<PAGE>
As filed with the Securities and Exchange Commission on May 11, 1999
Registration No. 333-75171
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GREENMOUNTAIN.COM COMPANY
(Exact name of Registrant as specified in its charter)
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Delaware 5961 03-0360441
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
55 Green Mountain Drive
South Burlington, Vermont 05407
(802) 846-6100
(Address, including zip code, and telephone number,
including area code, or Registrant's principal executive offices)
PETER H. ZAMORE, ESQ.
Vice President, General Counsel and Secretary
55 Green Mountain Drive
South Burlington, Vermont 05407
(802) 846-6100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
JOHN T. McCAFFERTY, Esq. THOMAS A. COLL, Esq.
TROY B. LEWIS, Esq. NANCY E. DENYES, Esq.
Jones, Day, Reavis & Pogue Cooley Godward LLP
2300 Trammell Crow Center 4365 Executive Drive, Suite 1100
2001 Ross Avenue San Diego, California 92121
Dallas, Texas 75201 (619) 550-6000
(214) 220-3939
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. +
+GreenMountain.com may not sell these securities until the registration +
+statement filed with the Securities and Exchange Commission is effective. +
+This prospectus is not an offer to sell these securities and it is not +
+soliciting an offer to buy these securities in any jurisdiction where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--May 11, 1999
PROSPECTUS
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Shares
[GreenMountain.com logo]
["Choose wisely. It's a small planet." logo]
Common Stock
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GreenMountain.com Company is offering shares of its common stock in an initial
public offering. Prior to this offering, there has been no public market for
GreenMountain.com's common stock.
We anticipate that the public offering price will be between $ and $ per
share. We have filed an application to include the shares of GreenMountain.com
in the Nasdaq National Market under the symbol "GMTN."
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price...................................... $ $
Underwriting discounts and commissions..................... $ $
Proceeds, before expenses, to GreenMountain.com............ $ $
</TABLE>
See "Risk Factors" on pages to for factors that you should consider before
investing in the shares of GreenMountain.com.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
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The underwriters may purchase up to additional shares from GreenMountain.com
at the public offering price, less underwriting discounts and commissions, to
cover over-allotments. Delivery of the shares will be on , 1999.
Prudential Securities
, 1999
<PAGE>
[Description of Front Cover Artwork]
Cover Page
Right: image of sun rings
Bottom right: image of caterpillar
Outside portion of gatefold
- ---------------------------
Top left: image of cocoon hanging from leaf
Right: image of sun rings
Top center: text reading "greenmountain.com the power of g* commerce to help
transform the environment"
Middle: three overlapping screenprints from greenmountain.com web site (home
page, welcome page and energy page)
Bottom right: greenmountain.com logo, with "Choose wisely. It's a small
planet." logo
Gatefold
- --------
Left: image of planet earth with sun rings and flying butterfly, surrounded by
following text:
Left: image of planet earth with sun rings and flying butterfly, surrounded
by following text:
"Small sensitive planet seeks caring individuals"
"Imagine a company where Internet commerce, basic consumer needs and the
environment all intersect. A place that easily empowers ordinary people to make
a real difference--one click at a time."
Right: image of child holding planet earth, surrounded by following text:
"Wouldn't it be great if what was purchased online helped create a brighter
future for your kids & the planet?"
"GreenMountain.com seeks to become a new marketplace community where
families, kids and others can help create a better world. The site will be a
cool and quick destination that translates environmental awareness into action.
Motivated to dramatically shape shopping habits, GreenMountain.com hopes to
benefit consumers and the world we all live in."
Bottom center: greenmountain.com logo, with "Choose wisely. It's a small
planet." logo
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 4
Risk Factors........................ 9
Use of Proceeds..................... 18
Dividend Policy..................... 18
Capitalization...................... 19
Dilution............................ 20
Selected Financial Information...... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Business............................ 32
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Environmental Advisory Board.......................................... 56
Management............................................................ 57
Certain Transactions.................................................. 71
Principal Stockholders................................................ 75
Description of Capital Stock.......................................... 78
Shares Eligible for Future Sale....................................... 81
Underwriting.......................................................... 83
Legal Matters......................................................... 84
Experts............................................................... 84
Additional Information................................................ 85
Index to Financial Statements......................................... F-1
</TABLE>
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any jurisdiction where the offer or
sale is not permitted. You should not assume that the information contained in
this prospectus is accurate as of any date other than the date on the front
cover of this prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
This summary sets forth the material highlights of the information contained
elsewhere in this prospectus. It may not contain all of the information that
you should consider before investing in GreenMountain.com, and you should read
the entire prospectus carefully.
The terms "GreenMountain.com," "we," "our" and "us" refer to
GreenMountain.com Company and its predecessor, Green Mountain Energy Resources
L.L.C., unless the context suggests otherwise. The term "you" refers to a
prospective investor.
Unless otherwise indicated, all information in this prospectus reflects our
conversion from a limited liability company to a corporation, which will occur
prior to the closing of this offering, and the related exchange of each common
unit of the limited liability company for 3.33 shares of common stock of the
corporation. See "Certain Transactions--Reorganization Transaction."
GreenMountain.com
GreenMountain.com uses the Internet and other media to offer environmentally
friendly electricity and other products to consumers. Our Web site--
www.greenmountain.com--will use the rich interactive resources of the Internet
to educate consumers about the environmental impact of their everyday purchases
and make it easy and appealing for them to use those purchases as agents of
change for a cleaner and healthier environment. Our mission is to make Green
Mountain the leading brand for environmentally friendly products.
"Environmentally friendly" or "green" products, as we use these terms for
purposes of our business plan, are those products that have a less harmful
effect on the environment than other products available to consumers having the
same or a similar use. We currently offer green electricity products in
Pennsylvania and California and are the leading retailer of green electricity
to residential customers in deregulated utility markets within the United
States. We expect to offer green electricity products in each deregulated
electricity market in which we can compete effectively. We also currently offer
solar generation equipment, and we expect to offer other green consumer
products.
Three broad trends support our business plan.
. Environmental Awareness. We believe that there is growing concern about
the environment among consumers today and that there is an excellent
opportunity to build a strong environmental brand presence. We believe
that, if offered a convenient, cost-effective choice, a large market of
consumers will purchase a product that is environmentally friendly over
one that is not.
. Deregulation of Electric Utility Markets. We expect deregulation of the
$200 billion electric utility industry--the largest source of industrial
air pollution in the United States--to provide consumers in more than
half the states with a choice of electricity supplier and generation
source by the end of 2003.
. Growth of the Internet. The Internet is emerging as one of the most
significant global communications media, enabling millions of people to
share information and conduct business electronically. We believe that
online retailers are able to communicate more efficiently and
effectively with more customers than traditional retailers. Dramatic
growth in both the number of Web users in the United States and the
volume of goods and services sold over the Internet in the United States
is expected to continue for the foreseeable future.
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<PAGE>
We believe in the interaction of education and free markets. Informed
consumers can use the power of their purchase decisions as forces for positive
environmental change. We refer to this concept as "g*commerce." We intend to
use the broad reach of the Internet to aggregate the g*commerce impact of a
large online community. We believe that the power of this community to effect
environmental change will be significant.
We are the first and only company to offer environmentally friendly
electricity products primarily to residential customers in the deregulated
electric utility markets of both Pennsylvania and California and one of the
first companies to offer green electricity products over the Internet. We
intend to take advantage of this first mover momentum to offer a wide variety
of green consumer products over the Internet and to position Green Mountain as
the best known and most trusted environmental brand.
Our predecessor was formed in February 1997 and commenced operations in
August 1997. As a result, we have only a limited operating history upon which
you can evaluate our business and prospects. For the year ended December 31,
1998, we generated revenues of $1.5 million and incurred net losses of $46.0
million, and for the first quarter of 1999, we generated revenues of $4.1
million and incurred net losses of $19.8 million. More than 99% of our revenues
have come from green electricity sales in Pennsylvania and California. We
expect to incur net losses in subsequent fiscal periods. Because we expect to
continue to incur significant market development expenses, we will need to
generate significant revenues to achieve profitability in the future.
Our Web address is www.greenmountain.com. Our principal executive offices
are at 55 Green Mountain Drive, South Burlington, Vermont 05407. Our telephone
number is 802.846.6100. The information on our Web site is not part of this
prospectus.
Our Business Strategy
To fulfill our mission, we have developed a strategy consisting of the
following key elements:
.Position Green Mountain as the most trusted and best known environmental
brand;
.Offer convenience and selection to purchasers of green consumer products;
.Develop and maintain our Web site as a state-of-the-art, interactive
commerce platform that makes purchasing our green products easy and
appealing; and
.Develop and maintain an online community that fosters and supports
g*commerce.
The GreenMountain.com Web Site
Our Web site is being upgraded to provide consumers with easy access to a
broad selection of green consumer products and in-depth, educational
environmental content. Our focus in this effort is on providing content with
environmental appeal to people of all ages, such as news articles, product
research information, corporate environmental value added reports and
environment-related tools, games and quizzes. Our approach is to compile
content from multiple sources and integrate it with our own editorial content
to increase its usefulness and the convenience, relevance and enjoyment of
consumers' visits to our Web site, thereby promoting increased traffic and
sales of our green products. We expect that our current upgrade will be
complete by October 1, 1999.
5
It's a small planet.(SM)
<PAGE>
Our Management Team
Our management team is led by Sam Wyly, our Chairman. Mr. Wyly, a Dallas,
Texas-based entrepreneur, has created and managed several public and private
companies. He co-founded Sterling Software, a New York Stock Exchange-listed
supplier of software products and services, in 1981 and currently serves as its
Chairman. He also serves as Chairman of the Executive Committee of Sterling
Commerce, a leading provider of business-to-business electronic commerce
software and network services that was spun off by Sterling Software in 1996.
Since August 1997, entities affiliated with the Wyly family have invested more
than $70 million in our company. We expect that the Wyly family will continue
to exercise significant control over our direction and management following the
closing of this offering.
Our managers have substantial expertise in brand development and marketing,
as well as Internet-related technologies. In addition, we have established
strategic relationships with leading marketing and technology companies to help
us accomplish our mission.
Our Environmental Commitment
We stake our reputation on the environmental soundness of our green
products. We view our environmental integrity as one of our most important
assets.
We believe strongly in our g*commerce vision. We intend to closely monitor
our effect on the environment and consider it an essential measure of our
success. We have established an Environmental Advisory Board, the management
position of Chief Environmental Officer, and a committee of our board of
directors, which will be responsible for reviewing our adherence to our
environmental principles.
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<PAGE>
The Offering
<TABLE>
<S> <C>
Shares offered by shares
GreenMountain.com................
Total shares outstanding after shares
this offering....................
Use of proceeds................... To provide working capital for brand
awareness and marketing, technology and
development expenses, repayment of any debt
and other general corporate purposes
Proposed Nasdaq National Market GMTN
symbol...........................
</TABLE>
Additional Potential Share Issuances
You should be aware that we are permitted, and in some cases obligated, to
issue shares of common stock in addition to the common stock expected to be
outstanding after this offering as indicated above. If and when we issue these
shares, the percentage of the common stock you own may be diluted. The
following is a summary of additional shares of common stock that may be issued
pursuant to the underwriters' over-allotment option and that we have currently
approved, or we expect to approve, for issuance upon the exercise of options
and warrants after this offering:
. shares issuable upon the exercise of the underwriters' over-allotment
option;
. shares issuable upon the exercise of the options outstanding as of the
date of this prospectus;
. shares available for issuance upon the exercise of options awarded under
our 1999 Stock Option Plan in the future, including an option expected to
be granted to Sam Wyly to purchase a number of shares of common stock
equal to 5% of the number of shares issued in this offering and an option
to be granted to David White to purchase a number of shares of common
stock equal to 5% of the number of shares issued in this offering
pursuant to the terms of his employment agreement; and
. shares issuable upon the exercise of warrants outstanding as of the date
of this prospectus.
Except as otherwise indicated, the number of shares outstanding set forth in
this prospectus does not reflect these potential issuances.
7
It's a small planet.(SM)
<PAGE>
Summary Financial Data
The following table summarizes our statements of operations for the period
from inception on February 26, 1997 to December 31, 1997, for the year ended
December 31, 1998 and for the three-month periods ended March 31, 1998 and 1999
and our balance sheet as of March 31, 1999. The statement of operations per
share data reflect our conversion from a limited liability company to a
corporation as if that conversion had occurred as of the beginning of the
period indicated. See our financial statements and the notes to those
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------
February 26, 1997
(Inception) to Year Ended
December 31, 1997 December 31, 1998 1998 1999
----------------- ----------------- ------ --------
(Unaudited)
(In thousands, except share data)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................. $ -- $ 1,531 $ -- $ 4,150
Cost of sales............ -- 1,098 -- 3,096
Total operating
expenses................ 13,905 46,465 6,731 21,080
Operating loss........... (13,905) (46,032) (6,731) (20,026)
Net loss................. (13,862) (46,039) (6,707) (19,811)
======== ======== ====== ========
Basic and diluted loss
per common share........ $ (19.65) $ (5.46) $(3.55) $ (0.80)
======== ======== ====== ========
Basic and diluted
weighted average common
shares
outstanding............. 706 8,431 1,892 24,783
======== ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1999
---------------------------
Actual As Adjusted (1)
------- ---------------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash................................................ $20,476 $
Restricted cash..................................... 2,513
Total assets........................................ 29,733
Total liabilities................................... 12,312
Stockholders' equity................................ 17,421
</TABLE>
- --------
(1)As adjusted to reflect the sale of the shares of common stock offered in
this offering at an assumed initial public offering price of $ per share,
after deducting underwriting discounts and commissions and estimated
offering expenses, as if this offering had been completed as of March 31,
1999. See "Use of Proceeds" and "Capitalization."
8
Choose wisely.
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the following risk factors, in addition to the other information in this
prospectus, before purchasing shares of GreenMountain.com common stock. Each of
these risk factors could adversely affect our business, operating results and
financial condition and the price of our common stock.
RISKS RELATED TO ESTABLISHMENT OF OUR BUSINESS
Our Business Plan Is Novel And Our Business May Not Prove To Be Profitable.
Our business plan is novel and without established precedent. It relies on
three broad trends:
.The willingness of consumers to use their purchasing decisions to address
environmental concerns;
.The movement from government controls to free market competition in the
electric utility industry; and
.Increasing use of the Internet for commerce transactions.
Our ability to grow our customer base and to generate sales sufficient for us
to achieve profitability depends on the continuation of these trends and the
successful implementation of the primary components of our business strategy.
To date, more than 99% of our revenues have come from sales of our green
electricity products in Pennsylvania and California. To grow our customer base
and generate increased sales, we must:
.Increase awareness of the Green Mountain brand;
.Offer a broad selection of green consumer products;
.Upgrade our Web site to accommodate and support expanded product
offerings; and
.Create an online community of people with shared concerns about the
environment.
Our financial success also depends on a number of other factors, including:
.Our ability to attract and retain satisfied customers;
.Interest of consumers in environmentally friendly products;
.The timing and form of deregulation of the electric utility industry;
.Our ability to secure competitively priced supply;
.New competitors and new products introduced by our competitors; and
.A high level of Internet usage.
The novel interaction of these factors presents a high degree of uncertainty
as to whether we can achieve profitability. Many of these factors are outside
our control. We cannot assure you that our business or your investment in our
stock will be profitable.
Our Limited Operating History And The New And Rapidly Evolving Markets In
Which We Operate Make Evaluating An Investment In Our Business Very Difficult.
We commenced active operations in August 1997 as a retail marketer of green
electricity products and determined in late 1998 to expand our retail marketing
efforts by developing a state-of-the-art, interactive commerce platform to
offer other green consumer products. We have a very limited operating history
upon which an evaluation of our company, our current business and our prospects
can be based. Our business model is evolving and an investor in our common
stock must consider the substantial and sometimes unforeseeable expenses
frequently encountered by early stage companies, companies that are in the
midst of significant business changes and companies that are in new and rapidly
evolving markets, such as the retail marketing of electricity and online
commerce. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Our Strategy."
9
It's a small planet.(SM)
<PAGE>
We Have Incurred Losses, We Anticipate Losses Will Continue And We May Never
Achieve Profitability. We have recorded a substantial net loss for each fiscal
period since our inception and expect to continue to incur substantial net
losses for the foreseeable future. We incurred net losses of approximately
$46.0 million in 1998 and approximately $19.8 million in the first quarter of
1999. In connection with the implementation of our expanded business strategy
and the growth of our business, we expect our cost of sales and operating
expenses to increase significantly, especially in the areas of sales, marketing
and brand promotion. We will, therefore, need to generate significant revenues
to achieve profitability. We may never achieve profitability. Even if we do, we
may be unable to sustain or increase profitability in the future. See "Selected
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Our Ability To Grow Our Customer Base And Generate Sales Depends On
Positioning The Green Mountain Brand And Maintaining Our Reputation. In order
to grow our customer base and generate sales, we believe we must position the
Green Mountain name as the leading environmental brand and maintain our
reputation as an environmentally oriented company, particularly in the Internet
market and in deregulated electricity markets within the United States.
Promoting and positioning the brand will depend largely on the success of our
marketing efforts and our ability to provide high quality products and customer
service. We cannot assure you that we will be successful in this regard.
Building the Green Mountain brand will require substantial marketing
expenditures. Our sales and marketing expenses were $33.0 million for 1998 and
$13.5 million in the first quarter of 1999. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." We cannot assure
you that our brand promotion activities will result in increased revenues or
that any such revenues will offset our marketing expenditures. State regulators
and environmental and consumer groups scrutinize claims regarding the
environmental benefits of products and from time to time challenge the
environmental benefits of products that claim to be green, including those
offered by us. Although we believe that our claims regarding the environmental
benefits of our products to be accurate and supportable, we cannot assure you
that these challenges will not adversely affect our reputation, our customer
base or our revenues. See "Business--Our Strategy."
Our Ability To Grow Our Customer Base And Generate Sales Depends On
Broadening Our Product Offerings. Our consumer product offerings currently
consist of green electricity products and solar generation equipment, each of
which we offer in Pennsylvania and California. To date, more than 99% of our
revenues have come from green electricity sales. In order to grow our customer
base and generate sales, we must broaden our product offerings to include other
green consumer products that can be offered outside of deregulated utility
markets. We cannot assure you that we will be able to do so. We do not intend
to manufacture any products but rather will sell products produced for us by
others under the Green Mountain brand and, accordingly, we will need to
establish relationships with third parties to purchase or otherwise obtain such
products. We will also need to enter into relationships with third parties to
make their own green products available on our Web site. Our experience in
purchasing and marketing green electricity may not be effective in purchasing
and marketing other green consumer products. We cannot assure you that we will
be able to establish the third-party relationships necessary to broaden our
product offerings. Moreover, the commercial availability of some of the
products that we hope to offer--for example, fuel cells for homes, offices and
cars--is dependent on technological advances. We cannot assure you when or even
that such advances will occur, that we will be able to develop profitably a
sufficient selection of green consumer products or that any of our products
will achieve market acceptance. See "Business--Our Strategy."
To Attract Customers And Make Sales Over The Internet, We Must Develop Our
Web Site And Implement Ongoing Improvements To Our Web Site In The Face Of
Rapid Technological Change. Our ability to attract consumers and sell them our
products over the Internet will depend on our ability to design, develop and
maintain a state-of-the-art Web site. The development of Web sites requires
substantial expenditures and lead time. As of March 31, 1999, we have spent
$1.0 million on the current upgrade of our Web site, and we expect to spend
another $4.5 million by October 1, 1999, when we expect this upgrade to be
complete. We are depending on Strategic Interactive Group, a specialized Web
site developer, for the upgrade of our Web site. If Strategic Interactive Group
does not meet our expectations, we would have to retain another Web site
developer and the upgrade of our Web site could be delayed. We cannot assure
you that the current upgrade of our Web site will be complete by October 1,
1999 or that our Web site will be successful in attracting customers after this
upgrade is complete. When we launch our upgraded Web site, it could contain
errors that
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<PAGE>
are discovered after it is launched and, as a result, we may be required to
modify the Web site to correct these errors. We cannot assure you that we will
be able to modify our Web site to correct any errors or that we will be able to
implement the ongoing improvements that we believe are required for the
continued success of a Web site and we cannot estimate the related costs with
any certainty. To date, approximately 4% of our customer sign-ups have come
through our Web site.
The online commerce industry is characterized by:
.Rapid technological changes;
.Frequent emergence of new industry standards and practices; and
.Continual changes in user and customer requirements and preferences.
Failure to adapt to the evolving technologies, industry standards and user
requirements and preferences on an ongoing basis could have a material adverse
effect on our ability to attract customers to and make sales through our Web
site. We cannot assure you that we will be successful in this regard. See
"Business--Our Strategy." and "--Our Web Site."
Our Failure To Develop And Maintain Strategic Web Site Relationships Could
Adversely Affect Our Ability To Attract Customers To Our Web Site. We believe
that in order to attract significant traffic to our Web site and thereby grow
our customer base we will need to establish and maintain relationships with
Internet portals, which are Web sites that offer a broad array of resources and
services on the Internet such as e-mail, discussion forums, search engines and
on-line shopping malls, to attract traffic to their site, and other high-
traffic Web sites that will carry links to our new Web site. For example, we
have entered into an arrangement with Yahoo! under which Yahoo! will place
banner advertising and button links on its properties and deliver e-mail, all
containing information about our energy business. We will also need to
establish and maintain relationships with content providers that will provide
our Web site with content that appeals to consumers who are concerned about the
environment. Competition exists for these types of relationships and we likely
will have to pay significant fees to establish and maintain these
relationships. We cannot assure you that we will be able to enter into or
maintain appropriate relationships or that, even if we do, we will attract
significant traffic to our Web site, grow our customer base or generate sales.
Our Ability To Expand Our Existing Green Electricity Business Into New
Markets Depends On The Outcome Of The Deregulation Process In Each State. We
believe that utility deregulation in the United States will continue on a
state-by-state basis. To date, however, only four states--Pennsylvania,
California, Massachusetts and Rhode Island--have implemented competition on a
statewide basis. Moreover, deregulation is a political process and its
continuation, as well as the timing and form of deregulation in any particular
state, cannot be predicted with any certainty. Specific features of
deregulation programs vary significantly from state to state. Our ability to
enter and compete in any particular deregulated market will depend on the
specific features of that market's deregulation program. For example, the
Pennsylvania program has afforded us greater opportunity than the California
program. We cannot assure you that deregulation will continue or that the
deregulation program implemented in any particular state in the future will
allow effective competition. If it does, we may face additional competition and
we cannot assure you that we will be able to compete successfully in any state.
If deregulation does not continue as we currently anticipate, we would be
unable to expand our existing green electricity business as contemplated by our
business plan and our financial prospects would be materially and adversely
affected. In any event, we may incur significant expenses in connection with
our lobbying efforts. See "Business--The Opportunity--Deregulation is
Empowering Consumers to Change the Way Electricity is Made."
OTHER RISKS RELATED TO OUR BUSINESS GENERALLY
Our Operating Results May Fluctuate Significantly And Cause Volatility In
Our Stock Price. Our operating results may fluctuate significantly from
quarter-to-quarter and year-to-year. Our limited operating
11
It's a small planet.(SM)
<PAGE>
history, in combination with the recent expansion of our business strategy,
also makes the prediction of future results of operations impossible. We
believe that period-to-period comparisons of our operating results are not
meaningful and that the results for any particular period should not be relied
on as an indication of future performance.
Our revenues and operating results may vary significantly from quarter-to-
quarter or year-to-year depending on a number of factors, including:
.Our ability to attract and retain customers;
.The level of consumer concern about the environment;
.The timing of deregulation of the electric utility industry and changes in
deregulation programs; and
.Other factors discussed under other captions under "Risk Factors."
Our limited operating history, together with the expansion of our business
strategy to include using our Web site to offer green consumer products other
than green electricity, also makes it difficult to fully assess the impact of
seasonal factors on our business. However, we expect to experience seasonality
in our business, reflecting a combination of seasonal fluctuations in Internet
usage, seasonal fluctuations of electricity usage and traditional retail
seasonality patterns. With respect to our existing retail electricity business,
higher than average use of electricity is expected in the summer and winter
months for Pennsylvania and California.
Fluctuations in operating results may result in volatility of the price of
our common stock in the public market. It is likely that, from time to time in
the future, our operating results will be below the expectations of public
market analysts and investors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Intense Competition May Affect Our Ability To Grow Our Customer Base And
Generate Sales. Both the deregulated electricity and online commerce markets
are new, rapidly evolving and highly competitive. We face intense competition,
and many of our competitors and potential competitors have:
.Longer operating histories;
.Greater name recognition;
.Larger customer bases; and
.Greater financial and other resources.
Competitors may enter the online commerce market easily and at relatively
little cost. In addition, our competitors, and competitors offering non-green
products in particular, may be able to devote significantly greater resources
than we can to the development and marketing of products. They may also be able
to offer better prices to our potential customers and make more attractive
offers to our potential strategic partners. We also anticipate competition from
other retailers attempting to offer a broad selection of green products. See
"Business--Our Competitive Position."
Poor Performance By One Or More Of Our Outside Service Providers Could Be
Disruptive To Our Business Operations. We rely on third-party service
providers for several key functions, including:
.Web site development;
.Mass media advertising;
.Direct mail marketing;
.Inbound and outbound telephone marketing;
.Mail response processing;
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Choose wisely.
<PAGE>
.Customer fulfillment;
.Billing and customer care; and
.Information technology functions.
Any interruption in these third-party services, or a deterioration in their
service, could be disruptive to our business. Many of the agreements with our
third-party service providers are terminable upon short notice. If any of these
arrangements is terminated, we cannot assure you that we will be able to find
an alternative provider on a timely basis or on similar terms. In addition,
changes in providers may result in increased administrative costs. See
"Business--Marketing, Sales and Customer Service" and "--Our Outside Service
Providers."
Our Existing Green Electricity Business Depends On Our Ability To Obtain
From Wholesale Electricity Suppliers, On Acceptable Terms, Electricity Meeting
Our Customers' Requirements. We do not generate electricity. For electricity
supply to serve the requirements of our green electricity customers, we
currently rely on short-term requirement contracts with wholesale electricity
suppliers. Under these contracts, our suppliers provide electricity, usually
for a one year period, that matches the aggregate customer requirements that
are assigned to them. These contracts are not dependent on any minimum number
of customers being assigned to them and permit us to service customers
throughout a state. Under some of these contracts, the supplier can discontinue
the assignment of additional customers upon 90 days' notice. The wholesale
price is fixed or based upon a fixed price spread for the term of the
contracts. We attempt to reduce our risk related to fluctuations in wholesale
prices and customer usage by using these contracts, but cannot assure you that
price fluctuations will not adversely affect our business.
Although we currently believe that we will be able to obtain sufficient
electric power to meet our supply needs for the foreseeable future, both for
our existing operations in Pennsylvania and California and future operations in
new deregulated electricity markets that we are likely to enter, we can give
you no assurance in this regard. We may be unable to obtain supply contracts
for our future needs or to extend or replace our existing supply contracts.
Moreover, we cannot assure you that any future supply contracts will be
available for any specified term or at any specified price or that any of them
will be requirements contracts that reduce our risk relating to fluctuations in
wholesale prices and customer usage. In addition specific features of a
deregulation program in any particular state may affect our access to and the
cost of supply arrangements for that state. See "Business--Our Green
Electricity Products."
Our Ability To Grow Our Customer Base And Generate Sales Depends Upon Public
Environmental Consciousness. Our ability to grow our customer base and generate
revenues from the sale of green consumer products depends on the continued
development of public concern about environmental issues. While we believe that
such concern is rooted in improvements to education and the wider dissemination
of environmental information in recent years, we cannot assure you that these
trends will continue or that the current levels of environmental consciousness
will be sustained. Given our business plan, the failure of such concern to
continue to develop could materially and adversely affect the growth of our
customer base and sales revenues and, accordingly, our financial prospects.
Potential Rapid Growth May Strain Our Human Resources. We have rapidly and
significantly expanded our operations, and future expansion will be required in
order for us to realize our business objectives. We have grown from 28
employees as of September 1, 1997 to 68 employees as of March 31, 1999, and our
operations have grown to serve approximately 76,000 electricity customers in
Pennsylvania and California as of April 30, 1999. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." We expect that
future growth will place a significant strain on our managerial, operational
and financial resources. We must manage our growth through appropriate systems
and controls in each of these areas. We must also expand, train and manage our
workforce. There is intense competition for personnel in the areas of our
activities, and there can be no assurance that we will be able to continue to
attract and retain personnel with the qualifications necessary for the
development of our business.
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It's a small planet.(SM)
<PAGE>
Our Senior Executives Have Joined Us Only Recently And Must Be Integrated
With Our Existing Management Team Without Disruption To Our Business
Operations. The operation of our business depends on our ability to grow,
integrate and retain an able management team. We recently hired a new Chief
Executive Officer, President and Chief Financial Officer. We cannot assure you
that we will successfully integrate these and other new arrivals with our
existing staff without disruption to our business operations or that we will
retain the services of key personnel.
Failure To Protect Our Intellectual Property Could Adversely Affect Our
Brand And Our Business. We rely on a combination of trademark and copyright
law, trade secret protection, confidentiality and license agreements with our
employees, strategic partners and others to protect our rights to our
intellectual property. We have filed applications to register some of our
service marks in the United States. Effective trademark, copyright and trade
secret protection may not be available in every country in which we intend
ultimately to offer our products. Despite our efforts, we cannot assure you
that our rights will be enforceable even if registered, and we may be unable to
deter misappropriation of our intellectual property. Misappropriation could
have a material adverse effect on our brand and our business by causing us to
lose customers and revenue opportunities. In addition, pursuing persons who
might misappropriate our intellectual property could be costly and divert the
attention of management from the operation of our business. See "Business--The
Protection of our Intellectual Property."
Products Sold By Us May Subject Us To Litigation And The Related Costs. We
will sell products produced by others under the Green Mountain brand. We also
plan to enter into relationships with others to make their green products
available on our Web site. These sales and relationships may subject us to
liabilities, including consumer product liabilities. Defending against any such
claims could be costly and divert the attention of management from the
operation of our business. While we intend to require our suppliers and other
parties in these relationships to indemnify us against those types of
liabilities, available indemnification may not be adequate. We currently have
product liability insurance coverage in the amount of $35 million, with a
$200,000 deductible, covering sales of electricity. Our liability insurance,
including any additional product liability insurance that we obtain to cover
sales of other products, may not adequately protect us against these types of
liabilities.
Claims Of Our Infringement On The Intellectual Property Rights Of Others
Could Be Costly And Disruptive To Our Business Operations. Other parties may
assert infringement claims against us or claims that we have violated a patent
or infringed a copyright, trademark or other proprietary right belonging to
them directly or through the use of technology that we license from others.
Defending against any such claim could be costly and divert the attention of
management from the operation of our business. In addition, the inability to
obtain or maintain the use of licenses or other technology could adversely
affect our business operations.
Year 2000 Complications Could Be Disruptive To Our Business Operations. On
January 1, 2000, many currently installed computer systems and software
products could fail or malfunction because they may not be able to distinguish
between 20th century dates and 21st century dates. We are subject to external
Year 2000-related failures or disruptions that might generally affect industry
and commerce, such as failures by energy generation or utility distribution
companies and related service interruptions. These failures or disruptions are
especially critical to us as a seller of retail electricity products.
Notwithstanding our Year 2000 efforts, the failure of our systems or those of
any of our information technology service providers, outsourcing partners or
suppliers, or the failure of the Internet generally, to be Year 2000 ready
could harm the operation of our systems or have unforeseen, material adverse
consequences to us. These consequences could include power supply interruptions
to our customers or the inability to bill our customers. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Readiness Disclosure."
RISKS RELATED TO THE INTERNET AND ONLINE COMMERCE ASPECTS OF OUR BUSINESS
Our Ability To Generate Sales Depends On Continued Growth Of Online
Commerce. Our ability to generate sales of green consumer products through our
Web site depends on continued growth in the use of the
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Internet and in the acceptance and volume of commerce transactions on the
Internet. We cannot assure you that the number of Internet users will continue
to grow or that commerce over the Internet will become more widespread or that
our sales will grow at a comparable rate. As is typical in the case of a new
and rapidly evolving industry, demand and market acceptance for recently
introduced services are subject to a high level of uncertainty. The Internet
may not prove to be a viable commercial marketplace for a number of reasons,
including:
.Lack of acceptable security technologies;
.Lack of access and ease of use;
.Congestion of traffic;
.Inconsistent quality of service and lack of availability of cost-
effective, high-speed service;
.Potentially inadequate development of the necessary infrastructure;
.Governmental regulation; and
.Uncertainty regarding intellectual property ownership.
We cannot assure you that the Internet will support increasing use or will
prove to be a viable commercial marketplace.
We May Lose Customers And Revenue Opportunities If We Are Not Able To
Acquire Or Maintain An Effective Web Address. We currently hold the domain name
"greenmountain.com," as well as other related names. We may not be able to
prevent third parties from acquiring Web addresses that are similar to ours. If
that should occur, we could lose customers and revenue opportunities to those
third parties. Domain names generally are regulated by Internet regulatory
bodies and their designees. The regulation of domain names in the United States
and in foreign countries is subject to change. As a result, we may not acquire
or maintain the "greenmountain.com" domain name in all of the countries in
which we may conduct business in the future. Furthermore, the relationship
between regulations governing such addresses and laws protecting trademarks is
not clear.
Failure Or Inadequate Performance Of Our Technology Systems May Interrupt
Our Operations And Result In The Loss Of Customers And Revenue
Opportunities. Our ability to grow our customer base and generate sales of our
green consumer products over the Internet will depend on the efficient and
uninterrupted operation of our Web-related technology systems that are required
to accommodate a high volume of traffic. We cannot assure you that our Web site
infrastructure will be able to accommodate the volume of traffic that could
develop or that upgrade requirements will not have an adverse impact on our
business. Although we intend to implement security measures, our systems will
be vulnerable to physical damage or interruption from human error, natural
disasters, telecommunication failures, break-ins, sabotage, computer viruses,
intentional acts of vandalism and similar events. We do not intend to have
redundant systems and have not adopted a formal disaster recovery plan.
Therefore, any system failure, including network, software or hardware failure,
that causes an interruption in our service or a decrease in responsiveness of
our Web site could cause us to lose customers and revenue opportunities and
could harm our reputation and brand. In addition, our business interruption
insurance may not compensate us for all losses that could occur as a result of
system failures.
Security Concerns Could Hinder Our Online Sales And May Require Significant
Expenditures. Concern about the transmission of confidential information over
the Internet has been a significant barrier to online commerce over the
Internet. We cannot assure you that consumers will not limit their use of the
Internet to purchase products because of security concerns. We rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication necessary to effect secure transmission of
confidential information, such as customer credit card numbers. We cannot
assure you that advances in computer capabilities, new discoveries in the field
of cryptography or other events or
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<PAGE>
developments will not result in a compromise or breach of the security measures
that we use to protect customer transaction data. In addition, we may be
required to make significant expenditures to protect against the threat of
security breaches or to alleviate problems caused by such breaches.
Information Displayed On Our Web Site May Subject Us To Litigation And The
Related Costs. We may be subject to claims for defamation, libel, copyright or
trademark infringement or based on other theories relating to information
published on our Web site. We could also be subject to claims based upon the
content that is accessible from our Web site through links to other Web sites.
Defending against any such claims could be costly and divert the attention of
management from the operation of our business.
Government Regulation Of The Internet And Online Commerce Is Still
Developing And Could Increase Our Operating Costs Or Otherwise Adversely Affect
Our Business. There are existing laws and regulations that specifically
regulate communications or commerce on the Internet. Further, laws and
regulations that address issues such as user privacy, pricing, content,
taxation and the characteristics and quality of online products and services
are under consideration by federal, state, local and foreign governments and
agencies. New laws or regulations relating to the Internet, or new applications
or interpretations of existing laws, could adversely affect our business by
increasing our operating costs or otherwise.
RISKS RELATED TO THIS OFFERING
Our Existing Stockholders Will Exercise Significant Control. We expect that
the Wyly family will continue to exercise significant control over our
direction and management following the closing of this offering. In addition,
our directors and executive officers and their affiliates will, in the
aggregate, beneficially own approximately % of the outstanding shares of
GreenMountain.com common stock upon the closing of this offering, or % if the
underwriters exercise their over-allotment option in full. As a result of their
share ownership, these stockholders will have a significant influence on all
matters requiring stockholder approval, including the election of directors.
This concentration of ownership could delay or prevent another person from
acquiring control or causing a change in control of GreenMountain.com, which
may affect your ability to resell your shares at a favorable price. See
"Principal Stockholders."
Our Shares Have Never Been Publicly Traded And A Public Market May Not
Develop Or Be Liquid. Prior to this offering, there has been no public market
for our common stock. We cannot predict the extent to which a trading market
will develop or how liquid that market might become. The initial public
offering price for the shares will be determined by negotiations between us and
the representative of the underwriters and may not be indicative of prices that
will prevail in the trading market following this offering. See "Underwriting."
Our Stock Price Is Likely To Be Volatile And This Volatility Could Affect
Your Ability To Resell Your Shares At A Profit. The trading price of our common
stock is likely to be volatile. The stock market has experienced significant
price and volume fluctuations, and the market prices of technology company
stocks, particularly those of Internet-related companies, have been highly
volatile. As a result, you may not be able to resell your shares at a price
equal to or greater than the initial public offering price. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against the
issuing company, resulting in substantial costs and a diversion of management's
attention from the operation of its business. See "Underwriting."
Shares Eligible For Future Sale By Our Existing Stockholders May Adversely
Affect Our Stock Price. The market price of our common stock could drop due to
the sales of a large number of shares of our common stock or the perception
that such sales could occur. These factors could also make it more difficult to
raise funds through future offerings of common stock. After this offering,
shares of common stock will be outstanding. Of these shares, the shares
sold in this offering will be freely tradeable without restrictions under the
Securities Act of 1933, except for any shares purchased by our "affiliates," as
defined in Rule 144 under the Securities Act. The number of shares of common
stock outstanding would
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increase to and the number of freely tradeable shares would increase to
if the underwriters exercise their over-allotment option in full. Our officers
and directors and stockholders holding in the aggregate shares of common
stock have entered into lock-up agreements pursuant to which they have agreed
not to offer or sell any shares of common stock for a period of 180 days after
the date of this prospectus without the prior written consent of Prudential
Securities, on behalf of the underwriters. Also, Prudential Securities may, at
any time and without notice, waive the terms of these lock-up agreements as
specified in the underwriting agreement. Upon expiration of this lock-up
period, the shares owned by these persons prior to completion of this offering
may be sold into the public market without registration under the Securities
Act in compliance with the volume limitations and other applicable restrictions
of Rule 144 under the Securities Act. After the date of this prospectus, we
intend to file a registration statement under the Securities Act to register
all shares of common stock issuable upon the exercise of outstanding stock
options and reserved for issuance under our 1999 Stock Option Plan. This
registration statement is expected to become effective immediately upon filing,
and subject to the vesting requirements and exercise of the related options (as
well as the terms of the lock-up agreements), shares covered by this
registration statement will be eligible for sale in the public markets. See
"Shares Eligible for Future Sale."
Investors Will Experience Immediate And Substantial Dilution And May
Experience Further Dilution. The initial public offering price of the common
stock in this offering will be substantially higher than the net tangible book
value per share of the common stock immediately after this offering. Therefore,
if you purchase shares of common stock in this offering, you will incur
immediate and substantial dilution of $ per share in the net tangible book
value per share of common stock from the price you paid, assuming an initial
public offering price of $ per share. The exercise prices of most of our
outstanding options are below the anticipated initial public offering price. To
the extent these options are exercised, you will experience further dilution.
See "Dilution."
Our Management Will Have Broad Discretion In Use Of Proceeds And It May Not
Effectively Utilize Those Funds. Our management will have broad discretion in
how we use the net proceeds of this offering. Investors will be relying on the
judgment of our management regarding the application of the net proceeds of
this offering. Our management's decision regarding use of the net proceeds may
not be the most effective utilization of those funds. See "Use of Proceeds."
Provisions In Our Governing Documents And Delaware Law Could Make
Transactions Beneficial To Our Stockholders More Difficult. Provisions of our
certificate of incorporation, our bylaws and Delaware law could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders. See "Description of Capital Stock."
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements based largely on our
current expectations and projections about future events and financial trends
affecting the financial condition of our business. The words "believe," "may,"
"will," "estimate," "continue," "anticipate," "intend," "expect" and similar
expressions identify these forward-looking statements. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions,
including those described above under the caption "Risk Factors." In light of
these risks and uncertainties, the forward-looking events and circumstances
discussed in this prospectus may not occur and actual results could differ
materially from those anticipated in the forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
17
It's a small planet.(SM)
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to GreenMountain.com from the sale of the
common stock in this offering, assuming a public offering price of $ per
share, will be $ , after deducting underwriting discounts and commissions and
estimated offering expenses. The net proceeds would increase to $ if the
underwriters exercise their over-allotment option in full.
The principal purpose of this offering is to obtain funds to be used as
working capital and for general corporate purposes. We currently anticipate
that we will use approximately 55% to 65% of the net proceeds for brand
awareness and marketing, 10% to 16% of the net proceeds for technology and
development, and 22% to 32% of the net proceeds for other general corporate
purposes, including acquisitions of or investments in strategic businesses or
technologies. We cannot assure you, however, that the amount of the net
proceeds of this offering actually applied for any particular use will not
differ from the amount we currently expect to use for that purpose.
We expect that we will spend for general corporate purposes an amount equal
to 2% to 6% of the net proceeds to make substantial contributions to the
political process and for public education toward the goal of accelerating the
deregulation of the electric utility industry and imposing on the sources of
industrial air pollution the costs of their pollution.
We currently have no commitments or agreements relating to any acquisition
or investment in any strategic business or technologies. We are, however,
exploring, and expect from time to time in the future to explore, possible
acquisitions or investments that would further our business objectives.
If prior to the closing of this offering we have obtained advances from
Green Funding I, L.L.C., an investment vehicle managed by the Wyly family, in
order to permit us to meet our working capital requirements, we will use a
portion of net proceeds to repay such advances in full. See "Certain
Transactions--Subsequent Transactions--Working Capital Funding Commitment."
As of the date of this prospectus, we cannot specify, other than as
indicated above, the particular uses for the net proceeds to be received upon
the closing of this offering. Accordingly, our management will have broad
discretion in the application of the net proceeds. See "Risk Factors--Risks
Related to this Offering--Our Management Will Have Broad Discretion in Use of
Proceeds and It May Not Effectively Utilize Those Funds."
Pending these uses, the net proceeds of this offering will be invested in
short-term, interest-bearing, investment-grade securities or guaranteed
obligations of the U.S. Government.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock, and we
do not anticipate declaring or paying any cash dividends on our common stock in
the foreseeable future. We intend to retain any future earnings for use in the
operation of our business.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999. Our
capitalization is presented:
.on an actual basis, but reflecting our conversion from a limited liability
company to a corporation as if that conversion had occurred as of March
31, 1999; and
.as adjusted to reflect the sale of the shares of common stock offered
in this offering at an assumed initial public offering price of $ per
share, after deducting the underwriting discounts and commissions and
estimated offering expenses, as if this offering had been completed as of
March 31, 1999. See "Use of Proceeds."
You should read this information together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the notes to those statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
At March 31, 1999
-------------------------
Actual As Adjusted
-------- -----------
(In thousands)
<S> <C> <C> <C>
Cash................................................. $ 20,476 $
======== ===
Long-term obligations................................ $ -- $
Stockholders' equity:
Common stock, $.01 par value, 150,000,000 shares
authorized; 28,356,615 shares issued (actual);
shares issued (as adjusted)(1)............... 284
Additional paid-in capital.......................... 104,241
Notes receivable.................................... (5,108)
Deferred compensation............................... (1,636)
Accumulated deficit................................. (79,713)
Treasury stock...................................... (647)
-------- ---
Total stockholders' equity.......................... 17,421
-------- ---
Total capitalization................................ $ 17,421 $
======== ===
</TABLE>
- --------
(1)Excludes 6,659,044 shares issuable upon exercise of options and warrants
outstanding as of March 31, 1999.
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<PAGE>
DILUTION
Purchasers of the common stock in this offering will experience immediate
and substantial dilution in the net tangible book value of the common stock
from the initial public offering price. Net tangible book value represents the
amount of our total tangible assets less our total liabilities, divided by the
number of shares of common stock outstanding.
.At March 31, 1999, our net tangible book value was $(16,194,862) or
$(0.57) per share on an actual basis, but reflecting our conversion from a
limited liability company to a corporation as if that conversion had
occurred as of March 31, 1999.
.After giving effect to the sale of the shares of common stock offered
in this offering at an assumed initial public offering price of $ per
share and after deducting the underwriting discounts and commissions and
estimated offering expenses, as if this offering had been completed as of
March 31, 1999, our pro forma net tangible book value on March 31, 1999
would have been $ or $ per share.
This represents an immediate increase in the net tangible book value of
approximately $ per share to our existing stockholders and an immediate and
substantial dilution of $ per share to new investors purchasing common stock
in this offering. The following table illustrates this per-share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price........................... $
Pro forma net tangible book value as of March 31, 1999......... $
Increase attributable to new investors.........................
Net tangible book value after this offering.....................
----
Dilution to new investors....................................... $
====
</TABLE>
The following table summarizes as of March 31, 1999, on a pro forma basis
assuming our conversion from a limited liability company to a corporation had
occurred as of that date, the differences between the number of shares
purchased from GreenMountain.com, the total consideration paid and the average
price paid per share assuming an initial public offering price of $ .
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------- --------------------- Price per
Number Percent Amount Percent Share
------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders... % % $
New investors...........
------- --------- --------- ----------
Total............... 100.0% $ 100.0%
======= ========= ========= ==========
</TABLE>
The discussion and table above assumes no exercise of any stock options or
warrants outstanding as of March 31, 1999. The following table sets forth the
number of shares of common stock purchasable upon the exercise of options and
warrants outstanding as of March 31, 1999 and the related exercise price.
<TABLE>
<CAPTION>
Number of Shares
Purchasable Under
Stock Options or Warrants Exercise Price
------------------------- --------------
<S> <C>
13,216 $68.09
46,564 $67.93
53,150 $67.75
5,367,294 $ 3.00
1,178,820 $ 6.01
</TABLE>
To the extent any of the options having an exercise price lower than the
initial public offering price are exercised, there will be further dilution to
new investors. See "Risk Factors--Risks Related to This Offering--Investors
Will Experience Immediate and Substantial Dilution and May Experience Further
Dilution."
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SELECTED FINANCIAL INFORMATION
The following selected financial data should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the notes to those statements
included elsewhere in this prospectus. The statement of operations data for the
period from inception on February 26, 1997 through December 31, 1997, for the
year ended December 31, 1998 and for the three-month periods ended March 31,
1998 and 1999, and the balance sheet data at December 31, 1997 and 1998 and
March 31, 1999, are derived from our financial statements included elsewhere in
this prospectus. The statement of operations per share data reflect our
conversion from a limited liability company to a corporation as if that
conversion had occurred as of the beginning of the period indicated. See
"Certain Transactions--Reorganization Transaction." The historical results
presented here are not necessarily indicative of future results.
<TABLE>
<CAPTION>
Three Months Ended
February 26, 1997 March 31,
(Inception) to Year Ended --------------------
December 31, 1997 December 31, 1998 1998 1999
----------------- ----------------- ------- -----------
(Unaudited)
(In thousands, except share data)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues............... $ -- $ 1,531 $ -- $ 4,150
Cost of sales.......... -- 1,098 -- 3,096
Operating Expenses:
Customer and regional
operations............ 982 4,834 652 2,270
Sales and marketing.... 4,337 33,010 4,065 13,496
General and
administrative........ 1,742 4,226 1,012 3,928
Technology and
development........... 2,048 2,918 833 1,147
Depreciation and
amortization.......... 90 768 169 239
Development and
transaction costs..... 4,706 709 -- --
-------- -------- ------- --------
Total operating
expenses............. 13,905 46,465 6,731 21,080
-------- -------- ------- --------
Operating loss......... (13,905) (46,032) (6,731) (20,026)
Interest income
(expense), net........ 43 (7) 24 215
-------- -------- ------- --------
Net loss............... $(13,862) $(46,039) $(6,707) $(19,811)
======== ======== ======= ========
Basic and diluted loss
per common share...... $ (19.65) $ (5.46) $ (3.55) $ (0.80)
======== ======== ======= ========
Basic and diluted
weighted average
common shares
outstanding........... 706 8,431 1,892 24,783
======== ======== ======= ========
<CAPTION>
At December 31, At March 31, 1999
----------------------------------- --------------------
As
1997 1998 Actual Adjusted(1)
----------------- ----------------- ------- -----------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash................... $ 1,933 $ 5,654 $20,476 $
Working capital........ 141 (2,268) 14,854
Total assets........... 4,183 11,411 29,733
Total liabilities...... 2,445 11,959 12,313
Stockholders' equity... 1,738 (548) 17,420
</TABLE>
- --------
(1) As adjusted to reflect the sale of the shares of common stock offered
in this offering at an assumed initial public offering price of $ per
share after deducting underwriting discounts and commissions and estimated
offering expenses, as if this offering had been completed as of March 31,
1999. See "Use of Proceeds" and "Capitalization."
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes to those statements included elsewhere in this
prospectus. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed below and elsewhere in this prospectus, particularly in
"Risk Factors."
Overview
We were formed as a limited liability company in February 1997. Prior to the
closing of this offering, we will convert from a limited liability company to a
corporation. See "Certain Transactions--Reorganization Transaction."
Between August 1997 and March 31, 1998, Green Funding I and Green Funding
II, investment vehicles managed by the Wyly family, contributed to us a total
of $70.0 million. In August 1997, Green Mountain Power Corporation, through a
subsidiary, contributed to us service marks, including our Choose wisely. It's
a small planet.SM and Green Mountain Energy ResourcesSM service marks,
marketing studies and analyses and its rights under agreements with third-party
service providers, valued at $4.0 million, in exchange for a 33% equity
interest in the limited liability company. In accordance with the limited
liability agreement, the $4.0 million value associated with Green Mountain
Power Corporation's initial capital contribution was credited to their capital
account. In August 1997, Green Funding I contributed $8.0 million and committed
to contribute an additional $22.0 million in exchange for a 67% equity
interest. By December 1998, as a result of capital contributions made by Green
Funding I after August 1997, the equity interest owned indirectly by Green
Mountain Power Corporation had been diluted to approximately 1%. In late
December 1998, we agreed to pay the subsidiary of Green Mountain Power
Corporation $1.0 million in cash for its remaining 1% equity interest, a non-
compete agreement, rights to the Green Mountain name and other concessions.
During January and February 1999, we raised $35.2 million in cash through
private equity offerings. See "Certain Transactions--Subsequent Transactions,"
"Principal Stockholders" and Notes (1) and (11) to our financial statements
included elsewhere in this prospectus.
Since commencing active operations in August 1997, we have:
.Established relationships with several outsourcing partners to perform
most of the marketing, sales and customer service functions necessary for
the operation of our business;
.Established relationships with environmental groups and entered into
affinity marketing programs with some of them;
.Designed and built our Information Network to provide for the efficient
communication of information with and among our outsourcing partners;
.Integrated our Web site into our Information Network to enable consumers
to purchase our electricity products online;
.Implemented an aggressive marketing campaign using the Internet and other
media aimed at creating awareness of the Green Mountain brand in
California, which opened for competition on April 1, 1998, and
Pennsylvania, which opened for competition on January 1, 1999;
.Established supply relationships for green electricity in California and
Pennsylvania;
.Commenced marketing green electricity to residential customers in the
deregulated electric utility markets of California and Pennsylvania;
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.Established supply relationships for Green Mountain SolarSM systems and
commenced marketing them in California and Pennsylvania; and
.Recruited a management team with substantial expertise in brand
development and marketing, as well as Internet-related technologies.
As of March 31, 1999, we had approximately 21,700 customers in California.
We began selling electricity products in Pennsylvania on January 1, 1999. As of
March 31, 1999, we had approximately 57,300 customers in Pennsylvania.
We had 28 employees as of September 1, 1997. As of March 31, 1999, we had 68
employees, including management and staff personnel, and an additional seven
temporary employees. We will add additional management and staff personnel as
necessary, but we expect to continue to rely heavily on outsourcing
arrangements.
We have only a limited operating history upon which you can evaluate our
business and prospects. We have not achieved profitability, and expect to incur
net losses in 1999 and subsequent fiscal periods. We expect our costs of sales
and operating expenses, especially in the areas of sales, marketing and brand
promotion, to increase significantly, and, as a result, will need to generate
significant revenues to achieve profitability. Even if we do achieve
profitability, we may be unable to sustain or increase profitability on a
quarterly or annual basis in the future. We believe that period-to-period
comparisons of our operating results are not meaningful and that results for
any particular period should not be relied on as an indication of future
performance. See "Risk Factors."
Results Of Operations--Year Ended December 31, 1998 Compared To The Year Ended
December 31, 1997
Revenues And Cost Of Sales
We did not generate revenues until the last half of 1998. Revenues increased
from zero in 1997 to $1.5 million in 1998. Cost of sales representing
electricity wholesale costs increased from zero in 1997 to $1.1 million in
1998. These increases were attributable to the commencement of electric service
to customers in California beginning April 1, 1998.
Customer And Regional Operations Expense
Customer and regional operations expense increased by $3.8 million from $1.0
million to $4.8 million from 1997 to 1998. This expense is comprised primarily
of the cost of our billing and customer care operations and expenses incurred
for operations within particular states, including general operating expenses,
supply personnel, legal and regulatory expenses and consulting and lobbying
expenses. Overall, the increase from 1997 to 1998 primarily represents:
.Approximately a $1.5 million increase attributable to the commencement of
billing activity when the California retail electricity market opened for
competition;
.Approximately a $0.9 million increase in regional operating activities
within states expected to open their electric utility markets for retail
competition in the foreseeable future;
.The preparation for commencement of service to customers in Pennsylvania
on January 1, 1999; and
.Costs associated with increased business development efforts.
In 1998, we entered into two electricity supply agreements to serve our
customers in California, and we entered into three electricity supply
agreements to cover anticipated customer requirements in Pennsylvania to
commence in 1999.
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Sales And Marketing Expense
Sales and marketing expense increased by $28.7 million from $4.3 million to
$33.0 million from 1997 to 1998. Our sales and marketing expenses consist
primarily of the costs related to building brand awareness, including
traditional media advertising, such as television, radio, print and billboards
and special events and promotions and direct marketing, including direct mail,
affinity programs, Internet and inbound and outbound telemarketing. Total sales
and marketing costs included the following amounts:
. Approximately $10.0 million for the year ended December 31, 1998 and
$0.7 million for the period from inception on February 26, 1997 through
December 31, 1997 for building brand awareness; and
. Approximately $17.4 million for the year ended December 31, 1998 and
$2.4 million for the period from inception on February 26, 1997 through
December 31, 1997 for direct marketing costs in Pennsylvania and
California.
These increases are primarily attributable to the commencement of service in
California in April 1998 and the anticipation of the commencement of service in
Pennsylvania effective January 1, 1999. These increases as discussed above
involve our use of marketing services from The Cullinan Group in 1998. We
expect sales and marketing expense to continue to increase as we expand our
green electricity business to additional states and expand the products offered
through our Web site.
General And Administrative Expense
General and administrative expenses increased $2.5 million from $1.7 million
to $4.2 million from 1997 to 1998. This expense is comprised primarily of
payroll and miscellaneous expenses relating to our administrative, human
resources, finance, legal and regulatory functions. Total payroll costs
included in general and administrative expense were approximately $2.8 million
for the year ended December 31, 1998 and $1.1 million for the period from
inception on February 26, 1997 through December 31, 1997. The increase in
payroll costs reflects the increase in the number of employees needed to
accommodate our growth in 1998. Total miscellaneous costs related to our
administrative, human resources, finance, legal and regulatory functions were
approximately $1.4 million for the year ended December 31, 1998 and $0.6
million for the period from inception on February 26, 1997 through December 31,
1997. Miscellaneous costs primarily included costs related to travel, office
supplies and meals and entertainment due to costs incurred for activities
supporting the entry into deregulated electric utility markets.
Technology And Development Expense
Technology and development expense increased $0.9 million from $2.0 million
to $2.9 million from 1997 to 1998. This expense is comprised primarily of
payroll, general operating expenses and costs of consultants relating to the
preliminary development and operation of our information technology systems.
The increase in this expense primarily relates to information technology
consulting services provided by Sterling Software. The increase was also
partially attributable to increased payroll and general operating costs related
to operating in 1998 for a full year rather than less than six months in 1997.
We anticipate this expense will increase in future periods as we continue to
implement improvements in our Web site and our Information Network.
Depreciation And Amortization
Depreciation and amortization increased $0.7 million from $0.1 million to
$0.8 million from 1997 to 1998. Our first full year of operations was 1998.
Depreciation and amortization for 1998 represent one full year, while
depreciation and amortization for 1997 represents a period from commencement of
operations in August 1997 to December 31, 1997. This increase is also due to
$0.9 million of property and equipment additions during 1998.
Development And Transaction Costs
Development and transaction costs decreased $4.0 million from $4.7 million
to $0.7 million from 1997 to 1998. In 1997, these costs were comprised
primarily of start-up and development costs of approximately $4.0
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million. Unamortized organization costs in the amount of $0.3 million were
written off in the fourth quarter of 1998, in accordance with a new accounting
pronouncement.
Interest Income/(Expense), Net
Interest income/(expense), net, increased $0.1 million from 1997 to 1998
resulting primarily from interest on cash and cash equivalents offset in part
by interest expense on a short-term, $10.0 million loan. This loan was both
obtained and repaid in 1998. Our operations have been funded almost exclusively
by capital contributions.
Income Tax Expense
No benefit for federal and state income taxes is reported in our financial
statements because we have elected to be taxed as a partnership prior to our
conversion from a limited liability company to a corporation. For the periods
presented, the federal and state tax effects of our tax losses were the
responsibility of Green Funding I as a member of the limited liability company
in accordance with our operating agreement. Subsequent to our conversion into a
corporation, we will account for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. If
we had applied this statement for the period from our inception through
December 31, 1998, the deferred tax asset generated, primarily from net
operating loss carry forwards, would have been offset by a full valuation
allowance.
Results Of Operations--Three Months Ended March 31, 1999 Compared To The Three
Months Ended March 31, 1998
Revenues And Cost Of Sales
Revenues increased from zero in the first quarter of 1998 to $4.1 million in
the first quarter of 1999. Cost of sales increased from zero in the first
quarter of 1998 to $3.1 million in the first quarter of 1999. The increase was
attributable to the commencement of electric service to customers in
Pennsylvania and California.
Customer And Regional Operations Expense
Customer and regional operations expense increased by $1.6 million from $0.7
million to $2.3 million from the first quarter of 1998 to the first quarter of
1999. The increase primarily represents:
. Approximately a $0.7 million increase attributable to the commencement
of billing activity when the Pennsylvania retail electricity market
opened for competition on January 1, 1999;
. Approximately a $0.7 million increase in regional operating expenses
within states expected to open their electric utility markets for retail
competition in the foreseeable future; and
. Costs associated with increased business development efforts.
Sales And Marketing Expense
Sales and marketing expense increased by $9.4 million from $4.1 million to
$13.5 million from the first quarter of 1998 to the first quarter of 1999. Our
sales and marketing expenses consist primarily of the costs related to building
brand awareness, traditional media advertising such as television, radio, print
and billboards and special events and promotions and direct marketing,
including direct mail, affinity programs, Internet and inbound and outbound
telemarketing. Total sales and marketing costs included the following amounts:
. Approximately $3.7 million for the quarter ended March 31, 1999 and $0.8
million for the quarter ended March 31, 1998, for building brand
awareness; and
. Approximately $6.7 million for the quarter ended March 31, 1999 and $2.6
million for the quarter ended March 31, 1998, for direct marketing costs
in Pennsylvania and California;
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These increases are primarily attributable to the commencement of service in
Pennsylvania effective January 1, 1999. These increases as discussed above
involve our use of marketing services from The Cullinan Group. The first
quarter of 1999 amounts also reflect approximately $0.4 million of
compensation expense associated with the difference between the purchase price
and exercise price of shares and options issued and their fair market value at
the date of sale or grant. We expect sales and marketing expense to continue
to increase as we expand our green electricity business to additional states
and expand the products offered through our Web site.
General And Administrative Expense
General and administrative expenses increased $2.9 million from $1.0
million for the first quarter of 1998 to $3.9 million for the first quarter of
1999. This expense is comprised primarily of payroll and miscellaneous
expenses relating to our administrative, human resources, finance, legal and
regulatory functions. Total payroll costs included in general and
administrative expense were approximately $2.5 million for the first quarter
of 1999 and $0.7 million for the first quarter of 1998. Total general and
administrative expense for the first quarter of 1999 reflects the recording of
approximately $2.1 million of compensation expense associated with the
difference between the purchase price and the exercise price of shares and
options issued and their fair market value at the date of sale or grant. Total
miscellaneous costs related to our administrative, human resources, finance,
legal and regulatory functions were approximately $1.4 million for the first
quarter of 1999 and $0.3 million for the first quarter of 1998. Miscellaneous
costs primarily included costs related to travel, office supplies and meals
and entertainment.
Technology And Development Expense
Technology and development expense increased $0.3 million from $0.8 million
for the first quarter of 1998 to $1.1 million for the first quarter of 1999.
This expense is comprised primarily of payroll, general operating expenses and
costs of consultants relating to the preliminary development and operation of
our information technology systems. The increase in this expense was primarily
attributable to increased payroll and general operating costs related to
increased consultant services for current operations provided by Sterling
Software and increased network development. We anticipate this expense will
increase in future periods as we continue to implement improvements in our Web
site and our Information Network.
Depreciation And Amortization
Depreciation and amortization for the first quarter of 1999 remained
consistent with the first quarter of 1998. Capitalized assets include
primarily computers and furniture and fixtures that were purchased when we
commenced operations.
Interest Income/(Expense), Net
The increase in interest income/(expense), net, of $0.2 million from the
first quarter 1998 to the first quarter 1999 resulted primarily from interest
earned on cash and cash equivalents as a result of our equity offerings in
January and February of 1999.
Liquidity And Capital Resources
Our operations have been funded almost entirely using proceeds raised
through the sale of equity interests.
Net cash used in operating activities was $12.3 million for 1997, $39.9
million for 1998, $5.1 million for the first quarter of 1998 and $19.1 million
for the first quarter of 1999. The period-to-period increases in net cash used
in operating activities resulted primarily from increasing net losses,
partially offset by increases in accrued expenses and accounts payable.
Net cash used in investing activities was $1.3 million for 1997, $0.8
million for 1998, $0.1 million for the first quarter of 1998 and $0.2 million
for the first quarter of 1999, entirely the result of purchases of property
and equipment, primarily computer equipment and furniture and fixtures.
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Net cash provided by financing activities was $15.6 million for 1997 and
$44.4 million for 1998. Net cash provided by financing activities in both 1997
and 1998 resulted primarily from capital contributions by Green Funding I.
During the first quarter of 1999, we raised $35.2 million of cash through
private equity offerings.
We are seeking additional investors through this offering to obtain working
capital for brand development and marketing, product development, enhancement
to our Web site and technology systems, expansion of our green electricity
business into new deregulated markets, environmental programs and other general
corporate purposes. The implementation of our expanded business plan is
dependent on this offering. Although we have no material commitments for
capital expenditures, we anticipate a substantial increase in our capital
expenditures and lease commitments consistent with anticipated growth in
operations, infrastructure and personnel. These expenditures will primarily be
for computer equipment, furniture and fixtures and leasehold improvements. We
also have total minimum lease obligations of $0.4 million under cancelable
operating leases. Several of our outsourcing agreements have minimum financial
commitments as follows:
. Our outsourcing agreement with en.able, L.L.C. commits us to pay minimum
monthly service charges for call center service and billing services in
the amount of $112,500;
. Our teleservices agreement with ICT Group, Inc. commits us to pay
minimum annual amounts for teleservices and communications costs of
$392,000;
. Our marketing services agreement with The Cullinan Group requires us to
pay a minimum monthly retainer fee of $30,000 as well as monthly advance
payments in the amount of anticipated expenses less the monthly retainer
fee; and
. Our marketing agreement with Yahoo! Inc. commits us to pay approximately
$6,000,000 over the one year term of the contract commencing in May
1999.
Our contracts with four electricity suppliers provide for separate letters
of credit or equivalent financial assurances to satisfy credit requirements.
The amounts of the letters of credit range from 15 days' to two months' of
receivables based on our load forecast. In addition, we have delivered to one
electricity supplier irrevocable letters of credit in association with the
supplier's purchase and installation of three wind power turbines. We also
delivered letters of credit to regulators securing our performance as an energy
service provider. Total supply and regulatory letters of credit outstanding at
December 31, 1998 were $2,765,230 and at March 31, 1999 were $2,477,251.
If we are unable to obtain financing through this offering, we will curtail
our current growth plans and we believe our existing cash resources, together
with up to $22.0 million available under a funding agreement with Green Funding
I, will be sufficient to fund our operations at least through 1999. See
"Certain Transactions--Subsequent Transactions--Working Capital Funding
Commitment" and Note (1) to our financial statements included elsewhere in the
prospectus. We believe that, assuming this offering closes, the net proceeds
from the offering, together with cash resources, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for the
foreseeable future. However, there may arise circumstances in which we need to
raise additional funds through public or private financings or other
arrangements, and we cannot assure you that we will be able to do so. The
failure to raise additional funds when needed could have a material adverse
effect on our business, results of operations and financial condition.
Market Risk Disclosures
We currently have no indebtedness, hold no derivative instruments and do not
earn foreign-sourced income. Accordingly, changes in interest rates or currency
exchange rates do not generally have a direct effect on our financial position.
Our commodity price risk is limited, as all of our electricity supply contracts
are
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short-term requirements contracts that generally match the aggregate customer
requirements that are assigned to them and they were not entered into for
trading or speculative purposes. Under some of these contracts, either we or
our suppliers can discontinue the assignment of additional customers with
advance notice. The wholesale price is either fixed or includes a fixed margin
to the wholesale clearing price for the term of the contracts. In the future,
as our electricity requirements reach substantial levels, we may increase the
volume of electricity contracts that we buy directly from electricity
wholesalers other than under requirements contracts in order to reduce our
overall costs of electricity supply and allow us greater marketing flexibility.
As of March 31, 1999, we did not face the level of equity price risk that we
expect to be subject to subsequent to this offering. To the extent that changes
in interest rates and currency exchange rates affect general economic
conditions, we would be affected by such changes.
Year 2000 Readiness Disclosure
State Of Readiness
On January 1, 2000, technology systems and software applications may fail or
malfunction due to the inability to distinguish between 20th century dates and
21st century dates. We have defined "Year 2000 readiness" or "Year 2000 ready"
as meaning a hardware or software system is suitable for continued use into the
Year 2000 and beyond. Specifically, date dependant systems may represent the
year 2001 as "01," but will not cease to perform the functions necessary for
its use.
We have determined during our initial assessment that our internal corporate
systems, including both hardware and software applications, are Year 2000
ready, with some exceptions. Those systems determined not to be Year 2000 ready
and which are critical to our operations will either be replaced or upgraded in
order to be Year 2000 ready. We expect to achieve Year 2000 readiness for all
of our systems by the end of the third quarter of 1999. The phases of our Year
2000 readiness program are as follows: (1) Planning and Awareness,
(2) Assessment, and (3) Remediation and Testing.
. Our Planning and Awareness phase is approximately 80% complete with
additional employee awareness expected to be completed by the end of the
third quarter of 1999.
. The overall Assessment phase is approximately 20% complete. As part of
Assessment, inventory is approximately 30% complete overall, with
internal corporate systems inventory 40% complete and outsourced business
systems inventory 20% complete. The internal figure will increase
significantly when the implementation of Microsoft SMS, a package which
will assist us in assessing our Year 2000 readiness, is complete. The
percentage of outsourced business systems inventory will increase
significantly when we receive the feedback to our inquiries on vendor and
partner Year 2000 readiness in response to the systems they employ to
meet our requirements. We expect the Assessment phase to be completed by
the end of the second quarter of 1999.
. Remediation and Testing is approximately one-third complete. Once we
install software patches and upgrades to our financial system, payroll
system and desktop applications, which we expect to complete by the end
of the third quarter of 1999, this phase will be finished.
In addition to building and physical plant equipment, we distinguish
technology systems into two categories, business systems and corporate systems.
The business systems consist of the hardware and software employed to support
the business operations of GreenMountain.com, including third-party service
providers. The corporate systems consist of the hardware and software required
to support the corporate infrastructure such as our network servers, desktop
computers, desktop applications and the financial system.
. For business systems, we have outsourced the majority of our operations.
We have relationships with electricity suppliers, local utility
distribution companies, billing centers, call centers, customer
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acquisition, mailing list providers, Web content providers, network
managers, and marketing groups. We have begun research into the state of
Year 2000 readiness with each of the organizations we do business with. We
believe we have a level of comfort that each will be able to continue
functioning and fulfilling their obligations to us. To formalize this, we
are in the process of preparing material to be sent to each supplier
asking them to certify that the equipment and software they employ to meet
their contractual obligations to us has been tested and will be suitable
for continued use into the Year 2000 and beyond. Additionally, we will be
reviewing the business sustainability of our key suppliers of billing and
customer care and some of their information technology functions. Lastly,
our network manager service provider will be assisting in the coordination
of a system level test plan that will push and pull transactions across
our network to and from our different suppliers and partners. The test
data will be designed to test transactions with key dates aimed at
confirming Year 2000 readiness and the expected time of completion of the
testing is August 1999.
. For corporate systems, we are a young company with new technology and no
legacy applications. All of our hardware is less than two years old and
is still supported by vendors and suppliers. Corporate software consists
mainly of desktop applications, the financial system and the payroll
system--preparing these applications to be Year 2000 ready consists of
applying patches and installing software upgrades. We are in the process
of installing Microsoft SMS, which will enable our organization to
inventory every desktop and server to determine the extent of those
items' Year 2000 readiness. Estimated time of completion for this project
is July 1999. We believe that in the majority of cases, we will be
applying software upgrades or patches to correct potential issues that
could result from the Year 2000 issue. Remediation of non-ready systems
is expected to be completed during the third quarter of 1999.
. We have performed an internal risk assessment to identify mechanical and
building systems that could be at risk for Year 2000-related issues. As
part of the Year 2000 readiness effort, we have identified non-computer
technology and outside suppliers that may be susceptible to Year 2000
issues, including our local electricity supplier and our security access
system provider. Completion of assessment and testing of mechanical and
building systems is expected to be completed during the third quarter of
1999.
We have performed research on the Year 2000 readiness of each of our
suppliers. We have relied on Internet postings, SEC filings, and documentation
provided by suppliers and partners. The research has obtained standard
responses on Year 2000 readiness, specifically that each company is either Year
2000 ready or in the process of becoming Year 2000 ready. For those business
systems that we deem critical to our operations and business sustainability, we
will require a more detailed response. We are in the process of preparing
material to be sent to these suppliers and vendors and expect that letters will
be sent by the end of the second quarter of 1999, requesting responses to be
received in the following quarter. These letters are being prepared and sent in
tandem with our system wide test to ensure that these suppliers and vendors are
in fact Year 2000 ready. We expect to complete this process during the third
quarter of 1999. However, we cannot assure you that the failure of one of these
third parties to be Year 2000 ready will not have a material adverse effect on
us. If we determine no later than September 1999 that an information technology
service provider, outsourcing provider or supplier will not be Year 2000 ready,
we believe we will be able to select in a timely manner alternatives which are
Year 2000 ready.
Costs To Address Year 2000 Issues
In order to meet current and future business needs, we are assessing our
hardware and software applications and making them Year 2000 ready. We are also
utilizing the services of Sterling Software to assist with the integration
testing of data shared with our information technology service providers,
outsourcing providers and suppliers. We have expensed less than $0.1 million in
connection with our Year 2000 readiness efforts since inception through
March 31, 1999 and we expect to incur approximately $0.5 million during the
remainder of 1999. These costs represent work to be performed to both make our
corporate and business systems Year 2000 ready and to assess the Year 2000
readiness of our information technology service providers, outsourcing partners
and suppliers.
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Risks Associated With Year 2000 Issues
We are subject to external Year 2000-related failures or disruptions that
might generally affect industry and commerce, such as failures by energy
generation or utility distribution companies and related service interruptions.
These failures or disruptions are especially critical to us as a seller of
retail electricity products. Notwithstanding our Year 2000 efforts, the failure
of our systems or those of any of our information technology service providers,
outsourcing partners or suppliers, or the failure of the Internet generally, to
be Year 2000 ready could harm the operation of our systems or have unforeseen,
material adverse consequences to us. These consequences could include the
inability to bill our customers. All of these factors could materially
adversely affect our business, results of operations and financial condition.
Contingency Plans
We have no formal overall worst-case scenario, however, we expect that at
the corporate level we would sustain no adverse affects due to the short-term
loss of corporate information technology systems. For our business systems, a
long-term disruption could impact our ability to serve customers, including
customer billing, customer service and our ability to interact with electric
utility and distribution companies. This would not, however, impact the ability
for customers to receive our energy products or electric distribution and
generation in general. As part of our contingency planning, we will use risk
assessment to develop contingency plans for worst-case scenarios in each area
of our business.
Recent Accounting Pronouncements
The Financial Accounting Standard Board (FASB) recently issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and displaying comprehensive income and its components in financial
statements. Comprehensive income, as defined, includes all changes to equity
(net assets) during a period from non-owner sources. SFAS No. 130 is effective
for financial statements for fiscal years beginning after December 15, 1997. We
have not had any transactions that are required to be reported in comprehensive
income.
The FASB recently issued SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to
report selected information about operating segments in interim financial
reports. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. We do not believe we currently operate in
more than one segment.
The FASB, in June 1998, issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
derivative instruments embedded in other contracts, be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. A company may also implement SFAS No. 133 as of
the beginning of any fiscal quarter after June 16, 1998. SFAS No. 133 cannot be
applied retroactively. SFAS No. 133 must be applied to derivative instruments
and derivative instruments embedded in hybrid contracts that were issued,
acquired or substantively modified after December 31, 1997 (and, at the
company's election, before January 1, 1998). We do not have any derivative
instruments at this time; however, such instruments may be embedded in future
electricity contracts.
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The American Institute of Certified Public Accountants Statement of Position
(SOP) No. 98-1, Software for Internal Use, provides guidance on accounting for
the cost of computer software developed or obtained for internal use. SOP No.
98-1 is effective for financial statements for fiscal years beginning after
December 15, 1998. We do not expect that SOP No. 98-1 will have a material
impact on our financial statements. GreenMountain.com anticipates that in the
second quarter of 1999 it will begin capitalizing certain costs in accordance
with SOP No. 98-1 associated with projects that enter the development stage,
including its Web site development project.
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BUSINESS
Our Mission
GreenMountain.com uses the Internet and other media to offer environmentally
friendly electricity and other products to consumers. Our Web site--
www.greenmountain.com--will use the rich interactive resources of the Internet
to educate consumers about the environmental impact of their everyday purchases
and to make it easy and appealing for them to use those purchases as agents of
change for a cleaner and healthier environment. Our mission is to make Green
Mountain the leading brand for environmentally friendly products.
We currently offer green electricity products in Pennsylvania and California
and are the leading retailer of green electricity to residential customers in
deregulated utility markets within the United States. We intend to offer green
electricity products in each deregulated utility market in which we can compete
effectively. We also currently offer solar generation equipment, and we expect
to offer other green consumer products.
The Opportunity
Public Concern About Environmental Problems Is High
Our environment faces serious problems.
.Air pollutants released by the burning of fossil fuels pose serious
threats to human health, ecosystems, visibility, crops and buildings.
.62 million Americans live in approximately 60 to 70 metropolitan areas
that fail air quality standards.
.Smog (ground level ozone) contributes to respiratory ailments.
.Emissions of nitrogen oxide are a major contributor to formation of smog.
.Electric utility generation accounts for 30% of nitrogen oxide emissions
in the United States.
.The mixture of sulfur dioxide and nitrogen oxide causes acid rain,
resulting in the acidification of lakes and streams, damage to trees at
high elevations and accelerated decay of buildings and paints.
.Electric utility generation accounts for 66% of sulfur dioxide emissions
in the United States.
.1998 was the hottest year on record and this decade has been the hottest
decade on record.
.Scientists generally believe that increases in carbon dioxide emissions
contribute to global warming.
.Electric utility generation accounts for 36% of carbon dioxide emissions
in the United States.
A recent Worldwatch publication stated:
. . . [There] is an exciting alternative economic model that
promises a better life everywhere without destroying the earth's
natural support systems. The new economy will be powered not by
fossil fuels, but by various sources of solar energy and hydrogen
. . . Instead of a throwaway economy, we will have a
reuse/recycle economy.
Even large oil companies seem to recognize the need for cleaner burning fuels
and renewable energy sources and are actively exploring alternatives to fossil
fuels. According to Worldwatch Institute:
.Atlantic Richfield's chief executive officer sees his company's large
holdings of natural gas playing a key role in the transition from a
carbon-based energy economy to one based on hydrogen.
.British Petroleum has committed to a ten-fold increase in sales of solar
photovoltaic cells reaching $1 billion over the next decade.
.Royal Dutch Shell has announced plans to invest $500 million in renewable
energy sources.
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We are convinced of the need to switch from the current fossil-fuel-based,
throwaway economy to an environmentally sustainable economy, and we believe
that our g*commerce model can help accelerate this change.
We believe that Americans are more concerned than ever about environmental
problems and are more knowledgeable than ever about green products and
processes. We also believe that Americans are increasingly sensitive to the
effect that their individual behavior can have on the environment and are
willing to change that behavior in order to protect the environment. We believe
that this behavioral trend is evidenced by the recent growth of recycling.
According to BioCycle Magazine, the percentage of recycled waste grew from 8%
in 1990 to 28% in 1997.
[BAR CHART REPRESENTING PERCENTAGE INCREASE
IN WASTE RECYCLED FROM 1990 TO 1997]
In addition, BioCyle Magazine reported in April 1998 that the number of
community curbside recycling programs had increased from 1,042 in 1989 to 8,937
in 1997.
According to the 1998 Green Gauge Report by Roper Starch Worldwide, 47% of
Americans "cite difficulty in finding pro-environmental versions of products
they need and say not having time to shop around to find them is a "major
reason' or "something of a reason' for not doing more environmentally." We
believe that if offered a convenient, cost-effective choice, many consumers
will purchase a product that is green over one that is not. Jacquelyn Ottman,
the author of Green Marketing: Opportunity for Innovation, has said "[p]eople
are 'greener' today than ever before" and "[g]reen marketing is looking more
mainstream all the time." The 1998 Green Gauge Report states:
As Americans' levels of environmental concern are high and
sizable numbers of Americans say they would feel more favorable
toward a business that takes environmental action, marketing
around environmental issues is an excellent way to reach
consumers and build a "power brand."
We aim to make Green Mountain a leading brand for green products.
Deregulation Is Empowering Consumers To Change The Way Electricity Is Made
Deregulation of the $200 billion electric utility industry--the largest
source of industrial air pollution in the United States--is part of a global
trend away from government control and toward free markets. The electricity
industry includes three basic functions: the production or generation of
electricity, wholesale and retail marketing of electricity and transmission and
distribution of electricity to the end user. Historically, in the United States
regulated electric utilities have provided bundled electricity service,
including generation,
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It's a small planet.(SM)
<PAGE>
marketing and distribution, within exclusive franchise service territories. The
underlying premise of the regulatory system guaranteed the utilities freedom
from competition and a "reasonable" rate of return on their investment in
exchange for a limitation on that investment return in the form of government
regulation of the prices the utilities were allowed to charge their customers.
The wholesale power sector is largely subject to federal regulation, while
the retail operations of electric utilities are principally regulated on the
state level. Since the passage of federal legislation in 1992, the Federal
Energy Regulatory Commission has implemented measures to facilitate competition
in wholesale power marketing. On a state-by-state basis, states have begun to
introduce competition to the retail power marketing and generation sectors.
Because of the inherent inefficiencies that would be involved in the
duplication of the "poles and wires" and other facilities required for the
distribution of electricity, this function remains in the hands of state-
franchised monopolies, subject to traditional rate of return price regulation.
As a result of deregulation, the power generation and marketing sectors have
been separated from the distribution function. Thus, the electric utility
industry is changing from one characterized by a single provider of bundled
electricity service to one having a number of electricity generators and
marketers who are not subject to governmental price regulation, but are subject
to market price competition and risk.
Currently, the industry segment in which we compete is retail marketing and
our primary target customers are residential customers. Deregulation is
providing consumers with a choice of electricity supplier and of generation
source. Because all electricity delivered into the electric distribution system
serving an area is fungible, choice does not affect the actual electrons
delivered for the consumer's use. It does, however, influence the source of the
electricity delivered to the distribution system. Choice allows the growing
community of informed and environmentally conscious consumers a convenient way
to direct market forces toward positive environmental change.
Because deregulation is a political process, the timing and outcome of
deregulation in any particular state is unpredictable. The specific features of
the deregulation program implemented in a particular state affect whether and
to what extent free competition will develop in that market. To date, four
states--Pennsylvania, California, Massachusetts and Rhode Island--have opened
their retail electricity markets to competition with varying degrees of
success.
.Pennsylvania. Pennsylvania's deregulation program has been the most
successful, resulting in the most active electricity retail market in the
United States. Pennsylvania consumers considering selection of a power
marketer other than their traditional electric utility compare their
"shopping credit" to the rate offered by that marketer. The "shopping
credit" is an amount deducted from the bill that the consumer would
receive from the utility if the consumer selects another supplier. The
prices charged for electricity by the suppliers are not subject to
Pennsylvania price regulation. Unregulated suppliers, including
unregulated affiliates of the traditional utilities, have been able to
offer power to consumers at prices equal to or less than the Pennsylvania
shopping credit, thus providing an incentive for consumers to switch from
their traditional utility supplier. We have not used discounts or price
incentives in establishing our rates, which are based on wholesale market
prices and competitive retail margins. From time to time, we do offer
sign-up incentives, such as an initial month of free service. The cost of
these incentives has been included in customer acquisition costs and have
not had a significant effect on our results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." While we do not view ourselves as a price competitor, we
believe that we benefit from price competition because it contributes to
an active market of consumers who have made a deliberate choice of
electricity supplier.
Pennsylvania's retail electricity market opened for competition on January
1, 1999. As of March 31, 1999, approximately 10% of the households in the
Pennsylvania market had elected to switch from their incumbent electricity
provider. Of those households, we estimate slightly less than one-third
switched to a green electricity product. As of March 31, 1999, there were
seven significant residential electricity suppliers (excluding incumbent
electric utilities and their affiliates) competing in the residential
Pennsylvania market, and two of them offered green electricity products.
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.California. California's deregulation program is currently in a
transitional phase that is substantially less favorable to free market
competition than the Pennsylvania program. Under the California program,
consumers considering selection of an unregulated supplier are allowed a
shopping credit equal to the average wholesale cost of power available
under a pool known as the California Power Exchange. Because the shopping
credit is equal only to the wholesale value of the electricity consumed,
independent suppliers cannot generally offer consumers a price savings
compared to the traditional utilities. A limited exception exists as a
result of credits available for the production of electricity from
renewable resources. The absence of legitimate price competition has
limited the development of a vibrant, deregulated market in California.
California's retail electricity market opened for competition on April 1,
1998. As of March 31, 1999, only 1% of the households in California had
chosen to switch from their incumbent electricity provider. As of
March 31, 1999, there were five residential electricity suppliers
(excluding incumbent electric utilities and their affiliates) competing
for new customers in the California market, and all of them offered green
electricity products. As a result, all households that have switched are
receiving green electricity.
.Massachusetts. Although the Massachusetts retail electricity market
nominally opened for competition on March 1, 1998. To date the shopping
credit in Massachusetts has not achieved a level permitting competitive
retail suppliers to match the rates offered by incumbent electricity
providers. Accordingly, no significant competition for residential
customers has developed. Under the Massachusetts deregulation program, the
shopping credit increases over time.
.Rhode Island. Although Rhode Island's residential retail electricity
market was formally open for competition by July 1998, no significant
competition has developed in Rhode Island for the same reason competition
for residential customers has not developed in Massachusetts. Under the
Rhode Island deregulation program, the shopping credit increases over
time.
The primary reason for the success of the Pennsylvania deregulation program
as compared to the programs in California, Massachusetts and Rhode Island is
that Pennsylvania's program has stimulated customer interest by allowing
competitive retail suppliers to offer consumers savings. Although the political
nature of the deregulation process makes it impossible to provide any assurance
in this regard, we believe that the legislators and regulators in states
opening their electric utility markets for competition in the future will
consider the success of the Pennsylvania deregulation program when establishing
the specific features of the deregulation program to be implemented in their
respective states. As the only independent power marketer focusing on
residential customers and operating in both the Pennsylvania and California
markets, we believe that we have established a credibility that will allow us
to effectively advocate the Pennsylvania model in consultation with government
officials in states exploring electric utility deregulation. See "Risk
Factors--Risks Related to Establishment of Our Business--Our Ability to Expand
Our Existing Green Electricity Business into New Markets Depends on the Outcome
of the Deregulation Process in Each State."
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<PAGE>
The following map indicates the status of electric utility deregulation
across the continental United States.
MAP OF THE CONTINENTAL UNITED STATES APPEARS HERE DEPICTING
LEGISLATIVE OR OTHER ACTION TAKEN IN EACH STATE TO DEREGULATE
THE ELECTRIC UTILITY MARKET, INDICATING STATES WHERE:
.RESTRUCTURING PLAN ADOPTED BY COMMISSION OR LEGISLATION (14 STATES AND THE
DISTRICT OF COLUMBIA)
.COMPANIES ORDERED TO FILE RESTRUCTURING PLANS OR ENABLING LEGISLATION
ENACTED (4 STATES)
.COMMISSION OR LEGISLATIVE INVESTIGATION UNDERWAY LIKELY TO LEAD TO A
RESTRUCTURING PLAN (4 STATES)
.AN INFORMATIONAL OR FACT-FINDING STUDY IS UNDERWAY (23 STATES)
.NO SUBSTANTIVE ACTIVITY IS UNDERWAY (3 STATES)
SOURCE: REGULATORY RESEARCH ASSOCIATES, FEBRUARY 16, 1999]
Pennsylvania, California, Massachusetts and Rhode Island are currently the
only states that have implemented competition on a statewide basis. In addition
to these four states, Arizona, Arkansas, Connecticut, Delaware, Illinois,
Maine, Maryland, Michigan, Montana, Nevada, New Hampshire, New Jersey, New
Mexico, New York, Oklahoma and Virginia have taken formal action to deregulate.
We expect that more than half of the states will provide consumers a choice of
electricity supplier and generation source by the end of 2003.
The deregulation of electricity follows the precedent of deregulation of
long distance telephone services, with some important differences. While long
distance telephone service (like wholesale electric sales) is largely governed
by federal laws, electric utilities are principally regulated by the states.
Also, we will be able to differentiate our products by their generation source
whereas the long distance telephone market is marked by an absence of product
differentiation.
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The Internet And Online Commerce Are Growing
We believe that the Internet is emerging as one of the most significant
global communications media. It is enabling millions of people to share
information and conduct business electronically. A number of factors are
contributing to the dramatic growth of this new medium, including:
.Ease of use;
.Reduced costs;
.Faster access;
.Improved content; and
.Increased attention in other media.
Jupiter Communications estimates that the number of Web users in the world will
grow from 138 million at the end of 1998 to 256 million by the end of 2002.
Online retailers are able to communicate effectively with customers by
providing:
.Visual product presentations;
.Up-to-date pricing and product information;
.Customer support and opportunities for customer feedback;
.Product offerings tailored to customer preferences; and
.Electronic billing and payment systems.
These features, together with the widespread availability of express delivery
services, make online retailing a viable alternative to traditional stores.
Online retailers also avoid the burden of managing and maintaining numerous
local facilities and enjoy lower transaction costs.
An increasingly broad base of products and services are being sold online,
including books, brokerage services, computers, music and travel services.
Jupiter Communications estimates that the value of goods and travel services
purchased on the Internet in the United States alone will grow from $7.1
billion in 1998 to $41.1 billion in 2002. We cannot assure you that our sales
will have a comparable growth rate.
As the number of online content, commerce and service providers has
expanded, strong brand recognition and strategic alliances have become critical
to success. Brand development is especially important for online retailers due
to the need to establish trust and loyalty with customers in the absence of
face-to-face interaction.
The Green Mountain Advantage
We believe that a significant opportunity exists for a company to market
green consumer products over the Internet. Research performed for us by
Copernicus, The Marketing Investment Strategy Group, which has assisted us with
the development of our overall marketing strategy, indicates that our green
electricity customers in Pennsylvania are 31% more likely to have accessed the
Internet in the last three months than the general population. According to the
1998 Green Gauge Report, an annual environmental survey conducted by Roper
Starch Worldwide, "the Internet is one source by which Americans are gaining
information about the environment" and "[i]ndeed, 71% of [households with one
or more personal computers] say they know 'a lot' or 'a fair' amount about the
environment." We believe that by creating an Internet destination site that
will appeal to people who care about the environment, we can make Green
Mountain a leading brand for green products.
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<PAGE>
We believe that we are uniquely qualified to capitalize on the opportunity
to market green products over the Internet as a result of:
.Our success in marketing green electricity to residential customers in the
deregulated utility markets of Pennsylvania and California; and
.The growing awareness of our Green Mountain brand name.
We are the leading seller of green electricity to residential customers in
deregulated utility markets within the United States based on number of
households served. In June 1998, we began marketing electricity products in
Pennsylvania, which opened for competition on January 1, 1999. As of April 30,
1999, we had approximately 56,094 customers in Pennsylvania. The Xenergy 1999
Retail Wheeling Multi-Client Study Phase 4 Final Report states:
The survey analysis identified Green Mountain as "the" green
marketer in Pennsylvania, with a total market share of 29
percent of all switchers, and with nearly all of the green
market share. Much of their success may be attributable to
their ability to effectively market, as their prices are often
higher than those of other green marketers in Pennsylvania.
They are the most recognized supplier in the market, whether
or not the customers are green purchasers.
California's retail electricity market opened for competition on April 1,
1998. Our marketing strategy in California was to concentrate first on northern
California due to its higher concentration of environmentally sensitive
consumers. We have recently increased our efforts in southern California. As of
April 30, 1999, we had approximately 19,565 customers in California,
approximately 75% of which were in northern California.
The following table illustrates the number of our customers for each month
from July 1998 through April 1999.
[BAR CHART REPRESENTING INCREASE IN CUSTOMER GROWTH FROM JULY 1998 TO APRIL
1999 IN TERMS OF ACTUAL CUSTOMERS BEING SERVED APPEARS HERE]
Market research performed for us by Copernicus indicates that from its first
introduction to the Pennsylvania market in June 1998, awareness of the Green
Mountain brand grew to 55% of residential households by April 1999. Similar
market research performed for us by Copernicus indicates that in November 1998,
16% of residential households in northern California and 11% of residential
households in the entire state were aware of our Green Mountain brand. By April
1999, awareness of the brand had grown to 31% in northern California and 24%
statewide. See "--Marketing, Sales and Customer Service--Marketing."
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Our Strategy
Position "Green Mountain" As The Most Trusted And Best Known Green Brand
We are the first and only company to offer green electricity products
primarily to residential customers in the deregulated electric utility markets
of both California and Pennsylvania and one of the first companies to offer
green electricity products over the Internet. We intend to take advantage of
this first mover momentum to offer a wide variety of green products over the
Internet and position Green Mountain as the most trusted and best known
environmental brand. We are engaged in aggressive marketing aimed at increasing
awareness both of the environmental impacts of people's everyday purchases and
of the Green Mountain brand through traditional media, principally in states in
which we offer our energy products. We will expand our marketing effort,
especially on the Internet, as we identify new green products that can be
marketed beyond those states.
We seek to establish relationships with environmental groups in support of
our message that personal purchasing decisions can effect positive
environmental change.
Some of our green electricity products are identified as environmentally
preferred by:
.Natural Resources Defense Council
.Environmental Defense Fund
.Clean Air Council (of Pennsylvania)
.Union of Concerned Scientists has chosen one of our products to serve
their California office and the electric vehicle charging station in
their parking lot.
We have an affinity marketing program with each of the following
organizations:
.Redwood Alliance, Arcata, California
.Bay Keeper, San Francisco, California
.Save Our Shores, Santa Cruz, California
.AIDS Fund, Philadelphia, Pennsylvania
Each of the following organizations have supported our work in community
outreach programs:
.Coalition of Clean Air, Los Angeles, California
.The Nature Company, Berkeley, California
The Episcopal Diocese of California under its Episcopal Power & Light
Program has recommended Green Mountain as the preferred electricity provider in
California. Several Episcopal churches have chosen our products to serve their
church facilities.
We stake our reputation on the environmental soundness of our products. We
participate in the nation's first voluntary certification program for
environmentally preferred electricity products--the Green-e Renewable
Electricity Branding Program. Two of our three green electricity products
offered to customers in Pennsylvania and both of our green electricity products
currently being offered to new customers in California are Green-e certified.
The Green-e program is intended to ensure that retail suppliers of Green-e
certified electricity actually buy the renewable energy promised to their
customers and to help consumers compare different electricity offerings. Under
the program, annual independent audits of the delivery of certified products
are conducted. Green-e is administered by the Center for Resource Solutions, a
non-profit organization based in San Francisco, with an independent board of
environmentalists, consumer advocates and renewable energy experts. In order
for an electricity product to be certified by Green-e, it currently must
satisfy the following criteria:
. At least 50% of the product must come from specified renewable sources;
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<PAGE>
. Emissions from the non-renewable generation component of the product and
the total fossil fuel emissions of the product must not exceed specified
rates;
. None of the product may come from nuclear power, other than a proportion
that is no greater than the proportion of nuclear power that is otherwise
available in the electricity distribution system; and
. The product must be offered by a company committed to following the
Green-e Code of Conduct on ethical treatment of customers, including
using simple contracts and disclosure labels.
Offer Convenience And Selection
In order to make it convenient for consumers to find pro-environmental
versions of products they need, we are expanding the offerings on our Web site
to include a broad selection of green consumer products in addition to the
green electricity products and solar generation equipment that we currently
offer in Pennsylvania and California. We will offer products obtained through
contracts with suppliers under our Green Mountain brand name, but do not intend
to do any manufacturing. We intend to pursue relationships with others to make
their green products available on our Web site, and we expect to derive
revenues from any sales of these products made through our site.
Develop And Maintain Our Web Site As A State-of-the-Art, Interactive Online
Commerce Platform
We are upgrading our Web site and technology systems to create a state-of-
the-art, interactive commerce platform that will enhance our expanded product
offerings and take advantage of the unique characteristics of online retailing.
Among other technology objectives, we intend for our Web site to:
.Provide personalized service programs;
.Make the user interface as intuitive, engaging and expedient as possible;
and
.Provide efficient fulfillment of product orders.
We currently use traditional media both to sell our products and to
encourage people to visit our Web site. As the Green Mountain brand becomes
more recognizable, we expect that the majority of our sales transactions will
be made through our Web site.
Develop And Maintain An Online Community That Fosters And Supports
"g*commerce"
We are seeking to develop an online community of individuals who are
concerned about the environment and want to use their personal purchase
decisions to effect positive environmental change. We believe that these
individuals will purchase a green product if:
.It is convenient;
.It is equal or better in quality;
.It has no more than a relatively minimal incremental cost; and
.They perceive that their purchase of that product will have a positive
effect on the environment.
We refer to the concept of harnessing free market forces to effect positive
environmental change as "g*commerce." We believe that educating consumers about
their own ability to effect positive environmental change through prudent
purchases will result in both revenue opportunities for us and improvements to
the environment.
Further, we believe that creating a large community of consumers of green
products will permit us to utilize the collective buying power of these
individual consumers to obtain and, in turn, offer green products at lower
prices than might otherwise be available and that, as we are able to lower
prices in this manner, we will attract additional customers.
Our approach to community development also includes affinity programs
intended to retain existing customers, increase revenue opportunities and
attract new customers.
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Marketing, Sales And Customer Service
Marketing
Mass Media. To date, our brand awareness efforts have been focused on
Pennsylvania and California and have utilized primarily television, print,
radio and billboard advertisements.
The Internet. We have engaged in extensive Internet banner advertising in
Pennsylvania and California. We intend increasingly to use the Internet in our
brand awareness efforts. We are pursuing marketing relationships with Internet
portals and other high-traffic Web sites in order to increase the level of
traffic to our Web site. These arrangements typically involve banner
advertising containing our message and an interactive link to our Web site, but
can also involve other products such as e-mail.
Direct Mail. We employ a highly targeted, database-driven direct mail
marketing strategy, in which direct mail is followed by outbound telemarketing.
We use two main categories of lists to target potential customers--membership
lists for environmental organizations and demographically-profiled lists
obtained from national databases. We outsource the list processing and analysis
function, as well as the mailing function. See "--Our Outside Service
Providers."
Affinity Programs. We use affinity marketing programs to market our products
through groups that share our interest in the environment. See "Our Strategy--
Position "Green Mountain" as the Most Trusted and Best Known Green Brand."
Events and Promotions. We utilize special events and promotions such as:
.Sponsorship of festivals and concerts by our spokesperson, Kenny Loggins;
.Appearances by GreenMountain.com representatives at local environmental,
health and sporting events to distribute information about us and our
products;
.Sponsorship of a tour through California by the "Veggie Van," an
alternative fuel vehicle that provides information about renewable energy;
and
.Appearances of our hot air balloon.
Marketing Relationships. Our overall marketing strategy has been developed
with the assistance of Copernicus, The Marketing Investment Strategy Group.
Other clients of Copernicus include such well-known companies as AT&T, Compaq
Computer, Hewlett-Packard, Michelin, Miller Brewing, Mobil, Nasdaq, Pepsi-Cola,
Polaroid and Visa.
We have established a relationship with The Cullinan Group, an integrated
marketing communications agency, to assist us with our brand development. More
specifically, on January 1, 1998, we entered into a marketing services
agreement with The Cullinan Group to prepare and execute marketing
communications plans and projects and place advertising for our energy
business. Under the agreement, which may be terminated by either party upon 90
days' prior written notice, we are required to pay a minimum monthly retainer
fee of $30,000, as well as monthly advance payments in the amount of
anticipated expenses less the monthly retainer fee. Total payments under this
contract for 1998 were approximately $16,228,000 and for the three months ended
March 31, 1999 were $6,511,613. Other clients of The Cullinan Group include
Georgia Pacific and Thinsulate Insulation/3M. See "--Our Outside Service
Providers."
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<PAGE>
In addition, we have established a relationship with Strategic Interactive
Group, an interactive media consulting agency and specialized Web site
developer, to assist us with enhancements to our Web site and our use of the
Internet in our brand awareness efforts. Other clients of Strategic Interactive
Group include Dell Computer, Federal Express, Kraft Foods and L.L. Bean. See
"--Our Outside Service Providers."
Sales
Customers may purchase our products through the following three methods:
.Internet. Customers may purchase our products through our Web site.
.Telephone. Customers may purchase our products through inbound or outbound
telephone contact. We outsource our call center functions. On January 30,
1998, we entered into a contract with ICT Group to manage our call center
and resulting databases. Under this agreement, which either party may
terminate by providing the other party with 30 business days' prior
written notice, we have minimum annual financial commitments for
teleservices and communications costs of $392,000. See "--Our Outside
Service Providers."
.Mail. Customers may purchase our products by mail. We outsource our mail
response processing. See "--Our Outside Service Providers."
When a customer purchases our products through one of these three methods,
information about the customer is placed into our Information Network and an
electronic data package is sent to a transaction router system. The transaction
router automatically submits an order for the appropriate customer service
activity. The transaction router is managed by Neon. See "--Our Outside Service
Providers."
Customer Service
Orders submitted through our Information Network initiate customer service
functions. These functions include primarily:
.Customer Fulfillment. This function fulfills customer requests for
additional information about us and our products. We outsource this
function. See "--Our Outside Service Providers."
.Product Delivery. Product delivery is effected directly by our suppliers.
.Billing and Customer Care. We outsource billing and customer care
functions. We have entered into an agreement with en.able, L.L.C. which
provides that en.able will provide billing and the related customer care
to our residential customers and will develop and implement a system to
facilitate our electronic interface with electric utility distribution
centers. Unless earlier terminated, the initial term of the agreement ends
on December 31, 2003, but the agreement may be renewed prior to the end of
the initial term and each renewal term for an additional one-year period
by mutual agreement of the parties. Beginning May 14, 2000, either party
may terminate the agreement upon 270 days' prior written notice to the
other party. We have agreed to pay en.able monthly service charges for
call center and billing services, additional resource charges and cost of
living adjustments. The monthly charges are variable and are based on the
number of billable accounts maintained each month; however, we have agreed
to pay minimum monthly service charges for call center service and billing
services in the amount of $112,500. See "--Our Outside Service Providers."
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Our Green Electricity Products
Deregulation of the electric utility industry is providing environmentally
conscious consumers with a choice of electricity supplier and generation
source. We are currently offering green electricity products--electricity
produced from renewable and other environmentally preferable generation
sources--in Pennsylvania and California. To date, more than 99% of our revenues
have come from the sale of our green electricity products in Pennsylvania and
California.
[PRINT ADVERTISEMENT--"IF YOU'RE PLANNING TO RECYCLE" --APPEARS HERE.]
We offer three green electricity products to residential electricity
customers in Pennsylvania. The following table indicates, for each of these
products, its generation composition and the average monthly additional cost or
savings of the product as compared to the price of non-green electricity
offered by incumbent electricity providers, weighted across all utility service
territories based on our actual sales.
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<PAGE>
<TABLE>
<CAPTION>
Product
-------
Additional Cost
Generation Composition or Savings
---------------------- ---------------
<S> <C> <C>
["ECOSMART" LOGO .1% from new renewable landfill gas, + $1.18
APPEARS HERE] which means gas generated from the
decomposition of municipal sold waste
placed in sanitary landfills
.99% from natural gas and/or large-scale
hydroelectric facilities
["ENVIROBLEND" .3% from new renewable landfill gas + 6.85
LOGO APPEARS
HERE] .47% from other renewable resources,
including small-scale hydroelectric,
["GREEN-E" LOGO landfill gas and/or wind facilities
APPEARS HERE]
.50% from natural gas and/or large-scale
hydroelectric facilities
["NATURE'S CHOICE" .5% from new renewable landfill gas + $10.37
LOGO APPEARS HERE]
.95% from other renewable resources,
["GREEN-E" LOGO including small-scale hydroelectric,
APPEARS HERE] landfill gas and/or wind facilities
</TABLE>
The pricing of these products varies by utility service territory based on,
among other things, the wholesale supply prices available to us.
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<PAGE>
We currently offer two green electricity products to new residential
electricity customers in California. The following table indicates, for each of
these products, its generation composition and the expected average monthly
additional cost or savings of the product as compared to the price of non-green
electricity offered by incumbent electricity providers.
<TABLE>
<CAPTION>
Product Average Monthly
------- Additional Cost
Generation Composition or Savings
---------------------- ---------------
<S> <C> <C>
["100% RENEWABLE .5% from new renewable wind, geothermal or -$0.66
POWER 2.0" LOGO landfill gas
APPEARS HERE]
["GREEN-E" LOGO .95% from other renewable resources,
APPEARS HERE] including small-scale hydroelectric,
biomass, which means fuels that includes
wood waste, agricultural wastes, methane
gas from landfills, crops grown
specifically for energy production and,
in California, municipal solid waste, and
geothermal facilities
["WIND FOR THE .25% from newly-built wind turbine +$12.19
FUTURE 2.0" LOGO generators
APPEARS HERE]
.75% from other renewable resources,
["GREEN-E" LOGO including small-scale hydroelectric,
APPEARS HERE] biomass and geothermal facilities
</TABLE>
There may be a construction-related delay for up to 12 months from the time
a customer orders the Wind for the Future 2.0SM product until the commencement
of wind-powered generation. During this delay, the customer will receive
electricity from renewable generation sources. Wind for the Future 2.0SM
customers pay the rate for the Wind for the Future 2.0SM product during the
delay period and would receive a refund of the difference between that price
and the price of the product actually delivered if the wind turbine does not
commence operations within 12 months.
Our current California electricity products were only recently introduced.
The products we previously offered in California--Water Power, 75% Renewable
Power and Wind for the FutureSM--remain available only to customers who
purchased them prior to the introduction of our current products. These
products were priced higher than our current 100% Renewable Power 2.0SM
product, which resulted in an average monthly additional cost to the consumer
of $5.17 for Water Power, $6.36 for 75% Renewable Power and $11.13 for Wind for
the FutureSM.
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<PAGE>
We expect to offer [PRINT ADVERTISEMENT--"NO COAL. NO NUKES. NO KIDDING."
green electricity --APPEARS HERE]
products similar to
those offered in
Pennsylvania and
California in the
retail electricity
market of any state
that deregulates in a
manner that we believe
will allow us to
compete effectively.
See "Risk Factors--
Risks Related to
Establishment of Our
Business--Our Ability
to Expand our Existing
Green Electricity
Business Into New
Markets Depends on the
Outcome of the
Deregulation Process in
Each State."
We currently offer
our electricity
products in both
Pennsylvania and
California at a
guaranteed price based
on a specified term,
generally one year, and
three years for our
Wind for the Future
2.0SM product. When a
customer's initial term
of service expires, we
offer products for
continued service that
are priced based upon
market prices available
at that time. Our
customers may switch to
another electricity
supplier at any time,
although there is a
small termination fee
for the Wind for the
Future 2.0SM product.
Our strategy has
been to obtain supply
contracts that obligate
wholesale suppliers to
provide electricity
meeting our
specifications
sufficient to meet all
requirements of a
specified number of
customers for the full
term of our arrangement
with those customers.
These requirements
contracts generally
provide that during the
relevant term the
suppliers will deliver
into the electricity distribution system a volume of electricity having the
characteristics selected by the customer equal to the amount of electricity
used by the customer during the service term. These supply contracts also
require our suppliers to provide all associated services, including
transmission, scheduling and settlement services, as applicable. These
contracts are not dependent on any minimum number of customers being assigned
to them and permit us to service customers throughout a state.
We have entered into three agreements with major wholesale electricity
suppliers to serve the requirements of our Pennsylvania customers. Under these
agreements, each supplier provides, for a period of one year, an amount of
electricity that matches the aggregate customer requirements assigned to that
supplier. For two of the
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<PAGE>
agreements, either we or the supplier may discontinue the assignment of
additional customers upon 90 days' notice. The wholesale price is fixed for the
term of each of these agreements.
We have entered into contracts with two wholesale electricity suppliers to
serve the requirements of our California customers. Under both of these
agreements, the wholesale price is based on a fixed price spread related to the
wholesale electricity price in California as determined by the California power
exchange. One of these agreements provides for a surcharge on the Wind for the
Future SM wind power product. Under one of these agreements, the supplier, for
a period of one year, provides electricity for each customer assigned to it,
and either party may discontinue the assignment of additional customers upon
three months' notice. Under the other agreement, the supplier provides
electricity for one- and three-year service periods, depending on the product
being served, and may be assigned additional customers through December 31,
1999.
Our contracts with four suppliers provide for separate letters of credit or
equivalent financial assurances to satisfy credit requirements. The amounts of
the letters of credit range from 15 days' to two months' of receivables based
on our load forecast. In addition, we have delivered to one supplier
irrevocable letters of credit in connection with the supplier's purchase and
installation of three wind power turbines. We also delivered letters of credit
to regulators securing our performance as an energy service provider. Total
supply and regulatory letters of credit outstanding at December 31, 1998 were
$2,765,230 and at March 31, 1999 were $2,477,251.
With the exception of minor costs associated with specialty content that
makes up less than 5% of our electricity requirements, to date we have avoided
taking on electricity supply costs that are not tied directly to customer sales
volumes. As described above, under our supply contracts the price we pay for
electricity is either fixed or, in California, based on the price established
by the California Power Exchange plus a specified amount. Because the price
terms for our customers reflect our wholesale price of the electricity plus a
retail margin and the term of our supply contract is coextensive with the term
of the contract with our customer, we generally are not at risk that the
wholesale price of power will exceed the price to be paid by our customers. In
the future, as our electricity requirements reach substantial levels, we may
increase the volume of electricity contracts that we buy directly from
electricity generators and wholesale marketers in order to reduce our overall
costs of electricity supply and allow us greater marketing flexibility. We
believe that we will be able to obtain sufficient electric power to meet our
supply needs, both for our existing operations in Pennsylvania and California
and future operations in new deregulated electricity we are likely to enter,
for the foreseeable future, although we can provide no assurance in this
regard. See "Risk Factors--Other Risks Related to Our Business Generally--Our
Existing Green Electricity Business Depends on our Ability to Obtain From
Wholesale Electricity Suppliers, on Acceptable Terms, Electricity Meeting our
Customers' Requirements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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<PAGE>
Other Products
Solar Generation
Equipment
[PRINT ADVERTISEMENT--"SOLAR POWER."--APPEARS We market Green
HERE] Mountain SolarSM
systems in California.
These systems typically
allow individual
homeowners to generate
from 20% to 50% of
their electric power
from the sun. We offer
five different Green
Mountain SolarSM
systems using two
different technologies.
The price of a Green
Mountain SolarSM system
in California is
between $6,000 and
$13,000 in areas
qualifying for the most
favorable state and
federal subsidy
programs and between
$10,000 and $20,000 in
other areas. Applied
Power Corporation
designs and installs
systems offered in
California using
components manufactured
by Solarex Corporation.
We began offering Green
Mountain SolarSM
systems in Pennsylvania
in April 1999 and
intend to expand our
marketing of Green
Mountain SolarSM
systems to other
markets.
New Product Offerings
Under Consideration
We do not intend to
manufacture any
products, but
rather will sell products produced for us by others under the Green Mountain
brand. We also expect to enter into relationships with others to make their
green products available on our Web site. See "Risk Factors--Risks Related to
Establishment of our Business--Our Ability to Grow our Customer Base and
Generate Sales Depends on Broadening our Product Offerings" and "--Risks
Related to the Internet and Online Commerce Aspects of our Business--Products
Sold by us May Subject us to Litigation and the Related Costs."
Some of the new product offerings we have under consideration are described
below.
Energy Efficient Home Products. We expect to offer on our Web site a home
energy audit feature which will enable visitors to our site to review the
energy efficiency of their home. In conjunction with that feature, we expect to
offer a variety of products principally related to the home which will assist
the user in reducing energy use and expenditures. These will initially consist
of relatively small items such as energy efficient lighting, but we expect to
expand our selection of offerings to include more substantial products such as
major appliances.
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Natural Gas. We are developing a marketing and branding strategy for natural
gas, which is a cleaner fossil fuel that we believe complements our electricity
products. Although the natural gas we would offer would generally not be
different from natural gas offered by other suppliers, we believe customers who
have chosen our electricity products will also be inclined to purchase natural
gas from us. We are also exploring the feasibility of offering a "green gas"
product, which would be a blend of landfill-gas derived fuel (methane) and
standard natural gas.
Like the electric utility industry, the natural gas utility industry is
being deregulated. We expect to offer retail natural gas products in each state
that deregulates in a manner that we believe will allow us to compete
effectively. Competition has opened in parts of the California and Pennsylvania
residential natural gas markets. We are currently negotiating with natural gas
suppliers in these markets.
Alternative Fuel Vehicles. We are currently exploring the feasibility of
marketing alternative fuel vehicles. Alternative fuel vehicles are vehicles
that operate using natural gas, ethanol, electricity or propane. There has been
increased attention to development of alternative fuel vehicles by automakers,
which has been primarily due to legislative trends that favor lower emission
vehicles and growing demand from consumers
who care about the environment. We believe that these trends will provide the
opportunity to market these vehicles on an increasingly larger scale.
Fuel Cells. We are exploring the feasibility of marketing fuel cells--a near
zero-emission electricity generation technology. Fuel cells convert natural
gas, gasoline or hydrogen into electricity without any combustion and the
related harmful by-products of nitrogen or sulfur dioxide. Fuel cells would be
a strong strategic addition to our green electricity products. Delivery of 100%
of the electricity needs of an average-sized residence would require placement
of a fuel cell unit the approximate size of a dishwasher. Potential residential
customers include customers who are interested in the environmental benefits of
fuel cell technology, as well as rural homes and households that desire back-up
or uninterrupted electricity generation. Our ability to offer fuel cells, as
well as other products, is dependent on technological advances, and we cannot
assure you whether or when those advances will occur. See "Risk Factors--Risks
Related to Establishment of our Business--Our Ability to Grow our Customer Base
and Generate Sales Depends on Broadening our Product Offerings."
Credit Cards. We expect to offer a credit card that will be co-branded with
the Green Mountain brand and Visa or MasterCard. This credit card would be
available over the Internet using an online application process, and monthly
statements would also be available over the Internet. A portion of our revenues
from these credit cards would be invested in environmentally beneficial
projects such as large-scale solar generation facilities. We believe this
product would foster a sense of community among our customers and a sense of
identification with GreenMountain.com.
Ecotourism. We are exploring the possibility of offering ecological tours
and vacations by partnering with high-quality travel providers. The travel we
would offer--ecotourism--is a nature-based form of specialty travel that
promotes responsible travel aimed at conserving the destination's natural areas
and sustaining the well-being of the local people.
Financial Services. We are considering ways in which we can provide our
customers financial services related to environmentally responsible
investments, such as investments in companies which have a demonstrated record
of environmental accomplishment. The Social Investment Forum's November 1997
Report on Responsible Investing Trends in the United States reported the
existence of $1.2 trillion in professionally managed portfolios incorporating
at least one social investment strategy. Approaches under consideration include
the provision of reports identifying the performance of environmentally
oriented mutual funds as well as more active marketing or sponsorship roles,
possibly in cooperation with a strategic partner.
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<PAGE>
Our Web Site
Our goal is to create a Web site that will be a state-of-the-art,
interactive commerce platform. In addition to the tools necessary for the sale,
fulfillment and customer service functions, our Web site will offer content and
community features that will appeal to people who are concerned about the
environment. We are depending on Strategic Interactive Group, a specialized Web
site developer, for the upgrade of our Web site. We expect that the current
upgrade of our Web site will be complete by October 1, 1999. See "Risk
Factors--Risks Related to Establishment of our Business--To Attract Customers
and Make Sales Over the Internet, We Must Develop our Web Site and Implement
Ongoing Improvements to our Web Site in the Face of Rapid Technological
Change."
Strategic Web Site Relationships
We believe that in order to attract significant traffic to our Web site we
need to establish and maintain relationships with Internet portals and other
high-traffic Web sites that will carry links to our new Web site. For example,
on March 25, 1999, we entered into an Advertising and Promotion Agreement with
Yahoo! becoming Yahoo!'s Premier Merchant for consumer energy. The agreement
provides for the placement of banner advertising and button links promoting our
energy business on Yahoo! properties and delivery of Yahoo! e-mail messages
about our energy business for a one-year period. This one-year period began May
1, 1999. For these services, GreenMountain.com agreed to pay Yahoo! a fixed fee
of $6.0 million and a fee for each new energy service account opened through
promotion provided by Yahoo!, with a cap on the total amount to be paid for
accounts opened. Under the agreement, Yahoo! will market certain promotions to
its registered users on a geographically-targeted basis. The banner advertising
and button links will be displayed to, and the e-mail will be delivered to,
residents of the states of California, Pennsylvania and New Jersey.
GreenMountain.com has the right to redirect promotions that would otherwise be
directed to New Jersey if New Jersey's deregulation program is delayed more
than one month. See "--Marketing, Sales and Customer Service--Marketing."
We will also need to establish relationships with content providers that
will provide our Web site with content that appeals to environmentally-
conscious consumers. To date, we have not yet entered into any agreements for
content. See "Risk Factors--Risks Related to Establishment of our Business--Our
Failure to Develop and Maintain Strategic Web Site Relationships Could
Adversely Affect our Ability to Attract Customers to our Web Site."
Community
Community will be an integral feature throughout our Web site. We believe
that through community activities such as e-mail newsletters, bulletin boards,
chat forums and eco-greeting cards, customers will have a unique opportunity to
share ideas about environmental issues and marketing solutions. We are
exploring community fostering elements for our Web site, including:
.A "socially responsible" business opportunities bulletin board;
.Live chats with environmental experts;
.Bulletin boards discussing environmental issues;
.User home pages--that will allow users to create their own home page on
our Web site;
.An eco-event locator--that will allow individuals to post and obtain
information about local, environment-related events;
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.Teacher's tools--that will help teachers educate children about the
environment; and
.Environment-related charitable and volunteer opportunities.
Content
We intend for our Web site to offer a broad range of engaging and
educational environment-related content. The role of content at our Web site
will be to:
.Inform visitors about how to use g*commerce to improve the environment;
.Communicate the tangible difference that purchasing through
GreenMountain.com can have on the environment;
.Influence customer purchase behavior;
.Educate visitors about relevant environmental issues; and
.Report our environmental performance to the GreenMountain.com community.
Examples of content that we are considering include:
.News articles and reports about the environment and issues that impact the
environment;
.Product research information;
.""Eco-tools" such as a home energy audit, a pollution locator, an eco-
investment tracker and an eco-travel planner;
.Expert roundtables addressing environment-related topics;
.Corporate environmental value added reports;
.Quizzes such as an eco-IQ quiz; and
.Games and other interactive activities for children.
We are exploring relationships with content providers. We expect our content
partners to include:
.Our suppliers and other vendors that sell products through our Web site,
who will provide direct product-related content;
.Leading environmental organizations; and
.Other environmental news providers.
We will maintain editorial oversight of all material contained on our Web site.
Online Purchasing
Our Web site will provide full online purchasing capability for many
products that we offer. Following placement of an order, the customer will
receive an e-mail confirmation. The e-mail confirmation will summarize the
purchase, the total amount of sale and any shipping information and will
include the anticipated delivery or activation date.
Following order placement by a customer, order information will enter our
Information Network and will be routed to the appropriate supplier. Product
delivery or activation will be effected directly by our suppliers.
The following forms of online customer service will be available:
.Visitors will be able to search for answers to their questions on our Web
site. Answers to frequently asked customer inquiries may be searched by
topic, product and category. Visitors will have access to their complete
account information and will be able to update their personal information.
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<PAGE>
.Customers will be able to complete a form at our Web site or e-mail
questions or concerns directly to our customer support staff. An inquiry
will be acknowledged immediately, and we anticipate that a personalized
response will be delivered within 24 hours.
.We will provide 24 hour a day live customer service support through a
toll-free telephone number. Our customer service representatives will have
complete access to and familiarity with our Web site and applications.
Visitors may modify their online preferences or profile through this
channel if necessary.
Features
Our Web site will encourage visitors to register upon entering to receive a
more personalized site experience. The registration process will consist of a
short questionnaire that will gather information about the visitor's
environmental concerns, product and service interests and standard contact
information. Visitors will not be required to register in order to purchase
products or experience our complete Web site.
After registering, a visitor will be invited to establish a personalized "My
GreenMountain.com" containing product information and content of particular
interest to the visitor. Using "My GreenMountain.com," visitors will be able to
check order status and account balance, make payments, see how their purchases
have contributed to helping the environment and communicate with customer
service to answer questions or resolve problems.
Information Technology
Our Information Network electronically routes customer information in a
manner that allows each of our outsourcing partners to efficiently and
effectively perform the specific marketing, sales or customer service function
for which it is responsible. The Information Network also:
.Collects customer usage information;
.Communicates billing data;
.Provides customers with electronic payment options; and
.Interfaces with local utility distribution companies to share customer
information.
The design of our Information Network gives us the ability to:
.Service a rapidly growing customer base;
.Minimize our capital expenditures and reduce fixed costs by outsourcing
functions that are priced based on variable, per customer or transaction
charges; and
.Maximize the expertise and competitive advantages of our outsourcing
partners.
The use of standard data sets that can adapt to the needs of each outsourcing
partner provides flexibility and allows for significant changes, such as the
replacement of an outsourcing partner, on relatively short notice.
We are in the process of implementing an enterprise database as part of our
Information Network. This will provide us with the ability to access and
manipulate data that has entered the Information Network on a real time basis
giving us even greater flexibility and control.
We manage our Information Network with the assistance of Sterling Software,
a supplier of software products and services with expertise in network
management and automation. Products from Sterling Software are used in more
than 90% of the Fortune 100 companies including Lockheed Martin, TWA and Zurich
Financial Services, and are used in more than 20,000 customer sites worldwide.
For a discussion of our agreement with Sterling Software, see "Certain
Transactions--Other Transactions and Relationships--Agreements with Sterling
Software."
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Our Outside Service Providers
We use third-party service providers to perform a number of key functions in
the operation of our business that would otherwise be performed by our
employees. We refer to our use of third-party service providers to perform
these functions as "outsourcing" and refer to these service providers as our
"outsourcing partners." Our extensive use of outsourcing reduces our internal
human resource and office space requirements and enables our management to
focus on our overall marketing strategy and the identification of new product
opportunities. See "Risk Factors--Other Risks Related to our Business
Generally--Poor Performance by One or More of our Outside Service Providers
Could Be Disruptive to our Business Operations."
The following table identifies the key functions that we outsource, the
outside service provider currently performing the function for us and a cross-
reference to additional information contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
Function Service Provider(s) For Additional Information
- -------------------- ------------------------ ---------------------------------
<S> <C> <C>
Information network Sterling Software See "--Certain Transactions--
management Other Transactions and
Relationship--Agreement with
Sterling Software"
Web site development Strategic Interactive See "--Marketing, Sales and
Group Customer Service--Marketing--
Marketing Relationships" and "--
Our Web Site"
Mass media The Cullinan Group See "--Marketing, Sales and
advertising Customer Service--Marketing--
Marketing Relationships"
Direct mail Experian (list See "--Marketing, Sales and
marketing processing and Customer Service--Marketing--
analysis); PGI (outbound Marketing Relationships"
direct mailing)
Inbound and outbound ICT Group; Transcom See "--Marketing, Sales and
telephone marketing Customer Service--Sales"
Mail response Midwest Graphics See "--Marketing, Sales and
processing Customer Service--Sales"
Customer fulfillment PGI See "--Marketing, Sales and
Customer Service--Customer
Service"
Billing and customer en.able, L.L.C. See "--Marketing, Sales and
care Customer Service--Customer
Service"
Information flow Neon See "--Marketing, Sales and
technology Customer Service--Sales" and "--
Information Technology"
</TABLE>
Our Competitive Position
Because both the deregulated electricity and online commerce markets are
new, rapidly evolving and highly competitive, we face intense competition and
anticipate that the competition will intensify in the future. Our competitors
and potential competitors include:
.Companies that offer competitive non-green products, like some of our
competitors in the deregulated electric utility markets, including Exelon
and Allegheny Energy in Pennsylvania, both of which are affiliates of
incumbent electric utilities;
.Companies that market green products in a single line of business, like
some of our competitors in the deregulated electric utility markets,
including Commonwealth Energy in California, that offer only green
electricity products;
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<PAGE>
.Retailers that do not specialize in offering green products, but do
include one or more green products among their offerings, like some of our
competitors in the deregulated electric utility markets, including
Conectiv in Pennsylvania; and
.Emerging online retailers that specialize in offering electricity
products.
We also anticipate competition from other retailers attempting to aggregate a
broad selection of green products.
We currently offer green electricity products in the deregulated utility
markets of Pennsylvania and California. To date, more than 99% of our revenues
have come from sales of our electricity products in those two states. In
Pennsylvania, as of March 31, 1999, approximately 10% of the households in the
Pennsylvania market had switched from their incumbent electricity provider. Of
those that switched from their incumbent electricity providers, approximately
30% switched to green electricity, and of those that switched to green
electricity, approximately 97% switched to us. In California, as of March 31,
1999, only 1% of the households in California had chosen to switch from their
incumbent electricity provider, and of those that had switched, approximately
25% switched to us. In California, all of those that switched are receiving
green electricity.
We believe that the most significant barrier to entry for a company seeking
to create a national consumer brand in order to compete in deregulated
electricity markets is the significant capital investment necessary for brand
development and technology infrastructure. We believe that the principal
competitive factors in the retail green electricity market are:
.First mover momentum;
.Strong brand recognition and presence;
.Marketing ability;
.Environmental credibility; and
.Competitive pricing.
We are focusing on increasing our Internet presence and expanding our
Internet sales of green electricity and other green products. The online
commerce market has relatively minimal barriers to entry in that current and
new competitors can launch new sites at a relatively low cost. We believe that
the principal competitive factors in the online commerce market include:
.First mover momentum;
.Strong brand recognition and presence;
.Broad product selection;
.Quality of site experience;
.Purchasing convenience;
.Competitive pricing; and
.Reliability and speed of fulfillment.
Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we do. We may face
increased competitive pressures as new technologies are developed and existing
technologies are improved. See "Risk Factors--Other Risks Related to Our
Business Generally--Intense Competition May Affect our Ability to Grow our
Customer Base and Generate Sales."
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The Protection Of Our Intellectual Property
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success, and rely
on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with our employees, strategic partners and others to
protect our intellectual property rights. See "Risk Factors--Other Risks
Related to Our Business Generally--Failure to Protect our Intellectual Property
Could Adversely Affect our Brand and our Business."
The Impact Of Government Regulation On Our Business
In addition to regulations applicable to businesses generally, including
federal and state consumer protection laws and regulations, we are subject to
the laws and regulations applicable to electric power retailers in the
deregulated electric utility markets in which we compete. See "Risk Factors--
Risks Related to Establishment of our Business--Our Ability to Expand our
Existing Electricity Business into New Markets Depends on the Outcome of the
Deregulation Process in Each State." We are also subject to laws and
regulations applicable to online commerce. See "Risk Factors--Risks Related to
the Internet and Online Commerce Aspects of our Business--Government Regulation
of the Internet and Online Commerce is Still Developing and Could Increase Our
Operating Costs or Otherwise Adversely Affect our Business."
Our Employees
As of March 31, 1999, we employed 68 full-time employees and seven temporary
employees. None of our employees is represented by a labor union, and we
consider our relations with employees to be good.
The Facilities Used In Our Business
Our headquarters are located in South Burlington, Vermont. We lease
approximately 16,000 square feet of space, which houses our administrative,
sales and marketing and operations and support staffs under a cancelable
operating lease that expires on September 30, 2002. Future minimum lease
payments required at December 31, 1998, assuming that we do not cancel the
lease, were $114,675 in each of 1999, 2000 and 2001 and $86,006 in 2002. The
lease agreement has a termination provision that enables us to terminate the
lease at (1) September 30, 1999 and pay an early termination payment of
$33,000, (2) September 30, 2000 and pay an early termination payment of
$25,000, and (3) September 30, 2001 and pay an early termination payment of
$12,500. We anticipate that we will require additional space within the next
six months, but that suitable additional space will be available at reasonable
cost.
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<PAGE>
ENVIRONMENTAL ADVISORY BOARD
To obtain expert advice on critical environmental issues and to facilitate
communication between GreenMountain.com and environmental community leaders, we
have assembled an Environmental Advisory Board which includes the following
individuals:
<TABLE>
<CAPTION>
Principal Affiliation and
Name Position Held
---- -------------------------
<S> <C>
Ralph Cavanagh............................... Natural Resource Defense
Council Co-Director, Energy
Program
Christopher Flavin........................... World Watch Institute
Senior Vice President
Lewis Milford................................ Clean Energy Group
President
V. John White................................ Center for Energy Efficiency
and Renewable Technologies
Executive Director
</TABLE>
Each member of the Environmental Advisory Board serves in his individual
capacity and not as a representative of the organization with which he is
affiliated. The members of our Environmental Advisory Board do not currently
receive any compensation for serving on that board, but are reimbursed for
their out-of-pocket expenses incurred in connection with their service on the
Environmental Advisory Board.
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MANAGEMENT
Our Executive Officers And Directors
The following table sets forth information regarding our executive officers
and directors as of May 10, 1999.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Sam Wyly................ 64 Chairman and Director
Dennis M. Crumpler...... 46 Vice Chairman, acting Chief Technology Officer and Director
Evan A. Wyly............ 37 Vice Chairman and Director
Mark Cuban.............. 40 Director*
Richard E. Hanlon....... 51 Director*
Reed E. Maltzman........ 32 Director*
Lisa Wyly............... 33 Director
H. Lee S. Hobson........ 34 Director
M. David White.......... 37 Chief Executive Officer
Dennis W. Kelly......... 45 President
Kevin W. Hartley........ 39 Executive Vice President and Chief Marketing Officer
Julia D. Blunden........ 32 Vice President, Strategic Planning
Thomas C. Boucher....... 44 Vice President, Energy Supply and Business Development
Karen K. O'Neill........ 46 Vice President, New Markets
Peter H. Zamore......... 47 Vice President, General Counsel and Secretary
Jay LeDuc............... 43 Director of Operations and Systems
Thomas H. Rawls......... 53 Chief Environmental Officer
K. Scott Canon.......... 37 Chief Financial Officer
</TABLE>
- --------
* Expected to be appointed to the board of directors prior to the closing of
this offering.
Sam Wyly has been our Chairman and a director of GreenMountain.com since
March 1999 and a member of the management committee of our predecessor since
August 1997. Mr. Wyly is an entrepreneur who has created and managed several
public and private companies. In the 1960's, he founded University Computing
Company, which became one of the first computer utility networks and one of the
first software products companies. His data transmission company, Datran, was
one of the pioneering telecommunications ventures that contributed to the
breakup of the telephone monopoly. He is a founder and currently serves as
Chairman and a director of Sterling Software, a worldwide supplier of software
products. He is also Chairman of the Executive Committee and a director of
Sterling Commerce, a provider of business-to-business electronic commerce
software to 80 of America's 100 largest corporations, Chairman and a director
of Michaels Stores, a large arts and crafts retail chain, and Chairman and a
director of Scottish Annuity & Life Holdings, a variable life insurance and
reinsurance company. He is a founding partner of Maverick Capital, a manager of
equity hedge funds. Mr. Wyly is the father of Evan Wyly and Lisa Wyly who also
serve as directors.
Dennis M. Crumpler has been a Vice Chairman, our acting Chief Technology
Officer and a director of GreenMountain.com since March 1999 and a member of
the management committee of our predecessor since February 1999. From September
1997 to the present, Mr. Crumpler has served as an investment manager for
Cimco, LLC, a private investment firm that is managing general partner of
Crumpler Family LP. From July 1998 to October 1998, he served as Senior Vice
President, Strategic Initiatives of Sterling Commerce. From September 1986 to
July 1998, Mr. Crumpler was Chief Executive Officer of XcelleNet, a company
specializing in systems management solutions for remote and mobile users.
XcelleNet was founded by Mr. Crumpler and was acquired by Sterling Commerce in
July 1998.
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<PAGE>
Evan A. Wyly has been a Vice Chairman and a director of GreenMountain.com
since March 1999 and a member of the management committee of our predecessor
since August 1997. Mr. Wyly is a founder, and since 1990 has been a Managing
Partner, of Maverick Capital, a manager of equity hedge funds with $3 billion
in assets. Mr. Wyly is also a director of Sterling Commerce, Sterling Software
and Michaels Stores.
Mark Cuban has been a member of the management committee of our predecessor
since February 1999 and is expected to be appointed as a director of
GreenMountain.com prior to the closing of this offering. From May 1995 to the
present Mr. Cuban has served as President and Chairman of the Board of
broadcast.com, a provider of live and on-demand audio and video programs over
the Internet, which he co-founded in 1995. From 1991 to May 1995, Mr. Cuban was
President of Radical Computing, a Dallas-based venture capital and investment
company specializing in technology companies.
Richard E. Hanlon has been a member of the management committee of our
predecessor since February 1999 and is expected to be appointed as a director
of GreenMountain.com prior to the closing of this offering. Mr. Hanlon has been
Vice President, Investor Relations of America Online, a global provider of
Internet online services, since February 1995. From March 1993 to February
1995, Mr. Hanlon was President of Hanlon & Co., a consulting firm. Mr. Hanlon
is also a director of Michaels Stores.
Reed E. Maltzman has been a member of the management committee of our
predecessor since February 1999 and is expected to be appointed as a director
of GreenMountain.com prior to the closing of this offering. From July 1998 to
the present, Mr. Maltzman has served as Director of Strategy at eBay, an
Internet auction company. From June 1997 to July 1998, he was an Associate
Research Analyst covering Internet stocks for BT Alex Brown, an investment
banking firm. From August 1995 to June 1997, Mr. Maltzman served as the Manager
of New Media Business Development of CKS Interactive, an interactive
advertising agency. From 1994 to August 1995, Mr. Maltzman attended the
Stanford School of Business.
Lisa Wyly has served as a director of GreenMountain.com since March 1999 and
a member of the management committee of our predecessor since August 1997. Ms.
Wyly is a Managing Director of Highland Stargate, Ltd., a private company that
oversees 100 family trusts and partnerships. From 1992 to 1997, Ms. Wyly was
Program Director of the Family Sign Language Program for the Massachusetts
State Association of Deaf. From 1990 to 1992, Ms. Wyly was a teacher at
R.E.A.D.S., a program for deaf and hard of hearing children.
H. Lee S. Hobson has been a director of GreenMountain.com since March 1999
and a member of the management committee of our predecessor since January 1999.
Mr. Hobson is a Partner and Senior Analyst of Maverick Capital. Mr. Hobson
focuses on investments in global consumer products companies and in Latin
America. Before joining Maverick in 1994, Mr. Hobson served as an associate in
the new business development division of PepsiCo Foods International, a
division of PepsiCo., a marketer of branded beverages and snack foods, with 27
control investments in companies outside the United States. Earlier he was an
analyst with Goldman Sachs in New York and an analyst with Societe Generale, an
investment banking firm, in Paris.
M. David White has been our Chief Executive Officer since October 1998. From
February 1998 to October 1998, Mr. White served as Senior Vice President,
Investment Banking Division, Donaldson, Lufkin & Jenrette, an investment
banking firm. Mr. White was Vice President of Finance of Boston Chicken, a
restaurant chain, from December 1994 to June 1997. From August 1986 to December
1994 and from June 1997 to January 1998, Mr. White was in the Investment
Banking Department of Merrill Lynch & Co., an investment banking firm, and
became a Director of the Investment Banking Department in January 1993.
Dennis W. Kelly has been our President since February 1999. From December
1982 to February 1999, Mr. Kelly served in both executive and managerial
capacities with The Coca-Cola Company, a beverage and consumer products
company, including Vice President, Director of Marketing for Europe, and Deputy
Chief Marketing Officer from February 1997 to February 1999, Vice President and
Director, Global Strategic Marketing Research from February 1995 to February
1997 and Vice President and General Manager,
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Noncarbonated Beverages, USA from January 1993 to February 1995. Prior to
December 1982, Mr. Kelly held positions with Procter & Gamble, a consumer
products company, and Touche Ross & Company, an accounting firm.
Kevin W. Hartley has been our Chief Marketing Officer and Executive Vice
President since December 1998. Prior to that, he served as our Vice President
of Marketing beginning August 1997. From May 1994 to August 1997, Mr. Hartley
held several positions with Green Mountain Power Corporation, including Vice
President of Marketing from May 1997 to August 1997. Between 1990 and 1994, Mr.
Hartley was Director of Retail Fiberglass Marketing for the Manville
Corporation (now the Schuller Corporation), a manufacturer of building and
insulation products.
Julie D. Blunden has been our Vice President of Strategic Planning since
October 1998. Prior to that, she served as our Regional Director of California
beginning August 1997. From January 1997 to August 1997, Ms. Blunden was
Director of Sales, then Regional Director, for the California region of Green
Mountain Power Corporation. From 1987 to August 1996, Ms. Blunden held several
positions with AES, a worldwide developer, owner and operator of power plants,
including Project Director from September 1995 to August 1996. From September
1993 to June 1995, Ms. Blunden also attended graduate business school, and
during part of 1994, she worked for the Center for Energy Efficiency and
Renewable Technologies.
Thomas C. Boucher has been our Vice President of Energy Supply and Business
Development since August 1997. From 1992 to August 1997, Mr. Boucher held
several financial, business and energy planning positions at Green Mountain
Power Corporation, including Vice President of Business Strategy from May 1996
to August 1997.
Karen K. O'Neill has been our Vice President of New Markets since August
1997. From 1989 to August 1997, Ms. O'Neill held several positions with Green
Mountain Power Corporation, including Vice President of Organization
Development and Human Resources from April 1997 to August 1997.
Peter H. Zamore has been our Vice President, General Counsel and Secretary
since August 1997. From January 1995 to August 1997, Mr. Zamore was General
Counsel of Green Mountain Power Corporation. From 1984 to 1995, Mr. Zamore was
an associate and then partner of Sheehey Brue Gray and Furlong, P.C., a
Burlington, Vermont law firm.
Jay LeDuc has been our Director of Operations and Systems since January
1999. Prior to that, he held other positions with us, including Director of
Regional Development from November 1997 to January 1999. From October 1992 to
October 1997, Mr. LeDuc served in several marketing positions with The Systems
House, a marketer of information systems solutions to the office products
industry, in Chicago, Illinois. Mr. LeDuc has served as co-chair of the
Pennsylvania Data Exchange Working Group and as a member of the Pennsylvania
Pilot Implementation Committee.
Thomas H. Rawls has been our Chief Environmental Officer since January 1999.
Prior to that, he served as our Director of Environmental Affairs beginning
August 1997. From March 1993 to August 1997, Mr. Rawls held several positions
with Green Mountain Power Corporation, including Manager of Marketing from June
1996 to July 1997. Since 1978, he has been chief editor of Country Journal, of
Harrowsmith, a magazine devoted primarily to topics about the environment and
rural life, and of Natural Health. He is the author of Small Places, In Search
of a Vanishing America (Little, Brown). Mr. Rawls is the former vice-chairman
of the Board of the Vermont Natural Resources Council, a statewide
environmental group, and is Chair of the Board of the Renewable Energy
Alliance, a national group of wholesale and retail power marketers.
K. Scott Canon has been our Chief Financial Officer since February 1999.
From March 1992 to February 1999, he has served in the following capacities
with the broker-dealer affiliate of Security Capital Group, a global real
estate research, investment and operating management company: member of the
board of directors from June 1996 to February 1999, Senior Vice President from
March 1997 to February 1999, President from January 1996 to March 1997 and Vice
President from May 1993 to January 1996. From October 1992 to March 1993, he
worked for Chase Manhattan Bank, and from August 1987 to October 1992 for
Goldman, Sachs, an investment banking firm.
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<PAGE>
Classified Board Of Directors
Prior to the closing of this offering, our certificate of incorporation will
be amended to provide that our board of directors will be divided into three
classes of directors. Each class will serve a staggered three-year term, except
that the initial directors will serve as indicated in the following paragraph.
Approximately one-third of our board of directors will be elected each year.
Vacancies on the board will be filled only by persons elected by a majority of
the remaining directors, and a director elected by the board to fill a vacancy
will serve for the remainder of the full term of the class of directors in
which the vacancy occurred and until such director's successor has been elected
and qualified. See "Description of Capital Stock--Provisions of our Certificate
of Incorporation, our Bylaws and Delaware Law."
Sam Wyly, Mark Cuban and Lee Hobson will serve as Class I directors, whose
terms expire at the 2000 annual meeting of stockholders. Dennis Crumpler, Reed
Maltzman and Evan Wyly will serve as Class II directors, whose terms expire at
the 2001 annual meeting of stockholders. Richard Hanlon and Lisa Wyly will
serve as Class III directors, whose terms expire at the 2002 annual meeting of
stockholders.
Board Committees
Prior to the closing of this offering, our board of directors expects to
establish five board committees--an Executive Committee, an Environmental
Integrity Committee, an Audit and Special Compensation Committee, a
Compensation Committee and a Nominating Committee.
Executive Committee
Between meetings of our full board of directors, the Executive Committee may
exercise all of the power and authority of the board in the oversight of the
management of our business and affairs, subject to certain limitations imposed
under Delaware law. The initial Executive Committee members will be Sam Wyly
and Evan Wyly.
Environmental Integrity Committee
The Environmental Integrity Committee will be responsible for reviewing our
effect on the environment and our adherence to our environmental principles and
making recommendations to the full board of directors as to how we can improve
our environmental performance. The initial members of the Environmental
Integrity Committee will be Sam Wyly, Dennis M. Crumpler and Reed E. Maltzman.
Audit And Special Compensation Committee
The Audit and Special Compensation Committee will review our internal
accounting procedures and controls and consult with and review the services
provided by our independent accountants. The Audit and Special Compensation
Committee will also review and determine the salaries, benefits, stock option
grants and other compensation of the Chairman, any Vice Chairman, any director
serving on the Compensation Committee, the Chief Executive Officer and all
other executive officers. The initial Audit and Special Compensation Committee
members will be Mark Cuban, Richard Hanlon and Reed Maltzman.
Compensation Committee
The Compensation Committee will review and determine the salaries, benefits,
stock option grants and other compensation of all employees, consultants,
directors and other individuals compensated by us whose compensation is
determined by action of the board of directors (other than the Chairman, any
Vice Chairman, any director serving on the Compensation Committee, the Chief
Executive Officer and all other executive officers). The initial Compensation
Committee members will be Sam Wyly, Evan Wyly and Richard E. Hanlon.
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<PAGE>
Nominating Committee
The Nominating Committee will responsible for considering and making
recommendations to the full board of directors regarding nominees for election
to the board of directors and board committee assignments. The initial members
of the Nominating Committee will be Sam Wyly, Evan Wyly and Richard E. Hanlon.
Director Compensation
We currently have no standard arrangement under which we compensate
directors for their services provided in that capacity, except that we
reimburse them for out-of-pocket expenses incurred in connection with attending
board of directors and committee meetings. Directors will be eligible to
receive stock option grants under our 1999 Stock Option Plan. See "--Stock
Option Agreements and Plans--1999 Stock Option Plan." Those persons who have
become or are expected to become directors of GreenMountain.com have been
granted options to purchase units in the limited liability company. See
"Principal Stockholders."
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<PAGE>
Executive Compensation
The following table sets forth summary information concerning the
compensation awarded to, earned by or paid for services rendered to us in all
capacities during 1997 and 1998, by our former and current Chief Executive
Officer and our four most highly compensated executive officers, other than our
Chief Executive Officer, who were serving as executive officers at the end of
1998. Mr. Hyde ceased to be an executive officer effective as of October 6,
1998. Mr. Luther retired an executive officer effective as of January 30, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------------
Name and All Other
Principal Position Year Salary Bonus Shares Underlying Options Compensation
------------------ ---- ------------------- ------------------------- ------------
<S> <C> <C> <C> <C> <C>
M. David White(1)....... 1998 $ 37,576 $ 0 0 $ 258(2)
Chief Executive Officer 1997 -- -- -- --
Douglas G. Hyde(3)...... 1998 285,000 0 0 153,697(4)
Chief Executive Officer 1997 98,679 106,875 4,974 1,200(4)
Kevin W. Hartley........
Vice President, 1998 155,000 125,000 0 8,348(5)
Marketing 1997 54,524 34,875 6,466 775(5)
Thomas C. Boucher....... 1998 150,000 45,000 0 9,743(6)
Vice President, Energy 1997 51,786 33,750 5,471 1,125(6)
Supply and Business
Development
David B. Luther(7)......
Vice President, 1998 150,000 45,000 0 18,820(8)
Operations 1997 60,714 33,750 2,487 8,413(8)
Peter H. Zamore......... 1998 140,000 45,000 0 9,204(9)
Vice President, General 1997 48,952 31,500 4,974 1,050(9)
Counsel and Secretary
</TABLE>
- --------
(1) Mr. White became the Chief Executive Officer as of October 5, 1998. Mr.
White's annualized salary for 1998 was $155,000.
(2) Represents contributions to our 401(k) plan.
(3) Mr. Hyde resigned as Chief Executive Officer and ceased to be an executive
officer as of October 6, 1998. Since that date, he has continued as an
employee at the same level of compensation and will cease to be an employee
as of April 6, 1999.
(4) For 1998, represents severance compensation in the amount of $142,500,
contributions to our 401(k) plan in the amount of $9,832 and payments for
life insurance in the amount of $1,365. For 1997, represents contributions
to our 401(k) plan in the amount of $1,200.
(5) For 1998, represents contributions to our 401(k) plan in the amount of
$7,932 and payments for life insurance in the amount of $416. For 1997,
represents contributions to our 401(k) plan in the amount of $775.
(6) For 1998, represents contributions to our 401(k) plan in the amount of
$9,132 and payments for life insurance in the amount of $611. For 1997,
represents contributions to our 401(k) plan in the amount of $1,125.
(7) Mr. Luther retired effective as of January 30, 1999.
(8) For 1998, represents contributions to our 401(k) plan in the amount of
$6,820 and payments for housing costs in the amount of $12,000. For 1997,
represents contributions to our 401(k) plan in the amount of $1,125 and
payments for housing costs in the amount of $7,288.
(9) For 1998, represents contributions to our 401(k) plan in the amount of
$8,432 and payments for life insurance in the amount of $772. For 1997,
represents contributions to our 401(k) plan in the amount of $1,050.
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Option Exercises In Last Fiscal Year And Option Grants In Last Fiscal Year
We did not grant any options to the executive officers named in the summary
compensation table above during 1998.
Fiscal Year End Option Values
The following table provides information, for each of the executive officers
named in the summary compensation table above, regarding unexercised options
held as of December 31, 1998. No options were exercised during 1998.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
December 31, 1998(1) December 31, 1998
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
M. David White........... 0 0 0 0
Douglas G. Hyde.......... 6,627 0 0 0
Kevin W. Hartley......... 3,446 5,168 0 0
Thomas C. Boucher........ 2,917 4,372 0 0
David B. Luther.......... 1,328 1,985 0 0
Peter H. Zamore.......... 2,651 3,976 0 0
</TABLE>
- --------
(1) Assuming our conversion from a limited liability company to a corporation
had occurred as of December 31, 1998.
Employment Agreements
Agreement With Vice Chairman
On February 5, 1999, we entered into a letter agreement with Dennis M.
Crumpler relating to his service to us as a director, Vice Chairman and
consultant. Under the agreement, Mr. Crumpler purchased an equity interest
under our Employee Unit Purchase Plan. See "Certain Transactions--Subsequent
Transactions--Employee Unit Purchase Plan." In connection with the execution of
the agreement, in February 1999, we granted him an option exercisable to
purchase 66,600 shares of common stock at an exercise price of $3.00 per share
in connection with his service as a director. See "Management--Director
Compensation." At that time, we also granted him an option exercisable to
purchase 474,525 shares of common stock at an exercise price of $3.00 per share
in connection with his service as Vice Chairman. These options provide for
vesting as to 20% of the underlying equity interest on the date of grant and
vesting as to 5% of the underlying equity interest on the first day of each of
the next 16 calendar quarters.
Employment Agreement With Our Chief Executive Officer
On October 5, 1998, we entered into an employment agreement with M. David
White, our Chief Executive Officer. The agreement provides that Mr. White will
receive an initial annual base salary of $155,000 and an annual incentive bonus
payable at the discretion of our board of directors. Mr. White did not receive
a bonus for 1998. In addition, he receives an annual expense allowance of up to
$50,000 for transportation and housing. Mr. White also receives health, term
life and disability insurance and is eligible to participate in other benefit
plans made available to our senior executives.
Under the agreement, Mr. White purchased an equity interest under our
Employee Unit Purchase Plan. See "Certain Transactions--Subsequent
Transactions--Employee Unit Purchase Plan." Under the agreement, in January
1999 we granted him an option exercisable to purchase 999,000 shares of common
stock at an exercise price of $3.00 per share. This option provides for vesting
as to 20% of the underlying equity interest on February 2, 1999 and vesting as
to 5% of the underlying equity interest on the first day of each of the next 16
calendar quarters. In addition, pursuant to antidilution provisions of the
agreement, in connection with the
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<PAGE>
completion of a private equity offering in February 1999 we granted him an
option exercisable to purchase 249,750 shares of common stock at an exercise
price of $6.01 per share. This option provides for vesting as to 20% of the
underlying equity interest on the date of grant and vesting as to 5% of the
underlying equity interest on the first day of each of the next 16 calendar
quarters. Under the agreement, we will also grant Mr. White an option in
connection with the closing of this offering that will entitle him to purchase
a number of shares of common stock equal to 5% of the number of shares issued
in this offering at an exercise price per share equal to the initial public
offering price. This option will vest as to 20% of the underlying shares on the
date of grant and as to 5% of the shares on the first day of each of the next
16 calendar quarters.
Mr. White's employment agreement provides for his employment until December
31, 2003, but his employment may be terminated earlier by either party. If we
terminate his employment for cause or he terminates his employment without good
reason, he will receive no further compensation or other benefits from us,
except compensation that has been accrued but not paid and benefits that we are
required by law to continue. If we terminate his employment without cause or he
terminates his employment with good reason, he will receive salary and
benefits, including health, life and disability insurance, for up to one year
following his termination and, if no member of the Wyly family is chairman of
the board of directors of GreenMountain.com, the options granted to him as
described above will immediately vest and be exercisable.
At the time he accepted his position with us, David White, our Chief
Executive Officer, also entered into an agreement with Highland Stargate, an
entity controlled by the Wyly family. That agreement contemplates that
Mr. White will provide investment advisory services to Highland and its
affiliates, but expressly provides that performance of those services will not
interfere with the performance by him of his duties to us on a substantially
full-time basis. In consideration for his services, Highland agreed to pay Mr.
White an amount sufficient to cause Mr. White's total annual compensation from
Highland, its affiliates and GreenMountain.com to equal not less than
$1,000,000 for the years 1999 through 2003 and a similar prorated amount for
that portion of 1998 subject to the agreement. Highland also agreed to lend
Mr. White $3,000,000 for the purpose of refinancing outstanding indebtedness
and making investments. Highland further agreed to provide Mr. White investment
opportunities, including the opportunity to invest in any significant new
venture of any Highland affiliate on a cost basis similar to Highland and its
affiliates. The loans to Mr. White are recourse and are secured by real estate
and specified investment securities owned by Mr. White including stock and
options issued by us.
Highland agreed to reimburse Mr. White's business expenses incurred on its
behalf and to provide health and similar insurance benefits substantially
similar to those contemplated in his agreement with us if we do not provide
them. The agreement contains provisions related to confidentiality,
noninterference by Mr. White in Highland's business, indemnification of
Mr. White against claims resulting from his employment by Highland and other
matters of a nature commonly found in agreements of this type.
Mr. White's Highland agreement provides for his employment until
December 31, 2003. Upon termination of his employment by Mr. White, by Highland
for cause or as a result of death or disability, the agreement provides that
Mr. White will receive no further compensation except for compensation which
has accrued prior thereto and for benefits required by law. Upon termination by
Highland without cause, the agreement further provides for the payment of
aggregate salary and bonus compensation which he would otherwise have been
entitled to receive through December 31, 2003. The contract further provides
that the compensation obligations of Highland to Mr. White will be deemed
satisfied if Mr. White's realized and unrealized profits with respect to
specified investment securities securing the loans described above exceed
$10,000,000.
At the time he accepted his position with us Scott Canon, our Chief
Financial Officer, entered into a substantially similar agreement with
Highland. Mr. Canon's agreement provided that Mr. Canon would receive a minimum
of $500,000 per year for the years 1999 through 2002, together with an amount
of $1,250,000 if
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GreenMountain.com becomes bankrupt or insolvent, or has been liquidated or
dissolved, on or before December 31, 2003. Mr. Canon's agreement with Highland
does not provide for loans. Highland's obligation to pay compensation to
Mr. Canon will be deemed satisfied if his realized and unrealized profits with
respect to investment in fully transferable GreenMountain.com securities shall
exceed $5,000,000 for ten consecutive days following consummation of an initial
public offering.
Employment Agreements With Other Executive Officers
On August 6, 1997, in connection with our initial formation we entered into
a three-year employment agreement with each of Thomas C. Boucher, Kevin W.
Hartley, Douglas G. Hyde, David B. Luther and Peter H. Zamore. Each of these
agreements provides that the executive will receive a minimum specified annual
salary and will be entitled to participate in any benefit plan made generally
available by us to our executives and key management employees. The minimum
specified annual salaries are as follows:
<TABLE>
<CAPTION>
Base
Name Salary
---- --------
<S> <C>
Thomas C. Boucher............................................... $150,000
Kevin W. Hartley................................................ 155,000
Douglas G. Hyde................................................. 285,000
David B. Luther................................................. 150,000
Peter H. Zamore................................................. 140,000
</TABLE>
During 1998, each of these executives was paid a salary equal to his base
salary and each of these executives, other than Mr. Hyde, who received no bonus
for 1998, received bonuses for 1998 as follows: Mr. Hartley, $125,000; Mr.
Boucher, $45,000; Mr. Luther, $45,000; and Mr. Zamore, $45,000. The bonuses
were determined by the management committee of the limited liability company on
a case-by-case basis based on each executive's contribution to the limited
liability company; the bonus awards were not tied to any specific performance
or similar criteria.
If we terminate the executive's employment for cause or the executive
terminates his employment without good reason, we have no further obligations
under the agreement other than to pay the executive's salary through the date
of termination. If we terminate the executive's employment without cause or the
executive terminates his employment for good reason, we are required to
continue to pay the executive an amount equal to his salary and provide medical
and dental insurance coverage for up to one year following termination.
Contemporaneously with the execution and delivery of these employment
agreements on August 6, 1997, each of these executives was granted an option
exercisable to purchase the number of shares indicated below at an exercise
price of $67.93 per share:
<TABLE>
<CAPTION>
Number of Shares
Name Underlying Option
---- -----------------
<S> <C>
Thomas C. Boucher...................................... 7,289
Kevin W. Hartley....................................... 8,614
Douglas G. Hyde........................................ 16,566
David B. Luther........................................ 3,313
Peter H. Zamore........................................ 6,627
</TABLE>
These options provide for vesting as to 20% of the underlying equity interest
on the date of grant and vesting as to 20% of the underlying equity interest on
each of the first four anniversaries of the grant date. In addition, the
unvested portion of these options becomes immediately exercisable upon the
closing of this offering.
On October 6, 1998, we entered into a separation agreement and release with
Mr. Hyde. Under that agreement Mr. Hyde resigned as our President, but
continued as our employee at the level of compensation provided in his
employment contract until April 6, 1999. We made an initial cash payment of
$142,500 to him shortly after the execution of the agreement, a second cash
payment of $142,500 to him shortly after December 31, 1998 and a third cash
payment of $142,500 to him in March, 1999. The agreement provides that
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<PAGE>
his option granted on August 6, 1997, to the extent vested on April 6, 1999,
will remain exercisable until August 6, 2002 . Under the agreement, he was
permitted to invest under the Employee Unit Purchase Plan. See "Certain
Transactions--Subsequent Transactions--Employee Unit Purchase Plan." Under the
agreement, Mr. Hyde is prohibited from engaging in some competitive activities
and from recruiting our employees and soliciting our customers during the two-
year period ending April 6, 2001.
Stock Option Agreements And Plans
Options Granted Upon Formation Of The Limited Liability Company
On August 6, 1997, options were granted to officers and advisors of the
limited liability company in connection with its formation. These grants are
evidenced by Operating Management Option Agreements and Supervisory Management
Option Agreements dated as of August 6, 1997. As of March 31, 1999, there were
outstanding under these agreements options exercisable for 53,149 shares of
common stock at an exercise price of $67.75 per share and options exercisable
for 37,776 shares of common stock of an exercise price of $67.93 per share. See
"Management--Employment Agreements--Employment Agreements with Other Executive
Officers" and "Shares Eligible for Future Sale."
1997 Employee Ownership Plan
In 1997, our predecessor adopted a 1997 Employee Ownership Plan. Under the
1997 Employee Ownership Plan, our predecessor from time to time granted options
to employees who had not previously entered into an agreement concerning an
option to purchase interests in the limited liability company. Options were
granted under the 1997 Employee Ownership Plan during the fiscal year ended
December 31, 1998 on a case-by-case basis. Based on input from the executive
officers, the management committee of the limited liability company considered
the contributions of each recipient to the limited liability company in making
the grants. In addition, to attract the talent necessary to enhance our growth,
the management committee considered the potential contributions of the
individuals in granting options to new employees.
As of March 31, 1999, there were outstanding under the 1997 Employee
Ownership Plan options exercisable for 8,787 shares of common stock at an
exercise price of $67.93. No additional options are expected to be granted
under the 1997 Employee Ownership Plan. See "Shares Eligible for Future Sale."
1999 Unit Option Plan
In 1999, our predecessor adopted a 1999 Unit Option Plan pursuant to which
the management committee or the committee administering the plan could
designate individuals eligible to receive options. Under the 1999 Unit Option
Plan, our predecessor granted options to directors, executive officers,
employees and consultants. As of March 31, 1999, there were outstanding under
the 1999 Unit Option Plan options exercisable for 5,367,294 shares of common
stock at an exercise price of $3.00 and 1,178,820 shares of common stock at an
exercise price of $6.01. Since March 31, 1999, options to purchase an
additional 59,940 shares of common stock at an exercise price of $9.01 and
86,580 shares at an exercise price of $12.01 have been granted in connection
with the hiring of new employees. See "Shares Eligible for Future Sale."
Grants, including grants to members of the management committee of the
limited liability company, made under the 1999 Unit Option Plan were approved
by the management committee of the limited liability company. The intent of the
management committee in making grants is to attract and retain the best
available talent and encourage the highest level of performance by providing an
opportunity to participate in any increase in our equity value. Based on input
from the executive officers, the management committee considered the
contributions of each recipient to the limited liability company in making the
grants. In addition, the management committee considered the economic
incentives necessary to attract directors, executive officers and employees to
a company of our size and limited operating history.
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<PAGE>
1999 Stock Option Plan
Prior to the closing of this offering, we will adopt a 1999 Stock Option
Plan, which will amend and restate the 1997 Employee Ownership Plan and the
1999 Unit Option Plan. The purpose of the 1999 Stock Option Plan is to attract
and retain the best available talent and encourage the highest level of
performance by executive officers, key employees, directors, advisors and
consultants, and to provide them with incentives to put forth maximum efforts
for the success of our business, in order to serve the best interests of
GreenMountain.com and its stockholders. We expect that option grants under the
1999 Stock Option Plan will be a key element of our compensation strategy, and
that we will utilize the reservation of shares under the 1999 Stock Option Plan
to the maximum extent practicable. Subject to the approval of the Audit and
Special Compensation Committee and our board of directors, we expect in
connection with the closing of this offering to grant to Sam Wyly, our
Chairman, an option to purchase a number of shares of common stock equal to 5%
of the number of shares issued in this offering at an exercise price per share
equal to the initial public offering price. This option will vest as to 20% of
the underlying shares on the date of grant and will vest as to 5% of the
underlying shares on the first day of each of the next 16 calendar quarters.
David White, our Chief Executive Officer, will receive a similar grant under
the terms of his employment agreement. See "--Employment Agreements--Employment
Agreement with Our Chief Executive Officer." Further, we expect that, following
the closing of this offering our directors who are actively involved in the
management of our business and our executive officers will from time to time
receive substantial option grants.
Administration. The 1999 Stock Option Plan will be administered by the Audit
and Special Compensation Committee or the full board of directors.
Options. The 1999 Stock Option Plan will authorize the grant of stock
options to purchase shares of GreenMountain.com common stock. Grants under the
1999 Stock Option Plan are not intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code.
Number of Shares Reserved. The total number of shares of common stock that
will be available for issuance under the 1999 Stock Option Plan is .
However, this number will be increased, if necessary, on each fiscal quarter so
that the sum of:
(1) the total number of shares of common stock previously issued upon the
exercise of stock options;
(2) the total number of shares of common stock then subject to outstanding
stock options; and
(3) the total number of shares of common stock then remaining available
under the 1999 Stock Option Plan to be made subject to future grants of
stock options equals 20% of the total number of outstanding shares of
common stock of GreenMountain.com, computed on a fully-diluted basis.
The Audit and Special Compensation Committee and the board of directors may
make additional adjustments in the maximum number of shares available under the
1999 Stock Option Plan or in the number of shares of common stock covered by
outstanding options, in the purchase price per share of common stock covered by
options, and/or in the kind of shares covered (including shares of another
issuer), as the Audit and Special Compensation Committee or the board of
directors in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of 1999
Stock Option Plan participants resulting from any change in our capital
structure, merger, consolidation, spin-off, reorganization, liquidation,
issuance of rights or warrants to purchase securities or any other corporate
transaction or event having a similar effect.
Eligibility. Our executive officers, key employees, directors, advisors and
consultants, and prospective employees, directors, advisors and consultants,
will be eligible to receive grants of stock options.
Transferability. Each option granted pursuant to the 1999 Stock Option Plan
may be subject to any transfer restrictions as the Audit and Special
Compensation Committee or the board of directors determines.
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<PAGE>
Description of Awards. The 1999 Stock Option Plan will not specify a maximum
term for stock options. The exercise price of the options may not be less than
the fair market value per share of common stock on the grant date. The Audit
and Special Compensation Committee or the board of directors may, without the
consent of the holder of an option, amend the terms of the option in several
respects, including acceleration of the time at which the option may be
exercised, extension of the expiration date, reduction of the exercise price
and waiver of other conditions or restrictions.
Each grant of options will specify the number of shares of common stock, the
exercise price and any vesting schedule and state whether the exercise price is
payable in cash, by the actual or constructive transfer to GreenMountain.com of
nonforfeitable, unrestricted shares of common stock already owned by the
participant having an actual or constructive value as of the time of exercise
equal to the total exercise price, by any other legal consideration authorized
by the Audit and Special Compensation Committee or the board of directors or by
a combination of such methods of payment.
The maximum aggregate number of shares of common stock with respect to which
options may be granted to any participant during any single calendar year will
not exceed .
Vesting of Options Upon a Change in Control. The stock option agreement
evidencing any stock option granted under the 1999 Stock Option Plan may
provide that the stock option will become exercisable if there is a change in
control of GreenMountain.com or in the event of similar transactions or events.
The specific terms of any such provision will be set forth in the stock option
or other agreement or in any agreement.
Amendment and Termination. The board of directors may amend or terminate the
1999 Stock Option Plan at any time. The termination of the 1999 Stock Option
Plan will not adversely affect the terms of any outstanding options. If any
law, rule or regulation removes or lessens any restrictions imposed for
options, the Audit and Special Compensation Committee or the board of directors
may amend the 1999 Stock Option Plan and all options then outstanding will be
subject to such amendment.
Grants Under the Plan. No options have been granted under the 1999 Stock
Option Plan and it is not possible to determine the specific awards of options
that will be granted to various individuals in the future under the 1999 Stock
Option Plan.
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Grants to Directors, Director Nominees And Executive Officers Named In Summary
Compensation Table
The following table sets forth information regarding options granted prior
to, and outstanding as of, the date of this prospectus to directors and
director nominees and executive officers named in the summary compensation
table included above.
<TABLE>
<CAPTION>
Number of
Shares
Date Underlying Exercise Expiration
Name Granted Options(1) Price Date
---- ------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sam Wyly(2)........................ 8/06/97 13,287 (3) $67.75 8/06/02
1/15/99 541,125 (4) $ 3.00 4/02/03
2/17/99 191,475 (5) $ 6.01 4/18/03
Dennis M. Crumpler................. 2/05/99 541,125 (6) $ 3.00 4/06/03
Evan A. Wyly....................... 8/06/97 14,945 (3) $67.75 8/06/02
1/15/99 541,125 (4) $ 3.00 4/02/03
2/17/99 124,875 (5) $ 6.01 4/18/03
Mark Cuban......................... 2/14/99 83,250 (7) $ 3.00 4/16/03
Reed E. Maltzman................... 2/04/99 83,250 (7) $ 3.00 4/16/03
Richard E. Hanlon.................. 2/04/99 83,250 (7) $ 3.00 4/16/03
Lisa Wyly(8)....................... 8/06/97 6,643 (3) $67.75 8/06/02
1/15/99 166,500 (4) $ 3.00 4/02/03
H. Lee S. Hobson................... 1/15/99 289,710 (9) $ 3.00 4/02/03
M. David White(10)................. 1/15/99 999,000 (4) $ 3.00 4/02/03
2/17/99 249,750 (11) $ 6.01 4/17/03
Douglas G. Hyde.................... 8/06/97 6,627 (12) $67.93 8/06/02
Kevin W. Hartley................... 8/06/97 8,614 (3) $67.93 8/06/02
1/15/99 216,450 (4) $ 3.00 4/02/03
2/17/99 16,650(5) $ 6.01 4/18/03
Thomas C. Boucher.................. 8/06/97 7,289 (3) $67.93 8/06/02
1/15/99 149,850 (4) $ 3.00 4/02/03
2/17/99 16,650(5) $ 6.01 4/18/03
David B. Luther.................... 8/06/97 1,328 (13) $67.93 8/06/02
Peter H. Zamore.................... 8/06/97 6,627 (3) $67.93 8/06/02
1/15/99 149,850 (4) $ 3.00 4/02/03
2/17/99 16,650(5) $ 6.01 4/18/03
</TABLE>
- --------
(1) Reflects our conversion from a limited liability company to a corporation.
(2) Does not include 2,664 shares issuable upon the exercise of options that
have become vested and are owned by four family trusts of which Mr. Sam
Wyly is trustee or 3,983 shares issuable upon the exercise of unvested
options that become exercisable upon the completion of this offering and
are owned of record by the same four family trusts. Subject to the approval
of the Audit and Special Compensation Committee and our board of directors,
we expect in connection with the closing of this offering to grant to Sam
Wyly an option to purchase a number of shares equal to 5% of the number of
shares issued in this offering at an exercise price per share equal to the
initial public offering price. This option will provide for vesting as to
20% of the underlying shares on the date granted and vesting as to 5% of
the underlying shares on the first day of each of the next 16 calendar
quarters.
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It's a small planet.(SM)
<PAGE>
(3) To date, these options have become vested with respect to 40% of the
underlying shares; the unvested portion will become exercisable upon the
closing of this offering.
(4) These options provide for vesting as to 20% of the underlying shares on
February 2, 1999 and vesting as to 5% of the underlying shares on the first
day of each of the next 16 calendar quarters.
(5) These options provide for vesting as to 20% of the underlying shares on
February 18, 1999 and vesting as to 5% of the underlying shares on the
first day of each of the next 16 calendar quarters.
(6) These options provide for vesting as to 20% of the underlying shares on
February 6, 1999 and vesting as to 5% of the underlying shares on the first
day of each of the next 16 calendar quarters.
(7) These options provide for immediate vesting.
(8) Does not include 666 shares issuable upon the exercise of options that
have become vested and are owned of record by a family trust of which Ms.
Wyly is trustee or 995 shares issuable upon the exercise of unvested
options which become exercisable upon the closing of this offering and are
owned of record by the same family trust.
(9) These options provide for vesting as to 20% of the underlying shares on
February 2, 1999 and vesting as to 5% of the underlying shares on the first
day of the next 16 calendar quarters. Pursuant to internal policies of
Maverick Capital, Ltd., Mr. Hobson has transferred the options to purchase
289,710 shares to Maverick Fund II, Ltd., Maverick Fund USA, Ltd. and
Maverick Fund L.D.C.
(10) Pursuant to Mr. White's employment agreement, in connection with the
closing of this offering we will grant to him an option that will entitle
him to purchase a number of shares equal to 5% of the number of shares
issued in this offering at an exercise price per share equal to the
initial public offering price. This option will provide for vesting as to
20% of the underlying shares on the date granted and vesting as to 5% of
the underlying shares on the first day of each of the next 16 calendar
quarters.
(11) These options provide for vesting as to 20% of the underlying shares on
the date granted and vesting as to 5% of the underlying shares on the
first day of each of the next 16 calendar quarters.
(12) Pursuant to Mr. Hyde's separation agreement and release, these options
will remain exercisable until August 6, 2002. See "Management--Employment
Agreements--Employment Agreements With Other Executive Officers."
(13) Upon his retirement, Mr. Luther forfeited options to purchase an
additional 1,985 shares.
Compensation Committee Interlocks And Insider Participation
The limited liability company does not have a compensation committee.
Decisions regarding compensation have been made by the full management
committee of the limited liability company, including Sam Wyly, the Chairman of
that committee. Mr. Wyly may be deemed to be an executive officer of the
limited liability company because of policy making functions performed by him
as Chairman of its management committee.
Sam Wyly is an executive officer and director of Sterling Software and
Michaels Stores. He serves as a member of the executive committee and stock
option committee of Sterling Software and as a member of the compensation
committee of Michaels Stores. Accordingly, Sam Wyly has participated in
decisions related to compensation of executive officers of each of
GreenMountain.com, Sterling Software and Michaels Stores.
Other than Sam Wyly, who may be deemed to have been an executive officer,
none of the limited liability company's executive officers has served on the
compensation committee, or on any full board of directors or other board
committee that performs functions similar to a compensation committee, of any
entity that has one or more of its executive officers who has served as a
member of the limited liability company's management committee.
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<PAGE>
Limitation Of Liability And Indemnification Matters
Prior to the closing of this offering, our certificate of incorporation and
bylaws will be amended. Our amended certificate will limit the liability of our
directors to the maximum extent permitted by Delaware law. Delaware law
provides that a director of a corporation will not be personally liable for
monetary damages for breach of that individual's fiduciary duties as a director
except for liability for any of the following:
.a breach of the director's duty of loyalty to the corporation or its
stockholders;
.any act or omission not in good faith or that involves intentional
misconduct or a knowing violation of the law;
.unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
.any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or recission.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers, as well as other employees
and individuals, against attorneys' fees and other expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with any threatened, pending or completed actions, suits or
proceedings in which such person was or is a party or is threatened to be made
a party by reason of such person being or having been a director, officer,
employee or agent of the corporation. The Delaware General Corporation Law
provides that Section 145 is not exclusive of other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Our amended certificate and amended bylaws will provide that we are required
to indemnify our directors and officers to the maximum extent permitted by law.
Our amended bylaws will also require us to advance expenses incurred by an
officer or director in connection with the defense of any action or proceeding
arising out of that party's status or service as a director or officer of
GreenMountain.com or as a director, officer, employer or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, if serving as such at our request. Our amended bylaws will also
permit us to secure insurance on behalf of any director or officer for any
liability arising out of his or her actions in a representative capacity.
We intend to enter into indemnification agreements with our directors and
some of our officers containing provisions that:
.indemnify, to the maximum extent permitted by Delaware law, those
directors and officers against liabilities that may arise by reason of
their status or service as directors or officers, except liabilities
arising from willful misconduct of a culpable nature;
.to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified; and
.to obtain directors' and officers' liability insurance if maintained for
other directors or officers.
We believe that the provisions of our certificate of incorporation and
bylaws described above and indemnification agreements are necessary to attract
and retain qualified persons as directors and officers. The limited liability
company currently has liability insurance for its management committee members
and officers and we intend to obtain directors' and officers' liability
insurance for directors and officers of GreenMountain.com.
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<PAGE>
CERTAIN TRANSACTIONS
Formation Of The Business
Background Of The Business
Between 1994 and 1997, an affiliate of Green Mountain Power Corporation
conducted extensive market research to evaluate the viability of a nationally-
marketed, premium-priced green electricity product supported by a strong pro-
environmental brand identity. This market research was designed to identify:
.The most attractive consumer segments;
.The key elements of environmental positioning; and
.The optimal design of potential green electricity products.
An affiliate of Green Mountain Power Corporation also participated, together
with 20 other companies, in deregulated energy pilot programs in Massachusetts
and New Hampshire in order to test the viability of marketing green electricity
and natural gas products.
Formation Of The Limited Liability Company
On August 6, 1997, a subsidiary of Green Mountain Power Corporation and
Green Funding I entered into a limited liability company agreement relating to
the formation of Green Mountain Energy Resources L.L.C.
Limited Liability Company Agreement. Under the limited liability company
agreement:
.The subsidiary of Green Mountain Power Corporation contributed service
marks, including our "Choose wisely. It's a small planet." and "Green
Mountain Energy Resources" service marks, some marketing studies and
analyses and its rights under agreements with several third-party service
providers, in exchange for a 33% equity interest in the limited liability
company;
.Green Funding I contributed $8.0 million and committed to contribute an
additional $22.0 million over time, in exchange for a 67% equity interest
in the limited liability company; and
.Immediately following the initial contribution by Green Funding I, the
subsidiary of Green Mountain Power Corporation received a distribution
from the limited liability company of $4.0 million.
The limited liability company agreement also contained provisions relating
to, among other things, the allocation of profits and losses, the management of
the limited liability company, restrictions on transfer and registration
rights.
Non-Compete and Name Use Agreement. In connection with the formation of the
limited liability company, on August 6, 1997, Green Mountain Power Corporation,
Green Funding I and the limited liability company entered into an agreement
containing:
.Covenants by Green Mountain Power Corporation and Green Funding I
generally not to engage in the retail energy business, subject to
exceptions related to Green Mountain Power Corporation's then-existing
business activities;
.Covenants by Green Mountain Power Corporation and Green Funding I not to
use the Green Mountain name in connection with business activities similar
to those conducted by the limited liability company; and
.Other covenants by Green Mountain Power Corporation relating to the use of
the Green Mountain name.
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<PAGE>
Transfer of Employees. In connection with the formation of the limited
liability company, on or about August 6, 1997, some individuals who were
employed by Green Mountain Power Corporation ceased their employment with that
company and became employees of the limited liability company. These
individuals included Ms. Blunden, Mr. Boucher, Mr. Hartley, Mr. Hyde, Mr.
Luther, Ms. O'Neill, Mr. Rawls and Mr. Zamore.
Subsequent Transactions
September 1997 Capital Infusion
On September 29, 1997, Green Funding I committed an additional $10.0 million
to the limited liability company in exchange for an additional equity interest
in the limited liability company, raising Green Funding I's total equity
interest to approximately 73%.
August 1998 Short-Term Loan
On August 26, 1998, the limited liability company arranged to borrow $10.0
million from Security Capital, Ltd. This loan, which bore interest at a rate of
10% per annum, was made by Security Capital, Ltd. Several entities, whose stock
is owned by irrevocable trusts of which members of the Wyly family are
beneficiaries, provided credit enhancement for the loan. The loan from Security
Capital was repaid in full as described below effective as of November 25,
1998. Total interest paid on that loan was $167,083.
November 1998 Capital Infusion
On November 20, 1998, Green Funding I committed an additional $20.0 million
to the limited liability company in exchange for an additional equity interest
in the limited liability company, raising Green Funding I's total equity
interest to approximately 99%. This contribution consisted of the payment in
full of the $10.0 million short-term note described above for the benefit of
the limited liability company and $10.0 million in cash.
December 1998 Repurchase Of Green Mountain Power Corporation's Equity
Interest
On December 23, 1998, Green Mountain Power Corporation, its subsidiaries,
Green Funding I and the limited liability company entered into an agreement
that provided for the termination of the non-compete and name use agreement
described above and the repurchase by the limited liability company of the
remaining approximately 1% equity interest held by the subsidiary of Green
Mountain Power Corporation. Under this agreement:
.Green Mountain Power Corporation agreed not to engage in the unregulated
marketing or retail sale of electricity or gas outside Vermont for seven
years;
.Green Mountain Power Corporation agreed not to use the Green Mountain
name, subject to a limited exception for activities in Vermont;
.The subsidiary of Green Mountain Power Corporation transferred to the
limited liability company its remaining equity interest, withdrew as a
member and caused its representative on the management committee of the
limited liability company to resign;
.The limited liability company agreed to pay Green Mountain Power
Corporation $1,000,000 in cash; and
.There were mutual releases granted between Green Funding I and the limited
liability company, on the one hand, and Green Mountain Power Corporation
and its subsidiaries, on the other hand.
As of January 1999, Green Funding I owned 100% of the equity interests in
the limited liability company represented by 6,000,000 common units.
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<PAGE>
Employee Unit Purchase Plan
During January and early February 1999, pursuant to our Employee Unit
Purchase Plan, 50 employees, consultants and advisors purchased 956,000 common
units in the limited liability company in the aggregate for total consideration
of $9.56 million. Upon our conversion from a limited liability company to a
corporation, these 956,000 common units will be converted to 3,183,480 shares
of common stock. Under the Employee Unit Purchase Plan, participants were
permitted to pay for the common units purchased with cash or promissory notes,
or with any combination of cash and promissory notes. Promissory notes used to
pay for the equity interests bear interest at 6% per annum and become payable
on the earliest of the obligor's death, termination of the obligor's employment
or services and December 31, 2003. On each of the first four anniversaries of
the date of the note, accrued and unpaid interest will be added to principal.
The notes are secured by all equity interests that the participant currently
owns, including those acquired under the Employee Unit Purchase Plan, and all
equity interests that the participant acquires in the future, but are otherwise
non-recourse to the obligor. The equity interests securing these notes are held
in escrow for our benefit. The following table sets forth, for the persons
named, the number of shares purchased and the aggregate amount and type of
consideration paid for them.
<TABLE>
<CAPTION>
Number of Amount of
Name Shares Cash Loan Total Consideration
---- --------- ---------- ---------- -------------------
<S> <C> <C> <C> <C>
Dennis M. Crumpler...... 666,000 $1,000,000 $1,000,000 $2,000,000
M. David White.......... 999,000 1,500,000 1,500,000 3,000,000
Dennis W. Kelly......... 133,200 200,000 200,000 400,000
Kevin W. Hartley........ 219,780 115,000 545,000 660,000
Julia D. Blunden........ 33,300 50,000 50,000 100,000
Thomas C. Boucher....... 34,632 52,000 52,000 104,000
Karen K. O'Neill........ 33,300 50,000 50,000 100,000
Peter H. Zamore......... 37,962 57,000 57,000 114,000
Jay LeDuc............... 8,658 13,000 13,000 26,000
Thomas Rawls............ 3,330 5,000 5,000 10,000
K. Scott Canon.......... 349,650 400,000 650,000 1,050,000
Michael Fulton.......... 66,600 100,000 100,000 200,000
--------- ---------- ---------- ----------
Totals................ 2,585,412 $3,542,000 $4,222,000 $7,764,000
========= ========== ========== ==========
</TABLE>
During this same period, 12 of our consultants and advisors purchased, in a
private equity offering, 44,000 common units in the limited liability company
in the aggregate for total consideration of $440,000. Upon our conversion from
a limited liability company to a corporation these 44,000 common units will be
converted into 146,520 shares of common stock.
Private Equity Offering
On February 17, 1999, the limited liability company closed a private equity
offering. Investors in the offering purchased 1,515,500 common units in the
limited liability company in the aggregate for total consideration of $30.3
million. Upon our conversion from a limited liability company to a corporation,
these 1,515,500 common units will be converted into 5,046,615 shares of common
stock. As a result of such purchases, Maverick Capital became the beneficial
owner of 750,000 common units, which will be represented by 2,497,500 shares
upon our conversion from a limited liability company to a corporation, for an
aggregate purchase price of $15.0 million. Evan Wyly is a Managing Partner and
H. Lee S. Hobson is a Partner of Maverick Capital. In addition, Green Funding
II acquired directly 500,000 common units, which will be represented by
1,665,000 shares upon our conversion from a limited liability company to a
corporation, for an aggregate purchase price of $10.0 million.
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Working Capital Funding Commitment
Pursuant to an agreement entered into in April 1999, Green Funding I has
committed to provide us with up to $22.0 million in cash to permit us to meet
our working capital needs for the remainder of our 1999 fiscal year. Any
advances under the agreement will bear interest at 6.0% per annum. The
agreement provides that accrued and unpaid interest will be capitalized and
added to principal on each June 30 and December 31. Principal, together with
accrued and unpaid interest, will be payable on the earlier of April 23, 2001
or the tenth day after the closing of this offering. Green Funding's obligation
to make advances under the agreement terminates upon the closing of this
offering. See "Use of Proceeds."
Reorganization Transaction
Prior to the closing of this offering, we will convert our business from a
limited liability company to a corporation in order to have a business
organization form that is more typical of other publicly traded entities. This
conversion will be accomplished by merging Green Mountain Energy Resources
L.L.C., a Delaware limited liability company, into GreenMountain.com Company, a
Delaware corporation. In connection with the conversion, the limited liability
company agreement will terminate, except for covenants that, by their terms,
require performance after the termination of such agreement, and each member
will have the right to receive 3.33 shares of GreenMountain.com common stock in
exchange for each of its common units in the limited liability company, subject
to the payment of cash in lieu of fractional shares. In addition, all
outstanding options and warrants exercisable for common units in the limited
liability company will, in effect, be converted into options or warrants
exercisable for GreenMountain.com common stock.
The former members of the limited liability company will have registration
rights with respect to shares of GreenMountain.com they receive in the
conversion. See "Description of Capital Stock--Registration Rights."
We have been informed that, following our conversion from a limited
liability company to a corporation, but prior to the closing of this offering,
the shares of GreenMountain.com owned by each of Green Funding I and Green
Funding II will be distributed to the beneficial holders of the ownership
interests in those entities.
Other Transactions And Relationships
Agreements With Sterling Software
In February 1998, we entered into an agreement with Sterling Software, a
supplier of software products and services with expertise in network management
and automation. Under that agreement, Sterling Software provides us with
network management services and other information systems consulting services.
Under that agreement, we paid Sterling Software $828,611 for services provided
by it during 1998. We paid Sterling Software $576,857 during the first quarter
of 1999 in connection with that agreement.
In addition, we entered into another agreement with Sterling Software in
December 1998 for the 1999 calendar year. This contract expanded the scope of
Sterling Software services to include programming and operational support for
data transmissions with all utility companies with which GreenMountain.com
interfaces, development of an enterprise database for our Information Network
and other software development projects for an approximate contract amount of
$4.4 million. As of March 31, 1999, we owed Sterling Software $771,117 under
that agreement, of which $391,365 was paid to it as of May 10, 1999.
Sam Wyly and Evan Wyly are directors and stockholders of Sterling Software.
Each of the agreements with Sterling Software was negotiated on an arms' length
basis and GreenMountain.com believes that the terms of these agreements are
comparable to those that could have been obtained with an unrelated third
party.
Transactions With Green Mountain Power Corporation
We paid $165,365 to Green Mountain Power Corporation for facilities
maintenance and other services during 1998. We received from Green Mountain
Power Corporation $73,191 for services provided to it by our employees during
1998.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information, as of the date of this
prospectus, with respect to beneficial ownership of shares of common stock of
GreenMountain.com, by each person who we expect to beneficially own more than
5% of the common stock after the offering, by each director and director
nominee, by each executive officer named in the summary compensation table
included above and by all directors, director nominees and executive officers
as a group. The information in the table reflects the distributions of shares
owned by Green Funding I and Green Funding II to the beneficial holders of the
ownership interests in those entities. See "Certain Transactions--
Reorganization Transaction."
<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Number of Shares Owned
Beneficially Owned ------------------
Name and Address Prior to the Prior to After the
of Beneficial Owner(1) Offering(2) Offering Offering
---------------------- ------------------ -------- ---------
<S> <C> <C> <C>
Sam Wyly............................. 2,276,970(3) 8.0%
Dennis M. Crumpler................... 801,281 2.8
Evan A. Wyly......................... 198,218 *
Mark Cuban........................... 83,250 *
Richard E. Hanlon.................... 83,250 *
Reed E. Maltzman..................... 83,250 *
Lisa Wyly............................ 658,639(4) 2.3
H. Lee S. Hobson..................... 8,325 *
M. David White....................... 1,311,188 4.6
Douglas G. Hyde...................... 58,575 *
Kevin W. Hartley..................... 286,669 1.0
Thomas C. Boucher.................... 83,546 *
Peter H. Zamore...................... 86,214 *
David B. Luther...................... 37,292 *
Maverick Capital, Ltd................ 4,647,848(5) 16.3
Locke Limited........................ 7,219,287(6) 25.5
All directors, director nominees and
executive officers as a group (18
persons)............................ 6,726,379 22.5% %
</TABLE>
- --------
*Less than 1%.
(1) Except as otherwise indicated, the address for each beneficial owner is c/o
GreenMountain.com Company, 55 Green Mountain Drive, P.O. Box 2206, South
Burlington, Vermont 05407-2206.
(2) For some beneficial owners, includes shares issuable upon the exercise of
options exercisable within 60 days and upon the closing of this offering,
as set forth in detail in the table set forth below.
(3) Includes 1,820,338 shares owned of record by four family trusts of which
Mr. Sam Wyly is trustee and 243,486 shares owned by the Cheryl R. Wyly
Marital Trust. Mr. Sam Wyly disclaims beneficial ownership of the shares
and options owned by these trusts.
(4) Includes 608,711 shares owned of record by a family trust of which Ms. Wyly
is trustee. Ms. Wyly disclaims beneficial ownership of the shares and
options owned by the trust.
(5) Shares shown as beneficially owned by Maverick Capital, Ltd. are owned of
record by Maverick Fund II, Ltd., Maverick Fund USA, Ltd. and Maverick Fund
L.D.C. Maverick Capital, Ltd. is the investment advisor for each of
Maverick Fund II, Ltd. and Maverick Fund L.D.C., and is the general partner
of Maverick Fund USA, Ltd. As a result of such positions, Maverick Capital,
Ltd. has voting and investment power over shares owned of record by these
three entities. Mr. Evan Wyly is a managing partner of Maverick Capital,
Ltd. and may be deemed to be a beneficial owner of the shares shown as
beneficially owned by Maverick Capital, Ltd. Mr. Evan Wyly disclaims
beneficial ownership of all shares beneficially owned by Maverick Capital,
Ltd., and, accordingly, such shares are excluded from the information in
the
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<PAGE>
table with respect to Mr. Evan Wyly. The address of Maverick Capital, Ltd.
is 300 Crescent Court, Suite 1000, Dallas, Texas 75201.
(6) The address of Locke Limited is Locke Limited c/o Aundyr Trust Company
Ltd., International House, Castle Hill, Victoria Road, Douglas, Isle of
Man IM2 4RB.
The following table sets forth information, as of the date of this
prospectus, with respect to beneficial ownership of shares of common stock of
GreenMountain.com issuable upon the exercise of options exercisable within 60
days or upon consummation of this offering, by each person who we expect to
own more than 5% of the common stock after the offering, by each director and
director nominee, by each executive officer named in the summary compensation
table included above and by all directors, director nominees and executive
officers as a group. The information in our table reflects the distributions
of shares owned by Green Funding I and Green Funding II to the beneficial
holders of the ownership interests in those entities.
<TABLE>
<CAPTION>
Shares Underlying
Shares Underlying Options Exercisable
Options Exercisable Upon Closing of
Name of Beneficial Owner Within 60 Days This Offering
------------------------ ------------------- -------------------
<S> <C> <C>
Sam Wyly........................... 191,129(1) 11,955(2)
Dennis M. Crumpler................. 135,281 0
Evan A. Wyly....................... 172,477 8,967
Mark Cuban......................... 83,250 0
Richard E. Hanlon.................. 83,250 0
Reed E. Maltzman................... 83,250 0
Lisa Wyly.......................... 44,948(3) 4,980(4)
H. Lee S. Hobson................... 0 0
M. David White..................... 312,188 0
Douglas G. Hyde.................... 6,627 0
Kevin W. Hartley................... 61,721 5,167
Thomas C. Boucher.................. 44,542 4,372
Peter H. Zamore.................... 44,276 3,976
David B. Luther.................... 1,328 0
Maverick Capital, Ltd.............. 72,428 0
Locke Limited...................... 0 0
All directors, director nominees
and executive officers as a group
(18 persons)...................... 1,455,600 44,269
</TABLE>
- --------
(1) Includes 2,664 shares issuable upon the exercise of options owned of
record by four family trusts of which Mr. Sam Syly is trustee. Mr. Sam
Wyly disclaims beneficial ownership of the options owned by these trusts.
(2) Includes 3,983 shares issuable upon the exercise of options owned of
options owned of record by four family trusts of which Mr. Sam Wyly is
trustee. Mr. Sam Wyly disclaims beneficial ownership of the options owned
by the trust.
(3) Includes 666 shares issuable upon the exercise of options owned of record
by a family trust of which Ms. Wyly is trustee. Ms. Wyly disclaims
beneficial ownership of the options owned by the trust.
(4) Includes 995 shares issuable upon the exercise of options owned of record
by a family trust of which Ms. Wyly is trustee. Ms. Wyly disclaims
beneficial ownership of the options owned by the trust.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Prior to the closing of this offering, our certificate of incorporation will
be amended so that we are authorized to issue 150,000,000 shares of common
stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par
value $0.01 per share. As of March 31, 1999, there were 28,356,615 shares of
common stock outstanding held of record by 91 stockholders, outstanding options
to purchase 6,645,828 shares of common stock and outstanding warrants to
purchase 13,216 shares of common stock. These amounts assume our conversion
from a limited liability company to a corporation and the related exchange of
each common unit of the limited liability company for 3.33 shares of common
stock of the corporation had occurred as of that date.
Common Stock
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends that may be declared by our board of directors,
subject to any preferential dividend rights of outstanding preferred stock. In
the event of the liquidation, dissolution or winding up of GreenMountain.com,
holders of common stock would be entitled to receive proportionately any of our
assets remaining after the payment of liabilities and subject to the prior
rights of any outstanding preferred stock. Holders of common stock have no
preemptive, subscription, redemption or conversion rights. Our outstanding
shares of common stock are, and the shares offered by us in this offering will
be, when issued and paid for, fully paid and nonassessable.
Preferred Stock
The board of directors has the authority, within the limitations and
restrictions stated in our certificate of incorporation, to provide by
resolution for the issuance of shares of preferred stock, in one or more
classes or series, and to fix the rights, preferences, privileges and
restrictions for them, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series and the designation of that series. The issuance of
preferred stock could adversely affect the voting and other rights of the
holders of common stock.
Registration Rights
After the closing of this offering, the holders of % of the outstanding
shares of common stock will hold registration rights that will allow them to
"piggyback" the registration of their shares under the Securities Act on future
registrations of our securities. Accordingly, whenever we propose to register
any shares of our common stock under the Securities Act (other than
registrations on Forms S-4 or S-8), these stockholders have the right to
include their shares of common stock in that registration. However, the number
of shares that those stockholders may include in any registration will be
reduced if the underwriters for that offering advise us that the aggregate
number of shares should be reduced. We are generally obligated to bear all
expenses, other than underwriting discounts and sales commissions, of the
registration of all shares of common stock of those stockholders. The
registration rights require those stockholders to indemnify us in some
circumstances. Registration of any of the shares of common stock held by
holders of registration rights generally would result in those shares becoming
freely tradable without restriction under the Securities Act immediately
following their distribution in the manner described in the applicable
registration statement.
Provisions Of Our Certificate of Incorporation, Our Bylaws And Delaware Law
Prior to the closing of this offering, our certificate of incorporation and
bylaws will be amended. Some provisions of our certificate of incorporation and
bylaws, as so amended, and Delaware law may have an anti-
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takeover effect and delay, defer or prevent a tender offer or takeover attempt
that a stockholder may consider in its best interest, including those attempts
that might result in a premium over the market price for the shares held by
stockholders.
Classified Board Of Directors, Removal Of Directors And Filling Vacancies In
Directorships
Our amended certificate of incorporation will provide that our board of
directors is divided into three classes of directors serving staggered three-
year terms. See "Management--Classified Board of Directors." In addition, our
amended certificate of incorporation will provide that directors may be removed
only for cause by the affirmative vote of the holders of at least 80% of our
voting securities entitled to vote. Under our amended certificate of
incorporation, any vacancy on our board of directors, including a vacancy
resulting from an enlargement of our board of directors, may be filled by the
vote of a majority of our directors then in office. The classification of our
board of directors and the limitations on the removal of directors and filling
of vacancies may deter a third party from seeking to remove incumbent directors
and simultaneously gaining control of the board of directors by filling the
vacancies created by such removal with its own nominees.
Cumulative Voting
Our amended certificate of incorporation will expressly deny stockholders
the right to cumulate votes in the election of directors. As a result, the
holders of a majority of the shares voted can elect all directors standing for
election.
Stockholder Action And Special Meeting Of Stockholders
Our amended certificate of incorporation will eliminate the ability of
stockholders to act by written consent in lieu of a meeting. It will also
provide that special meetings of the stockholders may only be called by our
Chairman, a Vice Chairman, by our Secretary within ten calendar days after
receipt of a written request of a majority of the total number of directors
(assuming no vacancies) or as otherwise may be provided in a preferred stock
designation and the business permitted to be conducted at any such meeting will
be limited to that brought before the meeting that is specified in the notice
of the meeting given by or at the direction of our Chairman, a Vice Chairman or
a majority of the total number of directors (assuming no vacancies) or that is
otherwise properly brought before the meeting by the presiding officer or by or
at the direction of a majority of the total number of directors (assuming no
vacancies).
Advance Notice Requirements For Stockholder Proposals And Directors
Nominations
Our amended bylaws will provide that stockholders seeking to bring business
before an annual meeting of stockholders or nominate candidates for election as
directors at an annual meeting of stockholders must provide timely notice in
writing. To be timely, a stockholder's notice must be delivered to or mailed
and received at our principal executive offices not less than 60 days nor more
than 90 days prior to the anniversary date of the date on which we first mail
our proxy materials for the prior year's annual meeting of stockholders, except
that if there was no annual meeting held during the prior year or if the annual
meeting is called for a date that is not within 30 days before or after that
anniversary, notice by the stockholder in order to be timely must be received
not later than the close of business on the tenth day following the date on
which public announcement was first made of the date of the annual meeting. Our
amended bylaws will also specify requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
directors at an annual meeting of stockholders.
Authorized But Unissued Shares
Authorized but unissued shares of common stock and preferred stock under our
amended certificate of incorporation will be available for future issuance
without stockholder approval. These additional shares may be used for a variety
of corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred stock could render
more difficult or discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise.
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<PAGE>
Supermajority Vote Requirements
Delaware law provides generally that the affirmative vote of a majority of
the shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage. Our
amended certificate of incorporation and bylaws will require the affirmative
vote of the holders of at least 80% of our voting securities entitled to vote,
to amend, repeal or adopt any provision inconsistent with some provisions,
including those provisions relating to:
.our classified board of directors;
.directorship vacancies and removal of directors;
.action by written consent of stockholders;
.special meetings of stockholders; and
.stockholder proposals and nominations of directors.
Delaware Section 203
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the person became an interested stockholder,
unless the interested stockholder attained that status with the approval of the
board of directors or the business combination is approved in a prescribed
manner. A "business combination" includes some mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to some exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within the prior three years
did own, 15% or more of the corporation's voting stock.
Market Information
Prior to this offering, there has been no public trading market for our
common stock. We have filed an application to include our common stock in the
Nasdaq National Market under the symbol "GMTN."
Transfer Agent
Our registrar and transfer agent for our common stock is Harris Trust and
Savings Bank.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, shares of common stock will be outstanding, assuming
the exchange of each common unit of the limited liability company outstanding
as of the date of this prospectus for shares of common stock. See
"Capitalization." Of these shares, the shares sold in this offering will be
freely tradeable without restriction under the Securities Act except for any
shares purchased by "affiliates" of GreenMountain.com as defined in Rule 144
under the Securities Act. The remaining shares are "restricted securities"
within the meaning of Rule 144 under the Securities Act. The restricted
securities generally may not be sold unless they are registered under the
Securities Act or are sold pursuant to an exemption from registration, such as
the exemption provided by Rule 144 under the Securities Act. If the
underwriters exercise their over-allotment in full, the number of shares of
common stock outstanding after this offering would increase to and, of
those shares, shares would be freely tradeable and would be restricted
securities as described above.
Our officers, directors and stockholders holding in the aggregate shares
of common stock have entered into lock-up agreements under which they have
agreed not to offer or sell any shares of common stock for a period of 180 days
after the date of this prospectus without the prior written consent of
Prudential Securities, on behalf of the underwriters. See "Underwriting."
Prudential Securities may, at any time and without notice, waive any of the
terms of these lock-up agreements specified in the underwriting agreement.
Following the lock-up period, these shares will not be eligible for sale in the
public market without registration under the Securities Act unless such sales
meet the applicable conditions and restrictions of Rule 144 as described below.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, any person (or persons whose shares are
aggregated), including an affiliate, who has beneficially owned shares for a
period of at least one year is entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of:
(1) 1% of the then-outstanding shares of common stock, and
(2) the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the notice of
such sale on Form 144 is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are also subject to provisions relating to notice and
manner of sale and the availability of current public information about us. In
addition, a person (or persons whose shares are aggregated) who has not been an
affiliate of us at any time during the 90 days immediately preceding a sale,
and who has beneficially owned the shares for at least two years, would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitation and other conditions described above. While the foregoing discussion
is intended to summarize the material provisions of Rule 144, it may not
describe all of the applicable provisions of Rule 144, and, accordingly, you
are encouraged to consult the full text of that Rule.
In addition, our employees, directors, officers, advisors or consultants who
were issued shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701, which permits non-
affiliates to sell their Rule 701 shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144, and permits affiliates to sell their Rule 701 shares without having
to comply with Rule 144's holding period restrictions, in each case commencing
90 days after the date of this prospectus.
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<PAGE>
As soon as practicable following the closing of this offering, we intend to
file a registration statement under the Securities Act to register shares
of common stock issuable upon the exercise of outstanding stock options or
reserved for issuance under our 1999 Stock Option Plan. See "Management--Stock
Option Agreements and Plans." After the effective date of such registration
statement, these shares will be available for sale in the open market subject
to the lock-up agreements described above and, for our affiliates, to the
conditions and restrictions of Rule 144.
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UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below, for whom Prudential Securities Incorporated is acting as representative.
We are obligated to sell, and the underwriters are obligated to purchase, all
of the shares of the common stock offered on the cover page of this prospectus,
if any are purchased. Subject to conditions set forth in the underwriting
agreement, each underwriter has severally agreed to purchase from us the number
of shares of common stock set forth below opposite its name:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ----------
<S> <C>
Prudential Securities Incorporated...................................
---
Total..............................................................
===
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, an over-allotment option to purchase up
to additional shares from us. If any of the additional shares are purchased,
the underwriters will severally purchase the additional shares in the same
proportion as set forth above.
The representative of the underwriters has advised us that the shares will
be offered to the public at the public offering price set forth on the cover
page of this prospectus. The underwriters may allow to selected dealers a
commission not in excess of $ per share and those dealers may reallow a
commission not in excess of $ per share to other dealers. After the shares are
released for sale to the public, the public offering price, the concession to
selected dealers and the reallowance to other dealers may be changed by the
underwriters. The representative has informed us that the underwriters do not
intend to sell shares to any investor who has granted them discretionary
authority.
We have engaged Prudential Securities Incorporated to act as our financial
advisor in connection with various business and strategic matters, in
consideration for a fee of $ .
We have agreed to pay to the underwriters the following fees, assuming both
no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares:
<TABLE>
<CAPTION>
Total Fees
-------------------------------------------------
Fee Without Exercise of Full Exercise of
Per Share Over-Allotment Option[s] Over-Allotment Option[s]
--------- ------------------------ ------------------------
<S> <C> <C> <C>
Fees paid by
GreenMountain.com...... $ $ $
</TABLE>
In addition, we estimate that we will spend approximately $ in expenses for
this offering. We have agreed to indemnify the underwriters against some
liabilities, including liabilities under the Securities Act or contribute to
payments that the underwriters may be required to make in respect of these
liabilities.
Our officers, directors and stockholders holding in the aggregate shares
of common stock have entered into lock-up agreements pursuant to which we and
they have agreed not to offer or sell any shares of common stock or securities
convertible into or exchangeable or exercisable for shares of common stock for
a period of 180 days from the date of this prospectus, subject to some
exceptions, without the prior consent of Prudential Securities. Prudential
Securities may, at any time and without notice, waive the terms of these lock-
up agreements specified in the underwriting agreement.
Prior to this offering, there has been no public market for our common
stock. The public offering price, negotiated between the representative and us,
is based upon factors such as our financial and operating history and
conditions, our prospects, the prospects of our industry and prevailing market
conditions.
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<PAGE>
Prudential Securities, representing the underwriters, may engage in the
following activities in accordance with applicable securities rules:
.Over-allotments involving sales in excess of the offering size, creating a
short position. Prudential Securities may elect to reduce this short
position by exercising some or all of the over-allotment option.
.Stabilizing and short covering: stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in the
open market may also reduce the short position. These activities may cause
the price of the shares to be higher than would otherwise exist in the
open market.
.Penalty bids permit the representatives to reclaim commissions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.
Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
We have asked the underwriters to reserve shares for sale at the same
offering price directly to our customers, employees, officers, directors and
other business affiliates or related third parties. The number of shares
available for sale to the general public in the offering will be reduced to the
extent such persons purchase the reserved shares.
LEGAL MATTERS
The validity of the common stock under Delaware law will be passed upon for
us by Jones, Day, Reavis & Pogue, Dallas, Texas. Additional legal matters in
connection with the offering will be passed upon for the underwriters by Cooley
Godward LLP, San Diego, California.
EXPERTS
The financial statements and schedules of GreenMountain.com as of December
31, 1998, included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
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ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the common stock we are offering by this prospectus.
This prospectus does not include all of the information contained in the
registration statement. You should refer to the registration statement and its
exhibits for additional information. Whenever we make reference in this
prospectus to any of our contracts, agreements or other documents, the
references are intended to set forth the material information regarding these
contracts agreements or other documents. These references, however, are not
necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract, agreement or other
document. When we complete this offering, we will also be required to file
annual, quarterly and special reports, proxy statements and other information
with the Commission.
You can reach our Commission filings, including the registration statement,
over the Internet at the Commission's web site at http://www.sec.gov. You may
also read and copy any document we file with the Commission at its public
reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven
World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may also
obtain copies of these documents at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the Commission at 1-800-SEC-0330 for further information on
the operation of the public reference facilities. Our Commission filings are
also expected to be available at the office of the Nasdaq National Market. For
further information on obtaining copies of our public filings at the Nasdaq
National Market, you should call (212) 656-5060.
We have applied for registration of the following marks used in this
prospectus: Choose wisely. It's a small planet.SM, EcoSmartSM, Enviro BlendSM,
g*commerceSM, GreenMountain.comSM, Green Mountain EnergySM, Green Mountain
Energy ResourcesSM, Green Mountain SolarSM, Nature's ChoiceSM, 100% Renewable
Power 2.0SM, Wind for the FutureSM and Wind for the Future 2.0SM. All other
trademarks, trade names or service marks appearing in this prospectus belong to
their respective holders.
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<PAGE>
GREENMOUNTAIN.COM COMPANY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999
(Unaudited).............................................................. F-3
Statements of Operations for the Period from Inception (February 26, 1997)
through December 31, 1997 and for the Year Ended December 31, 1998
and for the Three Months Ended March 31, 1998 and 1999 (Unaudited)....... F-4
Statements of Stockholders' Equity for the Period from Inception (February
26, 1997)
through December 31, 1997, for the Year Ended December 31, 1998
and for the Three Months Ended March 31, 1999 (Unaudited)................ F-5
Statements of Cash Flows for the Period from Inception (February 26, 1997)
through December 31, 1997 and for the Year Ended December 31, 1998
and for the Three Months Ended March 31, 1998 and 1999 (Unaudited)....... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
After the reorganization transaction discussed in Note 12 to
GreenMountain.com Company's financial statements is effected, we expect to be
in a position to render the following audit report.
/s/ Arthur Andersen LLP
Boston, Massachusetts
May 10, 1999
Report of Independent Public Accountants
To the Stockholders of
GreenMountain.com Company:
We have audited the accompanying balance sheets of GreenMountain.com Company
(a Delaware corporation) as of December 31, 1997 and 1998, and related
statements of operations, stockholders' equity and cash flows for the period
from inception (February 26, 1997) through December 31, 1997 and for the year
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GreenMountain.com Company
as of December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity and cash flows for the period from inception (February 26,
1997) through December 31, 1997 and for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
F-2
<PAGE>
GreenMountain.com Company
Balance Sheets
<TABLE>
<CAPTION>
December 31,
-------------------------- March 31,
1997 1998 1999
------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C>
Assets
Cash.................................. $ 1,933,403 $ 5,653,854 $20,475,503
Restricted Cash (Note 2).............. -- 2,920,407 2,513,247
Accounts Receivable (net of allowance
of $34,956 and $159,454 at December
31, 1998 and March 31, 1999
(unaudited), respectively) (Note 8).. -- 434,585 2,004,678
Unbilled Accounts Receivable (Note
2)................................... -- 235,732 1,116,578
Accounts Receivable--Related Party
(Note 6)............................. 16,457 23,915 66,504
Prepaid Expenses and Other Current
Assets............................... 636,232 422,268 990,552
------------ ------------ -----------
Total current assets.............. 2,586,092 9,690,761 27,167,062
------------ ------------ -----------
Property and Equipment, net of
depreciation (Notes 2 and 3)......... 1,268,708 1,367,360 1,340,450
Other Assets (Note 2)................. 328,565 352,600 1,225,620
------------ ------------ -----------
Total assets...................... $ 4,183,365 $ 11,410,721 $29,733,132
============ ============ ===========
Liabilities and Stockholders' Equity
Accounts Payable...................... $ 1,018,903 $ 4,270,946 $ 4,287,022
Accrued Expenses (Note 7)............. 1,426,476 7,688,254 8,025,628
------------ ------------ -----------
Total liabilities................. 2,445,379 11,959,200 12,312,650
Commitments and Contingencies (Note 5)
Stockholders' Equity:
Preferred stock ($0.01 par value;
50,000,000 authorized and 0 issued
and outstanding at December 31,
1997 and 1998 and March 31, 1999
(unaudited))....................... -- -- --
Common stock ($0.01 par value;
150,000,000 authorized and 799,200,
19,980,000 and 28,356,615 issued at
December 31, 1997 and 1998 and
March 31, 1999 (unaudited),
respectively)...................... 7,992 199,800 283,566
Additional paid-in capital.......... 15,592,008 59,800,200 104,241,055
Notes receivable from stockholders.. -- -- (5,108,250)
Deferred compensation............... -- -- (1,635,920)
Accumulated deficit................. (13,862,014) (59,901,079) (79,712,569)
Treasury stock (215,584 shares at
cost).............................. -- (647,400) (647,400)
------------ ------------ -----------
Total stockholders' equity........ 1,737,986 (548,479) 17,420,482
------------ ------------ -----------
Total liabilities and
stockholders' equity............. $ 4,183,365 $ 11,410,721 $29,733,132
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
GreenMountain.com Company
Statements of Operations
<TABLE>
<CAPTION>
Period from
Inception Three Months Ended
(February 26, 1997) Year Ended March 31,
through December 31, -------------------------
December 31, 1997 1998 1998 1999
------------------- ------------ ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues................ $ -- $ 1,530,496 $ -- $ 4,149,941
Cost of Sales........... -- 1,097,379 -- 3,096,161
Operating Expenses:
Customer and regional
operations........... 982,085 4,834,379 652,244 2,269,841
Sales and marketing... 4,336,623 33,010,308 4,065,064 13,495,724
General and
administrative....... 1,741,892 4,225,716 1,011,582 3,928,378
Technology and
development.......... 2,048,191 2,918,056 833,125 1,146,964
Depreciation and
amortization......... 90,597 767,605 168,957 239,053
Development and
transaction costs.... 4,705,713 709,068 -- --
------------ ------------ ----------- ------------
Total operating
expenses........... 13,905,101 46,465,132 6,730,972 21,079,960
------------ ------------ ----------- ------------
Operating loss...... (13,905,101) (46,032,015) (6,730,972) (20,026,180)
Interest income
(expense), net......... 43,087 (7,050) 23,583 214,690
------------ ------------ ----------- ------------
Net loss............ $(13,862,014) $(46,039,065) $(6,707,389) $(19,811,490)
============ ============ =========== ============
Basic and diluted loss
per common share....... $ (19.65) $ (5.46) $ (3.55) $ (0.80)
============ ============ =========== ============
Basic and diluted
weighted average common
shares outstanding..... 705,530 8,430,830 1,891,825 24,782,633
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
GreenMountain.com Company
Statements of Stockholders' Equity
for the Period from Inception (February 26, 1997) through December 31, 1997,
for the Year Ended December 31, 1998 and for the Three Months Ended March 31,
1999 (Unaudited)
<TABLE>
<CAPTION>
Notes
Common Shares Additional Receivable Treasury Shares Total
------------------- Paid-In from Deferred Accumulated ------------------- Stockholders'
Shares Amount Capital Stockholders Compensation Deficit Shares Amount Equity
---------- -------- ------------ ------------ ------------ ------------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
common stock on
August 6, 1997.. 653,286 $ 6,533 $ 11,993,467 $ -- $ -- $ -- -- $ -- $ 12,000,000
Return of
capital on
August 7, 1997.. -- -- (4,000,000) -- -- -- -- -- (4,000,000)
Issuance of
common stock... 145,914 1,459 7,598,541 -- -- -- -- -- 7,600,000
Losses
accumulated
during the
development
stage.......... -- -- -- -- -- (13,862,014) -- -- (13,862,014)
---------- -------- ------------ ----------- ----------- ------------- -------- --------- ------------
Balance at
December 31,
1997............ 799,200 7,992 15,592,008 -- -- (13,862,014) -- -- 1,737,986
Issuance of
common stock... 19,180,800 191,808 44,208,192 -- -- -- -- -- 44,400,000
Repurchase of
shares......... -- -- -- -- -- -- (215,584) (647,400) (647,400)
Net loss........ -- -- -- -- -- (46,039,065) -- -- (46,039,065)
---------- -------- ------------ ----------- ----------- ------------- -------- --------- ------------
Balance at
December 31,
1998............ 19,980,000 199,800 59,800,200 -- -- (59,901,079) (215,584) (647,400) (548,479)
Issuance of
common stock... 8,376,615 83,766 40,226,234 -- -- -- -- -- 40,310,000
Notes receivable
issued to
shareholders... -- -- -- (5,108,250) -- -- -- -- (5,108,250)
Deferred
Compensation... -- -- 4,454,700 -- (1,635,920) -- -- -- 2,818,780
Costs associated
with the
issuance of
common stock... -- -- (240,079) -- -- -- -- -- (240,079)
Net loss........ -- -- -- -- -- (19,811,490) -- -- (19,811,490)
---------- -------- ------------ ----------- ----------- ------------- -------- --------- ------------
Balance at March
31, 1999........ 28,356,615 $283,566 $104,241,055 $(5,108,250) $(1,635,920) $ (79,712,569) (215,584) $(647,400) $17,420,482
========== ======== ============ =========== =========== ============= ======== ========= ============
</TABLE>
The accompanying notes are an integral part to these financial statements.
F-5
<PAGE>
GreenMountain.com Company
Statements of Cash Flows
<TABLE>
<CAPTION>
for the Period
from Inception Three Months Ended
(February 26, 1997) Year Ended March 31,
through December 31, -------------------------
December 31, 1997 1998 1998 1999
------------------- ------------ ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities:
Net loss.............. $(13,862,014) $(46,039,065) $(6,707,389) $(19,811,490)
Adjustments to
reconcile net loss to
net cash used in
operating
activities--
Depreciation and
amortization....... 90,597 767,605 168,957 239,053
Provision for
doubtful accounts.. -- 34,956 -- 124,498
Loss on disposals of
property and
equipment.......... -- 17,225 -- --
Write-off of
organization
costs.............. -- 269,892 -- --
Deferred
compensation
charge............. -- -- -- 2,748,900
Other............... -- -- -- 69,880
Changes in assets
and liabilities--
Restricted cash... -- (2,920,407) -- 407,160
Accounts
receivable....... (16,457) (476,999) (13,070) (1,737,180)
Unbilled accounts
receivable....... -- (235,732) -- (880,846)
Prepaid expenses
and other current
assets........... (636,232) 213,964 547,859 (568,284)
Organization
costs............ (352,034) -- -- --
Accounts payable.. 1,018,903 3,252,043 (502,612) 16,076
Accrued expenses.. 1,426,476 5,261,778 1,392,315 337,374
------------ ------------ ----------- ------------
Net cash used in
operating
activities..... (12,330,761) (39,854,740) (5,113,940) (19,054,859)
------------ ------------ ----------- ------------
Cash Flows from
Investing Activities:
Purchases of property
and equipment........ (1,335,836) (824,809) (98,094) (182,743)
------------ ------------ ----------- ------------
Net cash used in
investing
activities..... (1,335,836) (824,809) (98,094) (182,743)
------------ ------------ ----------- ------------
Cash Flows from
Financing Activities:
Proceeds of short-term
borrowing............ -- 10,000,000 -- --
Payment of short-term
borrowing............ -- (10,000,000) -- --
Proceeds from issuance
of stock............. 19,600,000 44,400,000 5,900,000 35,201,750
Return of capital..... (4,000,000) -- -- --
Equity financing
costs................ -- -- -- (240,079)
Deferred financing
costs................ -- -- -- (902,420)
------------ ------------ ----------- ------------
Net cash
provided by
financing
activities..... 15,600,000 44,400,000 5,900,000 34,059,251
------------ ------------ ----------- ------------
Net Increase in Cash.... 1,933,403 3,720,451 687,966 14,821,649
Cash, beginning of
period................. -- 1,933,403 1,933,403 5,653,854
------------ ------------ ----------- ------------
Cash, end of period..... $ 1,933,403 $ 5,653,854 $ 2,621,369 20,475,503
============ ============ =========== ============
Supplemental Disclosure:
Interest paid......... $ -- $ -- $ -- 167,083
============ ============ =========== ============
Taxes paid............ $ -- $ 950 $ -- --
============ ============ =========== ============
Supplemental Disclosure
of Noncash Items:
Repurchase of shares
(see Note 1)......... $ -- $ 647,400 $ -- --
============ ============ =========== ============
Purchase of intangible
assets (Note 1)...... $ -- $ 352,600 $ -- --
============ ============ =========== ============
Stock sales financed
with notes receivable
(Note 11)............ -- -- -- $ 5,108,250
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part to these financial statements.
F-6
<PAGE>
GreenMountain.com Company
Notes to Financial Statements
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
(1) Organization and Business
GreenMountain.com Company, formerly known as Green Mountain Energy Resources
L.L.C., is a Delaware corporation, originally formed as a limited liability
company. As further discussed in Note 12, Green Mountain Energy Resources
L.L.C. reorganized into a corporation in 1999.
On August 6, 1997, a subsidiary of Green Mountain Power Corporation and
Green Funding I, L.L.C., an investment vehicle controlled by the Wyly family,
entered into a limited liability company agreement relating to the formation of
Green Mountain Energy Resources L.L.C. Green Mountain Energy Resources L.L.C.
was formed to become a national retail marketer of electricity produced from
renewable and other environmentally preferable sources to residential
customers. Under the limited liability agreement:
. A subsidiary of Green Mountain Power Corporation contributed certain
service marks, some marketing studies and analyses and its rights under
agreements with several third-party service providers, in exchange for a
33% equity interest in the limited liability company;
. Green Funding I contributed $8,000,000 and committed to contribute an
additional $22,000,000 over time, in exchange for a 67% equity interest in
the limited liability company; and
. Immediately following the initial contribution by Green Funding I, the
subsidiary of Green Mountain Power Corporation received a distribution
from the limited liability company of $4,000,000.
The limited liability company agreement also contained provisions relating
to the allocation of profits and losses, the management of the limited
liability company and restrictions on transfer and registration rights.
Green Mountain Energy Resources L.L.C. began active operations on August 6,
1997 under the terms of an operating agreement, dated August 6, 1997. On
September 29, 1997, Green Funding I committed an additional $10,000,000 to the
limited liability company. Green Mountain Power Corporation elected not to
contribute additional equity, resulting in an increase in Green Funding I's
equity interest to 73%. On November 20, 1998, Green Funding I committed an
additional $20,000,000 to the limited liability company. Green Mountain Power
Corporation again elected not to contribute additional equity, resulting in an
increase in Green Funding I's equity interest to 99%.
On December 23, 1998, Green Mountain Energy Resources L.L.C. entered into an
agreement with Green Mountain Power Corporation to buy back its equity
interests in the limited liability company and to obtain a non-compete
agreement, certain rights to the Green Mountain name and certain mutual
releases for $1,000,000. This amount was paid in two installments on January 4,
1999 and February 16, 1999. The limited liability company allocated $647,400 to
the repurchased equity interest ($3 a share) and $352,600 to the non-compete
agreement, certain rights to the Green Mountain name and certain mutual
releases obtained. This allocation was based on the fair value of the equity
interest and other intangible assets obtained.
The limited liability company losses for the period and year ended
December 31, 1997 and 1998 were allocated 100% to Green Funding I under the
operating agreement. Accordingly, the Company has no tax loss carry forwards
related to losses during those periods. The operating agreement was amended
January 4, 1999 to allocate losses, first to members other than Green Funding
I, to the extent of those members' capital contributions and, thereafter, to
members, including Green Funding I, in proportion to their respective ownership
interests.
F-7
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
GreenMountain.com has generated approximately $1.5 million in residential
electric revenue sales in California during 1998 and $4.1 million in California
and Pennsylvania during the three months ended March 31, 1999. The retail
energy market is at an early stage of development, as only a few states have
deregulated sales of electricity on a statewide basis as of December 1998.
GreenMountain.com began serving customers in Pennsylvania on January 1, 1999.
As of December 31, 1998 and March 31, 1999, GreenMountain.com had accumulated
deficits of $59,901,079 and $79,712,569, respectively. GreenMountain.com is
seeking additional investors, through an initial public offering, to fund its
planned expansion of its existing electricity business into new deregulated
markets and to broaden its green product offerings. The implementation of
GreenMountain.com's business plan is dependent on this offering. There can be
no assurance that such additional financing will be available. If
GreenMountain.com is unable to obtain financing through an initial public
offering, GreenMountain.com will curtail its current growth plans and
GreenMountain.com believes its existing cash resources, together with financing
available under an agreement with Green Funding I, in an amount up to $22
million, will be sufficient to fund its operations at least through 1999. Any
advances under the agreement will bear interest at 6% per annum. The agreement
provides that accrued and unpaid interest will be added to the principal on
each June 30 and December 31. Principal, together with accrued and unpaid
interest, will be payable on April 23, 2001. This agreement terminates upon an
initial public offering and any advances made under the agreement become due
and payable.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
Financial statements of a development stage company are prepared and
presented in the same manner as those of operating enterprises.
GreenMountain.com was considered a development stage company as of and for the
period from inception through December 31, 1997.
(b) Reclassifications
Certain prior year amounts have been reclassified to be consistent with the
current presentation.
(c) Restricted Cash
Certain of GreenMountain.com's power supply vendors and state regulators
require letters of credit to ensure fulfillment of the Company's commitments.
Associated amounts have been classified as restricted cash on the accompanying
balance sheet.
(d) Organization Costs
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-5, Reporting on the Costs of
Start-Up Activities, which requires that all start-up costs, including
organization costs, should be expensed as incurred. The new standard is
effective for fiscal years beginning after December 15, 1998, with early
application encouraged. In the fourth quarter of 1998 GreenMountain.com wrote
off the remaining unamortized balance of organization costs, amounting to
$269,892, or $0.03 per share, in accordance with the new pronouncement. This
amount is included in development and transaction costs in the accompanying
Statements of Operations.
F-8
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
(e) Property and Equipment
Property and equipment are stated at cost. GreenMountain.com provides for
depreciation on property and equipment on the straight-line basis over their
estimated useful lives as follows:
<TABLE>
<S> <C>
Computer hardware.............................................. 2 years
Computer software.............................................. 1-5 years
Furniture and fixtures......................................... 5-7 years
</TABLE>
(f) Other Assets
A non competition agreement and certain other intangibles included in other
assets are being amortized over 3 years.
(g) Federal Income Taxes
Federal income taxes have not been recorded in the accompanying financial
statements because such taxes, if any, were the responsibility of the
stockholders prior to the reorganization described in Note 12.
(h) Impairment of Long-Lived Assets
GreenMountain.com follows SFAS No. 121, Accounting for Long-Lived Assets and
for Long-Lived Assets To Be Disposed Of. SFAS No. 121 requires that long-lived
assets be reviewed for impairment by comparing the fair value of the assets
with their carrying amount. Any write-downs are to be treated as permanent
reductions in the carrying amount of the assets. Accordingly, GreenMountain.com
evaluates the possible impairment of long-lived assets at each reporting period
based on the undiscounted projected cash flows of the related asset. Should
there be an impairment, the cash flow estimates that will be used will contain
management's best estimates, using appropriate and customary assumptions and
projections at the time. To date GreenMountain.com does not believe that an
impairment exists.
(i) Use of Estimates in the Preparation of Financial Statements
The presentation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Operating results in the future could vary from the amounts
derived from management's estimates and assumptions.
(j) Fair Value of Financial Instruments
GreenMountain.com's financial instruments consist primarily of cash,
accounts receivable, unbilled accounts receivable and accounts payable. The
carrying amounts of these financial instruments as of December 31, 1997 and
1998 and March 31, 1999 approximate their fair values due to their short-term
nature.
(k) Revenue Recognition and Unbilled Accounts Receivable
Customers are billed for their use of electricity on a cycle basis
throughout the month. To reflect revenues in the proper period, the estimated
amount of unbilled sales revenue related to customer electricity usage is
recorded each month.
F-9
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
(l) Earnings per Share
The dilutive effect of potential common shares, consisting of outstanding
stock options and warrants is determined using the treasury method in
accordance with SFAS No. 128, Earnings per Share, which established standards
for computing and presenting earnings per share and which applies to entities
with publicly held common stock or potential common stock. In accordance with
SEC Staff Accounting Bulletin (SAB) No. 98, GreenMountain.com has determined
that there were no nominal issuances of common stock or potential common stock
in the period prior to GreenMountain.com's planned initial public offering.
Diluted weighted average shares outstanding for 1997 and 1998 exclude the
potential common shares from warrants and stock options because to do so would
have been antidilutive. The potential common shares excluded as of December 31,
1997 and 1998, and March 31, 1998 and 1999 related to outstanding warrants and
stock options were 123,439, 114,844, 124,405 and 6,659,044 respectively.
(m) Unaudited Interim Information
The financial information as of March 31, 1999 and for the three months
ended March 31, 1998 and 1999 is unaudited. In the opinion of management, such
information contains all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the results of such period.
(n) Employee Benefit Plan
GreenMountain.com has a defined contribution plan in which GreenMountain.com
contributes 2% of each employee's base salary up to the social security wage
base and 4% of such base above the social security wage base up to $160,000.
Additionally, GreenMountain.com matches 50% of each employee's contribution up
to the employee's first 6% contribution. Both GreenMountain.com and employee
contributions vest immediately. The charges included in the accompanying
Statements of Operations under this plan for the year ended December 31, 1998
and the period from inception through December 31, 1997 are $153,719 and
$20,821, respectively, and for the three months ended March 31, 1999 and 1998
are $46,354 and $34,084, respectively.
(o) Advertising Costs
Advertising costs are expensed as incurred as such efforts historically have
not met the direct-response criteria required for capitalization.
GreenMountain.com advertising to date has included television, consumer
publications, radio advertisements, billboard advertisements, cooperative
advertisements, newspaper advertisements, Internet advertisements and
sponsorship of public events. Total advertising costs for the period from
inception, February 26, 1997 through December 31, 1997, for the year ended
December 31, 1998 and for the three months ended March 31, 1998 and 1999, were
$4.3 million, $33.0 million, $4.1 million and $13.5 million, respectively. As
new advertising agreements are entered into, such as the Yahoo! Inc. agreement
which commences in May 1999, such costs could have long-term value and result
in capitalization and amortization over the period benefited.
F-10
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
(3) Property and Equipment
Property and equipment consisted of the following as of:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998 March 31, 1999
---------- ---------- --------------
<S> <C> <C> <C>
Computer hardware.......................... $ 809,920 $1,139,923 $1,215,103
Computer software.......................... 295,290 426,278 431,086
Furniture and fixtures..................... 230,626 567,685 670,440
---------- ---------- ----------
1,335,836 2,133,886 2,316,629
Less--Accumulated depreciation............. 67,128 766,526 976,179
---------- ---------- ----------
$1,268,708 $1,367,360 $1,340,450
========== ========== ==========
</TABLE>
(4) Options and Warrants
(a) 1997 and 1998 Options
During 1997 and 1998, GreenMountain.com granted options to employees,
officers, consultants and advisors at market value. The options expire on the
fifth anniversary of the grant date.
Option activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
--------- --------
<S> <C> <C>
Granted, August 6, 1997...................................... 102,850 $67.84
Granted...................................................... 7,373 $67.93
------- ------
Outstanding, December 31, 1997............................... 110,223 67.85
Granted.................................................... 2,014 67.93
Forfeited.................................................. (10,609) 67.93
------- ------
Outstanding, December 31, 1998............................... 101,628 $67.84
Granted.................................................... -- --
Forfeited.................................................. (1,914) 67.93
------- ------
Outstanding, March 31, 1999.................................. 99,714 $67.83
======= ======
</TABLE>
(b) 1999 Option Plan
During the first quarter of 1999, GreenMountain.com adopted an option plan
whereby options may be granted to employees, officers, directors, consultants
and advisors at market value. These options would vest over four years and
expire fifty months following the anniversary of the grant date. The authorized
number of options available for grant would remain fixed in an amount equal to
an ownership interest representing approximately 20% of GreenMountain.com.
F-11
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
Option activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
--------- --------
<S> <C> <C>
Outstanding, December 31, 1998............................... -- --
Granted.................................................... 6,546,114 $3.54
Forfeited.................................................. -- --
--------- -----
Outstanding, March 31, 1999.................................. 6,546,114 $3.54
========= =====
</TABLE>
(c) Warrants
During 1997, GreenMountain.com issued warrants to its consultants and
advisors for 13,216 shares at fair market value. The warrants vested
immediately and expire on the fifth anniversary date of the grant.
(d) Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 requires the measurement of the fair value of stock
options to be included in the statements of income or disclosed in the notes to
financial statements. GreenMountain.com has determined that it will continue to
account for stock-based compensation for employees under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and elect the
disclosure-only alternative under SFAS No. 123.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants during the applicable period:
<TABLE>
<CAPTION>
Three Months
Ended March
1997 1998 31, 1999
---------- -------------- -------------
<S> <C> <C> <C>
Volatility.............................. -- 0% 0%
Risk free rate of return................ 5.8% to 6% 5.46% to 5.65% 4.58% to 5.1%
Dividend yield.......................... -- -- --
Expected life in years.................. 2 2 3.5
</TABLE>
The weighted average fair value per share of options granted during 1997,
1998 and 1999 was $15.01, $7.13 and $0.85, respectively.
The following information is presented as of March 31, 1999 for two
identified groups of options, one group granted in 1997 and 1998 and the other
group granted in 1999.
<TABLE>
<CAPTION>
1997 and
1998 1999
Grants Grants
--------- ---------
<S> <C> <C>
Number of options outstanding............................. 99,714 6,546,114
Weighted-average exercise price........................... $67.83 $3.54
Weighted-average remaining contractual life............... 41 months 48 months
Number of options currently exercisable................... 39,674 1,509,023
Weighted-average exercise price of options currently
exercisable.............................................. $67.84 $3.47
</TABLE>
F-12
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
The following information is presented as of December 31, 1997, March 31,
1998 and December 31, 1998, respectively, for the group of options granted in
1997 and 1998.
<TABLE>
<CAPTION>
December March December
31, 1997 31, 1998 31, 1998
--------- --------- ---------
<S> <C> <C> <C>
Number of options outstanding................... 110,223 110,583 101,628
Weighted-average exercise price................. $67.85 $67.85 $67.84
Weighted-average remaining contractual life..... 56 months 53 months 44 months
Number of options currently exercisable......... 21,923 22,117 40,469
Weighted-average exercise price of options
currently exercisable.......................... $67.85 $67.85 $67.84
</TABLE>
Had compensation cost for GreenMountain.com's plans been determined
consistent with SFAS No. 123, GreenMountain.com's net income and earnings per
share of common stock would have been reduced to the following pro forma
amounts:
<TABLE>
<CAPTION>
Period from Inception
(February 26, 1997) Year Ended Three Months
through December 31, December 31, Ended March 31,
1997 1998 1999
--------------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net Income.............. As reported $(13,862,014) $(46,039,065) $(19,811,490)
Pro Forma (13,971,841) (46,330,132) (20,944,579)
Earnings per shares of
Common Stock........... As reported $(19.65) $(5.46) $(0.80)
Pro Forma $(19.80) $(5.50) $(0.85)
</TABLE>
GreenMountain.com recorded a charge to compensation expense of $2,748,900
and deferred compensation of $1,635,920 during the first quarter of 1999 for
the difference between the purchase price and exercise price of shares and
options issued and their fair market value. GreenMountain.com also recorded a
charge to expense of $42,430 related to the fair market value of options issued
to nonemployees.
(5) Commitments and Contingencies
(a) Power Supply Agreements
For the Pennsylvania market, GreenMountain.com has entered into three
agreements with major wholesale suppliers for electricity supply to serve the
requirements of GreenMountain.com's customers. Under all of the agreements, the
suppliers will provide electricity for a period of one year that matches the
aggregate customer requirements that are assigned to them. For two of the
agreements, either GreenMountain.com or the supplier can discontinue the
assignment of additional customers upon three months' notice. The wholesale
price is fixed for the term of the agreements.
For the California market, GreenMountain.com has negotiated requirements
contracts with two suppliers to supply its current product offerings in the
California market. Under both agreements, the wholesale price is based on a
fixed price spread related to the PX price of power (refers to the per kwh
wholesale electricity price in California, as determined by the California
Power Exchange) with one agreement providing for a surcharge on the Wind for
the FutureSM wind power product. One supplier provides electricity for a period
of one year for each of GreenMountain.com's customers assigned to it and either
party may discontinue the assignment of
F-13
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
additional customers to the agreement upon three months' notice. The other
supplier provides electricity for one and three year service periods, depending
on the product being served, and can be assigned additional customers through
December 31, 1999.
GreenMountain.com's contracts with four suppliers provide for separate
letters of credit or equivalent financial assurances to satisfy credit
requirements. The amounts of the letters of credit range from fifteen days' to
two months' of receivables based on GreenMountain.com's load forecast. In
addition, GreenMountain.com has delivered to one supplier irrevocable letters
of credit in connection with the supplier's purchase and installation of three
wind power turbines. GreenMountain.com also delivered letters of credit to
regulators securing its performance as an energy service provider. Total supply
and regulatory letters of credit outstanding at December 31, 1998 and March 31,
1999 were $2,765,230 and $2,477,251, respectively, reflected on the balance
sheet as restricted cash.
(b) Outsourcing Agreement
On May 15, 1998, GreenMountain.com entered into an amended outsourcing
agreement with en . able, L.L.C. (en . able) with respect to the development
and implementation of a system that facilitates the data and communications
interface between utility distribution centers and GreenMountain.com.
GreenMountain.com has also retained en . able to provide billing and the
related customer care to residential customers at prices defined in the
contract. The agreement continues until December 31, 2003 (Initial Term),
unless terminated at an earlier date. Commencing at the start of the third
contract year, but only during the Initial Term, either party may terminate
this agreement without cause for any reason upon 270 days' prior written notice
to the other party. The contract states that prior to the end of the Initial
Term and each renewal term, the parties may mutually agree to extend this
agreement for one additional contract year. GreenMountain.com has agreed to pay
monthly service charges for call center and billing services, additional
resource charges and cost of living adjustment to compensate en . able for the
volumes processed and all of the resources used in providing the services. The
monthly charges are variable and are based on the number of billable accounts
maintained each month. GreenMountain.com has agreed to pay minimum monthly
service charges for call center service and billing services in the amount of
$112,500 based on a customer billable unit baseline of 50,000 customers.
(c) Teleservices Agreement
On January 30, 1998, GreenMountain.com entered into a contract with ICT
Group, Inc. to manage its call center and resulting databases to support
GreenMountain.com's various teleservices requirements. Either party may
terminate this agreement without cause by providing the other party with 30
business days prior written notice. Under this contract, GreenMountain.com has
minimum annual financial commitments for teleservices and communications costs
of $392,000.
(d) Marketing Services Agreement
On January 1, 1998, GreenMountain.com entered into a marketing services
agreement with The Cullinan Group to create, prepare and execute marketing
communications plans and projects and place advertising with respect to
retailing electricity, natural gas and related products and services. The
contract is enforceable until terminated by 90 days notice in writing. Under
the terms of the agreement, GreenMountain.com is required to pay a minimum
monthly retainer fee of $30,000 as well as monthly advance payments in the
amount of anticipated expenses less the monthly retainer fee. Total
GreenMountain.com payments under this contract in 1998 and for the three months
ended March 31, 1999 were approximately $16,228,000 and $6,511,613,
respectively.
F-14
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
(e) Facility Lease Agreement
GreenMountain.com leases an office facility in Vermont under a cancelable
operating lease that expires September 30, 2002. Future minimum lease payments
required, provided GreenMountain.com does not cancel the lease, at December 31,
1998 are as follows:
<TABLE>
<S> <C>
1999............................................................. $114,675
2000............................................................. 114,675
2001............................................................. 114,675
2002............................................................. 86,006
--------
$430,031
========
</TABLE>
The lease agreement has a termination provision that enables
GreenMountain.com to terminate the lease at September 30, 1999, 2000 or 2001.
If GreenMountain.com elects to terminate the lease at any one of these dates,
GreenMountain.com is obligated to pay $33,000, $25,000, or $12,500,
respectively, as consideration for early termination.
(f) Advertising And Promotion Agreement
In March 1999, GreenMountain.com entered into an advertising and promotion
agreement with Yahoo! Inc., which provides banner advertisements and other
promotions for GreenMountain.com on the Yahoo! web sites. The total
consideration due during the one year term of the agreement is approximately
$6.0 million, commencing in May of 1999, as well as the payment of referral
fees for each new energy services account opened as a result of the Yahoo!
promotions. Expenses will be recognized under this contract throughout the term
of the contract and in a manner consistent with receipt of services provided by
Yahoo!
(6) Other Related Party Transactions
During 1998, GreenMountain.com paid Sterling Software, Inc. (an affiliate of
Sam Wyly, GreenMountain.com's Chairman) $828,611 for information technology
consulting services, and owed an additional $382,396 at December 31, 1998,
which is included in accounts payable on the balance sheet. During the three
months ended March 31, 1999, GreenMountain.com paid Sterling Software, Inc.
$576,857 for its services. GreenMountain.com has no minimum financial
commitment with regard to the agreement with Sterling Software, Inc.
GreenMountain.com has paid Green Mountain Power Corporation $470,653 and
$165,365 for electricity, facilities maintenance and other expenses paid by
Green Mountain Power Corporation on behalf of GreenMountain.com for 1997 and
1998, respectively. In addition, GreenMountain.com received $31,803 and $73,191
during 1997 and 1998, respectively, for services provided to Green Mountain
Power Corporation by GreenMountain.com's employees. As of December 31, 1998,
Green Mountain Power Corporation is no longer an affiliate of
GreenMountain.com.
(7) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998 March 31, 1999
---------- ---------- --------------
<S> <C> <C> <C>
Accrued customer and
regional operations.... $ 78,880 $ 955,255 $1,801,524
Accrued sales and
marketing.............. 226,081 3,639,386 4,474,384
Accrued general and
administrative......... 742,074 2,899,914 1,749,720
Accrued technology and
development............ 379,441 193,699 --
---------- ---------- ----------
$1,426,476 $7,688,254 $8,025,628
========== ========== ==========
</TABLE>
F-15
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
(8) Accounts Receivable
As of December 31, 1998 and March 31, 1999, GreenMountain.com is owed
$137,970 and $223,805, respectively, from the California Energy Commission
related to renewable energy credits provided to GreenMountain.com for selling
renewable energy to customers. GreenMountain.com expects to collect these
amounts in 1999.
(9) Short-Term Borrowings
GreenMountain.com borrowed a total of $10,000,000 in September and October
1998 from a financing company, which was subsequently repaid with a portion of
Green Funding I's additional $20,000,000 commitment. The interest due on such
borrowings was paid in early 1999. This loan, which bore interest at a rate of
10% per annum, was made by Security Capital, Ltd. Several entities, whose stock
is owned by irrevocable trusts of which certain members of the Wyly family are
beneficiaries, provided credit enhancement for the loan.
(10) Recent Accounting Pronouncements
The FASB recently issued SFAS No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes standards for reporting and displaying comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes to equity (net assets) during a period from non-owner
sources. SFAS No. 130 is effective for financial statements for fiscal years
beginning after December 15, 1997. To date, GreenMountain.com has not had any
transactions that are required to be reported in comprehensive income.
The FASB recently issued SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to
report selected information about operating segments in interim financial
reports. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. GreenMountain.com has determined that it
does not have any separately reportable business segments.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. A company may also
implement the statement as of the beginning of any fiscal quarter after
issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter).
SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be applied to
(a) derivative instruments and (b) certain derivative instruments embedded in
hybrid contracts that were issued, acquired, or substantively modified after
December 31, 1997 (and, at the company's election, before January 1, 1998).
This statement could increase volatility in earnings and other comprehensive
income for companies with applicable contracts. GreenMountain.com does not have
any derivative instruments at this time; however, such instruments may be
embedded in future electricity contracts.
F-16
<PAGE>
GreenMountain.com Company
Notes to Financial Statements--(Continued)
(Information at March 31, 1999 and for the
Three Months Ended March 31, 1998 and 1999 is Unaudited)
The AICPA issued SOP No. 98-1, Software for Internal Use, which provides
guidance on accounting for the cost of computer software developed or obtained
for internal use. SOP No. 98-1 is effective for financial statements for fiscal
years beginning after December 15, 1998. The adoption of SOP No. 98-1 did not
have a material impact on GreenMountain.com's financial statements.
GreenMountain.com anticipates that in the second quarter of 1999 it will begin
capitalizing certain costs in accordance with SOP No. 98-1 associated with
projects that enter the development stage, including its web site development
project.
(11) Subsequent Event--Unit Offerings
During 1999, GreenMountain.com completed two private placement offerings.
The first offering, completed in early January and early February 1999, was for
$10,000,000 from a sale of 1,000,000 units to
GreenMountain.com's employees and certain consultants for $10 per unit. Net
proceeds included $4,891,750 of cash and $5,108,250 of promissory notes from
employees and certain consultants. GreenMountain.com recognized compensation
expense of $2,072,300 in connection with the issuance of units. The second
offering, completed in mid-February 1999, resulted in net proceeds of
$30,310,000 from a sale of 1,515,500 units to investors for $20 per unit. As a
result of purchases during the second offering, Maverick Capital became the
beneficial owner of 750,000 common units, which will be represented by
2,497,500 shares upon the conversion from a limited liability company to a
corporation, for an aggregate purchase price of $15.0 million. Evan Wyly, a
Vice Chairman and a Director of GreenMountain.com, is a Managing Partner and H.
Lee S. Hobson, a GreenMountain.com Director, is a Partner of Maverick Capital.
In addition, Green Funding II, L.L.C., an investment vehicle controlled by the
Wyly family, acquired directly 500,000 common units, which will be represented
by 1,665,000 shares upon the conversion from a limited liability company to a
corporation, for an aggregate purchase price of $10.0 million.
(12) Subsequent Event--Reorganization
In 1999, GreenMountain.com merged into a newly formed Delaware corporation,
which (i) was the entity surviving the merger, succeeding to all rights,
properties and obligations of GreenMountain.com; (ii) is named
GreenMountain.com Company; and (iii) is taxable as a corporation. In connection
with the conversion, the limited liability company agreement will terminate,
except for certain covenants that, by their terms, require performance after
the termination of such agreement and each member will receive 3.33 shares of
GreenMountain.com common stock in exchange for each of its common units in the
limited liability company (subject to the payment of cash in lieu of fractional
shares). Additionally, any undistributed tax losses at the date of
reorganization will be reclassified against additional paid in capital. All
outstanding options and warrants exercisable for common units in the limited
liability company will, in effect, be converted into options or warrants
exercisable for GreenMountain.com common stock. The common stock information in
the financial statements and notes has been restated as if the common units
were converted to common shares.
F-17
<PAGE>
Until , 1999, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
[GreenMountain.com logo]
["Choose wisely. It's a small planet." logo]
[Description of Back Cover Artwork]
Bottom: image of children each holding planet earth, with sun rings in
background
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses, other than the underwriting
discounts and commissions, paid or payable by the Registrant in connection with
the distribution of the securities being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $166,800
NASD Filing Fee................................................... 30,500
Nasdaq National Market Listing Fee................................ 95,000
Advisory Fee...................................................... *
Printing costs.................................................... 550,000
Legal Fees and Expenses........................................... 800,000
Accounting Fees and Expenses...................................... 400,000
Blue Sky Fees and Expenses........................................ 2,000
Miscellaneous..................................................... 155,700
--------
Total $ *
========
</TABLE>
- --------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers.
Limitation Of Liability And Indemnification Matters
Prior to the closing of this offering, the Registrant's certificate of
incorporation and bylaws will be amended. The Registrant's amended certificate
of incorporation will limit the liability of the Registrant's directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of that individual's fiduciary duties as a director except for liability for
(1) a breach of the director's duty of loyalty to the corporation or its
stockholders, (2) any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the law, (3) unlawful payments
of dividends or unlawful stock repurchases or redemptions, or (4) any
transaction from which the director derived an improper personal benefit.
This limitation of liability does not apply to liabilities arising under
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or recission.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers, as well as other employees
and individuals, against attorneys fees and other expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with any threatened, pending or completed actions, suits or
proceedings in which such person was or is a party or is threatened to be made
a party by reason of such person being or having been a director, officer,
employee or agent of the corporation. The Delaware General Corporation Law
provides that Section 145 is not exclusive of other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
The Registrant's amended certificate of incorporation and amended bylaws
will provide that the Registrant is required to indemnify its directors and
officers to the maximum extent permitted by law. The Registrant's amended
bylaws will also require the Registrant to advance expenses incurred by an
officer or director in connection with the defense of any action or proceeding
arising out of that party's status or service as a director or officer of the
Registrant or as a director, officer, employer or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
if serving as such at the Registrant's request. The Registrant's amended bylaws
will also permit the Registrant to secure insurance on behalf of any director
or officer for any liability arising out of his or her actions in a
representative capacity.
II-1
<PAGE>
The Registrant intends to enter into indemnification agreements with its
directors and some of its officers containing provisions that (1) indemnify, to
the maximum extent permitted by Delaware law, those directors and officers
against liabilities that may arise by reason of their status or service as
directors or officers except liabilities arising from willful misconduct of a
culpable nature, (2) to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and (3) to
obtain directors' and officers' liability insurance if maintained for other
directors or officers.
The Registrant's predecessor limited liability company currently has
liability insurance for its management committee members and officers and the
Registrant intends to obtain directors' and officers' liability insurance for
its directors and officers.
Reference is also made to the Underwriting Agreement to be filed as Exhibit
1.1 to the Registration Statement for information concerning the underwriters'
obligation to indemnify the Registrant and its officers and directors in
certain circumstances.
Item 15. Recent Sales of Unregistered Securities.
Since its formation on February 26, 1997, the limited liability company (the
"LLC") predecessor to the Registrant has issued and sold the following
securities:
(1) In August 1997, the LLC issued and sold membership interests
representing 67% of the LLC to Green Funding I, L.L.C. in exchange for $8.0
million in cash and a commitment to contribute an additional $22.0 million
in cash over time and membership interests representing 33% to Green
Mountain Resources, Inc., a subsidiary of Green Mountain Power Corporation,
in exchange for a contribution of property. The issuance of these
membership interests was exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended (the "Act").
(2) In August 1997, the LLC issued warrants to purchase membership
interests to its consultants and advisors in exchange for services
performed by such consultants and advisors. The issuance of these warrants
was exempt from registration under Section 4(2) of the Act.
(3) In September 1997, the LLC issued and sold additional membership
interests to Green Funding I, L.L.C. in exchange for $10.0 million in cash,
increasing Green Funding I, L.L.C.'s ownership interest to approximately
73% of the LLC. The issuance of these membership interests was exempt from
registration under Section 4(2) of the Act.
(4) In November 1998, the LLC issued and sold additional membership
interests to Green Funding I, L.L.C., in exchange for $20.0 million in
cash, increasing Green Funding I, L.L.C.'s ownership interest to
approximately 99% of the LLC. The issuance of these membership interests
was exempt from registration under Section 4(2) of the Act.
(5) In early January and early February 1999, membership interests in
the LLC were unitized and the LLC issued and sold 47,750 common units in
the LLC to 34 of its employees in a private offering under a compensatory
plan, the Employee Unit Purchase Plan, in exchange for an aggregate of
$477,500, of which $250,500 was paid in cash and $227,000 was paid using
promissory notes payable to the LLC and secured by the acquired units as
permitted under the Employee Unit Purchase Plan. The issuance of these
common units was exempt from registration under Rule 701 promulgated by the
Securities and Exchange Commission (the "Commission") under Section 3(b) of
the Act.
(6) In early January and early February 1999, the LLC issued and sold
952,250 common units in the LLC in a private offering to 28 individuals,
each of whom qualified as an accredited investor as defined in Rule 501(a).
Sixteen of these individuals acquired 908,250 common units for an aggregate
of $9,082,500, of which $4,201,250 was paid in cash and $4,881,250 was paid
using promissory notes payable to the LLC and secured by the acquired units
as permitted under the Employee Unit Purchase
II-2
<PAGE>
Plan. Twelve of these individuals were consultants or advisors who acquired
44,000 common units for an aggregate of $440,000 in cash. The issuance of
these common units was exempt from registration under Section 4(2) of the
Act and was made in compliance with Rule 506 under the Act.
(7) In February 1999, the LLC issued and sold 1,515,500 common units in
the LLC in a private offering to 28 individuals and entities in exchange
for an aggregate of $30,310,000 in cash. Each individual and entity
qualified as an accredited investor under Rule 501(a). The issuance of
these common units was exempt from registration under Section 4(2) of the
Act and was made in compliance with Rule 506 under the Act.
All sales were made without general solicitation or general advertising.
Each purchaser represented that such purchaser was acquiring the interest for
investment purposes.
Prior to the closing of this offering, the LLC will be merged into the
Registrant. Following the merger, each member in the LLC will have the right to
receive 3.33 shares of Registrant's common stock in exchange for each of its
common units in the LLC (subject to the payment of cash in lieu of fractional
shares). In addition, all outstanding options and warrants exercisable for
common units in the LLC will, in effect, be converted into options or warrants
exercisable for the Registrant's common stock.
Item 16. Exhibits.
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
2.1 Form of Agreement and Plan of Merger by and between the LLC and
the Registrant**
3.1 Certificate of Incorporation of the Registrant**
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant**
3.3 Bylaws of the Registrant**
3.4 Form of Amended and Restated Bylaws of the Registrant**
4.1 Specimen Certificate of the Registrant's Common Stock*
4.2 Form of Registration Rights Agreement by and among the Registrant
and the stockholders indicated therein**
4.3 Warrant to Purchase Interest in Green Mountain Energy Resources
L.L.C. issued to Shallowbrook Securities, Ltd., dated as of
August 6, 1997**
4.4 Warrant to Purchase Interest in Green Mountain Energy Resources
L.L.C. issued to Capital Investment Group, Inc., dated as of
August 6, 1997**
5.1 Opinion of Jones, Day, Reavis & Pogue*
10.1 Second Amended and Restated Operating Agreement of the LLC, dated
as of March 26, 1999**
10.2 Employee Unit Purchase Plan of the LLC, as amended**
10.3 1997 Employee Ownership Plan of the LLC**
10.4 1999 Unit Option Plan of the LLC**
10.5 Form of 1999 Stock Option Plan of the Registrant**
10.6 Employment Agreement, dated as of October 5, 1998, by and between
the LLC and M. David White**
10.7 Employment Agreement, dated as of August 6, 1997, by and between
the LLC and Douglas G. Hyde**
10.8 Separation Agreement and Release, dated as of October 6, 1998, by
and between the LLC and Douglas G. Hyde**
10.9 Form of Employment Agreement, dated as of August 6, 1997, by and
between the LLC and each of the following individuals: Kevin W.
Hartley, Thomas C. Boucher, David B. Luther and Peter H. Zamore**
10.10 Form of Operating Management Option Agreement, dated as of August
6, 1997, by and between the LLC and each of the following
individuals: Douglas G. Hyde, Kevin W. Hartley, Thomas C.
Boucher, David B. Luther and Peter H. Zamore**
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.11 Form of Supervisory Management Option Agreement, dated as of
August 6, 1997, by and between the LLC and each of the following
individuals: Sam Wyly, Evan A. Wyly and Lisa Wyly**
10.12 Letter Agreement, dated as of February 5, 1999, by and between
the LLC and Dennis M. Crumpler**
10.13 Form of Indemnification Agreement**
10.14 Agreement, dated as of December 23, 1998, among the LLC, Green
Mountain Power Corporation, Green Mountain Resources, Inc. and
Green Funding I, L.L.C.**
10.15 Funding Agreement, dated as of April 23, 1999, by and between
Green Funding I, L.L.C. and the LLC**
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)*
23.2 Consent of Arthur Andersen LLP, independent public accountants
24.1 Power of Attorney**
27.1 Financial Data Schedule for the Period from Inception (February
26, 1997) through December 31, 1997
27.2 Financial Data Schedule for the Year ended December 31, 1998
27.3 Financial Data Schedule for the Three-Month Period Ended March
31, 1998
27.4 Financial Data Schedule for the Three-Month Period Ended March
31, 1999
99.1 Consent of Mark Cuban pursuant to Rule 438 under the Act**
99.2 Consent of Richard E. Hanlon pursuant to Rule 438 under the Act**
99.3 Consent of Reed E. Maltzman pursuant to Rule 438 under the Act**
99.4 Consent of Copernicus, The Marketing Investment Strategy Group
99.5 Consent of Jupiter Communications
99.6 Consent of Jacquelyn Ottman
99.7 Consent of Regulatory Research Associates
99.8 Consent of Roper Starch Worldwide Inc.
99.9 Consent of Social Investment Forum
99.10 Consent of Worldwatch Institute
99.11 Consent of Xenergy
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules
Report of Independent Public Accountants
Schedule II -- Reserves for the Period from Inception (February 26,
1997) through December 31, 1997
Schedule II -- Reserves for the Year ended December 31, 1998
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement No.
333-75171 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of South Burlington, State of Vermont, on May 11, 1999.
GREENMOUNTAIN.COM COMPANY
By: /s/ M. David White
----------------------------------
M. David White
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to Registration Statement No. 333-75171 has been signed below
by the following persons in the capacities indicated on May 11, 1999:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ M. David White Chief Executive Officer
___________________________________________ (Principal Executive Officer)
M. David White
* Controller
__________________________________________ (Principal Financial Officer)
K. Scott Canon
* Controller
___________________________________________ (Principal Financial Officer)
Michael Bursell
* Director
___________________________________________
Sam Wyly
* Director
___________________________________________
Dennis M. Crumpler
* Director
___________________________________________
Evan A. Wyly
* Director
___________________________________________
H. Lee S. Hobson
* Director
___________________________________________
Lisa Wyly
</TABLE>
* The undersigned, by signing his or her name hereto, does sign and execute
this Amendment No. 2 to Registration Statement No. 333-75171 pursuant to the
Powers of Attorney executed on behalf of the above-named officers and directors
and previously filed with the Securities and Exchange Commission.
By: /s/ M. David White
- -------------------------------------
M. David White,
Attorney-in-fact
II-6
<PAGE>
After the reorganization transaction discussed in Note 12 to
GreenMountain.com Company's financial statements is effected, we expect to be
in a position to render the following audit report.
/s/ Arthur Andersen LLP
Boston, Massachusetts
May 10, 1999
Report of Independent Public Accountants
To the Stockholders of
GreenMountain.com Company:
We have audited, in accordance with generally accepted auditing standards,
the financial statements of GreenMountain.com Company included in this
registration statement and have issued our report thereon. Our audit was made
for the purpose of forming an opinion on the basic financial statements taken
as a whole. The schedules listed in the accompanying index are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
<PAGE>
SCHEDULE II
GreenMountain.com Company
Reserves
For the Period From Inception (February 26, 1997) through December 31, 1997
<TABLE>
<CAPTION>
Balance at Balance at
beginning end of
of year Additions Deductions year
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Reserves deducted from assets to
which they apply:
Reserve for uncollectible
accounts receivable............. $ -- $ -- $ -- $ --
----- ----- ----- -----
</TABLE>
<PAGE>
SCHEDULE II
GreenMountain.com Company
Reserves
Year ended December 31, 1998
<TABLE>
<CAPTION>
Balance at Balance at
beginning end of
of year Additions Deductions year
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Reserves deducted from assets to
which they apply:
Reserve for uncollectible
accounts receivable............. $ -- $34,956 $ -- $34,956
----- ------- ----- -------
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
2.1 Form of Agreement and Plan of Merger by and between the LLC and the
Registrant**
3.1 Certificate of Incorporation of the Registrant**
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant**
3.3 Bylaws of the Registrant**
3.4 Form of Amended and Restated Bylaws of the Registrant**
4.1 Specimen Certificate of the Registrant's Common Stock*
4.2 Form of Registration Rights Agreement by and among the Registrant and
the stockholders indicated therein**
4.3 Warrant to Purchase Interest in Green Mountain Energy Resources L.L.C.
issued to Shallowbrook Securities, Ltd., dated as of August 6, 1997**
4.4 Warrant to Purchase Interest in Green Mountain Energy Resources L.L.C.
issued to Capital Investment Group, Inc., dated as of August 6, 1997**
5.1 Opinion of Jones, Day, Reavis & Pogue*
10.1 Second Amended and Restated Operating Agreement of the LLC, dated as
of March 26, 1999**
10.2 Employee Unit Purchase Plan of the LLC, as amended**
10.3 1997 Employee Ownership Plan of the LLC**
10.4 1999 Unit Option Plan of the LLC**
10.5 Form of 1999 Stock Option Plan of the Registrant**
10.6 Employment Agreement, dated as of October 5, 1998, by and between the
LLC and M. David White**
10.7 Employment Agreement, dated as of August 6, 1997, by and between the
LLC and Douglas G. Hyde**
10.8 Separation Agreement and Release, dated as of October 6, 1998, by and
between the LLC and Douglas G. Hyde**
10.9 Form of Employment Agreement, dated as of August 6, 1997, by and
between the LLC and each of the following individuals: Kevin W.
Hartley, Thomas C. Boucher, David B. Luther and Peter H. Zamore**
10.10 Form of Operating Management Option Agreement, dated as of August 6,
1997, by and between the LLC and each of the following individuals:
Douglas G. Hyde, Kevin W. Hartley, Thomas C. Boucher, David B. Luther
and Peter H. Zamore**
10.11 Form of Supervisory Management Option Agreement, dated as of August 6,
1997, by and between the LLC and each of the following individuals:
Sam Wyly, Evan A. Wyly and Lisa Wyly**
10.12 Letter Agreement, dated as of February 5, 1999, by and between the LLC
and Dennis M. Crumpler**
10.13 Form of Indemnification Agreement**
10.14 Agreement, dated as of December 23, 1998, among the LLC, Green
Mountain Power Corporation, Green Mountain Resources, Inc. and Green
Funding I, L.L.C.**
10.15 Funding Agreement, dated as of April 23, 1999, by and between Green
Funding I, L.L.C. and the LLC**
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)*
23.2 Consent of Arthur Andersen LLP, independent public accountants
24.1 Power of Attorney**
27.1 Financial Data Schedule for the Period from Inception (February 26,
1997) through December 31, 1997
27.2 Financial Data Schedule for the Year ended December 31, 1998
27.3 Financial Data Schedule for the Three-Month Period Ended March 31,
1998
27.4 Financial Data Schedule for the Three-Month Period Ended March 31,
1999
99.1 Consent of Mark Cuban pursuant to Rule 438 under the Act**
99.2 Consent of Richard E. Hanlon pursuant to Rule 438 under the Act**
99.3 Consent of Reed E. Maltzman pursuant to Rule 438 under the Act**
99.4 Consent of Copernicus, The Marketing Investment Strategy Group
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
99.5 Consent of Jupiter Communications
99.6 Consent of Jacquelyn Ottman
99.7 Consent of Regulatory Research Associates
99.8 Consent of Roper Starch Worldwide Inc.
99.9 Consent of Social Investment Forum
99.10 Consent of Worldwatch Institute
99.11 Consent of Xenergy
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
May 10, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statement of operations and the balance sheets and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-26-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,933,403
<SECURITIES> 0
<RECEIVABLES> 16,457
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,586,092
<PP&E> 1,335,836
<DEPRECIATION> 67,128
<TOTAL-ASSETS> 4,183,365
<CURRENT-LIABILITIES> 2,445,379
<BONDS> 0
0
0
<COMMON> 7,992
<OTHER-SE> 1,729,994
<TOTAL-LIABILITY-AND-EQUITY> 4,183,365
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,905,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,862,014)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,862,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,862,014)
<EPS-PRIMARY> (19.65)<F1>
<EPS-DILUTED> (19.65)<F2>
<FN>
<F1>EPS - Primary is EPS Basic per SFAS 128
<F2>EPS - Fully Diluted is EPS - Diluted per SFAS 128
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS AND THE BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 8,574,261
<SECURITIES> 0
<RECEIVABLES> 729,188
<ALLOWANCES> 34,956
<INVENTORY> 0
<CURRENT-ASSETS> 9,690,761
<PP&E> 2,133,886
<DEPRECIATION> 766,526
<TOTAL-ASSETS> 11,410,721
<CURRENT-LIABILITIES> 11,959,200
<BONDS> 0
0
0
<COMMON> 199,800
<OTHER-SE> (748,279)
<TOTAL-LIABILITY-AND-EQUITY> 11,410,721
<SALES> 1,530,496
<TOTAL-REVENUES> 1,530,496
<CGS> 1,097,379
<TOTAL-COSTS> 1,097,379
<OTHER-EXPENSES> 46,465,132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,050
<INCOME-PRETAX> (46,039,065)
<INCOME-TAX> 0
<INCOME-CONTINUING> (46,039,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,039,065)
<EPS-PRIMARY> (5.46)<F1>
<EPS-DILUTED> (5.46)<F2>
<FN>
<F1>EPS - PRIMARY IN EPS BASIC PER SFAS 128
<F2>EPS - FULLY DILUTED IS EPS - DILUTED PER SFAS 128
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS AND THE BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 2,621,369
<SECURITIES> 0
<RECEIVABLES> 29,527
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,739,269
<PP&E> 1,433,930
<DEPRECIATION> 218,483
<TOTAL-ASSETS> 4,265,678
<CURRENT-LIABILITIES> 3,335,082
<BONDS> 0
0
0
<COMMON> 7,992
<OTHER-SE> 922,604
<TOTAL-LIABILITY-AND-EQUITY> 4,285,678
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,730,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (23,583)
<INCOME-PRETAX> (6,707,389)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,707,389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,707,389)
<EPS-PRIMARY> (3.55)
<EPS-DILUTED> (3.55)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS AND THE BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 22,988,750
<SECURITIES> 0
<RECEIVABLES> 3,347,214
<ALLOWANCES> 159,454
<INVENTORY> 0
<CURRENT-ASSETS> 27,167,062
<PP&E> 2,316,629
<DEPRECIATION> 976,179
<TOTAL-ASSETS> 29,733,132
<CURRENT-LIABILITIES> 12,312,650
<BONDS> 0
0
0
<COMMON> 283,566
<OTHER-SE> 17,136,916
<TOTAL-LIABILITY-AND-EQUITY> 29,733,132
<SALES> 4,149,941
<TOTAL-REVENUES> 4,149,941
<CGS> 3,096,161
<TOTAL-COSTS> 3,096,161
<OTHER-EXPENSES> 21,079,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (214,690)
<INCOME-PRETAX> (19,811,490)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,811,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,811,490)
<EPS-PRIMARY> (0.80)
<EPS-DILUTED> (0.80)
</TABLE>
<PAGE>
EXHIBIT 99.4
To GreenMountain.com Company:
Copernicus, The Marketing Investment Strategy Group, hereby consents to the use
of the 1998 and 1999 research reports and quotes therefrom and to all
references to us included in or made a part of the GreenMountain.com Company
Registration on Form S-1 (Registration No. 333-75171).
/s/ Sohel Karmin
- -------------------------------------
Name:Sohel Karmin
Title:Senior Vice President
<PAGE>
EXHIBIT 99.5
To GreenMountain.com Company:
Jupiter Communications hereby consents to the use of its name and the inclusion
of the statements attributable to Jupiter Communications included in or made a
part of the GreenMountain.com Company Registration on Form S-1 (Registration
No. 333-75171).
/s/ Maria Kammer
- -------------------------------------
Name:Maria Kammer
Title:Director of Production
Date:May 6, 1999
The following information will be included in the Registration Statement:
"Jupiter Communications estimates that the number of Internet users in the
United States will grow from 83.4 million at the end of 1998 to 156.7 million
by the end of 2002 and that the value of goods and travel services purchased on
the Internet in the United States will grow from $7.1 billion to 1998 to $41.1
billion in 2002."
"Jupiter Communications estimates that the number of Internet users in the
world will grow from 138 million at the end of 1998 to 256 million by the end
of 2002."
<PAGE>
EXHIBIT 99.6
To GreenMountain.com Company:
I hereby consent to the use of the following quote from my book Green
Marketing: Opportunity for Innovation, and to all references to us included in
or made a part of the GreenMountain.com Company Registration on Form S-1
(Registration No. 333-75171).
/s/ Jacquelyn A. Ottman
_____________________________________
Jacquelyn Ottman
The following information will be included in the Registration Statement:
"[p]eople are "greener' today than ever before" and "[g]reen marketing is
looking more mainstream all the time."
<PAGE>
EXHIBIT 99.7
To GreenMountain.com Company:
Regulatory Research Associates hereby consents to the use of our Report
entitled "Electric Industry Restructuring Update" dated February 16, 1999 and
to all references to us included in or made a part of the Greenmountain.com
Company Registration on Form S-1 (Registration No. 333-75171).
/s/ Robert Schain
- -------------------------------------
Name:Robert Schain
Title:President
<PAGE>
EXHIBIT 99.8
To GreenMountain.com Company:
Roper Starch Worldwide Inc. hereby consents to the use of the 1998 Green Gauge
Report and quotes therefrom and to all references to us included in or made a
part of the Greenmountain.com Company Registration on Form S-1 (Registration
No. 333-75171).
/s/ David B. Rockland
- -------------------------------------
Name:David B. Rockland
Title:Senior Vice President
Managing Director
<PAGE>
EXHIBIT 99.9
To: GreenMountain.com Company
The Social Investment Forum hereby consents to the use of the following
information from our November 1997 Report on Responsible Investing Trends in
the United States and to all references to us included in or made a part of the
GreenMountain.com Company Registration on Form S-1 (Registration No. 333-
75171).
/s/ Steven J. Schueth
- -------------------------------------
Steven J. Schueth
Chair and President
Social Investment Forum
The following information will be included in the Registration Statement:
The Social Investment Forum's November 1997 Report on Responsible Investing
Trends in the United States reported the existence of $1.2 trillion in
professionally managed portfolios incorporating at least one social investment
strategy.
<PAGE>
EXHIBIT 99.10
May 10, 1999
Worldwide Institute hereby consents to the use of the following references and
quotes from the Worldwatch Institute as part of the GreenMountain.com Company
Registration on Form S-1 (Registration No. 333-75171).
(1) Worldwatch Briefing: "An Environmental Revolution," February 25, 1999.
(2) Vital Signs, 1998, by Lester R. Brown, Michael Renner, Christopher Flavin
et al., New York, London, 1998.
(3) State of the World, 1999, by Lester R. Brown, Christopher Flavin, et al.,
New York, London, 1999.
/s/ Christopher Flavin
- -------------------------------------
Name:Christopher Flavin
Title:Senior Vice President
The following information will be included in the Registration Statement:
According to the Worldwatch Institute (1) (2) (3):
. Atlantic Richfield CEO Michael Bowlin sees ARCO's large holdings of
natural gas playing a key role in the transition from a carbon-based
energy economy to one based on hydrogen.
. British Petroleum has committed to a 10-fold increase in sales of solar
photovoltaic cells, reaching $1 billion over the next decade.
. Royal Dutch Shell has announced plans to invest $500 million in
renewable energy sources.
Another recent Worldwide publication state (1):
. . . [There] is an exciting alternative economic model that promises a
better life everywhere without destroying the earth's natural support
systems. The new economy will be powered not by fossil fuels, but by
various sources of solar energy and hydrogen . . . Instead of a throwaway
economy, we will have a reuse/recycle economy.
<PAGE>
EXHIBIT 99.11
To GreenMountain.com Company:
Xenergy hereby consents to the use of the following information from The
Xenergy 1999 Retail Wheeling Multi-Client Study Phase 4 Final Report and to all
references to us included in or made a part of the Greenmountain.com Company
Registration on Form S-1 (Registration No. 333-75171).
/s/ William R. Huss
- -------------------------------------
Name:William R. Huss
Title:Sr. Vice President, Xenergy
The following information will be included in the Registration Statement:
"The survey analysis identified Green Mountain as the green marketer in
Pennsylvania, with a total market share of 29 percent of all switchers, and
with nearly all of the green market share. Much of their success may be
attributable to their ability to effectively market, as their prices are often
higher than those of other green marketers in Pennsylvania. They are the most
recognized supplier in the market, whether or not the customers are green
purchasers."
