<PAGE>
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:
<PAGE>
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 23, 1996 at 1:30 p.m.,
Lexington (Kentucky) Time, for the following purposes:
(1) To elect to the Board four directors to hold office until the 1999
Annual Meeting of Shareholders of the Company and one director to hold
office until the 1998 Annual Meeting of the 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, 1996, 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 1995 has
been mailed to each common shareholder of record on the Company's books.
By order of the Board of Directors,
/s/ George S. Brooks II
George S. Brooks II
General Counsel and Secretary
March 18, 1996
----------------
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.
<PAGE>
KU ENERGY CORPORATION
One Quality Street
Lexington, KY 40507-1462
MARCH 18, 1996
Proxy Statement Relating to 1996 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 18, 1996,
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
1995 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, 1996, 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 five 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.
<PAGE>
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 for their certificated shares and those shares which they may have
acquired through reinvested dividends. 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
8, 1996, as follows: for the Reinvestment Plan, to George S. Brooks II,
Secretary of the Company, at the address stated on page 1; for the ESOP, to
Banc One Kentucky, 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
WARREN W. ROSENTHAL, who has served as a director of the Company
since 1991 and of Kentucky Utilities Company since 1976, will
[PHOTO] not stand for re-election at the 1996 Annual Meeting of
Shareholders in accordance with the Board of Directors'
retirement policy. The Company expresses its appreciation to Mr.
Rosenthal for his substantial contribution and his years of
dedicated service as a director.
General. Five 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 Mira S. Ball, Carol M. Gatton, Frank
V. Ramsey, Jr., Charles L. Shearer and Lee T. Todd, Jr. as directors of the
Company, to hold office until the 1999 Annual Meeting of Shareholders of the
Company or, in the case of Mr. Gatton, until the 1998 Annual Meeting of
Shareholders, or in each case 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, 1996.
2
<PAGE>
The following information is given with respect to the nominees for election
as directors:
MIRA S. BALL, 61, is Secretary-Treasurer and Chief Financial
Officer of Ball Homes, Inc., a single-family residential
[PHOTO] developer and property management company. She has been a
director of the Company and Kentucky Utilities since 1992. Ms.
Ball beneficially owns 5,986 shares of Common Stock of the
Company.
CAROL M. GATTON, 63, is Chairman of Area Bancshares, Inc., a
bank holding company in Owensboro, Kentucky. He is also involved
[PHOTO] in real estate ventures and automobile dealerships. Mr. Gatton
beneficially owns 1,000 shares of Common Stock of the Company.
FRANK V. RAMSEY, JR., 64, is President and Director of Dixon
Bank, Dixon, Kentucky, and a farm owner and operator. He has
[PHOTO] 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.
CHARLES L. SHEARER, PH.D., 53, is President of Transylvania
University, Lexington, Kentucky. He has been a director of the
[PHOTO] Company since 1991 and a director of Kentucky Utilities since
1987. Dr. Shearer beneficially owns 1,389 shares of Common Stock
of the Company which include 200 shares held solely by his wife
and 14 shares held by his children.
LEE T. TODD, JR., PH.D., 49, is President and Chief Executive
Officer of DataBeam Corporation, a Kentucky-based high
[PHOTO] technology firm. He was elected a director of the Company and
Kentucky Utilities in August of 1995 when the number of
positions on the Boards was increased. Dr. Todd beneficially
owns 500 shares of the Common Stock of the Company.
3
<PAGE>
Information with respect to those directors whose terms are not expiring is
as follows:
HARRY M. HOE, 70, is President and a director of J. R. Hoe &
Sons, Inc., Middlesboro, Kentucky, a foundry and casting
[PHOTO] company. He has been a director of the Company since 1991 and a
director of Kentucky Utilities since 1979. Mr. Hoe beneficially
owns 15,794 shares of Common Stock of the Company which include
5,088 shares held solely by his wife. His term expires in 1998.
MILTON W. HUDSON, 68, has been an economic consultant
(Washington, DC) since 1991. He was Managing Director and Senior
[PHOTO] 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 1,142 shares
of Common Stock of the Company. His term expires in 1997.
JOHN T. NEWTON, 65, retired in 1995 as Chairman of the Board and
Chief Executive Officer of the Company and Kentucky Utilities, a
[PHOTO] position he had held since 1987. He had also been 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 32,653
shares of Common Stock of the Company which include 7,668 shares
held jointly with his wife and 5,000 shares held solely by his
wife. His term expires in 1997.
WILLIAM L. ROUSE, JR., 63, was Chairman of the Board and Chief
Executive Officer and a director of First Security Corporation
[PHOTO] 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 2,186
shares of Common Stock. His term expires in 1997.
MICHAEL R. WHITLEY, 53, was elected Chairman, President and
Chief Executive Officer of the Company and Kentucky Utilities on
[PHOTO] August 1, 1995. He had been President and Chief Operating
Officer of the Company and Kentucky Utilities since 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 24,122
shares of the Common Stock of the Company which include 6,300
shares held jointly with his wife and 337 shares held solely by
his wife. His term expires in 1998.
4
<PAGE>
Voting Securities Beneficially Owned by Directors, Nominees and Executive
Officers. The directors, nominees and executive officers of the Company and
Kentucky Utilities owned beneficially at January 31, 1996 an aggregate of
181,707 shares of Common Stock of the Company, representing in the aggregate
.5% of such 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
Committee, the Audit Committee, the Compensation Committee, the Finance
Committee, the Long-Range Planning Committee, and the Nominating and Corporate
Governance Committee. Committee members are the same for committees of the
Company and committees of Kentucky Utilities.
During 1995, the Board of Directors of the Company held 19 meetings
(including Committee meetings), and the Board of Directors of Kentucky
Utilities held 22 meetings (including Committee meetings).
During 1995, each current director attended 100% of the meetings of the
Company's and Kentucky Utilities' Board of Directors and applicable committee
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 1995. 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 1995 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 three times in 1995 and the
Kentucky Utilities' Compensation Committee met five times. 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 one time in 1995 and the
Kentucky Utilities' Finance Committee met twice in 1995. 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, Shearer and Todd. The Company's Long-Range Planning Committee
met once in 1995 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.
5
<PAGE>
The members of the Nominating and Corporate Governance Committee are Messrs.
Hoe, Rouse and Shearer. The Company's Nominating and Corporate Governance
Committee met four times in 1995 as did the Kentucky Utilities' Nominating and
Corporate Governance Committee. The Nominating and Corporate Governance
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 for
election to the Board, the Nominating and Corporate Governance 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." The Nominating and Corporate Governance Committee also makes
recommendations to the Board regarding Board size, the desired number of
employee (and former employee) directors and policies regarding Director
retirement or resignation.
Report of Compensation Committee on Executive Compensation. The Company's
principal business activities are carried out through Kentucky Utilities.
Except as noted elsewhere in this Proxy Statement, 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 1995 from
only Kentucky Utilities. 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.
In establishing and periodically reviewing the incentive compensation plans,
the Committees have utilized the services of outside consultants specializing
in executive compensation and benefits.
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
6
<PAGE>
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 $600 million and $2
billion). In 1995, there were 36 such comparable companies; 100% of
these survey companies are included among those in the EEI Index to
which the Company's performance is compared on page 11 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. In
order to provide base salary market data for non-utility specific
positions, information was also considered from the 1995 Wyatt Top
Management Report, which is comprised of information from a wide
variety of industries.
. 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 1995, there were four 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 four tiers of participation are 15%, 20%, 25% and 30%,
respectively, of annualized base salary at the beginning of the year,
with 30% being applicable only to Mr. Newton, former Chairman and CEO,
and Mr. Whitley, Chairman, President and CEO. Participants may earn up
to 1 1/2 times the target award opportunity to the extent performance
targets are exceeded. In 1995, 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 1995 who were officers of both the
Company and Kentucky Utilities, the performance measures and their
weightings were cost control (33 1/3%); net income (33 1/3%); and
safety performance (33 1/3%). For participants in the KUE Incentive
Plan for 1995 who were not also officers of Kentucky Utilities, the
performance measures and their weightings were cost control (20%), net
income (from 0 to 20%) and individual goals (from 60 to 80%).
7
<PAGE>
If the goals are met, awards are subject to being paid in cash after
each year. Incentive Plans awards earned in 1993, 1994 and 1995, 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
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.
. 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 annualized base salary in effect on
the first day of the Performance Cycle divided by the closing market
price of the Company's Common Stock on the last business day before the
beginning of the Performance Cycle. For 1995 for executive officers,
the percentage for an assistant officer was 10%, for vice presidents
and other officers was 20%, for senior vice presidents was 30%, for Mr.
Whitley, Chairman, President and CEO was 40% and for Mr. Newton, former
Chairman and CEO was 50%. 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 1995-1997 Performance Cycle,
there were 12 comparable companies;
8
<PAGE>
100% of these companies or subsidiaries of those companies included in
both comparative groups also were in the EEI Index to which the
Company's performance is compared on page 11 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 for 1995. 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.
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 1992-1994 Performance Cycle have lapsed
The Performance Cycle that commenced in 1993 was 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.
The Performance Cycle that commenced in 1994 will be completed in
1996. 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 1997 after necessary comparisons are made.
Contingent grants made for the 1995-1997 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 1998 after necessary comparisons are made.
. Benefits:
Executive officers of the Company and Kentucky Utilities, including
those listed in the Summary Compensation Table on page 13 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 Committees believe that the above-described components combine to
provide total compensation packages that enable the companies to
effectively recruit, motivate and retain executive personnel. The
Committees further believe the provisions of Section 162(m) of the
Internal
9
<PAGE>
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 1995 and do not anticipate any such
limitation for compensation to be paid in 1996.
The Kentucky Utilities Compensation Committee makes its
recommendations for the base salary of Michael R. Whitley, Chairman,
President and CEO, and Mr. Newton, former Chairman and CEO, by
utilizing the same criteria and philosophies described above. The
Committee analyzes Mr. Whitley's and 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. Whitley's and
Mr. Newton's compensation for 1995 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. Whitley and 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. Whitley and 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.
10
<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, 1990 and the reinvestment of all dividends. Following the graph is a chart
giving the same information.
[PERFORMANCE GRAPH APPEARS HERE]
Shareholder Returns
(Dividends Reinvested)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
KU Energy....................... $100.00 $142.00 $153.40 $166.87 $165.22 $194.85
EEI Index....................... 100.00 128.87 138.69 154.11 136.28 178.55
S&P 500 Index................... 100.00 130.47 140.41 154.56 156.60 215.45
</TABLE>
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. Similarly,
11
<PAGE>
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. The
annual retainer in effect upon the director's termination from a Board will
generally be calculated as described in the first paragraph under this caption.
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.
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 Director, 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 deferred under the Director Deferred Compensation Plans will be paid to
the participant upon termination as a director for any reason other than death
based on a choice made by the Director as permitted by the Director Deferred
Compensation Plans 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.
12
<PAGE>
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 1993 through 1995 in all
capacities, to the Chief Executive Officers 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
BONUS COMPENSATION PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(3) ($)(4) ($)(5) ($)(6)
- --------------------------- ---- ---------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
JOHN T. NEWTON; 1995 328,616 74,811 23,959 0 232,257
Former Chairman of the Board, 1994 462,694 149,979 13,380 158,738 7,561
Former Chief Executive Officer, 1993 424,237 144,362 11,886 0 8,444
& Current Director of the
Company & Kentucky Utilities(1)
MICHAEL R. WHITLEY; 1995 318,467 73,476 116 0 4,686
Chairman of the Board, President 1994 245,490 67,157 481 50,508 5,560
& Chief Executive Officer & 1993 219,529 62,164 1,258 0 6,045
Director of the Company &
Kentucky Utilities(2)
JAMES W. TIPTON; 1995 227,591 39,942 1,445 0 4,667
Senior Vice President 1994 214,043 63,210 1,373 50,508 5,537
of the Company 1993 204,042 60,331 1,201 0 5,712
O. M. GOODLETT; 1995 210,195 44,550 0 0 4,500
Senior Vice President of the 1994 200,251 56,889 0 30,246 4,500
Company & Kentucky Utilities 1993 188,724 54,257 0 0 4,497
WAYNE T. LUCAS; 1995 194,553 42,160 711 0 4,692
Senior Vice President 1994 159,699 33,754 523 22,658 5,522
of Kentucky Utilities 1993 139,331 31,695 446 5,813
JAMES M. ALLISON; 1995 169,405 38,160 0 0 4,527
Senior Vice President 1994 133,674 29,131 0 0 4,500
of Kentucky Utilities 1993 110,885 24,222 5,576 0 0
</TABLE>
- --------
(1) Retired as Chairman and CEO in August 1995.
(2) Assumed additional titles of Chairman and CEO on August 1, 1995, having
been President since November 1, 1994.
(3) Bonuses are paid under the Incentive Plans. The bonus reported for Mr.
Newton for 1995 has been prorated to reflect his retirement as of August 1,
1995. Any bonus earned but deferred under the Executive Deferred
Compensation Plans is included in the Table.
13
<PAGE>
(4) Other annual compensation consists of the following items: (1) amounts for
group term life insurance and related taxes; (2) an amount for above-market
interest earned and paid on deferred compensation for Mr. Newton in 1995;
and (3) an amount for taxes related to moving expenses for Mr. Allison in
1993.
(5) Reflects payouts under the Kentucky Utilities Performance Share Plan
described under "Report of Compensation Committee on Executive
Compensation" above. Performance goals were not met, and thus no payouts
were made for the Performance Cycle that relates to 1993 and 1995 in the
table above. Amounts shown for 1994 reflect a payout in the form of
restricted shares of the Company's common stock of 75% of the contingent
grant for the Performance Cycle commencing in 1991. Such restricted stock
will be forfeited if the officer terminates employment prior to January 1,
2001 for any reason other than retirement, disability or death. In the
event of a change in control, the restrictions lapse immediately.
(6) All other compensation includes: (a) above-market-rate interest earned on
deferred compensation; (b) the employer matching contribution made to the
officer's account in the 401(k) Employee Savings Plan; and (c) Supplemental
Security Plan Payment of $227,757 to Mr. Newton as the benefit payable for
the period of August 1, 1995 through July 31, 1996. Such amounts for 1995
with respect to items (a) and (b) are shown in the following table.
<TABLE>
<CAPTION>
INTEREST ON 401(K)
EXECUTIVE DEFERRED MATCHING
OFFICER COMPENSATION CONTRIBUTION
--------- ------------ ------------
<S> <C> <C>
John T. Newton................................ $N/A $4,500
Michael R. Whitley............................ $186 $4,500
James W. Tipton............................... $167 $4,500
O. M. Goodlett................................ $N/A $4,500
Wayne T. Lucas................................ $192 $4,500
James M. Allison.............................. $ 27 $4,500
</TABLE>
Performance Shares contingently awarded under the Performance Share Plans in
1995 are reported in the Long-Term Incentive Plan awards table below. A
description of how awards are determined is presented under "Report of
Compensation Committee on Executive Compensation." A description of the scale
by which performance targets are set follows the table.
Long-Term Incentive Plan--Awards In Last Fiscal Year
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER NON-
PERIOD STOCK
NUMBER OF UNTIL PRICE-BASED PLANS(5)
UNITS MATURATION -------------------------------------
OR OR THRESHOLD
NAME OTHER RIGHTS PAYOUT(4) ($) TARGET ($) MAXIMUM ($)
- ---- ------------ ----------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
John T. Newton.......... 1,727(1) 3 $ 0 $25,905-$38,858 $ 51,810
Michael R. Whitley...... 4,075(2) 3 $ 0 $61,125-$91,688 $122,250
James W. Tipton......... 2,445(2) 3 $ 0 $36,675-$55,013 $ 73,350
O. M. Goodlett.......... 2,200(3) 3 $ 0 $33,000-$49,500 $ 66,000
Wayne T. Lucas.......... 2,085(3) 3 $ 0 $31,275-$46,913 $ 62,550
James M. Allison........ 1,855(3) 3 $ 0 $27,825-$41,738 $ 55,650
</TABLE>
- --------
(1) Constitutes Performance Shares contingently granted under the KUE
Performance Share Plan in 1995 as adjusted on a prorated basis to reflect
retirement as of August 1, 1995.
14
<PAGE>
(2) Constitutes Performance Shares contingently granted under the KUE
Performance Share Plan in 1995.
(3) Constitutes Performance Shares contingently granted under the Kentucky
Utilities Performance Share Plan in 1995.
(4) Number of years in Performance Cycle.
(5) 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, 1995.
For the Performance Cycle commencing in 1995, 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 1995-1997 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.
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. The credited years of
service under the Retirement Plan for such persons were as follows: Mr. Newton,
37 years; Mr. Whitley, 31 years; Mr. Tipton, 28 years; Mr. Goodlett, 25 years;
Mr. Lucas, 26 years; and Mr. Allison, 1 year. All of the credited years of
service were computed as of December 31, 1995 except for Mr. Newton's service
which was determined as of August 1, 1995, his date of retirement. 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 1995, 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 1995 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. Whitley,
$101,643; Mr. Tipton, $93,138; Mr. Goodlett, $84,738; Mr. Lucas, $86,998; and
Mr. Allison, $50,219. Mr. Newton's annual pension benefit under the Retirement
Plan commencing on his August 1, 1995 retirement date is $106,309.
15
<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 prior to age 65, the
member will receive the "retirement benefit" if the member lives to retirement
age and remains 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 1995 basic salary) are as follows: Mr. Whitley, $145,164; Mr. Tipton,
$62,166; Mr. Goodlett, $62,889; Mr. Lucas, $43,376; and Mr. Allison, $63,262.
Mr. Newton's annual benefit under the Supplemental Security Plan, commencing on
his August 1, 1995 retirement, is $227,757. 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,
16
<PAGE>
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 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.
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 1996. The
firm has served as the independent public accountants for the Company and
Kentucky Utilities 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 1997
Annual Meeting of Shareholders must be received by the Company at its principal
executive offices no later than November 17, 1996 in order to be eligible to be
considered for inclusion in the Company' 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
17
<PAGE>
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 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
Michael R. Whitley
Chairman, President and Chief
Executive Officer
George S. Brooks II
General Counsel and Secretary
18
<PAGE>
[LOGO OF KU ENERGY CORPORATION]
<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, William L. Rouse, Jr., John T. Newton and Michael R. Whitley, 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, 1996, at the 1996 annual meeting of shareholders (or any
adjourned session) as follows:
1. Election of Directors:
FOR all nominees WITHHOLD AUTHORITY to vote for all
listed below nominees listed below [_]
(except as marked
to the contrary
below) [_]
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below.
MIRA S. BALL, CAROL M. GATTON, FRANK V. RAMSEY, JR., CHARLES L. SHEARER AND LEE
T. TODD, JR.
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.
- --------------------------------------------------------------------------------
