SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e) (2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|X| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Cogeneration Corporation of America
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing party:
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(4) Date filed:
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Preliminary Copies
COGENERATION CORPORATION OF AMERICA
One Carlson Parkway, Suite 240
Minneapolis, Minnesota 55447-4454
SOLICITATION IN OPPOSITION
TO
PROXY STATEMENT
AND
CONSENT STATEMENT
OF
NRG ENERGY, INC.
----------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 12, 1998
----------------
GENERAL INFORMATION
Cogeneration Corporation of America, a Delaware corporation (the
"Company"), is distributing this opposition solicitation to its stockholders in
connection with a Special Meeting of Stockholders of the Company to be held at
8:00 a.m., Local Time, on Thursday, November 12, 1998, at the Hyatt Regency
Hotel, 1300 Nicollet Mall, Minneapolis, Minnesota 55403, which was called upon
the demand of NRG Energy, Inc. ("NRG"), a wholly-owned subsidiary of Northern
States Power Company ("NSP"). The purpose of the Meeting is to consider and act
upon a proposal made by NRG to remove Robert T. Sherman, Jr., the Company's
Chief Executive Officer, from his position as a director of the Company.
This opposition solicitation and the enclosed WHITE proxy card are first
being mailed to stockholders on or about October [21], 1998.
The Company, its three independent directors and its chief executive
officer (who is also a director of the Company), are Participants in this
opposition solicitation. The Company's three independent directors, Lawrence I.
Littman, Spyros S. Skouras, Jr. and Charles J. Thayer (collectively, the
"Independent Directors") comprise the Company's Independent Directors Committee.
The Participants believe that it is not in the interest of the Company or
the Company's public stockholders who own a majority of the Company's stock and
who are not affiliated with NSP that Robert Sherman be removed as a director of
the Company which would result in NSP's NRG unit taking control of the Board of
Directors and eventually the day to day operations of the Company. The
Participants also believe that they have an obligation to correct certain
misstatements contained in NRG's Proxy Statement and Consent Statement. The
basis for such belief, and a discussion of such misstatements, appear below.
<PAGE>
At the Meeting, a quorum will consist of 60% of the votes entitled to be
cast by the holders of all shares of Common Stock that are outstanding and
entitled to vote. Approval of the NRG Proposal requires the affirmative vote of
only a majority of the shares of Common Stock present or represented by proxy at
the Meeting and entitled to vote. Because NRG owns or controls approximately
47.6% of the outstanding shares, these shares would be a majority of the shares
at the Meeting, even if every other share which was voted, was voted against the
NRG Proposal (except in the unlikely situation where more than 95.2% of the
outstanding shares were present or represented by proxies at the Meeting).
However, NRG does require the proxies, either voting in favor of or against or
abstaining on the NRG Proposal, of 12.4% of the outstanding shares to gain a
quorum to hold a valid Meeting. As a result, it will be more difficult for NRG
to obtain a quorum for the Meeting if a significant number of stockholders
refuse or fail to participate in the Meeting than it will be to obtain
sufficient votes to remove Robert Sherman as a director of the Company.
Accordingly, the purpose of this opposition solicitation is to encourage
you to execute and return the enclosed WHITE proxy card which is solicited by
the Company in order to have you (i) revoke all prior proxies and consents given
by you to NRG, (ii) vote against the NRG Proposal and (iii) grant the right to
the persons appointed on the enclosed WHITE proxy card to boycott the Meeting if
they determine that doing so will be the most effective way to prevent the NRG
Proposal from being passed. The WHITE proxy card will be used to boycott the
Meeting if it appears to the persons appointed that NRG does not have sufficient
proxies to obtain a quorum for the Meeting. That decision cannot be made until
the time of the Meeting.
The Company believes that David H. Peterson, Julie A. Jorgensen, Craig A.
Mataczynski and Ronald J. Will, directors of the Company who are employees of
NRG, support the NRG Proposal and, therefore, are not Participants in this
solicitation.
At your option, you may revoke a proxy delivered pursuant to this
solicitation at any time before it is exercised. A proxy may be revoked by
executing and delivering a later dated proxy, by delivering written notice of
the revocation of the proxy to the Secretary of the Company prior to the
Meeting, or by attending and voting at the Meeting. Attendance at the Meeting,
in and of itself, will not constitute a revocation of a proxy.
If you duly execute and return the enclosed WHITE proxy card prior to the
Meeting, and do not thereafter revoke it, and no decision is made to boycott the
Meeting, your shares will be voted. If no directions are specified, your shares
will be counted towards a quorum and voted AGAINST the removal of Robert Sherman
from his position as a member of the Company's Board of Directors, FOR granting
the right to the persons appointed on the WHITE proxy card to boycott the
Meeting if they determine that doing so will be the most effective way to
prevent the NRG Proposal from being passed, and, in accordance with the
discretion of the named proxies, on other matters that may properly be brought
before the Meeting.
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<PAGE>
If your shares are held in the name of a bank, broker, or other nominee,
you are urged to contact the person responsible for your account and direct him
or her to execute a WHITE proxy card on your behalf.
The close of business on October 8, 1998 has been fixed as the Record Date
for the determination of stockholders of the Company entitled to notice of and
to vote at the Meeting. On that date, the Company had outstanding 6,871,069
shares of its Common Stock. Each share of Common Stock entitles the holder to
one vote.
At the Meeting, abstentions will be treated as present for purposes of
determining a quorum, while shares held by a broker that the broker fails to
vote ("broker non-votes") will not be treated as present for quorum purposes.
Abstentions will have the effect of votes against the approval of the NRG
Proposal. However, under applicable Delaware law, a broker non-vote will have no
effect on the outcome of the NRG Proposal.
Certain information required to be disclosed in this opposition
solicitation pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934 is included on Schedule A which is attached to this
opposition solicitation.
REASONS FOR OPPOSING THE NRG PROPOSAL
The Company and the Independent Directors strongly believe that it is not
in the Company's interest or the interest of the Company's public stockholders
who own a majority of the Company's stock and who are not affiliated with NSP
that Robert Sherman be removed as a director of the Company. Such removal would
result in NSP's NRG unit taking control of the Board of Directors of the Company
and, eventually, the day to day operations of the Company.
NRG employees presently occupy four of the eight seats on the Company's
Board of Directors. The Chairman of NRG, David Peterson, is also the Chairman of
the Company's Board of Directors. Three of the remaining seats are held, in
accordance with the Company's bylaws, by the Independent Directors. The fourth
seat is held by the Company's President and Chief Executive Officer, Robert
Sherman.
NRG has indicated that if it is successful in removing Mr. Sherman from
the Company's Board of Directors, it plans to terminate immediately his
employment with the Company. NRG proposes to replace Mr. Sherman in both
capacities - as a director and as chief executive officer - with yet another
NSP-affiliated employee, which would give NSP control of five of the eight seats
on the Board, as well as control of the daily operations of the Company as
carried out by its chief executive officer.
The Company and the Independent Directors believe it to be poor corporate
governance willingly to permit a 45% stockholder to both control its Board of
Directors and its chief executive officer. Admittedly, NRG nominees comprised a
majority of the Company's Board of Directors pursuant to the plan of
reorganization approved by the Bankruptcy Court when the Company emerged from
bankruptcy.
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<PAGE>
Indeed, some of the Participants in this solicitation were involved in the
negotiation and implementation of that governance structure. However, since that
structure changed with the election of Mr. Sherman as Chief Executive Officer
and a director, it has become clear to the Participants in this solicitation in
light of the conduct of NRG's board appointees (with NSP's acquiescence), that a
governance structure permitting NRG to control both the Board of Directors and
the chief executive officer would make the necessary accountability of
management to the full board practically meaningless and leaves practical
control of all aspects of the Company's governance and operations in the hands
of one party. A majority of the Board of Directors can not only change the
Company's management, but also amend many of the Company's bylaws, at will. This
change has become increasingly significant because, in the view of the
Participants, the NRG nominees have been willing to permit NSP's NRG unit to
take advantage of the Company and its public stockholders.
NRG has publicly announced that it has met its minimum obligation to the
Company under the Co-Investment Agreement entered into on April 30, 1996 (which
was intended to be the Company's primary vehicle for growth for seven years).
Because NRG and the Company are competitors in the same market for cogeneration
energy projects, there is an inherent conflict of interests between NSP's NRG
unit and the Company's public stockholders - one's advantage is the other's
disadvantage. The Independent Directors Committee is very concerned that NRG
will not provide additional projects to the Company to foster future growth.
Furthermore, if NSP gains control of the Board of Directors of the Company, it
will be in a position to acquire projects at the expense of the Company without
the check of a meaningful independent voice - neither in management nor on the
Board. The Independent Directors do not have the same ability or time to monitor
the day to day conduct of the Company, NSP or NSP's NRG unit as the Company's
independent Chief Executive Officer. In addition, NSP would be in a position,
and would have an incentive, to compel the Company to take actions that could be
in the interests of NSP and its NRG unit and not the Company and its public
stockholders.
Allowing NSP to both control the Company's Board of Directors and its
daily operations (through its "control" of the chief executive officer) has the
potential of causing severe and irreparable harm to the Company and its public
stockholders who are unaffiliated with NSP. The Company believes that in the
past NSP has consistently demonstrated a desire to take advantage of the Company
and its public stockholders by unreasonably using its influence to the
disadvantage of the public stockholders. Of course, all of the Company's
directors, whether NRG affiliates or not, have a fiduciary duty to the Company
and to all of its stockholders
With the current balance of power, management of the Company, under the
independent leadership of Robert Sherman, has worked together with the
Independent Directors Committee to monitor NSP's and NRG's actions and to
protect the interests of the Company and its public stockholders. Such
protection by independent management would, to a large degree, disappear if the
NRG Proposal is passed.
o NRG has consistently offered the Company projects for purchase under the
Co-Investment Agreement at prices significantly in excess of fair market
values.
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<PAGE>
o NSP's NRG unit initially offered to sell the Company its interest in a
project located in Morris, Illinois (the "Morris Project") for
approximately $8,000,000. After a thorough analysis of the project and its
potential benefits to the Company, Mr. Sherman and the Company's
management determined that such a price was excessively high and
recommended that the Company not enter into an agreement on such terms.
With the support of the Independent Directors Committee, the Company made
a counter-offer for approximately $5,000,000 which was eventually
accepted. During negotiations in which NRG attempted to finance the sale
of the project to the Company on onerous terms, the Company learned that,
in addition to the $5,000,000 that it agreed to pay NRG, NRG caused to be
paid to itself a $4,000,000 development fee from the Morris Project which
would have given NRG a total of approximately $9,000,000 for the
transaction. Management was able to negotiate to have NRG credit the
$4,000,000 development fee taken from the Morris Project against the
$5,000,000 purchase price.
o Pursuant to the Co-Investment Agreement, NRG initially offered to sell its
interest in the Mid-Continent Power Company ("MCPC") to the Company for
approximately $36,000,000 ($21,000,000 more than NRG initially paid for
its interest). This offer was not recommended by management and --- was
rejected by the Independent Directors Committee - the price was determined
to be excessive and "above market". NRG then offered the project to a
third-party for approximately $25,000,000 ignoring the Company's right of
first refusal contained in the Co-Investment Agreement.
After failed negotiations with NRG to resolve these issues, the
Independent Directors Committee was compelled to seek costly arbitration
to prevent the loss to the Company's public stockholders of the
substantial value represented by the MCPC project. Following the unanimous
decision of the arbitration panel to force NRG to offer MCPC to the
Company for $25,000,000 (saving the Company and its public stockholders
more than $10,000,000), NRG commenced its proxy solicitation to oust Mr.
Sherman.
The Company believes that the real underlying reason for NRG's proxy
solicitation is retaliation for NRG's loss in the arbitration. This belief
comes from the fact that the NRG-affiliated directors voted to re-elect
Mr. Sherman as Chief Executive Officer on August 10, 1998 and the Company
believes that the only material event which occurred at this time was the
MCPC arbitration. The formal decision to buy MCPC (over the continuing
opposition of NRG) was made at the beginning of September, less than two
weeks before NRG filed its proxy materials.
o NRG has indicated that it intends to seek reimbursement from the Company
in connection with its proxy and consent solicitation and in connection
with litigations that may arise out of its proxy and consent solicitation
if the NRG Proposal is approved, without submitting the request for such
reimbursements to a vote of the Company's stockholders.
The Independent Directors Committee has worked with the Company's Chief
Executive Officer to advise it with respect to NSP's and NRG's actions,
especially those actions requiring Mr. Sherman's particular expertise in the
energy businesses. The independent directors do not believe that they have the
time or the expertise to monitor on
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<PAGE>
a day to day basis the Company's interaction with NSP or NRG without the benefit
of an independent Company executive, one who is not responsible to NRG. It is
for this reason that the Board of Directors initiated a search for an
independent Chief Executive Officer when the vacancy in the position occurred.
Mr. Sherman has been instrumental in zealously protecting the Company from
overpaying for projects offered by NRG under the Co-Investment Agreement.
INACCURACIES CONTAINED IN NRG'S PROXY STATEMENT
The Company believes that certain misstatements and inaccuracies are
contained in NRG's Proxy Statement and Consent Statement.
o Although NRG complains of communication failures within the Company, the
Company and the Independent Directors know of no instances of failed
communication except that of the NRG-employee directors neglecting to
notify the Independent Directors of their intention to commence the NRG
proxy solicitation.
o The NRG proxy materials imply that if its proposal is successful, NRG will
seek to terminate Mr. Sherman's employment with the Company "for cause".
No facts have been presented supporting Mr. Sherman's termination for
cause, nor does the Company believe that any such facts exist. The
dismissal of Mr. Sherman in violation of his employment contract will
result in substantial financial liabilities to the Company.
o Despite implications to the contrary, the Company's financial performance
for 1998 is positive, with pre-tax income up approximately 34% for the
first 6 months compared to the same period for 1997.
o NRG's statement that new projects and financing plans are not presented to
the full Board of Directors is untrue.
THE COMPANY'S GOOD FAITH ATTEMPTS TO RESOLVE NRG'S ISSUES
The Independent Directors have attempted to engage both NSP and NRG in
discussions intended to resolve the issues addressed by the NRG Proxy Statement
and Consent Statement and to encourage the joint development of a plan to
maximize the Company's value for stockholders. On September 19, 1998, shortly
after the filing of NRG's preliminary proxy materials with the Securities and
Exchange Commission, the Independent Directors Committee sent a letter to the
Chairman and Chief Executive Officer of NSP, James J. Howard, seeking a meeting
to understand the basis for NRG's actions. No response was received and so, on
September 28, 1998, the Independent Directors Committee sent a second letter to
Mr. Howard. To date, neither Mr. Howard nor any representatives of NSP or NRG
have chosen to meet with the Independent Directors Committee to attempt to
resolve NRG's (and NSP's) issues and explain the reasons for NRG's (and NSP's)
hostile actions. Copies of the letters referred to above are attached as Exhibit
1 to this opposition solicitation.
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<PAGE>
CONCLUSION
The Company believes that, taking into account NRG's 45% ownership of the
Common Stock, an even division on the Board between NRG nominees and other
directors (a 50% representation) more than adequately represents that stock
ownership. However, four out of seven directors (or a 57% representation),
assuming that the vacancy resulting from Mr. Sherman's removal is not filled, or
five out of eight directors (or a 62.5% representation), assuming that the
vacancy is filled by a director named by NRG, would comprise an
over-representation on the Board. In seeking to be over-represented on the Board
of Directors of the Company, neither NSP nor NRG has offered any assurances of
continued independence of action to the Company. NRG has made no attempt to deal
with the existing conflicting obligations put upon the affiliates and officers
of NRG that it appoints to the Company's Board of Directors in such critical
areas as avoiding misappropriation of corporate opportunities, avoiding
conflicts in the development and implementation of competing business plans,
maintaining Company personnel distinct from NRG employees, or assuring
confidential technical and financial support for potential projects that may be
attractive to both NRG and the Company. In general, there has been no indication
from NSP or NRG as to how they will seek to achieve good corporate governance
for the benefit of all stockholders, rather than simply looking out for their
own interests. Of course, all of the Company's directors, whether NRG affiliates
or not, have a fiduciary duty to the Company and to all of its stockholders.
NRG's hostile actions create uncertainty not only for the future direction
of the Company, and for the Company's stockholders, officers and customers, but
for the Company's sources of financing. At the present time, the Company is
seeking credit lines to finance its future growth, including, among other
matters, its purchase of the MCPC project. At least one prospective lender has
informed the Company that, in the face of NRG's pending hostile solicitation, it
will no longer pursue financing with the Company.
In light of NRG's public statement that it has fulfilled its minimum
obligation to the Company under the Co-Investment Agreement, the Company and the
Independent Directors Committee believe that the future independence and success
of the Company depends on, among other matters, its ability to source and
operate power projects. The Company and the Independent Directors Committee
believe that NSP's and NRG's actions threaten the Company's ability to achieve
those necessary objectives.
The Company and the Independent Directors Committee believe that it is in
the Company's best interest and the best interest of its public stockholders who
own a majority of the Company's stock and who are unaffiliated with NSP to
preserve the current balance of power existing both on the Company's Board of
Directors and between its management and a powerful minority stockholder.
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<PAGE>
SCHEDULE A
INFORMATION REGARDING PARTICIPANTS
Certain information concerning each of the directors and executive
officers of the Company who are Participants is set forth below.
Lawrence I. Littman, age 67, has served as an Independent Director of the
Company since April 1996. Since May 1996, Mr. Littman has been a director of Car
One, a division of Liberty Cab & Limousine Company. He was Chief Executive
Officer of Liberty Cab & Limousine Company from 1967 to 1992 and General Manager
from 1992 to May 1996. From 1984 to June 1993, he served as Chief Executive
Officer of Lil Stable, Inc. Mr. Littman's business address is 1660 South A1A,
Apartment 212, Jupiter, Florida 33477-8449.
Robert T. Sherman, Jr., age 45, has served as President, Chief Executive
Officer and a Director of the Company since May 1997. From 1991 to May 1997, Mr.
Sherman was Vice President at Cogen Technologies, Inc., a privately-held company
developing cogeneration projects. From 1985 to 1991, he served in various
capacities as a senior officer of CRSS Capital, Inc., a wholly-owned subsidiary
of CRSS Inc. that provides energy services to industrial companies. Mr.
Sherman's business address is One Carlson Parkway, Suite 240, Minneapolis,
Minnesota 55447-4454.
Spyros S. Skouras, Jr., age 45, has served as an Independent Director of
the Company since July 1995. He is currently a Managing Director of S Three
Capital LLC. From April 1995 until May 1998, Mr. Skouras served as Senior Vice
President of Wexford Management LLC ("Wexford"). Prior to joining Wexford, Mr.
Skouras was President of Skouras Capital from 1991 to March 1995 and Chief
Operating Officer of Prudential-Grace Lines, Inc. from 1976 to 1990. Mr.
Skouras's business address is Three Stamford Plaza, 301 Tresser Boulevard, 9th
Floor, Stamford, Connecticut 06901.
Charles J. Thayer, age 54, has served as an Independent Director of the
Company since April 1996. He has also served as Managing Director of Cartwell
Capital Ltd., a private NASD member investment firm, since 1989. He was Chairman
and Interim Chief Executive Officer of Sunbeam Corporation from January 1993 to
August 1993, Vice Chairman from April 1996 to August 1996 and a director from
1990 to April 1997. Mr. Thayer has served as Trustee of the Cystic Fibrosis
Foundation since 1980 and currently serves as Vice Chairman of the foundation
and as Chairman of the Board of Cystic Fibrosis Services. He is an Advisory
Director of the Louisville Community Development Bank. Mr. Thayer is also a
director of Digital Wireless Corporation. Mr. Thayer's business address is P.O.
Box 2247, Fort Lauderdale, Florida 33303-2247.
Except as disclosed in this opposition solicitation, to the knowledge of
the Company, no Participant
o owns any securities of the Company or any subsidiary of the Company,
beneficially or of record, or has purchased or sold any of such
securities within the past two years;
A-1
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o or any of their associates beneficially own, directly or indirectly,
any securities of the Company;
o has any substantial interest, direct or indirect, by security
holdings or otherwise, in any matter to be acted upon at the
Meeting;
o is, or has been within the past year, a party to any contract,
arrangement, or understanding with any person with respect to any
securities of the Company, including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees
against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies;
o or any of their associates, has had or will have a direct or
indirect material interest in any transaction or series of similar
transactions since the beginning of the Company's last fiscal year
or any currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or
is to be a party in which the amount involved exceeds $60,000;
o or any of their associates, has any arrangements or understandings
with any person with respect to any future employment by the Company
or its affiliates or with respect to any future transactions to
which the Company or any of its affiliates will or may be a party.
The total number of shares (including currently exercisable options) held
by Participants as of October [ ], 1998, is [90,070] shares, or [ ]% of the
total shares outstanding. Without giving effect to currently exercisable
options, the participants own a total of [25,070] shares, or approximately [ ]%
of the outstanding shares. Information regarding the ownership by each
participant of the Company's securities is set forth in this opposition
solicitation under "Security Ownership of Certain Beneficial Owners and
Management".
The following table sets forth information concerning each Participant's
purchases and sales of the Company's securities, since October [ ], 1996.
Name Date Nature of Transaction Number of Shares
- ---- ---- --------------------- ----------------
Lawrence I. Littman
Robert T. Sherman, Jr. 8/20/98 Purchase 500
Spyros S. Skouras, Jr.
Charles J. Thayer
A-2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding shares of
Common Stock beneficially owned as of October 5, 1998 (except as otherwise noted
below) by each (i) person believed by the Company to own beneficially more than
five percent of the outstanding shares of Common Stock, (ii) director (which
does not include a director emeritus) and (iii) of the Company's three most
highly compensated executive officers, and the directors (which does not include
a director emeritus) and executive officers of the Company as a group, and the
percentage of the outstanding shares of Common Stock represented thereby. Other
than as set forth below, no director or executive officer of the Company is
known to be the beneficial owner of any shares of Common Stock. Except as noted
below, the Company believes that each of the persons listed has sole investment
and voting power with respect to the shares included in the table.
Shares Beneficially Owned (1)
-------------------------------
Name Number of Shares Percent
- --------------------------------------------- ---------------- ------------
NRG Energy, Inc. (2)
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445.................. 3,254,288 47.60%
Northern States Power Company (2)
414 Nicollet Mall, Fourth Floor
Minneapolis, MN 55401........................ 3,254,288 47.60
Wexford Capital Partners II, LP (3)
411 West Putnam Avenue
Greenwich, CT 06830......................... 443,976 6.49
David H. Peterson (4)........................ 11,000 *
Leonard A. Bluhm (5)(6)...................... 11,500 *
Julie A. Jorgensen (7)....................... -- --
Lawrence I. Littman (5)...................... 10,070 *
Craig A. Mataczynski (8)..................... 10,500 *
Robert T. Sherman, Jr. (9)................... 40,500 *
Spyros S. Skouras, Jr. (10).................. 10,000 *
Charles J. Thayer (11)....................... 30,000 *
Ronald J. Will (12).......................... 12,500 *
Timothy P. Hunstad (13)...................... 25,500 *
Directors and Executive Officers as a group
(9 persons) (14)........................... 150,000 2.2
- ----------------
* Represents less than 1.0% of the outstanding shares of Common Stock.
(1) Under the rules of the Commission, a person is deemed to be a beneficial
owner of a security if he or she has or shares the power to vote or to
direct the voting of such security, or the power to dispose or to direct
the disposition of such security. A person is also deemed to be a
beneficial owner of any securities that such person has the right to
acquire beneficial ownership of within 60 days as well as any securities
owned
A-3
<PAGE>
by such person's spouse, children or relatives living in the same
household. Accordingly, more than one person may be deemed to be a
beneficial owner of the same securities.
(2) Includes 3,106,612 shares as to which NRG has sole voting and investment
power, and 147,676 shares as to which NRG has sole voting power only. The
shares listed as beneficially owned by NSP are owned by NRG, its
wholly-owned subsidiary. The foregoing information is as of the date set
forth in and based solely on a Schedule 13D filed April 14, 1998.
(3) Includes 348,672 shares owned by Wexford Capital Partners II, LP and
95,304 shares owned by Wexford Overseas Partners Fund I, LP. Through an
investment management agreement, Wexford Management LLC, which manages the
funds, has sole voting and investment power of the funds. This information
is as of the date set forth in and based on the Schedule 13D filed May 8,
1997 and other information furnished to the Company by Wexford Management
LLC.
(4) Includes 10,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of October 5, 1998. In addition, Mr. Peterson
beneficially owns approximately 25,912 shares of NSP Common Stock,
including approximately 7,708 shares of NSP Common Stock through an
employee stock ownership plan and 18,204 shares issuable upon exercise of
NSP stock options that may be exercised within 60 days of October 5, 1998.
(5) Includes 10,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of April 10, 1998.
(6) Mr. Bluhm resigned as Chief Executive Officer of the Company on April 30,
1997.
(7) Ms. Jorgensen beneficially owns approximately 24,067 shares of NSP Common
Stock, including (i) approximately 372 shares of NSP Common Stock owned
through an employee stock ownership plan, (ii) approximately 321 shares of
NSP Common Stock held by Ms. Jorgensen's spouse through an employee stock
ownership plan, (iii) approximately 4,076 shares of NSP Common Stock owned
by Ms. Jorgensen's spouse, and for which she shares investment power and
(iv) 18,590 shares of NSP Common Stock issuable upon exercise of NSP stock
options owned by Ms. Jorgensen's spouse that may be exercised within 60
days of October 5, 1998.
(8) Includes 10,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of April 10, 1998. In addition, Mr. Mataczynski
beneficially owns approximately 2,627 shares of NSP Common Stock,
including approximately 1,131 shares of NSP Common Stock through an
employee stock ownership plan and 1,496 shares of NSP Common Stock
issuable upon exercise of NSP stock options that may be exercised within
60 days of October 5, 1998.
(9) Includes 35,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of April 10, 1998. In addition, Mr. Sherman
beneficially owns 200 shares of NSP Common Stock.
(10) Includes 10,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of April 10, 1998. Excludes shares held by
Wexford Management LLC, Mr. Skouras's former employer.
(11) Includes 10,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of April 10, 1998 and 10,000 shares owned by
Chartwell Capital Ltd. Mr. Thayer is the principal and Managing Director
of Chartwell Capital Ltd.
(12) Represents 2,500 shares of Common Stock held jointly with his spouse and
10,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of October 5, 1998. In addition, Mr. Will
beneficially owns approximately 15,584 shares of NSP Common Stock,
including (i) approximately 6,035 shares through an employee stock
ownership plan, (ii) 5,272 shares issuable upon exercise of NSP stock
options that may be exercised within 60 days of October 5, 1998, (iii)
4,076 shares of NSP Common Stock which held by Mr. Will's spouse through
an employee stock ownership plan and for which he shares
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investment power, and (iv) 201 shares of NSP Common Stock which he owns
jointly with his spouse and for which he shares investment power.
(13) Includes 25,000 shares issuable upon exercise of stock options that may be
exercised within 60 days of April 10, 1998.
(14) Includes 120,000 shares issuable upon exercise of stock options that may
be exercised within 60 days of April 10, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative Transactions
On January 31, 1996, the Company entered into a Management Services
Agreement with NRG. The Management Services Agreement provides that NRG will
provide management, administrative, operation, maintenance and certain other
services to the Company in connection with the day to day business of the
Company. The Company expensed approximately $562,000 during the fiscal year
ended December 31, 1997 pursuant to the Management Services Agreement with NRG.
In addition, the Company entered into a Leased Employee Agreement dated May 1,
1996 with NRG, whereby NRG agreed to lease its employee, Leonard A. Bluhm, to
the Company to perform the duties of President and Chief Executive Officer of
the Company. For the fiscal year ended December 31, 1997, the Company paid NRG
$7,252 which included the salary paid to Mr. Bluhm and other amounts necessary
to reimburse NRG for expenditures associated with or resulting from Mr. Bluhm's
employment.
Co-Investment Agreement
On April 30, 1996, the Company also entered into a Co-Investment Agreement
with NRG. Pursuant to the Co-Investment Agreement, NRG agreed to offer to the
Company ownership interests in certain power projects which were initially
developed by NRG or with respect to which NRG has entered into a binding
acquisition agreement with a third party. If any eligible project reaches
certain contract milestones (which include the execution of a binding power
purchase agreement and fuel supply agreement and the completion of a feasibility
and engineering study) by April 30, 2003, NRG has agreed to offer to sell to the
Company all of NRG's ownership interest in such project. Eligible projects
include, with certain exceptions and exclusions, proposed or existing electric
power plants within the United States which NRG initially develops or in which
NRG proposes to acquire an ownership interest. NRG is obligated under the
Co-Investment Agreement to offer to the Company, during the three-year period
ending on April 30, 1999, projects with an aggregate equity value of at least
$60,000,000 or a minimum of 150 net Mega Watts ("MW"). As of the date of this
opposition solicitation, ownership interests in projects with an aggregate of
more than 130 net MW have been offered under the Co-Investment Agreement,
including the 117 net MW Morris Project described below.
Among the exclusions from the Co-Investment Agreement are (i) any
ownership interest in a project which is below a level that would cause the
project (or its owners) to be in violation of the relevant power purchase
agreement or applicable state or federal law upon the generation of electricity
for sale by such project, (ii) any indirect ownership interest held by NRG in an
eligible project arising from NRG's direct or indirect ownership of equity
interests in the Company, (iii) any ownership interest in a facility below 25 MW
in capacity, and (iv) any
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ownership interest that is retained in order to later be sold in an exempt
transaction. Exempt transactions include (a) any sale or disposition of an
ownership interest that is consummated as a result of a foreclosure or
conveyance in lieu of foreclosure of liens or security interests, (b) any sale
or disposition of an ownership interest to a third party that is or will become
a participant in the eligible project, where the obligation to sell the interest
is incidental to the provision of services or the contribution of assets to the
project and is created prior to the execution and delivery of a binding power
purchase agreement and fuel supply agreement and the completion of an
engineering and feasibility study with respect to the project, and (c) any sale
or disposition of an ownership interest as part of a larger transaction
involving the sale of all or substantially all of the assets of NRG or the sale
of an equity interest in NRG, provided that the person acquiring the ownership
interest agrees to be bound by the Co-Investment Agreement.
In December 1997, a wholly-owned subsidiary of the Company purchased the
Morris Project from NRG. The Morris Project, with an aggregate of 117 net MW,
had been offered under the Co-Investment Agreement. Additionally, the Company
recently prevailed in an arbitration proceeding against NRG brought under the
Co-Investment Agreement regarding the Company's right of first refusal with
respect to the MCPC project - a 110 MW cogeneration facility in Pryor, Oklahoma.
In the arbitration, the Company contended that NRG, in violation of the
Co-Investment Agreement, improperly agreed to sell the MCPC project to a
third-party at a price approximately $10,000,000 below the original offer made
to the Company, without first offering it to the Company at the lower price.
Pursuant to the arbitration award, the Company has accepted NRG's offer to sell
the project on the same terms offered to the third party and expects to close
the transaction on or about October 15, 1998.
To facilitate the Company's ability to acquire ownership interests which
may be offered pursuant to its Co-Investment Agreement, NRG has agreed to
finance the Company's purchase of such ownership interests at commercially
competitive terms to the extent funds are unavailable to the Company on
comparable terms from other sources. Any such financing provided by NRG under
the terms of the Co-Investment Agreement is required to be recourse to the
Company and secured by a lien on the ownership interest acquired. Such financing
also is required to be repaid from the net proceeds received by the Company from
offerings of equity or debt securities of the Company (when market conditions
permit such offerings to be made on favorable terms) after taking into account
the working capital and other cash requirements of the Company as determined by
its Board of Directors. During the fiscal year ended December 31, 1997, NRG
provided approximately $818,000 in project and construction management services
rendered in connection with the Gray's Ferry Project partnership, of which the
Company is one-third owner.
In light of the Company's internal development activities, the Company
does not expect the Co-Investment Agreement to serve as the primary source of
future project development activities.
Sale of Power Operations, Inc.
Power Operations, Inc. ("Power Operations"), then a wholly-owned
subsidiary of the Company, assumed operations and maintenance responsibilities
for the Company's Newark facility and the Company's Parlin facility, in each
case replacing the former operator, on
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November 8, 1996 and December 31, 1996, respectively. Effective January 1, 1997,
Power Operations was sold by the Company to NRG for $10.00 plus the amount of
Power Operations' outstanding accounts receivable and an indemnification by NRG
to the Company for certain potential losses or other liabilities that might
occur with respect to the termination of the prior operator of the Newark and
Parlin facilities and the assumption by Power Operations of operations and
maintenance responsibilities for such facilities. The terms of this transaction
were approved by the Independent Directors Committee of the Company's Board of
Directors as required by the Company's By-laws.
NRG Option
In March 1996, NRG and NRGG (Schuylkill) Cogeneration Inc. ("NSC"), a
wholly-owned subsidiary of the Company, entered into a $10,000,000 loan
agreement (the "Cogeneration Note") to provide a means of funding an NSC capital
contribution obligation to the Grays Ferry Cogeneration Partnership. In
connection with NRG's assistance with the Gray's Ferry project, its financing
and the Note, the Company granted NRG the right to convert a portion of
borrowings under the Note to Common Stock of the Company (the "Option"). On
November 25, 1997, NRG exercised such option and reduced the outstanding
principal amount of the Note by $3,000,000 in exchange for 396,255 shares of the
Company's Common Stock.
Morris Project Acquisition
In December 1997, NRGG Funding Inc. ("NRGG Funding"), a wholly-owned
subsidiary of the Company, completed its acquisition from NRG of all of NRG's
interest in a 117 MW project located in Morris, Illinois by acquiring 100% of
the interests in NRG (Morris) Cogen, LLC ("Morris LLC"). Morris LLC has the
exclusive right to build and operate a cogeneration plant to be located in
Morris, Illinois within a petrochemical manufacturing facility, which is owned
by Equistar Chemicals LP ("Equistar"), a joint venture of Millennium Chemicals
Inc. and Lyondell Petrochemical Company. A 25-year agreement has been executed
for the sale of steam and electric output from the project. NRG commenced
construction of the Morris Project in September 1997 with commercial operation
currently expected to occur in the fourth quarter of 1998.
NRGG Funding agreed to assume all of the obligations of NRG and to provide
future equity contributions to Morris LLC which are limited to the lesser of 20%
of the total project cost or $22,000,000. NRG has guaranteed to the Morris
Project's lenders that NRGG Funding will make these future equity contributions,
and the Company has guaranteed to NRG the obligation of NRGG Funding to make
these future equity contributions. In addition, Morris LLC is obligated to pay
NRG $1,000,000 as and when permitted under the project's principal loan
agreement. Morris LLC has previously paid $4,000,000 to NRG in connection with
the financial closing of the construction financing of the Morris Project.
The Company intends to arrange financing (the terms and manner of which
have not been determined by the Company) to fund the required future equity
contributions to Morris LLC. NRG is obligated under a Supplemental Loan
Agreement between the Company, NRGG Funding and NRG to loan NRGG Funding and the
Company (as co-borrower) the full amount of such equity contributions by NRGG
Funding, all at NRGG Funding's option. Any such loan
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<PAGE>
will be secured by a lien on all of the membership interests of Morris LLC and
will be fully recourse to NRGG Funding and the Company.
Other Transactions
Effective May 23, 1996, NRG guaranteed payment of pre-existing liabilities
of NRG Generating (Newark) Cogeneration Inc. ("Newark") and NRG Generating
(Parlin) Cogeneration Inc. ("Parlin"), wholly-owned subsidiaries of the Company,
of up to $5,000,000, which amount will be reduced as certain defined milestones
are reached and eliminated no later than May 23, 2001. On June 28, 1996, NRG
advanced Parlin approximately $56,000,000 to pay off the Parlin nonrecourse
financing which included a $3,100,000 million cost to terminate an interest rate
swap agreement. At December 31, 1997, loans aggregating approximately $4,400,000
million remained outstanding to NRG.
Under an agreement dated April 30, 1996, the Parlin project sells up to 9
MW of power to NRG Parlin, Inc. ("NPI"), a wholly-owned subsidiary of NRG. NPI
resells this power at retail to E.I. du Pont under an agreement extending until
2021. Total sales to NPI were $1,300,000 million in 1997.
Related Party Transactions
The Company entered into a Liquidating Asset Agreement with Wexford
pursuant to which Wexford was granted authority to liquidate certain assets of
the Company for which Wexford is to receive an asset liquidation fee. The
maximum fee available to Wexford is $1,500,000. During the fiscal year ended
December 31, 1997, Wexford was paid $1,219,000 under the terms of the
Liquidating Asset Agreement. Spyros S. Skouras, Jr., a director of the Company,
was Senior Vice President of Wexford from April 1995 until May 1998.
EMPLOYMENT ARRANGEMENTS WITH MR. SHERMAN
On March 28, 1998, the Company and Mr. Sherman entered into an employment
agreement (the "Employment Agreement") pursuant to which Mr. Sherman is employed
as President and Chief Executive Officer of the Company. Under the Employment
Agreement, Mr. Sherman was entitled during 1997 to receive an annual base salary
of $210,000 (prorated for the period of time he served during 1997) and a bonus
of 60% of such annual base salary. In addition, pursuant to the Employment
Agreement the Company paid Mr. Sherman a $40,000 signing bonus and granted him
options to purchase an aggregate 205,000 shares of Common Stock. Such options
contain a change of control provision which provides for the acceleration of
such options, to the extent not then vested, upon a "change in control" and
certain other "corporate transactions" as defined in the Company's 1997 Stock
Option Plan. The Employment Agreement also contains restrictive covenants which
restrict Mr. Sherman with respect to work product and his ability to compete
with the Company and to appropriate certain business opportunities during his
employment and for one year following the date of termination of his employment.
Mr. Sherman and various parties acting on his behalf have been engaged in
discussion with representatives of NSP and NRG which would lead to his immediate
or
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eventual resignation as an officer and director of the Company, in an effort to
avoid the proxy contest with respect to the Meeting. To date, such negotiations
have not been successful
OTHER MATTERS
Under Delaware law, no business may be transacted at the Meeting other
than the NRG Proposal. If any procedural matters are properly brought before the
Meeting, the proxies named in the enclosed WHITE proxy card will vote on those
matters in accordance with their judgment of the best interests of the Company.
The Company will bear the expense of preparing, printing and mailing this
opposition solicitation and the solicitation of the WHITE proxies for the
Meeting. It is currently estimated that the aggregate amount to be spent by the
Company in connection with the solicitation of proxies, excluding the salaries
and fees of directors, officers and employees, will be approximately $[ ], of
which approximately $[ ] has been incurred to date. It is anticipated that
approximately [ ] employees, directors and officers of the Company may solicit
proxies by letter, telephone, telecopy, telegraph, facsimile, or in person
without additional compensation therefor. The Company will also provide certain
persons, firms, banks and corporations holding shares in the names or in the
names of nominees, which in either case are beneficially owned by others, proxy
materials for transmittal to such beneficial owners and will reimburse such
record owners for their expenses in doing so.
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<PAGE>
SHAREHOLDER PROPOSALS
The 1999 Annual Meeting of Stockholders is anticipated to be held in May
1999. A notice of intent of a stockholder of the Company to make a nomination or
to bring any other matter before the 1999 Annual Meeting must comply with the
applicable requirements set forth in the Company's Restated By-laws and must be
received not more than 180 days and not less than 120 days in advance of the
1999 Annual Meeting by the Secretary of the Company at the Company's principal
executive offices, One Carlson Parkway, Suite 240, Minneapolis, Minnesota
55447-4454. However, if the 1999 Annual Meeting is held on a date more than 30
days before or after May 21, 1999, any stockholder who wishes to have a proposal
included in the Company's proxy statement for the 1999 Annual Meeting must
deliver a copy of the proposal to the Company a reasonable time before the proxy
solicitation is made. The Company reserves the right to decline to include in
the Company's proxy materials any stockholder's proposal which does not comply
with the rules of the Commission for inclusion therein. The Company will furnish
copies of the applicable By-law provisions which set forth the requirements for
the Notice of Intent upon written request to the Secretary of the Company at the
aforementioned address.
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<PAGE>
EXHIBIT 1
September 19, 1998
Mr. James J. Howard
Chairman & CEO
Northern States Power
414 Nicollet Mall
Minneapolis, MN 55401
Dear Mr. Howard,
As an independent outside director of several public companies, we know
you understand a director's duties and responsibilities. We, the
independent outside directors of CogenAmerica, have those same duties and
responsibilities. We are clearly disappointed that your subsidiary, NRG
Energy, has announced a hostile proxy solicitation to obtain 'control' of
CogenAmerica.
We are truly puzzled by NRG's objective. The existing conflicts of
interest with CogenAmerica's public shareholders remain - even in the
event NRG's proposed proxy solicitation is successful. Questions of
'conflict of interest' and 'corporate opportunity' do not disappear with
'control' of a public company; as you know, the standard of conduct
actually becomes more onerous.
CogenAmerica and NRG both compete in the market for new projects, as a
result, NRG has a perpetual conflict of interest with CogenAmerica's
public shareholders. NSP has an interest in two IPP's , and these
interests are not easily reconciled. The bankruptcy court sought to
balance this situation with the establishment of the independent directors
committee.
The independent directors have made concerted efforts over the past year
to help NRG management understand the very difficult situation their
actions can create, including recent events regarding MCPC.
As you may know, NRG offered to sell MCPC, under the terms of the
co-investment agreement, to CogenAmerica for approximately $36 million.
This offer was not recommended by management and was rejected by the
independent directors committee - the price was determined to be 'above
market' and represented a potential unwarranted and excessive price
(events now indicate approximately $10 million) for NRG at the expense of
CogenAmerica's public shareholders. We all (including NSP) would have had
exposure to shareholder action had the independent directors acted on
NRG's initial representatives.
As you know, the MCPC matter is complicated by NRG's agreement, despite
its obligation to CogenAmerica, to sell MCPC to a third party. We know NRG
can't sell MCPC twice. We recognize that NRG management believes that it
is in the best interests of CogenAmerica for MCPC to be sold to a third
party. We offered to let NRG substitute a project of equivalent value for
MCPC. The objective of
<PAGE>
the arbitration was to serve the economic interests of CogenAmerica
shareholders - not harm NRG. This offer remains open - it appears to be in
everyone's best interest.
The MCPC situation represents just one of many conflicts created by NRG
management's actions. As a result, we are very troubled by NRG's proposal
to control the board and designate the CEO. In the absence of an
independent CEO the independent directors committee will find it necessary
to rely on independent outside advisors for independent advice.
There are always two sides to every story - our intention today is to
share our views with you. We hope you better understand the untenable
situation that certain NRG actions create for us as directors of
CogenAmerica and that you question the wisdom of NRG's proposed proxy
solicitation, in light of what it will and won't accomplish.
NRG's announcement to conduct a hostile proxy solicitation clearly
disrupts CogenAmerica's acquisition and financing efforts and will cause
economic harm to all CogenAmerica shareholders. We urge you to seek a
resolution of this situation in the interest of all our shareholders.
We respectfully request a meeting with you to discuss alternatives to
resolve this situation in the best interests of CogenAmerica shareholders.
We believe it is in everyone's best interest to avoid confrontation.
Thank you for your consideration.
Sincerely,
Charles J. Thayer, on behalf of all
the members of the Independent
Directors Committee of
CoGeneration Corporation of
America
Lawrence I. Littman
Spyros S. Skouras
Charles J. Thayer
<PAGE>
September 28, 1998
Mr. James J. Howard
Chairman & CEO
Northern States Power
414 Nicollet Mall
Minneapolis, MN 55401
Dear Mr. Howard,
We are disappointed that you have not responded to our letter of September
19th requesting a meeting with you to discuss resolution of the issues
related to NRG Energy's proposed hostile proxy solicitation to obtain
control of CogenAmerica.
It is surprising to us that NSP, a highly respected public utility that
practices 'independent' board governance, would support NRG's action - a
proposal that contradicts the very definition of 'independent' boards as
recommended by such organizations as The Business Roundtable, The Council
of Institutional Investors and the National Association of Corporate
Directors.
We remain concerned that NRG's proposal to replace independent management
does not contain any NRG plan to grow CogenAmerica shareholder value.
Especially in light of NRG's public announcement that it has fulfilled its
obligations under the co-investment agreement.
We remain committed to meeting with you to discuss alternatives to resolve
this situation in the best interests of all CogenAmerica shareholders and
avoid further disruption to CogenAmerica's business.
Sincerely,
Charles J. Thayer, on
behalf of all the
members of the
Independent Directors
Committee of
CoGeneration
Corporation of America
Lawrence I. Littman
Spyros S. Skouras
Charles J. Thayer
<PAGE>
Preliminary Copies
COGENERATION CORPORATION OF AMERICA
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - NOVEMBER 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY.
THIS PROXY IS NOT SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Robert T. Sherman, Jr.,
Lawrence I. Littman, Spyros S. Skouras, Jr. and Charles J. Thayer, or any of
them acting singly, with the power of substitution in any of them, the proxies
of the undersigned to act for the undersigned with the same force and effect as
the undersigned, with respect to all shares of Common Stock of Cogeneration
Corporation of America (the "Company") held of record by the undersigned on
October 8, 1998, at the Special Meeting of Stockholders (the "Meeting") to be
held at the Hyatt Regency Hotel, 1300 Nicollet Mall, Minneapolis, Minnesota
55403 at 8:00 a.m. on November 12, 1998, and at any adjournment(s) thereof,
hereby revoking any proxy or consent heretofore given, and ratifying and
confirming all that said proxies may do or cause to be done by virtue thereof,
with respect to the matters contained herein. By granting this proxy, the
undersigned expressly confers the authority to vote all shares of common stock
of the Company held of record by the undersigned or to boycott the Meeting, as
set forth below.
This proxy, when properly executed, unless a decision is made to boycott
the Meeting, will be voted as directed. If no direction is indicated, the proxy
will be voted AGAINST the proposal of NRG Energy, Inc., a stockholder of the
Company, to remove Robert T. Sherman, Jr. from his position as a member of the
Company's Board of Directors, and FOR granting the right to the proxies named
above to boycott the Meeting if they determine that doing so will be the most
effective way to prevent the removal of Robert T. Sherman, Jr. from his position
as a member of the Company's Board of Directors.. In their discretion, the
proxies named above are authorized to vote upon such other matters as may
properly come before the Meeting or at any adjournment(s) thereof.
Shares cannot be voted unless this proxy card is signed and returned.
(To be Signed on Reverse Side)
<PAGE>
o REMOVAL OF DIRECTOR. To remove Robert T. Sherman, Jr. from the Company's
Board of Directors.
FOR |_| AGAINST |_| ABSTAIN |_|
o BOYCOTT THE MEETING. Discretion to boycott the Meeting if it is determined
that doing so will be the most effective way to prevent the removal of
Robert T. Sherman, Jr. from his position as a member of the Company's
Board of Directors.
FOR |_| AGAINST |_| ABSTAIN |_|
o Discretion to vote upon such other matters as may properly come before the
Meeting or at any adjournment(s) thereof.
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE. The
undersigned hereby acknowledges receipt of the Solicitation in Opposition to
Proxy Statement and Consent Statement of NRG Energy, Inc. dated October [21],
1998.
Date: ______________, 1998
__________________________
Signature
___________________________
Signature if held jointly
Please sign your name above exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title as it appears hereon. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a corporation, it should be
signed by an authorized officer and the corporate seal affixed. When a proxy is
given by a partnership, it should be signed in the partnership name by an
authorized person.
