SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
Louisville Gas and Electric Company
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $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:
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2) Aggregate number of securities to which transaction applies:
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was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
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[LOGO]
March 28, 1994
Dear Louisville Gas and Electric Company stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Louisville Gas and Electric Company, to be held Tuesday, May 24, 1994, at 10:00
a.m. at the Hyatt Regency Louisville, 320 W. Jefferson Street, Louisville,
Kentucky.
Business matters to be acted upon at the meeting are the election of three
directors to three-year terms expiring in 1997, approval of the independent
auditors for 1994, and the transaction of any other business properly brought
before the meeting. We will also report on the progress of LG&E and stockholders
will have the opportunity to present questions of general interest.
We encourage you to carefully read the proxy statement and complete, sign
and return your proxy in the envelope provided, even if you plan to attend the
meeting. Returning your proxy to us will not prevent you from voting in person
at the meeting, or from revoking your proxy and changing your vote at the
meeting, if you are present and choose to do so.
If you plan to attend the Annual Meeting, please fill out the ticket request
attached to the form of proxy and return it with your proxy. An admission card
will be mailed to you prior to the meeting. If you wish to attend the meeting
but do not have a ticket, you will be admitted to the meeting after presenting
personal identification and evidence of ownership.
The directors and officers of LG&E appreciate your continuing interest in
the business of LG&E. We hope you can join us at the meeting.
Sincerely,
[Signature]
Roger W. Hale
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Louisville Gas and Electric Company
("LG&E"), a Kentucky corporation, will be held at the Hyatt Regency Louisville,
320 West Jefferson Street, Louisville, Kentucky, on Tuesday, May 24, 1994, at
10:00 a.m. for the following purposes:
1. To elect three directors, each for a three-year term expiring in 1997;
2. To approve and ratify the appointment of Arthur Andersen & Co.,
certified public accountants, as independent auditors of LG&E for 1994;
and
3. To transact such other business as may properly come before the meeting.
The close of business on March 15, 1994, has been fixed by the Board of
Directors as the record date for determination of stockholders entitled to
notice of and to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to attend the meeting. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE
REPLY ENVELOPE AS SOON AS POSSIBLE. Your cooperation in signing and returning
your proxy promptly is greatly appreciated.
By Order of the Board of Directors,
Dorothy E. O'Brien, Secretary
Louisville Gas and Electric Company
220 West Main Street
Louisville, Kentucky 40202
March 28, 1994
PROXY STATEMENT
--------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 24, 1994
----------------------
The Board of Directors of LG&E hereby solicits your proxy, and asks that you
vote, sign, date and promptly mail the enclosed proxy card for use at the Annual
Meeting of Stockholders to be held May 24, 1994, 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 stockholders on or about March 28, 1994.
If you plan to attend the meeting, please complete the ticket request form
attached to your proxy and return it promptly. An admission card, which will
expedite your admission to the meeting, will be mailed to you prior to the
meeting. Stockholders who do not have an admission card, including beneficial
owners whose accounts are held by brokers or other institutions, will be
admitted to the meeting upon presentation of personal identification and, in the
case of beneficial owners, proof of ownership.
The outstanding stock of LG&E is divided into three classes: Common Stock,
Preferred Stock (without par value), and Preferred Stock, par value $25 per
share. At the close of business on March 15, 1994, the record date for the
Annual Meeting, the following shares of each were outstanding:
Common Stock, without par value....................... 21,294,223 shares
Preferred Stock, par value $25 per share
5% Series......................................... 860,287 shares
7.45% Series...................................... 858,128 shares
Preferred Stock, without par value
$5.875 Series..................................... 250,000 shares
Auction Series A (stated value $100 per share).... 500,000 shares
All of the outstanding LG&E Common Stock is owned by LG&E Energy Corp. ("LG&E
Energy"). No persons or groups are known by management to be beneficial owners
of more than five percent of LG&E's Preferred Stock. As of March 3, 1994, all
Directors, nominees for director and executive officers of LG&E as a group
beneficially owned 80 shares of LG&E Preferred Stock, which is less than
one-tenth of one percent of the total LG&E Preferred Stock outstanding on that
date.
Owners of record at the close of business on March 15, 1994, of the Common
Stock, the 5% Cumulative Preferred Stock, par value $25 per share (the "5%
Preferred Stock"), and the 7.45% Cumulative Preferred Stock, par value $25 per
share (the "7.45% Preferred Stock"), are entitled to one vote per share for each
matter presented at the Annual Meeting or any adjournment thereof, and, in
addition, have cumulative voting rights with respect to the election of
directors. Accordingly, in electing directors, each stockholder is entitled to
as many votes as the number of shares of stock owned multiplied by the number of
directors to be elected, and may cast all such votes for a single nominee or may
distribute them among two or more nominees. The persons named as proxies reserve
the right to cumulate votes represented by proxies which they receive, and to
distribute such votes among one or more of the nominees at their discretion.
You may revoke your proxy at any time before it is voted by giving written
notice of its revocation to the Secretary of LG&E, by delivery of a later dated
proxy, or by attending the Annual Meeting and voting in person. Signing a proxy
does not preclude you from attending the meeting in person.
Directors are elected by a plurality of the votes cast by the holders of
LG&E's Common Stock, 5% Preferred Stock and 7.45% Preferred Stock, at a meeting
at which a quorum is present. "Plurality"
1
means that the individuals who receive the largest number of votes cast are
elected as directors up to the maximum number of directors to be chosen at the
meeting. Consequently, any shares not voted (whether by withholding authority,
broker nonvote or otherwise) have no impact on the election of directors except
to the extent the failure to vote for an individual results in another
individual receiving a larger percentage of votes.
The affirmative vote of a majority of the shares of LG&E Common Stock, 5%
Preferred Stock and 7.45% Preferred Stock represented at the Annual Meeting is
required for the approval of the independent auditors and any other matters that
may properly come before the meeting. Abstentions from voting on any such matter
are treated as votes against, while broker nonvotes are treated as shares not
voted.
LG&E Energy owns all of the outstanding LG&E Common Stock, and intends to
vote this stock in favor of the nominees for directors as set forth below,
thereby ensuring their election to the Board. LG&E Energy also intends to vote
all of the outstanding LG&E Common Stock in favor of the appointment of Arthur
Andersen & Co. as the independent auditors for LG&E as set forth in Proposal No.
2 herein. Nonetheless, the Board encourages you to vote on each of these
matters, and appreciates your interest.
The Annual Report to Stockholders of LG&E Energy (the "Annual Report"),
including its consolidated financial statements and information concerning LG&E,
is enclosed with this proxy statement. Of particular importance to stockholders
of LG&E are the following sections of the Annual Report: pages 20 and 21 under
the caption "Louisville Gas and Electric Company", pages 22 through 24 under the
caption "Retail Electric", pages 25 and 26 under the caption "Retail Gas", and
page 56 under the captions "Board of Directors" and "Officers." The Annual
Report is supplemented by audited financial statements of LG&E and management's
discussion of such financial statements, which are included as an appendix to
this proxy statement (the "Appendix"), and are incorporated by reference herein.
All stockholders are urged to read the accompanying Annual Report and Appendix.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of LG&E presently consists of ten members. The
directors are classified into three classes, as nearly equal in number as
possible, with respect to the time for which they are to hold office. One class
of directors is elected at each year's Annual Meeting to serve for three-year
terms and to continue in office until their successors are elected and
qualified.
At this Annual Meeting, the following three persons are proposed for
election to the Board of Directors for three-year terms expiring at the 1997
Annual Meeting: William C. Ballard, Jr., S. Gordon Dabney and T. Ballard Morton,
Jr. All of the nominees are presently directors of both LG&E and LG&E Energy
Corp.
The Board of Directors does not know of any nominee who will be unable to
stand for election or otherwise serve as a director. If for any reason any
nominee becomes unavailable for election, the Board of Directors may designate a
substitute nominee, in which event the shares represented on the proxy cards
returned to LG&E will be voted for such substitute nominee, unless an
instruction to the contrary is indicated on the proxy card.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION
OF THE THREE NOMINEES FOR DIRECTOR.
2
INFORMATION ABOUT DIRECTORS AND NOMINEES
The following contains certain information as of March 3, 1994, concerning
the nominees for director, as well as the directors whose terms of office
continue after the 1994 Annual Meeting.
NOMINEES FOR DIRECTOR WITH TERMS EXPIRING AT 1997 ANNUAL MEETING OF STOCKHOLDERS
WILLIAM C. BALLARD, JR. (AGE 53)
Mr. Ballard has been of counsel to the law firm of Greenebaum Doll &
McDonald since May 1992. He served as Executive Vice President and Chief
Financial Officer from 1978 until May 1992, of Humana, Inc., a healthcare
services company. Mr. Ballard is a graduate of the University of Notre Dame, and
received his law degree, with honors, from the University of Louisville School
of Law. He also received a Master of Law degree in taxation from Georgetown
University. Mr. Ballard has been a director of LG&E since May 1989 and of LG&E
Energy since August 1990. Mr. Ballard is also a member of the Board of Directors
of United Healthcare Corp., MidAmerica Bancorp, Vencor, Inc., American Safety
Razor, Inc., McGaw Inc. and Arjo, A.B.
S. GORDON DABNEY (AGE 65)
Mr. Dabney has been President since 1955 of Standard Foods, Inc., which is
engaged in the food processing business. Mr. Dabney attended the University of
Florida. He has been a director of LG&E since January 1987 and of LG&E Energy
since August 1990. Mr. Dabney is also a member of the Board of Directors of
First Kentucky National Corporation and National City Bank of Kentucky.
T. BALLARD MORTON, JR. (AGE 61)
Mr. Morton has been Executive in Residence at the College of Business and
Public Administration of the University of Louisville since 1983. Mr. Morton is
a graduate of Yale University. Mr. Morton has been a director of LG&E since May
1967 and of LG&E Energy since August 1990. Mr. Morton is also a member of the
Board of Directors of PNC Bank, Kentucky, Inc. and the Kroger Company.
DIRECTORS WHOSE TERMS EXPIRE AT 1995 ANNUAL MEETING OF STOCKHOLDERS
OWSLEY BROWN II (AGE 51)
Mr. Brown was named the Chief Executive Officer of Brown-Forman Corporation,
a consumer products company, in July 1993, and has been President of
Brown-Forman Corporation since 1987. Mr. Brown is a graduate of Yale University,
and received his master's degree in business administration from Stanford
University. He has been a director of LG&E since May 1989 and of LG&E Energy
since August 1990. Mr. Brown is also a member of the Board of Directors of
Brown-Forman Corporation, Hilliard Lyons Trust Company and NACCO Industries,
Inc.
GENE P. GARDNER (AGE 64)
Mr. Gardner has been Chairman of Beaver Dam Coal Company, which is engaged
in the ownership and development of coal properties, since April 1983. Mr.
Gardner is a graduate of the University of Louisville and of the Advanced
Management Program of the University of Virginia, Colgate-Darden Graduate School
of Business. Mr. Gardner has been a director of LG&E since July 1979 and of LG&E
Energy since August 1990. He is also a member of the Board of Directors of
Commonwealth Bank and Trust Company, Commonwealth Financial Corporation and
Thomas Industries, Inc.
J. DAVID GRISSOM (AGE 55)
Mr. Grissom has been Chairman of Mayfair Capital, Inc., a private investment
firm, since April 1989. He served as Chairman and Chief Executive Officer of
Citizens Fidelity Corporation from April 1977 until March 31, 1989. Upon the
acquisition of Citizens Fidelity Corporation by PNC Financial Corp. in February
1987, Mr. Grissom served as Vice Chairman and a Director of PNC Financial Corp.
until March 1989. Mr. Grissom is a graduate of Centre College and the University
of Louisville School of Law. Mr. Grissom has been a director of LG&E since
January 1982 and of LG&E
3
Energy since August 1990. He is also a member of the Board of Directors of
Capital Holding Corporation, Churchill Downs, Inc., Columbia/HCA Healthcare
Corporation, Transco Energy Co., Regal Cinemas Inc. and Sphere Drake Holdings
LTD.
DIRECTORS WHOSE TERMS EXPIRE AT 1996 ANNUAL MEETING OF STOCKHOLDERS
ROGER W. HALE (AGE 50)
Mr. Hale has been Chief Executive Officer and a Director of LG&E since June
1989, Chairman of the Board of LG&E since February 1, 1990, and served as
President of LG&E from June 1989 until January 1, 1992. Mr. Hale has been a
Director and Chairman of the Board, President and Chief Executive Officer of
LG&E Energy since August 1990. Prior to his coming to LG&E, Mr. Hale served as
Executive Vice President of Bell South Enterprises, Inc. Mr. Hale is a graduate
of the University of Maryland, and received a master's degree in management from
the Massachusetts Institute of Technology, Sloan School of Management. Mr. Hale
is also a member of the Board of Directors of PNC Bank, Kentucky, Inc. and H&R
Block, Inc.
DAVID B. LEWIS (AGE 49)
Mr. Lewis is a founding partner of the law firm of Lewis, White & Clay, a
Professional Corporation in Detroit, Michigan. Since 1972, Mr. Lewis has served
as Chairman of the Board and a Director of the firm. Mr. Lewis is a graduate of
Oakland University and received his law degree from the University of Michigan
Law School. He also received a master's degree in business administration from
the University of Chicago Graduate School of Business. Mr. Lewis has been a
director of LG&E and LG&E Energy since November 1992. Mr. Lewis is also a member
of the Board of Directors of Consolidated Rail Corporation (Conrail), and serves
or has served as a board member for numerous educational, cultural and civic
organizations in the Detroit and Washington, D.C. areas.
ANNE H. MCNAMARA (AGE 46)
Mrs. McNamara has been Senior Vice President -- Administration and General
Counsel of AMR Corporation and its subsidiary, American Airlines, Inc. since
June 1988. Mrs. McNamara is a graduate of Vassar College, and received her law
degree from Cornell University. She has been a director of LG&E and LG&E Energy
since November 1991.
DONALD C. SWAIN (AGE 62)
Dr. Swain has been President of the University of Louisville since April
1981. Dr. Swain is a graduate of the University of Dubuque. He received his
master's and doctoral degrees in history from the University of California at
Berkeley. He has been a director of LG&E since May 1985 and of LG&E Energy since
August 1990. Dr. Swain is also a member of the Board of Directors of PNC Bank,
Kentucky, Inc.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Each member of the Board of Directors of LG&E is also a director of LG&E
Energy. The committees of the Board of Directors of LG&E include an Audit
Committee, a Compensation Committee and a Nominating and Development Committee.
The directors who are members of the various committees of LG&E serve in the
same capacity for purposes of the LG&E Energy Board of Directors.
During 1993, there were seven regular meetings and one special meeting of
the LG&E Board. All directors attended 75% or more of the total number of
meetings of the Board of Directors and Committees of the Board on which they
served, except Owsley Brown II, who attended 65%.
COMPENSATION OF DIRECTORS
Directors who are also officers of LG&E receive no compensation in their
capacities as directors. During the first quarter of 1993, directors received a
retainer of $1,083 per month, or $13,000 annually ($14,000 annually for
committee chairmen), a fee for Board meetings of $850 per meeting and a fee for
each committee meeting of $700. Effective April 1, 1993, the retainer fee was
increased to $1,250 per month, or $15,000 annually ($16,000 for committee
chairmen), and the fee for committee
4
meetings was increased to $750. Non-employee directors residing out of the
Louisville area receive reimbursement for expenses incurred in traveling to
meetings, and receive an additional $750 compensation for each Board meeting
they attend. The foregoing amounts represent the aggregate fees paid to
directors in their capacities as directors of LG&E and LG&E Energy.
Non-employee directors of LG&E may elect to defer all or a part of their
fees (including retainers, fees for attendance at regular and special meetings,
committee meetings and travel compensation) pursuant to the LG&E Energy Corp.
Deferred Stock Compensation Plan (the "Deferred Stock Plan"). Each deferred
amount is credited by LG&E Energy to a bookkeeping account and then is converted
into a stock equivalent on the date the amount is credited. The number of stock
equivalents credited to the director is based upon the average of the high and
the low sale price of LG&E Energy Common Stock on the New York Stock Exchange
for the five trading days prior to the conversion. Additional stock equivalents
will be added to stock accounts at the time that dividends are declared on LG&E
Energy Common Stock, in an amount equal to the amount of LG&E Energy Common
Stock that could be purchased with dividends that would be paid on the stock
equivalents if converted to LG&E Energy Common Stock. In the event that LG&E
Energy is a party to any consolidation, recapitalization, merger, share exchange
or other business combination in which all or a part of the outstanding LG&E
Energy Common Stock is changed into or exchanged for stock or other securities
of the other entity or LG&E Energy, or for cash or other property, the stock
account of a participating director shall be converted to such new securities or
consideration equal to the amount each share of LG&E Energy Common Stock
receives, multiplied by the number of share equivalents in the stock account.
A director will be eligible to receive a distribution from his or her
account only upon termination of service, death, retirement or otherwise.
Following departure from the Board, the distribution will occur, at the
director's election, either in one lump sum or in no more than five annual
installments. The distribution will be made, at the director's election, either
in LG&E Energy Common Stock or in cash equal to the then-market price of the
LG&E Energy Common Stock allocated to the director's stock account. At March 3,
1994, six directors were participating in the Deferred Stock Plan.
Subject to approval by the stockholders of LG&E Energy at the Annual
Meeting, directors of LG&E who are also directors of LG&E Energy will receive
stock options pursuant to the LG&E Energy Corp. Stock Option Plan for
Non-Employee Directors (the "Stock Option Plan"), for their services as
directors of LG&E Energy. Pursuant to the terms of the Stock Option Plan, which
was approved by the Board of Directors of LG&E Energy on December 1, 1993, each
director of LG&E Energy was awarded a grant of an option to purchase 2,000
shares of LG&E Energy Common Stock, which option may be exercised after February
2, 1995. Directors of LG&E Energy will be awarded a grant of an option for 2,000
shares of LG&E Energy Common Stock annually following the adoption of the Stock
Option Plan by LG&E Energy stockholders.
AUDIT COMMITTEE
The Audit Committee of the Board is composed of Messrs. Dabney, Brown,
Gardner and Lewis, Dr. Swain and Mrs. McNamara. During 1993, the Audit Committee
maintained direct contact with the independent auditors and LG&E's Internal
Auditor to review the following matters pertaining to LG&E, and to LG&E Energy
and its subsidiaries: the adequacy of accounting and financial reporting
procedures; the adequacy and effectiveness of internal accounting controls; the
scope and results of the annual audit and any other matters relative to the
audit of these companies' accounts and their financial affairs that the
Committee, the Internal Auditor, or the independent auditors deemed necessary.
The Audit Committee met three times during 1993.
COMPENSATION COMMITTEE
The Compensation Committee, composed of non-employee directors, approves the
compensation of the Chief Executive Officer and the executive officers of LG&E
Energy and LG&E. The Committee makes recommendations to the full Board regarding
benefits provided to executive officers and the
5
establishment of various employee benefit plans. The members of the Compensation
Committee are Messrs. Ballard, Dabney, Gardner, Grissom and Morton and Mrs.
McNamara. The Compensation Committee met three times during 1993.
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 stockholders. To be considered for inclusion in the slate
of nominees proposed by the Board of Directors at an annual meeting, stockholder
recommendations must be submitted in writing to the Secretary of LG&E not later
than 120 days prior to the meeting. In addition, the Articles of Incorporation
and Bylaws of LG&E contain procedures governing stockholder nominations for
election of directors at a stockholders' meeting.
The members of the Nominating and Development Committee are Messrs. Ballard,
Brown, Grissom, Hale, Lewis and Morton, and Dr. Swain. The Nominating and
Development Committee met twice during 1993.
The Securities Exchange Act of 1934, as amended, requires LG&E's officers
and directors to file reports of ownership and changes in ownership of LG&E
Energy Common Stock and LG&E Preferred Stock with the Securities and Exchange
Commission. Based solely on a review of the copies of such forms and amendments
thereto received by LG&E, or written representations from LG&E officers and
directors that no Forms 5 were required to be filed, LG&E believes that during
1993 all Section 16(a) filing requirements applicable to its officers, directors
and greater than ten percent beneficial owners were met on a timely basis, with
one exception. Mr. Chris Hermann timely filed a Form 3 after his appointment as
Vice President and General Manager - Wholesale Electric of LG&E, but
inadvertently failed to disclose beneficial ownership of additional shares held
jointly with a parent. An amended Form 3 was filed promptly after learning of
the omission.
PROPOSAL NO. 2
APPROVAL OF INDEPENDENT AUDITORS FOR 1994
Based upon the recommendation of the Audit Committee, the Board of
Directors, subject to ratification by stockholders, has selected Arthur Andersen
& Co. as independent auditors to audit the accounts of LG&E and LG&E Energy for
the fiscal year ending December 31, 1994. Arthur Andersen has audited the
accounts of LG&E for many years and LG&E Energy since its organization in 1990,
and has provided certain other consulting services during 1993. The stockholders
previously approved the employment of the firm at the Annual Meeting on May 11,
1993.
Representatives of Arthur Andersen & Co. will be present at the Annual
Meeting. Such representatives will be given the opportunity to make a statement
if they so desire, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL
OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
6
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
On October 15, 1992, the Securities and Exchange Commission published new
rules for executive compensation disclosure. These rules are intended to present
shareholders with a clear and concise presentation of the compensation paid to
executive officers and to make clear the reasoning of the Compensation Committee
and the Board of Directors in making fundamental compensation decisions.
Decisions on the compensation of officers are made by the Compensation
Committee of the Board of Directors. Each member of the Compensation Committee
is a non-employee director, and all decisions of the Compensation Committee
relating to the compensation of LG&E's executive officers are reviewed by the
full Board of Directors, with the exception of grants of stock options and
performance units, which are made solely by the Compensation Committee.
LG&E is the principal subsidiary of LG&E Energy. As noted above, the members
of the Compensation Committee and Board of Directors of LG&E also serve in the
same capacity for LG&E Energy. Certain executive officers of LG&E are also
executive officers of LG&E Energy. For those individuals, references below to
the Compensation Committee and Board of Directors refers to the Compensation
Committee and Board of Directors of both LG&E and LG&E Energy unless otherwise
indicated, and discussions of their compensation include compensation earned for
services to both LG&E and LG&E Energy.
The executive compensation program of LG&E and LG&E Energy was developed and
implemented after consultation with a worldwide, highly respected independent
executive compensation consultant. That consultant has concluded that the
structure of the executive compensation program and the target awards and
opportunities provided to executives are consistent with the compensation and
pay programs of comparable companies, including utilities and utility holding
companies nationwide. The Compensation Committee and the Board of Directors has
continued access to this compensation consultant as desired, and are provided
with independent compensation data for their review.
Set forth below is a report submitted by the members of the Compensation
Committee addressing compensation policies for 1993 as they affected the
executive officers of LG&E, including the executive officers named in the
following tables. The executive officers of LG&E participate in certain stock-
based compensation plans of LG&E Energy and references to stock, stockholder
performance or stockholder return relate to LG&E Energy Common Stock.
COMPENSATION PHILOSOPHY
This report reflects the compensation philosophy as set by the Committee and
the Board of Directors, and as reflected in the salaries and awards paid to the
executive officers of LG&E, LG&E Energy and its subsidiaries. There are three
major components of the executive compensation program: (1) base salary; (2)
short-term or annual incentives; and (3) long-term incentives. LG&E developed
its executive compensation program to focus on both short-term and long-term
business objectives which are designed to enhance overall shareholder value. The
short-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 stockholders.
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 stockholders in both
the long and short 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 compensation
practices must be competitive with utilities, utility holding companies, and
other industries to ensure that a stable and successful management team can be
recruited and retained. The Compensation Committee believes
7
that LG&E's most direct competitors for executive talent are not limited to the
companies that would be included in the index against which shareholder returns
are compared. For this reason, the compensation peer group is not the same as
the index in the Comparison of Five-Year Total Return graph included on page 11
of this proxy statement. In order to establish competitive compensation levels
for all executive positions, the Committee establishes salaries and short-term
benefit levels based upon compensation data from four utility and two
all-industry surveys (the "Survey Group"), the latter of which consist of
non-utility businesses with annual revenues of $1 billion to $2.5 billion. The
Committee establishes long-term benefit levels based upon compensation data from
a survey of utilities compiled by a national compensation consulting firm (the
"Long-Term Survey Group"). In 1993, there were 57 utilities in the Long-Term
Survey Group.
The Committee establishes a target salary (the "Position Rate") for each
executive at the 65th percentile of the average for executives in similar
positions with companies in the Survey Group. Salaries, short-term and long-term
incentives are based on this Position Rate as described below.
In 1993, a new Federal tax law was passed which limits the deductibility of
executive compensation in excess of $1,000,000 unless certain exceptions are
met. Under transition rules adopted by the Internal Revenue Service, this new
law is not expected to impact the Company with respect to executive compensation
paid in 1994. The Compensation Committee is reviewing the new law and associated
regulations, as well as the structure of its salary, short-term and long-term
incentive programs.
The compensation information set forth in other sections of this proxy
statement, particularly with respect to the tabular information presented,
reflects the considerations set forth in this report. The Base Salary,
Short-Term Incentives, and Long-Term Incentives sections that follow address the
compensation philosophy for all executive officers except for Mr. Roger W. Hale.
Mr. Hale's compensation is determined in accordance with the terms of his
Employment Agreement (see Chief Executive Officer Compensation on page 9 of this
proxy statement).
BASE SALARY
The base salaries for executive officers are designed to be competitive with
the Survey Group. The Position Rate represents the maximum base salary that an
executive officer may receive. Actual base salaries are determined based on
individual performance and experience.
SHORT-TERM INCENTIVES
The short-term or annual incentives provide direct financial compensation to
executives and reward them for meeting performance measures which are
established at the beginning of each performance year. The performance goals are
set taking into account economic and business factors known to company
management, the Committee and the Board at the time the goals are established.
The factors include external competition, inflation, and financial and market
data and trends, as well as certain standards of excellence consistent with core
company values. In 1993, short-term incentive payments for executive officers
were based from 50% to 75% on Net Income Available for Common Stock (NIAC), 25%
on Management Effectiveness, and from 10% to 25% on Customer Satisfaction. The
percentages varied within the executive officer group based upon the nature of
each individual's functional responsibilities. This component of the executive
compensation program focuses executives on the tasks most immediately at hand
and is based upon priorities which are tailored for each performance year.
In 1993, the amount of an executive officer's short-term incentive award
(the "targeted amount") was expressed as a percentage of Position Rate, with the
officer being entitled to receive from 0% to 150% of such targeted amount
dependent on Company performance and individual performance. Targeted amounts
for 1993 ranged from 26% to 40% of Position Rate for each executive officer and
approached the 65th percentile of the level of such awards granted to comparable
executives employed by companies in the Survey Group.
8
LONG-TERM INCENTIVES
On June 11, 1990, the stockholders of LG&E Energy approved the Omnibus
Long-Term Incentive Plan (the "Long-Term Plan"). The Long-Term Plan is
administered by a committee of not less than three directors of LG&E Energy who
are appointed by the Board of Directors. At this time, the Compensation
Committee of LG&E Energy 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; and performance units and
performance shares. To date, the Committee has chosen to award stock options,
stock appreciation rights and performance units to executive officers.
The Compensation Committee establishes an aggregate amount of long-term
benefits by grouping the executives into three categories, based on job
description and content. The Committee sets within each group the percentage of
an individual's Position Rate to be paid in options and the percentage to be
paid in performance units, so that, in the judgement of the Committee, an
individual receives an amount of stock options and performance units
approximately equal in value. The aggregate value of the stock options and
performance units (expressed as a percentage of Position Rate) is intended to
equal the amount of long-term benefits (expressed as a percentage of salary)
payable to executives in similar positions with utilities in the 60th percentile
of the Long-Term Survey Group. Stock options are awarded annually at fair market
value at the time of grant and vest after one year has elapsed. The options are
exercisable over a nine-year term. Compensation awards are thus tied to stock
price appreciation in excess of the stock's value at time of grant, rewarding
executives as if they shared in the ownership of LG&E Energy. The number of
shares subject to options is determined by taking the amount of the executive's
Position Rate to be paid in options, as determined above, and dividing that
amount by the fair market value of LG&E Energy Common Stock on the date of the
grant. Prior awards are not considered when making new grants.
The Long-Term Plan also features the award of performance units, which are
basically equivalent to one share of LG&E Energy Common Stock. The number of
performance units granted is determined by taking the amount of the executive's
Position Rate to be paid in performance units, as determined above, and dividing
that amount by the Fair Market Value of LG&E Energy Common Stock on the date of
the grant. Each executive officer is entitled to receive from 0% to 150% of the
performance units contingently awarded to the executive based on the Company's:
(1) total shareholder return, which is defined as share price increase plus
dividends paid divided by share price at beginning of the period; and
(2) return on invested capital over a three-year period compared to a goal
set internally.
Total shareholder return is determined through comparing LG&E Energy's total
shareholder return over a three-year period to that of the utility holding
companies and gas and electric utilities in the Salomon Brothers Electric
Utilities Index at the time the Long-Term Plan was established in 1990.*
The value of the performance units is substantially dependent upon the
changing value of LG&E Energy's Common Stock in the marketplace. Because of
changes to effective tax rates produced through the adoption of the Revenue
Reconciliation Act of 1993, the Committee determined that 50% of the 1993
performance unit award be paid in LG&E Energy Common Stock and 50% in cash,
rather than 65% in stock and 35% in cash, as in the previous year. For the same
reason, the performance units awarded in 1991 and 1992 also were changed to a
50%/50% payout from a 65%/35% payout.
- ------------------------
*While similar, the utilities in the Salomon Brothers Index are not necessarily
the same as the utilities in the Standard & Poor's Utility Index used in the
Company Performance Graph on page 11 of this proxy statement. The Salomon
Brothers Index was selected by the Committee at the time awards were originally
made under the Long-Term Plan, and in the judgement of the Committee, continues
to represent an appropriate peer group for compensation purposes.
9
CHIEF EXECUTIVE OFFICER COMPENSATION
In 1993, the Chief Executive Officer of LG&E, Mr. Roger W. Hale, was
compensated pursuant to an employment agreement dated April 1989, as updated by
Board actions in 1990, which was originally developed to induce him to move to
LG&E from another company. Mr. Hale entered into a new employment contract with
LG&E Energy in November 1993; the new agreement had no effect on Mr. Hale's
compensation as discussed in this report. This agreement dictates his short-term
incentive target award and long-term incentive opportunities, including stock
option and performance share plan grants made during 1993. The Committee
compares Mr. Hale's compensation to that for chief executive officers of
companies contained in the Survey Group, as well as approximately 20 electric
and gas utilities and holding companies, with comparable revenues, market
capitalization and asset size. In setting long-term awards, the Company also
considers survey data from various compensation consulting firms. Mr. Hale is
also the Chief Executive Officer of LG&E Energy. The following discussion of Mr.
Hale's compensation includes his compensation earned for services to both LG&E
and LG&E Energy. Details of Mr. Hale's 1993 compensation are set forth below.
BASE SALARY. Mr. Hale was paid a base salary of $385,000 during 1993. This
reflects an original employment contract rate, plus salary increases. The
Committee, in determining annual salary increase, focused on Mr. Hale's
individual performance (including his management effectiveness, as described
below) and the level of increases provided to other LG&E and LG&E Energy
employees. The 1993 increase was 5.5%.
SHORT-TERM INCENTIVE. Mr. Hale's target short-term incentive award is 50%
of base salary, as dictated by the employment agreement. Like all other
executive officers receiving short-term incentive awards, Mr. Hale may
receive from 0 to 150% of the targeted amount, based on Company performance
and individual performance. His 1993 short-term incentive payout was based
75% on performance in corporate NIAC, and 25% on Management Effectiveness.
The resulting payout for 1993 performance was 68% of base salary. The
Committee considered Mr. Hale's management effectiveness in several areas in
determining the final 1993 award. These included the increased profitability
of LG&E and LG&E Energy, profitability of LG&E Energy subsidiaries, debt
refinancings, customer satisfaction rating, and others.
LONG-TERM INCENTIVE PAYOUT. In 1993, Mr. Hale received 4,807 options and
10,683 performance units. These amounts were determined in accordance with
the terms of his employment agreement. The terms of the options and
performance units (including the manner in which performance units are
earned) for Mr. Hale are the same as for other executive officers, as
described under the heading "Long-Term Incentives."
In the 1991-1993 period, LG&E Energy exceeded the target for Total
Shareholder Return, but was somewhat below target in its ROIC performance.
Performance was at the 88th percentile of its comparison group in Total
Shareholder Return, and at 75% of targeted ROIC performance. That resulted
in a payout equal to 112.5% of the approved target. In addition, the market
value of LG&E Energy Common Stock increased from $25.86 at grant to $40.50
during the performance period. This further increased the value of the
payout of the performance units awarded to Mr. Hale in 1991.
OTHER BENEFITS. Mr. Hale receives LG&E Energy contributions to thrift and
savings plans, similar to those of other employees.
MEMBERS OF THE COMPENSATION COMMITTEE
William C. Ballard, Jr., Chairman
S. Gordon Dabney
Gene P. Gardner
J. David Grissom
Anne H. McNamara
T. Ballard Morton, Jr.
10
COMPANY PERFORMANCE
All of the outstanding Common Stock of LG&E is owned by LG&E Energy, and
accordingly, there are no trading prices for LG&E's Common Stock. The following
graph reflects a comparison of the cumulative total return (change in stock
price plus reinvested dividends) to stockholders of LG&E Energy Common Stock
from December 31, 1988 through December 31, 1993 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.
[Filed under Cover Form SE]
- ------------------------
(1) Total Shareholder Return assumes $100 invested on December 31, 1988 with
quarterly reinvestment of dividends.
11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows the cash compensation paid or to be paid by LG&E,
LG&E Energy or any of its subsidiaries, as well as certain other compensation
paid or accrued for those years, to the Chief Executive Officer and the four
most highly compensated officers of LG&E in all capacities in which they served
(including service for LG&E Energy) during 1991, 1992 and 1993:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION
--------------------------------- AWARDS
OTHER --------------- PAYOUTS
ANNUAL SECURITIES --------- ALL OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION OPTIONS/ SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)(2) ($)(1)
- ---------------------------------- ----- --------- --------- ----------- --------------- --------- -----------
Roger W. Hale 1993 $ 385,000 $ 261,800 $ 9,387 4,807 $ 604,341 11,417(3)
Chairman of the Board and CEO 1992 365,000 205,300 8,127 5,367 412,405 10,765
1991 343,000 200,000 5,969 0
Edward J. Casey, Jr. 1993 193,000 120,566 441 2,553 48,195 6,874(3)
Group President, 1992 168,000 118,800 288 2,618 33,530 5,305
LG&E Energy Services 1991 135,000 73,400 2,351 0
(former position -- Executive
Vice President and Chief
Financial Officer)
Victor A. Staffieri 1993 175,000 75,097 3,883 2,087 0 1,462(3)
President -- LG&E 1992 130,625(4) 72,352 2,738 1,887 0 162,920(5)
(former position -- Senior
Vice President, Public Policy,
and General Counsel)
Stephen R. Wood 1993 174,000 71,572 5,727 2,087 54,878 4,588(3)
Executive Vice President and 1992 163,000 57,445 3,171 2,357 38,640 3,653
Chief Administrative 1991 151,000 58,600 2,676 0
Officer (former position --
Senior Vice President and
Chief Administrative Officer)
Charles A. Markel, III 1993 163,000 54,714 4,897 1,820 48,195 5,185(3)
Treasurer 1992 155,000 52,088 1,528 2,357 34,825 4,755
1991 130,000 50,100 2,351 0
<FN>
- ------------------------------
(1) In order to facilitate the adoption of the new SEC disclosure rules
regarding executive compensation, the SEC does not require that this column
include information for fiscal years ended before December 15, 1992.
(2) The Long-Term Plan was established in 1990 and the first performance cycle
was 1990-1992. Thus, no distributions took place prior to 1992.
(3) Includes employer contributions to 401(k) plan, nonqualified thrift plan
and employer paid life insurance premiums in 1993 as follows: Mr. Hale,
$2,968, $4,655 and $3,794 respectively; Mr. Casey, $2,968, $3,206 and $700
respectively; Mr. Wood, $2,633, $669 and $1,286 respectively; Mr.
Staffieri, $0, $0 and $1,462 respectively; and Mr. Markel, $1,832, $2,427
and $926 respectively.
(4) Reported compensation is only for a portion of the year. Mr. Staffieri
joined LG&E on March 15, 1992.
(5) Consists of moving and relocation expenses in excess of benefits available
to all salaried employees, and $610 in employer paid life insurance
premiums.
12
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN 1993 FISCAL YEAR
The following table contains information at December 31, 1993, with respect
to grants of stock options and stock appreciation rights (SARs) to the named
executive officers:
INDIVIDUAL GRANTS POTENTIAL
-------------------------------------- REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL
SECURITIES TOTAL RATES OF STOCK
UNDERLYING OPTIONS/SARS EXERCISE PRICE APPRECIATION
OPTIONS/SARS GRANTED TO OR BASE FOR OPTION TERM
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------------------
NAME (#) (1) FISCAL YEAR ($/ SHARE) DATE 0%($) 5%($) 10%($)
- ----------------------- ----------------- ------------------- ----------- ------------ ------ --------- ---------
Roger W. Hale 4,807 19.1% $ 36.04 2/3/2003 0 $ 108,952 $ 276,107
Edward J. Casey, Jr. 2,553 10.1 36.04 2/3/2003 0 57,865 146,640
Stephen R. Wood 2,087 8.3 36.04 2/3/2003 0 47,303 119,874
Victor A. Staffieri 2,087 8.3 36.04 2/3/2003 0 47,303 119,874
Charles A. Markel, III 1,820 7.2 36.04 2/3/2003 0 41,251 104,538
<FN>
- ------------------------------
(1) Options are awarded annually at fair market value at time of grant; 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 1993 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 1993
and the value of unexercised options and SARs held by them as of December 31,
1993:
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS AT
ACQUIRED VALUE AT FY-END (#) FY-END ($)(1)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------ ------------- ----------- --------------- ----------------
Roger W. Hale 0 N/A 15,430/4,807 $195,430/$21,439
Edward J. Casey, Jr. 0 N/A 7,218/2,553 90,489/11,386
Stephen R. Wood 1,147 $17,723 6,444/2,087 79,989/9,308
Victor A. Staffieri 0 N/A 1,887/2,087 19,530/9,308
Charles A. Markel, III 0 N/A 6,957/1,820 87,895/8,117
<FN>
- ------------------------------
(1) Dollar amounts reflect market value of LG&E Energy Common Stock at
year-end, minus the exercise price.
13
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN 1993 FISCAL YEAR
The following table provides information concerning awards made in 1993 to
the named executive officers in 1993 under the Long-Term Plan.
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE OR NON-STOCK PRICE BASED PLANS
NUMBER OF OTHER PERIOD (NUMBER OF SHARES)
SHARES, UNITS OR UNTIL MATURATION -----------------------------------------------
NAME OTHER RIGHTS(#) OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ---------------------------- ------------------- ------------------- ----------------- ----------- ---------------
Roger W. Hale 10,683 12/31/95 4,807 10,683 16,025
Edward J. Casey, Jr. 1,276 12/31/95 574 1,276 1,914
Stephen R. Wood 938 12/31/95 422 938 1,407
Victor A. Staffieri 938 12/31/95 422 938 1,407
Charles A. Markel, III 819 12/31/95 369 819 1,229
Each performance unit awarded represents the right to receive an amount
payable 50% in LG&E Energy Common Stock and 50% in cash on the date of payout,
the latter portion being payable in cash in order to facilitate the payment of
taxes by the recipient. The amount of the payout is determined by the then-fair
market value of LG&E Energy Common Stock. The Long-Term Plan rewards executives
on a three-year rolling basis dependent upon: (1) the total shareholder return
for shareholders and (2) return on capital. The target for award eligibility
requires that LG&E Energy shareholders earn a total return at a preset level in
comparison to that of the utility holding companies and gas and electric
utilities in the Salomon Brothers Electric Utilities Index. The return on
capital component of the Long-Term Plan is triggered by the actual return on
capital exceeding preset levels of achievement established by the Compensation
Committee prior to commencement of the period. The Committee sets a contingent
award for each management level selected to participate in the Plan and such
amount is the basis upon which incentive compensation is determined. Depending
on the level of achievement, the participant can receive from zero to 150% of
the contingent award amount. Payments made under the Long-Term Plan in 1993 are
reported in the summary compensation table for the year of payout.
PENSION PLANS
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under LG&E's qualified defined
benefit pension plans, as well as non-qualified supplemental pension plans that
provide benefits that would otherwise be denied participants by reason of
certain Internal Revenue Code limitations for qualified plan benefits, based on
the remuneration that is covered under the plan and years of service with LG&E,
LG&E Energy and its subsidiaries:
14
PENSION PLAN TABLE
30
15 20 25 OR MORE
YEARS OF YEARS OF YEARS OF YEARS OF
REMUNERATION SERVICE SERVICE SERVICE SERVICE
- --------------- ----------- ----------- ----------- -----------
$100,000 $ 50,464 $ 50,464 $ 50,464 $ 56,675
$150,000 $ 82,464 $ 82,464 $ 82,464 $ 86,374
$200,000 $ 114,464 $ 114,464 $ 114,464 $ 115,641
$250,000 $ 146,464 $ 146,464 $ 146,464 $ 146,464
$300,000 $ 178,464 $ 178,464 $ 178,464 $ 178,464
$350,000 $ 210,464 $ 210,464 $ 210,464 $ 210,464
$400,000 $ 242,464 $ 242,464 $ 242,464 $ 242,464
$450,000 $ 274,464 $ 274,464 $ 274,464 $ 274,464
$500,000 $ 306,464 $ 306,464 $ 306,464 $ 306,464
$550,000 $ 338,464 $ 338,464 $ 338,464 $ 338,464
$600,000 $ 370,464 $ 370,464 $ 370,464 $ 370,464
$650,000 $ 402,464 $ 402,464 $ 402,464 $ 402,464
$700,000 $ 434,464 $ 434,464 $ 434,464 $ 434,464
$750,000 $ 466,464 $ 466,464 $ 466,464 $ 466,464
$800,000 $ 498,464 $ 498,464 $ 498,464 $ 498,464
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 or, in the case of a participant who has been
employed for less than five full calendar years, the period of his or her
employment with LG&E and its subsidiaries. The estimated years of service for
each named executive is as follows: 3 years for Mr. Casey; 27 years for Mr.
Hale; 1 year for Mr. Staffieri; 9 years for Mr. Markel; and 4 years for Mr.
Wood. Benefits shown are computed as a straight life single annuity beginning at
age 65.
Current Federal law prohibits paying benefits under the Retirement Income
Plan in excess of $115,641 per year. Officers of LG&E and LG&E Energy with at
least one year of service with either company are eligible to participate in
LG&E's Supplemental Executive Retirement Plan (the "Supplemental Executive
Retirement Plan"), which is an unfunded supplemental plan that is not subject to
the $115,641 limit. Presently, participants in the Supplemental Executive
Retirement Plan consist of all of the eligible officers of LG&E and LG&E Energy.
This plan provides generally for retirement benefits equal to 64% of average
current earnings during the final 36 months prior to retirement, reduced by
Social Security benefits, by amounts received under the Retirement Income Plan
and by benefits from other employers. As part of its employment agreement with
Mr. Hale, LG&E established a separate Supplemental Executive Retirement Plan.
The special plan generally provides for a retirement benefit for Mr. Hale of 2%
for each of his first 20 years of service with LG&E, LG&E Energy or with certain
prior employers, 1.5% for each of the next 10 years of service and 1% for each
remaining year of service completed prior to age 65, all multiplied by Mr.
Hale's final 60 months average compensation, less benefits payable from the
Retirement Income Plan, benefits payable from any other qualified or
non-qualified plan sponsored by LG&E, LG&E Energy or certain prior employers,
and primary Social Security benefits. Under Mr. Hale's new employment agreement
(see page 16 of this proxy statement), he may elect to commence payment of his
retirement benefits at age 50. If he retires prior to age 65, Mr. Hale's
benefits will be reduced by factors set forth in the employment agreement.
15
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 $213,108 for Mr.
Casey; $362,052 for Mr. Hale; $122,508 for Mr. Markel; $169,452 for Mr.
Staffieri; and $157,548 for Mr. Wood.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Ballard, Barr, Dabney, Gardner and Morton, Dr. Swain and Mrs.
McNamara served as members of the Compensation Committee during 1993. None of
the members of the Compensation Committee are or were officers or employees of
LG&E or its affiliates. Mr. Ballard is of counsel to the law firm of Greenebaum
Doll & McDonald, which provides legal services to LG&E from time to time.
EMPLOYMENT CONTRACT AND TERMINATION OF EMPLOYMENT
ARRANGEMENTS AND CHANGE IN CONTROL PROVISIONS
Roger W. Hale entered into an employment agreement with LG&E Energy for
services to be provided to LG&E and LG&E Energy through December 31, 1994. Mr.
Hale is entitled under this agreement to a minimum base salary of $25,000 per
month (subject to annual review by the Compensation Committee), and to
participate in the Short-Term Plan and the Long-Term Plan. Mr. Hale's
arrangement with LG&E Energy provides for a stock option target award of 45% of
base salary and a long-term incentive target award of 100% of base salary. LG&E
Energy's Board of Directors may terminate the agreement at any time and, if it
does so for reasons other than cause, LG&E Energy must pay Mr. Hale's base
salary for two years.
In November 1993, Mr. Hale entered into a new employment agreement with LG&E
Energy superseding the prior agreement. The new agreement was effective upon its
execution, and extends through December 31, 1998. Under the new agreement, Mr.
Hale is entitled to an annual base salary of not less than $385,000, subject to
annual review by the Compensation Committee. The other substantive terms of the
new agreement related to compensation remain essentially unchanged from the
previous contract.
In the event of a change in control, all officers of LG&E and LG&E Energy
shall be entitled to the following payments if, within twenty-four months after
such change in control, they are terminated for reasons other than cause or
disability, or their employment responsibilities are altered: (i) all accrued
compensation; (ii) a severance amount equal to 2.99 times the sum of (a) his or
her annual base salary and (b) his or her "target" award pursuant to the
Short-Term Plan. However, in no event is the payment to the executive to equal
or exceed an amount which would constitute a nondeductible payment pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or
be subject to an excise tax imposed by Section 4999 of the Code. The executive
is entitled to receive such amounts in a lump-sum payment within thirty days of
termination. A change in control encompasses certain mergers and acquisitions,
changes in Board membership and acquisitions of voting securities of LG&E
Energy.
Also upon a change in control of LG&E Energy, all stock-based awards shall
vest 100%, and all performance-based awards, such as performance units and
performance shares, shall immediately be paid out in cash, based upon the extent
to which the performance goals have been met through the effective date of the
change in control or based upon the assumed achievement of such goals, whichever
amount is higher.
16
STOCKHOLDER PROPOSALS
FOR 1995 ANNUAL MEETING
Any stockholder may submit a proposal for consideration at the 1995 Annual
Meeting. Any stockholder desiring to submit a proposal for inclusion in the
proxy statement for consideration at the 1995 Annual Meeting should forward the
proposal so that it will be received at LG&E's principal executive offices no
later than November 28, 1994. 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 1995 proxy
statement.
OTHER MATTERS
At the Annual Meeting, it is intended that the first two items set forth in
the accompanying notice and described in this proxy statement will be presented.
Should any other matter be properly presented at the Annual Meeting, the persons
named in the accompanying proxy will vote upon them in accordance with their
best judgment. The Board of Directors knows of no other matters which may be
presented at the meeting.
LG&E will bear the costs of this proxy solicitation. LG&E will provide
copies of this proxy statement, the accompanying proxy and the Annual Report to
brokers, dealers, banks and voting trustees, and their nominees, for mailing to
beneficial owners, and upon request therefor, will reimburse such record holders
for their reasonable expenses in forwarding solicitation materials. In addition
to using the mails, proxies may be solicited by directors, officers and regular
employees of LG&E or its subsidiaries, in person or by telephone. LG&E and LG&E
Energy have retained D.F. King & Co., Inc., a firm of professional proxy
solicitors, to assist in the solicitations at an estimated fee of $5,000 plus
reimbursement of reasonable expenses.
ANY STOCKHOLDER MAY OBTAIN WITHOUT CHARGE A COPY OF LG&E'S ANNUAL REPORT ON
FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR
1993, BY SUBMITTING A REQUEST IN WRITING TO: DOROTHY E. O'BRIEN, SECRETARY,
LOUISVILLE GAS AND ELECTRIC COMPANY, P.O. BOX 32010, 220 WEST MAIN STREET,
LOUISVILLE, KENTUCKY 40232.
17
ANNUAL MEETING OF STOCKHOLDERS -- MAY 24, 1994
The Annual Meeting of Stockholders of Louisville Gas and Electric Company will
be held on Tuesday, May 24, 1994, at 10:00 a.m. at the Hyatt Regency
Louisville, 320 West Jefferson Street, Louisville, Kentucky. The left side
of this form is a ticket request form. If you plan to attend the Annual
Meeting, please return the ticket request form with your proxy. An admission
ticket will be mailed to you prior to the meeting. If you wish to attend the
meeting but do not have a ticket, you will be admitted to the meeting after
presenting personal identification and proof of ownership.
THE BOTTOM RIGHT PORTION OF THIS FORM IS THE PROXY CARD. Each proposal
is fully explained in the enclosed Notice of Annual Meeting of Stockholders
and Proxy Statement. To vote your proxy, please MARK by placing an "X" in the
appropriate box, SIGN and DATE the proxy. Then please DETACH and RETURN the
completed proxy promptly in the enclosed envelope.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
DETACH HERE DETACH HERE
- -------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS PROXY
PREFERRED LOUISVILLE GAS AND ELECTRIC COMPANY
/ / FOR all nominees listed below 220 WEST MAIN STREET
(except as marked to the con- P.O. BOX 32010
rary below) LOUISVILLE, KENTUCKY 40232
/ / WITHHOLD AUTHORITY to ACCOUNT NUMBER PREFERRED SHARES OF RECORD
vote for all nominees listed
below
(INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR AN INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME)
WILLIAM C. BALLARD, JR.
S. GORDON DABNEY
T. BALLARD MORTON, JR.
2. APPROVAL OF ARTHUR ANDERSEN
& CO. AS INDEPENDENT AUDITORS __________________ __________________
SIGNATURE SIGNATURE
/ / FOR / / AGAINST / / ABSTAIN __________________
DATE SIGNATURE(S) SHOULD
CORRESPOND TO THE NAME(S)
APPEARING IN THIS PROXY.
IF EXECUTOR, TRUSTEE,
GUARDIAN, ETC. PLEASE
INDICATE.
- -------------------------------------------------------------------------------
DETACH HERE DETACH HERE
PLEASE SEND AN ADMITTANCE TICKET TO:
LOUISVILLE GAS AND ELECTRIC COMPANY
220 WEST MAIN STREET
P.O. BOX 32010
LOUISVILLE, KENTUCKY 40232
TICKET REQUEST
(PLEASE RETURN THIS CARD BY MAY 9, 1994)
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LOUISVILLE GAS AND ELECTRIC COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- MAY 24, 1994
Roger W. Hale, Victor A. Staffieri and Edward J. Casey, Jr. are hereby
appointed as proxies, with full power of substitution, to vote the shares of
the stockholder(s) named on the reverse side hereof, at the Annual Meeting of
Stockholders of Louisville Gas and Electric Company to be held on May 24,
1994, and at any adjournment thereof, as directed on the reverse side hereof,
and in their discretion to act upon any other matters that may properly come
before the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS YOU SPECIFY. IF NOT SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2. A VOTE FOR PROPOSAL 1 INCLUDES DISCRETIONARY AUTHORITY TO CUMULATE
VOTES SELECTIVELY AMONG THE NOMINEES AS TO WHOM AUTHORITY TO VOTE HAS NOT BEEN
WITHHELD.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN THE
COMPLETED PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.