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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Cogeneration Corporation of America
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LETTERHEAD]
April 26, 1999
Dear Stockholder,
On behalf of the Board of Directors, I cordially invite you to attend the
1999 Annual Meeting of Stockholders of Cogeneration Corporation of America,
which will be held at the IDS Center, 50th Floor, 710 Marquette Avenue,
Minneapolis, Minnesota 55042, on Thursday, May 20, 1999, commencing at 1:00
p.m., local time. The matters to be acted upon at the meeting are described in
the attached Notice of Annual Meeting of Stockholders and Proxy Statement.
Your vote on the business to be considered at the meeting is important,
regardless of the number of shares you own. Whether or not you plan to attend
the meeting, please complete, date, sign and promptly return the accompanying
proxy in the enclosed prepaid envelope prior to the meeting so that your shares
may be represented at the Annual Meeting. Returning the proxy does not deprive
you of your right to attend the meeting and to vote your shares in person.
Sincerely yours,
David H. Peterson
CHAIRMAN OF THE BOARD
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COGENERATION CORPORATION OF AMERICA
One Carlson Parkway, Suite 240
Minneapolis, Minnesota 55447-4454
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1999
Notice is hereby given that the Annual Meeting of Stockholders of
Cogeneration Corporation of America, a Delaware corporation ("CogenAmerica"),
will be held on Thursday, May 20, 1999, at 1:00 p.m., local time, at the IDS
Center, 50th Floor, 710 Marquette Avenue, Minneapolis, Minnesota 55402 for the
following purposes:
1. To elect eight directors for terms expiring at the 2000 annual
meeting of stockholders;
2. To ratify the appointment of PricewaterhouseCoopers LLP as
CogenAmerica's independent public accountants;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 12, 1999 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting or any adjournment thereof. A list of such
stockholders will be maintained at CogenAmerica's headquarters during the
ten-day period prior to the date of the Annual Meeting and will be available for
inspection by stockholders, for any purpose germane to the meeting, during
ordinary business hours. Please mark, sign and date the enclosed proxy card and
mail it promptly in the accompanying envelope.
By Order of the Board of Directors,
Thomas L. Osteraas
SECRETARY
Minneapolis, Minnesota
April 26, 1999
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE WHICH HAS
BEEN PROVIDED. IN THE EVENT YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE YOUR SHARES IN PERSON.
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COGENERATION CORPORATION OF AMERICA
One Carlson Parkway, Suite 240
Minneapolis, Minnesota 55447-4454
(612) 745-7900
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1999
GENERAL INFORMATION
The Board of Directors (the "Board of Directors") of Cogeneration
Corporation of America, a Delaware corporation ("CogenAmerica"), is furnishing
this Proxy Statement to the holders of common stock, par value $0.01 per share
(the "Common Stock"), of CogenAmerica in connection with CogenAmerica's
solicitation of proxies for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 1:00 p.m., local time, on Thursday, May 20, 1999
and at any and all adjournments thereof.
A proxy delivered pursuant to this solicitation is revocable at the option
of the person giving it at any time before it is exercised. A proxy may be
revoked, prior to its exercise, by executing and delivering a later dated proxy
card, by delivering written notice of the revocation of the proxy to the
Secretary of CogenAmerica prior to the Annual Meeting, or by attending and
voting at the Annual Meeting. Attendance at the Annual Meeting, in and of
itself, will not constitute a revocation of a proxy. Unless previously revoked,
the shares represented by the enclosed proxy will be voted in accordance with
the stockholder's directions if the proxy is duly executed and returned prior to
the Annual Meeting. If no directions are specified, the shares will be voted
FOR the election of the director nominees recommended by the Board of Directors,
FOR the ratification of the appointment of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") as CogenAmerica's independent public accountants, and
in accordance with the discretion of the named proxies on other matters properly
brought before the Annual Meeting.
CogenAmerica will bear the expense of preparing, printing and mailing this
Proxy Statement and soliciting the proxies it is seeking. In addition to the
use of the mails, proxies may be solicited by officers, directors and employees
of CogenAmerica, in person, or by telephone, telegraph or facsimile
transmission. CogenAmerica also will request brokerage firms, banks, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares of Common Stock as of the record date and will provide reimbursement
for the cost of forwarding the proxy materials in accordance with customary
practice. Your cooperation in promptly signing and returning the enclosed proxy
card will help to avoid additional expense.
This Proxy Statement and the enclosed proxy card are first being mailed to
stockholders on or about April 26, 1999. A copy of the Annual Report on Form
10-K for the fiscal year ended December 31, 1998, as filed with the Securities
and Exchange Commission (the "Commission"), is being mailed with this Proxy
Statement.
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QUORUM AND VOTING REQUIREMENTS
The close of business on April 12, 1999 has been fixed as the record date
(the "Record Date") for the determination of stockholders of CogenAmerica
entitled to notice of and to vote at the 1999 Annual Meeting. Only stockholders
of record at the close of business on the Record Date will be entitled to notice
of, and to vote at, the Annual Meeting. On that date, CogenAmerica had
outstanding 6,852,962 shares of its Common Stock. Each share of Common Stock
entitles the holder to one vote.
At the Annual Meeting, the holders of sixty percent (60%) of the voting
power of the outstanding shares of stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum. Abstentions will be
treated as present for purposes of determining a quorum. Shares held by a
broker as nominee (i.e., in "street name") that are represented by proxies at
the annual meeting, but that the broker fails to vote on one or more matters as
a result of incomplete instructions from the beneficial owner of the shares
("broker non-votes"), will also be treated as present for quorum purposes.
With regard to the election of directors ("Proposal One"), votes may be
cast for the nominees or may be withheld. The election of directors requires
the affirmative vote of at least a majority of the shares of Common Stock
present or represented by proxy at the meeting and entitled to vote thereon.
Under applicable Delaware law, a broker non-vote will have no effect on the
outcome of Proposal One.
With regard to the ratification of independent public accountants
("Proposal Two"), votes may be cast for or against the matter, or stockholders
may abstain from voting on such matter. Approval of Proposal Two requires the
affirmative vote of at least a majority of the shares of Common Stock present or
represented by proxy at the meeting and entitled to vote thereon. Therefore,
abstentions will have the effect of votes against the approval of the matter.
However, under applicable Delaware law, a broker non-vote will have no effect on
the outcome of Proposal Two.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Action will be taken at the Annual Meeting for the election of eight
directors, each of whom will serve until the 2000 Annual Meeting and until his
or her successor is elected and qualified. Proxies cannot be voted for a
greater number of persons than the number of nominees named therein.
CogenAmerica's Restated By-laws provide that no fewer than two of the
nominees of the Board of Directors must consist of independent directors and
that the directors who constitute the Independent Director's Committee are to be
nominated by the Independent Directors Committee. The Independent Directors
Committee has nominated Lawrence I. Littman, Charles J. Thayer and Mark Liddell
to serve as directors who are members of the Independent Directors Committee.
Messrs. Littman and Thayer qualify as Independent Directors under the applicable
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By-law criteria. If elected, these individuals will constitute the Independent
Directors Committee.
The Board of Directors has no reason to believe that any of the nominees
for director will not be available to stand for election as director. However,
if some unexpected occurrence should require the substitution by the Board of
Directors or the Independent Directors Committee of some other person or persons
for any one or more of the nominees, the proxies may be voted in accordance with
the discretion of the named proxies FOR such substitute nominees.
The name, age, principal occupation for the last five years, selected
biographical information and period of service as a director of CogenAmerica of
each of the nominees for election as director are set forth below.
DAVID H. PETERSON, age 57, has served as a Director of CogenAmerica since
April 1996 and Chairman of the Board of Directors of CogenAmerica from April
1996 to December 1996 and since January 1998. He has also served as Chairman of
the Board of NRG Energy, Inc. ("NRG Energy") since January 1994, Chief Executive
Officer since November 1993, and President and a Director since 1989. Mr.
Peterson was also Chief Operating Officer of NRG Energy from 1992 to November
1993. NRG Energy beneficially owns approximately 47.6% of the outstanding
Common Stock of CogenAmerica and is a wholly-owned subsidiary of Northern States
Power Company ("NSP") that is principally engaged in the acquisition,
development and operation of, and ownership of interests in, independent power
production and cogeneration facilities, thermal energy production, energy
transmission facilities, and resource recovery facilities. Prior to joining NRG
Energy, Mr. Peterson was Vice President, Non-Regulated Generation for NSP, and
he has served in various other management positions with NSP during the last 20
years.
JULIE A. JORGENSEN, age 37, has served as a Director of CogenAmerica since
February 1998 and as interim President and Chief Executive Officer since October
1998. Ms. Jorgensen has been Senior Counsel for NRG Energy from June 1997 and
was previously Corporate Secretary of NRG Energy from October 1997 to October
1998. She was Vice President and General Counsel of NRG Energy from December
1994 until June 1997, Assistant General Counsel from January 1994 to December
1994 and Counsel from January 1993 to January 1994.
MARK LIDDELL, age 44, has not previously served as a Director of
CogenAmerica. He has served as the President and a director of Gulfport Energy
Corporation since January, 1997. Prior to joining Gulfport Energy, he was the
President and a director of DLB Oil & Gas, Inc. from January 1994 until January,
1997.
LAWRENCE I. LITTMAN, age 68, has served as an Independent Director of
CogenAmerica since April 1996. Since May 1996, Mr. Littman has been a director
of Car One, a division of Liberty Cab & Limousine Company ("Liberty"). He was
Chief Executive Officer of Liberty from 1967 to 1992 and General Manager from
1992 to May 1996.
CRAIG A. MATACZYNSKI, age 38, has served as a Director and Assistant
Secretary of CogenAmerica since April 1996. He has been President and Chief
Executive Officer of NRG Energy's North America Division since June 1998. Mr.
Mataczynski served as Vice President of U.S. Business Development for NRG Energy
from December 1994 to June 1998. From May
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1993 to January 1995, he was President of NEO Corporation ("NEO"), a
wholly-owned subsidiary of NRG Energy that develops small electric generation
projects within the United States. Prior to joining NEO, Mr. Mataczynski served
from 1982 to June 1994 in various managerial capacities at NSP, including
Director, Strategy and Development from March 1993 to June 1994.
MICHAEL O'SULLIVAN, age 38, has served as Director of CogenAmerica since
October 1998. He has been a Vice President of NRG Energy's North America
Division since June 1998. Prior to that, Mr. O'Sullivan was Executive Director,
Business Development for NRG Energy since May 1995. From 1991 until joining NRG
Energy, Mr. O'Sullivan was Vice President of Business Development for Indeck
Energy Services, a privately held independent power company.
CHARLES J. THAYER, age 55, has served as an Independent Director of
CogenAmerica since April 1996. He has served as Chairman and Managing Director
of Chartwell 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 Cystic Fibrosis Services, the foundation's
national mail order pharmacy, and as a member of the foundation's compensation
committee. He is an Advisory Director of the Louisville Community Development
Bank.
RONALD J. WILL, age 58, has served as a Director of CogenAmerica since
April 1996. He has been Managing Director and Chief Executive Officer of NRG
Europe since June 1998. Mr. Will served as Vice President, Operations and
Engineering for NRG Energy from March 1994 to June 1998, and as Vice President,
Operations from 1992 to March 1994. Prior to joining NRG Energy, he was
President and Chief Executive Officer of NRG Thermal Corporation, a wholly-owned
subsidiary of NRG Energy that provides customers with thermal services, from
1991 to 1992. Mr. Will served in a variety of positions with Norenco
Corporation, a wholly-owned thermal services subsidiary of NRG Energy, including
Vice President and General Manager from 1989 to 1991.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN PROPOSAL
ONE.
PROPOSAL TWO:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
CogenAmerica's bylaws provide that the selection of accountants for the
ensuing calendar year shall be made annually in advance of the annual meeting of
stockholders and shall be submitted to the stockholders for ratification or
rejection at such meeting. The Corporation has selected PricewaterhouseCoopers
LLP as CogenAmerica's independent public accountants for the fiscal year ending
December 31, 1999. PricewaterhouseCoopers LLP has served as CogenAmerica's
independent public accountants since April 30, 1996. A representative of
PricewatherhouseCoopers LLP will be available at the Annual Meeting to respond
to appropriate questions and will be given an opportunity to make a statement on
behalf of PricewaterhouseCoopers LLP, if desired.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS COGENAMERICA'S
INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if any other matters are properly brought before the
Annual Meeting, it is the intention of the named proxies in the accompanying
proxy to vote in accordance with their judgment on such matters.
ADDITIONAL INFORMATION
EXECUTIVE OFFICERS OF COGENAMERICA
The executive officers of CogenAmerica are elected annually and serve at
the pleasure of the Board of Directors. The following sets forth certain
information with respect to the executive officers of CogenAmerica.
JULIE A. JORGENSEN, age 37, has served as interim President and Chief
Executive Officer since October 1998 and as a Director of CogenAmerica since
February 1998. Ms. Jorgensen is an employee of NRG Energy and her services as
interim President and Chief Executive Officer are leased to CogenAmerica by NRG
Energy. See "Proposal One: Election of Directors" for biographical information
concerning Ms. Jorgensen.
TIMOTHY P. HUNSTAD, age 41, has served as Vice President and Chief
Financial Officer of CogenAmerica since September 1996. Prior to joining
CogenAmerica, he was President of NEO from January 1995 until September 1996 and
Managing Director, Finance of NRG Energy from July 1994 until December 1994.
Mr. Hunstad served as Treasurer of NRG Australia, Ltd., a wholly-owned project
subsidiary of NRG Energy, from March 1993 until June 1994.
RICHARD C. STONE, age 49, has served as Vice President, Business
Development and Marketing, of CogenAmerica since September 1997. He was Vice
President of Business Development for Wheelabrator Environmental Systems Inc.,
the waste-to-energy and cogeneration subsidiary of Wheelabrator Technologies
Inc., from 1989 to September 1997.
THOMAS L. OSTERAAS, age 32, has served as General Counsel and Corporate
Secretary of CogenAmerica since December 1998. Prior to joining CogenAmerica,
he was Senior Counsel for NRG Energy from January 1997 until December 1998.
Prior to joining NRG Energy he was an associate in the Los Angeles office of the
law firm Morrison & Foerster from September 1993 until January 1997.
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DIRECTOR NOT STANDING FOR RE-ELECTION
SPYROS S. SKOURAS, JR., age 45, has served as a Director of CogenAmerica
since July 1995, but has chosen not to stand for re-election at the Annual
Meeting.
1998 CHANGE IN BOARD COMPOSITION
At CogenAmerica's 1998 Annual Meeting of Stockholders the following persons
were elected to the Board of Directors: David H. Peterson, Julie A. Jorgensen,
Lawrence I. Littman, Craig A. Mataczynski, Spyros S. Skouras, Jr., Charles J.
Thayer, Ronald J. Will and Robert T. Sherman, Jr. As a result, at such time
four of CogenAmerica's eight directors were executive officers of NRG Energy,
with the remaining members of the Board of Directors consisting of Mr. Sherman
and three other directors who constituted the Independent Directors Committee.
According to its most recent Schedule 13D filing, NRG Energy beneficially owns
an aggregate of 3,254,288 shares, or 47.6%, of the outstanding Common Stock.
On September 14, 1998, NRG Energy sent a letter to David H. Peterson,
CogenAmerica's Chairman, requesting that he call a special meeting of
CogenAmerica's stockholders to consider the removal of Mr. Sherman from
CogenAmerica's Board of Directors. On such date NRG Energy also filed
preliminary solicitation materials with the Commission pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended, relating to a proposed
solicitation of proxies and consents from CogenAmerica's stockholders to remove
Mr. Sherman from CogenAmerica's Board (the "Proxy Solicitation"). On October 8,
1998, NRG Energy filed definitive solicitation materials with the Commission
relating to the Proxy Solicitation. On October 26, 1998, NRG Energy delivered to
CogenAmerica's registered agent consents of the holders of in excess of 50% of
CogenAmerica's outstanding Common Stock in favor of Mr. Sherman's removal from
CogenAmerica's Board of Directors. At a Board of Directors meeting on October
27, 1998, by the affirmative vote of a majority of the directors, Michael
O'Sullivan was appointed to fill the vacancy created by the removal of Mr.
Sherman from the Board, Mr. Sherman's employment with CogenAmerica was
terminated and Ms. Jorgensen was elected as CogenAmerica's interim President and
Chief Executive Officer.
At a Special Meeting of CogenAmerica's stockholders held on November 12,
1998, the stockholders approved the removal of Mr. Sherman as a director of
CogenAmerica. Continuing as directors were Mr. Peterson, Ms. Jorgensen,
Mr. Littman, Mr. Mataczynski, Mr. Skouras, Mr. Thayer and Mr. Will. On the same
day, CogenAmerica's Board of Directors also confirmed the appointment of Michael
O'Sullivan to fill the vacancy on the Board of Directors created by the removal
of Mr. Sherman, the termination of Mr. Sherman's employment with CogenAmerica
and the election of Ms. Jorgensen as CogenAmerica's interim President and Chief
Executive Officer.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The following discussion of meetings of the Board of Directors and the
Board's committees includes meetings held during CogenAmerica's fiscal year
ended December 31, 1998.
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During the fiscal year ended December 31, 1998, the Board of Directors of
CogenAmerica met thirteen times. No member of the Board of Directors attended
fewer than 75% of the total number of meetings held by the Board of Directors
and the committees on which such director served during that period.
CogenAmerica's Board of Directors currently has three committees: an Audit
Committee, an Independent Directors Committee and a Compensation Committee. In
addition, the Compensation Committee has a 1997 Stock Option Subcommittee. The
principal functions of these committees and the names of the directors currently
serving as members of such committees are set forth below.
AUDIT COMMITTEE. The members of the Audit Committee are Spyros S. Skouras,
Jr., Lawrence I. Littman, and Ronald J. Will. The Audit Committee has such
powers, authority and responsibilities as are normally incident to the functions
of an Audit Committee. Typical Audit Committee functions are to initiate or
review the results of all audits or investigations into the business affairs of
CogenAmerica and its subsidiaries, conduct audit reviews with CogenAmerica's
management, financial employees and independent auditors, and review
CogenAmerica's financial statements and reports. The Audit Committee met once
during the fiscal year ended December 31, 1998.
INDEPENDENT DIRECTORS COMMITTEE. The members of the Independent Directors
Committee are Lawrence I. Littman, Spyros S. Skouras, Jr. and Charles J. Thayer.
The Independent Directors Committee has three members, two of whom must be
Independent Directors, as defined in CogenAmerica's Bylaws. Prior to the annual
meeting, the Independent Directors Committee nominates those individuals who
will serve on the Board of Directors and constitute the three members of the
Independent Directors Committee. It designates the individuals to fill any
vacancies on the Board of Directors that are to be filled by a member of the
Independent Directors Committee and that arise between annual meetings of
stockholders. The Independent Directors Committee also has the sole authority
and responsibility to make all decisions and take all actions on behalf of
CogenAmerica under certain agreements between NRG Energy and CogenAmerica,
including the Co-Investment Agreement. See "Compensation Committee Interlocks
and Insider Participation." The Independent Directors Committee met twenty
times during the fiscal year ended December 31, 1998.
COMPENSATION COMMITTEE AND THE STOCK OPTION SUBCOMMITTEE. The members of
the Compensation Committee are Charles J. Thayer, David H. Peterson, Craig A.
Mataczynski and Lawrence I. Littman. Messrs. Thayer and Littman also serve on
the 1997 Stock Option Subcommittee of the Compensation Committee. While the
Board of Directors administers the NRG Generating (U.S.) Inc. 1996 Stock Option
Plan (the "1996 Plan"), the 1997 Stock Option Subcommittee administers the NRG
Generating (U.S.) Inc. 1997 Stock Option Plan (the "1997 Plan"), and the
Compensation Committee administers the NRG Generating (U.S.) Inc. 1998 Stock
Option Plan (the "1998 Plan", and collectively with the 1997 Plan and the 1996
Plan, the "Plans"). The Compensation Committee and the 1997 Stock Option
Subcommittee each has the powers and authority granted to it by any incentive
compensation plan for employees of CogenAmerica or any of its subsidiaries and
such other powers, authority and responsibilities as may be determined by the
Board of Directors. The Compensation Committee determines the compensation of
(a) employees of CogenAmerica who are directors of CogenAmerica, and (b)
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after receiving and considering the recommendation of the chief executive
officer and the president of CogenAmerica, all other employees of CogenAmerica
who are officers of CogenAmerica or who occupy such other positions as may be
designated by the Compensation Committee. The Compensation Committee met five
times during the fiscal year ended December 31, 1998. The 1997 Stock Option
Subcommittee of the Compensation Committee met once during the fiscal year ended
December 31, 1998.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF COGENAMERICA'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), THAT MIGHT INCORPORATE
FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE
FOLLOWING REPORT AND THE PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS.
The following is the Compensation Committee's report to the stockholders of
CogenAmerica with respect to the compensation of CogenAmerica's executive
officers and the resulting actions taken by CogenAmerica for the fiscal year
ended December 31, 1998.
POLICY
The Compensation Committee's objective is to provide a competitive
compensation program that will attract and retain talented executives who are
critical to CogenAmerica's long-term success, motivate key senior officers to
achieve strategic business objectives and reward them for their achievements,
and align the interests of the executives with the interests of stockholders
through periodic grants of stock options. The components of the compensation
program, as described below, clearly link the interests of management with those
of the stockholders.
The executive compensation program of CogenAmerica comprises salary, an
annual cash incentive program, long term incentive opportunity in the form of
stock options and certain broad based employee benefit programs offered by
CogenAmerica. The Compensation Committee retained the services of a compensation
consultant in early 1998 to review CogenAmerica's compensation programs and, as
a result of this competitive review, CogenAmerica adopted the 1998 Plan, which
was approved by the shareholders in May 1998, and new incentive guidelines were
approved by the Board of Directors in May and August 1998.
The incentive guidelines adopted in May and August 1998 provide a range for
executive base salaries based on executive salaries in the independent power
producer ("IPP") industry, and the guidelines also focus on performance-based
compensation. The majority of companies in the IPP industry are subsidiaries of
public utilities rather than stockholder owned companies. As a result, the
compensation consultants recommended, and the Compensation Committee and the
Board adopted, a compensation program that targets a larger portion of executive
compensation in the form of compensation tied to the performance of
CogenAmerica's Common Stock in order to better align the interests of management
with the stockholders of CogenAmerica.
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In addition, the incentive guidelines provide for a "team" approach to
short term incentives, whereby consistent weightings are applied amongst senior
management to the performance of CogenAmerica's key objectives. Moreover, short
term incentive is to be increased in relation to any increase in performance
objectives in order to award executives for meeting more challenging performance
levels. In addition, the incentive guidelines provide a range for the award of
annual stock options for the years 1999-2001.
EXECUTIVE COMPENSATION OBJECTIVES
The Compensation Committee's objective is to provide a competitive
compensation program that will attract and retain the expertise required for
managing in the fast-changing independent power industry sector. Further, the
objective is to provide the appropriate incentives to match compensation with
performance in both the short term as well as the long term. The components of
the compensation program as described below clearly link the interests of
management with those of the stockholders.
Total executive compensation (base salary plus incentive compensation) was
compared by the compensation consultant with similar companies. Generally, the
Compensation Committee targets base salary levels that are near the median of
the group (adjusted for company size) although the incentive compensation
programs are designed to provide above median compensation for above target
performance.
EXECUTIVE COMPENSATION COMPONENTS
Total executive compensation during the year ended December 31, 1998
consisted of three primary components: base salary, short term incentive and
long term incentive.
BASE SALARY
Base salary levels are largely determined by comparison with the salaries
of similar positions in the IPP industry as determined by the compensation
consultant. The compensation consultant compared cash compensation levels both
with and without CogenAmerica's short-term incentive program.
SHORT-TERM INCENTIVE COMPENSATION
The Short-Term Incentive Plan is a cash bonus plan which is designed to
support the achievement of important business objectives that will contribute to
CogenAmerica's long term success and enhance shareholder value. Participation in
the short-term plan is limited and is approved annually by the Compensation
Committee. The majority of the short-term incentive is linked to the annual
increase in earnings per share and new business development with the balance of
the short-term incentive awarded on achievement of certain individual goals.
Short-term incentive awards vary by position.
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LONG-TERM INCENTIVE COMPENSATION
Long-term incentives for directors, executive officers and certain
operations managers are currently provided through grants of stock options under
the 1996 Plan, the 1997 Plan and the 1998 Plan. Stock options provide gains to
the participants only if CogenAmerica's Common Stock price increases over the
fair market value of the stock (as determined under the Plans) on the date the
options are granted. The Plans permit the grant of nonqualified stock options or
incentive stock options ("ISOs").
Following CogenAmerica's emergence from bankruptcy in 1996, option grants
were utilized by CogenAmerica to attract new individuals to CogenAmerica's Board
of Directors and management team. These options vest in three equal annual
installments beginning on the first anniversary of the date of grant. In 1998
the Board of Directors began implementing certain policies for the annual award
of additional stock options in order to encourage the retention of these key
individuals.
The incentive guidelines recommended by the compensation consultant and
adopted by the Board of Directors in May 1998 provide for additional grants to
certain other officers and directors. One such grant was made during the fiscal
year ended December 31, 1998. Timothy P. Hunstad, Vice President and Chief
Financial Officer, was granted 17,000 options. See "Executive and Director
Compensation - Stock Option Grants and Related Information."
Subsequent to the end of the year, CogenAmerica's interim President and CEO
has been awarded options to purchase 30,000 shares of Common Stock, options to
which she was entitled upon her election as a member of the Board of Directors
in February 1998.
CogenAmerica's Secretary and General Counsel was hired from NRG Energy in
December, 1998. The Board of Directors agreed to grant stock options to this
individual; however, no such grants have been awarded by the Board at this time.
The grants vest in three equal annual installments beginning on the first
anniversary of the date of grant.
COMPENSATION OF THE INTERIM CHIEF EXECUTIVE OFFICER
On October 27, 1998, the Board of Directors elected Julie A. Jorgensen
interim President and CEO following the Board's termination of Robert T.
Sherman, Jr. as President and CEO. Ms. Jorgensen is an employee of NRG Energy
and her services as interim President and CEO are leased to CogenAmerica by NRG
Energy. Ms. Jorgensen's compensation is paid by NRG Energy, which is reimbursed
by CogenAmerica.
Ms. Jorgensen's base compensation and short-term incentive for the balance
of 1998 was determined (prorated for the period of time served) on the same
terms and conditions as those of Mr. Sherman. In addition, Ms. Jorgensen was to
be awarded certain stock options to purchase 30,000 shares of Common Stock to
which she was entitled as a result of her election to the Board of Directors of
CogenAmerica in February of 1998. Such stock options were awarded to
Ms. Jorgensen in February 1999.
11
<PAGE>
COMPENSATION OF THE FORMER CHIEF EXECUTIVE OFFICER
CogenAmerica's former Chief Executive Officer was employed under the terms
of an employment contract negotiated at the time of his election as President
and Chief Executive Officer and a Director of CogenAmerica. Mr. Sherman was
terminated as President and CEO by the Board of Directors on October 27, 1998.
Subsequent to his termination CogenAmerica, NRG Energy and Mr. Sherman settled
certain claims. See "Related Party Transactions - Settlement Agreement and
Mutual Release."
SUMMARY
The Compensation Committee's objective in setting executive compensation
and in establishing a balance between annual salary, short-term incentives and
long-term incentive compensation is to clearly link pay with performance. Very
simply, executives are rewarded when and to the extent stockholders are
rewarded. To achieve these goals the Compensation Committee adopted certain
recommendations made by the compensation consultant in 1998 and the Compensation
Committee plans to annually review CogenAmerica's compensation program and make
modifications it deems necessary to continue to attract, retain and motivate
talented, experienced executives.
Charles J. Thayer, Chairman
Lawrence I. Littman
Craig A. Mataczynski
David H. Peterson
EXECUTIVE AND DIRECTOR COMPENSATION
The following table sets forth all compensation, including bonuses and
other payments, paid or accrued by CogenAmerica during the fiscal year ended
December 31, 1998 ("fiscal year 1998"), the fiscal year ended December 31, 1997
("fiscal year 1997"), the 6-month period ended December 31, 1996 ("transition
period 1996"), and the fiscal year ended June 30, 1996 ("fiscal year 1996") to
each individual who served as CogenAmerica's chief executive officer during
fiscal year 1998 and each other executive officer whose cash compensation
exceeded $100,000 during the fiscal year ended December 31, 1998 (collectively,
the "Named Executive Officers").
12
<PAGE>
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
LONG-TERM
COMPEN-
ANNUAL COMPENSATION SATION
--------------------------------------------- --------------
AWARDS
--------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) SARS (#)
- ----------------------------------- ------------------------- ------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Julie A. Jorgensen Fiscal Year 1998 39,780 (1) 22,000 -- --
Interim President and
Chief Executive Officer
Robert T. Sherman, Jr. Fiscal Year 1998 217,500 (2) -- 444,006 (4) --
Former President and Fiscal Year 1997 140,000 (3) 166,000 73,886 (5) 205,000 (6)
Chief Executive Officer
Timothy P. Hunstad Fiscal Year 1998 140,006 75,400 17,418 (7) 17,000 (9)
Vice President and Fiscal Year 1997 127,125 29,167 18,032 (8) --
Chief Financial Officer Transition Period 1996 46,667 20,000 -- 75,000 (10)
Richard C. Stone Fiscal Year 1998 158,756 96,000 7,782 (11) --
Vice President, Business Fiscal Year 1997 51,072 12,086 2,594 (12) 100,000 (13)
Development and Marketing
</TABLE>
- -------------------
(1) Ms. Jorgensen became interim President and Chief Executive Officer on
October 27, 1998. Compensation covers the period October 27 to December
31, 1998. Ms. Jorgensen's services as interim President and Chief
Executive Officer are leased to CogenAmerica by NRG Energy.
(2) Includes base compensation of $210,000 through March 31, 1998 and $220,000
from April 1 to December 31, 1998.
(3) Mr. Sherman became President and Chief Executive Officer on May 1, 1997.
Compensation covers the period May 1 to December 31, 1997.
(4) Includes compensation of $10,872 relating to a car program, $7,134 relating
to life and health insurance, and $426,000 relating to the Settlement
Agreement. See "Related Party Transactions - Settlement Agreement and
Mutual Release."
(5) Includes compensation of $30,058 and $38,554 relating to a car program and
a relocation program, respectively.
(6) All of Mr. Sherman's options to purchase Common Stock were either cancelled
upon his termination as an employee of CogenAmerica, or expired unexercised
as of March 31, 1999.
(7) Includes compensation of $10,680 and $6,738 relating to a car program and
life and health insurance, respectively.
(8) Includes compensation of $9,040 and $7,130 relating to a car program and
life and health insurance, respectively.
(9) This option was granted pursuant to the 1997 Plan.
(10) This option was granted pursuant to the 1996 Plan.
(11) Includes compensation of $7,782 for life and health insurance.
(12) Includes compensation of $2,594 for life and health insurance.
(13) This option was granted pursuant to the 1996 Plan.
On March 28, 1997, CogenAmerica and Mr. Sherman entered into an employment
agreement (the "Employment Agreement") pursuant to which Mr. Sherman was
employed as
<PAGE>
President and Chief Executive Officer of CogenAmerica. Under the Employment
Agreement, Mr. Sherman was entitled during 1998 to receive an annual base salary
of $220,000. See "Related Party Transactions - Settlement Agreement and Mutual
Release" for information concerning the terms of a Settlement Agreement with Mr.
Sherman which, among other things, provided for certain payments to be made
under the Employment Agreement through December 31, 1998, and for a mutual
release of all further claims by any party thereunder.
Effective as of January 1999 for a period of one year, each of Mr. Hunstad
and Mr. Stone entered into severance agreements with CogenAmerica which provide
that in exchange for certain confidentiality and non-competition undertakings,
each of Mr. Hunstad and Mr. Stone will be entitled to payment of six months base
salary in the event that such individual is involuntarily terminated other than
for cause.
DIRECTOR COMPENSATION
Each non-employee director of CogenAmerica receives an annual retainer fee
of $14,000, and is entitled to a $1,000 fee paid quarterly for each Board of
Directors meeting attended in person ($500 for telephonic attendance) and $500
for each scheduled committee meeting attended in person ($250 for telephonic
attendance) and reimbursement of reasonable expenses incurred in attending
meetings of the Board of Directors and its committees. Each director is
eligible to receive grants of nonqualified options to purchase Common Stock
under the Plans.
STOCK OPTION GRANTS AND RELATED INFORMATION
The following table sets forth information concerning stock option grants
during the fiscal year ended December 31, 1998 to the Named Executive Officers:
OPTION GRANTS DURING FISCAL YEAR 1998
--------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS EXERCISE ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO PRICE EXPIRATION APPRECIATION FOR OPTION TERM
NAME OPTIONS EMPLOYEES IN ($/SH) DATE ----------------------------
GRANTED (#) FISCAL YEAR 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Julie A. Jorgensen --- --- --- --- --- ---
Robert T. Sherman, Jr. --- --- --- --- --- ---
Timothy P. Hunstad 17,000 (1)(2) 27.4% 14 8/10/2008 $149,677 $379,311
Richard C. Stone --- --- --- --- --- ---
</TABLE>
(1) This option was granted pursuant to the 1997 Plan and incrementally vests
in three equal annual installments beginning on August 10, 1999.
(2) This option may become immediately exercisable as to all shares covered by
the option and remain exercisable for the full remaining term of the option
(without regard to termination of the optionee's employment) in the event
of a "change in control" and certain other "corporate transactions" as
defined in the 1997 Plan.
14
<PAGE>
None of the Named Executive Officers exercised any stock options during the
fiscal year ended December 31, 1998. The following table sets forth information
concerning the value of unexercised options held by the Named Executive Officers
as of December 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 OPTION/SAR VALUES
---------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, DECEMBER 31, 1998
1998 (#) ($) (1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Julie A. Jorgensen -- -- -- --
Robert T. Sherman, Jr. 35,000 -- -- --
Timothy P. Hunstad 50,000 42,000 178,125 89,063
Richard C. Stone 16,667 83,333 -- --
</TABLE>
_____________
(1) Represents the excess of the fair market value of the Common Stock of $9.00
per share (the closing selling price of the Common Stock as quoted on the
Nasdaq National Market on December 31, 1998) above the exercise price of
the options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during the fiscal year ended
December 31, 1998 were Charles J. Thayer (Chairman), David H. Peterson, Craig A.
Mataczynski, and Lawrence I. Littman. Mr. Peterson is Chairman of the Board,
President and Chief Executive Officer of NRG Energy, and Mr. Mataczynski is
President and Chief Executive Officer of NRG North America. The following
information describes certain relationships between CogenAmerica and NRG Energy.
ADMINISTRATIVE TRANSACTIONS
Effective April 30, 1996, CogenAmerica entered into a Management Services
Agreement with NRG Energy. The Management Services Agreement provides that NRG
Energy will provide management, administrative, operation, maintenance and
certain other services to CogenAmerica in connection with the day to day
business of CogenAmerica. CogenAmerica expensed approximately $217,000 pursuant
to the Management Services Agreement during fiscal year 1998. CogenAmerica's
interim President and Chief Executive Officer, Julie A. Jorgensen, is an
employee of NRG Energy whose services are leased to CogenAmerica. Ms.
Jorgensen's base salary of $220,000 per year was pro rated for the period from
October 27, 1998 to December 31, 1998, and CogenAmerica expects to reimburse NRG
Energy for such amounts.
15
<PAGE>
CO-INVESTMENT AGREEMENT
Pursuant to the Co-Investment Agreement between CogenAmerica and NRG
Energy, dated April 30, 1996, NRG Energy has agreed to offer to CogenAmerica
ownership interests in certain power projects which were initially developed by
NRG Energy or with respect to which NRG Energy 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 PPA and
fuel supply agreement and the completion of a feasibility and engineering study)
by April 30, 2003, NRG Energy has agreed to offer to sell to CogenAmerica all of
NRG Energy's ownership interest in such project. Eligible projects include, with
certain exceptions and exclusions, proposed or existing electric power plants
within the U.S. which NRG Energy initially develops or in which NRG Energy
proposes to acquire an ownership interest. NRG Energy is obligated under the
Co-Investment Agreement to offer to CogenAmerica, during the three-year period
ending on April 30, 1999, projects with an aggregate equity value of at least
$60 million or a minimum of 150 net MW. As of the date hereof, ownership
interests in projects with an aggregate of more than 240 net MW have been
offered under the Co-Investment Agreement, including the 117 MW Morris Project
and the 110 MW Pryor Project.
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 PPA or applicable state or
federal law upon the generation of electricity for sale by such project, (ii)
any indirect ownership interest held by NRG Energy in an eligible project
arising from NRG Energy's direct or indirect ownership of equity interests in
CogenAmerica, (iii) any ownership interest in a facility below 25 MW in
capacity, and (iv) any ownership interest that is retained in order to later be
sold in an "exempt transaction." Exempt transactions include (i) any sale or
disposition of all or a portion of an ownership interest that is consummated as
a result of a foreclosure or conveyance in lieu of foreclosure of liens or
security interests (other than by NRG Energy) encumbering the eligible project
or such ownership interest, (ii) any sale or disposition of an ownership
interest to a third party that is or will become a participant in the eligible
project (such as a local or industry investor, a financial institution or a fuel
or equipment supplier), provided that the obligation to sell the interest is
incidental to the provision of services or the contribution of assets to the
eligible project and is created prior to the execution and delivery of a binding
PPA and fuel supply agreement and the completion of an engineering and
feasibility study with respect to the project, and (iii) any sale or disposition
of an ownership interest to another person as part of a larger transaction
involving the sale of all or substantially all of the assets of NRG Energy or
the sale of an equity interest in NRG Energy, provided that the person acquiring
the ownership interest agrees to be bound by the Co-Investment Agreement with
respect to such ownership interest (if such ownership interest has not
previously been offered for sale to CogenAmerica pursuant to the Co-Investment
Agreement). In January 1998, CogenAmerica initiated an arbitration proceeding
pursuant to the terms of the Co-Investment Agreement to resolve a dispute with
NRG Energy concerning the rights and obligations of CogenAmerica and NRG Energy
with respect to the Pryor Project. The arbitration proceeding was resolved in
favor of CogenAmerica and CogenAmerica closed on its acquisition of the project
on October 9, 1998.
NRG Energy has agreed to finance CogenAmerica's purchase of ownership
interests that may be offered pursuant to its Co-Investment Agreement at
commercially competitive terms to the extent funds are unavailable to
CogenAmerica on comparable terms from other sources. The
16
<PAGE>
Co-Investment Agreement requires any such financing to be recourse to
CogenAmerica and secured by a lien on the ownership interest acquired. The
Company is required to repay such financing from the net proceeds of any
offerings of equity or debt securities of CogenAmerica (when market conditions
permit such offerings to be made on favorable terms) after taking into account
the working capital and other cash requirements of CogenAmerica, as determined
by its Board of Directors
PRYOR PROJECT
On October 9, 1998, CogenAmerica Pryor Inc. ("CogenAmerica Pryor"), a
wholly-owned subsidiary of CogenAmerica, acquired from Mid-Continent Power
Company, LLC ("MCPC LLC") the entire interest in a 110 MW cogeneration project
located in Pryor, Oklahoma, (the "Pryor Project"). MCPC LLC was owned 50% by
NRG Energy, Inc. ("NRG Energy").
CogenAmerica Pryor acquired the Pryor Project by purchasing from MCPC LLC
all of the issued and outstanding stock of Oklahoma Loan Acquisition Corporation
("OLAC") for a cash purchase price of approximately $23.9 million. The Pryor
Project sells power to Oklahoma Gas and Electric Company and steam to a number
of industrial users.
The terms of the Stock Purchase Agreement, including the consideration paid
thereunder, were determined on the basis of the terms of the Co-Investment
Agreement and an order of an arbitration panel in a proceeding between
CogenAmerica and NRG Energy. Under a Loan Agreement, NRG Energy has loaned
CogenAmerica and CogenAmerica Pryor approximately $23.9 million to finance this
acquisition.
MORRIS PROJECT FINANCING
In December 1997, CogenAmerica Funding Inc. ("CogenAmerica Funding"), a
wholly-owned subsidiary of CogenAmerica, completed its acquisition from NRG
Energy of all of NRG Energy's interest in a 117 MW project located in Morris,
Illinois by acquiring 100% of the interests in NRG (Morris) Cogen, LLC ("Morris
LLC"). As part of the acquisition, NRG Energy agreed in a Supplemental Loan
Agreement dated December 10, 1997 to loan to CogenAmerica and CogenAmerica
Funding up to $22 million to make required equity contributions to Morris LLC.
At December 31, 1998, $12 million had been drawn under the Supplemental Loan
Agreement and contributed as equity. Subsequent to year end, additional draws
and equity fundings have been made and as of March 26, 1999, the entire $22
million had been drawn and contributed as equity.
OTHER TRANSACTIONS
Effective May 23, 1996, NRG Energy guaranteed payment of pre-existing
liabilities of CogenAmerica Newark Inc. ("CogenAmerica Newark") and CogenAmerica
Parlin Inc. ("CogenAmerica Parlin"), wholly-owned subsidiaries of CogenAmerica,
of up to $5 million, which amount will be reduced as certain defined milestones
are reached and eliminated no later than May 23, 2001. The amount currently
guaranteed by NRG Energy is $3 million. On June 28, 1996, NRG Energy advanced
CogenAmerica Parlin approximately $56 million to pay off the Parlin nonrecourse
financing which included a $3.1 million cost to terminate an interest rate swap
agreement. At December 31, 1998, in addition to the Morris and Pryor debt
described above, loans aggregating approximately $4.4 million remained
outstanding to NRG Energy.
17
<PAGE>
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
Energy. NPI resells this power at retail to E.I. du Pont under an agreement
extending until 2021. Total sales to NPI were $1.3 million in 1998.
Affiliates of NRG Energy operate several of CogenAmerica's cogeneration
projects under contracts with the project entities. NRG Energy's subsidiary,
Power Operations, Inc., operates CogenAmerica's Parlin project under an
Operating and Maintenance Agreement with CogenAmerica Parlin dated December 31,
1996, and it also operates CogenAmerica's Newark project under an Operating and
Maintenance Agreement with CogenAmerica Newark dated November 8, 1996. The
amount expensed by CogenAmerica for these services in 1998 was $427,000. NRG
Energy is also the construction manager for the Morris Project, and received
$1.2 million in fees and expense reimbursements for such services in 1998. An
NRG Energy subsidiary, NRG Morris Operations, Inc., operates the Morris plant
under an Operation and Maintenance Agreement dated September 19, 1997. NRG
Energy was paid $1.1 million for such services in 1998, including reimbursement
for mobilization expenses.
RELATED PARTY TRANSACTIONS
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
On December 1, 1998, CogenAmerica entered into a Settlement Agreement and Mutual
Release with Robert T. Sherman and NRG Energy (the "Settlement Agreement"). In
the Settlement Agreement, CogenAmerica and NRG Energy released all claims
against Mr. Sherman, and Mr. Sherman released all claims against CogenAmerica
and NRG Energy, based on Mr. Sherman's employment with CogenAmerica. The only
exception to the mutual release is that it does not release any claim that
Mr. Sherman may have for indemnification for a claim made against Mr. Sherman
based upon actions taken in his capacity as an officer, director or employee of
CogenAmerica. The Settlement Agreement also provided for the dismissal of
certain lawsuits that were pending among the parties.
In addition, the Settlement Agreement provided that Mr. Sherman would
receive the base salary and employee health benefits provided by his employment
agreement with CogenAmerica dated March 28, 1997 (the "Employment Agreement")
through December 31, 1998, and that Mr. Sherman would not be entitled to receive
any additional compensation from CogenAmerica other than as provided in the
Settlement Agreement. The Settlement Agreement required CogenAmerica to pay
Mr. Sherman $406,000, and NRG Energy to pay Mr. Sherman $130,000. The sum
payable by CogenAmerica included payment for Mr. Sherman's outstanding shares of
stock of CogenAmerica, and payments for emotional distress, general damages, and
settlement of any and all other claims, including any and all claims under the
Employment Agreement or arising out of the employment relationship. The sum
payable by NRG Energy represents payment for emotional distress, general
damages, and settlement of any and all other claims. Under the Settlement
Agreement, Mr. Sherman agreed to serve as an independent contractor consultant
to CogenAmerica during the period from January 1, 1999 through December 31,
2001, for up to ten days per calendar year, for which Mr. Sherman will be paid
$20,000 per year. Mr. Sherman agreed to provide additional consulting services,
if requested, for $2,500 per day.
18
<PAGE>
See "Executive and Director Compensation -- Compensation Committee
Interlocks and Insider Participation" above for a description of certain
transactions and relationships between CogenAmerica and NRG Energy. David H.
Peterson, the Chairman of the Board of Directors of CogenAmerica, is Chairman of
the Board, President and Chief Executive Officer of NRG Energy; CogenAmerica
interim President and Chief Executive Officer and director Julie A. Jorgensen is
Senior Counsel of NRG Energy, and her services as interim President and Chief
Executive Officer are leased to CogenAmerica by NRG Energy; CogenAmerica
director Craig A. Mataczynski is the President and CEO of NRG North America;
CogenAmerica director Ronald J. Will is Managing Director and Chief Executive
Officer of NRG Europe; and CogenAmerica director Michael O'Sullivan is Vice
President of NRG Energy's North America division. Until September 1, 1996, Mr.
Hunstad, who is the Vice President and Chief Financial Officer of CogenAmerica,
was President of NEO Corporation, a wholly-owned subsidiary of NRG Energy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding shares of
Common Stock beneficially owned as of April 8, 1999 (except as otherwise noted
below) by each (i) person believed by CogenAmerica to own beneficially more than
five percent of the outstanding shares of Common Stock, (ii) director, (iii)
named executive officer set forth in the Summary Compensation Table herein and
(iv) the directors and executive officers of CogenAmerica 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 CogenAmerica is
known to be the beneficial owner of any shares of Common Stock. Except as noted
below, CogenAmerica believes that each of the persons listed has sole investment
and voting power with respect to the shares included in the table.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
Name Number of Shares Percent
- ------------------------------------------------ ------------------ ---------
<S> <C> <S>
NRG Energy, Inc. (2)
1221 Nicollet Mall, Suite 700 3,254,288 47.60
Minneapolis, MN 55403-2445
Wexford Capital Partners II, LP (3)
411 West Putnam Avenue 443,976 6.47
Greenwich, CT 06380
David H. Peterson (4) (14) 21,000 *
Julie A. Jorgensen (5) 1,500 --
Mark Liddell -- --
Lawrence I. Littman (6) 20,070 *
Craig A. Mataczynski (7) (14) 20,500 *
Michael O'Sullivan (8) -- --
19
<PAGE>
Robert T. Sherman, Jr. -- --
Spyros S. Skouras, Jr. (6) 20,000 *
Richard C. Stone (9)
16,667 *
Charles J. Thayer (10) 40,000 *
Ronald J. Will (11) (14) 22,500 *
Timothy P. Hunstad (12) 50,500 *
Directors and Executive Officers
as a group (13) 212,737 3.10
</TABLE>
- --------------
* 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 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 Energy has sole voting and
investment power, and 147,676 shares as to which NRG Energy has sole voting
power only. The foregoing information is as of the date set forth in and based
solely on a Schedule 13D filed October 30, 1998 and furnished to the Company by
NRG Energy.
(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 20,000 shares issuable upon exercise of stock options that may
be exercised within 60 days of April 8, 1999. In addition, Mr. Peterson
beneficially owns approximately 24,386 shares of NSP Common Stock, including
approximately 6,215 shares through an employee stock ownership plan and 16,204
shares issuable upon exercise of NSP stock options that may be exercised within
60 days of April 8, 1999.
(5) Represents 300 shares owned jointly with spouse and beneficial ownership
of an additional 1,200 shares. In addition, Ms. Jorgensen beneficially owns
approximately 3,501 of NSP restricted stock, and approximately 26,921 shares of
NSP Common Stock, including approximately 735 through an employee stock
ownership plan, approximately 1,578 through a dividend reinvestment and stock
purchase plan, and approximately 24,608 shares issuable upon exercise of NSP
stock options that may be exercised within 60 days of April 8, 1999.
(6) Includes 20,000 shares issuable upon exercise of stock options that may
be exercised within 60 days of April 8, 1999.
(7) Includes 20,000 shares issuable upon exercise of stock options that may
be exercised within 60 days of April 8, 1999. In addition, Mr. Mataczynski
beneficially owns 2,720 shares of NSP Common Stock, including 1,224 shares
through an employee stock ownership plan and 1,496 shares issuable upon exercise
of NSP stock options that may be exercised within 60 days of April 8, 1999.
(8) Mr. O'Sullivan beneficially owns 232 shares of NSP Common Stock through
an employee stock ownership plan.
(9) Includes 16,667 shares issuable upon exercise of stock options that may
be exercised within 60 days of April 8, 1999.
20
<PAGE>
(10) In addition, Chartwell Capital Ltd., of which Mr. Thayer is Chairman and
Managing Director, owns 1,000 shares of NSP Common Stock.
(11) Represents 2,500 shares of Common Stock held jointly with spouse and
20,000 shares issuable upon exercise of stock options that may be exercised
within 60 days of April 8, 1999. In addition, Mr. Will beneficially owns 16,033
shares of NSP Common Stock, including (i) 5,272 shares issuable upon exercise of
NSP stock options that may be exercised within 60 days, (ii) 4,183 shares of NSP
Common Stock which are owned by Mr. Will's spouse and for which he shares
investment power, and (iii) 202 shares of NSP Common Stock which he owns jointly
with his spouse and for which he shares investment power.
(12) Includes 50,000 shares issuable upon exercise of stock options that may
be exercised within 60 days of April 8, 1999. In addition, Mr. Hunstad
beneficially owns 237 shares of NSP Common Stock through an employee stock
ownership plan.
(13) Includes 166,667 shares issuable upon exercise of stock options that may
be exercised within 60 days of April 8, 1999.
(14) Current NRG Energy corporate policy prohibits NRG Energy employees from
receiving the economic benefit of options granted to them in their capacity as a
director.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires CogenAmerica's directors and
executive officers, and persons who beneficially own more than 10% of any class
of CogenAmerica's equity securities, to file with the Commission initial reports
("Form 3") of beneficial ownership and reports of changes ("Form 4") in
beneficial ownership of Common Stock and other equity securities of
CogenAmerica. Officers, directors and greater than 10% beneficial owners are
required by Commission regulation to furnish CogenAmerica with copies of all
Section 16(a) reports they file. To CogenAmerica's knowledge, based solely on a
review of the copies of such reports furnished to CogenAmerica and written
representations that no other reports were required, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with for the fiscal year ended December 31,
1998.
STOCKHOLDER PROPOSALS AND NOMINATION OF DIRECTOR CANDIDATES
The 2000 Annual Meeting of Stockholders ("2000 Annual Meeting") is
anticipated to be held in May 2000. A notice of intent ("Notice of Intent") of
a stockholder of CogenAmerica to make a nomination or to bring any other matter
before the 2000 Annual Meeting must comply with the applicable requirements set
forth in CogenAmerica's Restated By-laws and must be received not more than 180
days and not less than 120 days in advance of the 2000 Annual Meeting (provided,
however, that the Board may reduce to 100 the minimum number of days in advance
of the 2000 Annual Meeting by which such notice must be received if the Board
determines such a reduction is in the best interest of CogenAmerica) by the
Secretary of CogenAmerica at CogenAmerica's principal executive offices, One
Carlson Parkway, Suite 240, Minneapolis, Minnesota 55447-4454; however, if the
2000 Annual Meeting is held on a date more than 30 days before or after May 20,
2000, any stockholder who wishes to have a proposal included in CogenAmerica's
proxy statement for the 2000 Annual Meeting must deliver a copy of the proposal
to CogenAmerica a reasonable time before the proxy solicitation is made.
CogenAmerica reserves the right to decline to include in CogenAmerica's proxy
materials any
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<PAGE>
stockholder's proposal which does not comply with the rules of the Commission
for inclusion therein. CogenAmerica 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 CogenAmerica at the aforementioned address.
PERFORMANCE GRAPH
The closing price of the Company's Common Stock on April 12, 1999 was
$10.3125 per share. The following performance graph compares the percentage
change in the cumulative weighted average total return on the common stock of
CogenAmerica with the total cumulative returns during the same period of (i) the
Nasdaq Composite Index and (ii) an index of comparable peer issuers constructed
by CogenAmerica. The index of comparable peer issuers is composed of AES
Corporation, Calpine Corporation, California Energy Company Inc. and Trigen
Energy Corporation during the periods that each company has been publicly
traded. In compliance with Commission Regulations, the returns of each of the
comparable companies have been weighted according to capitalization during the
period from May 1, 1996, the first trading day after CogenAmerica emerged from
bankruptcy protection with a new capital structure. The graph assumes that the
value of the investment in CogenAmerica's Common Stock and each index was $100
on May 1, 1996, and that all dividends were reinvested.
<TABLE>
<CAPTION>
Data Points for 1999 5/1/96 12/31/96 12/31/97 12/31/98
------ -------- -------- --------
<S> <C> <C> <C> <C>
Cogeneration Corporation
of America 100 149 263 119
Weight Comparables 100 171 323 338
NASDAQ Composite 100 108 131 183
</TABLE>
The foregoing Notice and Proxy Statement are sent by order of the Board of
Directors.
Thomas L. Osteraas
Secretary
April 26, 1999
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