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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
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
KU ENERGY CORPORATION
(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:
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KU ENERGY CORPORATION
One Quality Street
Lexington, KY 40507-1462
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of KU Energy Corporation (the "Company")
will be held in the Second Floor Assembly Room at the offices of the Company,
One Quality Street, Lexington, Kentucky, on April 25, 1995 at 1:30 p.m.,
Lexington (Kentucky) Time, for the following purposes:
(1) To elect to the Board three directors to hold office until the 1998
Annual Meeting of Shareholders of the Company or until their respective
successors shall have been duly elected and qualified.
(2) To transact such other business as may properly come before the
meeting.
For further information with respect to the foregoing, reference is made to
the attached Proxy Statement.
Only holders of Common Stock of the Company of record on its books at the
close of business on March 8, 1995, are entitled to vote at the meeting. All
such shareholders of record are requested to be represented at the meeting,
either in person or by proxy.
A copy of the Company's Annual Report to Shareholders for the year 1994 has
been mailed to each common shareholder of record on the Company's books.
By order of the Board of Directors,
LOGO
George S. Brooks II
General Counsel and Secretary
March 17, 1995
----------------
SHAREHOLDERS WHO CANNOT ATTEND THE MEETING IN PERSON ARE REQUESTED TO DATE
AND SIGN THEIR PROXIES AND RETURN THEM TO THE COMPANY IN THE ENCLOSED ENVELOPE,
AS PROMPTLY AS POSSIBLE. THE BOARD OF DIRECTORS DESIRES THE REPRESENTATION OF
ALL SHAREHOLDERS AT THE MEETING, WHETHER THEIR HOLDINGS ARE SMALL OR LARGE.
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KU ENERGY CORPORATION
One Quality Street
Lexington, KY 40507-1462
MARCH 17, 1995
Proxy Statement Relating to 1995 Annual Meeting of Shareholders
The purposes of the meeting are set forth in the accompanying Notice. The
enclosed proxy is solicited on behalf of the Board of Directors of the Company
and the cost of such solicitation will be borne by the Company. Following the
initial solicitation of proxies by mail beginning on or about March 17, 1995,
certain of the officers, employees and directors of the Company may solicit
proxies by correspondence, telephone, telecopy, telegraph or in person, but
without extra compensation. In addition, the Company has retained Georgeson &
Company, Inc., New York, New York, to assist in the solicitation of proxies.
Such solicitation may be made by mail, telephone, telecopy, telegraph or in
person. The estimated cost of the services of Georgeson & Company, Inc. is
$8,500. The Company will pay to banks, brokers, nominees and other fiduciaries
their reasonable charges and expenses incurred in forwarding the proxy material
to their principals.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER ENTITLED TO VOTE
AT THE MEETING WHO MAKES A WRITTEN REQUEST THEREFOR A COPY OF THE COMPANY'S
1994 ANNUAL REPORT ON FORM 10-K (OTHER THAN CERTAIN EXHIBITS) AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES EXCHANGE ACT OF
1934. WRITTEN REQUESTS FOR A COPY OF THE REPORT SHOULD BE MAILED TO GEORGE S.
BROOKS II, SECRETARY OF THE COMPANY, AT THE ADDRESS STATED ABOVE.
The Company has been the parent holding company of Kentucky Utilities Company
("Kentucky Utilities") since December 1991.
On the record date for the meeting, March 8, 1995, there were 37,817,878
shares of Common Stock outstanding. Only holders of Common Stock of record on
the books of the Company at the close of business on the record date are
entitled to vote at the meeting. Each such holder is entitled to vote at the
meeting, one vote per share, in respect to each of the matters to be voted on
at the meeting, except that in the election of directors each such holder is
entitled to cumulative voting and therefore may give one nominee for election
as many votes as shall equal the number of directors to be elected multiplied
by the number of shares of Common Stock held by such shareholder or may
distribute such votes among any two or more of the nominees. The proxies
solicited herewith seek discretionary authority to cast cumulative votes in the
election of directors.
A majority of the shares entitled to be cast on a matter constitutes a quorum
for action on that matter. Once a share is represented for any purpose at the
meeting, it will be deemed present for quorum purposes for the remainder of the
meeting and any adjournment of the meeting (unless a new record date is set).
If a quorum exists, action on a matter (other than the election of directors)
will be approved if the votes cast favoring the action exceed the votes cast
opposing the action unless a higher vote is required by law. The three nominees
for director receiving the highest number of votes will be elected. Shares
represented by a limited proxy, such as where a broker may not vote on a
particular matter without instructions from the beneficial owner and no
instructions have been received (i.e., a "broker non-vote"), will be counted to
determine the presence of a quorum but will not be present for other purposes
and will not be the equivalent of a "no" vote on a proposition. Shares
represented by a proxy with instructions to abstain on a matter will be counted
in determining whether a quorum is in attendance. An abstention is not the
equivalent of a "no" vote on a proposition.
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Shareholders may vote either in person or by duly authorized proxy. The
giving of a proxy will not prevent a shareholder from voting in person at the
meeting. A proxy may be revoked by a shareholder at any time prior to the
voting thereof by giving written notice to the Secretary of the Company prior
to such voting. All shares entitled to vote and represented by effective
proxies on the enclosed form, received by the Company, will be voted at the
meeting (or any adjourned session thereof) in accordance with the terms of such
proxies.
Each Participant in the Company's Automatic Dividend Reinvestment and Stock
Purchase Plan (the "Reinvestment Plan"), Kentucky Utilities' Employee Stock
Ownership Plan (the "ESOP") or the Kentucky Utilities Employee Savings Plan
(the "Savings Plan") will receive a form of proxy by which such Participant may
direct the agent or trustee under such Plans as to the manner of voting shares
credited to the Participant's accounts under such Plans. Shareholders of record
who are participants in the Reinvestment Plan will receive only one form of
proxy which will be deemed to include shares held of record and shares, if any,
held under such Plan. A Participant of any of such Plans wishing to vote in
person at the meeting may obtain a proxy for shares credited to his account
under such Plans by making a written request therefor by April 11, 1995, as
follows: for the Reinvestment Plan, to George S. Brooks II, Secretary of the
Company, at the address stated on page 2; for the ESOP, to Liberty National
Bank and Trust, PO Box 32500, Louisville, Kentucky 40232, Attention: Barbara J.
Steele, Trust Investment Division; and for the Savings Plan, to National City
Bank, Kentucky, PO Box 36010, Louisville, Kentucky 40233, Attention: Judith E.
Meany.
Election of Directors
General. Three directors are to be elected at the meeting. Barring unforeseen
circumstances and in the absence of contrary directions, the proxies solicited
herewith will be voted for the election of W. B. Bechanan, Harry M. Hoe and
Michael R. Whitley as directors of the Company, to hold office until the 1998
Annual Meeting of Shareholders of the Company or until their respective
successors shall have been duly elected and qualified. The proxies may also be
voted for a substitute nominee or nominees in the event any one or more of said
persons shall be unable to serve for any reason or be withdrawn from
nomination, an occurrence not now anticipated. Except as otherwise indicated,
each nominee has been engaged in his present principal occupation for at least
the past five years. All information regarding share ownership is as of January
31, 1995.
The following information is given with respect to the nominees for election
as directors:
W. B. BECHANAN, 69, retired in 1987 as Chairman of the Board and
- ------------ Chief Executive Officer of Kentucky Utilities. He has been a
- ------------ director of the Company since 1991 and a director of Kentucky
Utilities since 1978. Mr. Bechanan beneficially owns 25,975
shares of Common Stock of the Company which include 22,389
shares held pursuant to family trusts under which Mr. Bechanan
has shared investment power.
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- ------------ HARRY M. HOE, 69, is President and a director of J. R. Hoe &
- ------------ Sons, Inc., Middlesboro, Kentucky, a foundry and casting
company. He has been a director of the Company since 1991 and a
director of Kentucky Utilities since 1979. Mr. Hoe beneficially
owns 14,888 shares of Common Stock of the Company which include
4,796 shares held solely by his wife.
MICHAEL R. WHITLEY, 52, was elected President and Chief
- ------------ Operating Officer of the Company and Kentucky Utilities on
- ------------ November 1, 1994. He was Executive Vice President of these
companies from August 1, 1994 to November 1, 1994. Before this
period, he had been a Senior Vice President of the Company since
1988 and of Kentucky Utilities since 1987. Mr. Whitley was
Secretary of the Company from 1988 until 1992 and of Kentucky
Utilities from 1978 until 1992. Mr. Whitley is a director of LFS
Bancorp Inc. and its wholly owned subsidiary, Lexington Federal
Savings Bank. Mr. Whitley has been a director of the Company and
Kentucky Utilities since 1992. Mr. Whitley beneficially owns
16,292 shares of the Common Stock of the Company which include
337 shares held solely by his wife.
Information with respect to those directors whose terms are not expiring is
as follows:
MIRA S. BALL, 60, is Secretary-Treasurer and Chief Financial
- ------------ Officer of Ball Homes, Inc., a single-family residential
- ------------ developer and property management company. She has been a
director of the Company and Kentucky Utilities since 1992. Ms.
Ball beneficially owns 5,918 shares of Common Stock of the
Company. Her term expires in 1996.
MILTON W. HUDSON, 67, has been an economic consultant
- ------------ (Washington, D.C.) since 1991. He was Managing Director and
- ------------ Senior Economic Advisor of Morgan Guaranty Trust Company of New
York from January 1990 until his retirement in June 1991. He has
been a director of the Company since 1991 and a director of
Kentucky Utilities since 1990. Mr. Hudson beneficially owns
1,076 shares of Common Stock of the Company. His term expires in
1997.
JOHN T. NEWTON, 64, is Chairman of the Board and Chief Executive
- ------------ Officer of the Company and Kentucky Utilities. He also was
- ------------ President of these companies from 1987 to November 1, 1994. Mr.
Newton has been a director of the Company since 1988 and a
director of Kentucky Utilities since 1974. He beneficially owns
35,407 shares of Common Stock of the Company which include
11,941 shares held jointly with his wife. His term expires in
1997.
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- ------------ FRANK V. RAMSEY, JR., 63, is President and Director of Dixon
- ------------ Bank, Dixon, Kentucky, and a farm owner and operator. He has
been a director of the Company since 1991 and a director of
Kentucky Utilities since 1986. Mr. Ramsey beneficially owns
1,400 shares of Common Stock of the Company. His term expires in
1996.
WARREN W. ROSENTHAL, 71, is a private investor and the owner of
- ------------ Patchen Wilkes Farm, Lexington, Kentucky (a thoroughbred horse-
- ------------ breeding operation). Mr. Rosenthal is a director of
Immunomedics, Inc. He has been a director of the Company since
1991 and a director of Kentucky Utilities since 1976. Mr.
Rosenthal beneficially owns 17,400 shares of Common Stock of the
Company. His term expires in 1996.
WILLIAM L. ROUSE, JR., 62, was Chairman of the Board and Chief
- ------------ Executive Officer and a director of First Security Corporation
- ------------ of Kentucky, a multi-bank holding company, prior to his
retirement in 1992. Mr. Rouse is a director of Ashland,
Incorporated. He has been a director of the Company since 1991
and a director of Kentucky Utilities since 1989. Mr. Rouse
beneficially owns 1,000 shares of Common Stock of the Company.
In addition, Mr. Rouse's account under the Directors Deferred
Compensation Plan described below has the equivalent of 803
shares of Common Stock. His term expires in 1997.
CHARLES L. SHEARER, PH.D., 52, is President of Transylvania
- ------------ University, Lexington, Kentucky. He has been a director of the
- ------------ Company since 1991 and a director of Kentucky Utilities since
1987. Dr. Shearer beneficially owns 1,320 shares of Common Stock
of the Company which include 200 shares held solely by his wife
and 12 shares held by his children. His term expires in 1996.
Voting Securities Beneficially Owned by Directors, Nominees and Executive
Officers; Other Information. The directors, nominees and executive officers of
the Company and Kentucky Utilities owned beneficially at February 1, 1995 an
aggregate of 187,239 shares of Common Stock of the Company, representing in the
aggregate .5% of such stock.
On March 30, 1994, a report on Form 4 (due February 15, 1994) was filed on
behalf of Roger C. Grimm, a former Vice President of the Company, with the
Securities and Exchange Commission reporting a purchase of Company Common
Stock.
Meetings and Committees of the Board of Directors. All members of the
Company's Board of Directors are currently members of Kentucky Utilities' Board
of Directors. The Board of Directors of the Company and the Board of Directors
of Kentucky Utilities have each established six committees: the Executive
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Committee, the Audit Committee, the Compensation Committee, the Finance
Committee, the Long-Range Planning Committee, and the Nominating Committee.
Committee members are the same for committees of the Company and committees of
Kentucky Utilities.
During 1994, the Board of Directors of the Company held 7 meetings, and the
Board of Directors of Kentucky Utilities also held 7 meetings.
During 1994, each director attended 100% of the meetings of the Company's and
Kentucky Utilities' Board of Directors and applicable committee meetings,
except Mr. Rouse who attended 88% (29 of 33 meetings).
The members of the Executive Committee are Messrs. Newton, Rosenthal, Rouse,
Shearer and Whitley. Neither the Company's nor Kentucky Utilities' Executive
Committee met during 1994. The Executive Committee has the full power of the
Board between meetings of the Board, except as provided by law.
The members of the Audit Committee are Ms. Ball and Messrs. Hoe, Hudson and
Rouse. The Company's Audit Committee met two times in 1994 as did the Kentucky
Utilities' Audit Committee. The Audit Committee selects and engages (and may
discharge) the Company's independent auditors; approves or disapproves each
professional service or type of service to be provided by the auditors; meets
with the auditors regarding the scope and results of the annual audit and of
internal accounting procedures and practices; reviews any recommendations which
may be made by the independent auditors; and generally exercises supervision
over all matters relating to audit functions, making periodic reports to the
Board.
The members of the Compensation Committee are Messrs. Ramsey, Rosenthal and
Rouse. The Company's Compensation Committee met five times in 1994 as did the
Kentucky Utilities' Compensation Committee. The Compensation Committee reviews
compensation for all officers, directors' fees and fees paid to directors for
membership on the various committees of the Board; makes recommendations to the
Board at least annually with respect to appropriate levels of compensation and
fees and administers certain benefit plans.
The members of the Finance Committee are Messrs. Hudson, Ramsey, Rosenthal
and Shearer. The Company's Finance Committee met three times in 1994 and the
Kentucky Utilities' Finance Committee met once in 1994. The Finance Committee
monitors and reviews financing programs and capital structure of the Company,
reviews the Company's cash position in order to establish programs for the
proper investment of amounts determined to be available for such purpose from
time to time, and reports to the Board at least annually concerning its
activities, or, when appropriate, makes recommendations which the committee
deems appropriate for action to be taken by the Board.
The members of the Long-Range Planning Committee are Messrs. Ramsey,
Rosenthal, Rouse and Shearer. The Company's Long-Range Planning Committee met
once in 1994 as did the Kentucky Utilities Long-Range Planning Committee. The
Long-Range Planning Committee makes recommendations to the Board with respect
to the Company's future strategy.
The members of the Nominating Committee are Messrs. Hoe, Rouse and Shearer.
The Company's Nominating Committee met one time in 1994 as did the Kentucky
Utilities' Nominating Committee. The Nominating Committee makes recommendations
to the Board with respect to qualified candidates for election to the Board;
and reviews the performance of Board members and, based upon such review, makes
recommendations to the Board as to which members shall stand for reelection. In
making recommendations
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for election to the Board, the Nominating Committee will consider persons
recommended by shareholders. Any shareholder wishing to make such a
recommendation must comply with certain requirements of the Company's By-laws
described herein under the caption "General--Proposals of Shareholders."
Report of Compensation Committee on Executive Compensation. The Company's
principal business activities are carried out through Kentucky Utilities. Other
than Mr. Tipton, each of the officers of the Company whose compensation is
reported in the Summary Compensation Table is also an officer of Kentucky
Utilities and received compensation in 1994 from only Kentucky Utilities. Such
officers of the Company and Kentucky Utilities do not receive separate
compensation from the Company for services as an officer. Mr. Tipton was an
officer of Kentucky Utilities until November 1, 1994, at which time he was
elected an officer of the Company, and his compensation was thereafter paid
only by the Company. The Kentucky Utilities' Board of Directors establishes
compensation for Kentucky Utilities' executive officers on the basis of
recommendations made by that Board's Compensation Committee. In addition, the
Board of Directors of the Company establishes compensation for Company
executive officers who are not also Kentucky Utilities executive officers on
the basis of recommendations made by that Board's Compensation Committee. In
addition to recommending base salary for all executive officers, the
Compensation Committees make recommendations concerning certain incentive
compensation and other compensation programs established by the respective
Boards of Directors. The incentive compensation plans described below are
administered by the respective Compensation Committees.
Given the rapid and fundamental changes occurring in the utility industry and
the resulting need to attract, retain and motivate a high-quality officer team,
the Compensation Committees are committed to implementing executive
compensation policies and programs which:
. Support the strategic business missions of the Company and Kentucky
Utilities;
. Emphasize a strong pay for performance orientation;
. Have a meaningful portion of compensation at risk; and
. Provide a competitive level of compensation that is consistent with the
appropriate external marketplace.
The key elements of the executive compensation program are base salary,
annual performance incentive, long-term performance incentive, and benefits.
These key elements are addressed separately below.
. Base salary:
The base salaries of all executive officers are reviewed annually by
the Committees, which make recommendations to the respective Boards of
Directors. In considering base salary levels for all officers other
than the Chairman and CEO, the Committees initially review
recommendations made by the Chairman and CEO. As part of the review,
consideration is given to the operating performance and financial
condition of the Company and/or Kentucky Utilities, as well as the
executives' contributions in guiding the Company to these achievements.
Consideration is also given to market data for electric utility
executives as set forth in the annual Edison Electric Institute
Executive Compensation Survey (the "EEI Survey"). More specifically,
comparisons are made to those survey companies similarly sized to the
Company (those with annual revenues of between $300 million and $2
billion). In 1994, there were 44 such comparable companies; 95% of
these survey companies are included among those in the EEI Index to
which the Company's performance is compared on page 12 of this proxy
statement. The intent of the Committees and Boards is, in general, to
set base salary levels at or above the average but below the highest
reported level for comparable positions as shown by the EEI Survey.
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. Annual Performance Incentive:
The Kentucky Utilities Annual Performance Incentive Plan (the
"Kentucky Utilities Incentive Plan") and the Company's Annual
Performance Incentive Plan (the "KUE Incentive Plan" and together, the
"Incentive Plans") are designed to provide cash incentive compensation
opportunities to attract, retain and motivate a select group of
employees of Kentucky Utilities and the Company, respectively,
including executive officers. Under the Committees' practice, no
employee who has received an award under one of the plans (i.e. either
the Kentucky Utilities Incentive Plan or the KUE Incentive Plan) for a
plan year is eligible to receive an award under the other plan for such
plan year. Annual cash incentive compensation is based on the financial
and competitive strength of the Company or Kentucky Utilities, as the
case may be. The Incentive Plans provide for establishment of
individual incentive awards based on performance against specific
predetermined performance targets. For Kentucky Utilities the
performance targets are based on cost per kilowatt hour, safety
performance and net income available to common shareholders. For the
Company, the performance targets are based on cost-control criterion,
safety performance and net income available to common shareholders
(safety criterion has not been applied to officers who are not also
officers of Kentucky Utilities). In addition, personal performance
goals are set for most participants.
The Compensation Committees determine eligible participants. An
individual's potential incentive compensation is determined by a
varying percentage of base salary depending on the individual's
position and other factors as determined each year by the respective
Committees. For 1994, there were three tiers of participation for
executive officers. If the performance targets are not met, no awards
are paid. If the targets are achieved, the awards for executive
officers for the three tiers of participation are 20%, 25% and 30%,
respectively, of base compensation, with 30% being applicable only to
the Chairman and CEO. Participants may earn up to 1 1/2 times the
target award opportunity to the extent performance targets are
exceeded. In 1994, the weightings for the various performance measures
set forth above varied for each participation tier. For individuals
participating in the Kentucky Utilities Incentive Plan, cost-per-
kilowatt-hour performance was weighted from 20 to 33 1/3%; net income
performance was weighted from 20 to 33 1/3%; safety performance was
weighted from 20 to 33 1/3%; and individual goals were weighted from 0
to 40% of the total award. In the case of participants in the KUE
Incentive Plan for 1994 who were officers of both the Company and
Kentucky Utilities, the performance measures and their weightings were
cost control (from 30 to 33 1/3%); net income (from 30 to 33 1/3%);
safety performance (from 30 to 33 1/3%); and individual goals (from 0
to 10%). For participants in the KUE Incentive Plan for 1994 who were
not also officers of Kentucky Utilities, the performance measures and
their weightings were cost control (20%); net income (20%); and
individual goals (60%).
If the goals are met, awards are subject to being paid in cash after
each year. Incentive Plans awards earned in 1992, 1993 and 1994, as a
result of attaining or exceeding the performance goals for each of
those years, are set forth in the Summary Compensation Table under the
column "Bonus" for the individuals named therein.
Participants may elect to have all or any portion of their cash
awards deferred under the applicable Executive Optional Deferred
Compensation Plan (collectively, the "Executive Deferred Compensation
Plans") established by the Company and Kentucky Utilities,
respectively. Amounts deferred will be maintained in an unfunded
account for each participant and will be credited with earnings each
quarter at a rate of interest equal to the greater of (1) the return on
capital of the Company or Kentucky Utilities (as the case may be) for
the 12 months ended each quarter or (2) the 13-week Treasury Bill rate
in effect on the first business day following each quarter. Amounts
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credited under the Executive Deferred Compensation Plans will be paid
to each participant upon termination of employment or as otherwise
permitted by the Executive Deferred Compensation Plans.
In establishing and periodically reviewing the Incentive Plans, the
Committees have utilized the services of outside consultants
specializing in executive compensation and benefits. In addition,
during 1994, Kentucky Utilities' executive compensation practices and
plans were the subject of a review by an independent consultant/auditor
selected by the Kentucky Public Service Commission as part of the
Commission's audit of Kentucky Utilities' management and operations.
The consultant/auditor produced a report entitled "Comprehensive
Management Audit of Kentucky Utilities Company" (the "Audit Report").
Among the consultant/auditor's findings was the opinion that "overall,
the annual incentives are well-designed, within competitive practice
and appropriate" with "goals established annually (that are)
aggressive..........which support a "pay-for-performance' environment.''
. Long-Term Performance Incentive:
The Kentucky Utilities Performance Share Plan (the "Kentucky
Utilities Performance Share Plan") and the Company's Performance Share
Plan (the "KUE Performance Share Plan" and together the "Performance
Share Plans") are designed to provide long-term incentives in the form
of additional compensation to officers and other select employees of
Kentucky Utilities and the Company, respectively, dependent upon
achievement of the performance measurement compared to a group of
comparable companies selected by the Committees.
Prior to 1993, the performance measure of the Kentucky Utilities
Performance Share Plan was growth in earnings per share compared to
other companies, but such measure was amended with shareholder approval
in 1993 to return on equity compared to the group of comparable
companies, which is also the measure used in the KUE Performance Share
Plan.
Under the Performance Share Plans, each year the respective
Compensation Committees determine a Performance Cycle and the number of
Performance Shares to be contingently granted to each eligible
participant for that Performance Cycle. The Committees have determined
that the number of Performance Shares contingently granted will be
based on a varying percentage of base salary divided by the year-end
market price of the Company's Common Stock. For 1994 for executive
officers, the percentage for a base salary of $100,000 to $125,000 was
20%, for $125,000 to $150,000 was 25%, for $150,000 to $200,000 was
30%, for $200,000 to $300,000 was 40% and for a base salary of $300,000
or above was 50% (the maximum percentage, which in 1994 applied only to
the Chairman and CEO). No employee who receives an award under one of
the plans (i.e. either the Kentucky Utilities Performance Share Plan or
the KUE Performance Share Plan) for a Performance Cycle is eligible to
receive an award from the other plan for such Performance Cycle. Each
Performance Cycle is a number of years determined by the Compensation
Committees over which the contingent grants of Performance Shares may
be earned. Existing Performance Cycles for Kentucky Utilities and the
Company have been set at three years. Under both plans a Performance
Share is a share unit which is contingently granted to a participant at
the beginning of a Performance Cycle.
The number of Performance Shares that may be earned by each
participant for a Performance Cycle is based on the relative
performance of the Company or Kentucky Utilities, as the case may be,
compared to the specified group of similar companies, as determined for
that particular Performance Cycle. For the 1994-1996 Performance Cycle,
there were 12 comparable companies; 100% of these companies or
subsidiaries of those companies included in both comparative groups
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also were in the EEI Index to which the Company's performance is
compared on page 12 of this proxy statement. For each Performance
Cycle, management submits to the respective Compensation Committee
recommendations for proposed participants, target award opportunities
(stated in Performance Shares), Performance Cycle length, a scale which
specifies the number of Performance Shares to be earned by each
participant depending upon the degree to which the target goal is met
and a group of companies to which performance comparison will be made.
See the information following the table "Long-Term Incentive Plan--
Awards In Last Fiscal Year" for a description of the scale applicable
to contingent grants made in 1994. At the end of each Performance
Cycle, the Compensation Committees determine the number of Performance
Shares earned by each participant, based on the degree to which actual
performance compared to the targets set. Upon such determination,
Performance Shares earned for that Performance Cycle, if any, will be
converted into an equal number of restricted shares of the Company's
Common Stock.
The first Performance Cycle for Kentucky Utilities commenced in 1990
and was completed in 1992. Since the stringent target goals set by the
Committee were not met, there were no distributions of restricted
shares to participants. All contingent grants for the 1990-1992
Performance Cycle have lapsed.
The Performance Cycle for Kentucky Utilities that commenced in 1991
was completed in 1993. Based on performance during the 3-year cycle,
75% of the maximum level of shares were converted to restricted shares
during 1994. These awards of restricted shares are shown on the Summary
Compensation Table as LTIP Payouts.
The Performance Cycle that commenced in 1992 was completed in 1994.
Performance Shares earned in respect of that Performance Cycle, if any,
will be distributed in the form of restricted shares to participants in
the second quarter of 1995 after necessary comparisons are made.
The Performance Cycle that commenced in 1993 will be completed in
1995. Shares earned in respect of that Performance Cycle, if any, will
be distributed in the form of restricted shares to participants in the
second quarter of 1996 after necessary comparisons are made.
Contingent grants made for the 1994-1996 Performance Cycle are shown
in the table "Long-Term Incentive Plan--Awards in Last Fiscal Year."
Shares earned in respect of this Performance Cycle, if any, will be
distributed in the form of restricted shares to participants in the
second quarter of 1997 after necessary comparisons are made.
The Performance Share Plans have been included with the Incentive
Plans in reviews by outside consultants as described under "Annual
Performance Incentive" above. The Performance Share Plans were also
reviewed as part of the Kentucky Public Service Commission's Management
Audit. The Audit Report concluded that "overall, the long-term
incentives are well-designed, within competitive practice and
appropriate."
. Benefits:
Executive officers of the Company and Kentucky Utilities, including
those listed in the Summary Compensation Table on page 14 of this proxy
statement, are eligible for participation in the standard benefit
package available to all Company and Kentucky Utilities' employees. In
addition, executive officers of the Company and Kentucky Utilities are
eligible to be members in Kentucky Utilities' Supplemental Security
Plan, which is described below under "Executive Compensation."
The above-described components combine to provide total compensation packages
that enable the companies to effectively recruit, motivate and retain executive
personnel. As an overall finding in the Audit
10
<PAGE>
Report, the independent consultant/auditor stated that "the current pay program
for KU officers is competitive and meets the defined pay policy."
The Committees believe the provisions of Section 162(m) of the Internal
Revenue Code, which limit the deductibility of certain compensation expense
(generally referred to as the "$1 million dollar limit"), will not limit the
deductibility of any compensation that was paid by the Company or Kentucky
Utilities in 1994 and do not anticipate any such limitation for compensation to
be paid in 1995.
The Kentucky Utilities Compensation Committee makes its recommendations for
the base salary of John T. Newton, Chairman and CEO, by utilizing the same
criteria and philosophies described above. The Committee analyzes Mr. Newton's
individual performance on the additional basis of its evaluation of the
performance and coordination of the Company's and Kentucky Utilities' other
management personnel. The incentive portion of Mr. Newton's compensation for
1994 was provided under the KUE Incentive Plan and the KUE Performance Share
Plan. As described above, compensation under these plans is tied to Company
performance. Awards made under those plans to Mr. Newton were established at
the levels and utilizing formulas set forth above. Specific information
regarding the level of compensation, and Incentive Plan and Performance Share
Plan participation for Mr. Newton are set forth in the tables shown under
"Executive Compensation" below and as detailed in the discussion above.
None of the present members of the Compensation Committees is (or has been)
an employee of the Company or Kentucky Utilities. The members of the Company's
Compensation Committee and Kentucky Utilities' Compensation Committee
responsible for this report are:
Frank V. Ramsey, Jr.
Warren W. Rosenthal
William L. Rouse, Jr.
11
<PAGE>
Performance Graph. The following performance graph compares the performance
for the last five years of the Company's Common Stock (or for periods prior to
December 1, 1991, Kentucky Utilities' Common Stock) to the S&P 500 Index and
the index of investor-owned electric and combination electric and natural gas
utilities reported by Edison Electric Institute (the "EEI Index"). The graph
gives total shareholder return in each case assuming $100 invested at December
31, 1989 and the reinvestment of all dividends. Following the graph is a chart
giving the same information.
LOGO
Shareholder Returns
(Dividends Reinvested)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1989 1990 1991 1992 1993 1994
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
KU Energy.......................... $100 $107.11 $152.10 $164.31 $178.75 $176.98
EEI Index.......................... 100 101.37 130.64 140.59 156.22 138.14
S&P 500 Index...................... 100 96.89 126.42 136.05 149.76 151.74
</TABLE>
12
<PAGE>
Directors' Compensation. Each director of the Company is also a director of
its principal subsidiary, Kentucky Utilities. Each director who is not an
employee of the Company or Kentucky Utilities is paid an annual retainer of
$20,000. This retainer is reduced by any retainer paid from a Company
subsidiary. Kentucky Utilities pays non-employee directors an annual retainer
of $15,000. Thus, the net annual Company retainer paid to such directors is
$5,000 but the aggregate paid for serving on both Boards is $20,000.
In addition to an annual retainer, the Company and Kentucky Utilities pay
each non-employee director a $750 fee for each meeting of a Board or a
particular committee attended; provided that if the Boards of the Company and
Kentucky Utilities meet on the same day, only one $750 fee is paid for both
meetings and if the same committee of the Boards of the Company and Kentucky
Utilities meet on the same day, only one $750 fee is paid for both meetings.
Out-of-pocket travel expenses are paid to directors for all meetings attended.
All eligible directors of the Company and Kentucky Utilities are entitled to
participate in the Director Retirement Retainer Programs (the "Director
Retirement Plans") of the Company and Kentucky Utilities. Directors who are
not, and have not previously been, an officer of Kentucky Utilities, the
Company, or their affiliated companies ("outside directors") are eligible to
participate. An outside director who is 65 years of age and has completed at
least five consecutive years of service on the Company's and/or Kentucky
Utilities' Board will receive, upon termination of service from a Board for any
reason other than death, an annual retirement benefit equal to the annual
retainer paid to such Board's directors in effect as of such termination,
payable monthly over a period of years equal to the number of full years such
director served on the Board, but not in excess of 10 years. Such payments
cease, however, if the director dies before all such payments are made. In the
event of a change in control of the Company or Kentucky Utilities, any person
then receiving a retirement benefit would be paid, within 30 days of the change
in control, a lump-sum payment equal to the discounted present value of all
then unpaid installments of the director's retirement benefit. In the event of
a change in control, each outside director in office immediately prior to such
change in control will be eligible to receive an accelerated retirement benefit
if the director terminates service from a Board for any reason other than death
within three years of the date of the change in control. Such accelerated
retirement benefit would be paid in a lump sum within 30 days of such
termination and would be equal to the discounted present value of the
retirement benefit which such director would have received if the director had
retired from the Board at age 70 (or for certain directors, 72) and lived to
collect the full benefit otherwise payable under the applicable Director
Retirement Plan. Such benefit would be based on the higher of the annual
retainer in effect immediately prior to the change in control or immediately
prior to such director's termination of service. Change in control is broadly
defined under the Director Retirement Plans and includes any merger,
consolidation, reorganization or sale of substantially all of the assets of the
Company or Kentucky Utilities which results in less than a majority of the
voting power of the resulting entity being owned by the holders of the Common
Stock of the Company prior to the transaction; a change in the majority of the
Board of Directors of the Company or Kentucky Utilities over a two-year period
which is not approved by two-thirds of the incumbent directors; and the
acquisition by any person or group of persons of beneficial ownership of 10% or
more of the Common Stock of the Company or Kentucky Utilities. The annual
retainer in effect upon the director's termination from a Board will be
calculated as described in the first paragraph under this caption.
13
<PAGE>
Directors may elect to have all or a specified portion of their directors'
fees deferred under the Director Deferred Compensation Plans (the "Director
Deferred Compensation Plans") of the Company and Kentucky Utilities. Amounts
deferred will be maintained in unfunded accounts for each participant, which,
based on a choice made by the Directors in advance, either: 1) bear interest at
a floating rate based upon the average prime rate charged by banks as reported
in the Federal Reserve Bulletin; or 2) experience appreciation (depreciation)
and earnings based on a hypothetical investment in the Company's common stock.
Amounts credited under the Director Deferred Compensation Plans will be paid to
the participant upon termination as a director for any reason other than death
in a single payment or, with interest, quarterly over a period of not to exceed
40 calendar quarters, or, with interest, annually over a period of not to
exceed 10 years. In the event of a participant's death, payment of any
remaining balance of credited amounts will be made in a single payment to a
designated beneficiary. In certain cases, directors may receive a distribution
of deferred amounts in the event of substantial financial hardship. Because
officers of the Company and Kentucky Utilities receive no compensation for
services as directors, any director who is an officer is not eligible to
participate in the plans.
Executive Compensation. The following table contains information with respect
to the compensation paid by (or earned from) the Company and Kentucky
Utilities, for all services rendered during 1992 through 1994 in all
capacities, to the Chief Executive Officer and the other four most highly
compensated executive officers of the Company and Kentucky Utilities:
Summary Compensation Table
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION PAYOUTS
-------------------------- ------------
LTIP
OTHER ANNUAL ------------ ALL OTHER
NAME AND PRINCIPAL COMPENSATION PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($)(3) ($)(4)
------------------ ---- --------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
JOHN T. NEWTON; 1994 462,694 149,979 13,380 158,738 7,561
Chairman of the Board, 1993 424,237 144,362 11,886 0 8,444
Chief Executive Officer 1992 414,909 99,075 11,161 NA 4,870
& Director of the Company
& Kentucky Utilities
MICHAEL R. WHITLEY; 1994 245,490 67,157 481 50,508 5,560
President, Chief Operating 1993 219,529 62,164 1,258 0 6,045
Officer & Director of the 1992 210,682 41,834 21 NA 3,574
Company & Kentucky
Utilities
JAMES W. TIPTON; 1994 214,043 63,210 1,373 50,508 5,537
Senior Vice President of 1993 204,042 60,331 1,201 0 5,712
the Company 1992 205,199 41,834 18 NA 3,346
O. M. GOODLETT; 1994 200,251 56,889 0 30,246 4,500
Senior Vice President of 1993 188,724 54,257 0 0 4,497
the Company & Kentucky 1992 160,215 24,736 0 NA 2,182
Utilities
WAYNE T. LUCAS; 1994 159,699 33,754 523 22,658 5,522
Senior Vice President of 1993 139,331 31,695 446 0 5,813
Kentucky Utilities 1992 141,305 23,803 413 NA 3,101
</TABLE>
14
<PAGE>
- --------
(1) Bonuses are paid under the Annual Performance Incentive Plan. Any bonus
earned but deferred under the Executive Deferred Compensation Plan is
included in the Table.
(2) Other annual compensation consists of amounts for group term life insurance
and related income taxes.
(3) Under the Kentucky Utilities Performance Share Plan, which commenced in
1990 and is described under "Report of Compensation Committee on Executive
Compensation" above, Performance Shares have been contingently granted each
year since 1990 in each case for a three-year Performance Cycle. For the
Performance Cycle commencing in 1990, there was a zero payout. For the
Performance Cycle commencing in 1991, a payout of 75% of the contingent
grant was made in 1994 as shown in the table above. The 1994 amounts
represent awards of restricted shares of Company Common Stock (valued at
April 26, 1994, the date of transfer to the officers). Such shares will be
forfeited if the officer terminates employment prior to January 1, 2001 for
any reason other than retirement, disability or death or in the event of a
change in control. Shares of Common Stock are awarded under the plan only
after the end of the Performance Cycle and if the performance goals have
been met.
(4) All other compensation includes above-market-rate interest earned on
deferred compensation and the employer matching contribution made to the
officer's account in the 401(k) Employee Savings Plan. Such amounts for
1994 are shown in the following table.
<TABLE>
<CAPTION>
INTEREST ON 401(K)
EXECUTIVE DEFERRED MATCHING
OFFICER COMPENSATION CONTRIBUTION
--------- ------------ ------------
<S> <C> <C>
John T. Newton.................................. $3,061 $4,500
Michael R. Whitley.............................. $1,060 $4,500
James W. Tipton................................. $1,037 $4,500
O. M. Goodlett.................................. $ 0 $4,500
Wayne T. Lucas.................................. $1,022 $4,500
</TABLE>
Performance Shares contingently awarded under the Company's and Kentucky
Utilities' Performance Share Plans in 1994 are reported in the Long-Term
Incentive Plan awards table below. A description of how awards are determined
is presented under "Report of Compensation Committee on Executive
Compensation." A description of the scale by which performance targets are set
follows the table.
Long-Term Incentive Plan--Awards In Last Fiscal Year
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
PERIOD
UNTIL ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
NUMBER OF MATURATION PRICE-BASED PLANS(4)
UNITS OR OR ----------------------------------------
NAME OTHER RIGHTS PAYOUT(3) THRESHOLD($) TARGET($) MAXIMUM($)
- ---- ------------ ----------- ------------ ---------------- ----------
<S> <C> <C> <C> <C> <C>
John T. Newton.......... 7,240(1) 3 $ 0 $97,740-$146,610 $195,480
Michael R. Whitley...... 2,275(1) 3 $ 0 $30,713-$ 46,069 $ 61,425
James W. Tipton......... 2,170(2) 3 $ 0 $29,295-$ 43,943 $ 58,590
O. M. Goodlett.......... 1,955(2) 3 $ 0 $26,393-$ 39,589 $ 52,785
Wayne T. Lucas.......... 990(2) 3 $ 0 $13,365-$ 20,048 $ 26,730
</TABLE>
- --------
(1) Constitutes Performance Shares contingently granted under the KU Energy
Performance Share Plan in 1994.
(2) Constitutes Performance Shares contingently granted under the Kentucky
Utilities Performance Share Plan in 1994.
15
<PAGE>
(3) Number of years in Performance Cycle.
(4) See description below for the scale that determines which amount would be
applicable. Amounts are calculated based on the price of the Company's
Common Stock on December 31, 1994.
For the Performance Cycle commencing in 1994, payouts of contingent grants
shown in the table above will be determined by calculating the average return
on equity for the Performance Cycle of the Company or Kentucky Utilities, as
the case may be, compared to the average return on equity for the Performance
Cycle for the comparable companies. The returns will be ranked in descending
order. For the 1994-1996 Performance Cycle, the scale that determines if grants
are earned is as follows: if the Company's or Kentucky Utilities' rank, as the
case may be, is in the top two, the payout will be 100% of the contingent grant
(the Maximum shown in the table); if their rank is third or fourth, the payout
will be 75% and if their rank is fifth or sixth, the payout will be 50% (the
two figures shown as Target in the table); and if their rank is seventh or
below, no shares will be awarded (shown as the Threshold in the table) for that
Performance Cycle under the applicable Performance Share Plan. Similar scales
have been established for other outstanding Performance Cycles (with the scale
relating to growth in earnings per share for the Kentucky Utilities Performance
Share Plan prior to the Performance Cycle commencing in 1993).
Each of the officers of the Company and Kentucky Utilities is entitled to
participate in the Kentucky Utilities employee retirement plans described
below. Executive officers, like other employees, are eligible to participate in
Kentucky Utilities' Retirement Plan, and all eligible persons whose
compensation is reported in the Summary Compensation Table participated in the
Retirement Plan. Contributions to the Retirement Plan are determined
actuarially and cannot be readily calculated as applied to any individual
participant or small group of participants. Generally, compensation for
Retirement Plan purposes means base compensation while a participant, excluding
overtime pay, commissions, performance incentive compensation or other
extraordinary compensation. The compensation for Retirement Plan purposes of
the individuals named in the foregoing table is substantially equivalent to the
base salary reported in the Summary Compensation Table. As of December 31,
1994, the credited years of service under the Retirement Plan for such persons
were as follows: Mr. Newton, 36 years; Mr. Whitley, 30 years; Mr. Tipton, 27
years; Mr. Goodlett, 24 years; and Mr. Lucas, 25 years. Retirement Plan
benefits depend upon length of service, age at retirement and amount of
compensation (determined in accordance with the Retirement Plan).
Although higher amounts are determined under the Retirement Plan and shown in
the table below, in most cases, pension benefits under the Retirement Plan or
compensation used to measure such benefits will be reduced to comply with
maximum limitations imposed by the Internal Revenue Code. Under such
limitations effective in 1994, no base compensation above $150,000 may be used
to calculate a benefit, except in the case of certain executive officers to
preserve benefits accrued under previously applicable rules. In addition, no
annual benefit derived from employer contributions may exceed $120,000.
Assuming retirement at age 65, a Retirement Plan participant would be eligible
at retirement for a maximum annual pension benefit (without taking into account
the Internal Revenue Code limitations referred to above) set forth in the
following table. However, assuming retirement at age 65, assuming 1994 base
compensation and taking into account the Internal Revenue Code limitations, the
annual pension benefit under the Retirement Plan for the executive officers
named in the Summary Compensation Table would be as follows: Mr. Newton,
$118,347; Mr. Whitley, $101,643; Mr. Tipton, $93,138; Mr. Goodlett, $84,638;
and Mr. Lucas, $86,738.
16
<PAGE>
<TABLE>
<CAPTION>
FINAL
AVERAGE ANNUAL BENEFIT AFTER SPECIFIED YEARS OF SERVICE(2)
BASE --------------------------------------------------------------
PAY(1) 15 20 25 30 35 40 45
------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$150,000................ $ 29,999 $ 39,999 $ 49,999 $ 59,999 $ 69,998 $ 79,998 $ 89,998
200,000................ 39,999 53,332 66,665 79,998 93,331 106,664 119,997
250,000................ 49,999 66,665 83,331 99,998 116,664 133,330 149,996
300,000................ 59,999 79,998 99,998 119,997 139,997 159,996 179,996
350,000................ 69,998 93,331 116,664 139,997 163,329 186,662 209,995
400,000................ 79,998 106,664 133,330 159,996 186,662 213,328 239,994
450,000................ 89,998 119,997 149,996 179,996 209,995 239,994 269,993
500,000................ 99,998 133,330 166,663 199,995 233,328 266,660 299,993
550,000................ 109,997 146,663 183,329 219,995 256,660 293,326 329,992
600,000................ 119,997 159,996 199,995 239,994 279,993 319,992 359,991
</TABLE>
- --------
(1) "Final average base pay" generally means the average annual compensation
during the 60 consecutive months of highest pay during the period of
employment.
(2) Annual benefits shown are on a straight life annuity basis. Amounts shown
are not subject to any deduction for Social Security benefits or other
offset amounts. Benefits may be reduced by Internal Revenue Code
limitations described above.
Executive officers and certain other employees of the Company and Kentucky
Utilities are eligible to be members in Kentucky Utilities' Supplemental
Security Plan which provides retirement, disability and death benefits as well
as a change in control retirement benefit and a change in control severance
benefit. As to executive officers, upon retirement at age 65, an eligible
member will receive 15 annual payments of an amount equal to 75% of basic
compensation, offset by benefits payable from any defined benefit plan of the
Company or an affiliate (such as Kentucky Utilities' Retirement Plan) and
social security benefits. Basic compensation is the annualized base monthly
salary of the member, exclusive of performance incentive compensation or other
extraordinary compensation, in effect at termination of employment by
retirement, disability or death. Upon termination of employment by death of an
eligible executive officer prior to age 65, the member's beneficiary will
receive an annual benefit equal to 50% of basic compensation until the later of
the date such member would have attained age 65 or completion of 15 annual
payments. Upon termination of employment by disability, the member will receive
the "retirement benefit" if the member lives to retirement age and is then
disabled or the "death benefit" if the member dies prior to retirement age and
is disabled at death. Benefits will be paid from the general funds of the
employer. The estimated annual benefits from Kentucky Utilities' Supplemental
Security Plan that would be payable upon retirement at normal retirement age
for the individuals named in the Summary Compensation Table (assuming 1994
basic salary) are as follows: Mr. Newton, $227,266; Mr. Whitley, $89,247; Mr.
Tipton, $56,502; Mr. Goodlett, $48,466; and Mr. Lucas, $38,866. To assist in
providing funds to pay such benefits when they become payable, insurance is
purchased on the lives of the members of the Supplemental Security Plan.
Under the Supplemental Security Plan, members are entitled to change in
control severance benefits in the following circumstances: (i) involuntary
termination of the individual's employment within two years following the
change in control for reasons other than cause, death, permanent disability or
attainment of age 65; (ii) resignation within two years of the change in
control for good reason (as defined in the plan); and (iii) in respect of the
Chairman of the Board, the President, the Chief Financial Officer or, if such
positions are filled by less than three persons, the Executive Vice President,
in each case of Kentucky Utilities, termination of employment for any reason
during the 30-day period commencing on the first anniversary of the change in
control. In such circumstances, the employee will be entitled to a change in
control severance
17
<PAGE>
payment equal to a certain percentage (300% in the case of executive officers
of the Company or Kentucky Utilities) of the sum of (i) the employee's basic
compensation and (ii) the employee's target annual performance incentive
compensation. In addition, the employee will be entitled to continuation of
certain employee welfare benefits for up to three years following termination
of employment, subject to an offset for comparable benefits. Under the
Supplemental Security Plan, the employee is entitled to receive additional
payments, if necessary, to reimburse the employee for certain federal excise
tax liabilities. The Supplemental Security Plan's change in control retirement
benefit provides that, upon termination of employment, other than for cause (as
defined in the Supplemental Security Plan) following a change in control, an
eligible member will receive a lump sum amount equal to the present value of
the retirement benefit (described in the preceding paragraph and assuming the
member is then 65 but prorated if the member then has less than 15 years of
service, including an assumed three additional years of service for executive
officers); provided that, if the termination is more than two years from the
change in control, the calculation of years of service will not include the
assumed additional three years and the compensation upon which the benefit is
calculated will be the actual compensation in effect at termination (rather
than the compensation in effect at the change in control which, if higher,
would be used if termination occurred within two years of the change in
control). The change in control severance benefits and change in control
retirement benefits are effective for a minimum of five years, which is
automatically extended from year to year unless Kentucky Utilities gives notice
that it does not wish to extend the period of effectiveness. Change in control
has essentially the same meaning as under the Director Retirement Plans
described under "Directors' Compensation."
The Performance Share Plans and Executive Deferred Compensation Plans contain
provisions relating to a change in control. Under each of these plans a change
in control has essentially the same meaning as under the Director Retirement
Plans described under "Directors' Compensation." Under the Performance Share
Plans, if a participant's employment is terminated voluntarily or involuntarily
after a change in control, such participant will have the right to an immediate
cash payment for all Performance Cycles in which the participant is currently
participating. The amount payable to a participant in the event of termination
in connection with a change in control will be determined in accordance with
the formula specified in the Performance Share Plan. In addition, after a
change in control, whether or not the participant is terminated, under the
Executive Deferred Compensation Plans, all amounts held under such plans will
be paid to the participant. The Incentive Plans do not contain any change in
control provisions.
General
Independent Public Accountants. The Audit Committee of the Board has selected
the firm of Arthur Andersen LLP as independent public accountants to examine
the financial statements of the Company and Kentucky Utilities for 1995. The
firm has served as the Company's independent public accountants since 1991 and
as Kentucky Utilities' independent public accountants for many years.
Representatives of the firm are not expected to be present at the annual
meeting.
Proposals of Shareholders. Under the rules of the Securities and Exchange
Commission, any shareholder proposal intended to be presented at the 1996
Annual Meeting of Shareholders must be received by the Company at its principal
executive offices no later than November 19, 1995, in order to be eligible to
be considered for inclusion in the Company's proxy materials relating to that
meeting. A shareholder submitting a proposal or nominating a person to serve as
director must comply with procedures set forth in the Company's By-laws. In
general, the By-laws provide that for business to be considered at an annual
meeting of shareholders, a shareholder must give timely and proper notice of
the matter to the Secretary of the Company. The notice must specify in
reasonable detail the business desired to be brought before the meeting
18
<PAGE>
and contain other information required by the By-laws. Nominations for director
may be made by shareholders only if the shareholder has given timely and proper
notice thereof to the Secretary of the Company. The notice must contain the
name of the person or persons nominated, certain information about the nominee
and other information required by the By-laws. Shareholder proposals or
nominations must be received no fewer than 60 days prior to the meeting (or, if
the date of the meeting has not been made public, within 10 days after the
publication of the date of the meeting).
Other Business. The meeting is being held for the purposes set forth in the
Notice which accompanies this Proxy Statement. The Board of Directors of the
Company knows of no business to be transacted at the meeting other than the
election of directors. However, if any other business should properly be
presented to the meeting, the proxies will be voted in respect thereof in
accordance with the judgment of the person or persons voting the proxies.
KU Energy Corporation
By order of the Board of Directors
John T. Newton,
Chairman and Chief Executive Officer
George S. Brooks II
General Counsel and Secretary
19
<PAGE>
[LOGO]
<PAGE>
KU ENERGY CORPORATION THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PROXY. The undersigned appoints, and if a participant in the Company's
dividend reinvestment plan, and/or Kentucky Utilities Company's employee stock
ownership plan and/or employee savings plan, authorizes and directs the
appropriate agent or trustee, in each case as agent for the undersigned, to
appoint, W.B. BECHANAN, WARREN W. ROSENTHAL and JOHN T. NEWTON, and each of
them, attorneys and proxies, with power of substitution, to vote all shares of
COMMON STOCK of KU Energy Corporation of record in the name of the undersigned,
and all shares, if any, of such stock credited to the account of the
undersigned under each of such plans, in each case, at the close of business on
March 8, 1995, at the 1995 annual meeting of shareholders (or any adjourned
session) as follows:
FOR all nominees WITHHOLD AUTHORITY to vote for all
listed below nominees listed below [_]
(except as marked
to the contrary
below) [_]
1. Election of Directors:
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below.
W.B. Bechanan, Harry M. Hoe, Michael R. Whitley
In their discretion with respect to such other business as may properly come
before the meeting,
all as set forth in the Notice and Proxy Statement relating to the meeting.
(to be signed on reverse side)
(continued from other side)
SHARES REPRESENTED BY THIS PROXY SHALL BE
VOTED AS SPECIFIED ON THE REVERSE SIDE. IN
ABSENCE OF SPECIFIC DIRECTIONS, SAID SHARES
SHALL BE VOTED FOR THE ELECTION OF DIRECTORS.
PLEASE DO
NOT FOLD
Dated ______
PLEASE SIGN BELOW
-----------------------
-----------------------
NOTE: PLEASE DATE AND SIGN EXACTLY AS NAME(S) APPEAR ABOVE AND RETURN SIGNED
PROXY IN ENCLOSED ENVELOPE. IF THE STOCK IS ISSUED IN THE NAMES OF TWO OR MORE
PERSONS, ALL SHOULD SIGN THE PROXY. STATE FULL TITLE WHEN SIGNING AS EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC.
