SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
RIDGEWOOD ELECTRIC POWER TRUST III
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Name of Subject Company
RIDGEWOOD ELECTRIC POWER TRUST III
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(Name of Persons Filing Statement)
INVESTOR SHARES OF BENEFICIAL INTEREST
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(Title of Class of Securities)
[ ]
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(CUSIP Number of Class of Securities)
Daniel V. Gulino, Esq.
Senior Vice President and General Counsel
Ridgewood Electric Power Trust III
c/o Ridgewood Power LLC
947 Linwood Avenue
Ridgewood, New Jersey 07450
Telephone: (201) 447-9000
Facsimile: (201) 447-0474
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(Name, address, and telephone numbers of person authorized
to receive notices and communications on behalf of
the persons filing statement)
Copies to:
Douglas S. Eakeley, Esq. and
Peter M. Suzuki, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telephone: (973) 597-2500
Facsimile: (973) 597-2400
[ ] Check box if the filing relates solely to preliminary communications made
before commencement of a tender offer.
ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is Ridgewood Electric Power Trust III (the
"Trust"). The Trust was organized as a Delaware business trust on December 6,
1993. The address of the principal executive offices of the Trust is c/o
Ridgewood Power LLC, 947 Linwood Avenue, Ridgewood, New Jersey 07450-2939, and
the telephone number of the principal executive offices of the Trust is (201)
447-9000. The title of the class of equity securities to which this
Solicitation/Recommendation Statement (the "Statement") relates are investor
shares of beneficial interest in the Trust (the "Shares"). There are 391.8444
Shares outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The name, business telephone number and business address of the Trust, which is
the person filing this Statement, is set forth in Item 1 above.
This Statement relates to the tender offer by Golden State Financial (the
"Bidder") to purchase up to 25 Shares at a price of $30,000 per Share on a
"first received, first buy" basis with an October 11, 2000 termination date (the
"Offer"). The Offer is set forth in Bidder's letter dated September 10, 2000,
addressed to Holders of Ridgewood Electric Power Trust III, the Offer is
attached as Exhibit A hereto and incorporated by reference. To the best
knowledge of the Trust, the Bidder has not filed a Schedule TO in connection
with the Offer. The Bidder's letter of September 10, 2000, states that its
address is PO Box 2233, Orinda, CA, 94563-2233.
ITEM 3. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS, AND AGREEMENTS
Certain agreements, arrangements or understandings between the Trust and its
executive officers, managing shareholder, trustees, and affiliates are described
in the Trust's Annual Report on Form 10-K for the fiscal year ended December 31,
1999 (the "Annual Report") under the following items: "Item 10. Directors and
Executive Officers of the Registrant," "Item 11. Executive Compensation," "Item
12. Security Ownership of Certain Beneficial Owners and Management," "Item 13.
Certain Relationships and Related Transactions," and "General Development of the
Business" found in Item 1. Business. A copy of the pertinent portions of the
Annual Report is attached as Exhibit B hereto and such portions are incorporated
herein by reference.
Except as discussed herein or incorporated herein by reference, to the best
knowledge of the Trust, as of the date hereof there exists no other material
agreement, arrangement or understanding and no actual or potential conflict of
interests between the Trust or its affiliates and (i) the Trust's executive
officers, managing shareholder, trustees or affiliates, or (ii) the Bidder or
its executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
The managing shareholder of the Trust considered the terms of the Offer and
determined that the offer was so violative of the law for a proper tender offer
under Section 14(d) of the Securities Exchange Act of 1934, that the managing
shareholder wrote a cease-and-desist letter to the Bidder demanding that the
Offer be withdrawn or conformed to the applicable rules governing tender offers,
discussed in Item. 8 herein. The managing shareholder found the Offer to be
coercive in its terms and manipulative in its failure to comply with applicable
laws. Accordingly, the managing shareholder recommended to the holders of Shares
that they reject the Offer and not tender any Shares to the Bidder. A copy of
the letter to holders of Shares communicating this position is attached as
Exhibit C hereto and is incorporated herein by reference.
In reaching its determination and recommendation, the managing shareholder
considered numerous factors, including, without limitation, the paucity of
information provided by the Bidder regarding itself and its financial resources
, the possible adverse tax consequences to holders of Shares that could be
caused by a reclassification of the Trust as a publicly traded partnership if
more than 2% of the Trust's shares are sold in any 12 month period, and the
possible regulatory problems that could be created if the sale of Shares to the
Bidder violates ownership restrictions under the Public Utilities Regulatory
Procedures Act of 1978.
The managing shareholder believes that the Offer is coercive in that: o the
Offer purports to be made on a "first received, first buy" basis, rather than on
a pro rata basis; o the Offer does not describe or offer any withdrawal rights;
and o the Bidder has not filed a Schedule TO or furnished holders of the Shares
with basic information regarding the Offer.
The managing shareholder believes that such coercive acts are also manipulative
and violative of basic aspects of the Securities Exchange Act and the rules
promulgated thereunder.
The foregoing discussion of the information and factors considered by the
managing shareholder is not intended to be exhaustive but addresses all of the
material information and factors considered by the managing shareholder in its
consideration of the Offer. In view of the variety of factors and the amount of
information considered, the managing shareholder did not find it practicable to
provide specific assessments of, quantify or otherwise assign any relative
weights to the specific factors considered in determining to recommend that the
holders of Shares reject the Offer. Such determination was made after
consideration of all the factors taken as a whole.
To the best of the Trust's knowledge after reasonable inquiry, none of the
Trust's executive officers, the managing shareholder, or trustees currently
intends to tender to the Bidder the Shares held of record or beneficially owned
by such persons.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
To date, the Trust has not employed, retained or compensated any person to make
solicitations or recommendations to the holders of Shares with respect to the
Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
There have been no transactions in the Shares during the past 60 days by the
Trust, or to the best of the Trust's knowledge, by any executive officer,
trustee, affiliate, or subsidiary of the Trust.
ITEM 7. PURPOSES FOR THE TRANSACTION AND PLANS OR PROPOSAL
No negotiation is being undertaken or is underway by the Trust in response to
the Offer which relates to or would result in (1) a tender offer or other
acquisition of the Trust's securities by the Trust, any subsidiary of the Trust,
or any other person; (2) an extraordinary transaction such as a merger,
reorganization or liquidation involving the Trust or any subsidiary of the
Trust; (3) a purchase, sale or transfer of a material amount of assets of the
Trust or any subsidiary of the Trust; or (4) any material change in the present
dividend rate or policy of the Trust, or in the indebtedness or capitalization
of the Trust.
Except for the actions by the managing shareholder described in Item 4 and Item
8, there are no transactions, board resolutions, agreements in principle or
signed contracts entered into in response to the Offer which relate to or would
result in one or more of the matters referred to in the first paragraph of this
Item 7.
ITEM 8. ADDITIONAL INFORMATION
On September 22, 2000, the Trust sent a letter to the Bidder demanding that the
Bidder cease and desist from its unlawful, coercive and manipulative tender
offer practices contained in the Offer; a copy of that letter is attached as
Exhibit D hereto and is incorporated herein by reference.
ITEM 9. EXHIBITS
Exhibit A - Bidder's offer letter dated September 10, 2000.
Exhibit B - Excerpts from Ridgewood Electric Power Trust III Annual
Report on Form 10-K for the period ended December 31, 1999.
Exhibit C - Letter to Holders of Shares dated September 22, 2000
Exhibit D - Letter to Bidder Demanding that the Bidder Cease and Desist
from Unlawful Tender Offer Practices.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
RIDGEWOOD ELECTRIC POWER TRUST III, by
Ridgewood Power LLC, its managing shareholder
By: /s/ Robert E. Swanson
Name: Robert E. Swanson
Title: President
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<PAGE>
EXHIBIT A
Golden State Financial
[Letterhead]
September 10, 2000
Holders of: RIDGEWOOD ELECTRIC POWER TRUST III
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Re: Purchase Offer
Dear Investor:
We are offering you an opportunity to sell your Investor Shares ("Shares") in
Ridgewood Electric Power Trust III (the "Trust"). We are offering to purchase
those Shares for $30,000 / Share. This amount will be reduced by any
distributions declared or distributed by the Trust after September 1, 2000.
This offer is limited to the purchase of up to 25 Shares. We will accept Shares
on a "first-received, first-buy" basis. You will be paid promptly following (I)
the acceptance by us of a valid Agreement of Sale and Transfer, properly
executed by you, and (ii) the transfer of Shares from you as seller to us as
purchaser on the records of the Trust. All accepted sales of Shares will be
irrevocable upon our receipt of your executed Agreement of Sale and Transfer.
Golden State Financial is not an affiliate of the Managing Shareholder or the
Trust.
This offer provides you an opportunity to decide whether of not you want to
continue to e involved with the Trust. You may wish to sell your Shares in the
Trust for any number of reasons including the following:
DESIRE FOR LIQUIDITY - You may have other investment opportunities or other uses
for the funds.
SIMPLIFY TAX REPORTING - Your last K-1 will be for tax year 2000.
FAST, COMMISSION-FREE SALE - There will be no commission charged.
To liquidate your Shares carefully complete the enclosed Agreement of Sale and
Transfer noting the following:
* You must obtain a Medallion Guarantee for your signature (both signatures if
held jointly.
* If the Shares are held in a trust we will need a copy of the front page, the
signature page and the powers of the trustee from the trust agreement.
* If the Shares are held in a retirement account, please provide the name of the
custodian and the account number.
Return completed Agreement in the enclosed envelope
PO Box 2233 o Orinda, CA o 94563-2233
Phone (800) 990-5604 FAX (925)
253-2501
<PAGE>
Golden State Financial
[Letterhead]
Agreement of Sale and Transfer
For Investor Shares In
RIDGEWOOD ELECTRIC POWER TRUST III
Subject to acceptance by Purchaser, the undersigned ("Seller") hereby sells,
assigns, transfers, conveys and delivers (the "Sale") to Golden State Financial
or its designated assignee ("Purchaser"), all of the Seller's rights, title and
interest in Investor Shares ("Shares"), in Ridgewood Electric Power Trust III, a
Delaware business trust ("Trust") being sold pursuant to this Agreement,
Purchase price shall be $30,000 per Share. Payment for such purchase will be
made immediately upon completion of the transfer of Shares from Seller to
Purchaser on the Trust's records.
Such Sale shall include, without limitation, all rights in, and claims to, any
Trust profits and losses, cash distributions, voting rights and other benefits
of any nature whatsoever, distributable or allocable to such Shares under the
Declaration of Trust. The Seller hereby irrevocably constitutes and appoints the
Purchaser as the true and lawful agent and attorney-in-fact for the Seller with
respect to such Shares, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with a Share). Purchaser as
attorney-in-fact shall also have the right to deliver such Shares and transfer
ownership of such Shares on the Trust's books maintained by the Managing
Shareholder, together with all accompanying evidences of transfer and
authenticity to, or upon the order of Purchaser. Upon the execution of this
Agreement by the Seller and Purchaser, Purchaser shall have the right to receive
all benefits and cash distributions and otherwise exercise all rights of
beneficial ownership of such Shares as of September 1, 2000.
The Seller hereby represents and warrants to the Purchaser that the Seller owns
such Shares and has full power and authority to validly sell, assign, transfer,
convey and deliver to the Purchaser such Shares, and that when any such Shares
are accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title.
All authority herein conferred or agreed to confer shall survive the death or
incapacity of the Seller and any obligations of the Seller shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
This agreement is irrevocable and may not be withdrawn. Upon request, the Seller
will execute and deliver any additional documents deemed by the Purchaser to be
necessary or desirable to complete the assignment, transfer and purchase of such
Shares.
The Seller hereby certifies, under penalties of perjury, that (I) the tax
identification number shown on this form is the Seller's correct Taxpayer
Identification Number; and (ii) Seller is not subject to backup withholding
either because Seller has not been notified by the Internal Revenue Service (the
"IRS") that Seller is subject to backup withholding as a result of failure to
report all interest or dividends, or the IRS has notified Seller that Seller is
no longer subject to backup withholding.
The Seller hereby directs the Managing Shareholder to immediately change the
address of record as the registered owner of shares to be transferred herein to
that of the Purchaser, conditional solely upon Purchaser's execution of this
agreement.
If legal title to the Shares is held through an IRA or KEOGH or similar account,
I understand that this agreement must be signed by the custodian of such IRA or
KEOGH account. Furthermore, I hereby authorize and direct the custodian of such
IRA or KEOGH to confirm this agreement.
This offer expires October 11, 2000
PO Box 2233 o Orinda, CA o 94563-2233
Phone (800) 990-5604 FAX (925)
253-2501
<PAGE>
Golden State Financial
[Letterhead]
RIDGEWOOD ELECTRIC POWER TRUST III
Print Seller's Name Clearly Print Joint Seller's or Custodian's name
Seller's Signature Joint Seller's or Custodian's Signature
Medallion Guarantee Medallion Guarantee
Home Phone Number Custodian holding the Shares (if applicable)
Work Phone Number Retirement Account Number
Fax Number
Mailing Address Certificate Enclosed (Yes or No)
City, State, Zip Code Certificate Enclosed (Yes or No)
Social Security/Tax ID No.
Date
Number of Shares to be sold
(Indicate "all" if so desired)
Accepted by Purchaser's Authorized Representative
Send completed form to:
Golden State Financial
(Envelope Enclosed)
PO Box 2233 o Orinda, CA o 94563-2233
Phone (800) 990-5604 FAX (925)
253-2501
<PAGE>
EXHIBIT B
Item 10. Directors and Executive Officers of the Registrant.
(a) General.
As Managing Shareholder of the Trust, Ridgewood Power LLC has direct and
exclusive discretion in management and control of the affairs of the Trust
(subject to the general supervision and review of the Independent Trustees and
the Managing Shareholder acting together as the Board of the Trust). The
Managing Shareholder will be entitled to resign as Managing Shareholder of the
Trust only (i) with cause (which cause does not include the fact or
determination that continued service would be unprofitable to the Managing
Shareholder) or (ii) without cause with the consent of a majority in interest of
the Investors. It may be removed from its capacity as Managing Shareholder as
provided in the Declaration.
Ridgewood Holding, which was incorporated in April 1992, is the Corporate
Trustee of the Trust.
Managing Shareholder.
Ridgewood Power Corporation was incorporated in February 1991 as a Delaware
corporation for the primary purpose of acting as a managing shareholder of
business trusts and as a managing general partner of limited partnerships which
are organized to participate in the development, construction and ownership of
Independent Power Projects. It organized the Trust and acted as managing
shareholder until April 1999. On or about April 21, 1999 it was merged into the
current Managing Shareholder, Ridgewood Power LLC. Ridgewood Power LLC was
organized in early April 1999 and has no business other than acting as the
successor to Ridgewood Power Corporation.
Robert E. Swanson has been the President, sole director and sole
stockholder of Ridgewood Power Corporation since its inception in February 1991
and is now the controlling member, sole manager and President of the Managing
Shareholder. All of the equity in the Managing Shareholder is or will be owned
by Mr. Swanson or by family trusts. Mr. Swanson has the power on behalf of those
trusts to vote or dispose of the membership equity interests owned by them.
The Managing Shareholder has also organized Ridgewood Electric Power Trust
I ("Ridgewood Power I"), Ridgewood Electric Power Trust II ("Ridgewood Power
II"), Ridgewood Electric Power Trust IV ("Ridgewood Power IV"), Ridgewood
Electric Power Trust V ("Ridgewood Power V") and The Ridgewood Power Growth Fund
(the "Growth Fund") as Delaware business trusts to participate in the
independent power industry. Ridgewood Power LLC is now also their managing
shareholder. The business objectives of these five trusts are similar to those
of the Trust.
A number of other companies are affiliates of Mr. Swanson and Ridgewood
Power. Each of these also was organized as a corporation that was wholly-owned
by Mr. Swanson. In April 1999, most of them were merged into limited liability
companies with similar names and Mr. Swanson became the sole manager and
controlling owner of each limited liability company. For convenience, the
remainder of this Memorandum will discuss each limited liability company and its
corporate predecessor as a single entity.
The Managing Shareholder is an affiliate of Ridgewood Energy
Corporation("Ridgewood Energy"), which has organized and operated 48 limited
partnership funds and one business trust over the last 18 years (of which 25
have terminated) and which had total capital contributions in excess of $190
million. The programs operated by Ridgewood Energy have invested in oil and
natural gas drilling and completion and other related activities. Other
affiliates of the Managing Shareholder include Ridgewood Securities LLC
("Ridgewood Securities"), an NASD member which has been the placement agent for
the private placement offerings of the six trusts sponsored by the Managing
Shareholder and the funds sponsored by Ridgewood Energy; Ridgewood Capital
Management LLC ("Ridgewood Capital"), which assists in offerings made by the
Managing Shareholder and which is the sponsor of four privately offered venture
capital funds (the Ridgewood Capital Venture Partners and Ridgewood Capital
Venture Partners II funds); Ridgewood Power VI LLC ("Power VI"), which is a
managing shareholder of the Growth Fund, and RPMCo. Each of these companies is
controlled by Robert E. Swanson, who is their sole director or manager.
Set forth below is certain information concerning Mr. Swanson and other
executive officers of the Managing Shareholder.
Robert E. Swanson, age 53, has also served as President of the Trust since
its inception in 1991 and as President of RPMCo, Power I, Power II, Power IV,
Power V and the Growth Fund, since their respective inceptions. Mr. Swanson has
been President and registered principal of Ridgewood Securities and became the
Chairman of the Board of Ridgewood Capital on its organization in 1998. He also
is Chairman of the Board of the Ridgewood Capital Venture Partners I and II
venture capital funds. In addition, he has been President and sole stockholder
of Ridgewood Energy since its inception in October 1982. Prior to forming
Ridgewood Energy in 1982, Mr. Swanson was a tax partner at the former New York
and Los Angeles law firm of Fulop & Hardee and an officer in the Trust and
Investment Division of Morgan Guaranty Trust Company. His specialty is in
personal tax and financial planning, including income, estate and gift tax. Mr.
Swanson is a member of the New York State and New Jersey bars, the Association
of the Bar of the City of New York and the New York State Bar Association. He is
a graduate of Amherst College and Fordham University Law School.
Robert L. Gold, age 41, has served as Executive Vice President of the
Managing Shareholder, RPMCo, the Trust, Power I, Power II, Power IV, Power V and
the Growth Fund since their respective inceptions, with primary responsibility
for marketing and acquisitions. He has been President of Ridgewood Capital since
its organization in 1998. As such, he is President of the Ridgewood Capital
Venture Partners I and II funds. He has served as Vice President and General
Counsel of Ridgewood Securities Corporation since he joined the firm in December
1987. Mr. Gold has also served as Executive Vice President of Ridgewood Energy
since October 1990. He served as Vice President of Ridgewood Energy from
December 1987 through September 1990. For the two years prior to joining
Ridgewood Energy and Ridgewood Securities Corporation, Mr. Gold was a corporate
attorney in the law firm of Cleary, Gottlieb, Steen & Hamilton in New York City
where his experience included mortgage finance, mergers and acquisitions, public
offerings, tender offers, and other business legal matters. Mr. Gold is a member
of the New York State bar. He is a graduate of Colgate University and New York
University School of Law.
Thomas R. Brown, age 45, joined the Managing Shareholder in November 1994
as Senior Vice President and holds the same position with the Trust, RPMCo and
each of the other trusts sponsored by the Managing Shareholder. He became Chief
Operating Officer of the Managing Shareholder, RPMCo and the Ridgewood Power I
through V trusts in October 1996, and is the Chief Operating Officer of the
Growth Fund. Mr. Brown has over 20 years' experience in the development and
operation of power and industrial projects. From 1992 until joining the Managing
Shareholder he was employed by Tampella Services, Inc., an affiliate of
Tampella, Inc., one of the world's largest manufacturers of boilers and related
equipment for the power industry. Mr. Brown was Project Manager for Tampella's
Piney Creek project, a $100 million bituminous waste coal fired circulating
fluidized bed power plant. Between 1990 and 1992 Mr. Brown was Deputy Project
Manager at Inter-Power of Pennsylvania, where he successfully developed a 106
megawatt coal fired facility. Between 1982 and 1990 Mr. Brown was employed by
Pennsylvania Electric Company, an integrated utility, as a Senior Thermal
Performance Engineer. Prior to that, Mr. Brown was an Engineer with Bethlehem
Steel Corporation. He has an Bachelor of Science degree in Mechanical
Engineering from Pennsylvania State University and an MBA in Finance from the
University of Pennsylvania. Mr. Brown satisfied all requirements to earn the
Professional Engineer designation in 1985.
Martin V. Quinn, age 53, assumed the duties of Chief Financial Officer of
the Managing Shareholder, the Trust, four other trusts organized by the Managing
Shareholder and RPMCo in November 1996 under a consulting arrangement. He became
a full-time officer of the Managing Shareholder and RPMCo in April 1997 and is
now also Chief Financial Officer of the Growth Fund. He is also the Chief
Financial Officer of Ridgewood Capital and of the Ridgewood Capital Venture
Partners I and II funds.
Mr. Quinn has 32 years of experience in financial management and corporate
mergers and acquisitions, gained with major, publicly-traded companies and an
international accounting firm. He formerly served as Vice President of Finance
and Chief Financial Officer of NORSTAR Energy, an energy services company, from
February 1994 until June 1996. From 1991 to March 1993, Mr. Quinn was employed
by Brown-Forman Corporation, a diversified consumer products company and
distiller, where he was Vice President-Corporate Development. From 1981 to 1991,
Mr. Quinn held various officer-level positions with NERCO, Inc., a mining and
natural resource company, including Vice President- Controller and Chief
Accounting Officer for his last six years and Vice President-Corporate
Development. Mr. Quinn's professional qualifications include his certified
public accountant qualification in New York State, membership in the American
Institute of Certified Public Accountants, six years of experience with the
international accounting firm of PricewaterhouseCoopers LLC, and a Bachelor of
Science degree in Accounting and Finance from the University of Scranton (1969).
Mary Lou Olin, age 47, has served as Vice President of the Managing
Shareholder, RPMCo, Ridgewood Capital, the Trust, Power I, Power II, Power IV,
Power V and the Growth Fund since their respective inceptions. She has also
served as Vice President of Ridgewood Energy since October 1984, when she joined
the firm. Her primary areas of responsibility are investor relations,
communications and administration. Prior to her employment at Ridgewood Energy,
Ms. Olin was a Regional Administrator at McGraw-Hill Training Systems where she
was employed for two years. Prior to that, she was employed by RCA Corporation.
Ms. Olin has a Bachelor of Arts degree from Queens College.
(c) Management Agreement.
The Trust has entered into a Management Agreement with the Managing
Shareholder detailing how the Managing Shareholder will render management,
administrative and investment advisory services to the Trust. Specifically, the
Managing Shareholder will perform (or arrange for the performance of) the
management and administrative services required for the operation of the Trust.
Among other services, it will administer the accounts and handle relations with
the Investors, provide the Trust with office space, equipment and facilities and
other services necessary for its operation and conduct the Trust's relations
with custodians, depositories, accountants, attorneys, brokers and dealers,
corporate fiduciaries, insurers, banks and others, as required. The Managing
Shareholder will also be responsible for making investment and divestment
decisions, subject to the provisions of the Declaration.
The Managing Shareholder will be obligated to pay the compensation of the
personnel and all administrative and service expenses necessary to perform the
foregoing obligations. The Trust will pay all other expenses of the Trust,
including transaction expenses, valuation costs, expenses of preparing and
printing periodic reports for Investors and the Commission, postage for Trust
mailings, Commission fees, interest, taxes, legal, accounting and consulting
fees, litigation expenses and other expenses properly payable by the Trust. The
Trust will reimburse the Managing Shareholder for all such Trust expenses paid
by it.
As compensation for the Managing Shareholder's performance under the
Management Agreement, the Trust is obligated to pay the Managing Shareholder an
annual management fee described below at Item 13 -- Certain Relationships and
Related Transactions.
The Board of the Trust (including both initial Independent Trustees) have
approved the initial Management Agreement and its renewals. Each Investor
consented to the terms and conditions of the initial Management Agreement by
subscribing to acquire Investor Shares in the Trust. The Management Agreement
will remain in effect until January 4, 2001 [assumes board approval] and year to
year thereafter as long as it is approved at least annually by (i) either the
Board of the Trust or a majority in interest of the Investors and (ii) a
majority of the Independent Trustees. The agreement is subject to termination at
any time on 60 days' prior notice by the Board, a majority in interest of the
Investors or the Managing Shareholder. The agreement is subject to amendment by
the parties with the approval of (i) either the Board or a majority in interest
of the Investors and (ii) a majority of the Independent Trustees.
(d) Executive Officers of the Trust.
Pursuant to the Declaration, the Managing Shareholder has appointed
officers of the Trust to act on behalf of the Trust and sign documents on behalf
of the Trust as authorized by the Managing Shareholder. Mr. Swanson has been
named the President of the Trust and the other executive officers of the Trust
are identical to those of the Managing Shareholder. The officers have the duties
and powers usually applicable to similar officers of a Delaware business
corporation in carrying out Trust business. Officers act under the supervision
and control of the Managing Shareholder, which is entitled to remove any officer
at any time. Unless otherwise specified by the Managing Shareholder, the
President of the Trust has full power to act on behalf of the Trust. The
Managing Shareholder expects that most actions taken in the name of the Trust
will be taken by Mr. Swanson and the other principal officers in their
capacities as officers of the Trust under the direction of the Managing
Shareholder rather than as officers of the Managing Shareholder.
(e) The Trustees.
The 1940 Act requires the Independent Trustees to be individuals who are
not "interested persons" of the Trust as defined under the 1940 Act (generally,
persons who are not affiliated with the Trust or with affiliates of the Trust).
There must always be at least two Independent Trustees; a larger number may be
specified by the Board from time to time. Each Independent Trustee has an
indefinite term. Vacancies in the authorized number of Independent Trustees will
be filled by vote of the remaining Board members so long as there is at least
one Independent Trustee; otherwise, the Managing Shareholder must call a special
meeting of Investors to elect Independent Trustees. Vacancies must be filled
within 90 days. An Independent Trustee may resign effective on the designation
of a successor and may be removed for cause by at least two-thirds of the
remaining Board members or with or without cause by action of the holders of at
least two-thirds of Shares held by Investors. Under the Declaration, the
Independent Trustees are authorized to act only where their consent is required
under the 1940 Act and to exercise a general power to review and oversee the
Managing Shareholder's other actions. They are under a fiduciary duty similar to
that of corporation directors to act in the Trust's best interest and are
entitled to compel action by the Managing Shareholder to carry out that duty, if
necessary, but ordinarily they have no duty to manage or direct the management
of the Trust outside their enumerated responsibilities.
The Independent Trustees of the Trust are Ralph O. Hellmold, Jonathan C.
Kaledin and Joseph Ferrante, Jr. Set forth below is certain information
concerning them. Each of them also serves as an independent trustee of Power II
and as an independent panel member of Power V. Both are independent power
programs sponsored by Ridgewood Power. Independent panel members must approve
transactions between their program and the Managing Shareholder or companies
affiliated with the Managing Shareholder, but have no other responsibilities.
Neither Mr. Hellmold nor Mr. Kaledin is otherwise affiliated with the Trust, any
of the Trust's officers or agents, the Managing Shareholder, any other Trustee,
any affiliates of the Managing Shareholder and any other Trustees, or any
director, officer or agent of any of the foregoing.
Ralph O. Hellmold, age 59, is founder, sole shareholder and President of
Hellmold Associates, Inc., an investment banking firm and investment adviser
specializing in working with troubled companies or their creditors to raise
capital, divest businesses and restructure liabilities, whether in or outside
bankruptcy. Other financial advisory services provided by Hellmold Associates,
Inc. include mergers and acquisitions advice, valuations, fairness opinions and
expert witness testimony. In addition to working with troubled companies or
their creditors, Hellmold Associates, Inc. also acts as general partner of funds
which invest in the securities of financially distressed companies.
From 1987 to 1990, when he formed Hellmold Associates, Inc., Mr. Hellmold
was a Managing Director at Prudential-Bache Capital Funding, where he served as
co-head of the Corporate Finance Group, co-head of the Investment Banking
Committee and head of the Financial Restructuring Group. From 1974 to 1987, Mr.
Hellmold was a partner at Lehman Brothers and its successors, where he worked in
the General Corporate Finance Group and co-founded the Financial Restructuring
Group. Prior thereto, he was a research analyst at Lehman Brothers and at
Francis I. du Pont & Company. He received his undergraduate degree magna cum
laude from Harvard College and an M.I.A. from Columbia University. He is a
Chartered Financial Analyst and a member of the New York Society of Security
Analysts. Mr. Hellmold is the holder of one- half share in each of Power I and
and Power II, a shareholder of one-half Share in the Trust and a limited partner
or shareholder in numerous limited partnerships and a business trust sponsored
by Ridgewood Energy to invest in oil and gas development and related businesses.
Mr. Hellmold is a director of Core Materials Corporation, Columbus, Ohio and of
International Aircraft Investors, Torrance, California.
Jonathan C. Kaledin, age 42, has been New York Regional Counsel of The
Nature Conservancy, the international land conservation organization, since
September 1995. From 1990 to June 1995, he was the Executive Director of the
National Water Funding Council ("NWFC"), an advocacy and public affairs
organization representing municipalities, businesses, financial institutions and
others on the financial aspects of clean water infrastructure projects required
by the federal Clean Water Act and the federal Safe Drinking Water Act. Prior to
running the NWFC, Mr. Kaledin practiced law in both the private and public
sectors, specializing in environmental and real estate matters. Mr. Kaledin
received his undergraduate degree magna cum laude from Harvard College and a law
degree from New York University.
The Independent Trustees and the Managing Shareholder expanded the
number of Independent Trustees to three in January 2000 and elected Joseph
Ferrante, Jr. as the additional Independent Trustee. Mr. Ferrante, age 55, has
been a lawyer in private practice in Ridgewood, New Jersey for more than five
years specializing in business and taxation matters. He received a Juris Doctor
degree in law from the George Washington University in 1970 and his
undergraduate degree from the Johns Hopkins University. He advises a large
number of start-up and entrepreneurial companies.
The Corporate Trustee of the Trust is Ridgewood Holding. Legal title to
Trust Property is now and in the future will be in the name of the Trust, if
possible, or Ridgewood Holding as trustee. Ridgewood Holding is also a trustee
of Power I, Power II, Power IV, Ridgewood Power V and the Growth Fund and of an
oil and gas business trust sponsored by Ridgewood Energy and is expected to be a
trustee of other similar entities that may be organized by the Managing
Shareholder and Ridgewood Energy. The President, sole director and sole
stockholder of Ridgewood Holding is Robert E. Swanson; its other executive
officers are identical to those of the Managing Shareholder. See -- Managing
Shareholder. The principal office of Ridgewood Holding is at 1105 North Market
Street, Suite 1300, Wilmington, Delaware 19899.
The Trustees are not liable to persons other than Shareholders for the
obligations of the Trust.
The Trust has relied and will continue to rely on the Managing Shareholder
and engineering, legal, investment banking and other professional consultants
(as needed) and to monitor and report to the Trust concerning the operations of
Projects in which it invests, to review proposals for additional development or
financing, and to represent the Trust's interests. The Trust will rely on such
persons to review proposals to sell its interests in Projects in the future.
(f) Section 16(a) Beneficial Ownership Reporting Compliance
To the knowledge of the Trust, there were no violations of the reporting
requirements of section 16(a) of the 1934 Act by officers and directors of the
Trust in the last fiscal year.
(g) RPMCo.
As discussed above at Item 1 - Business, RPMCo assumed day-to-day
management responsibility for the San Joaquin, Byron, On- site Cogeneration and
Providence Projects in 1996. Like the Managing Shareholder, RPMCo is controlled
by Robert E. Swanson. It has entered into an "Operation Agreement" with certain
of the Trust's subsidiaries, effective January 1, 1996, under which RPMCo, under
the supervision of the Managing Shareholder, provides the management,
purchasing, engineering, planning and administrative services for those Projects
that were previously furnished by employees of the Trust or by unaffiliated
professionals or consultants and that were borne by the Trust or Projects as
operating expenses. To the extent that those services were provided by the
Managing Shareholder and related directly to the operation of the Project, RPMCo
charges the Trust at its cost for these services and for the Trust's allocable
amount of certain overhead items. RPMCo shares space and facilities with the
Managing Shareholder and its Affiliates. To the extent that common expenses can
be reasonably allocated to RPMCo, the Managing Shareholder may, but is not
required to, charge RPMCo at cost for the allocated amounts and such allocated
amounts will be borne by the Trust and other programs. Common expenses that are
not so allocated are borne by the Managing Shareholder.
Initially, the Managing Shareholder does not anticipate charging RPMCo for
the full amount of rent, utility supplies and office expenses allocable to
RPMCo. As a result, both initially and on an ongoing basis the Managing
Shareholder believes that RPMCo's charges for its services to the Trust are
likely to be materially less than its economic costs and the costs of engaging
comparable third persons as managers. RPMCo will not receive any compensation in
excess of its costs.
Allocations of costs will be made either on the basis of identifiable
direct costs, time records or in proportion to each program's investments in
Projects managed by RPMCo; and allocations will be made in a manner consistent
with generally accepted accounting principles.
RPMCo does not provide any services related to the administration of the
Trust, such as investment, accounting, tax, investor communication or regulatory
services, nor will it participate in identifying, acquiring or disposing of
Projects. RPMCo will not have the power to act in the Trust's name or to bind
the Trust, which will be exercised by the Managing Shareholder or the Trust's
officers, although it may be authorized to act on behalf of the subsidiaries
that own Projects.
The Operation Agreement does not have a fixed term and is terminable by
RPMCo, by the Managing Shareholder or by vote of a majority of interest of
Investors, on 60 days' prior notice. The Operation Agreement may be amended by
agreement of the Managing Shareholder and RPMCo; however, no amendment that
materially increases the obligations of the Trust or that materially decreases
the obligations of RPMCo shall become effective until at least 45 days after
notice of the amendment, togetherwith the text thereof, has been given to all
Investors.
The executive officers of RPMCo are Mr. Swanson (President), Mr. Gold
(Executive Vice President), Mr. Brown (Senior Vice President and Chief Operating
Officer), Mr. Quinn (Senior Vice President and Chief Financial Officer) and Ms.
Olin (Vice President). Douglas V. Liebschner, Vice President - Operations, is a
key employee.
Douglas V. Liebschner, age 52, joined RPMCo in June 1996 as Vice President
of Operations. He has over 27 years of experience in the operation and
maintenance of power plants. From 1992 until joining RPMCo, he was employed by
Tampella Services, Inc., an affiliate of Tampella, Inc., one of the world's
largest manufacturers of boilers and related equipment for the power industry.
Mr. Liebschner was Operations Supervisor for Tampella's Piney Creek project, a
$100 million bituminous waste coal fired circulating fluidized bed ("CFB") power
plant. Between 1989 and 1992, he supervised operations of a waste to energy
plant in Poughkeepsie, N.Y. and an anthracite-waste-coal-burning CFB in
Frackville, Pa. From 1969 to 1989, Mr. Liebschner served in the U.S. Navy,
retiring with the rank of Lieutenant Commander. While in the Navy, he served
mainly in billets dealing with the operation, maintenance and repair of ship
propulsion plants, twice serving as Chief Engineer on board U.S. Navy combatant
ships. He has a Bachelor of Science degree from the U.S. Naval Academy,
Annapolis, Md.
Item 11. Executive Compensation.
Through 1995, the executive officers of the Trust and the Managing
Shareholder were compensated by Ridgewood Energy. The Trust was not charged for
their compensation; the Managing Shareholder remitted a portion of the fees paid
to it by the Trust to reimburse Ridgewood Energy for employment costs incurred
on the Managing Shareholder's business. Since 1996 the Managing Shareholder has
compensated these persons without additional payments by the Trust and will be
reimbursed by Ridgewood Energy for costs related to Ridgewood Energy's business.
The Trust will reimburse RPMCo at allocable cost for services provided by
RPMCo's employees; no such reimbursement per employee exceeded $60,000 in 1999
or 1998. Information as to the fees payable to the Managing Shareholder and
certain affiliates is contained at Item 13 -- Certain Relationships and Related
Transactions.
As compensation for services rendered to the Trust, pursuant to the
Declaration, each Independent Trustee is entitled to be paid by the Trust the
sum of $5,000 annually and to be reimbursed for all reasonable out-of-pocket
expenses relating to attendance at Board meetings or otherwise performing his
duties to the Trust. Accordingly, in January 1998 the Trust paid each
Independent Trustee $5,000 for his services. The Board of the Trust is entitled
to review the compensation payable to the Independent Trustees annually and
increase or decrease it as the Board sees reasonable. The Trust is not entitled
to pay the Independent Trustees compensation for consulting services rendered to
the Trust outside the scope of their duties to the Trust without prior Board
approval.
Ridgewood Holding, the Corporate Trustee of the Trust, is not entitled to
compensation for serving in such capacity, but is entitled to be reimbursed for
Trust expenses incurred by it which are properly reimbursable under the
Declaration.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The Trust sold 391.8444 Investor Shares (approximately $39.2 million of
gross proceeds) of beneficial interest in the Trust pursuant to a private
placement offering under Rule 506 of Regulation D under the Securities Act. The
offering closed on May 31, 1995. Further details concerning the offering are set
forth above at Item 1 -- Business.
The Managing Shareholder purchased for cash in the offering one full
Investor Share. Ralph O. Hellmold, an Independent Trustee of the Trust,
purchased for cash in the offering one-half of a full Investor Share. By virtue
of their purchase of Investor Shares, the Managing Shareholder and Mr. Hellmold
are entitled to the same ratable interest in the Trust as all other purchasers
of Investor Shares. No other Trustees or executive officers of the Trust
acquired Investor Shares in the Trust's offering.
The Managing Shareholder was issued one Management Share in the Trust
representing the beneficial interests and management rights of the Managing
Shareholder in its capacity as the Managing Shareholder (excluding its interest
in the Trust attributable to Investor Shares it acquired in the offering). The
management rights of the Managing Shareholder are described in further detail
above at Item 1 -- Business and in Item 10 Directors and Executive Officers of
the Registrant. Its beneficial interest in cash distributions of the Trust and
its allocable share of the Trust's net profits and net losses and other items
attributable to the Management Share are described in further detail below at
Item 13 -- Certain Relationships and Related Transactions.
Item 13. Certain Relationships and Related Transactions.
The Declaration provides that cash flow of the Trust, less reasonable
reserves which the Trust deems necessary to cover anticipated Trust expenses, is
to be distributed to the Investors and the Managing Shareholder (collectively,
the "Shareholders"), from time to time as the Trust deems appropriate. Prior to
Payout (the point at which Investors have received cumulative distributions
equal to the amount of their capital contributions), each year all distributions
from the Trust, other than distributions of the revenues from dispositions of
Trust Property, are to be allocated 99% to the Investors and 1% to the Managing
Shareholder until Investors have been distributed during the year an amount
equal to 14% of their total capital contributions (a "14% Priority
Distribution"), and thereafter all remaining distributions from the Trust during
the year, other than distributions of the revenues from dispositions of Trust
Property, are to be allocated 80% to Investors and 20% to the Managing
Shareholder. Revenues from dispositions of Trust Property are to be distributed
99% to Investors and 1% to the Managing Shareholder until Payout. In all cases,
after Payout, Investors are to be allocated 80% of all distributions and the
Managing Shareholder 20%.
For any fiscal period, the Trust's net profits, if any, other than those
derived from dispositions of Trust Property, are allocated 99% to the Investors
and 1% to the Managing Shareholder until the profits so allocated offset (1) the
aggregate 14% Priority Distribution to all Investors and (2) any net losses from
prior periods that had been allocated to the Shareholders. Any remaining net
profits, other than those derived from dispositions of Trust Property, are
allocated 80% to the Investors and 20% to the Managing Shareholder. If the Trust
realizes net losses for the period, the losses are allocated 80% to the
Investors and 20% to the Managing Shareholder until the losses so allocated
offset any net profits from prior periods allocated to the Shareholders. Any
remaining net losses are allocated 99% to the Investors and 1% to the Managing
Shareholder. Revenues from dispositions of Trust Property are allocated in the
same manner as distributions from such dispositions. Amounts allocated to the
Investors are apportioned among them in proportion to their capital
contributions.
On liquidation of the Trust, the remaining assets of the Trust after
discharge of its obligations, including any loans owed by the Trust to the
Shareholders, will be distributed, first, 99% to the Investors and the remaining
1% to the Managing Shareholder, until Payout, and any remainder will be
distributed to the Shareholders in proportion to their capital accounts.
The Trust made distributions in 1998 and 1999 as stated at Item 5 -- Market
for Registrant's Common Equity and Related Stockholder Matters. The Trust and
its subsidiaries paid fees or reimbursements to the Managing Shareholder and its
affiliates as follows:
Fee Paid to 1999 1998 1997 1996 1995
Management Managing 594,576 673,933 766,866 794,026 482,000
fee Shareholder
Cost
reimbursements* RPMCo 15,813,187 15,617,631 14,308,444 11,566,400 0
Investment Managing 0 0 0 0 343,779
fee Shareholder
Placement Ridgewood 0 0 0 0 147,950
agent fee Securities
and sales Corporation
commissions
Organizational, Managing 0 0 0 0 860,195
distribution Shareholder
and offering fee
* Prior to 1996, these costs were either paid by the Trust or by the Projects
directly. These include all payroll, parts, routine maintenance and other
expenses (except for royalties for landfill gas) of operating Projects that are
not operated by non-affiliated managers, and an allocation of RPMCo's overhead.
These costs are paid by the Projects and do not appear in the Trust's financial
statements.
The investment fee equaled 2% of the proceeds of the offering of Investor
Shares and was payable for the Managing Shareholder's services in investigating
and evaluating investment opportunities and effecting investment transactions.
The placement agent fee (1% of the offering proceeds) and sales commissions were
also paid from proceeds of the offering, as was the organizational, distribution
and offering fee (5% of offering proceeds) for legal, accounting, consulting,
filing, printing, distribution, selling, closing and organization costs of the
offering.
The management fee, payable monthly under the Management Agreement at the
annual rate of 2.5% of the Trust's net asset value, began on the date the first
Project was acquired and compensates the Managing Shareholder for certain
management, administrative and advisory services for the Trust. In addition to
the foregoing, the Trust reimbursed the Managing Shareholder at cost for
expenses and fees of unaffiliated persons engaged by the Managing Shareholder
for Trust business and in 1995 for payroll and other costs of operation of the
Trust's Projects. Beginning in 1996, these reimbursements were paid to RPMCo.
The reimbursements to RPMCo, which do not exceed its actual costs, are described
at Item 10(g) -- Directors and Executive Officers of the Registrant -- RPMCo.
Other information in response to this item is reported in response to Item
11. Executive Compensation, which information is incorporated by reference into
this Item 13.
Item 1. (a) General Development of Business.
Ridgewood Electric Power Trust III, the Registrant hereunder (the "Trust"),
was organized as a Delaware business trust on December 6, 1993 to participate in
the development, construction and operation of independent power generating
facilities ("Independent Power Projects" or "Projects"). Ridgewood Energy
Holding Corporation ("Ridgewood Holding"), a Delaware corporation, is the
Corporate Trustee of the Trust.
The Trust sold whole and fractional shares of beneficial interest in the
Trust ("Investor Shares") at $100,000 per Investor Share, and terminated its
private placement offering on May 31, 1995, at which time it had raised
approximately $39.2 million. Net of Offering fees, commissions and expenses, the
Offering provided approximately $32.9 million of net funds available for
investments in the development and acquisition of Independent Power Projects and
associated expenses. The Trust has 764 record holders of Investor Shares (the
"Investors"). As described below in Item 1(c)(2), the Trust has invested
substantially all of its net funds in four sets of Independent Power Projects.
The Trust is organized similarly to a limited partnership. Ridgewood Power
LLC (the "Managing Shareholder"), a Delaware corporation, is the Managing
Shareholder of the Trust. For information about the merger of the prior Managing
Shareholder, Ridgewood Power Corporation, into Ridgewood Power LLC, see Item
10(b) - Directors and Executive Officers of the Registrant - Managing
Shareholder.
In general, the Managing Shareholder has the powers of a general partner of
a limited partnership. It has complete control of the day to day operation of
the Trust and as to most acquisitions. The Managing Shareholder is not regularly
elected by the owners of the Investor Shares (the "Investors"). The Managing
Shareholder and the Independent Trustees of the Trust meet together as the Board
of the Trust and take the actions that the 1940 Act requires a board of
directors to take for a business development company. The Board of the Trust
also provides general supervision and review of the Managing Shareholder but
does not have the power to take action on its own. The Independent Trustees do
not have any management or administrative powers over the Trust or its property
other than as expressly authorized or required by the Declaration of Trust of
the Trust (the "Declaration") or the 1940 Act.
The Corporate Trustee acts on the instructions of the Managing Shareholder
and is not authorized to take independent discretionary action on behalf of the
Trust. See Item 10. Directors and Executive Officers of the Registrant below for
a further description of the management of the Trust.
The following chart summarizes some of these relationships.
Ridgewood Electric Power Trust III and certain affiliates
(some entities and relationships omitted)
Robert E. Swanson Family trusts
x x (Mr. Swanson has
Sole manager x x sole voting and
Chief executive officer x x investment power)
Owner of 46% of equity x x Owners of 54% of equity
_________________X__________________X______________________________
x x x x x x
x x x x x x
x x x x x x
Ridgewood Ridgewood Power Ridgewood Ridgewood Ridgewood Ridgewood
Securities Management LLC Power LLC Energy Power VI Capital
Corporation Holding LLC Management
Corporation LLC
Operates power Corporate Manager
Placement plants for five Managing Trustee Co-Managing of two
agent power trusts Shareholder for all Shareholder venture
("Ridgewood ("RPMCo") of six six trusts (dormant) capital
Securities") trusts x of the funds &
("Ridgewood x Growth Fund marketing
Power") x ("Power VI Co") affiliate
x x x ("Ridgewood
x x x Capital")
x x x x
______________________________x____________x_____________ x x
x x x x x x x x
x x x x x x x x
Ridgewood Ridgewood Ridgewood Ridgewood Ridgewood The Ridgewood x
Electric Electric Electric Electric Electric Power Growth x
Power Trust Power Trust Power Trust Power Trust Power Trust Fund x
I II III IV V (the x
("Power I") ("Power II") ( the ("Power IV") ("Power V") " Growth x
"Trust") Fund") x
x
___________________________________x
x x
x x
Ridgewood Capital Ridgewood Capital
Venture Partners Venture Partners II
(the "Venture Capital Funds")
The Trust made an election to be treated as a "business development
company" under the Investment Company Act of 1940, as amended ( the "1940 Act").
On February 14, 1994, the Trust notified the Securities and Exchange Commission
of such election and registered the Investor Shares under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). On April 16, 1994, the
election and registration became effective.
<PAGE>
EXHIBIT C
To: Ridgewood Power III Shareholders September 22, 2000
Re: Recommendation to Reject the Golden State Financial Tender Offer of
September 10, 2000
--------------------------------------------------------------------------------
As I indicated in my September 15, 2000 letter to you, Ridgewood Power
recently became aware of an offer by Golden State Financial made to some, but
not all Shareholders to purchase a limited number of Shares of Ridgewood
Electric Power Trust III (the "Trust"). The tender offer is not registered with
the Securities and Exchange Commission ("SEC") and therefore is illegal.
Ridgewood Power is not aware of how or where Golden State Financial
obtained the names and addresses of the shareholders who received the tender
offer. Not all Shareholders received an offer, so Golden Sate may have old
addresses or a partial list. Ridgewood Power certainly did not provide and would
not provide any such shareholder information to Golden State Financial or any
third party, unless we were required by law. I would like to reassure you that
it is Ridgewood Power's position to protect to the utmost our shareholders'
privacy.
Although Golden State did not register its tender offer with the SEC, I
must file this response letter with the SEC. Consequently, the language of this
letter (except for this paragraph and the last paragraph) has been carefully
drafted by Ridgewood's attorneys. You may find this language formalistic. We are
not at liberty to expand on this material. Unfortunately, if you call us, we are
required to limit our comments to material contained in this letter.
Recommendations
The Golden State Financial tender offer omits many of the disclosures
required or recommended by the SEC to prevent fraudulent, deceptive or
manipulative practices in the tender offer process. For that reason and as
further explained below, we recommend that YOU reject the tender offer and not
sell your shares to golden state.
First, Golden State Financial has provided very little information
about itself, only a post office box in Orinda, California and an "800"
telephone number. The only company by that name that we could find in Orinda is
a small mortgage brokerage office. The SEC recommends that a tender offer bidder
such as Golden State Financial provide more information regarding its (a)
financial resources; (b) capacity to pay for tendered securities; (c) historic
business practices; and (d) control persons and promoters.
Financial information and historic business practices are particularly
important for making an informed decision regarding tendering your shares.
Shareholders need to know whether the bidder has the funds necessary to
consummate the offer. If the bidder does not have the financing for the offer
(e.g., cash or a commitment from a bank) at the commencement of the offer, the
Bidder should clearly state that it cannot purchase securities until it obtains
financing. We cannot determine from Golden State Financial's offering materials
whether it can realistically afford to pay for any shares tendered.
Second, Golden State Financial's tender offer has two features that are
unfavorable to the Trust's Shareholders - (a) the offer is irrevocable and does
not contain withdrawal rights and (b) the offer is on a "first received, first
buy" basis without a pro-rata provision.
As a result, once you deliver an executed Agreement of Sale and
Transfer, you have irrevocably sold your shares to Golden State Financial.
Additionally, there is no disclosure regarding Golden State Financial's ability
to extend the expiration date of the offer. It is conceivable that payment for
your shares could be significantly delayed beyond the October 11, 2000 if Golden
State Financial extends the expiration date of the offer. In addition, a tender
offer on a "first-received, first buy" basis is contrary to SEC tender offer
requirements applicable to this tender offer. SEC rules require that tender
offers under Regulation 14D contain "withdrawal rights" that permit the
shareholder to withdraw the tender prior to the expiration of the offer.
Third, the SEC also recognizes that the tax status of the Trust is an
essential concern and that the Bidder should disclose whether or not the
purchases will jeopardize the Trust's flow-through tax status. Golden State's
offer is for up to 25 shares. That is almost 6.4% of the outstanding shares of
the Trust. Under IRS rules for Trust III, sales of more than 2% of the Trust's
shares in any 12 month period can allow the IRS to reclassify the Trust as a
"publicly traded partnership." This means that the Trust would be taxed as a
corporation and that your earnings would be taxed twice (at the Trust level and
as dividends on your tax return) rather than once. Golden State Financial has
not considered this impact on you and on all other Trust Shareholders. In turn,
Ridgewood Power Corp. as managing Shareholder has under the Trust Agreement the
obligation to review any potential transfers, and may reject them if the tax
status of the Trust might be jeopardized.
Finally, we have no information as to whether Golden State Financial
has connections to the electric power industry or whether by purchasing shares
it may violate ownership restrictions under the Public Utilities Regulatory
Procedures Act of 1978. If the Trust were to violate that law, even
inadvertently, our power contracts would be jeopardized.
For all these reasons, we recommend that our shareholders reject Golden
State Financial's offer, which lacks almost all the essential information that
you need to make an informed decision.
We have also written Golden State Financial to advise them that we
believe the tender offer violates federal laws regarding tender offer. We have
told Golden State Financial that if it does not withdraw the offer or comply
with the laws, we will consider taking legal action in order to protect our
Investors.
In compliance with SEC. recommendations, we want to advise you of the
following:
Ridgewood Power, as managing shareholder, does not believe that it has a
conflict of interest in opposing Golden State Financial's offer. Ridgewood
Power's rights and duties will be unchanged regardless of whether shareholders
transfer shares to Golden State Financial or not. Golden State Financial has not
communicated with us at all other than to send us a copy of its documents and it
has no affiliation or relationship with the Trust or Ridgewood Power. The Trust
has not obtained or requested any outside valuations of its assets or its
securities.
As you might imagine, it is extremely annoying to have some outfit lob
in an illegal tender offer, and we have to spend our time (and Trust money on
lawyers) to advise us on how to legally respond to an illegal offer. Because
this letter will be properly filed with the SEC, I am hopeful that the SEC will
look into the activities of Golden State.
<PAGE>
EXHIBIT D
Ridgewood Power LLC
September 22, 2000
Via Fax (925-253-2501) and Overnight Delivery
Golden State Financial
PO Box 2233
Orinda, CA 94563
RE: Tender Offer for Shares of Ridgewood Electric Power
Trusts I and III
Dear Golden State Financial:
We have recently become aware of your tender offers for shares of
Ridgewood Electric Power Trusts I and III (the "Trusts") set forth in letters
sent to certain investors in the Trusts dated September 10, 2000 (the "September
10 Offer Letters"). We have reviewed the September 10 Offer Letters and we have
determined that they do not conform to the law and rules governing tender offers
under Regulation 14D and Regulation 14E of the Securities Exchange Act of 1934
("Reg. 14D" and "Reg. 14E" respectively). As a result, the September 10 Offer
Letters are misleading and coercive in their terms and manipulative in their
failure to provide the information required by Reg. 14D and Reg. 14E ) and, we
believe, constitute illegal tender offers.
Therefore, we hereby demand that you withdraw the tender offers
represented by the September 10 Offer Letters. Please respond to this letter on
or before September 29, 2000. As you maybe aware, the federal laws permit a
private right of action and we will consider all available remedies to protect
the interests of the investors in the Trusts, including such possible private
legal action.
Enclosed are copies of the Schedule 14D-9s, which are being filed with
the Securities and Exchange Commission today, along with copies of letters to
the investors in the Trusts recommending that investors reject your offers for
the reasons stated therein.
Please contact me at the phone number and address above as soon as
possible but before September 29, 2000.
Very truly yours,
Daniel V. Gulino
