivery of a later dated
proxy, or by attending the Annual Meeting and voting in person. Signing a proxy
does not preclude you from attending the meeting in person.
Directors are elected by a plurality of the votes cast by the holders of
LG&E's Common Stock, 5% Preferred Stock and 7.45% Preferred Stock, at a meeting
at which a quorum is present. "Plurality"
1
<PAGE>
means that the individuals who receive the largest number of votes cast are
elected as directors up to the maximum number of directors to be chosen at the
meeting. Consequently, any shares not voted (whether by withholding authority,
broker nonvote or otherwise) have no impact on the election of directors except
to the extent the failure to vote for an individual results in another
individual receiving a larger percentage of votes.
The affirmative vote of a majority of the shares of LG&E Common Stock, 5%
Preferred Stock and 7.45% Preferred Stock represented at the Annual Meeting is
required for the approval of the independent auditors and any other matters that
may properly come before the meeting. Abstentions from voting on any such matter
are treated as votes against, while broker nonvotes are treated as shares not
voted.
LG&E Energy owns all of the outstanding LG&E Common Stock, and intends to
vote this stock in favor of the nominees for directors as set forth below,
thereby ensuring their election to the Board. LG&E Energy also intends to vote
all of the outstanding LG&E Common Stock in favor of the appointment of Arthur
Andersen LLP as the independent auditors for LG&E as set forth in Proposal No. 2
herein. Nonetheless, the Board encourages you to vote on each of these matters,
and appreciates your interest.
The Annual Report to Shareholders of LG&E Energy (the "Annual Report"),
including its consolidated financial statements and information regarding LG&E,
is enclosed with this proxy statement. Of particular importance to shareholders
of LG&E are the following sections of the Annual Report: page 7 under the
caption "Retail Gas and Electric Strategy," page 11 under the caption "Gallatin
Steel," pages 16 and 17 under "Asset Maximization," pages 19 through 21 under
the caption "Total Customer Satisfaction," and page 54 under the captions "Board
of Directors" and "Officers." The Annual Report is supplemented by audited
financial statements of LG&E and management's discussion of such financial
statements, which are included as an appendix to this proxy statement (the
"Appendix"), and are incorporated by reference herein. All shareholders are
urged to read the accompanying Annual Report and Appendix.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of LG&E presently consists of ten members. The
directors are classified into three classes, as nearly equal in number as
possible, with respect to the time for which they are to hold office. One class
of directors is elected at each year's Annual Meeting to serve for three-year
terms and to continue in office until their successors are elected and
qualified.
At this Annual Meeting, the following three persons are proposed for
election to the Board of Directors for three-year terms expiring at the 1998
Annual Meeting: Owsley Brown II, Gene P. Gardner and J. David Grissom. All of
the nominees are presently directors of both LG&E and LG&E Energy Corp.
The Board of Directors does not know of any nominee who will be unable to
stand for election or otherwise serve as a director. If for any reason any
nominee becomes unavailable for election, the Board of Directors may designate a
substitute nominee, in which event the shares represented on the proxy cards
returned to LG&E will be voted for such substitute nominee, unless an
instruction to the contrary is indicated on the proxy card.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION
OF THE THREE NOMINEES FOR DIRECTOR.
2
<PAGE>
INFORMATION ABOUT DIRECTORS AND NOMINEES
The following contains certain information as of February 15, 1995,
concerning the nominees for director, as well as the directors whose terms of
office continue after the 1995 Annual Meeting.
DIRECTORS WHOSE TERMS EXPIRE AT 1998 ANNUAL MEETING OF SHAREHOLDERS
OWSLEY BROWN II (AGE 52)
Mr. Brown was named the Chief Executive Officer of Brown-Forman Corporation,
a consumer products company, in July 1993, and has been President of
Brown-Forman Corporation since 1987. Mr. Brown is a graduate of Yale University,
and received his master's degree in business administration from Stanford
University. He has been a director of LG&E since May 1989 and of LG&E Energy
since August 1990. Mr. Brown is also a member of the Board of Directors of
Brown-Forman Corporation, Hilliard Lyons Trust Company and NACCO Industries,
Inc.
GENE P. GARDNER (AGE 65)
Mr. Gardner has been Chairman of Beaver Dam Coal Company, which is engaged
in the ownership and development of coal properties, since April 1983. Mr.
Gardner is a graduate of the University of Louisville and of the Advanced
Management Program of the University of Virginia, Colgate-Darden Graduate School
of Business. Mr. Gardner has been a director of LG&E since July 1979 and of LG&E
Energy since August 1990. He is also a member of the Board of Directors of
Commonwealth Bank and Trust Company, Commonwealth Financial Corporation and
Thomas Industries, Inc.
J. DAVID GRISSOM (AGE 56)
Mr. Grissom has been Chairman of Mayfair Capital, Inc., a private investment
firm, since April 1989. He served as Chairman and Chief Executive Officer of
Citizens Fidelity Corporation from April 1977 until March 31, 1989. Upon the
acquisition of Citizens Fidelity Corporation by PNC Financial Corp. in February
1987, Mr. Grissom served as Vice Chairman and a Director of PNC Financial Corp.
until March 1989. Mr. Grissom is a graduate of Centre College and the University
of Louisville School of Law. Mr. Grissom has been a director of LG&E since
January 1982 and of LG&E Energy since August 1990. He is also a member of the
Board of Directors of Providian Corporation, Churchill Downs, Inc., Columbia/HCA
Healthcare Corporation, Transco Energy Co., Regal Cinemas Inc. and Sphere Drake
Holdings LTD.
DIRECTORS WHOSE TERMS EXPIRE AT 1996 ANNUAL MEETING OF SHAREHOLDERS
ROGER W. HALE (AGE 51)
Mr. Hale has been Chief Executive Officer and a Director of LG&E since June
1989, Chairman of the Board of LG&E since February 1, 1990, and served as
President of LG&E from June 1989 until January 1, 1992. Mr. Hale has been a
Director and Chairman of the Board, President and Chief Executive Officer of
LG&E Energy since August 1990. Prior to his coming to LG&E, Mr. Hale served as
Executive Vice President of Bell South Enterprises, Inc. Mr. Hale is a graduate
of the University of Maryland, and received a master's degree in management from
the Massachusetts Institute of Technology, Sloan School of Management. Mr. Hale
is also a member of the Board of Directors of PNC Bank, Kentucky, Inc. and H&R
Block, Inc.
DAVID B. LEWIS (AGE 50)
Mr. Lewis is a founding partner of the law firm of Lewis, White & Clay, a
Professional Corporation in Detroit, Michigan. Since 1972, Mr. Lewis has served
as Chairman of the Board and a Director of the firm. Mr. Lewis is a graduate of
Oakland University and received his law degree from the University of Michigan
Law School. He also received a master's degree in business administration from
the University of Chicago Graduate School of Business. Mr. Lewis has been a
director of LG&E and LG&E Energy since November 1992. Mr. Lewis is also a member
of the Board of Directors of Consolidated Rail Corporation (Conrail), and serves
or has served as a board member for numerous educational, cultural and civic
organizations in the Detroit and Washington, D.C. areas.
3
<PAGE>
ANNE H. MCNAMARA (AGE 47)
Mrs. McNamara has been Senior Vice President -- Administration and General
Counsel of AMR Corporation and its subsidiary, American Airlines, Inc. since
June 1988. Mrs. McNamara is a graduate of Vassar College, and received her law
degree from Cornell University. She has been a director of LG&E and LG&E Energy
since November 1991.
DONALD C. SWAIN (AGE 63)
Dr. Swain has been President of the University of Louisville since April
1981. Dr. Swain is a graduate of the University of Dubuque. He received his
master's and doctoral degrees in history from the University of California at
Berkeley. He has been a director of LG&E since May 1985 and of LG&E Energy since
August 1990. Dr. Swain is also a member of the Board of Directors of PNC Bank,
Kentucky, Inc.
NOMINEES FOR DIRECTOR WITH TERMS EXPIRING AT 1997 ANNUAL MEETING OF SHAREHOLDERS
WILLIAM C. BALLARD, JR. (AGE 54)
Mr. Ballard has been of counsel to the law firm of Greenebaum Doll &
McDonald since May 1992. He served as Executive Vice President and Chief
Financial Officer from 1978 until May 1992, of Humana, Inc., a healthcare
services company. Mr. Ballard is a graduate of the University of Notre Dame, and
received his law degree, with honors, from the University of Louisville School
of Law. He also received a Master of Law degree in taxation from Georgetown
University. Mr. Ballard has been a director of LG&E since May 1989 and of LG&E
Energy since August 1990. Mr. Ballard is also a member of the Board of Directors
of United Healthcare Corp., MidAmerica Bancorp, Vencor, Inc., American Safety
Razor, Inc. and Arjo, A.B.
S. GORDON DABNEY (AGE 66)
Mr. Dabney has been President since 1955 of Standard Foods, Inc., which is
engaged in the food processing business. Mr. Dabney attended the University of
Florida. He has been a director of LG&E since January 1987 and of LG&E Energy
since August 1990.
T. BALLARD MORTON, JR. (AGE 62)
Mr. Morton has been Executive in Residence at the College of Business and
Public Administration of the University of Louisville since 1983. Mr. Morton is
a graduate of Yale University. Mr. Morton has been a director of LG&E since May
1967 and of LG&E Energy since August 1990. Mr. Morton is also a member of the
Board of Directors of PNC Bank, Kentucky, Inc. and the Kroger Company.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Each member of the Board of Directors of LG&E is also a director of LG&E
Energy. The committees of the Board of Directors of LG&E include an Audit
Committee, a Compensation Committee and a Nominating and Development Committee.
The directors who are members of the various committees of LG&E serve in the
same capacity for purposes of the LG&E Energy Board of Directors.
During 1994, there were seven regular meetings and one special meeting of
the LG&E Board. All directors attended 75% or more of the total number of
meetings of the Board of Directors and Committees of the Board on which they
served.
COMPENSATION OF DIRECTORS
Directors who are also officers of LG&E receive no compensation in their
capacities as directors. During 1994, directors received a retainer of $1,417
per month, or $17,000 annually ($18,000 annually for committee chairmen), a fee
for Board meetings of $900 per meeting and a fee for each committee meeting of
$750. Non-employee directors residing out of the Louisville area received
reimbursement for expenses incurred in traveling to meetings, and received an
additional $750 compensation for each Board meeting they attended. The foregoing
amounts represent the aggregate fees paid to directors in their capacities as
directors of LG&E and LG&E Energy during 1994.
4
<PAGE>
Non-employee directors of LG&E may elect to defer all or a part of their
fees (including retainers, fees for attendance at regular and special meetings,
committee meetings and travel compensation) pursuant to the LG&E Energy Corp.
Deferred Stock Compensation Plan (the "Deferred Stock Plan"). Each deferred
amount is credited by LG&E Energy to a bookkeeping account and then is converted
into a stock equivalent on the date the amount is credited. The number of stock
equivalents credited to the director is based upon the average of the high and
the low sale price of LG&E Energy Common Stock on the New York Stock Exchange
for the five trading days prior to the conversion. Additional stock equivalents
will be added to stock accounts at the time that dividends are declared on LG&E
Energy Common Stock, in an amount equal to the amount of LG&E Energy Common
Stock that could be purchased with dividends that would be paid on the stock
equivalents if converted to LG&E Energy Common Stock. In the event that LG&E
Energy is a party to any consolidation, recapitalization, merger, share exchange
or other business combination in which all or a part of the outstanding LG&E
Energy Common Stock is changed into or exchanged for stock or other securities
of the other entity or LG&E Energy, or for cash or other property, the stock
account of a participating director shall be converted to such new securities or
consideration equal to the amount each share of LG&E Energy Common Stock
receives, multiplied by the number of share equivalents in the stock account.
A director will be eligible to receive a distribution from his or her
account only upon termination of service, death, retirement or otherwise.
Following departure from the Board, the distribution will occur, at the
director's election, either in one lump sum or in no more than five annual
installments. The distribution will be made, at the director's election, either
in LG&E Energy Common Stock or in cash equal to the then-market price of the
LG&E Energy Common Stock allocated to the director's stock account. At February
15, 1995, six directors were participating in the Deferred Stock Plan.
Non-employee directors of LG&E who are also directors of LG&E Energy also
receive stock options pursuant to the LG&E Energy Corp. Stock Option Plan for
Non-Employee Directors (the "Directors' Option Plan"), which was approved by the
shareholders at the 1994 annual meeting. Under the terms of the Directors'
Option Plan, upon initial election or appointment to the Board, each new
director, who has not been an employee or officer of the company within the
preceding three years, receives an option grant for 2,000 shares of LG&E Energy
Common Stock. Following these initial grants, eligible directors will receive an
annual grant of an option for 2,000 shares on the first Wednesday of each
February. The option exercise price per share for each share of LG&E Energy
Common Stock is the fair market value on the grant date. Options granted are not
exercisable during the first twelve months from the date of grant and will
terminate 10 years from the date of grant. In the event of a tender offer or an
exchange offer for shares of LG&E Energy Common Stock, all then exercisable, but
unexercised options granted under the Directors' Option Plan will continue to be
exercisable for thirty days following the first purchase of shares pursuant to
such tender or exchange offer.
The Directors' Option Plan authorizes the issuance of up to 250,000 shares
of LG&E Energy Common Stock, of which 36,000 are subject to existing options at
a weighted average per share price of $39.00. As of February 15, 1995, each
non-employee director held 2,000 exercisable options to purchase LG&E Energy
Common Stock. The number of shares subject to the Directors' Option Plan and
subject to awards outstanding under the plan will adjust with any stock dividend
or split, recapitalization, reclassification, merger, consolidation, combination
or exchange of shares, or any similar corporate change.
AUDIT COMMITTEE
The Audit Committee of the Board is composed of Messrs. Dabney, Brown,
Gardner and Lewis, Dr. Swain and Mrs. McNamara. During 1994, the Audit Committee
maintained direct contact with the independent auditors and LG&E Energy's
Internal Auditor to review the following matters pertaining to LG&E, and to LG&E
Energy and its subsidiaries: the adequacy of accounting and financial reporting
procedures; the adequacy and effectiveness of internal accounting controls; the
scope and
5
<PAGE>
results of the annual audit and any other matters relative to the audit of these
companies' accounts and their financial affairs that the Committee, the Internal
Auditor, or the independent auditors deemed necessary. The Audit Committee met
three times during 1994.
COMPENSATION COMMITTEE
The Compensation Committee, composed of non-employee directors, approves the
compensation of the Chief Executive Officer and the executive officers of LG&E
Energy and LG&E. The Committee makes recommendations to the full Board regarding
benefits provided to executive officers and the establishment of various
employee benefit plans. The members of the Compensation Committee are Messrs.
Ballard, Dabney, Gardner, Grissom and Morton and Mrs. McNamara. The Compensation
Committee met three times during 1994.
NOMINATING AND DEVELOPMENT COMMITTEE
The Nominating and Development Committee is composed of the Chairman of the
Board and certain other directors. The Committee reviews and recommends to the
Board of Directors nominees to serve on the Board and their compensation. The
Committee considers nominees suggested by other members of the Board, by members
of management and by shareholders. To be considered for inclusion in the slate
of nominees proposed by the Board of Directors at an annual meeting, shareholder
recommendations must be submitted in writing to the Secretary of LG&E not later
than 120 days prior to the meeting. In addition, the Articles of Incorporation
and Bylaws of LG&E contain procedures governing shareholder nominations for
election of directors at a shareholders' meeting. The Chairman of the Annual
Meeting may refuse to acknowledge the nomination of any person not made in
compliance with these procedures.
The members of the Nominating and Development Committee are Messrs. Ballard,
Brown, Grissom, Hale, Lewis and Morton, and Dr. Swain. The Nominating and
Development Committee met twice during 1994.
The Securities Exchange Act of 1934, as amended, requires LG&E's officers
and directors to file reports of ownership and changes in ownership of LG&E
Energy Common Stock and LG&E Preferred Stock with the Securities and Exchange
Commission. Based solely on a review of the copies of such forms and amendments
thereto received by LG&E, or written representations from LG&E officers and
directors that no Forms 5 were required to be filed, LG&E believes that during
1994 all Section 16(a) filing requirements applicable to its officers, directors
and greater than ten percent beneficial owners were met on a timely basis, with
two exceptions. Mr. Charles A. Markel III, Treasurer of LG&E, timely filed a
Form 5 for 1993, but inadvertently failed to disclose beneficial ownership of
shares held by his spouse in three separate accounts. Amended Form 5s were filed
promptly after learning of the omissions. Mr. M. Lee Fowler, Vice President and
Controller of LG&E, inadvertently failed to timely file one report relating to
four purchases of Common Stock made by his spouse pursuant to voluntary cash
contributions under the Dividend Reinvestment and Stock Purchase Plan. The
shares are held by his spouse as custodian for Mr. and Mrs. Fowler's
grandchildren. The purchases were promptly reported on Mr. Fowler's Form 5 for
1994 upon learning of the omission.
PROPOSAL NO. 2
APPROVAL OF INDEPENDENT AUDITORS FOR 1995
Based upon the recommendation of the Audit Committee, the Board of
Directors, subject to ratification by shareholders, has selected Arthur Andersen
LLP as independent auditors to audit the accounts of LG&E and LG&E Energy for
the fiscal year ending December 31, 1995. Arthur Andersen has audited the
accounts of LG&E for many years and LG&E Energy since its organization in 1990.
The shareholders previously approved the employment of the firm at the Annual
Meeting on May 24, 1994.
6
<PAGE>
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. Such representatives will be given the opportunity to make a statement
if they so desire, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL
OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Decisions on the compensation of officers are made by the Compensation
Committee of the Board of Directors. Each member of the Compensation Committee
is a non-employee director, and all decisions of the Compensation Committee
relating to the compensation of LG&E's executive officers are reviewed by the
full Board of Directors, with the exception of long-term incentive plan
administration, which is performed solely by the Compensation Committee.
LG&E is the principal subsidiary of LG&E Energy. As noted above, the members
of the Compensation Committee and Board of Directors of LG&E also serve in the
same capacity for LG&E Energy. Certain executive officers of LG&E are also
executive officers of LG&E Energy. For those individuals, references below to
the Compensation Committee and Board of Directors refer to the Compensation
Committee and Board of Directors of both LG&E and LG&E Energy unless otherwise
indicated, and discussions of their compensation include compensation earned for
services to both LG&E and LG&E Energy.
The executive compensation program for LG&E and LG&E Energy was developed
and implemented after consultation with a worldwide, highly respected
independent executive compensation consultant. That consultant has concluded
that the structure of the executive compensation program and the target awards
and opportunities provided to executives are consistent with the compensation
and pay programs of comparable companies, including utilities and utility
holding companies nationwide. The Compensation Committee and the Board of
Directors have continued access to this compensation consultant as desired, and
are provided with independent compensation data for their review.
Set forth below is a report submitted by the members of the Compensation
Committee addressing LG&E and LG&E Energy's compensation policies for 1994 which
affect the executive officers of LG&E and LG&E Energy, including the executive
officers named in the following tables. The executive officers of LG&E
participate in certain stock-based compensation plans of LG&E Energy and
references to stock, shareholder performance or shareholder return relate to
LG&E Energy Common Stock.
COMPENSATION PHILOSOPHY
This report reflects the compensation philosophy as set by the Compensation
Committee and the Board of Directors, and as reflected in the salaries and
awards paid to the executive officers of LG&E, LG&E Energy and its subsidiaries.
There are three major components of the executive compensation program: (1) base
salary; (2) short-term or annual incentives; and (3) long-term incentives. LG&E
developed its executive compensation program to focus on both short-term and
long-term business objectives which are designed to enhance overall shareholder
value. The short-term and long-term incentives are premised on the belief that
the interests of executives should be closely aligned with those of LG&E
Energy's shareholders. Based on this philosophy, these two portions of each
executive's total compensation package are placed at risk and are linked to the
accomplishment of specific results that are designed to benefit LG&E Energy's
shareholders in both the short-term and long-term. Under this
pay-for-performance approach, a highly competitive level of compensation can be
earned in years of strong performance; conversely, in years of below-average
performance, compensation may decline below competitive benchmarks.
7
<PAGE>
The executive compensation program also recognizes that compensation
practices must be competitive with utilities, utility holding companies, and
other industries to ensure that a stable and successful management team can be
recruited and retained. The Compensation Committee believes that LG&E's most
direct competitors for executive talent are not limited to the companies that
would be included in the utility industry index against which shareholder
returns may be compared. For this reason, the compensation peer group is not the
same as the utility industry index in the Comparison of Five-Year Total Return
graph included on page 13 of this Proxy Statement. In order to establish
competitive compensation levels for all executive positions, the Compensation
Committee establishes salaries and short-term incentive levels based upon
compensation data from three utility and three all-industry surveys (the "Survey
Group"), the latter of which primarily consists of non-utility businesses with
annual revenues of $0.5 billion to $2.5 billion. Long-term incentive levels,
however, are established by the Compensation Committee based upon compensation
data from a survey of utilities and utility holding companies (the "Long-Term
Survey Group") compiled by a national compensation consulting firm. In 1994,
there were 61 utilities and utility holding companies in the Long-Term Survey
Group. The Compensation Committee utilizes the Long-Term Survey Group for
purposes of establishing long-term incentive levels because the long-term
financial performance goals of the Company can be measured more effectively
against the utilities in the Long-Term Survey Group, rather than the Survey
Group.
The Compensation Committee establishes a target salary (the "Position Rate")
for each executive at approximately the 65th percentile of the range for
executives in similar positions with companies in the Survey Group. Salaries,
short-term and long-term incentives are based on this Position Rate as described
below.
In 1993, a new Federal tax law was passed which limits the deductibility of
executive compensation in excess of $1,000,000 unless certain exceptions are
met. Because the Company's executive compensation programs qualify for these
exceptions under transition rules adopted by the Internal Revenue Service, this
new law is not expected to impact the Company's executive compensation practices
in 1995. The Compensation Committee is reviewing the tax law and associated
regulations, as well as the structure of its salary, short-term and long-term
incentive programs.
The compensation information set forth in other sections of this proxy
statement, particularly with respect to the tabular information presented,
reflects the considerations set forth in this report. The Base Salary,
Short-Term Incentives, and Long-Term Incentives sections that follow address the
compensation philosophy for all executive officers except for Mr. Roger W. Hale.
Mr. Hale's compensation is determined in accordance with the terms of his
Employment Agreement (see Chief Executive Officer Compensation on page 10 of
this proxy statement).
BASE SALARY
The base salaries for LG&E executive officers are designed to be competitive
with the Survey Group. The Position Rate represents the maximum base salary that
an executive officer may receive and, as stated above, approximates the salary
at the 65th percentile of the range for executives in similar positions with
companies in the Survey Group. Actual base salaries are determined based on
individual performance and experience.
SHORT-TERM INCENTIVES
The short-term or annual incentives provide direct financial compensation to
executives and reward them for meeting performance measures which are
established at the beginning of each performance year. The performance goals are
set with consideration for economic and business factors known to Company
management, the Compensation Committee and the Board at the time the goals are
established. The factors include external competition, inflation, financial and
market data and trends, as well as certain standards of excellence consistent
with core company values. In 1994, short-term incentive payments for executive
officers were based from 50% to 75% on Net Income Available for Common Stock
(NIAC), 25% on Management Effectiveness, and from 10% to 25% on Customer
8
<PAGE>
Satisfaction. The percentages varied within the executive officer group based
upon the nature of each individual's functional responsibilities, with more
senior officers having a greater percentage of their short-term incentives based
on NIAC. This component of the executive compensation program focuses executives
on the tasks most immediately at hand and is based upon priorities which are
tailored for each performance year.
In 1994, the short-term incentive targets (the "targeted amounts") ranged
from 26% to 41% of Position Rate for each executive officer and approached the
65th percentile of the level of such awards granted to comparable executives
employed by companies in the Survey Group. The individual officers are entitled
to receive from 0% to 150% of their targeted amounts, dependent upon Company and
individual performance during 1994 as measured by NIAC, Management Effectiveness
and Customer Satisfaction. Based on such performances, payouts of the short-term
awards for 1994 ranged from 29% to 51% of each executive officer's targeted
amount.
LONG-TERM INCENTIVES
On June 11, 1990, the shareholders of LG&E Energy approved the Omnibus
Long-Term Incentive Plan (the "Long-Term Plan"). The Long-Term Plan is
administered by a committee of not less than three directors of LG&E Energy who
are appointed by the Board of Directors. At this time, the Compensation
Committee administers the Long-Term Plan. The Long-Term Plan provides for the
grant of any or all of the following types of awards: stock options, stock
appreciation rights, restricted stock, performance units and performance shares.
To date, the Compensation Committee has chosen to award stock options, stock
appreciation rights and performance units to executive officers.
The Compensation Committee establishes an aggregate amount of long-term
incentives by grouping the executives into four categories, based on job
description and content. The Compensation Committee sets within each group the
percentage of an individual s Position Rate to be paid in options and the amount
to be paid in performance units. The aggregate value of the stock options and
performance units (expressed as a percentage of Position Rate) is intended to
approach the amount of long-term incentives (expressed as a percentage of
salary) payable to executives in similar positions with utilities and utility
holding companies in the 65th percentile of the Long-Term Survey Group,
depending upon achievement of targeted Company performance.
Stock options are awarded annually at fair market value at the time of grant
and vest after one year has elapsed. Options are granted with an exercise price
equal to the market value of the Common Stock at the time of grant, so they
provide no value unless the Company's stock price increases after the grants are
awarded. Vested options are exercisable over a nine-year term. Compensation
awards are thus tied to stock price appreciation in excess of the stock's value
at time of grant, rewarding executives as if they shared in the ownership of
LG&E Energy. The number of shares subject to options is determined by taking the
percentage of the executive's Position Rate to be paid in options, as determined
above, and dividing that amount by the fair market value of LG&E Energy Common
Stock on the date of the grant. Prior awards are not considered when making new
grants.
The number of performance units granted is determined by taking the amount
of the executive's Position Rate to be paid in performance units, as determined
above, and dividing that amount by the fair market value of LG&E Energy Common
Stock on the date of the grant. The value of the performance units is
substantially dependent upon the changing value of LG&E Energy's Common Stock in
the marketplace. Each executive officer is entitled to receive from 0% to 150%
of the performance units contingently awarded to the executive based on the
Company's:
(1) total shareholder return, defined as share price increase plus dividends
paid, divided by share price at beginning of the period ("Total
Shareholder Return"); and
(2) return on invested capital ("ROIC") over a three-year period measured
against a pre-established, internally set goal.
9
<PAGE>
Total Shareholder Return is determined through comparing LG&E Energy's total
shareholder return over a three-year period to that of the utility holding
companies and gas and electric utilities in the Salomon Brothers Electric
Utility Index at the time the Long-Term Plan was established in 1990.*
Payouts of long-term incentive awards in February 1995 were based on Company
performance during the 1992-1994 period. During such period, LG&E Energy
exceeded the target level for Total Shareholder Return, but was somewhat below
target in its ROIC performance. Performance was at the 95th percentile of its
comparison group with respect to Total Shareholder Return, and at 80% of
targeted ROIC performance, resulting in payouts of 115% of the contingent
awards. Because of changes to effective tax rates produced through the adoption
of the Revenue Reconciliation Act of 1993, the Compensation Committee determined
in 1993 that 50% of the 1993 performance unit awards be paid in LG&E Energy
Common Stock and 50% in cash, rather than 65% in stock and 35% in cash, as in
1992. For the same reason, the performance units awarded in 1991 and 1992 also
were changed to a 50%/50% payout from a 65%/35% payout, and the 1994 performance
unit awards were paid 50% in LG&E Energy Common Stock and 50% in cash.
In December 1994, special one-time stock option awards through the Long-Term
Plan were granted to two key business unit executives to provide them with
additional incentive to grow their business units consistent with increasing
shareholder value. Mr. Casey, Group President -- Energy Services, and Mr.
Staffieri, President -- LG&E, were granted 25,000 and 20,000 stock options,
respectively, in addition to their annual grants under the Long-Term Plan. These
additional options vest 50% in 1996 and 50% in 1998. All other terms of these
one-time stock option grants match the terms of the annual stock options granted
to all LG&E executives under the Long-Term Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of the Chief Executive Officer of LG&E Energy, Mr. Roger W.
Hale, is governed by the terms of an employment agreement. Mr. Hale originally
entered into an employment agreement with LG&E in April 1989. That agreement was
developed to induce him to move to LG&E from another company, and was updated by
Board action in 1990. The term of Mr. Hale's original employment agreement was
to expire by its terms on December 31, 1994.
In recognition of Mr. Hale's continued importance to the performance of LG&E
Energy and his significant contributions to LG&E Energy, including particularly
his leadership role in transforming LG&E, a local utility company, into LG&E
Energy, a national (and, increasingly, international) diversified energy
services company, the Compensation Committee in late 1993 negotiated with Mr.
Hale to retain his services beyond the term of his original agreement.
Consequently, Mr. Hale entered into a new employment agreement with LG&E Energy,
effective in November 1993. The term of this new agreement (the "Agreement")
extends through December 31, 1998. The Agreement provides for an increase in Mr.
Hale's minimum base salary, and provides that Mr. Hale may elect to retire and
commence payment of his retirement benefits on or after age 50 (see page 17 of
this proxy statement).
The Agreement dictates the level of Mr. Hale's minimum compensation, but the
Compensation Committee retains discretion to increase such compensation. The
Compensation Committee compares Mr. Hale's compensation to that for chief
executive officers of companies contained in the
- ------------------------
*While similar, the utilities and utility holding companies that were in the
Salomon Brothers Electric Utility Index in 1990 are not necessarily the same as
those in the Standard & Poor's Utility Index used in the Company Performance
Graph on page 13 of this proxy statement. The Salomon Brothers Index was
selected by the Compensation Committee at the time awards were originally made
under the Long-Term Plan. The companies included in the index at that time
continue to be used to determine Total Shareholder Return, subject to
eliminations due to merger or takeover activity. In the judgment of the
Compensation Committee, these companies continue to represent an appropriate
peer group for compensation purposes.
10
<PAGE>
Survey Group, as well as approximately 20 electric and gas utilities and utility
holding companies, with comparable revenues, market capitalization and asset
size. In setting long-term awards, the Company also considers survey data from
various compensation consulting firms. Details of Mr. Hale's 1994 compensation
are set forth below.
BASE SALARY. Mr. Hale was paid a base salary of $410,000 during 1994. The
Agreement provides that his salary shall not be less than his 1993 salary of
$385,000 and is to be reviewed as of each January 1 by the Compensation
Committee. The Compensation Committee, in determining the annual salary
increase for 1994, focused on Mr. Hale's individual performance (including
his management effectiveness, as described below) and the level of increases
provided to other LG&E Energy and LG&E employees. The 1994 increase was
6.6%.
SHORT-TERM INCENTIVE. Mr. Hale's target short-term incentive award is 50%
of base salary, as dictated by the Agreement. Like all other executive
officers receiving short-term incentive awards, Mr. Hale may receive from 0
to 150% of the targeted amount, based on Company performance and individual
performance. His 1994 short-term incentive payout was based 75% on corporate
NIAC performance, and 25% on Management Effectiveness.
The resulting payout for 1994 performance was 65% of base salary. The
Compensation Committee considered Mr. Hale's management effectiveness in
several areas in determining the final 1994 award. These included the
increased profitability of LG&E Energy and LG&E, profitability of LG&E
Energy subsidiaries, customer satisfaction rating, and other measures.
LONG-TERM INCENTIVE PAYOUT. In 1994, Mr. Hale received 4,787 options and
10,637 performance units. These amounts were determined in accordance with
the terms of his Agreement, which provides that his long-term incentive
awards shall include target awards of performance units with a value not
less than 100% of base salary, and stock options with a market value at
grant of not less than 45% of base salary. The terms of the options and
performance units (including the manner in which performance units are
earned) for Mr. Hale are the same as for other executive officers, as
described under the heading "Long-Term Incentives."
In the 1992-1994 period, LG&E Energy exceeded the target for Total
Shareholder Return, but was somewhat below target in its ROIC performance.
Performance was at the 95th percentile of its comparison group in Total
Shareholder Return, and at 80% of targeted ROIC performance. That resulted
in a payout equal to 115% of the approved target. In addition, the market
value of LG&E Energy Common Stock increased from $30.56 at grant to $36.88
during the performance period. This further increased the value of the
payout of the performance units awarded to Mr. Hale in 1992.
OTHER BENEFITS. Mr. Hale receives LG&E Energy contributions to thrift and
savings plans, similar to those of other employees.
11
<PAGE>
CONCLUSION
The Compensation Committee believes that the Company's current executive
compensation system serves the interests of the Company and its shareholders
effectively. The Compensation Committee takes very seriously its
responsibilities with respect to the Company's executive compensation system. To
this end, the Compensation Committee will continue to monitor and revise the
compensation policies as necessary to ensure that the Company's compensation
system continues to meet the needs of the Company and its shareholders.
MEMBERS OF THE COMPENSATION COMMITTEE
William C. Ballard, Jr., Chairman
S. Gordon Dabney
Gene P. Gardner
J. David Grissom
Anne H. McNamara
T. Ballard Morton, Jr.
12
<PAGE>
COMPANY PERFORMANCE
All of the outstanding Common Stock of LG&E is owned by LG&E Energy, and
accordingly, there are no trading prices for LG&E's Common Stock. The following
graph reflects a comparison of the cumulative total return (change in stock
price plus reinvested dividends) to shareholders of LG&E Energy Common Stock
from December 29, 1989, through December 30, 1994, with the Standard & Poor's
500 Composite Index and the Standard & Poor's Utility Index. The comparisons in
this table are required by the Securities and Exchange Commission and,
therefore, are not intended to forecast or be indicative of possible future
performance of LG&E Energy Common Stock.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN (1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LG&E Energy S&P 500 S&P Utilities
<S> <C> <C> <C>
12/29/89 100 100 100
1990 104 97 97
1991 132 126 112
1992 156 136 121
1993 189 150 138
1994 183 152 127
- ----------
<FN>
(1) Total Shareholder Return assumes $100 invested on December 29, 1989, with
quarterly reinvestment of dividends.
</TABLE>
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows the cash compensation paid or to be paid by LG&E,
LG&E Energy or any of its subsidiaries, as well as certain other compensation
paid or accrued for those years, to the Chief Executive Officer and the four
most highly compensated officers of LG&E in all capacities in which they served
(including service for LG&E Energy) during 1992, 1993 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
---------------------------------- -----------
OTHER SECURITIES PAYOUTS
ANNUAL UNDERLYING -------- ALL OTHER
COMPEN- OPTIONS/ LTIP COMPEN-
NAME AND SALARY BONUS SATION SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)
- ----------------------------------- ----- ------------ -------- ------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger W. Hale 1994 $ 410,500 $266,825 $10,822 4,787 $506,584 $ 12,819(1)
Chairman of the Board 1993 385,000 261,800 9,387 4,807 604,341 11,417
and CEO 1992 365,000 205,300 8,127 5,367 412,405 10,765
Edward J. Casey, Jr. 1994 235,000 142,945 6,058 28,200 55,504 7,661(1)
Group President, 1993 193,000 120,566 441 2,553 48,195 6,874
LG&E Energy Services 1992 168,000 118,800 288 2,618 33,530 5,305
Victor A. Staffieri 1994 213,000 120,750 4,771 23,000 35,515 2,947(1)
President 1993 175,000 75,097 3,883 2,087 0 1,462
1992 130,625(2) 72,352 2,738 1,887 0 162,920(3)
Stephen R. Wood 1994 197,000 101,007 5,974 2,229 44,957 6,604(1)
Executive Vice President and 1993 174,000 71,572 5,727 2,087 54,878 4,588
Chief Administrative Officer 1992 163,000 57,445 3,171 2,357 38,640 3,653
David R. Carey 1994 177,000 62,100 3,705 2,073 39,388 5,144(1)
Senior Vice President 1993 154,000 56,022 1,259 1,820 48,195 3,579
Operations 1992 145,000 46,446 317 2,069 34,825 3,401
<FN>
- ------------------------------
(1) Includes employer contributions to 401(k) plan, nonqualified thrift plan
and employer paid life insurance premiums in 1994 as follows: Mr. Hale
$2,970, $5,079 and $4,770 respectively; Mr. Casey $2,970, $3,991 and $700
respectively; Mr. Staffieri $1,485, $0 and $1,462 respectively; Mr. Wood
$1,888, $3,430 and $1,286 respectively; and Mr. Carey $1,401, $3,213 and
$530 respectively.
(2) Reported compensation is only for a portion of the year. Mr. Staffieri
joined LG&E on March 15, 1992.
(3) Consists of moving and relocation expenses in excess of benefits available
to all salaried employees, and $610 in employer paid life insurance
premiums.
</TABLE>
14
<PAGE>
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN 1994 FISCAL YEAR
The following table contains information at December 31, 1994, with respect
to grants of stock options and stock appreciation rights (SARs) to the named
executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
--------------------------- REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL
SECURITIES TOTAL RATES OF STOCK
UNDERLYING OPTIONS/SARS EXERCISE PRICE APPRECIATION
OPTIONS/SARS GRANTED TO OR BASE FOR OPTION TERM
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME (#) (1) FISCAL YEAR ($/ SHARE) DATE 0%($) 5%($) 10%($)
- ---------------------- ------------ ------------ ------------ ---------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger W. Hale 4,787 4.7% $ 38.59 2/2/2004 0 $116,176 $ 294,413
Edward J. Casey, Jr. 3,200 3.1 38.59 2/2/2004 0 77,661 196,808
Edward J. Casey, Jr. 25,000(2) 24.4 37.38 12/8/2004 0 587,702 1,489,352
Victor A. Staffieri 3,000 2.9 38.59 2/2/2004 0 72,807 184,508
Victor A. Staffieri 20,000(2) 19.5 37.38 12/8/2004 0 470,162 1,191,482
Stephen R. Wood 2,229 2.2 38.59 2/2/2004 0 54,096 137,089
David R. Carey 2,073 2.0 38.59 2/2/2004 0 50,310 127,495
<FN>
- ------------------------------
(1) Options are awarded at fair market value at time of grant; unless otherwise
indicated, options vest in one year and are exercisable over a ten-year
term.
(2) Options vest 50% in 1996 and 50% in 1998.
</TABLE>
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN 1994 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table sets forth information with respect to the named
executive officers concerning the exercise of options and/or SARs during 1994
and the value of unexercised options and SARs held by them as of December 31,
1994:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS/SARS
ACQUIRED OPTIONS/SARS AT FY-END
ON VALUE AT FY-END (#) ($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Roger W. Hale 10,063 $114,270 10,174/4,787 $37,907/$0
Edward J. Casey, Jr. 0 N/A 9,771/28,200 66,455/0
Victor A. Staffieri 0 N/A 3,974/23,000 14,433/0
Stephen R. Wood 0 N/A 8,531/2,229 58,371/0
David R. Carey 0 N/A 8,489/2,073 62,376/0
<FN>
- ------------------------------
(1) Dollar amounts reflect market value of LG&E Energy Common Stock at
year-end, minus the exercise price.
</TABLE>
15
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN 1994 FISCAL YEAR
The following table provides information concerning awards made in 1994 to
the named executive officers under the Long-Term Plan.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE OR NON-STOCK PRICE BASED PLANS
NUMBER OF OTHER PERIOD (NUMBER OF SHARES(1)
SHARES, UNITS OR UNTIL MATURATION -------------------------------------
NAME OTHER RIGHTS OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ------------------------------------------------------ ---------------- ---------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Roger W. Hale 10,637 12/31/96 4,787 10,637 15,956
Edward J. Casey, Jr. 2,203 12/31/96 991 2,203 3,305
Victor A. Staffieri 2,073 12/31/96 933 2,073 3,110
Stephen R. Wood 1,114 12/31/96 501 1,114 1,671
David R. Carey 933 12/31/96 420 933 1,400
<FN>
- ------------------------------
(1) The table indicates the number of performance units which are paid 50% in
stock and 50% in cash at maturation.
</TABLE>
Each performance unit awarded represents the right to receive an amount
payable 50% in LG&E Energy Common Stock and 50% in cash on the date of payout,
the latter portion being payable in cash in order to facilitate the payment of
taxes by the recipient. The amount of the payout is determined by the then-fair
market value of LG&E Energy Common Stock. The Long-Term Plan rewards executives
on a three-year rolling basis dependent upon: (1) the total shareholder return
for shareholders and (2) return on capital. The target for award eligibility
requires that LG&E Energy shareholders earn a total return at a preset level in
comparison to that of the utility holding companies and gas and electric
utilities in the Salomon Brothers Electric Utilities Index. The return on
capital component of the Long-Term Plan is triggered by the actual return on
capital exceeding preset levels of achievement established by the Compensation
Committee prior to commencement of the period. The Committee sets a contingent
award for each management level selected to participate in the Plan and such
amount is the basis upon which incentive compensation is determined. Depending
on the level of achievement, the participant can receive from zero to 150% of
the contingent award amount. Payments made under the Long-Term Plan in 1994 are
reported in the summary compensation table for the year of payout.
PENSION PLANS
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under LG&E's qualified defined
benefit pension plans, as well as non-qualified supplemental pension plans that
provide benefits that would otherwise be denied participants by reason of
certain Internal Revenue Code limitations for qualified plan benefits, based on
the remuneration that is covered under the plan and years of service with LG&E,
LG&E Energy and its subsidiaries:
16
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
30
15 20 25 OR MORE
YEARS OF YEARS OF YEARS OF YEARS OF
REMUNERATION SERVICE SERVICE SERVICE SERVICE
- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000 $ 50,236 $ 50,236 $ 50,236 $ 56,483
$150,000 $ 82,236 $ 82,236 $ 82,236 $ 86,183
$200,000 $114,236 $114,236 $114,236 $114,236
$250,000 $146,236 $146,236 $146,236 $146,236
$300,000 $178,236 $178,236 $178,236 $178,236
$350,000 $210,236 $210,236 $210,236 $210,236
$400,000 $242,236 $242,236 $242,236 $242,236
$450,000 $274,236 $274,236 $274,236 $274,236
$500,000 $306,236 $306,236 $306,236 $306,236
$550,000 $338,236 $338,236 $338,236 $338,236
$600,000 $370,236 $370,236 $370,236 $370,236
$650,000 $402,236 $402,236 $402,236 $402,236
$700,000 $434,236 $434,236 $434,236 $434,236
$750,000 $466,236 $466,236 $466,236 $466,236
$800,000 $498,236 $498,236 $498,236 $498,236
</TABLE>
A participant's remuneration covered by the Retirement Income Plan (the
"Retirement Income Plan") is his or her average base salary and short-term
incentive payment (as reported in the Summary Compensation Table) for the five
calendar plan years during the last ten years of the participant's career for
which such average is the highest. The estimated years of service for each named
executive is as follows: 4 years for Mr. Carey; 4 years for Mr. Casey; 28 years
for Mr. Hale; 2 years for Mr. Staffieri; and 4 years for Mr. Wood. Benefits
shown are computed as a straight life single annuity beginning at age 65.
Current Federal law prohibits paying benefits under the Retirement Income
Plan in excess of $118,800 per year. Officers of LG&E and LG&E Energy with at
least one year of service with either company are eligible to participate in
LG&E's Supplemental Executive Retirement Plan (the "Supplemental Executive
Retirement Plan"), which is an unfunded supplemental plan that is not subject to
the $118,800 limit. Presently, participants in the Supplemental Executive
Retirement Plan consist of all of the eligible officers of LG&E and LG&E Energy.
This plan provides generally for retirement benefits equal to 64% of average
current earnings during the final 36 months prior to retirement, reduced by
Social Security benefits, by amounts received under the Retirement Income Plan
and by benefits from other employers. As part of its employment agreement with
Mr. Hale, LG&E established a separate Supplemental Executive Retirement Plan.
The special plan generally provides for a retirement benefit for Mr. Hale of 2%
for each of his first 20 years of service with LG&E, LG&E Energy or with certain
prior employers, 1.5% for each of the next 10 years of service and 1% for each
remaining year of service completed prior to age 65, all multiplied by Mr.
Hale's final 60 months average compensation, less benefits payable from the
Retirement Income Plan, benefits payable from any other qualified or
non-qualified plan sponsored by LG&E, LG&E Energy or certain prior employers,
and primary Social Security benefits. Under Mr. Hale's employment agreement (see
page 10 of this proxy statement), he may elect to commence payment of his
retirement benefits at age 50. If he retires prior to age 65, Mr. Hale's
benefits will be reduced by factors set forth in the employment agreement.
The estimated annual benefits to be received under the Retirement Income
Plan and the Supplemental Executive Retirement Plans upon normal retirement at
age 65 and after deduction of Social Security benefits will be $141,696 for Mr.
Carey; $236,292 for Mr. Casey; $382,116 for Mr. Hale; $208,800 for Mr.
Staffieri; and $185,268 for Mr. Wood.
17
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Ballard, Dabney, Gardner, Grissom and Morton, and Mrs. McNamara
served as members of the Compensation Committee during 1994. None of the members
of the Compensation Committee are or were officers or employees of LG&E or its
affiliates. Mr. Ballard is of counsel to the law firm of Greenebaum Doll &
McDonald, which provides legal services to LG&E from time to time.
EMPLOYMENT CONTRACT AND TERMINATION OF EMPLOYMENT
ARRANGEMENTS AND CHANGE IN CONTROL PROVISIONS
In November 1993, Mr. Hale entered into a new employment agreement with LG&E
Energy for services to be provided to LG&E and LG&E Energy, superseding the
prior agreement. The new agreement was effective upon its execution, and extends
through December 31, 1998. Under the new agreement, Mr. Hale is entitled to an
annual base salary of not less than $385,000, subject to annual review by the
Compensation Committee, and to participate in the Short-Term Plan and the Long-
Term Plan. Mr. Hale's arrangement with LG&E Energy provides for a stock option
target award of not less than 45% of base salary and a long-term incentive
target award of not less than 100% of base salary. LG&E Energy's Board of
Directors may terminate the agreement at any time and, if it does so for reasons
other than cause, LG&E Energy must pay Mr. Hale's base salary for two years.
In the event of a change in control, all officers of LG&E and LG&E Energy
shall be entitled to the following payments if, within twenty-four months after
such change in control, they are terminated for reasons other than cause or
disability, or their employment responsibilities are altered: (i) all accrued
compensation; (ii) a severance amount equal to 2.99 times the sum of (a) his or
her annual base salary and (b) his or her "target" award pursuant to the
Short-Term Plan. However, in no event is the payment to the executive to equal
or exceed an amount which would constitute a nondeductible payment pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or
be subject to an excise tax imposed by Section 4999 of the Code. The executive
is entitled to receive such amounts in a lump-sum payment within thirty days of
termination. A change in control encompasses certain mergers and acquisitions,
changes in Board membership and acquisitions of voting securities of LG&E
Energy.
Also upon a change in control of LG&E Energy, all stock-based awards shall
vest 100%, and all performance-based awards, such as performance units and
performance shares, shall immediately be paid out in cash, based upon the extent
to which the performance goals have been met through the effective date of the
change in control or based upon the assumed achievement of such goals, whichever
amount is higher.
18
<PAGE>
SHAREHOLDER PROPOSALS
FOR 1996 ANNUAL MEETING
Any shareholder may submit a proposal for consideration at the 1996 Annual
Meeting. Any shareholder desiring to submit a proposal for inclusion in the
proxy statement for consideration at the 1996 Annual Meeting should forward the
proposal so that it will be received at LG&E's principal executive offices no
later than November 7, 1995. Proposals received by that date that are proper for
consideration at the Annual Meeting and otherwise conforming to the rules of the
Securities and Exchange Commission will be included in the 1996 proxy statement.
OTHER MATTERS
At the Annual Meeting, it is intended that the first two items set forth in
the accompanying notice and described in this proxy statement will be presented.
Should any other matter be properly presented at the Annual Meeting, the persons
named in the accompanying proxy will vote upon them in accordance with their
best judgment. The Board of Directors knows of no other matters which may be
presented at the meeting.
LG&E will bear the costs of this proxy solicitation. LG&E will provide
copies of this proxy statement, the accompanying proxy and the Annual Report to
brokers, dealers, banks and voting trustees, and their nominees, for mailing to
beneficial owners, and upon request therefor, will reimburse such record holders
for their reasonable expenses in forwarding solicitation materials. In addition
to using the mails, proxies may be solicited by directors, officers and regular
employees of LG&E or its subsidiaries, in person or by telephone. LG&E and LG&E
Energy have retained D.F. King & Co., Inc., a firm of professional proxy
solicitors, to assist in the solicitations at an estimated fee of $5,000 plus
reimbursement of reasonable expenses.
ANY SHAREHOLDER MAY OBTAIN WITHOUT CHARGE A COPY OF LG&E'S ANNUAL REPORT ON
FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR
1994, BY SUBMITTING A REQUEST IN WRITING TO: JOHN R. MCCALL, SECRETARY,
LOUISVILLE GAS AND ELECTRIC COMPANY, P.O. BOX 32010, 220 WEST MAIN STREET,
LOUISVILLE, KENTUCKY 40232.
19
<PAGE>
[ LOGO ]
ANNUAL MEETING OF SHAREHOLDERS -- APRIL 25, 1995
The Annual Meeting of Shareholders of Louisville Gas and Electric Company will
be held on Tuesday, April 25, 1995, at 10:00 a.m., E.D.T. at the Hyatt Regency
Louisville, 320 West Jefferson Street, Louisville, Kentucky. The left side of
this form is a ticket request form. If you plan to attend the Annual Meeting,
please complete the ticket request form and return it with your proxy.
An admission ticket will be mailed to you prior to the meeting. If you wish to
attend the meeting but do not have a ticket, you will be admitted to the
meeting after presenting personal identification and proof of ownership.
THE BOTTOM RIGHT PORTION OF THIS FORM IS THE PROXY CARD. Each proposal is fully
explained in the enclosed Notice of Annual Meeting of Shareholders and Proxy
Statement. To vote your proxy, please MARK by placing an "X" in the appropriate
box, SIGN and DATE the proxy. Then please DETACH and RETURN the completed proxy
promptly in the enclosed envelope.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
DETACH HERE DETACH HERE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PROXY
PREFERRED
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below (except as marked to the contrary below)
/ / WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME)
OWSLEY BROWN II
GENE P. GARDNER
J. DAVID GRISSOM
2. APPROVAL OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
[ LOGO ]
LOUISVILLE GAS AND ELECTRIC COMPANY
220 WEST MAIN STREET
P.O. BOX 32010
LOUISVILLE, KENTUCKY 40232
- -------------------------------------- --------------------------------------
SIGNATURE SIGNATURE
- --------------------------- SIGNATURE(S) SHOULD CORRESPOND TO THE NAME(S)
DATE APPEARING IN THIS PROXY. IF EXECUTOR, TRUSTEE,
GUARDIAN, ETC. PLEASE INDICATE.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
DETACH HERE DETACH HERE
[ LOGO ]
LOUISVILLE GAS AND ELECTRIC COMPANY
220 WEST MAIN STREET
P.O. BOX 32010
LOUISVILLE, KENTUCKY 40232
TICKET REQUEST
(PLEASE RETURN THIS CARD BY APRIL 10, 1995)
------------------------------------
PLEASE SEND AN ADMITTANCE TICKET TO:
------------------------------------
NAME:
------------------------------------
ADDRESS:
------------------------------------
CITY: STATE: ZIP CODE:
------------------------------------
TELEPHONE NUMBER:
------------------------------------
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<PAGE>
LOUISVILLE GAS AND ELECTRIC COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- APRIL 25, 1995
Roger W. Hale, Victor A. Staffieri and Edward J. Casey, Jr. are hereby
appointed as proxies, with full power of substitution, to vote the shares of the
shareholder(s) named on the reverse side hereof, at the Annual Meeting of
Shareholders of Louisville Gas and Electric Company to be held on April 25,
1995, and at any adjournment thereof, as directed on the reverse side hereof,
and in their discretion to act upon any other matters that may properly come
before the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS YOU SPECIFY. IF NOT SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1
AND 2. A VOTE FOR PROPOSAL 1 INCLUDES DISCRETIONARY AUTHORITY TO CUMULATE VOTES
SELECTIVELY AMONG THE NOMINEES AS TO WHOM AUTHORITY TO VOTE HAS NOT BEEN
WITHHELD.
Please mark, sign and date this proxy on the reverse side and return the
completed proxy promptly in the enclosed envelope.
