SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12
RIDGEWOOD ELECTRIC POWER TRUST IV
(Name of Registrant as Specified in its Charter)
Ridgewood Electric Power Trust IV
(Name of Person filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4 and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
RIDGEWOOD ELECTRIC POWER TRUST IV
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
NOTICE OF SOLICITATION OF CONSENTS
To the Investors of RIDGEWOOD ELECTRIC POWER TRUST IV:
Notice is Hereby Given that Ridgewood Power Corporation, the
Managing Shareholder, is soliciting the consent of the holders of
the Investor Shares of Ridgewood Electric Power Trust IV, a
Delaware business trust (the "Trust") to a proposal (the
"Conversion") to allow the Trust to invest in ventures together
with other investment programs sponsored by the Managing
Shareholder, without the delays and uncertainties of obtaining
approval from the Securities and Exchange Commission, by
withdrawing the Trust's election to be a business development
company.
Only Investors of record at the close of business on September 9,
1996, will be entitled to notice of the solicitation and to grant
or withhold consents. The consents will be tabulated at the
Managing Shareholder's principal offices, 947 Linwood Avenue.
Ridgewood, New Jersey 07450-2939 at 5:00 p.m., prevailing local
time, on Wednesday, October 2, 1996 or on such later date (but
not later than November 30, 1996) to which the Managing
Shareholder may adjourn the tabulation.
By order of the Managing Shareholder: Robert K. Brady,
Secretary
September 9, 1996
CONTENTS OF PROXY STATEMENT
Page
Summary of Proposal 1
Introduction 2
Proposal to Permit Investments with other Ridgewood Programs
by Converting the Trust from a Business Development Company 3
Current Legal Status of the Trust 12
Other Information 16
Exhibit A - Proposed Amendment to the Declaration of Trust
Exhibit B - Description of New England Hydro Project Acquisition
Exhibit C - Listing of Statutory Provisions Affected by Conversion
RIDGEWOOD ELECTRIC POWER TRUST IV
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
(201) 447-9000 fax (201) 447-0474
PROXY STATEMENT
for Solicitation of Consents
September 9, 1996
SUMMARY OF PROPOSAL
The consents of the Investors of Ridgewood Electric Power Trust
IV (the "Trust") are being requested for ending the Trust's
status as a business development company. The purpose of the
change (the "Conversion") is to allow the Trust to invest with
other programs sponsored by Ridgewood Power Corporation, the
Managing Shareholder of the Trust, with only the approval of the
Trust's Independent Trustees, who may not be "interested
persons" (as defined by law and explained below) of the
Trust or the Managing Shareholder. The Managing
Shareholder believes that this will end the delays and
uncertainties of seeking approval from the Securities and
Exchange Commission (the "Commission") for such transactions
and therefore will increase opportunities for the Trust to
diversify its investments and to increase the size and quality of the potential
investment pool.
In particular, the Trust's decision whether to purchase a 50%
interest or a 100% interest in a package of 19 small
hydroelectric projects located in Maine and New Hampshire, as
described below (the "New England Hydro Projects"), is contingent
on approval of the Conversion.
It is expected that this Notice of Solicitation of Consents and this
Proxy Statement and the Consent Form will be mailed to Investors on or
about September 9, 1996. Investors are asked to give their written
consent to the Conversion no later than October 2, 1996, by returning
the enclosed consent form to the Trust at 947 Linwood Avenue,
Ridgewood, New Jersey 07450-2939 or by faxing it to (201) 447-
0474. The written consent of a majority in interest of all
Investors (other than the Managing Shareholder) is required for
approval.
The remainder of this Proxy Statement contains important
information regarding the Conversion and Investors should read it
in its entirety before voting. Investors who wish further
information may contact the Trust at the address above or by
calling (201) 447-9000.
Background:
Companies that hold themselves out as investing in
securities or that own more than specified percentages of
their assets in investment securities must register as
investment companies under the Investment Company Act of
1940, as amended (the "1940 Act"). Investment companies
are subject to many legal restrictions that would impair the
Trust's operations. When the Trust was organized, there was
some question whether it would be required to register as an
investment company.
The Trust elected a less restrictive alternative under
the 1940 Act, business development company status, so
that it would be in compliance with the 1940 Act in the
event that the development of its business would require
it to register under that law.
The Trust is actively engaged in operating independent
power plants and it now appears that it is not and will
not be required to register as an investment company or
to be a business development company.
So long as the Trust is a business development company,
it is prohibited from co-investing or engaging in other
transactions with another investment program sponsored by
any affiliated party of the Trust unless the Commission
approves. The approval process can take nine months or
more, each program must invest on exactly identical terms
and there is no assurance the Commission will approve.
These limitations make it more difficult to diversify the
Trust's investment. For example, unless the Conversion
is approved, the Trust would have to purchase all of the
New England Hydro Projects, which would commit 40% of the
Trust's invested funds in a single set of Projects.
To maintain investor protections at their current level,
the Trust will continue to comply with all
business development company rules other than the ban on
co-investments and other transactions with other
investment programs sponsored by the Managing Shareholder
or its affiliates ("Ridgewood Programs")and filing requirements. The
Independent Trustees will have to approve all co-
investments and material transactions with Ridgewood
Programs.
The Managing Shareholder may be subject to conflicts of interest
in acting on behalf of both the Trust and another Ridgewood Program
in considering and approving material transactions.
Status of the Trust if the Conversion is approved:
The Trust expects to purchase a 50% interest in all the New
England Hydro Projects, with the remainder designated for
purchase by Ridgewood Electric Power Trust V, a program
being sponsored by the Managing Shareholder.
The Trust will continue to be a. reporting company that
will file 10-K's, 10-Q's and other public reports.
The Trust will comply with all restrictions on
business development companies, other than the
restrictions on transactions with other Ridgewood
Programs and filing requirements.
The Independent Trustees will continue as before and
their approval will be required for any material
transaction with another Ridgewood Program. The Independent Trustees,
as before, must be persons who are not affiliated with the Trust or
the Managing Shareholder and who are not otherwise "interested persons"
of the Trust, as defined by the 1940 Act and further described below.
[end of Summary]
INTRODUCTION
The consent which is requested in the foregoing Notice of
Solicitation of Consents is being solicited by Ridgewood Power
Corporation, the "Managing Shareholder" of Ridgewood Electric
Power Trust IV, a Delaware business trust (the "Trust") with
respect to a proposal to amend the Amended and Restated
Declaration of Trust (the "Declaration") of the Trust to end its
status as a business development company under the Investment
Company Act of 1940, as amended (the "1940 Act"). This is to be
done for the purpose of allowing the Trust to invest in ventures
in which other investment programs sponsored by the Managing
Shareholder or its affiliates ("Ridgewood Programs") also invest,
without the requirement of obtaining the approval of the
Securities and Exchange Commission (the "Commission") for the
transactions. The consents will be tabulated at 5:00 p.m.,
prevailing local time, on a date (the "Tabulation Date") which is
the later of Wednesday, October 2, 1996 or a later date (but not
later than November 30, 1996) to which the Managing Shareholder
may adjourn the tabulation.
The mailing address and principal executive office of the Trust
is 947 Linwood Avenue, Ridgewood, New Jersey 07450-2939. Its
telephone number is (201) 447-9000 and its facsimile number is
(201) 447-0474. Consents must be given in writing and any
consent given may be revoked by the Investor who gives the
consent by notifying the Secretary of the Trust in writing at any
time prior to the tabulation thereof. Consents and revocations
may be mailed or delivered to the Trust at its principal
executive office, as stated above, or may be sent by facsimile to
the number stated above. All consents received will be tabulated
unless revoked. The consents will be received at and will be
tabulated at the principal executive office of the Trust. It is
expected that the Notice and Proxy Statement and the form of
consent will be mailed to Investors on or about September 9,
1996.
The close of business on September 9, 1996 has been fixed as the
time for the determination of the Investors entitled to consent.
Each share of beneficial interest in the Trust (an "Investor
Share"), is entitled to one vote and fractional Investor Shares
to corresponding fractional votes, except that any Investor Share
owned by the Managing Shareholder or any person that controls, is
controlled by or is under common control with the Managing
Shareholder (an "Affiliate") will not be treated as outstanding
and the holder thereof will not be entitled to consent. There
are 480.1 Investor Shares outstanding whose holders are
entitled to consent in response to the Notice of Solicitation.
Although there is no quorum for giving of consents, no action can
be taken pursuant to this solicitation unless at least a majority
in interest of the holders of the Investor Shares (excluding the
Managing Shareholder and its Affiliates) entitled to consent (a
"Majority") grant their consents to the action.
Votes made by consents returned prior to the Tabulation Date will
be counted by the Managing Shareholder. Abstentions and failures
by record holders to vote the shares owned by beneficial owners
(including "broker non-votes") will not be counted as voting on
the Conversion. Because the Conversion requires the vote of a
Majority of all Investors (excluding the Managing Shareholder and
its Affiliates), a failure to vote has the effect of a vote
against the Conversion.
A copy of the Trust's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, as filed with the Securities and
Exchange Commission, including financial statements and schedules
thereto, will be furnished by the Trust without charge to each
person to whom this Proxy Statement is delivered, upon written or
oral request of such person to the Trust at 947 Linwood Avenue,
Ridgewood, New Jersey 07450-2939, Attention: Secretary, or by
telephone request to the Trust at (201) 447-9000 during normal
business hours.
PROPOSAL TO PERMIT INVESTMENTS WITH OTHER RIDGEWOOD PROGRAMS BY
CONVERTING THE TRUST FROM A BUSINESS DEVELOPMENT COMPANY
The Managing Shareholder has proposed that the Trust take action
(the "Conversion") to end its status as a business development
company under the 1940 Act. As a business development company,
the Trust is prohibited by the 1940 Act from investing in
ventures in which other Ridgewood Programs also invest, unless
the Commission issues an exemptive order granting a waiver from
this prohibition. These exemptive orders are difficult to
obtain, can only be granted if each program invests on identical
terms and may be denied in the Commission's discretion. Even if
exemptive orders are granted, the prolonged process of applying
for them significantly impairs the Trust's ability to acquire
potential investments, as described below. By electing to give
up its business development company status, the Trust would have
added flexibility in making acquisitions and in participating in
cooperative ventures with other Ridgewood Programs. In
particular, ending the business development company status of the
Trust would allow the Trust to invest with affiliated investment
programs in projects too large for the Trust to acquire alone and
to increase the diversification of the Trust's investments,
without the uncertainty and delays of the exemptive order process
and the requirement for identical terms of investment.
Although the 1940 Act imposes many other operating restrictions
on the Trust and also requires the Trust to adhere to many
procedural requirements, to date the cost of complying with
these other provisions of the 1940 Act has not been significantly
burdensome to the Trust. Further, Investors have in many cases
made investment decisions to acquire Shares in the Trust with the
knowledge that the Trust was subject to the 1940 Act's
requirements. Accordingly, the Managing Shareholder has proposed
that the Trust after the Conversion will continue to comply with
all legal requirements for business development
companies, other than the prohibitions on investing together with
another Ridgewood Program and certain filing requirements.
The amendment to the Declaration will
expressly require the Trust to continue to comply with those
material legal requirements as if it were still a business
development company. See -- Amendment to Declaration. Thus
only a limited number of changes to the Declaration are being
made. See -- Effects of Conversion.
Background
When the Trust was organized in January 1995, the Managing
Shareholder had contemplated that it would invest in independent
electric power projects and similar capital projects ("Projects")
in two ways. First, the Trust might make majority or controlling
investments in Projects with the intention of operating those
Projects itself. Second, the Trust might invest in other Projects
together with the developers of the Projects or others and the
developers or other managers unaffiliated with the Trust would
manage those Projects. The Trust anticipated that it through the
Managing Shareholder would actively monitor its investments in
all the Projects and might provide business advice or managerial
assistance to the second type of Projects. Thus, the Trust might
act as an active investor with managerial control over certain
Projects and might have the status of a more passive investor in
other Projects.
However, to the extent the Trust were to invest in Projects that
it did not operate, its ownership interests in such Projects
might be considered to be securities under the 1940 Act. Under
the 1940 Act, if the Trust had held itself out to the public as a
company investing in securities and had more than 100 Investors,
it would be required to register as a closed-end investment
company under the 1940 Act. It would also have had to do so,
even if it did not hold itself out as an investor in securities,
if more than 40% of its assets (excluding cash and securities
issued by or guaranteed by the United States Government) were
invested in "investment securities" (which include in relevant part
any securities other than U.S. Government securities and securities
of majority-owned, non-investment company subsidiaries) and if it
had more than 100 Investors.
Because the Trust correctly anticipated that it would have well
over 100 Investors and in the course of the investment process it
might have triggered those provisions of the 1940 Act, it confronted the
possibility that it would have to register as an investment
company. The Managing Shareholder concluded that the 1940 Act's
restrictions on investment companies, however, would have made
the Trust's business plan extremely difficult to carry out.
The 1940 Act provides business development company status as an
alternative to investment company registration for companies that
are prepared to invest primarily in private placements, to
provide significant managerial assistance to the issuers, so
long as investments meeting those requirements represent at
least 50% of the company's total assets at the end of an
initial investment period and eventually, together with cash
items, U.S. Government securities and high quality short-
term debt securities, represent at least 70% of its total
assets. See Current Legal Status of the Trust -- The 1940
Act below.
The business development company provisions were not inconsistent
with the Trust's business plan and would allow the Trust to
comply with the 1940 Act in the event the Trust were considered
to be an investment company. Therefore, in order to reduce legal
risks at a time when the Trust's status might be uncertain, the
Trust elected to become a business development company and has
operated as such since its registration under the Securities
Exchange Act of 1934, as amended, became effective on March 25,
1995.
The 1940 Act prohibits business development companies from
investing in business ventures in which "affiliated persons" (as
defined by the 1940 Act) also invest, unless the Commission
reviews the transaction to determine whether the proposed co-
investment would comply with the requirements of Section 57 of
the 1940 Act (which include in part a mandate that the parties
invest on identical terms) and issues an exemptive order
permitting the co-investment. The Managing Shareholder and the
other Ridgewood Programs it sponsors are affiliated persons of
the Trust. Therefore, with limited exceptions that are not
useful to the Trust, without the Commission's approval the Trust
may not invest in any business venture in which another Ridgewood
Program invests. As described below, the Managing Shareholder
believes that this restriction unnecessarily limits the Trust and
may reduce diversification of its portfolio, with corresponding
risks to Investors. Accordingly, the Managing Shareholder has
proposed the Conversion.
Reasons for the Conversion
As long as the Trust is a business development company, it is
prohibited from entering into joint ventures with other Ridgewood
Programs sponsored by the Managing Shareholder without obtaining
an exemptive order. This in most cases effectively restricts the
Trust's investments to ownership in small Projects or forces the
Trust to invest in single larger Projects, thus creating higher
risks to Investors because of less diversification of
investments.
The Trust's current and proposed investments in operating assets
or entities ("Projects") demonstrate this problem. As of the
date of this Proxy Statement, the Trust had net proceeds from its
offering of Investor Shares of $39.4 million. It has made
investments or committed funds as follows:
Project Total cost Trust's Investment Status
to acquire percentage made or to be of
and develop ownership made by investment
Project of Project Trust
Pump Services $ 400,000 100% $ 400,000 Wholly owned
(irrigation (may be by Trust
power) expanded)
Providence 20,000,000 66% 12,800,000 Co-ownership
(landfill-gas- with Ridgewood
fueled Electric Power
electric power Trust III
plant; (permitted by
currently 12 Commission
megawatt order
capacity) discussed
below)
New England 18,000,000 50% 9,000,000 Pending. See
Hydro (19 (estimated) Proposed
small hydro- Acquisition of
electric New England
Projects Hydro
aggregating Projects,
16.75 megawatts below
Totals $37,400,000 22,200,000
If the Trust were obliged to purchase all of a Project, it would
be limited to investment in each of the two Projects with
acquisition costs in excess of $10 million listed above and
perhaps one smaller Project, or investment in one of the larger
Projects and a few smaller Projects. As a result, its portfolio
would be more concentrated and possibly more subject to risks
from lack of diversification, although if two larger Projects
were purchased the time to fully invest proceeds and costs of
investigation might be reduced. During the investment period, as
provided by the Declaration of Trust, the Trust's funds not
invested in Projects would be invested in cash equivalents or
U.S. government securities with relatively low yields. Co-
investment, on the other hand, would allow investment in all of
these Projects with substantial funds being available for
further, diversifying investments.
Co-investment with unaffiliated parties is often undesirable,
impracticable or impossible. Such co-investment proposals often
involve protracted and intense negotiations regarding the
economic terms of the transaction and operating control of the
Project, which increases acquisition costs. Even more important,
the Trust is a relatively small participant in the market for
independent power projects with capacities of over 20 megawatts.
The Managing Shareholder has found that a program's ability to
commit capital promptly and to close a transaction expeditiously
is a major competitive advantage for the Trust and other
Ridgewood Programs. The delays and changes of position caused by
negotiations with an unaffiliated co-investor can dilute or
destroy this competitive advantage. For this reason, the Trust
believes that seeking unaffiliated co-investors frequently will
not be a suitable alternative to investing with other Ridgewood
Programs, as would be permitted after the Conversion.
The Commission by order may grant an exemption from the
transactional prohibitions so long as the Trust participates in
the transactions on terms at least as advantageous as the terms
enjoyed by any other affiliated participants and meets other
statutory requirements. The approval process for such an order
requires notice to the public, a public comment period and
careful review of the Trust's filing by the Commission's staff.
At the completion of the process, there is no assurance that any
application will be approved and there is no assurance that the
proposed transaction can be completed in accordance with the
terms of the order or within the time period permitted by the
waiver.
In order to invest together with Ridgewood Electric Power Trust
III in the Providence Project (an electric generating station
located near Providence, Rhode Island that uses landfill gas for
fuel) the Trust applied for and received an exemptive order that
allowed it to invest with Ridgewood Electric Power Trust III in
Projects on terms equally favorable to those afforded to that
program, subject to review by and approval of the Trust's
Independent Trustees. The application was filed on April 6, 1995
and after an amended application addressing concerns of the
Commission's staff was filed, the exemptive order was received on
December 11, 1995. The order was valid for only a limited time.
It should also be noted that the Commission's staff has
informally advised the Trust that the granting of the prior
exemptive order by the Commission should not be considered to be
any indication that the staff would or would not recommend relief
in the future.
The application process for exemptive orders thus impairs the
Trust's competitive advantages of speed and certainty in
acquiring Projects. If the Trust endeavors to diversify its
investment portfolio and to invest in the most advantageous
opportunities by co-investing with other Ridgewood Programs,
the uncertainties and delays of the exemption process can impair its
competitive position in negotiating Project acquisitions. The
Trust accordingly does not believe that the ability to seek
exemptive orders is an adequate alternative to the Conversion.
The direct costs of routine compliance with the 1940 Act as a
business development company are anticipated to be less than
$45,000 per year for the Trust. Approximately 40% of these costs
represent fees of and other costs relating to the Independent
Trustees, which would continue after the Conversion. Costs of
business development company compliance are not in themselves a
material reason for the Conversion.
Potential Conflicts of Interest
If the Conversion is approved and additional co-investments or
other Ridgewood Program Transactions are proposed by the Managing
Shareholder, the Managing Shareholder might be considered to have
potential conflicts of interest arising from its duties to the
Trust and to any other Ridgewood Program considering the co-
investment. In most cases, the Managing Shareholder expects that
these conflicts will be insubstantial. In acquiring Projects,
the economic terms of the acquisition are generally determined
through arms'-length bargaining with the seller. When the Trust
and similar Ridgewood Programs invest at the same time, the
Managing Shareholder will endeavor to have them participate on
substantially identical terms (but reserving the ability to have
programs participate on dissimilar terms in order to meet their
investment objectives or to conform to transactional
requirements) with the first-organized program having the first
opportunity to invest until all of its available funds that can
prudently be invested in the Project are committed, and with
subsequently organized programs investing in their turns on the
same basis.
In those few cases where one Ridgewood Program is not able to
invest on similar terms with other Ridgewood Programs (typically
because of legal or transactional requirements or a delay in the
availability of funds) or in other cases where the transactional
terms are not similar, the Managing Shareholder will attempt to
resolve any conflict by reference to relevant interest rates or
risk/return considerations or to the terms negotiated by other
participants in the Project.
Further, in every case where the Trust engages in a material
transaction involving another Ridgewood Program, the Independent
Trustees will be required to separately review and approve the
terms of the transaction.
Proposed Acquisition of New England Hydro Projects
The Conversion has been under consideration by the Managing
Shareholder since the receipt of the Providence exemptive order
in December 1995. However, a recent investment opportunity is a
significant factor in the decision to propose the Conversion at
this time. On April 4, 1996, the Trust entered into a non-
binding letter of intent with Consolidated Hydro, Inc. ("CHI")
for the purchase of an interest in 19 small operating
hydroelectric Projects located in Maine and New Hampshire
and having a gross generating capacity of 16.7 megawatts. Definitive
purchase agreements are expected to be executed in mid-
September 1996, with an initial closing planned for early
October 1996. The Projects, together with a brief
description, are described in Exhibit B to
this Proxy Statement. The proposed purchase price for all 19
Projects plants is approximately $16 million and anticipated
transaction costs, necessary capital improvements and regulatory
compliance requirements increase the total investment to
approximately $18 million. That investment, if made by the
Trust, would exhaust the major portion of its funds available for
investment and would reduce the diversification of its portfolio.
The Managing Shareholder therefore believed that it would be in
the Trust's best interests to share this opportunity with
Ridgewood Electric Power Trust V ("Ridgewood Power V"), a new
Ridgewood Program that in April 1996 began an ongoing private
placement to raise funds for investment. However, such a co-
investment cannot be made without the approval of the Commission,
unless the Conversion is approved and the Trust ceases to be a
business development company.
CHI was unwilling to sell less than all of the Projects and was
also unwilling to delay the sale for a period long enough to
proceed with the exemption order process or to bear the risk that
the order would not be granted. In order to preserve this
investment opportunity, the Trust agreed to purchase only a 50%
interest in all the Projects at a price equal to approximately $8
million, and to take an assignable option expiring 90 days after
the initial closing for the Trust to acquire the remainder at a
price of an additional $8 million plus interest thereon computed
from the date of closing. The interest rate escalates monthly.
If the option were not timely exercised by the Trust or an
assignee of the Trust after the initial closing, CHI would have
the right for an additional 30 days to repurchase the 50%
interest first sold to the Trust at a price equal to $2 million
less than the price paid by the Trust. The Trust thus has a
compelling economic incentive to purchase the remaining 50%
itself if Ridgewood Power V is unable to do so.
If the Conversion is approved, the Trust will assign the option
to acquire the remaining 50% interest in the New England Projects
to Ridgewood Power V if that program has funds available for the
purchase. In that case, the Trust anticipates that Ridgewood
Power V will exercise the option and thus will become the owner
of the remaining 50% of each New England Project. There is no
assurance that Ridgewood Power V will have sufficient funds to do
so. If the Conversion were not approved and the Trust is unable
to assign the option or if Ridgewood Power V does not exercise
the option for any other reason, the Trust anticipates that it
would purchase the remainder of the New England Hydro Projects
rather than allow CHI either to repurchase the partial interest
the Trust had already acquired at a $2 million loss to the Trust
or to sell the remaining interest to a non-Affiliate of the Trust
which may have priorities conflicting with the Trust's. A copy
of the acquisition agreements may be obtained, free of charge,
from the Trust at the address stated on page 2.
This transaction structure is compelled by the prohibitions of
the 1940 Act on co-investment of the Trust with other Ridgewood
Programs. Otherwise, the Trust would have proposed that it and
Ridgewood Electric Power Trust V enter into an agreement together
to acquire the entire package of Projects on similar terms, thus
allowing both Ridgewood Programs to diversify their investments.
The Trust intends to acquire at least a 50% interest in the
Projects regardless of whether the Conversion is approved, but
subject to satisfactory fulfillment of closing conditions
contained in the acquisition agreements. The acquisition
agreements and other terms of the transaction are subject to
change in response to governmental action, operating conditions,
and other contingencies and Investors must recognize that the
proposed acquisition of the New England Hydro Projects may not
occur or may occur on materially different terms from those
stated here.
Although one reason for the Conversion is to allow co-investment
with Ridgewood Power V in the New England Hydro Projects, the
Conversion, if approved, will permit the Trust to invest jointly
with any Ridgewood Program in any venture, subject only to the
approval of the Managing Shareholder, the approval of a
majority of the Independent Trustees and in the case of a
Ridgewood Program that is a business development company,
the discretionary approval of the Commission. No consent or vote of
Investors will be required for any future co-investment.
Basis for Withdrawing Business Development Company Election
The Managing Shareholder has found, based on its experience with
the three prior Ridgewood Programs, Ridgewood Electric Power
Trusts I through III, and with the initial
investments of the Trust, that in many cases the Trust will
choose to have the Managing Shareholder exercise management
control over the Projects in which the Trust invests. By doing
so, the Trust avoids fragmentation of responsibility and the loss in
some cases of economies of scale and gains management experience
and hands-on knowledge. The Trust may contract with other
persons to provide routine operating, maintenance and
administrative services (and intends to do so for the New England
Hydro Projects), but will remain responsible for management, will
direct or oversee the contractor and will determine operating
policies, capital expenditures and repair and maintenance
schedules.
Accordingly, the Trust will not be and does not intend to hold
itself out as a non-operating investor in Projects, although it
may make such investments if warranted. Further, the Trust does
not anticipate that more than 40% of its assets, as explained at
Current Legal Status of the Trust -- the 1940 Act below, will be
invested in investment securities for purposes of the 1940 Act or that it
will be unable to qualify under an exemptive rule discussed
there. If the Conversion is approved and 50% of the New England
Hydro Projects is purchased, almost 100% of the Trust's assets
(other than cash or U.S. Government securities representing funds
awaiting investment) will be invested in Projects operated by the
Trust itself or together with Ridgewood Power V. The Trust
expects that the remaining funds eventually will be invested
primarily in Projects it operates. Finally, even if the Trust
were deemed to be either holding itself out as an investor in
securities or were to have more than 40% of its assets invested
in investment securities, it believes that it is and will be primarily
engaged in operating independent power Projects and thus will not
be an investment company.
Thus, given these developments, the Trust believes that it will
not be required to register as an investment company and thus
there is no continuing need for it to maintain its election to be
a business development company as an alternative.
Amendment to Declaration
The Conversion would be effected by amending the Declaration and
by filing a withdrawal of election to be a business development
company with the Commission. The Trust anticipates that it will
do so as soon after the Tabulation Date as possible. The text of
the amendment to the Declaration is attached as Exhibit A.
In summary, the amendment authorizes the Trust to withdraw the
business development company election. It also defines a
"Ridgewood Program Transaction" as a transaction with a Ridgewood
Program, an entity controlled by a Ridgewood Program or Programs,
or an entity in which a Ridgewood Program or Program has
invested, that would otherwise be prohibited by the 1940 Act.
The Amendment states that after the Conversion, Ridgewood Program
Transactions will not be subject to any provision of the 1940 Act
or rules thereunder that would restrict the Trust or entities the
Trust controls or has invested in from entering into Ridgewood
Program Transactions. Instead, a Ridgewood Program Transaction
must be approved either by the Managing Shareholder and a
majority of the Independent Trustees, or by a majority of the
Independent Trustees and a Majority of the Investors. No express
standards for approval are specified, although the Managing
Shareholder and the Independent Trustees are subject to the
fiduciary requirements of Delaware law in making their decisions.
Under Delaware law, unless such transactions are entirely fair
to the Trust, a court may void the transaction or order other
relief.
The amendment also requires the Trust to continue to comply with
all other requirements of the 1940 Act as if the Trust continued
to be a business development company, except that the Trust would
not be required to file any reports required of business
development companies with the Commission or any other regulatory
agency. With regard to the requirements that the Trust will
continue to adhere to, the Trust will not be able to request
exemptive relief from or to take actions requiring approval by
the Commission, and the Commission will not have the ability
to regulate the Trust under the 1940 Act, because the Trust
will no longer be subject to the
Commission's authority over business development companies. This
means that the Trust will not be able to obtain relief from
restrictions on business development companies that it might (or
might not) otherwise obtain if the Conversion were not
undertaken. The Trust does not believe that this inability will
have any material adverse effect on the Trust, although there can
be no assurance that future events would not make such
relief desirable.
The requirements of the 1940 Act that the Trust will promise
to comply with, and those that it will not be required to
follow, are listed in Exhibit C to this Proxy Statement.
Copies of the Declaration of Trust reflecting all changes
proposed by this Proxy Statement are available from the Trust
without charge on request by any Investor. Requests should be
made to the Trust at 947 Linwood Avenue, Ridgewood, New Jersey
07450-2939, Attention: Secretary, or by telephone to the Trust
at (201) 447-9000 during normal business hours.
Effects of Conversion
The Conversion would end for the Trust, for its
subsidiaries and for the companies in which it invests the
following prohibitions on Ridgewood Program Transactions,
which so long as the Trust remains a business development
company can only be lifted by an order of the Commission:
a. purchases of property from other Ridgewood
Programs or companies they control or invest in.
b. sales of property to other Ridgewood Programs or
companies they control or invest in, except for Investor
Shares in some cases.
c. loans to other Ridgewood Programs or companies they
control or invest in.
d. acting as a joint or joint and several participant
in any transaction or venture with other Ridgewood Programs
or companies they control or invest in, if the Trust may
have a less advantageous position than other participants
(although a joint enterprise is permissible if no affiliate
or insider has a financial interest in a party to the
transaction and the Trust or its investees do not commit
more than 5% of their total assets to the transaction).
For the Commission to waive any of these prohibitions
in its discretion, it must find that the transaction's terms
are reasonable, fair, not overreaching, consistent with the Trust's
investment policy and consistent with the general purposes of the
1940 Act.
After the Conversion, the Trust or its subsidiaries or companies in which it
invests may effect any of these transactions, so long as at least a
majority of the Independent Trustees (or a Majority of the Investors)
approve the transaction. The standards applicable to the Commission's
orders will not apply to the Independent Trustees' decisions, although
under Delaware law the transaction must be "entirely fair" to the Trust.
In contrast, the prohibitions listed in clauses a-d above will continue
to apply to transactions with persons related to the Trust other than
Ridgewood Programs and companies controlled by or invested in by Ridgewood
Programs.
In particular, the Managing Shareholder, Ridgewood Power Management
Corporation ("Ridgewood Management"); other Affiliates; officers, directors
and employees of the Trust, the Managing Shareholder and Ridgewood
Management; persons owning 5% of the Investor Shares; or any affiliate or
affiliated person of the foregoing, will be prohibited from entering into
any transaction listed in clauses a-d above, except for certain employee
benefit transactions and other exceptions listed in Section 57 of the
1940 Act.
The Conversion would also end supervision of the Trust by the Commission
under the 1940 Act and thus would end the Commission's ability to bring
administrative or court proceedings against the Trust and its Affiliates
under the 1940 Act. The Commission and Investors will retain rights of
action under laws other than the 1940 Act; and Investors will have
contractual rights of action for breach by the Trust of the provisions
of the 1940 Act that it is agreeing to continue to comply with.
The Conversion will not affect the status of the Trust as a business
trust
organized under Delaware law. The Trust's Investor Shares will continue
to be registered under the Securities Exchange Act of 1934, which requires
the Trust to file annual, quarterly and current reports (10-K, 10-Q and 8-K)
and to comply with the proxy solicitation rules, short-swing insider trading
rules, tender offer rules and other rules applicable to "public companies"
generally.
Independent Trustees
As part of the Conversion, transactions with affiliated persons
will require the approval of at least a majority of the
Independent Trustees. There must be at least two Independent
Trustees and the number may be increased to not more than eight
by action of the Managing Shareholder and the Independent
Trustees acting together as the "Board" of the Trust.
The Independent Trustees both before and after the Conversion must not be
"interested persons" of the Trust as defined by the 1940 Act. Interested
persons are
i. any person directly or indirectly owning, controlling or having
the power to vote 5% or more of the outstanding voting securities of
the Trust;
ii. any person 5% or more of whose outstanding voting securities
are directly or indirectly owned, controlled or held with power to vote
by the Trust;
iii. any person directly or indirectly controlling, controlled by or
under common control with the Trust,
iv. any officer, director, partner, copartner or employee of the Trust;
v. any investment adviser of or any member of an advisory board of
the Trust;
vi. any member of the immediate family of any natural person listed above;
vii. any person, partner or employee of any person who at any time
since the beginning of the last two completed fiscal years of the Trust
has acted as legal counsel for the Trust;
viii. any broker or dealer registered under the Securities Exchange Act
of 1934 or any affiliated person of such a broker or dealer;
ix. any natural person who the Commission by order shall have determined
to be an interested person, by reason of having had at any time since the
beginning of the last two completed fiscal years of the Trust, a material
business or professional relationship with the Trust or the principal
executive officer of the Trust, or with any other investment company having
the same investment adviser or principal underwriter or with the principal
executive officer of such other investment company;
x. any person having the relationships described in clauses i.-ix.
with any investment adviser of or principal underwriter for the Trust;
except that no person is an interested person of the Trust solely by
reason of being a member of its Board or an advisory board or an owner of
its securities, or because he or she is a member of the immediate family of
such a person.
Under the current Declaration of Trust, the consent of a majority
of the Independent Trustees is required for certain actions by
the Trust specified in the 1940 Act: approval of the Management
Agreement with the Managing Shareholder, appointment of the
independent accountants of the Trust, certain transactions with
persons having distant relationships with the Trust, and sales of
shares below net asset value. The Independent Trustees have no
authority to control the Managing Shareholder as to other
matters, which include investment and divestiture decisions and
most aspects of the management and administration of the Trust
and Trust Property, although they may supervise and review the
Managing Shareholder's actions "to the extent necessary to carry
out the fiduciary duties of the Board's members" under the 1940
Act. These provisions will be preserved under the Conversion,
because the Declaration will require the Board and the
Independent Trustees to perform duties as if the Trust continued
to be a business development company under the 1940 Act as in
effect from time to time.
In addition, any new Ridgewood Program Transaction would require
the approval of at least a majority of the Independent Trustees
or the vote of a Majority of the Investors, in lieu of the
current requirement for Commission approval. See -- Amendment to
Declaration, above.
The Independent Trustees would continue to meet at least
quarterly and would be provided with all information concerning
the Trust's operations that they would require or request. Their
compensation would remain fixed at $5,000 per year, plus actual
out-of-pocket expenses incurred.
Federal Income Tax Consequences
The Conversion will not have any federal income tax consequences
to the Investors.
Absence of Dissenters' Rights
There are no dissenter's rights with respect to the Conversion,
which means that Investors who do not grant their consent to the
Conversion do not have the right to receive payment of the fair
value of their shares.
No Additional Anti-Takeover Effects
The Conversion will not cause the Trust to be subject to any
business combination statute limiting the ability of corporations
to merge with or enter into transactions involving interested
stockholders and does not contain provisions making a change of
control of the Trust more difficult.
Vote to Approve
Approval of the Conversion requires the affirmative vote of the
holders of at least a majority of all of the issued and
outstanding Investor Shares, excluding Investor Shares owned by
the Managing Shareholder and its Affiliates. The Managing
Shareholder will vote the one Investor Share owned by it in favor
of the Conversion.
THE MANAGING SHAREHOLDER RECOMMENDS A VOTE "FOR" APPROVAL OF THE
CONVERSION.
CURRENT LEGAL STATUS OF THE TRUST
The 1940 Act
The Trust is a business development company under the 1940 Act
and has registered its Investor Shares under the Securities
Exchange Act of 1934, as amended, which requires the Trust to
file annual, quarterly and other reports (such as Forms 10-K,
10-Q and 8-K) and to be subject to the proxy rules and other
regulatory requirements of that act that are applicable to the
Trust. The Trust has no intention to and will not permit the
creation of any form of a trading market in the Shares in
connection with this registration. The registration of the
Trust's Investor Shares under the Securities Exchange Act of 1934
will be unaffected by the Conversion and it will continue to file
the reports required under that Act.
As a business development company, the Trust is a closed-end
company (defined by the 1940 Act as a company that does not offer
for sale or have outstanding any redeemable security) that is
regulated under the 1940 Act only as a business development
company. The 1940 Act requires that a majority of the Managing
Shareholder and Independent Trustees be persons other than
"interested persons" as defined in the act. Under the 1940 Act,
approval of both the Independent Trustees and the Commission is
required for certain transactions of business development
companies involving certain closely affiliated persons.
Accordingly, the Trust currently is required to obtain an
exemptive order of the Commission permitting investments in one
or more of the same Projects or Project development companies by
the Trust and other entities sponsored or managed by the Managing
Shareholder, including the Ridgewood Programs, or with affiliates
of the Managing Shareholder. A business development company may
not change the nature of its business so as to cease to be, or to
withdraw its election as, a business development company unless
authorized to do so by at least a majority vote of its
outstanding voting securities.
The 1940 Act restricts the kind of investments a business
development company may make. A business development company may
not acquire any asset other than a "Qualifying Asset" unless, at
the time the acquisition is made, Qualifying Assets comprise at
least 70% of the company's total assets by value. The principal
categories of Qualifying Assets that are relevant to the Trust's
proposed activities are:
(1) Securities issued by "eligible portfolio
companies" that are purchased by the Trust from the
issuer in a transaction not involving any public
offering (i.e., private placements of securities). An
"eligible portfolio company" (a) must be organized
under the laws of the United States or a state and have
its principal place of business in the United States;
(b) may not be an investment company other than a small
business investment company licensed by the Small
Business Administration and wholly-owned by the Trust
and (c) may not have issued any class of securities
that may be used to obtain margin credit from a broker
or dealer in securities. The last requirement
essentially excludes all issuers that have securities
listed on an exchange or quoted on the National
Association of Securities Dealers, Inc.'s national
market system, along with other companies designated by
the Federal Reserve Board. Except for temporary
investments of the Trust's available funds,
substantially all of the Trust's investments are
expected to be Qualifying Assets under this provision.
(2) Securities received in exchange for or distributed
on or with respect to securities described in paragraph
(1) above, or on the exercise of options, warrants or
rights relating to those securities.
(3) Cash, cash items, U.S. Government securities or
high quality debt securities maturing not more than one
year after the date of investment.
A business development company must make available "significant
managerial assistance" to the issuers of Qualifying Assets
described in paragraphs (1) and (2) above, which may include
without limitation arrangements by which the business development
company (through its directors, officers or employees) offers to
provide (and, if accepted, provides) significant guidance and
counsel concerning the issuer's management, operation or business
objectives and policies.
In addition to the requirement that 70% of the assets be invested
in Qualifying Assets, the staff of the Commission has a policy requiring
that at least 50% of a business development company's total assets be and
remain invested in Qualifying Assets other than those described in paragraph
(3) above not later than two years after the close of the company's initial
offering of securities or two and one-half years after its organization.
The Trust currently has more than 50% of its total assets so invested.
A business development company also must be organized under the
laws of the United States or a state, have its principal place of
business in the United States and have as its purpose the making
of investments in Qualifying Assets described in paragraph (1)
above.
Although the Trust does not anticipate that it will incur
material debt and is prohibited under the Declaration in certain
cases from issuing additional classes of securities without
approval from a majority of the outstanding Shares, a business
development company is permitted under specified conditions to
issue multiple classes of indebtedness and classes of equity
securities senior to the Shares if its asset coverage (as defined
in the 1940 Act) is at least 200% immediately after each
issuance. Although such actions are not anticipated, in the
event the Trust were to issue publicly distributable debt or
senior equity securities, no distribution to Shareholders would
be permitted by the Trust unless the Trust were to meet the
applicable asset coverage ratios at the time of the distribution.
The Trust is also permitted to borrow for temporary or emergency
purposes an amount up to 5% of its total assets.
If the Trust were not a business development company, but met the
definition of an investment company described below, it would be
required to register as an investment company under the 1940 Act
in order to continue operation.
The 1940 Act in relevant part defines an investment company as an
organization that either (a) is or holds itself out as being or
that will be primarily engaged in the business of investing in
securities, or (b) is engaged or proposes to engage in the
business of investing in securities and that owns or proposes to
own "investment securities" (securities other than U.S.
government securities and securities issued by majority-owned
operating subsidiaries of the company) in an amount exceeding 40%
of the company's total assets (excluding U.S. government
securities and cash items). An exemptive rule under the 1940 Act
increases the 40% threshold to 45% if no more than 45% of the
company's net income after taxes for the preceding 12 month
period is derived from investment securities (other than those
issued by operating issuers primarily controlled by the company
and through which the company engages in a business other than
investing or trading in securities).
As mentioned above, the Trust believes that it is not and is not
likely to ever become an investment company.
Investment Policies
The Trust's current investment policies will not be changed if
the Conversion is approved. As provided by the Declaration of
Trust, the Trust will continue to invest in the independent
electric power, energy and environmental facilities industries.
Its investments may include, but are not limited to, investments
in the following types of facilities:
cogeneration facilities producing both electricity and heat
energy;
other independent power generation facilities producing
electricity and other forms of energy from natural gas, oil,
coal, hydropower, geothermal or waste resources, or from other
technologies (excluding nuclear facilities, however);
other power-related products or services, or other non-utility
facilities that are involved in or related to the production,
transmission or distribution of electrical power, heat energy,
or other energy or environmental products; and
pre-development or preparatory activities for the evaluation,
planning, permitting and development of the facilities in
which it may invest.
The Trust focuses its investment efforts in two areas: (i) the
acquisition of controlling equity interests in smaller existing
electric power Projects (with purchase prices of up to $10
million), (ii) the acquisition of equity interests in larger
electric Projects together with other Ridgewood Programs or with
well capitalized co-participants), in which case control of the
Projects is shared with or held by the other participants. In
each case, the Trust seeks to make substantial equity investments
that may provide long-term returns. The Trust does not invest in
Projects or Project securities with the aim of trading those
securities.
In investing in smaller Projects, the Trust emphasizes equity
investments as a means of reducing leverage risks, transaction
costs associated with negotiating debt finance and required
Project reserves for debt service and amortization. If at a
future date additional capital were to be required, the Trust
believes that it would be easier and more economical at that time
to obtain debt finance for a Project with a substantial equity
component and an operating history. The Trust believes that
investing in existing Projects or Projects with short development
cycles reduces delays between the Investors' commitments of funds
and the receipt of cash flow from Projects.
In investing in larger Projects, the Trust seeks to make equity
investments with other well-capitalized entities, which may
include other Ridgewood Programs or industry participants such as
unregulated subsidiaries of electric utilities (which may not own
more than 50% of an Independent Power Project). The Trust, in
seeking to obtain pre-tax cash flow from a Project, is not
primarily concerned with reported earnings or the tax treatment
of its income or investment. Accordingly, the Trust encourages
the other participants to enter into arrangements by which the
Trust obtains a disproportionate share of cash flow while other
participants are allocated higher amounts of accounting earnings
or tax benefits. Thus the Trust's participation in the larger
Project may enhance objectives of other participants. Further,
the Trust generally will not demand that it operate or control a
larger Project, which may make it an attractive participant. In
such cases, the Trust will seek to require the manager to be
compensated on a performance-based or subordinated basis so as to
encourage the manager to enhance the Trust's returns.
The Trust typically invests in securities that do not and that
are not expected to have any public market and substantially all
of its investments are expected to be in the form of limited
liability interests in "pass-through" entities. Typically, the
Trust will be a limited partner in a limited partnership that
owns a Project in which it invests. The Trust may invest through
limited liability companies or other entities affording it
limited liability as may be desirable. If an unaffiliated person
is not the general partner for the partnership, the Trust will
organize a corporation to act as the general partner (which will
usually have a 1% interest in the partnership) and the Trust will
own the stock of that corporation.
The Managing Shareholder searches for and evaluates prospective
investments for the Trust. It actively participates in the
market for investments through its own personnel and independent
consultants. Project investigation is undertaken by its own
engineering staff, together with reports from independent
engineering, legal, investment banking and other professionals.
Ownership of Securities by Directors, Executive Officers and
Certain Beneficial Owners
To the knowledge of the Trust, no person owns of record or
beneficially more than 5% of the Trust's Investor Shares. The
Managing Shareholder owns the only Management Share.
The following information pertains to the Investor Shares of the
Trust beneficially owned, directly or indirectly, by the Managing
Shareholder, the Independent Trustees, and executive officers
individually and by all those persons as a group. Each person
named has an address c/o the Trust at 947 Linwood Avenue,
Ridgewood, New Jersey 07450-2939.
Name Amount and nature Percent
of beneficial
ownership
(shares)
Managing Share-
holder and
Affiliates (a) Ridgewood Power 1.00 .2
Corporation
Independent John C. Belknap 0 0
Trustees Richard D. Propper, M.D. 0 0
All current
directors and
executive
officers as a
group (8) (a): 1.00 .2
(a) Mr. Swanson is the sole stockholder and director of the Managing
Shareholder and is deemed to beneficially own all Investor Shares owned by it.
Voting Requirements
The Declaration of Trust requires the consent of more
than 50% in interest of all of the Investors,
excluding the Managing Shareholder and persons
affiliated with the Managing Shareholder, in order to amend
the Declaration. Amendment of the Declaration is necessary
for the Conversion.
Section 58 of the 1940 Act also requires the consent of the
holders of a "majority" of the Trust's voting securities to
withdraw the business development company election. Section
2(a)(42) of the 1940 Act defines "majority" in the
alternative: either 67% of the securities present at
the meeting if at least half of the voting securities
are represented, or more than 50% of the voting
securities, whichever is less.
The Managing Shareholder has undertaken to vote in favor of the
Conversion and it is the only holder of voting securities
which is not allowed to vote under the Declaration. Thus,
if more than 50% in interest of all other Investors, as
required by the Declaration, consent to the Conversion, then more than
50% in interest of all holders of voting
securities will have consented and the statutory requirement will be met.
OTHER INFORMATION
Cost of Consent Solicitation
The cost of preparing, assembling and mailing this Proxy
Statement, the Notice of Solicitation and form of consent will be
borne by the Trust. The Trust will request nominees and
fiduciaries to forward the proxy material to the beneficial
owners of the stock held of record by such persons, and the Trust
will reimburse them, upon request, for reasonable expenses
incurred in connection therewith.
Other Matters
No other business is to be presented pursuant to this Proxy
Statement or the solicitation of consents.
Shareholder Proposals
No annual meeting of the Trust is provided for by the
Declaration and the Trust does not currently
contemplate that any special meeting of or further
consent solicitation of Shareholders will occur. In
the event that a Shareholder meeting or consent
solicitation were to occur in the future, Shareholders
wishing to present proposals for inclusion in proxy
materials may do so within a reasonable time prior to
the record date of the consent solicitation or special
meeting. Inclusion of proposals is subject to federal
laws and regulations governing proxy solicitations,
which give the Trust in certain cases the right to
refuse to include a proposal. There is no assurance
that any proposal, if submitted, will be included in
proxy materials or will be presented for consideration
by Investors.
Transfer Agent and Shareholder Information
The transfer agent for the Common Stock is the Managing
Shareholder at 947 Linwood Avenue, Ridgewood, New Jersey 07450-
2939 and its telephone number is (201) 447-9000. For information
concerning the Trust, please contact the Assistant Secretary of
the Trust, Mary Louise Olin, at the Trust's principal executive
offices.
On Behalf of the Managing Shareholder:
Robert E. Swanson, President
Ridgewood, New Jersey September 9, 1996
EXHIBIT A
AMENDMENT NO. 1
TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
RIDGEWOOD ELECTRIC POWER TRUST IV
This AMENDMENT NO. 1 (the "Amendment") to the Amended
and Restated Declaration of Trust, dated as of August 31,
1995, of Ridgewood Electric Power Trust IV, a Delaware
business trust (the "Trust"), is made by Ridgewood Energy
Holding Corporation, a Delaware corporation which is the
Corporate Trustee of the Trust (the "Corporate Trustee"), as
of ____________, 1996.
RECITALS
The Corporate Trustee has entered into the Amended and
Restated Declaration of Trust, dated as of August 31, 1995
(the "Prior Declaration") for the benefit of the persons
admitted as Investors under the terms of the Prior
Declaration. Capitalized terms not defined in this
Amendment shall have the meanings assigned to them by the
Prior Declaration. The Prior Declaration, as modified by
this Amendment, is referred to as the "Declaration."
The Managing Shareholder has proposed to the Investors
that the Trust withdraw its election to be a business
development company under the 1940 Act and has submitted
this Amendment to authorize that withdrawal. The Managing
Shareholder also proposed that after the withdrawal of the
election the Trust continue to comply with all requirements
of the 1940 Act applicable to business development
companies, except for the prohibitions on transactions with
investment programs sponsored by the Managing Shareholder,
which would be governed by the provisions of this Amendment.
This Amendment was submitted to the Investors for their
consent on September 9, 1996 and the consents were tabulated
on _____________, 1996, at which time the Trust determined
that this Amendment had received the consent of the
Investors required under Sections 15.8(b) and 15.2(b) of the
Prior Declaration.
NOW THEREFORE, pursuant to the proposal of the Managing
Shareholder and the consent of a Majority of the Investors,
the Corporate Trustee adopts this Amendment to the Prior
Declaration as follows:
A. Authorization to Withdraw Business Development
Company Election.
The Prior Declaration is amended by adding the
following Section 1.10 after the existing Section 1.9:
1.10. Withdrawal of Business Development
Company Election. On and after the date of the
Amendment adopting this Section 1.10, the Trust is
authorized, empowered and directed to withdraw its
prior election to operate as a business
development company under the 1940 Act, effective
upon the filing of a notice of withdrawal with the
Securities and Exchange Commission.
B. Authorization to Enter into Transactions with other
Ridgewood Programs.
Section 1.8(i) of the Prior Declaration (empowering the
Trust to do business as a business development company) is
amended by replacing it in its entirety with the following:
(i) To engage in Ridgewood Program
Transactions, subject to the requirements of
Section 12.5(c)(iv).
Article II of the Prior Declaration is amended by
adding the following definition:
"Ridgewood Program Transaction" -- A
"Ridgewood Program Transaction" is any transaction
with either (a) an investment program sponsored by
the Managing Shareholder or an affiliate of the
Managing Shareholder (a "Ridgewood Program") or
(b) an entity controlled by a Ridgewood Program or
Programs or an entity in which a Ridgewood Program
has invested, that if the Trust were a business
development company would be prohibited for the
Trust or entities in which the Trust invests by
Sections 57(a) or 57(d) of the 1940 Act or rules
thereunder, as in effect from time to time.
The Prior Declaration is amended by adding the
following Section 12.5(c)(iv) after the existing Section
12.5(c)(iii):
(iv) Any Ridgewood Program Transaction.
C. Covenant to Continue Compliance with Other Business
Development Company Requirements.
The Prior Declaration is amended by adding the
following Section 9.7 after the existing Section 9.6:
9.7. Compliance with Certain Business
Development Company Requirements. Except as
provided in this Section 9.7, the Trust shall
comply with each provision of the 1940 Act
applicable to business development companies and
the rules thereunder, all as in effect from time
to time, as if the Trust continued to be a
business development company.
(a) Notwithstanding the foregoing, the
Trust in entering into Ridgewood Program
Transactions shall not be required to comply with
any provision of Sections 57(a)-(e) of the 1940
Act, or any other provision of the 1940 Act or
rule or order thereunder (other than Sections
57(k) and (l)) that would restrict the Trust from
entering into Ridgewood Program Transactions.
(b) The Trust shall not be required to
prepare and file with the Securities and Exchange
Commission or any other regulatory or self-
regulatory agency any report, certification,
finding or other document that would otherwise be
required under the 1940 Act, and shall not be
required to comply with Section 54 of the 1940
Act. Notwithstanding the foregoing, the Trust
shall maintain the books and records required of
business development companies under that Act.
(c) In the event that any or all of the
provisions of the 1940 Act applicable to business
development companies are modified or repealed,
such modification or repeal shall apply to the
Trust's obligations under this Section 9.7
concurrently. If any modification to the 1940 Act
would create multiple classes of business
development company or would otherwise create a
choice among differing regulatory requirements,
the Board shall determine which class or set of
regulatory requirements shall apply to the Trust.
(d) References in this Declaration to
rights, duties, obligations or other matters
prescribed by the 1940 Act shall mean rights,
duties, obligations or other matters arising under
this Section 9.7, to the extent it requires the
Trust to comply with the 1940 Act or rules
thereunder.
(e) The sections of the 1940 Act with which
the Trust will continue to comply and those with which it will
no longer comply are as follows:
[list attached as Exhibit C to this Proxy Statement]
D. Conforming Changes to the Declaration
Sections 1.2(c) (authorizing the business development
company election) and 12.4(h) (empowering the Managing
Shareholder to take actions to maintain business development
company status) of the Prior Declaration are repealed:
E. Construction of Amendment.
The Managing Shareholder has power to construe this
Amendment and the effects of the withdrawal of the business
development company election and to act upon any such
construction. Its construction of those matters and any
action taken pursuant thereto by the Trust or a Managing
Person in good faith shall be final and conclusive.
IN WITNESS WHEREOF, the Corporate Trustee has executed
this Amendment as of the ___ day of __________, 1996.
RIDGEWOOD ENERGY HOLDING
CORPORATION
By________________________
Name:___________________
Title:____________________
EXHIBIT B
DESCRIPTION OF NEW ENGLAND HYDRO PROJECT
ACQUISITION
Three newly organized limited partnerships that are
beneficially owned by the Trust have entered into definitive
agreements with Consolidated Hydro, Inc. ("CHI") and its
affiliates for the purchase of interests in 19 small
hydroelectric Projects located in Maine and New Hampshire
with a total capacity of 16.75 megawatts. The terms of the
agreement, including the possible participation of Ridgewood
Electric Power Trust V, a program sponsored by the Managing
Shareholder ("Ridgewood Power V"), are summarized at
Proposal to Permit Investments . . . -- New England Hydro
Projects in the Proxy Statement. Closing of the initial 50%
purchase in the Projects by the Trust and the purchase of
the remaining 50% interest in the Projects by either the
Trust or Ridgewood Power V will be subject to approval of
the Conversion and fulfillment of numerous other conditions
and governmental requirements. If the investigation and
other elements of the transaction are satisfactorily
resolved, the Managing Shareholder expects that the initial
purchase will close in September 1996 and that the remaining
50% interest will be purchased by Ridgewood Power V (if the
Conversion is approved in a timely manner) or by the Trust
in the fourth quarter of 1996.
The capacities of the plants range from .25 to 1.49
Megawatts. The plants sell their output under existing
long-term power purchase contracts that expire between 2007
and 2023. Most of the plants operate under hydroelectric
licenses granted by the Federal Energy Regulatory Commission
("FERC"). Five plants, with a total capacity of 3.26
Megawatts, have licensing proceedings pending. Eight
plants (8.22 Megawatts) have licenses expiring between 2019
and 2024. The remaining seven plants (4.27 Megawatts), do
not require FERC licensing.
Major operational and financial issues for these Projects
include climatic variations such as droughts that can reduce
output or floods, which can damage the Projects, the
advanced age of many of the structures and equipment, and
license grant or renewal conditions, which may include
environmental restrictions on the use of river flow (and
thus output) or requirements for construction of fish
ladders or other enhancements for aquatic habitat. As part
of its investigation, the Managing Shareholder is attempting
to determine capital requirements for repair, rehabilitation
and output enhancements.
CHI will provide operating and maintenance services for the
New England Hydro Projects after the purchases under the
direction of the Managing Shareholder. CHI will be entitled
to reimbursement of its direct costs and expenses, an annual
management fee of $295,000, an annual fee for indirect
administrative costs of $125,000 and an annual performance fee of up to
$150,000 if defined performance targets are met.
There is no assurance that the proposed transaction or any
variant thereof will occur, that any purchase will be
economically advantageous to the Trust or that the Trust
will acquire any interest in any of the hydroelectric
plants. In the Managing Shareholder's experience, the
complex and protracted process of investigating potential
acquisitions, negotiating terms with the seller and in some
cases financial institutions, obtaining necessary
governmental permits and consents, and matching the
transaction's terms to the Trust's needs, which are
dependent upon the entire asset portfolio of the Trust and
thus shift as other acquisition opportunities change, cause
frequent and unpredictable changes in the terms of the
transaction and the probability of closing. Investors must
understand that the proposed acquisition may not close or
that the final terms and conditions of the transaction may
differ from those described here or elsewhere, regardless of
their vote on the Conversion.
EXHIBIT C
POST-CONVERSION COMPLIANCE WITH THE 1940 ACT
After the Conversion, the Trust agrees with the Investors to continue
to comply with the following sections of the 1940 Act:
Section 55 (specifying types of assets in which the Trust may invest)
Section 56 (requiring majority of directors to be persons who are not
interested persons)
Section 57 (restricting transactions with related persons) except for
Ridgewood Program Transactions
Section 59 (to the extent applying Sections 1, 2, 3, 4, 5, 6, 9, 10(f),
15(a), (c) and (f), 16(b), 17(f)-(j), 19(a), 20(b), 32(a) and (c), 34,
35(a)-(c), 36, 38(a) and (c), 39, 47, 50, 51, 52 and 53, but excepting
the provisions described below Section 60 (applying certain Section 12
restrictions on investment companies Section 61 (applying Section 18
limitations on capital structure)
Section 62 (applying certain Section 21 limitations on loans to certain
affiliates)
Section 63 (applying certain Section 23 limitations on distribution and
repurchase of the Trust's securities)
Section 64 (applying Section 31 requirements as to books and records
and authorizing the Commission to prescribe risk statements)
Section 65 (applying Section 48 provisions)
The Trust is not agreeing with the Investors to comply after the Conversion
with the following statutory provisions applying to business investment
companies:
Section 33 (requiring filing of legal documents in derivative lawsuits with
the Commission)
Section 35(d) (allowing the Commission to challenge names of business
development companies as being misleading)
Section 36 (to the extent empowering the Commission to bring actions for
breach of fiduciary duty, but the Trust covenants that Investors shall
continue to have the right to bring an action for such breach)
Section 37 (making larceny or embezzlement of Trust funds a federal crime,
although such actions will remain crimes under other federal and state laws)
Section 38(b) (governing certain filings with the Commission)
Section 40 (procedures for orders and proceedings)
Section 41 (hearing procedures)
Section 42 (power of Commission to investigate and bring legal actions)
Section 43 (procedures for court appeals from Commission)
Section 44 (federal court jurisdiction)
Section 45 (public status of documents filed with Commission)
Section 46 (annual reports of Commission)
Section 49 (criminal penalties)