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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
LG&E ENERGY CORP.
- --------------------------------------------------------------------------------
(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/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
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(4) Date Filed:
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[LOGO]
March 20, 1998
Dear LG&E Energy Corp. shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
LG&E Energy Corp. to be held Wednesday, April 22, 1998, at 10:00 a.m., E.D.T. at
the Hyatt Regency Louisville, 320 W. Jefferson Street, Louisville, Kentucky.
Business items to be acted upon at the Annual Meeting are the election of
four directors, the approval of Arthur Andersen LLP as independent auditors of
the company for 1998 and the transaction of any other business properly brought
before the meeting. Additionally, we will report on the progress of LG&E Energy,
and shareholders will have the opportunity to present questions of general
interest.
We encourage you to read the proxy statement carefully and complete, sign
and return your proxy in the envelope provided, even if you plan to attend the
meeting. Returning your proxy to us will not prevent you from voting in person
at the meeting, or from revoking your proxy and changing your vote at the
meeting, if you are present and choose to do so.
If you plan to attend the Annual Meeting, please check the box on the proxy
card indicating that you plan to attend the meeting. Please bring the Admission
Ticket, which forms the top portion of the form of proxy, to the meeting with
you. If you wish to attend the meeting but do not have an Admission Ticket, you
will be admitted to the meeting after presenting personal identification and
evidence of ownership.
The directors and officers of LG&E Energy appreciate your continuing
interest in the business of LG&E Energy. We hope you can join us at the meeting.
Sincerely,
[SIGNATURE]
Roger W. Hale
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of LG&E Energy Corp. ("LG&E Energy"), a
Kentucky corporation, will be held at the Hyatt Regency Louisville, 320 West
Jefferson Street, Louisville, Kentucky, on Wednesday April 22, 1998, at 10:00
a.m., E.D.T. At the Annual Meeting, shareholders will be asked to consider and
vote upon the following matters, which are more fully described in the
accompanying proxy statement:
1. A proposal to elect four directors, three for three-year terms expiring
in 2001 and one for a two-year term expiring in 2000;
2. A proposal to approve and ratify the appointment of Arthur Andersen LLP
as independent auditors of LG&E Energy for 1998; and
3. Such other business as may properly come before the meeting.
The close of business on February 17, 1998, has been fixed by the Board of
Directors as the record date for determination of shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to attend the meeting. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE
REPLY ENVELOPE AS SOON AS POSSIBLE. Your cooperation in signing and promptly
returning your proxy is greatly appreciated.
By Order of the Board of Directors,
John R. McCall, Secretary
LG&E Energy Corp.
220 West Main Street
Louisville, Kentucky 40202
March 20, 1998
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 22, 1998
----------------------
The Board of Directors of LG&E Energy hereby solicits your proxy, and asks
that you vote, sign, date and promptly mail the enclosed proxy card for use at
the Annual Meeting of Shareholders to be held April 22, 1998, and at any
adjournment of such meeting. The meeting will be held at the Hyatt Regency
Louisville, 320 West Jefferson Street, Louisville, Kentucky. This proxy
statement and the accompanying proxy were first mailed to shareholders on or
about March 20, 1998.
If you plan to attend the meeting, please check the box on the proxy card
indicating that you plan to attend the meeting. Also, please bring the Admission
Ticket, which forms the top portion of the form of proxy, to the meeting with
you. Shareholders who do not have an Admission Ticket, including beneficial
owners whose accounts are held by brokers or other institutions, will be
admitted to the meeting upon presentation of personal identification and, in the
case of beneficial owners, proof of ownership.
At the close of business on February 17, 1998, the record date for the
Annual Meeting, there were 66,527,636 shares of Common Stock of LG&E Energy
outstanding and entitled to vote. LG&E Energy has no other outstanding voting
securities. Owners of record of LG&E Energy Common Stock at the close of
business on February 17, 1998, are entitled to one vote per share for each
matter presented at the Annual Meeting or any adjournment thereof. In addition,
each shareholder has cumulative voting rights with respect to the election of
directors. Accordingly, in electing directors, each shareholder is entitled to
as many votes as the number of shares of stock owned multiplied by the number of
directors to be elected. All such votes may be cast for a single nominee or may
be distributed among two or more nominees. The persons named as proxies reserve
the right to cumulate votes represented by proxies which they receive and to
distribute such votes among one or more of the nominees at their discretion.
You may revoke your proxy at any time before it is voted by giving written
notice of its revocation to the Secretary of LG&E Energy, by delivery of a later
dated proxy, or by attending the Annual Meeting and voting in person. Signing a
proxy does not preclude you from attending the meeting in person.
The Annual Report to Shareholders of LG&E Energy (the "Annual Report"),
including financial statements, is enclosed with this proxy statement.
PENDING KU ENERGY MERGER
On May 20, 1997, LG&E Energy and KU Energy Corporation ("KU Energy") entered
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
KU Energy will be merged with and into LG&E Energy, with LG&E Energy as the
surviving corporation (the "Merger"). The Merger was unanimously approved by the
Boards of Directors of both companies and was approved by shareholders of each
company in special shareholder meetings on October 14, 1997. The merger
transaction is expected to close shortly after all of the conditions to
consummation of the Merger, including receipt of all regulatory approvals, are
met or waived. Such conditions are expected to be met before the end of 1998,
but could be met as early as the second quarter of 1998.
To date, the Merger has been approved substantially as filed by the Public
Service Commission of Kentucky on September 12, 1997 and by the Virginia State
Corporation Commission on January 20, 1998. The Merger remains subject to
approval by the Federal Energy Regulatory Commission ("FERC"), the Securities
and Exchange Commission ("SEC") and expiration of applicable waiting
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periods following requisite notifications to the Federal Trade Commission and
the Department of Justice ("FTC-DOJ Filings"). Filings for approval were made
with the FERC on October 9, 1997 and with the SEC on January 13, 1998. The
FTC-DOJ Filings were made on February 25, 1998.
Pursuant to the Merger Agreement, at the effective time of the Merger, the
new LG&E Energy Board of Directors will consist of 15 members, eight members of
which will be designated by LG&E Energy and seven members of which will be
designated by KU Energy. As a result, at the effective time of the Merger, it is
expected that the size of the Board of Directors will be increased to 15 members
and that three current members will resign from membership. See "Election of
Directors" on page 3 of this proxy statement.
Following the Merger, the Board of Directors will have the following four
committees: (a) an Audit Committee, (b) a Compensation Committee, (c) a
Nominating and Governance Committee and (d) a Long Range Planning Committee. The
Merger Agreement provides for the size of each listed committee, and for the
respective designations to such committees by LG&E Energy and KU Energy.
Further, the Merger Agreement provides that, upon consummation of the Merger,
the Board of Directors of Louisville Gas and Electric Company ("LG&E"), the
principal subsidiary of LG&E Energy, will consist of those persons serving as
directors of LG&E immediately prior to the Merger, plus those persons designated
by KU Energy to serve on the LG&E Energy Board of Directors. Similarly,
following the Merger, the Board of Directors of Kentucky Utilities Company
("KU") will consist of those persons serving as directors of KU immediately
prior to the Merger plus those persons designated by LG&E Energy to serve on the
LG&E Energy Board of Directors.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The number of members of the Board of Directors of LG&E Energy has been
fixed at twelve, pursuant to the Company's bylaws and resolutions adopted by the
Board of Directors. However, the Board of Directors of LG&E Energy presently
consists of eleven members. The directors are classified into three classes, as
nearly equal in number as possible, with respect to the time for which they are
to hold office. One class of directors is elected at each year's Annual Meeting
to serve for three-year terms and to continue in office until their successors
are elected and qualified.
In October 1997, the Board of Directors unanimously appointed Jeffery T.
Grade to complete the unexpired term of Ronald L. Bittner, who died unexpectedly
in August 1997. Mr. Bittner had been appointed to the Board of Directors in
October 1996 and was subsequently elected at the 1997 Annual Meeting to a
three-year term.
Both Mr. Grade's and Mr. Bittner's appointments were the result of searches
conducted by the Nominating and Development Committee of the Board of Directors
for qualified candidates to fill the two open positions on the Board of
Directors created when the directors voted unanimously in mid-1996 to increase
the size of the Board of Directors from ten to twelve members, in accordance
with the Company's bylaws. Despite the remaining vacancy on the Board of
Directors, shareholders may not vote for a number of nominees greater than the
number of nominees named in this Proxy Statement. Procedures for reviewing and
nominating candidates to the LG&E Energy Board of Directors are discussed in
more detail in "Information Concerning the Board of Directors-Nominating and
Development Committee".
At this Annual Meeting, the following three persons are proposed for
election to the Board of Directors for three-year terms expiring at the 2001
Annual Meeting: Owsley Brown II, Gene P. Gardner and J. David Grissom. Also at
this Annual Meeting, Jeffery T. Grade is proposed for election to the Board of
Directors to complete the remainder of a term expiring at the 2000 Annual
Meeting. All of the nominees are presently directors of LG&E Energy and LG&E.
The Board of Directors does not know of any nominee who will be unable to
stand for election or otherwise serve as a director. If for any reason any
nominee becomes unavailable for election, the Board of Directors may designate a
substitute nominee, in which event the shares represented on the proxy cards
returned to LG&E Energy will be voted for such substitute nominee, unless an
instruction to the contrary is indicated on the proxy card.
Directors are elected by a plurality of the votes cast by the holders of
LG&E Energy Common Stock at a meeting at which a quorum is present. "Plurality"
means that the individuals who receive the largest number of votes are elected
as directors up to the maximum number of directors to be chosen at the meeting.
Consequently, any shares not voted (whether by withholding authority, broker
nonvote or otherwise) have no impact on the election of directors except to the
extent the failure to vote for an individual results in another individual's
receiving a larger number of votes.
As discussed above, at the effective time of the Merger, which could be
shortly after the Annual Meeting, the Board of Directors of LG&E Energy will
consist of fifteen directors, eight designated by LG&E Energy and seven
designated by KU Energy. It is expected that, at the effective time of the
Merger, the size of the Board of Directors will be increased to fifteen members
and that three current members of the Board of Directors will resign from
membership. Messrs. Dabney, Gardner, and Dr. Swain have submitted resignations
which are contingent upon the successful completion of the Merger. Further, in
this regard, KU Energy has designated the following individuals, all of whom are
currently directors of KU Energy and KU, and they have been appointed to the
Board by the LG&E Energy Board also contingent upon the successful completion of
the Merger to fill the vacancies created by the resignations and the increase in
the size of the Board.
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MICHAEL R. WHITLEY (AGE 55)
Chairman, President and Chief Executive Officer of KU Energy and KU;
MIRA S. BALL (AGE 63)
Secretary-Treasurer and Chief Financial Officer of Ball Homes, Inc., a
single-family residential developer and property management company;
CAROL M. GATTON (AGE 65)
Chairman of Area Bancshares, Inc., an Owensboro, Kentucky bank holding
company;
FRANK V. RAMSEY, JR. (AGE 66)
President and Director of Dixon Bank, Dixon, Kentucky;
WILLIAM L. ROUSE, JR. (AGE 65)
Formerly Chairman of the Board and Chief Executive Officer of First
Security Corporation of Kentucky, a multi-bank holding company, and
currently a director of Ashland, Incorporated;
CHARLES L. SHEARER, PH.D. (AGE 55)
President of Transylvania University, Lexington, Kentucky; and
LEE T. TODD, JR., PH.D. (AGE 51)
President and Chief Executive Officer of DataBeam Corporation, a
Kentucky-based, high-technology firm.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION
OF THE FOUR NOMINEES FOR DIRECTOR.
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INFORMATION ABOUT DIRECTORS AND NOMINEES
The following contains certain information as of February 17, 1998,
concerning the nominees for director, as well as the directors whose terms of
office continue after the 1998 Annual Meeting.
NOMINEES FOR DIRECTORS WITH TERMS EXPIRING AT 2001 ANNUAL MEETING OF
SHAREHOLDERS
<TABLE>
<S> <C>
OWSLEY BROWN II (AGE 55)
Mr. Brown has been the Chairman and Chief Executive Officer of Brown-
Forman Corporation, a consumer products company, since July 1995, and
[PHOTO2] was President of Brown-Forman Corporation from 1987 to 1995. Mr. Brown
was first named Chief Executive Officer of Brown-Forman Corporation in
July 1994. Mr. Brown is a graduate of Yale University, and received his
master's degree in business administration from Stanford University. He
has been a director of LG&E Energy since August 1990 and of LG&E since
May 1989. Mr. Brown is also a member of the Board of Directors of
Brown-Forman Corporation, Hilliard Lyons Trust Company and NACCO
Industries, Inc.
GENE P. GARDNER (AGE 68)
Mr. Gardner has been Chairman of Beaver Dam Coal Company, which is
engaged in the ownership and development of coal properties, since
[PHOTO3] April 1983. Mr. Gardner is a graduate of the University of Louisville
and of the Advanced Management Program of the University of Virginia,
Colgate-Darden Graduate School of Business. Mr. Gardner has been a
director of LG&E Energy since August 1990 and of LG&E since July 1979.
He is also a member of the Board of Directors of Commonwealth Bank and
Trust Company, Commonwealth Financial Corporation and Thomas
Industries, Inc.
J. DAVID GRISSOM (AGE 59)
Mr. Grissom has been Chairman of Mayfair Capital, Inc., a private
investment firm, since April 1989. He served as Chairman and Chief
[PHOTO4] Executive Officer of Citizens Fidelity Corporation from April 1977
until March 31, 1989. Upon the acquisition of Citizens Fidelity
Corporation by PNC Financial Corp. in February 1987, Mr. Grissom served
as Vice Chairman and as a Director of PNC Financial Corp. until March
1989. Mr. Grissom is a graduate of Centre College and the University of
Louisville School of Law. Mr. Grissom has been a director of LG&E
Energy since August 1990 and of LG&E since January 1982. He is also a
member of the Board of Directors of Providian Financial Corporation,
Churchill Downs, Inc., and Regal Cinemas, Inc.
</TABLE>
NOMINEE FOR DIRECTOR WITH TERM EXPIRING AT 2000 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<S> <C>
JEFFERY T. GRADE (AGE 54)
Mr. Grade has been Chairman and Chief Executive Officer of
[PHOTO1] Harnischfeger Industries, Inc., which is engaged in the manufacture and
distribution of equipment for the mining, papermaking and material
handling industries, since January 1993. He served as President and
Chief Executive Officer from 1992 to 1993 and President and Chief
Operating Officer from 1986 to 1992. Mr. Grade is a graduate of the
Illinois Institute of Technology and received a master's degree in
business administration from DePaul University. Mr. Grade has been a
director of LG&E Energy and LG&E since October 1997. He is also a
member of the Board of Directors of Case Corporation and Coeur D'Aline
Mines Corporation.
</TABLE>
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DIRECTORS WHOSE TERMS EXPIRE AT 1999 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<S> <C>
ROGER W. HALE (AGE 54)
Mr. Hale has been a Director and Chairman of the Board, President and
Chief Executive Officer of LG&E Energy since August 1990. Mr. Hale has
[PHOTO5] also been Chief Executive Officer and a Director of LG&E since June
1989, Chairman of the Board of LG&E since February 1, 1990, and served
as President of LG&E from June 1989 until January 1, 1992. Prior to his
coming to LG&E, Mr. Hale served as Executive Vice President of Bell
South Enterprises, Inc. Mr. Hale is a graduate of the University of
Maryland, and received a master's degree in management from the
Massachusetts Institute of Technology, Sloan School of Management. Mr.
Hale is also a member of the Board of Directors of PNC Bank, Kentucky,
Inc., and H&R Block, Inc.
DAVID B. LEWIS (AGE 53)
Mr. Lewis is a founding partner of the law firm of Lewis & Munday, a
Professional Corporation, in Detroit, Michigan. Since 1972, Mr. Lewis
[PHOTO6] has served as Chairman of the Board and a Director of the firm. Mr.
Lewis is a graduate of Oakland University and received his law degree
from the University of Michigan Law School. He also received a master's
degree in business administration from the University of Chicago
Graduate School of Business. Mr. Lewis has been a director of LG&E
Energy and LG&E since November 1992. Mr. Lewis is also a member of the
Board of Directors of Consolidated Rail Corporation, TRW, Inc., and
M.A. Hanna Company, and serves or has served as a board member for
numerous educational, cultural and civic organizations in the Detroit
and Washington, D.C. areas.
ANNE H. MCNAMARA (AGE 50)
Mrs. McNamara has been Senior Vice President and General Counsel of AMR
Corporation and its subsidiary, American Airlines, Inc., since June
[PHOTO7] 1988. Mrs. McNamara is a graduate of Vassar College, and received her
law degree from Cornell University. She has been a director of LG&E
Energy and LG&E since November 1991. Mrs. McNamara is also a member of
the Board of Directors of The SABRE Group Holdings, Inc.
DONALD C. SWAIN (AGE 66)
Dr. Swain served as President of the University of Louisville from
April 1981 to June 1995, and has served as President Emeritus since
[PHOTO8] July 1995. Dr. Swain is a graduate of the University of Dubuque. He
received his master's and doctoral degrees in history from the
University of California at Berkeley. He has been a director of LG&E
Energy since August 1990 and of LG&E since May 1985.
</TABLE>
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DIRECTORS WHOSE TERMS EXPIRE AT 2000 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<S> <C>
WILLIAM C. BALLARD, JR. (AGE 57)
Mr. Ballard has been of counsel to the law firm of Greenebaum Doll &
McDonald PLLC since May 1992. He served as Executive Vice President and
[PHOTO9] Chief Financial Officer from 1978 until May 1992, of Humana, Inc., a
healthcare services company. Mr. Ballard is a graduate of the
University of Notre Dame, and received his law degree, with honors,
from the University of Louisville School of Law. He also received a
Master of Law degree in taxation from Georgetown University. Mr.
Ballard has been a director of LG&E Energy since August 1990 and of
LG&E since May 1989. Mr. Ballard is also a member of the Board of
Directors of United Healthcare Corp., Health Care REIT, Inc.,
Healthcare Recoveries, Inc., MidAmerica Bancorp, American Safety Razor,
Inc. and Atria Communities, Inc.
S. GORDON DABNEY (AGE 69)
Mr. Dabney was President of Standard Foods, Inc., which is engaged in
the food processing business, from 1955 until he retired in 1995. Mr.
[PHOTO10] Dabney is currently a business consultant. He attended the University
of Florida. He has been a director of LG&E Energy since August 1990 and
of LG&E since January 1987.
T. BALLARD MORTON, JR. (AGE 64)
Mr. Morton has been Executive in Residence at the College of Business
and Public Administration of the University of Louisville since 1983.
[PHOTO11] Mr. Morton is a graduate of Yale University. Mr. Morton has been a
director of LG&E Energy since August 1990 and of LG&E since May 1967.
Mr. Morton is also a member of the Board of Directors of the Kroger
Company.
</TABLE>
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INFORMATION CONCERNING THE BOARD OF DIRECTORS
Each member of the Board of Directors of LG&E Energy is also a director of
LG&E. The committees of the Board of Directors of LG&E Energy include an Audit
Committee, a Compensation Committee and a Nominating and Development Committee.
The directors who are members of the various committees of LG&E Energy serve in
the same capacity for purposes of the LG&E Board of Directors. See "Pending KU
Energy Merger" on page 1 of this proxy statement for more information regarding
the Board of Directors following such Merger.
During 1997, there were a total of twelve meetings of the LG&E Energy Board.
All directors attended 75% or more of the total number of meetings of the Board
of Directors and Committees of the Board on which they served with the exception
of David B. Lewis.
COMPENSATION OF DIRECTORS
Directors who are also officers of LG&E Energy or its subsidiaries receive
no compensation in their capacities as directors. During 1997, directors
received a retainer of approximately $1,750 per month, or $21,000 annually
($22,100 annually for committee chairmen), a fee for Board meetings of $1,100
per meeting and a fee for each committee meeting of $1,000. Non-employee
directors residing out of the Louisville area received reimbursement for
expenses incurred in traveling to meetings, and received an additional $1,000
compensation for each Board meeting they attended. The foregoing amounts
represent the aggregate fees paid to directors in their capacities as directors
of LG&E Energy and LG&E during 1997.
Non-employee directors of LG&E Energy and its subsidiaries may elect to
defer all or a part of their fees (including retainers, fees for attendance at
regular and special meetings, committee meetings and travel compensation)
pursuant to the LG&E Energy Corp. Deferred Stock Compensation Plan (the
"Deferred Stock Plan"). Each deferred amount is credited by LG&E Energy to a
bookkeeping account and then is converted into a stock equivalent on the date
the amount is credited. The number of stock equivalents credited to the director
is based upon the average of the high and the low sale price of LG&E Energy
Common Stock on the New York Stock Exchange for the five trading days prior to
the conversion. Additional stock equivalents will be added to stock accounts at
the time that dividends are declared on LG&E Energy Common Stock, in an amount
equal to the amount of LG&E Energy Common Stock that could be purchased with
dividends that would be paid on the stock equivalents if converted to LG&E
Energy Common Stock. In the event that LG&E Energy is a party to any
consolidation, recapitalization, merger, share exchange or other business
combination in which all or a part of the outstanding LG&E Energy Common Stock
is changed into or exchanged for stock or other securities of the other entity
or LG&E Energy, or for cash or other property, the stock account of a
participating director shall be converted to such new securities or
consideration equal to the amount each share of LG&E Energy Common Stock
receives, multiplied by the number of share equivalents in the stock account.
A director will be eligible to receive a distribution from his or her
account only upon termination of service by death, retirement or otherwise.
Following departure from the Board, the distribution will occur, at the
director's election, either in one lump sum or in no more than five annual
installments. The distribution will be made, at the director's election, either
in LG&E Energy Common Stock or in cash equal to the then-market price of the
LG&E Energy Common Stock allocated to the director's stock account. At February
17, 1998, seven directors were participating in the Deferred Stock Plan.
Non-employee directors also receive stock options pursuant to the LG&E
Energy Corp. Stock Option Plan for Non-Employee Directors (the "Directors'
Option Plan"), which was approved by the shareholders at the 1994 Annual
Meeting. Under the terms of the Directors' Option Plan, upon initial election or
appointment to the Board, each new director, who has not been an employee or
officer of the Company within the preceding three years, receives an option
grant for 4,000 shares of LG&E Energy Common Stock. Following the initial grant,
eligible directors receive an annual option grant of
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4,000 shares on the first Wednesday of each February. Option grants for
1994-1996 were for 2,000 shares, all of which were adjusted in April 1996 to
reflect a two-for-one stock split. The option exercise price per share for each
share of LG&E Energy Common Stock is the fair market value on the grant date.
Options granted are not exercisable during the first twelve months from the date
of grant and will terminate 10 years from the date of grant. In the event of a
tender offer or an exchange offer for shares of LG&E Energy Common Stock, all
then exercisable, but unexercised options granted under the Directors' Option
Plan will continue to be exercisable for thirty days following the first
purchase of shares pursuant to such tender or exchange offer.
The Directors' Option Plan authorizes the issuance of up to 500,000 shares
of LG&E Energy Common Stock, of which 188,000 shares are subject to existing
options at a weighted average per share price of $21.63. Information on the
number of exercisable options held by each non-employee director is shown in
footnote 3 under "Ownership of LG&E Energy Common Stock" on page 10 of this
proxy statement. The number of shares subject to the Directors' Option Plan and
subject to awards outstanding under the plan will adjust with any stock dividend
or split, recapitalization, reclassification, merger, consolidation, combination
or exchange of shares, or any similar corporate change.
AUDIT COMMITTEE
The Audit Committee of the Board is composed of Messrs. Ballard, Dabney,
Brown, Gardner, Grade, Grissom and Lewis, and Dr. Swain. During 1997, the Audit
Committee maintained direct contact with the independent auditors and LG&E
Energy's Internal Auditor to review the following matters: the adequacy of LG&E
Energy's and its subsidiaries' accounting and financial reporting procedures;
the adequacy and effectiveness of LG&E Energy's and its subsidiaries' system of
internal accounting controls; the scope and results of the annual audit and any
other matters relative to the audit of LG&E Energy's and its subsidiaries'
accounts and its financial affairs that the Committee, the Internal Auditor, or
the independent auditors deemed necessary. The Audit Committee met three times
during 1997.
COMPENSATION COMMITTEE
The Compensation Committee, composed of non-employee directors, approves the
compensation of the Chief Executive Officer and the executive officers of LG&E
Energy and its subsidiaries. The Committee makes recommendations to the full
Board regarding benefits provided to executive officers and the establishment of
various employee benefit plans. The members of the Compensation Committee are
Messrs. Dabney, Gardner, Grade, Grissom and Morton and Mrs. McNamara. The
Compensation Committee met two times during 1997.
NOMINATING AND DEVELOPMENT COMMITTEE
The Nominating and Development Committee is composed of the Chairman of the
Board and certain other directors. The Committee reviews and recommends to the
Board of Directors nominees to serve on the Board and their compensation. The
Committee considers nominees suggested by other members of the Board, by members
of management and by shareholders. To be considered for inclusion in the slate
of nominees proposed by the Board of Directors at an annual meeting, shareholder
recommendations must be submitted in writing to the Secretary of LG&E Energy not
later than 120 days prior to the Annual Meeting. In addition, the Articles of
Incorporation and bylaws of LG&E Energy contain procedures governing shareholder
nominations for election of directors at a shareholders' meeting. The Chairman
of the Annual Meeting may refuse to acknowledge the nomination of any person not
made in compliance with these procedures. The Nominating and Development
Committee also provides advice and counsel as necessary to executive management
concerning business development activities of LG&E Energy. The members of the
Nominating and Development Committee are Messrs. Ballard, Brown, Lewis, Hale (ex
officio), Morton and Dr. Swain and Mrs. McNamara. The Nominating and Development
Committee met three times during 1997.
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OWNERSHIP OF LG&E ENERGY COMMON STOCK
LG&E Energy does not know of any shareholder who, as of February 17, 1998,
beneficially owned more than five percent of LG&E Energy's outstanding Common
Stock.
The table below shows information as of February 17, 1998, concerning
beneficial ownership by each director, each nominee for director, each executive
officer named in the Summary Compensation Table beginning on page 18 of this
proxy statement (the "Summary Compensation Table"), and all directors and
executive officers as a group. Unless otherwise indicated, each person has sole
investment and voting power (or shares such powers with a member of his or her
family) with respect to the shares set forth on the following table.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED
NAME OF BENEFICIAL OWNER (1)(2)(3)
- ------------------------------------------------------------------ ------------
<S> <C>
William C. Ballard, Jr. 35,104
Walter Z. Berger 70,780
Owsley Brown II 20,417
S. Gordon Dabney 32,646
Gene P. Gardner 36,908
Jeffery T. Grade 119
J. David Grissom 22,335
Roger W. Hale 188,086
David B. Lewis 17,400
John R. McCall 39,234
Anne H. McNamara 21,655
T. Ballard Morton, Jr. 33,057
Victor A. Staffieri 97,021
Donald C. Swain 18,695
Stephen R. Wood 62,624
All Directors and Executive Officers as a group
(20 persons) (4) 820,800
</TABLE>
- ------------------------
(1) Includes the following share equivalents of LG&E Energy Common Stock
credited to the participating directors' accounts under the Deferred Stock
Plan as of February 17, 1998: Mr. Brown, 2,416.753; Mr. Dabney, 11,045.931;
Mr. Gardner, 11,208.381; Mr. Grade, 119.019; Mrs. McNamara, 5,055.336; Mr.
Morton, 11,057.969; and Dr. Swain, 2,094.752. Participants are eligible to
receive distributions from their accounts upon departure from the Board of
Directors.
(2) Includes shares subject to stock options granted under LG&E Energy's
Long-Term Incentive Plan, exercisable within 60 days following February 17,
1998, as follows: Mr. Hale, 136,042 shares; Mr. Berger 70,780 shares; Mr.
McCall, 37,651 shares; Mr. Staffieri, 90,536 shares and Mr. Wood, 53,407
shares.
(3) Includes 16,000 shares subject to stock options granted under the Directors'
Option Plan, exercisable within 60 days following February 17, 1998, for
each of Messrs. Ballard, Brown, Dabney, Gardner, Grissom, Lewis and Morton,
and Mrs. McNamara and Dr. Swain.
(4) For each director and nominee, the number of shares of LG&E Energy Common
Stock beneficially owned as of February 17, 1998, is less than two-tenths of
one percent of the total LG&E Energy Common Stock outstanding on that date,
and the total number of shares beneficially owned by all directors and
executive officers as a group is less than one and three-tenths percent of
the then-outstanding LG&E Energy Common Stock. In the case of executive
officers, the share total shown includes 493,372 stock options granted under
LG&E Energy's Omnibus Long-Term Incentive Plan, exercisable within 60 days
of February 17, 1998.
10
<PAGE>
PROPOSAL NO. 2
APPROVAL OF INDEPENDENT AUDITORS FOR 1998
Based upon the recommendation of the Audit Committee, the Board of
Directors, subject to ratification by shareholders, has selected Arthur Andersen
LLP as independent auditors to audit the accounts of LG&E Energy and LG&E for
the fiscal year ending December 31, 1998. Arthur Andersen has audited the
accounts of LG&E Energy since its organization in 1990, and has audited the
accounts of LG&E for many years. The shareholders previously approved the
employment of the firm at the Annual Meeting on May 8, 1997.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. Such representatives will be given the opportunity to make a statement
if they so desire, and will be available to respond to appropriate questions.
The affirmative vote of a majority of shares of LG&E Energy Common Stock
represented at the Annual Meeting is required for the approval of the
independent auditor. Abstentions from voting on any such matter are treated as
votes against, while broker nonvotes are treated as shares not voted.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL
OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised wholly of
non-employee directors and makes all decisions regarding the compensation of
LG&E Energy's executive officers, including the setting of base pay and the
administration of the Company's Omnibus Long-Term Incentive Plan (the "Long-Term
Plan") and Short-Term Incentive Plan (the "Short-Term Plan"), each as defined
herein.
The Company's executive compensation program and the target awards and
opportunities for executives are designed to be competitive with the
compensation and pay programs of comparable companies, including utilities,
utility holding companies and companies in general industry nationwide. The
executive compensation program has been developed and implemented over time
through consultation with, and upon the recommendations of,
nationally-recognized executive compensation consultants. The Compensation
Committee and the Board of Directors have continued access to such consultants
as desired, and are provided with independent compensation data for their
review.
Set forth below is a report submitted by the members of the Compensation
Committee addressing LG&E Energy's compensation policies during 1997 for
officers of LG&E Energy, including the executive officers named in the following
tables.
COMPENSATION PHILOSOPHY
There are three major components of LG&E Energy's executive compensation
program: (1) base salary; (2) short-term or annual incentives; and (3) long-term
incentives. LG&E Energy developed its executive compensation program to focus on
both short-term and long-term business objectives that are designed to enhance
overall shareholder value. The short-term and long-term incentives are premised
on the belief that the interests of executives should be closely aligned with
those of LG&E Energy's shareholders. Based on this philosophy, these two
portions of each executive's total compensation package are placed at risk and
are linked to the accomplishment of specific results that are designed to
benefit LG&E Energy's shareholders in both the short-term and long-term. Under
this pay-for-performance approach, a highly competitive level of compensation
can be earned in years of strong performance; conversely, in years of
below-average performance, compensation may decline below competitive
benchmarks.
The executive compensation program also recognizes that LG&E Energy's
compensation practices must be competitive not only with utilities and utility
holding companies, but also companies in general industry to ensure that a
stable and successful management team can be recruited and retained. The
Compensation Committee believes that the Company's most direct competitors for
executive talent are not limited to the companies that would be included in the
utility industry index against which shareholder returns may be compared. For
this reason, the various compensation peer groups, as established below, are not
the same as the utility industry index in the Comparison of Five-Year Total
Return graph included on page 17 of this proxy statement.
Pursuant to this competitive market positioning philosophy, in establishing
compensation levels for all executive positions for 1997, the Compensation
Committee reviewed competitive compensation information for general industry
companies with revenue between $1.5 - $3.5 billion (the "Survey Group") and
established targeted total direct compensation (base salary plus short-term
incentives and long-term incentives) for each executive for 1997 to approach the
50th percentile of the competitive range from the Survey Group. Salaries,
short-term incentives and long-term incentives for 1997 are described below.
The 1997 compensation information set forth in other sections of this proxy
statement, particularly with respect to the tabular information presented,
reflects the considerations set forth in this report. The Base Salary,
Short-Term Incentives, and Long-Term Incentives sections that follow
12
<PAGE>
address the compensation philosophy for 1997 for all executive officers except
for Mr. Roger W. Hale. Mr. Hale's compensation is determined in accordance with
the terms of his Employment Agreement (See "Chief Executive Officer
Compensation" on page 14 of this proxy statement for a description of his 1997
compensation).
BASE SALARY
The base salaries for LG&E Energy executive officers for 1997 were designed
to be competitive with the Survey Group at approximately the 50th percentile of
the base salary range for executives in similar positions with companies in the
Survey Group. Actual base salaries were determined based on individual
performance and experience.
SHORT-TERM INCENTIVES
The short-term incentives for 1997 provided direct financial compensation to
executives and rewarded them for meeting performance goals that were established
at the beginning of the 1997 performance year. The Short-Term Plan provides for
Company Performance Awards and Individual Performance Awards, each of which is
expressed as a percentage of base salary and each of which is determined
independent of the other. In 1997, payment of Company Performance Awards for
executive officers was based 100% on Net Income Available for Common Stock
("NIAC"). Payment of Individual Performance Awards was based 100% on Management
Effectiveness, which included a Customer Satisfaction element. The awards varied
within the executive officer group based upon the nature of each individual's
functional responsibilities, with more senior officers having a greater
percentage of their short-term incentives based on Company Performance Awards.
This component of the 1997 executive compensation program focused executives on
the tasks most immediately at hand and were based upon priorities tailored to
the 1997 performance year.
In 1997, the Company Performance Award targets for executive officers ranged
from 18% to 30% of base salary, and the Individual Performance Award targets for
executive officers ranged from 12% to 20% of base salary. Both awards were
established to be competitive with the 50th percentile of the level of such
awards granted to comparable executives employed by companies in the Survey
Group. The individual officers were eligible to receive from 0% to 150% of their
targeted amounts, dependent upon Company and individual performance during 1997
as measured by NIAC with regard to Company Performance Awards, and were eligible
to receive from 0% to 175% of their targeted amounts dependent upon individual
performance as measured by Management Effectiveness with regard to Individual
Performance Awards. Based upon such performances, payouts of Company Performance
Awards for 1997 to the executive officers named in the following tables ranged
from 0% to 21%, and to the other executive officers ranged from 0% to 24%, of
base salary, respectively. Payouts for the Individual Performance Awards to the
named executive officers ranged from 26% to 35%, and to the other executive
officers ranged from 15% to 24%, of base salary, respectively. In addition, the
Compensation Committee awarded special payments to certain officers, including
each of the named executive officers, to adjust for increased expenses in 1997
associated with mark-to-market accounting, the write-off of certain regulatory
assets and uncapitalized transaction costs associated with the leasing
transaction with Big Rivers Electric Corporation. These payments ranged from 6%
to 19% of the named executive officers' respective base salaries.
LONG-TERM INCENTIVES
The Long-Term Plan is administered by a committee of not less than three
non-employee directors of LG&E Energy who are appointed by the Board of
Directors. At this time, the Compensation Committee administers the Long-Term
Plan. The Long-Term Plan provides for the grant of any or all of the following
types of awards: stock options, stock appreciation rights, restricted stock,
performance units and performance shares. To date, the Compensation Committee
has chosen to award stock options, stock appreciation rights and performance
units to executive officers.
The Compensation Committee determined the competitive long-term grants to be
awarded for each executive based on the long-term awards for the 50th percentile
of the Survey Group. The
13
<PAGE>
aggregate expected value of the stock options and performance units (delivered
50% in the form of performance units and 50% in the form of nonqualified stock
options in 1997) was intended to approach the expected value of long-term
incentives payable to executives in similar positions with companies in the 50th
percentile of the Survey Group, depending upon achievement of targeted Company
performance.
Stock options were granted to executive officers during the first quarter of
1997 at an exercise price equal to the fair market value at the date of the
grant and were subject to a one-year vesting requirement. Since options were
granted with an exercise price equal to the market value of the Common Stock at
the time of grant, they provide no value unless the Company's stock price
increases after the grants are awarded. Once the options vest, they are
exercisable over a nine-year term. These awards are thus tied to stock price
appreciation in excess of the stock's value at time of grant, rewarding
executives as if they shared in the ownership of LG&E Energy. The number of
shares subject to options was determined by taking the expected value to be
provided in options, as determined above, and dividing that amount by the
estimated current value of an option using a variation of the Black-Scholes
Option Pricing methodology provided by the outside compensation consultant.
Prior awards were not considered when making new grants.
The number of performance units granted was determined by taking the amount
of the executive's long-term award to be delivered in performance units
(adjusted on a present value basis), as determined above, and dividing that
amount by the fair market value of LG&E Energy Common Stock on the date of the
grant. The value of the performance units is substantially dependent upon the
changing value of LG&E Energy's Common Stock in the marketplace. Each executive
officer is entitled to receive from 0% to 150% of the performance units
contingently awarded to the executive based on the Company's total shareholder
return over a three-year period (defined as share price increase plus dividends
paid, divided by share price at beginning of the period) measured against the
total shareholder return for such period ("TSR") by a peer group selected by the
Committee. The peer group for measuring the Company's TSR performance (the
"Long-Term Plan Peer Group") consists of approximately 90 utility holding
companies and gas and electric utilities.(1) Performance units granted prior to
1996 included return on invested capital ("ROIC") over a three-year period
measured against a pre-established, internally set goal as a performance measure
in addition to TSR.
Payouts of long-term incentive awards in February 1998 were based on Company
performance during the 1995-1997 period. During such period, LG&E Energy's
performance was at the 36th percentile of its comparison group with respect to
TSR, and at 64% of targeted ROIC performance (as adjusted for certain items
deemed appropriate by the Compensation Committee), resulting in payouts of 57%
of the contingent awards. The performance units are payable 50% in LG&E Energy
Common Stock and 50% in cash.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of the Chief Executive Officer of LG&E Energy, Mr. Roger W.
Hale, is governed by the terms of an employment agreement. Mr. Hale originally
entered into an employment agreement with LG&E in April 1989. That agreement was
developed to induce him to move to LG&E from another company, and was updated by
Board actions in 1990, 1993 and 1997 to recognize his fundamental role in
establishing LG&E Energy as a national and international diversified energy
services company. The term of Mr. Hale's 1997 employment agreement (the "1997
Agreement") expires by its terms on December 31, 2001. (In connection with the
prospective Merger, a supplemental agreement
- ------------------------
(1)While similar, the utilities and holding companies that are in the Long-Term
Plan Peer Group are not necessarily the same as those in the Standard &
Poor's Utility Index used in the Company Performance Graph on page 17 of the
proxy statement or the Survey Group. Nevertheless, in the judgment of the
Compensation Committee, the companies in the Long-Term Plan Peer Group
continue to represent the appropriate peer group for performance unit
compensation purposes.
14
<PAGE>
for employment has also been entered into by Mr. Hale and the Company. See
"Employment Contracts and Termination of Employment Arrangements and Change in
Control Provisions" on page 22 of this proxy statement.)
The 1997 Agreement dictates the level of Mr. Hale's minimum 1997
compensation, but the Compensation Committee retains discretion to increase such
compensation. For 1997, the Compensation Committee compared Mr. Hale's
compensation to that of chief executive officers of companies contained in the
Survey Group as well as electric and gas utilities and utility holding companies
with comparable revenues, market capitalization and asset size. In setting
long-term awards, the Company also considered survey data from various
compensation consulting firms. Mr. Hale also receives LG&E Energy contributions
to thrift and savings plans, similar to those of other officers and employees.
Details of Mr. Hale's 1997 compensation are set forth below.
BASE SALARY. Mr. Hale was paid a base salary of $580,000 during 1997. The
1997 Agreement provides that his salary shall not be less than $580,000 and
is to be reviewed as of each January 1 by the Compensation Committee. The
Compensation Committee, in determining the annual salary increase for 1997,
focused on Mr. Hale's individual performance (including his management
effectiveness, as described below), the growth of LG&E Energy and the
compensation provided to other LG&E Energy and LG&E officers. The 1997
increase was 13.7%.
SHORT-TERM INCENTIVES. Mr. Hale's target short-term incentive award was 60%
of his 1997 base salary. Like all other executive officers receiving
short-term incentive awards, Mr. Hale was eligible to receive more or less
than the targeted amount, based on Company performance and individual
performance. His 1997 short-term incentive payouts were based 70% on Company
Performance Goals and 30% on Individual Performance Goals.
In 1997, no Company Performance Award payout was made to Mr. Hale. Mr.
Hale's Individual Performance Award payout was 32% of his 1997 base salary.
The Compensation Committee considered Mr. Hale's effectiveness in several
areas in determining the final Individual Performance Award. These included
the financial performance of LG&E Energy, LG&E and other LG&E Energy
subsidiaries, Company growth, customer satisfaction ratings and other
measures, such as the Company's announcement and progress, respectively,
during 1997, on the significant strategic initiatives of the Merger and the
leasing transaction with Big Rivers. Additionally, the Compensation
Committee awarded Mr. Hale a payment of 22% of his base salary as a reward
for his leadership role and contributions to the Company's strategic
performance during 1997 (adjusted for those factors previously described in
connection with the additional short-term incentives paid to the Company's
executive officers. See "Short-Term Incentives" on page 13 of this proxy
statement).
LONG-TERM INCENTIVE GRANT. In 1997, Mr. Hale received 67,728 options, and
23,145 performance units for the 1997-1999 performance period. These amounts
were determined in accordance with the terms of his 1997 Agreement and
provide expected value representing approximately 110% of his base salary.
The terms of the options and performance units (including the manner in
which performance units are earned) for Mr. Hale are the same as for other
executive officers, as described under the heading "Long-Term Incentives."
LONG-TERM INCENTIVE PAYOUT. In the 1995-1997 period, LG&E Energy's
performance was at the 36th percentile of its comparison group in TSR, and
at 64% of targeted ROIC performance (as adjusted for certain items deemed
appropriate by the Compensation Committee). That resulted in a payout equal
to 57% of the approved target. In addition, the market value per share of
LG&E Energy Common Stock increased from $19.30 at grant to $24.81 during the
performance period. This further increased the value of the payout of the
performance units originally awarded to Mr. Hale in 1995.
15
<PAGE>
In connection with the Merger and in recognition of Mr. Hale's continued
importance to the future performance of LG&E Energy, the Compensation Committee
in mid-1997 negotiated with Mr. Hale to retain his services following
consummation of the Merger. Consequently, Mr. Hale has entered into a
conditional employment agreement with LG&E Energy, effective upon consummation
of such Merger. The term of this new agreement (the "Prospective Agreement")
will extend through the fifth anniversary of the closing of the KU Energy
Merger. The Prospective Agreement had no effect on Mr. Hale's 1997 compensation
as discussed in this report. See "Employment Contracts and Termination of
Employment Arrangements and Change in Control Provisions" on page 22 of this
proxy statement.
TAX MATTERS
Section 162(m) of the Code was enacted in 1993 and generally prohibits the
Company from deducting executive compensation in excess of $1,000,000.
Qualifying "performance based compensation" is not subject to this deduction
limitation if certain requirements are satisfied. It is the Compensation
Committee's general intent to preserve the deductibility of executive
compensation to the extent reasonably practicable and to the extent consistent
with its other compensation objectives. To ensure that certain compensation
payable under the Long-Term Plan and Short-Term Plan remain deductible, the
Compensation Committee and the Board of Directors recommended, and the
shareholders approved, modification of the Long-Term Plan and adopted a new
Short-Term Plan in 1996. Although not all of the compensation paid to executive
officers under these two plans constitutes "performance based compensation," all
compensation paid to executive officers in 1997 was deductible.
CONCLUSION
The Compensation Committee believes that the Company's executive
compensation system served the interests of the Company and its shareholders
effectively during 1997. The Compensation Committee takes very seriously its
responsibilities with respect to the Company's executive compensation system,
and it will continue to monitor and revise the compensation policies as
necessary to ensure that the Company's compensation system continues to meet the
needs of the Company and its shareholders.
MEMBERS OF THE COMPENSATION COMMITTEE
J. David Grissom, Chairman
S. Gordon Dabney
Gene P. Gardner
Jeffery T. Grade
Anne H. McNamara
T. Ballard Morton, Jr.
16
<PAGE>
COMPANY PERFORMANCE
The following graph reflects a comparison of the cumulative total return
(change in stock price plus reinvested dividends) to shareholders of LG&E Energy
Common Stock from December 31, 1992, through December 31, 1997, with the
Standard & Poor's 500 Composite Index and the Standard & Poor's Utility Index.
The comparisons in this table are required by the Securities and Exchange
Commission and, therefore, are not intended to forecast or be indicative of
possible future performance of LG&E Energy Common Stock.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE
<S> <C> <C> <C>
TOTAL SHAREHOLDER RETURN (1)
LG&E Energy S&P Utilities S&P 500
12/31/92 $100 $100 $100
1993 $122 $114 $110
1994 $117 $105 $112
1995 $142 $150 $153
1996 $173 $154 $189
1997 $184 $192 $252
</TABLE>
- ------------------------
(1) Total Shareholder Return assumes $100 invested on December 31, 1992, with
quarterly reinvestment of dividends.
17
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows the cash compensation paid or to be paid by LG&E
Energy or any of its subsidiaries, as well as certain other compensation paid or
accrued for those years, to the Chief Executive Officer and the next four
highest compensated executive officers of LG&E Energy who were serving as such
at December 31, 1997, in all capacities in which they served during 1995, 1996
and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION
--------------------------------- AWARDS
OTHER ------------- PAYOUTS
ANNUAL SECURITIES ----------- ALL OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION OPTIONS/ SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#)(3) ($) ($)
- -------------------------------------------- ---- ---------- -------- --------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger W. Hale 1997 $ 580,000 $311,808 $18,212 67,728 $ 313,037 $ 26,675(1)
Chairman of the Board, 1996 510,000 416,068 11,010 55,000 641,092 26,909
President and CEO 1995 436,500 303,859 14,716 13,292 559,686 13,901
Victor A. Staffieri 1997 270,000 159,064 8,063 27,946 57,416 10,635(1)
Chief Financial Officer and 1996 245,000 175,310 7,431 26,022 124,950 9,336
Chief Financial Officer -- Louisville 1995 230,764 134,695 6,215 6,394 49,137 7,149
Gas and Electric Company
(Former position: President --
Distribution
Services Division and President --
Louisville Gas and Electric Company)
Walter Z. Berger, Group 1997 270,000 100,008 7,630 27,946 0 10,269(1)
President -- Energy Marketing Division 1996 219,468(2) 144,232 5,445 62,834 0 1,012
Stephen R. Wood 1997 245,000 138,039 6,849 15,605 32,306 8,721(1)
President -- Distribution Services 1996 226,000 106,256 7,082 14,772 67,130 7,877
Division and President -- Louisville 1995 212,000 106,848 9,084 2,284 49,137 7,484
Gas and Electric Company
(Former position: Executive Vice
President and Chief Administrative
Officer)
John R. McCall 1997 245,000 114,764 6,922 15,605 32,306 11,414(1)
Executive Vice President, 1996 231,000 112,303 7,230 15,098 35,868 11,029
General Counsel and Corporate Secretary 1995 220,000 106,848 5,791 4,568 0 8,696
</TABLE>
- ------------------------
(1) Includes employer contributions to 401(k) plan, nonqualified thrift plan and
employer paid life insurance premiums in 1997 as follows: Mr. Hale $3,135,
$8,349 and $15,191, respectively; Mr. Staffieri $3,135, $5,682 and $1,818,
respectively; Mr. Berger $4,120, $5,314 and $835, respectively; Mr. Wood
$2,989, $4,446 and $1,286, respectively; and Mr. McCall $3,135, $3,939 and
$4,340, respectively.
(2) Reported compensation is only for a portion of the year. Mr. Berger joined
LG&E Energy on February 5, 1996.
(3) As adjusted for the 2 for 1 stock split effective in April 1996.
18
<PAGE>
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN 1997 FISCAL YEAR
The following table contains information at December 31, 1997, with respect
to grants of stock options and stock appreciation rights (SARs) to the named
executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
--------------------------- REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL
SECURITIES TOTAL EXERCISE RATES OF STOCK
UNDERLYING OPTIONS/SARS OR BASE PRICE APPRECIATION
OPTIONS/SARS GRANTED TO PRICE FOR OPTION TERM
GRANTED EMPLOYEES IN ($/ EXPIRATION ----------------------------------
NAME (#) (1) FISCAL YEAR SHARE) DATE 0%($) 5%($) 10%($)
- -------------------------------------- ------------ ------------ -------- ---------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger W. Hale 67,728 19.5% $ 24.18 02/6/2007 0 $ 1,029,917 $ 2,610,313
Victor A. Staffieri 27,946 8.1 24.18 02/6/2007 0 424,966 1,076,946
Walter Z. Berger 27,946 8.1 24.18 02/6/2007 0 424,966 1,076,946
Stephen R. Wood 15,605 4.5 24.18 02/6/2007 0 237,300 601,365
John R. McCall 15,605 4.5 24.18 02/6/2007 0 237,300 601,365
</TABLE>
- ------------------------
(1) Options are awarded at fair market value at time of grant; unless otherwise
indicated, options vest in one year and are exercisable over a ten-year
term.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN 1997 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table sets forth information with respect to the named
executive officers concerning the exercise of options and/or SARs during 1997
and the value of unexercised options and SARs held by them as of December 31,
1997:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS/SARS AT
ACQUIRED OPTIONS/SARS FY-END
ON VALUE AT FY-END (#) ($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------- -------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Roger W. Hale 0 N/A 98,214/67,728 $485,927/$42,838
Victor A. Staffieri 0 N/A 62,590/47,946 310,048/140,126
Walter Z. Berger 0 N/A 42,834/47,946 153,881/89,526
Stephen R. Wood 0 N/A 37,802/15,605 231,801/9,870
John R. McCall 0 N/A 22,046/15,605 93,606/9,870
</TABLE>
- ------------------------
(1) Dollar amounts reflect market value of LG&E Energy Common Stock at year-end,
minus the exercise price.
19
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN 1997 FISCAL YEAR
The following table provides information concerning awards made in 1997 to
the named executive officers under the Long-Term Plan.
<TABLE>
<CAPTION>
NUMBER PERFORMANCE
OF OR ESTIMATED FUTURE PAYOUTS UNDER
SHARES, OTHER PERIOD NON-STOCK PRICE BASED PLANS
UNITS OR UNTIL (NUMBER OF SHARES) (1)
OTHER MATURATION -------------------------------------
NAME RIGHTS OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ------------------------------------------------------------ --------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Roger W. Hale 23,145 12/31/99 9,258 23,145 34,718
Victor A. Staffieri 4,775 12/31/99 1,910 4,775 7,163
Walter Z. Berger 4,775 12/31/99 1,910 4,775 7,163
Stephen R. Wood 2,666 12/31/99 1,066 2,666 3,999
John R. McCall 2,666 12/31/99 1,066 2,666 3,999
</TABLE>
- ------------------------
(1) The table indicates the number of performance units which are paid 50% in
stock and 50% in cash at maturation.
Each performance unit awarded represents the right to receive an amount
payable 50% in LG&E Energy Common Stock and 50% in cash on the date of payout,
the latter portion being payable in cash in order to facilitate the payment of
taxes by the recipient. The amount of the payout is determined by the then-fair
market value of LG&E Energy Common Stock. For awards made in 1997, the Long-Term
Plan rewards executives on a three-year rolling basis dependent upon the total
shareholder return for shareholders. The target for award eligibility requires
that LG&E Energy shareholders earn a total return at a preset level in
comparison to that of the utility holding companies and gas and electric
utilities in the Long-Term Plan Peer Group. The Committee sets a contingent
award for each management level selected to participate in the Plan and such
amount is the basis upon which incentive compensation is determined. Depending
on the level of achievement, the participant can receive from zero to 150% of
the contingent award amount. Payments made under the Long-Term Plan in 1997 are
reported in the summary compensation table for the year of payout.
20
<PAGE>
PENSION PLANS
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under LG&E Energy's qualified
defined benefit pension plans, as well as non-qualified supplemental pension
plans that provide benefits that would otherwise be denied participants by
reason of certain Internal Revenue Code limitations for qualified plan benefits,
based on the remuneration that is covered under the plan and years of service
with the Company and its subsidiaries:
1997 PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------
REMUNERATION 15 20 25 30 OR MORE
- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$100,000 $ 48,088 $ 48,088 $ 48,088 $ 55,884
$150,000 $ 80,088 $ 80,088 $ 80,088 $ 85,584
$200,000 $ 112,088 $ 112,088 $ 112,088 $ 112,088
$250,000 $ 144,088 $ 144,088 $ 144,088 $ 144,088
$300,000 $ 176,088 $ 176,088 $ 176,088 $ 176,088
$350,000 $ 208,088 $ 208,088 $ 208,088 $ 208,088
$400,000 $ 240,088 $ 240,088 $ 240,088 $ 240,088
$450,000 $ 272,088 $ 272,088 $ 272,088 $ 272,088
$500,000 $ 304,088 $ 304,088 $ 304,088 $ 304,088
$550,000 $ 336,088 $ 336,088 $ 336,088 $ 336,088
$600,000 $ 368,088 $ 368,088 $ 368,088 $ 368,088
$650,000 $ 400,088 $ 400,088 $ 400,088 $ 400,088
$700,000 $ 432,088 $ 432,088 $ 432,088 $ 432,088
$750,000 $ 464,088 $ 464,088 $ 464,088 $ 464,088
$800,000 $ 496,088 $ 496,088 $ 496,088 $ 496,088
$850,000 $ 528,088 $ 528,088 $ 528,088 $ 528,088
$900,000 $ 560,088 $ 560,088 $ 560,088 $ 560,088
$950,000 $ 592,088 $ 592,088 $ 592,088 $ 592,088
$1,000,000 $ 624,088 $ 624,088 $ 624,088 $ 624,088
$1,050,000 $ 656,088 $ 656,088 $ 656,088 $ 656,088
</TABLE>
A participant's remuneration covered by the Retirement Income Plan (the
"Retirement Income Plan") is his or her average base salary and short-term
incentive payment (as reported in the Summary Compensation Table) for the five
calendar plan years during the last ten years of the participant's career for
which such average is the highest. The estimated years of service for each named
executive employed by the Company at December 31, 1997, is as follows: 31 years
for Mr. Hale; 1 year for Mr. Berger; 3 years for Mr. McCall; 8 years for Mr.
Wood; and 5 years for Mr. Staffieri. Benefits shown are computed as a straight
life single annuity beginning at age 65.
Current Federal law prohibits paying benefits under the Retirement Income
Plan in excess of $120,000 per year. Officers of LG&E Energy and LG&E with at
least one year of service with either company are eligible to participate in
LG&E's Supplemental Executive Retirement Plan (the "Supplemental Executive
Retirement Plan"), which is an unfunded supplemental plan that is not subject to
the $120,000 limit. Presently, participants in the Supplemental Executive
Retirement Plan consist of all of the eligible officers of LG&E Energy and LG&E.
This plan provides generally for retirement benefits equal to 64% of average
current earnings during the final 36 months prior to retirement, reduced by
Social Security benefits, by amounts received under the Retirement Income Plan
and by benefits from other employers. As part of its employment agreement with
Mr. Hale, LG&E established a separate Supplemental Executive Retirement Plan.
The special plan generally provides for a retirement benefit for Mr. Hale of 2%
for each of his first 20 years of service with LG&E Energy, LG&E or with certain
prior employers, 1.5% for each of the next 10 years of service and 1% for each
remaining year of service completed prior to age 65, all multiplied by Mr.
Hale's final 60 months average
21
<PAGE>
compensation, less benefits payable from the Retirement Income Plan, benefits
payable from any other qualified or nonqualified plan sponsored by LG&E Energy,
LG&E or certain prior employers, and primary Social Security benefits. Under Mr.
Hale's employment agreement (see below), he may elect to commence payment of his
retirement benefits at age 50. If he retires prior to age 65, Mr. Hale's
benefits will be reduced by factors set forth in the employment agreement.
The estimated annual benefits to be received under the Retirement Income
Plan and the Supplemental Executive Retirement Plans upon normal retirement at
age 65 and after deduction of Social Security benefits will be $586,896 for Mr.
Hale; $238,356 for Mr. Berger; $210,804 for Mr. McCall; $276,144 for Mr.
Staffieri; and $240,996 for Mr. Wood.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
ARRANGEMENTS AND CHANGE IN CONTROL PROVISIONS
Effective January 1, 1997, Mr. Hale entered into a new employment agreement
with LG&E Energy. The new agreement extends through December 31, 2001. Under the
new agreement, Mr. Hale is entitled to an annual base salary of not less than
$580,000, subject to annual review by the Compensation Committee, and to
participate in the Short-Term Plan and the Long-Term Plan. Mr. Hale's
arrangement with LG&E Energy provides for a short-term incentive target award of
not less than 60% of base salary and long-term incentive grants with a present
value of not less than 110% of base salary to be delivered two-thirds in the
form of performance units/shares and one-third in the form of non-qualified
stock options. In addition, the 1997 Agreement provides that at the Company's
expense a life insurance policy in the amount of not less than $2 million shall
be provided to Mr. Hale. LG&E Energy's Board of Directors may terminate the
agreement at any time and, if it does so for reasons other than cause, LG&E
Energy must pay Mr. Hale's base salary plus his target short-term incentive
award for the remaining term of his employment contract, but not less than two
years.
In connection with the Merger, on May 20, 1997, Mr. Hale entered into an
employment agreement to become effective upon the consummation of the Merger.
Under this Prospective Agreement, which will have an initial term of five years
commencing on the effective date of the Merger, Mr. Hale is entitled to an
annual base salary of not less than $675,000, subject to annual review by the
Compensation Committee. The Prospective Agreement also contains short-term and
long-term incentive, life insurance and termination provisions similar to the
1997 Agreement.
In connection with the pending Merger, all officers of LG&E Energy have
entered into revised change in control agreements with the effect that the
Merger shall not constitute a change in control for such officers. Such
amendments, which are effective upon completion of the Merger, provide for the
benefits described below. In the event of a change in control, all such officers
of LG&E Energy shall be entitled to the following payments if, within
twenty-four months after such change in control, they are terminated for reasons
other than cause or disability, or their employment responsibilities are
altered: (i) all accrued compensation; (ii) a severance amount equal to 2.99
times the sum of (a) his or her annual base salary and (b) his or her bonus or
"target" award paid or payable pursuant to the Short-Term Plan. Payments may be
made to executives which would equal or exceed an amount which would constitute
a nondeductible payment pursuant to Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), or be subject to an excise tax imposed by Section
4999 of the Code and, in the latter case, LG&E Energy will "gross up" the
applicable severance payments to the executive to cover any excise taxes that
may be due. The executive is entitled to receive such amounts in a lump-sum
payment within thirty days of termination. A change in control encompasses
certain mergers and acquisitions, changes in Board membership and acquisitions
of voting securities of LG&E Energy.
Also upon a change in control of LG&E Energy, all stock-based awards shall
vest 100%, and all performance-based awards, such as performance units and
performance shares, shall immediately be paid out in cash, based upon the extent
to which the performance goals have been met through the
22
<PAGE>
effective date of the change in control or based upon the assumed achievement of
such goals, whichever amount is higher and prorated for the executive's deemed
period of service during the relevant performance period. Additionally,
executives shall receive payments in respect of accrued but unused vacation days
and for placement assistance.
SHAREHOLDER PROPOSALS
FOR 1999 ANNUAL MEETING
Any shareholder may submit a proposal for consideration at the 1999 Annual
Meeting. Any shareholder desiring to submit a proposal for inclusion in the
proxy statement for consideration at the 1999 Annual Meeting should forward the
proposal so that it will be received at LG&E Energy's principal executive
offices no later than November 20, 1998. Proposals received by that date that
are proper for consideration at the Annual Meeting and otherwise conforming to
the rules of the Securities and Exchange Commission will be included in the 1999
proxy statement.
OTHER MATTERS
At the Annual Meeting, it is intended that the first two items set forth in
the accompanying notice and described in this proxy statement will be presented.
Should any other matter be properly presented at the Annual Meeting, the persons
named in the accompanying proxy will vote upon them in accordance with their
best judgment. The Board of Directors knows of no other matters which may be
presented at the meeting.
LG&E Energy will bear the costs of printing and preparing this proxy
solicitation. LG&E Energy will provide copies of this proxy statement, the
accompanying proxy and the Annual Report to brokers, dealers, banks and voting
trustees, and their nominees, for mailing to beneficial owners, and upon request
therefor, will reimburse such record holders for their reasonable expenses in
forwarding solicitation materials. In addition to using the mails, proxies may
be solicited by directors, officers and regular employees of LG&E Energy or its
subsidiaries, in person or by telephone. LG&E Energy and LG&E have retained D.F.
King & Co., Inc., a firm of professional proxy solicitors, to assist in the
solicitations at an estimated fee of $7,500 plus reimbursement of reasonable
expenses.
ANY SHAREHOLDER MAY OBTAIN WITHOUT CHARGE A COPY OF LG&E ENERGY'S ANNUAL
REPORT ON FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE YEAR 1997, BY SUBMITTING A REQUEST IN WRITING TO: JOHN R. MCCALL, SECRETARY,
LG&E ENERGY CORP., P.O. BOX 32030, 220 WEST MAIN STREET, LOUISVILLE, KENTUCKY
40232.
23
<PAGE>
[LGE ENERGY LOGO]
-------------------------
ADMISSION TICKET
LG&E ENERGY CORP.
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, April 22, 1998
10:00 a.m., EDT
Hyatt Regency Louisville
320 West Jefferson Street
Louisville, Kentucky
If you plan to attend the meeting, please check the box on the proxy card
indicating that you plan to attend. Please bring this Admission Ticket to the
meeting with you.
THE BOTTOM PORTION OF THIS FORM IS THE PROXY CARD. Each proposal is fully
explained in the enclosed Notice of Annual Meeting of Shareholders and Proxy
Statement. To vote your proxy, please MARK by placing an "X" in the appropriate
box, SIGN and DATE the proxy. Then please DETACH and RETURN the completed proxy
promptly in the enclosed envelope.
TRIANGLE DETACH HERE TRIANGLE TRIANGLE DETACH HERE TRIANGLE
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH PROPOSAL
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below
(except as marked to the contrary
below)
/ / WITHHOLD AUTHORITY to vote for
all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
FOR AN INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME)
OWSLEY BROWN II
GENE P. GARDNER
JEFFERY T. GRADE
J. DAVID GRISSOM
2.APPROVAL OF ARTHUR ANDERSEN LLP
AS
INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
/ / I plan to attend the Annual Meeting, and I
will bring ___ guest(s).
- ----------------------------------------
SIGNATURE
- --------------------------------------------
DATE
[LGE ENERGY LOGO]
PROXY
- ----------------------------------------
SIGNATURE
COMMON
SIGNATURE(S) SHOULD CORRESPOND TO
THE NAME(S) APPEARING IN THIS
PROXY. IF EXECUTOR, TRUSTEE,
GUARDIAN, ETC. PLEASE INDICATE.
<PAGE>
Complimentary parking will be available
at the Hyatt Regency and the Cowger
Parking Garage. Please visit the
[MAP] registration table to receive your
parking voucher, which you will give to
the parking attendant upon leaving.
TRIANGLE DETACH HERE TRIANGLE TRIANGLE DETACH HERE TRIANGLE
LG&E ENERGY CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- APRIL 22, 1998
Roger W. Hale, Victor A. Staffieri and John R. McCall are hereby appointed
as proxies, with full power of substitution, to vote the shares of the
shareholder(s) named on the reverse side hereof, at the Annual Meeting of
Shareholders of LG&E Energy Corp. to be held on April 22, 1998, and at any
adjournment thereof, as directed on the reverse side hereof, and in their
discretion to act upon any other matters that may properly come before the
meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS YOU SPECIFY. IF NOT SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL OF THE
PROPOSALS. A VOTE FOR PROPOSAL 1 INCLUDES DISCRETIONARY AUTHORITY TO CUMULATE
VOTES SELECTIVELY AMONG THE NOMINEES AS TO WHOM AUTHORITY TO VOTE HAS NOT BEEN
WITHHELD.
Please mark, sign and date this proxy on the reverse side and return the
completed proxy promptly in the enclosed envelope.
<PAGE>
[LGE ENERGY LOGO]
-------------------------
ADMISSION TICKET
LG&E ENERGY CORP.
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, April 22, 1998
10:00 a.m., EDT
Hyatt Regency Louisville
320 West Jefferson Street
Louisville, Kentucky
If you plan to attend the meeting, please check the box on the proxy card
indicating that you plan to attend. Please bring this Admission Ticket to
the meeting with you.
THE BOTTOM PORTION OF THIS FORM IS THE PROXY CARD. Each proposal is fully
explained in the enclosed Notice of Annual Meeting of Shareholders and Proxy
Statement. To vote your proxy, please MARK by placing an "X" in the
appropriate box, SIGN and DATE the proxy. Then please DETACH and RETURN the
completed proxy promptly in the enclosed envelope.
TRIANGLE DETACH HERE TRIANGLE TRIANGLE DETACH HERE TRIANGLE
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH
PROPOSAL
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below (except as marked to the contrary below)
/ / WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME)
OWSLEY BROWN II
GENE P. GARDNER
JEFFERY T. GRADE
J. DAVID GRISSOM
2.APPROVAL OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
/ / I plan to attend the Annual Meeting, and I will bring ___
guest(s).
- ----------------------------------------
SIGNATURE
- ------------------------------------------
DATE
[LGE ENERGY LOGO]
PROXY
- ----------------------------------------
SIGNATURE
401(K)
SIGNATURE(S) SHOULD CORRESPOND TO
THE NAME(S) APPEARING IN THIS
PROXY. IF EXECUTOR, TRUSTEE,
GUARDIAN, ETC. PLEASE INDICATE.
<PAGE>
Complimentary parking will be available
at the Hyatt Regency and the Cowger
Parking Garage. Please visit the
[MAP] registration table to receive your
parking voucher, which you will give to
the parking attendant upon leaving.
TRIANGLE DETACH HERE TRIANGLE TRIANGLE DETACH HERE TRIANGLE
LG&E ENERGY CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- APRIL 22, 1998
Roger W. Hale, Victor A. Staffieri and John R. McCall are hereby
appointed as proxies, with full power of substitution, to vote the shares of
the shareholder(s) named on the reverse side hereof, at the Annual Meeting
of Shareholders of LG&E Energy Corp. to be held on April 22, 1998, and at
any adjournment thereof, as directed on the reverse side hereof, and in
their discretion to act upon any other matters that may properly come before
the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS YOU SPECIFY. IF NOT SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL OF
THE PROPOSALS. A VOTE FOR PROPOSAL 1 INCLUDES DISCRETIONARY AUTHORITY TO
CUMULATE VOTES SELECTIVELY AMONG THE NOMINEES AS TO WHOM AUTHORITY TO VOTE
HAS NOT BEEN WITHHELD.
Please mark, sign and date this proxy on the reverse side and return the
completed proxy promptly in the enclosed envelope.
