10-12G

   SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

           THE RIDGEWOOD POWER GROWTH FUND
  (Exact Name of Registrant as Specified in Its Charter)

        Delaware                           22-3495594
(State or Other Jurisdiction             (I.R.S. Employer Identification No.)
of Incorporation or Organization)

c/o Ridgewood Power Corporation, 947 Linwood Avenue, Ridgewood, New Jersey 07450
(Address of Principal Executive Offices)                        (Zip Code)

Registrant's Telephone Number, including Area Code:  (201) 447-9000

Securities to be registered pursuant to Section 12(b) of the Act:  None

Securities to be registered pursuant to Section 12(g) of the Act:

Investor Shares of Beneficial Interest
Preferred Participation Rights

(Title of Class)

Exhibit Index is located on page 49.





PART I

Item 1.  Business.
Forward-looking statement advisory

     This Registration  Statement on Form 10, as with some other statements made
by or on behalf of the  Ridgewood  Power  Growth Fund (the  "Fund") from time to
time, has forward-looking  statements.  These statements discuss business trends
and other matters  relating to the Fund's future results,  year 2000 remediation
and the business  climate and are found,  among other places,  at Items 1(c)(3),
1(c)(4), 1(c)(5), 1(c)(6), 1(c)(7), and 2(b). In order to make these statements,
the Fund has had to make  assumptions as to the future.  It has also had to make
estimates in some cases about events that have already happened,  and to rely on
data  that  may be  found  to be  inaccurate  at a  later  time.  Because  these
forward-looking  statements are based on  assumptions,  estimates and changeable
data,  and because any attempt to predict the future is subject to other errors,
what  happens  to the Fund in the future may be  materially  different  from the
Fund's statements here.

     The Fund therefore warns readers of this document that they should not rely
on these  forward-looking  statements without considering all of the things that
could make them inaccurate.  This Registration Statement discusses many (but not
all) of the risks and  uncertainties  that might  affect  these  forward-looking
statements.

     Some of these are changes in political and economic conditions,  federal or
state  regulatory  structures,   government  taxation,  spending  and  budgetary
policies,  government  mandates,  demand for electricity and thermal energy, the
ability of customers to pay for energy received,  supplies of fuel and prices of
fuels, operational status of plant, mechanical breakdowns, availability of labor
and the  willingness  of electric  utilities to perform  existing power purchase
agreements in good faith.  Some of these cautionary  factors that readers should
consider are  described  below at Item 1(c)(5) - Trends in the Electric  Utility
and Independent Power Industries.

     By making these  statements  now, the Fund is not making any  commitment to
revise these forward-looking  statements to reflect events that happen after the
date of this document or to reflect unanticipated future events.


(a)  General Development of Business.

     The Registrant is the Ridgewood Power Growth Fund, which was organized as a
Delaware  business  trust in January  1998 to  participate  in the  development,
construction  and  operation of  independent  power  generating  facilities  and
capital  facilities  ("Independent  Power  Projects" or  "Projects").  Ridgewood
Energy Holding Corporation ("Ridgewood Holding"), a Delaware corporation, is the
Corporate Trustee of the Fund.

     The Fund has sold whole and fractional shares of beneficial interest in the
Fund ("Investor  Shares") at $100,000 per Investor Share.  Its offering began on
February  9,  1998  and  is  ongoing.  As of  April  20,  1999,  it  had  raised
approximately  $38,000,000.  Net of offering fees, commissions and expenses, the
offering had provided as of that date approximately  $31,500,000 for investments
in the development and acquisition of Projects and operating expenses.  The Fund
has  approximately 740 record holders of Investor Shares (the  "Investors").  As
described below in Item 1(c)(4), the Fund has invested  approximately $2 million
of its assets in common  stock of ZAP Power  Systems,  Inc., a  manufacturer  of
electric  bicycles  and  similar  personal  vehicles,   and  is  considering  an
investment in a portfolio of landfill gas fueled electric generating Projects in
England. The Fund is actively seeking additional Projects for investment.

     The Fund has two Managing  Shareholders:  Ridgewood Power LLC, a New Jersey
limited liability company ("Ridgewood Power") and Ridgewood Power VI LLC ("Power
VI Co"),  which is also a New Jersey  limited  liability  company.  The Managing
Shareholders have direct and exclusive  discretion in the management and control
of the affairs of the Fund.  Both Ridgewood Power and Power VI Co are controlled
by Robert E.  Swanson,  who is the manager of each.  The officers of Power VI Co
are also the same as those of Ridgewood Power and Power VI Co currently does not
conduct any  business.  It is  anticipated  that  Ridgewood  Power will take all
actions  necessary to manage the Fund,  without any  participation  by Ridgewood
Power VI Co, unless Ridgewood Power were to become unable to act as the Managing
Shareholder  because of a possible  reorganization of other,  similar investment
programs that it manages.  In that case, Power VI Co would be activated to serve
as Managing Shareholder. A further discussion of Ridgewood Power and Power VI Co
is  found  at  Item  5(b)  -  Directors  and   Executive   Officers  -  Managing
Shareholders.  In the remainder of this Registration Statement, when a reference
is made to the "Managing  Shareholder,"  it is to Ridgewood  Power so long as it
acts as Managing  Shareholder  and to Power VI Co if Power VI Co is activated to
serve as a Managing Shareholder. The two Managing Shareholders and the Investors
are collectively referred to as the "Shareholders."

     The Fund  currently  has three  Independent  Panel  Members.  Approval of a
majority  of  the  Independent   Panel  Members  is  required  for  approval  of
transactions  between the Fund and other  investment  programs  sponsored by the
Managing  Shareholder.  The  Independent  Panel Members do not exercise  general
oversight of the Managing  Shareholder  or of the Fund and are not  directors of
the  Fund.  The  Independent  Panel  Members  do  not  have  any  management  or
administrative powers over the Fund or its property.

     The Fund has a Corporate Trustee, Ridgewood Energy Holding Corporation. The
Corporate  Trustee acts on the  instructions of the Managing  Shareholder and is
not authorized to take independent  discretionary  action on behalf of the Fund.
See Item 5 - Directors  and  Executive  Officers of the  Registrant  below for a
further description of the management of the Fund.

     The Managing  Shareholders  are  controlled  by Robert E.  Swanson,  who is
currently  their sole manager and chief executive  officer.  The following chart
illustrates  some of the important  relationships  among the Fund,  the Managing
Shareholders and some of their affiliates. For additional information,  see Item
5 -- Directors and Executive Officers of the Registrant.






The Ridgewood Power Growth Fund and certain affiliates
(some entities and relationships omitted)

              Robert E. Swanson         Family trusts           Two indivi-
                         x                  x (Mr. Swanson has    duals  x
 Sole manager            x                  x  sole voting and   1% each x
 Chief executive officer x                  x  investment power)         x
 Owner of 46% of equity  x                  x Owners of 52% of equity    x
        _________________X__________________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 this     funds and
                            ("Ridgewood        x           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") ("Power   ("Power IV") ("Power V")  "Fund")      x
                           III")                                          x
                                                                          x
                                          ________________________________X__
                                          x                                  x
                                          x                                  x
                                   Ridgewood Capital    Ridgewood Institutional
                                   Venture Partners     Venture Partners, LLC
                                        LLC
                                            (the "Venture Capital Funds")

(b)  Financial Information about Industry Segments.

     The  Fund has been  organized  to  operate  in only one  industry  segment:
independent  power  generation and related capital,  infrastructure  and venture
projects.

(c)  Narrative Description of Business.

(1) General Description.  The Fund's investment objectives are:

     providing  capital  appreciation over an extended period of time, either by
(a) selling  all or some of the Fund's  assets or (b)  changing  the Fund into a
more liquid investment (by combining with other companies, by a public offering,
by creating a market for the Investor Shares or otherwise) and

     generating  current cash flow for  distribution  to Investors to the extent
consistent with the capital appreciation objective.

The Fund  intends to achieve its  objectives  by making  equity  investments  in
"Projects"  or in  companies  owning  Projects or assets  that may benefit  from
industry  deregulation.  In many  cases,  the Fund may  operate  those  Projects
itself. The Projects may include:

o conventionally fueled, small to medium-size independent electric power plants;

o landfill  gas,  biomass or other  "waste"  fueled power  plants that  generate
electricity  or heat,  or both,for  sale while  helping to remedy  environmental
problems;

o cogeneration plants that produce electricity and heat together for sale;

o other power  generating  facilities that produce  electricity,  heat or motive
power for sale or use;

o  waste  transfer  stations,  pumping  facilities  and  other  facilities  that
contribute to the operation of other Projects;

o other types of capital projects,  such as fuel plants,  processing  facilities
and  recycling  facilities,  that are  expected  to have  consistent  cash flows
similar to those from independent electric power plants; and equity interests in
companies  affected by the deregulation of the electricity  industry,  including
those with long-term or unconventional business strategies.

     The Fund will not invest in nuclear power facilities.

     The Fund will try to invest in Projects that provide  long-term cash flows.
Its  investments  will be structured  for federal income tax purposes as "direct
participation"  investments,  so that  income,  gains,  losses,  deductions  and
credits flow through to each Investor's  personal tax return, and are subject to
tax only once.  Investors will  generally have limited  liability for the Fund's
obligations and those of the Projects.

(2) Risk Considerations

     General
     Investment in the Fund involves  substantial risks and potential  conflicts
of  interest  and is  suitable  only for  those  persons  who meet the  investor
suitability  standards on a continuing basis, have a substantial net worth, have
no need for liquidity from such investment, and are able to bear the loss of the
entire investment.  Each prospective Investor should consider carefully the risk
factors attendant to the purchase of Shares,  including without limitation those
discussed  below,  and each should review the investment with his own legal, tax
and financial advisors. In addition, each prospective Investor should understand
that  the  Subscription   Agreement  and  the  Declaration  materially  restrict
Investors from selling or otherwise disposing of their Shares.

     Importance of Regulatory and Political Environments
     Independent  Power  Projects,   including  cogeneration   facilities,   are
creatures of the regulatory and political process. Since the passage of PURPA in
1978,  the  Independent  Power  industry  has  grown,  in  large  part,  because
regulatory and political  environments  made it feasible to amass the large sums
of long-term  capital needed to develop,  construct and operate power plants. In
particular, the regulatory advantages currently provided by PURPA for Qualifying
Facilities are essential for the viability of most  Independent  Power Projects.
Modification  or repeal of PURPA or the regulations  thereunder  could make some
Projects uneconomic.

     In  several  states,   including   Massachusetts,   Maine  and  California,
requirements  may be imposed on sellers  of  electricity  to  purchase a minimum
amount of "renewable" power (generally,  power from small hydroelectric  plants,
geothermal,  solar or wind plants, or plants that burn non-fossil fuels).  These
requirements  may be very  advantageous  for the types of Projects  the Fund may
invest  in,  but  adverse  state or federal  action  might  make those  Projects
uneconomic in the future. Further, it is possible that future developments, such
as more stringent  requirements of environmental  laws and enforcement  policies
thereunder,  could  affect  the costs of and the  manner in which  Projects  are
developed,  built or operated.  There can be no assurance that in such event the
Projects  would be able to recover  all or any of such  increased  costs or that
their businesses and financial  conditions would not be materially and adversely
affected.

Deregulatory Initiatives
     The Comprehensive Energy Policy Act of 1992 (the "1992 Energy Act") removed
certain  restrictions  imposed  by the  Holding  Company  Act on the  ability of
electric utility holding companies and electric utilities to control their local
markets.  Since  passage of the 1992 Energy Act,  FERC in its Order 888 of April
1996 has deregulated the wholesale  market for electricity (the market for sales
to local  utilities or distributors of  electricity).  Further,  many states are
implementing plans to further encourage  investment in wholesale  generators and
to facilitate  utility decisions to spin off or divest generating  capacity from
the  transmission  or  distribution  businesses of the  utilities.  As a result,
Independent  Power  Projects in the future will face  competition  not only from
other  Independent  Power  Projects  seeking to sell  electricity on a wholesale
basis but also from exempt wholesale generators,  electric utilities with excess
capacity and independent  generators spun off or otherwise  separated from their
parent utilities.

     On the other hand,  by expanding  the  potential  pool of Projects in which
electric  utility holding  companies and electric  utilities are able to invest,
the 1992  Energy Act has  resulted  in  increased  competition  from the holding
companies  and  utilities  to  develop  promising   Projects  and  in  increased
competition in the sale of electricity by Independent  Power Projects.  Further,
the 1992 Energy Act and Order 888  introduced an element of  competition  in the
transmission  component of the  electric  power  industry by requiring  electric
utilities to make available their  transmission  facilities to Independent Power
Projects where it is in the public interest and does not unreasonably impair the
reliability of electricity service. In April 1996, FERC adopted Order 888, which
required electric utilities and power pools to make transmission  facilities and
information available on equal terms to all generators.

     The deregulation of transmission may benefit the Fund in the future in that
deregulated transmission may give Projects in which the Fund participates access
to customers that are not geographically located near the Projects. If there are
limitations on transmission  capacity,  however,  the Fund might have to compete
and bid for capacity in order to transmit electricity to distant customers if it
is selling in a competitive  market or if it is selling  "renewable"  power to a
distant  customer.  In those  events,  the Fund might  have to  compete  against
companies  that are far larger  and more  diversified  than  itself or that have
lower costs of operation or access to transmission facilities.  If the Fund were
unsuccessful in obtaining  transmission  capacity,  it might not be able to sell
its output except to local utilities (or in some cases, local retail customers).
There is no assurance  local  customers  would  purchase  that power or that the
local price would be as advantageous  as the price more distant  customers would
pay.

     The large scale  deregulation of transmission  facilities is likely to have
other  far-reaching  effects  which  may be  adverse  to the  Independent  Power
industry,  generally,  or to the  particular  facilities  owned by the Fund.  In
particular, because the Fund anticipates investing in small scale facilities, it
may be  difficult  for it in the short run to market  power to end users or over
long   distances.   As  a  result,   it  may  suffer   significant   competitive
disadvantages.

     State initiatives to deregulate and encourage competition in the businesses
of generating  electric power and transmitting it to customers are also creating
significant risks.  Further,  jurisdictional  disputes between federal and state
regulators  and proposed  congressional  actions have hampered the creation of a
coordinated  regulatory posture and have raised significant  questions as to the
allocation of electric  utility costs and obligations  that may not be recovered
by utilities in a competitive environment. As a result, although it appears that
competitive  generating  markets  will be  created in many  states and  possibly
nationally,  there is uncertainty as to the eventual regulatory  environment and
the risks and opportunities it will create.

     As various states  implement  retail  deregulation,  a number of additional
risks are posed for Independent Power Projects.  In many states,  local electric
utilities are being  required or encouraged to sell their  generating  stations.
Often,  large electric  utilities,  affiliates of natural gas marketers or other
large  entities  have  purchased  large  quantities  of  these  assets  and thus
immediately  become sizable  competitors in the market to sell  electricity.  In
some  other  states,  local  electric  utilities  will be  permitted  to  retain
generating  assets and sell power to themselves.  In that event, they may prefer
purchases from their own plants and opportunities for Independent Power Projects
to sell electricity in a competitive market may be stifled.

     Further,  in a  competitive  market,  prices  for  electricity  may be very
volatile.  If a  generator  is  nonetheless  able to  obtain a  long-term  Power
Contract,  the prices under that  contract may be  inadequate to cover costs and
yield a return,  or the generator may lose  opportunities to sell electricity at
higher prices. If a generator is unable to obtain a long-term Power Contract and
sells its output under short term contracts on in a spot or auction market,  the
prices  received  may be  inadequate  to cover costs or to permit the Project to
earn a return. Prices may vary so much as to make planning impossible.  There is
no assurance that the generator will be able to obtain new Power Contracts so as
to keep its Project in continuous operation and the generator may have to absorb
significant  costs of Project shutdown and restart as well as lay off and rehire
its workforce, as has occurred with two Projects located in Maine in which Power
IV and Power V have invested.

     These factors have caused new investment in independent power plants in the
United States to be  substantially  reduced,  have  intensified the pressures on
larger market  participants to consolidate,  have created additional  incentives
for  generating  efficiency  and low-cost  production  of power,  have tended to
depress the purchase prices of existing  small-scale  Projects and are likely to
have  additional,  unpredictable  effects.  Recently,  a  number  of very  large
utilities,  natural gas companies and independent generation companies have paid
significant  premiums  over book value or other  measures  of value to  purchase
large  packages of power  plants  being  divested by  utilities  and others have
announced plans to construct extremely  large-scale merchant power plants. These
transactions  or  proposals  have been in the range of  hundreds  of millions of
dollars  to  billions  of  dollars.   This  may  indicate  that  these  industry
participants  have  concluded  that very large scale is a necessary  competitive
advantage.

     The Fund instead will attempt to follow a  diversified  strategy  that does
not  attempt  to  compete  head-on  with these  types of  competitors.  The Fund
believes that in many cases  emphasis on scale and  purchasing  market share may
lead to  suboptimal  returns.  Instead,  the Fund  will  seek to  develop  niche
markets,  to engage in ventures with large utilities or other  participants that
need its  investments  for financial or regulatory  reasons or to acquire equity
interests  in  undervalued  companies.  Where  possible,  the Fund may invest in
existing  Projects  with  long-term  Power  Contracts  that are less  exposed to
competitive forces, or in Projects with regulatory or tax advantages.  There can
be no assurance,  however,  that these strategies will be successful or that the
Fund will not be competitively disadvantaged by its relatively small size.

Threats to Power Contracts
     The Power Contract with the local utility,  industrial host or other energy
purchaser  is perhaps the most  important  contract  to an existing  Independent
Power  Project.  Many  long-term  Power  Contracts  between local  utilities and
independent  power  producers  now  provide  for  rates  in  excess  of  current
short-term  rates for  purchased  power and the  utilities  are  treating  their
contractual  obligations  as a form  of  stranded  cost.  There  has  been  much
speculation  that in the course of  deregulating  the electric  power  industry,
federal or state regulators or utilities would attempt to invalidate these power
purchase  contracts as a means of throwing some of the costs of  deregulation on
the owners of independent power plants.

     To date, the Federal Energy Regulatory  Commission and each state regulator
that has addressed the issue have ruled that existing  Power  Contracts will not
be  affected  by their  deregulation  initiatives.  The  regulators  have so far
rejected the requests of a few utilities to invalidate existing Power Contracts.
Further, no action has yet been taken by federal or state legislators to date to
impair Independent Power Projects' existing power sales contracts, and there are
federal  constitutional   provisions  restricting  actions  to  impair  existing
contracts.  There can not be any  assurance,  however,  that the  rapid  changes
occurring in the industry and the economy as a whole would not cause  regulators
or  legislative  bodies to attempt to change the  regulatory  structure  in ways
harmful  to  Independent  Power  Projects  or  to  attempt  to  impair  existing
contracts.  In  particular,  some  regulatory  agencies have urged  utilities to
construe  Power  Contracts  strictly and to police  Independent  Power  Projects
compliance with those Power Contracts vigorously. Predicting the consequences of
any legislative or regulatory  action is inherently  speculative and the effects
of any  action  proposed  or  effected  in the future may harm or help the Fund.
Because of the consistent position of the regulatory authorities to date and the
other factors  discussed here, the Fund believes that so long as it performs its
obligations  under the Power  Contracts,  it will be entitled to the benefits of
those contracts.

     In recent years,  many electric  utilities that have entered into long-term
Power  Contracts have  concluded  that the prices set under those  contracts are
disadvantageous to them under current conditions.  Accordingly,  they have often
attempted to exploit all possible  means of  terminating  these Power  Contracts
with Independent Power Projects,  including requests to regulatory  agencies and
alleging  violations  of  even  immaterial  terms  of  the  Power  Contracts  as
justification  for terminating  those contracts.  The Fund's current  investment
strategy includes the purchase  smaller-sized  Projects with existing  long-term
Power  Contracts.  If the prices for  electricity  under those  contracts are in
excess of the prices charged by alternative  sources, or if the electric utility
purchasers  under those  contracts  have other  incentives  to  terminate  those
contracts, the Fund may face material costs in contesting those utility actions.
Power II,  which is a previous  Power Trust  sponsored by  Ridgewood  Power,  is
currently  defending a legal  proceeding  in  California  which  involves such a
challenge.  A second  Power  Trust,  Power I,  succesfully  defended  a  similar
challenge in 1995-1997.

Other Aspects of Power Contracts
     A generating  facility which uses biomass or "waste" fuel, such as landfill
gas or waste coal, may be a Qualifying  Facility under PURPA.  However, in order
for a cogeneration  facility using conventional fuel to be a Qualifying Facility
under PURPA and current  regulations,  at least 5% of a Project's  total  energy
output must be "useful" heat energy that  typically is sold or made available in
the form of steam or hot water to an entity (the "Steam  Host").  Under  current
regulatory  interpretations,  heat  energy is "useful" if its use has a business
purpose  independent  from the sale of  electricity  and there is some  economic
justification for the use. Typically,  a Project meets its PURPA requirements by
entering  into a long term  contract  with a Steam Host which  provides that the
Steam Host will take delivery of sufficient thermal energy to permit the Project
to meet the  requirements of PURPA.  If a cogeneration  Project did not meet the
requirements for supplying heat energy to a Steam Host because, for example, the
Steam  Host  went  out  of  business,  or  the  thermal  contract  is  otherwise
terminated,  that  cogenerating  Project  might lose its status under PURPA as a
Qualifying  Facility.  If as a result of this loss of  status  the  cogenerating
Project  became  subject to federal and state  regulation or its Power  Contract
were terminated or modified, the cogenerating Project might incur material loss.
Although  PURPA  provides  grace periods for a  cogeneration  Project to find an
alternative Steam Host,  potential  alternate Steam Hosts may be very limited or
non-existent  because of the practical  necessity for a Steam Host to be located
adjacent to the Project to minimize heat loss.

     Under PURPA,  electric power utilities are directed to purchase electricity
output  offered to them by Qualifying  Facilities at a price no greater than the
utilities'  avoided costs of generating  electricity  from another  source.  The
Power Contracts for many existing Projects have been negotiated with the utility
as long term  agreements  to  purchase  the  Projects'  output.  There can be no
assurance  that the rates offered to a new Project or the other terms of a Power
Contract will be sufficiently  favorable to induce  development and construction
of a Project or permit profitable operation of a completed Project.

     Many long-term Power Contracts provide for levelized rates over the life of
the  contracts or shorter  periods,  which are  designed to stabilize  projected
revenues  earned by an Independent  Power Project.  The effect of many levelized
rate contracts is to provide that the utility will purchase  electricity  from a
Project at higher rates in the earlier  years in exchange for an agreement  from
the Project to accept lower rates to be paid by the utility in later years. If a
Project experiences operational difficulties and produces less than the expected
volume of electricity  in later years,  it may be required to make cash payments
to the utility to compensate for such shortfall, thereby reducing available cash
flow to the Project owner.

     Although  there is some  risk  that a utility  bound by a  long-term  Power
Contract may be unable to meet its purchase  obligations,  under current federal
law and current law in most states  electric  utilities are required to maintain
prudent financing  structures and are reviewed  periodically by their regulators
for  compliance  with  these  requirements.  In  addition,  if state  regulators
approve,  the payments made by a utility to an Independent  Power Project may be
included  as  allowed  costs  to be  passed  through  to  the  utility's  retail
customers,  thereby giving the utility an additional source of revenue which can
be used to make payments to the Independent Power Project. Accordingly,  failure
of a utility to meet payment  obligations to an Independent  Power Project which
is operating in compliance with its Power Contract has been a rare occurrence.

     Most  deregulatory  programs treat Power Contracts with prices in excess of
market prices as "stranded costs" and provide for reimbursement to utilities for
those stranded costs for an extended period of time. During these periods, which
can range from three to ten years or longer in some instances, there may be some
assurance that the utilities will pay. However,  retail  deregulation may impose
other  financial  strains on  electric  utilities,  which will be  relegated  to
maintaining  the  distribution   network  and  delivering  power  to  individual
residential,  commercial and industrial locations.  Those utilities will have to
downsize and reorganize their workforces and resources and compete in many cases
as suppliers of electricity.  It is likely that some utilities may reorganize or
enter  bankruptcy if they are unable to meet these  challenges.  In those cases,
the  Fund may be  unable  to  collect  amounts  due to it or may have its  Power
Contracts  abrogated in bankruptcy.  Industrial  and other retail  purchasers of
power do not have an assured source of revenue from which to make payments under
the Power Contract and a Project  selling to them must rely solely on the credit
of such  purchaser.  Consequently,  although  the Fund will  conduct a  business
review of each purchaser's  creditworthiness prior to contracting with it, there
can be no  assurance  that it will  remain in  business  over time or be able to
perform its payment obligations for the duration of the Power Contract.

     In the event of a default or failure to pay by an energy  purchaser under a
Power  Contract  because of its bankruptcy or  insolvency,  regulatory  changes,
failure of a Project to comply with the terms of its  contract or other  events,
there  can be no  assurance  that  the  Project  will be able to  obtain a Power
Contract  with  another  purchaser  or to  obtain a Power  Contract  on terms as
favorable as those of the previous contract.

     The Fund expects that if it were to invest in capital  facilities  or other
investments  outside the electric power industry,  those  facilities  would have
output contracts  providing for long-term payments by a responsible  customer or
customers  for the  facilities'  production.  These  contracts  would  likely be
structured in a manner similar to Power Contracts with non-utility customers. In
that  event,  the  Fund  would  be  subject  to  the  risks  of  the  customers'
creditworthiness  and the long-term  anticipated  demand for the products.  With
regard to investments  in other types of industries,  such as Zap Power Systems,
Inc., the Fund's  investment is subject to the many risks of any enterprise that
markets its products to consumers. In addition, Zap's business plan contemplates
marketing  its bicycles  and vehicles  through  dealers and  franchisees.  Zap's
ability  to do so  profitably  will  depend  upon its  ability  to  organize  an
effective  dealer  and  franchise  system  and to create a mass  market  through
advertising  and  marketing  efforts for its  products.  Zap has no  significant
experience in those areas.

Reliance on Fuel Supplies at Appropriate Prices
     Since  the  cost of fuel is  usually  one of the  largest  components  of a
Project's  operating  costs  (especially  so in the case of natural gas, coal or
oil-fired electric power Projects), the success of a Project may depend not only
on the availability of fuel supplies but also on the Project's ability to obtain
long term contracts for fuel and fuel transportation at appropriate prices.

     The Fund will  attempt  to  invest  in  Projects  which  have  fuel  supply
arrangements  which  closely match the fuel  adjustment  provisions of the Power
Contract with the utility,  industrial user or other energy  purchaser,  so that
changes in Project fuel costs will be offset by corresponding changes in revenue
from the sale of energy. Existing Projects that do not have favorable fuel price
adjustment  provisions  in fuel supply  contracts  may have  purchase  prices or
values that are significantly discounted from those of other Projects.

     If fuel prices  payable by a Project are  relatively  high  compared to the
contract price of energy,  the Project may not be able to generate  energy on an
economic  basis.  On the other hand, if a Project's  economic  returns are based
upon  the  ability  to  generate   substantial   fuel  savings  through  use  of
cogeneration and other more efficient power generation technologies,  lower fuel
prices may tend to reduce the value of the fuel savings and may adversely affect
the financial  performance  of the Project.  Since  cogeneration  and other more
efficient  technologies  often require  higher  capital costs than  conventional
power plants, periods of very low fuel prices could result in fuel savings which
are insufficient to cover the additional capital costs,  thereby creating losses
from the Project.

     Small  scale  Projects  may find it  difficult  or  uneconomical  to obtain
long-term  fuel supply  contracts and thus may be exposed to risks of fuel price
escalations.  For example,  after a relatively long period of depressed  prices,
natural  gas prices in many areas  tripled  between  summer  1996 and the winter
months of 1996-1997.  These  increases  adversely  affected many small  Projects
operated by Prior Programs, although RPMCo was able to negotiate one-year supply
contracts for many Projects it managed at a price  substantially  less than peak
prices.  Because the Fund may be a relatively  small consumer of fuel, it may be
difficult for it to economically hedge fuel prices or purchase reliable supplies
on a long term  basis.  In that  case,  the Fund may be exposed to the risk that
fuel  price  increases  could  reduce  or even  eliminate  profitability  of its
Projects.

     A separate  component  of a  Project's  overall  fuel  requirements  is the
availability,  reliability and cost of transporting the fuel to the Project. For
example,  Projects fired by natural gas may be dependent upon a single  pipeline
for  transportation  of large  volumes  of  natural  gas,  and may be  adversely
affected by the costs of transportation on the pipeline or by outages,  capacity
restrictions,  priority allocations to other customers or other events affecting
the pipeline.  Some Projects are designed to operate on alternate fuels (such as
using fuel oil when natural gas is  unavailable)  but these  alternate fuels are
also subject to similar variables of availability, cost and transportation.

         In contrast to the Power Contract, which is one of the first objectives
of a Project,  the fuel supply contracts are frequently obtained relatively late
in the development process or in the operating stage. There is no assurance that
adequate  fuel  supply  arrangements  for  a  Project  will  be  available  from
dependable sources and at acceptable prices at the time required.

     It should be noted  that  hydroelectric  Projects  and  landfill-gas-fueled
Projects may have little or no net fuel expense. However, hydroelectric Projects
are  dependent  on rainfall  and  snowfall to create river flow and droughts can
severely limit or cease their output.  Landfill gas-fired Projects often have no
alternate source of fuel, and federal regulations effectively limit their use of
alternate  fossil fuels (such as natural gas) to 25% of total fuel use per year.
Therefore  an  interruption  for any reason of the fuel supply from the landfill
(because  of  equipment   problems,   default  by  the  fuel  supply   operator,
environmental  requirements or routine  maintenance,  for example) may reduce or
eliminate the ability of the Project to operate.

Environmental Regulation
     Projects   in  which  the  Fund  will   participate   will  be  subject  to
environmental regulation by federal, state and local government authorities. The
failure  to  comply  and to  maintain  compliance  with  these  regulations  may
potentially  result in  substantial  liability  for  pollution and other damages
under statutes and  regulations  relating to  environmental  matters.  Thus, the
regulatory risks associated with the environment should be considered  carefully
by Investors before investing in the Fund. Environmental regulation includes the
requirement  that the  Projects  in which the Fund will  participate  obtain and
maintain  various  regulatory  approvals,  licenses  and  permits.  The  process
involved in obtaining these approvals can be quite time consuming and expensive,
resulting in delays in the  development or construction of a Project or imposing
operating  limitations  on the Project.  These  factors  could lead to increased
costs to the Fund. If the Fund invests in Projects that were developed by others
or that have an  operating  history,  it may  become  liable for  pollution  and
environmental  discharges  that occurred before it took ownership of the Project
or that the Fund had no ability  to affect.  As a result,  the  purchase  of any
existing Project or any Project located on land affected by previous  activities
may subject  the Fund to  unpredictable  and  material  contingent  liabilities.
Although the Fund through its investigation of Projects will attempt to minimize
such contingencies, there can be no assurance that it can do so.

     In  addition,   there  can  be  no  assurance  that  future   environmental
legislation or regulations will not affect Project economics.  The imposition of
more  stringent  environmental  laws and  more  effective  enforcement  policies
thereunder   could   significantly   increase  the  costs  associated  with  the
development,  construction and operation of any Project and, thus, substantially
reduce the return which  Investors  could  anticipate  with regard to the Fund's
interest therein.  For example,  ongoing  implementation of Title V of the Clean
Air Act Amendments of 1990 will require all existing  industrial  sources of air
pollution to obtain new operating  permits and to comply with  additional  daily
operational limits.

Identifying Projects
     There is no assurance that there will be a sufficient  number of attractive
potential Projects available to the Fund. In seeking to participate in Projects,
in many  cases the Fund is  likely to  encounter  significant  competition  from
construction companies,  equipment vendors, electric and gas utilities and their
affiliates,  other Project Sponsors and investment  groups which  participate in
the  development,   construction  and  operation  of  Projects.  Many  of  these
competitors have greater experience in the independent power industry or project
development or have superior capital resources.

     The  consolidation  of the  independent  power  industry  has  resulted  in
increased competition for acquire most available electric generating Projects in
the United States.  The process of identifying  and investing in Projects can be
protracted and during that period  Investors' funds are held in U.S.  Government
securities,  in money market funds  holding  those  securities  or in short-term
commercial  paper  or  money  market  instruments  at lower  yields  than  those
anticipated  from the  Projects.  Factors that may cause delays  include lack of
funds  for  the  Fund  to  begin  the  acquisition  process,  variations  in the
availability  of Projects and funds  available to other  purchasers of Projects,
negotiations and  environmental and regulatory delays caused by agency action or
the need to investigate or remediate conditions before investing funds. The Fund
seeks to reduce the period  necessary  to invest  funds,  primarily  through the
Early  Investor  Incentive,  which was  instituted  to allow  programs  to begin
acquiring Projects during their offering periods. The period from the closing of
the offering to 90% investment of available funds dropped from  approximately 29
months in Ridgewood  Power I to 9-1/2  months in Ridgewood  Power III but was 22
months  for  Ridgewood  Power IV and is  estimated  to be at least 15 months for
Ridgewood Power V.

Need for Diversification
         The Fund expects that it will participate in several Projects. However,
the size of each  investment  may depend upon a variety of  factors,  including,
among other  things,  the amount of funds  available  to the Fund,  the size and
timing of the  proposed  investment,  the  availability  of  capital  from other
investors,  the ability of other investment  programs  sponsored by the Managing
Shareholders to participate,  and the requirements of other  participants in the
transaction.  Based on prior experience, the Fund believes that the likely range
for each major investment by the Fund may be from 10% to 33% of the Fund's total
capital,  and may exceed 33% if the Fund  participates  in certain  larger scale
Projects.  There can be no assurance  that any  Projects  will earn a return and
failure of any Project to earn a satisfactory  return may have an adverse effect
on the financial performance of the Fund as a whole if that Project represents a
significant portion of the Fund's investments.

Risks of Foreign Investments
     The Fund may invest in  Projects  located  outside the United  States.  The
Managing  Shareholders and Prior Programs have not yet invested material amounts
in foreign  Projects,  although  they have  evaluated  several  proposals,  have
expended funds on due diligence and  exploratory  investments and are developing
Projects in Egypt and South America.  Neither  Managing  Shareholder and none of
their  Affiliates has any  significant  experience in evaluating,  investing in,
developing,  operating  or  disposing  of  Projects  located  outside the United
States.  Among the  risks  that the Fund will  encounter  in making  investments
outside the United  States are:  risks in relying upon  unknown or  little-known
foreign  businesses  as partners or operators of projects,  increased  costs for
legal,  accounting,  environmental  and other  services,  exposure to unfamiliar
systems of governmental regulation,  electricity pricing,  taxation,  employment
relations and economic organization, inability to obtain goods and services from
abroad  or  local  requirements  to  purchase  goods  and  services  of  unknown
characteristics  and quality from local suppliers,  credit risks in dealing with
local  businesses and customers,  foreign exchange risks such as depreciation of
the local  currency  against the dollar or  inability  to transfer  money to the
United States, governmental and business corruption,  kidnapping,  extortion and
other risks to the Fund's  personnel,  and difficulty in selling or disposing of
Projects or assets.

Utilization of Funds for Undesignated Projects
     The Fund may  direct a  substantial  portion  of the net  proceeds  of this
offering  of  Shares  to  Projects  that  have  not  been   designated  in  this
Registration  Statement,  as it may be  supplemented  from time to time, and the
Fund may be unable to or may decline to participate in any specific  investments
described in this Registration  Statement or any supplements  thereto.  Further,
the Fund's investment  objectives are broad and grant a great deal of discretion
to the Managing Shareholder in determining whether a potential Project is within
the  Fund's  objectives.  Therefore,  prospective  Investors  may not be able to
evaluate  the  Projects  in which the Fund  participates  before  they  purchase
Shares;  nor will  prospective  Investors  have any  voice in the  selection  of
Projects  after they purchase  Shares,  and the Fund may invest in Projects that
differ from those  described in this  Registration  Statement or from those that
the Prior  Programs have invested in.  Consequently,  Investors  will be relying
upon the judgment of the Managing Shareholder for such decisions.

Projects  Require  Large  Amounts  of  Capital  and  Time  for  Development  and
Construction
     The Fund may  commit  a  significant  portion  of its  capital  to a single
Project,  and it is possible that additional capital may be required to complete
a Project or make necessary alterations or additions to such Project.  There can
be no assurance that the Fund will have access to any such additional capital or
that the Project can obtain any such  additional  capital from other  sources on
satisfactory  terms.  Further,  to the  extent the Fund  participates  in larger
Projects,  extended  periods of time (one to three years) may elapse  before the
Project commences operation.

Construction
     The Fund may invest in the development and construction of new Projects and
if it does so, it will be exposed  to the risks  that arise in the  construction
stage of a Project.  These  risks  include  interruptions  of  supplies  or work
stoppages;  delays  caused by  changes  in plans and  specifications;  inclement
weather; subcontractor  non-performance;  planning error; contractor insolvency;
cost increases;  regulatory  changes;  and other  construction-related  matters.
Although  the Fund  will  attempt  to  reduce  those  risks  where  possible  by
contracting  with   responsible   contractors  or  suppliers  on  a  turnkey  or
performance  incentive  basis (where these risks are assumed by others),  it may
not be possible to do so effectively.

Financing and Leverage
     Although  the Fund does not  intend to borrow  any funds to make its equity
investments in Projects,  certain Projects may require non-recourse construction
and/or long term financing in order to be viable. There can be no assurance that
such financing will be available at the time required on satisfactory  terms and
conditions,  and if not available,  the Project may be abandoned and all amounts
invested in the Project to that point will likely be lost.  Even if  commitments
for construction and/or long term financing are obtained by a Project,  there is
no assurance that the Project will be able to meet all of the  conditions  which
are  typically  required  by  project  finance  lenders  in order  to fund  such
financing  commitments.  Further, even if construction or long term financing is
obtained,  failure  by the  Project to obtain and  maintain  expected  operating
parameters  may lead the  holders of the debt to  foreclose  on the  Project and
eliminate the equity investment of the owners.

     The Fund will seek to limit the risks of leverage by limiting the number of
investments in Projects with leverage and/or conducting its due diligence with a
focus on the  adequacy  of debt  service  coverage  (excess  of cash  flow  over
required payments of principal and interest) and debt service  reserves,  and by
focusing on acquiring Projects with a record of prior performance.

Limited Transferability of Fund Assets
     The Fund's  interests  in many  Projects  in which it  participates  may be
illiquid. When the Fund initially commits funds to a Project, it may endeavor to
negotiate the right to sell all or part of its equity  interests in a Project at
a later time without the consents of other participants.  However, the interests
in  Project  Entities  in which the Fund  participates  with other  owners  will
typically  be closely held and the Fund's  ability to transfer its  interests in
such  Project  entities  may be  restricted  or  prohibited  by their  governing
documents,  or by other agreements among Project participants or by covenants in
financing documents.  Even if the Fund successfully negotiates the right to sell
its interest in a project without obtaining the consents of other  participants,
the Fund may find that it is  unable  to sell or  dispose  of its  interests  in
Projects  at the  times  it had  planned  or that  such  transactions  would  be
disadvantageous  to the Fund.  Successful  sales would depend upon,  among other
things,  the operating  history and  prospects for the Projects to be sold,  the
number of potential  purchasers  and the  economics of any bids made by them and
the state of the  independent  power market.  In addition,  sales of substantial
interests in a Project may result in adverse tax consequences.

     The Managing Shareholder will have full discretion to determine whether any
of the Fund  Properties  should  be sold and  which  should  be held and in what
proportions,  and the Fund will have no  obligation  to sell all or a portion of
any asset for the benefit of Investors or to retain any asset for the benefit of
Investors.  Investors  may be  required  to  remain  in  the  Fund  until  it is
terminated and dissolved.

General Risks of Operation
    The  commencement  of  operation by a Project  does not  necessarily  assure
recovery of or a profit on any  investment  made in such Project by the Fund. If
an electric generation Project or a capital project is completed and placed into
operation,  it will be subject to the general risks of the industry,  including,
but not  limited  to,  equipment  failures,  fuel  interruption,  failure of the
Project to perform  according to  projections,  loss of a Power Contract for not
maintaining a minimum required output availability or other breaches,  decreases
or  escalations  in Power  Contract or fuel supply  contract price indices in an
unexpected manner,  bankruptcy of a key customer or supplier,  failure to obtain
required  wheeling rights or use of  transmission  facilities at economic rates,
liabilities  in  tort  (which  may  exceed  insurance  coverage),  environmental
obligations,  inability  to obtain  desirable  amounts of  insurance at economic
rates, acts of God and other catastrophes.

Joint Activity with Others
     It is  anticipated  that the Fund  will  normally  participate  in a larger
Project  jointly  with one or more  other  entities  through a joint  venture or
partnership  vehicle.  To the extent that other participants in a Project cannot
fulfill their  obligations or have  divergent  interests or are in a position to
take action  contrary  to the  policies or  objectives  of the Fund,  the Fund's
interest in such venture may be adversely  affected.  In certain cases, the Fund
may  participate or be deemed to participate as a general  partner of the entity
developing the Project,  thereby exposing the Fund to general partner liability.
The Fund will seek to limit such  exposures by  interposing a limited  liability
entity between the Fund and the Project, or by obtaining specific agreement from
other  Project  participants  they will not seek  recourse  against  Fund assets
(other than the Fund's investment in the Project) for any claims.

     Although  the  Managing  Shareholder  will remain  closely  involved in all
aspects  of the Fund's  activities,  the Fund in some  cases  (typically  larger
Projects)  will  rely  upon  the  advice  of  others  as to the  development  or
management of Projects.  Thus, a substantial  amount of  responsibility  will be
placed on third  parties who function as Project  Sponsors or Project  managers.
The success of any Project will, to a large extent, be determined by the quality
and  performance  of its Project  Sponsors and  managers.  Project  Sponsors and
Project development companies may have conflicting demands on their resources or
may  be  adversely  affected  by  other  developments  at  their  affiliated  or
associated  entities.  As a result, there is the risk that such Project Sponsors
or Project  development  companies  or their  other  investors  may be unable to
fulfill their responsibilities.

Limited Operating Experience
         Although Ridgewood Power has participated in numerous independent power
projects and  executive  officers of  Ridgewood  Power and advisors to Ridgewood
Power have  extensive  backgrounds  in the  independent  power  industry and the
construction  and operation of Independent  Power Projects,  Ridgewood Power has
limited expertise in the design, construction and operation of independent power
plants.  There can be no assurance that Ridgewood  Power's prior  experience has
given it a comprehensive  knowledge of the independent power industry sufficient
enough to result in successful or profitable operations of the Fund or that such
experience extends to all of the diverse areas of the independent power industry
or capital facilities developments in which the Fund may participate.

     Power VI Co has no business track record or experience whatever,  is not an
operating  business  and has no capital  resources.  Its  officers  are those of
Ridgewood  Power and  Ridgewood  Power will make all of its  personnel and other
resources available to Power VI Co as needed to allow Power VI Co to perform its
duties to the Fund.

     Projects  that the Fund will  operate for its own  account  will be managed
under contract with the Fund by Ridgewood  Power  Management  LLC ("RPMCo"),  an
affiliate  of the  Managing  Shareholder.  Although  many  of the  officers  and
personnel  of  Ridgewood  Power also serve as officers  and  personnel of RPMCo,
RPMCo  was  organized  in  January  1996 and thus  has  only  limited  operating
experience.  Many of its  personnel,  although  experienced,  have been recently
hired by it.  Further,  RPMCo also manages the  operations of Projects owned and
operated by the Prior Programs,  and is currently subject to substantial demands
on  its  organizational  and  management  resources.  It is  possible  that  the
management  of  Projects  to be  acquired by the Fund would be impaired by these
demands,  although  the  Managing  Shareholder  believes  that  RPMCo  will have
sufficient resources and experience to operate Projects for the Fund.

Delaware Business Trust
     The Fund has been  organized as a Delaware  business  trust having  limited
liability of the Shareholders of the Fund. Not every state in which the Fund may
conduct  business  has enacted  legislation  recognizing  the limited  liability
provisions of the Delaware  business  trust.  Accordingly,  there is a risk that
investors  will not have limited  liability for  activities of the Fund in those
states.  Such risk is  substantially,  if not entirely,  mitigated by the Fund's
conducting  its  activities  and holding its interest in Projects in such states
through  limited  liability  entities  such as limited  partnerships  or limited
liability companies.

Limitations on Liability of Managing
Persons to Fund
     The Declaration  provides that the Fund's officers and agents, the Managing
Shareholders, the Corporate Trustee, the affiliates of the Managing Shareholders
and their respective directors, officers and agents when acting for the Managing
Shareholders or their affiliates on behalf of the Fund (collectively, "Ridgewood
Managing  Persons") will be  indemnified  and held harmless by the Fund from any
and all claims  rising out of their  management  of the Fund,  except for claims
arising out of the recklessness or misconduct of such persons or a breach of the
Declaration  by such  persons.  Therefore,  the right of an Investor to bring an
action against any of the Ridgewood  Managing Persons for a breach of its or his
fiduciary responsibility or other obligations to the Fund may be limited.

Disparity in Shareholder Contributions
     Power  VI Co,  in its  capacity  as a  Managing  Shareholder,  and  its key
employees  and those of the Fund and Ridgewood  Power,  through the Key Employee
Incentive  Plan, will receive,  after the  preferences to Investors,  25% of the
distributions  of the Fund. The Managing  Shareholders and employees will not be
obligated to contribute  any cash to the Fund for that  interest,  except to the
extent that Fund  Organizational,  Distribution and Offering Expenses exceed the
Organizational,  Distribution  and Offering Fee payable to Ridgewood  Poweror to
the extent the plan requires some monetary contribution by employees.  Ridgewood
Power has purchased one full share as an Investor in the Fund.

Lack of Investor Participation in Management
     Investors  have no right to vote on who  will act as  Managing  Shareholder
unless both Managing  Shareholders  resign, are removed by special action of the
Investors  or are  incapable  of  acting as  Managing  Shareholders  because  of
bankruptcy or legal disability. Similarly, Investors have no right to vote on or
select the  Independent  Panel Members of the Fund unless an  Independent  Panel
Member  resigns or is incapable of acting.  Therefore,  Investors have much more
limited rights to participate in control of the Fund than would  stockholders of
a  corporation.  The Managing  Shareholder  has the  exclusive  right to manage,
control  and  operate  the  affairs  and  business  of the  Fund and to make all
decisions relating thereto and has full, complete and exclusive  discretion with
respect to all such  matters.  Investors  have no right,  power or  authority to
participate  in the  ordinary  and  routine  management  of Fund  affairs  or to
exercise any control over the decisions of the Fund. Accordingly, no prospective
Investor should  purchase any Shares unless the prospective  Investor is willing
to entrust all aspects of management of the Fund to the Managing Shareholder.

Limited Transferability of Shares
     Shares in the Fund are an illiquid  investment.  There is no market for the
Shares,  and,  because  there will be a limited  number of persons who  purchase
Shares and significant restrictions on the transferability of such Shares, it is
expected  that no public  market will  develop.  Any change in the status of the
Shares would require  compliance with multiple  regulatory and tax  requirements
and consent from a majority in interest of Investors.  Investors  will generally
be  prohibited  from  selling  or  transferring   their  Shares  except  in  the
circumstances permitted under Article 13 of the Declaration,  and all such sales
or transfers  require the consent of the Fund,  which may withhold such approval
in its sole discretion.  Accordingly, an Investor will have no assurance that he
or she can liquidate  his or her  investment in the Fund and must be prepared to
bear the  economic  risk of the  investment  until  the Fund is  terminated  and
dissolved.

     The Shares have not been, and are not expected to be,  registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities law in a
manner that will make the Shares freely  transferable  by purchasers  under such
laws and,  therefore,  cannot be resold unless they are subsequently  registered
under the Act or an exemption from such registration is available and subject to
other limitations and conditions  imposed by the Declaration.  The provisions of
Rule 144 under the Act would be available to Investors in  connection  with such
resale,  if the  requirements  of that rule are met, but the Fund has no current
intention to allow transfers to be made on the open market pursuant to the rule.

     The  illiquidity  of  and  other   significant  risks  associated  with  an
investment in the Fund make the purchase of Shares suitable only for an Investor
who has  substantial  net worth,  who has no need for liquidity  with respect to
this  investment,  who  understands  the risks  involved,  who has reviewed this
Registration  Statement and the Exhibits  hereto and the risks involved with his
or her  tax,  legal  and  investment  advisors,  and who has  adequate  means of
providing for his or her current and foreseeable needs and contingencies.

Voluntary Additional Capital Contributions
     There will be no mandatory  assessments  of the  Investors and the Managing
Shareholder. Investors may, however, be called upon on a voluntary basis to make
additional  Capital  Contributions  after the expenditure of the Initial Capital
Contributions.  If an Investor elects not to make a requested additional Capital
Contribution,   the  Managing   Shareholder  may  determine  that  the  Managing
Shareholder,  other  Investors  or other  persons may do so or may supply  loans
instead, which may result in a dilution of that Investor's interest in the Fund.

Failure Of Fund To Perform Funding Obligations

     Although  the Fund  anticipates  that it will be able to perform all of its
commitments  to invest in Projects,  in certain  instances  there may be adverse
consequences to the Fund if it were to fail to do so. For example, a partnership
agreement or other  instrument  governing the Fund's  participation in a Project
might provide  that, in the event the Fund fails to make a capital  contribution
to the partnership or particular  Project as required under such agreement,  the
Fund will forfeit its entire interest in the partnership or Project, as the case
may be.

Potential Conflicts of Interest
There are material, potential conflicts of interest involved in the operation of
the Fund. Some examples of these potential conflicts include:

o competing  demands for management  resources of the Managing  Shareholder  and
RPMCo;
o competing demands for allocating investment or divestiture opportunities among
programs;
o competing  demands for  opportunities  to sell electric  power in  competitive
markets;
o conflicts between the interests of the Managing Shareholder and its Affiliates
in receiving  compensation  from the Fund for investment  activities,  operating
activities,  and divestitures,  as well as reimbursement  for expenses,  and the
interests of the Investors;  
o conflicts relating to the allocation of costs and expenses among programs;
o conflicts arising from the fact that the Managing  Shareholder will not make a
capital  contribution  in respect of its  interests as such in the Fund and that
the Investors will supply all of the capital of the Fund;
o conflicts  between the interests of the Fund and other  programs  sponsored by
the Managing  Shareholder  and its Affiliates if those programs are co-owners of
Projects with the Fund;
o conflicts as to who will supply additional  capital in the event the Fund were
to require additional contributions;
o potential interests of the Managing Shareholder or its Affiliates in competing
independent power or investment ventures;
o the lack of  independent  representation  of  Investors  in  structuring  this
offering and in determining compensation; and
o conflicts between the interests of key employees and the Managing  Shareholder
and those of Investors  with regard to  determining  compensation  under the Key
Employees Incentive Plan.

Material  transactions  between  the Fund and other  Programs  sponsored  by the
Managing  Shareholder  and its  Affiliates  must be reviewed and approved by the
Independent Review Panel. Although the potential conflicts of interest described
here and others  cannot be  eliminated,  the Fund  believes  any such  potential
conflicts will not materially affect the obligation of Ridgewood Power and Power
VI Co in their capacities as Managing  Shareholders to act in the best interests
of the Investors and the Fund.

Tax Risks
         There are tax advantages associated with an investment in the Fund, and
there are some tax risks associated with those tax benefits.  The risks include,
but are not limited to, those discussed below.

(A) Partnership Tax Status of Fund
     While it is the  opinion of tax  counsel to  Ridgewood  Power that the Fund
should be  recognized  as a partnership  for federal  income tax purposes,  such
opinion is not binding  upon the Service and no advance  ruling from the Service
as to such status has been requested, and such a request is not contemplated. If
a secondary market for the Fund's Investor Shares develops,  the Service, in the
event it audits  the Fund,  might  attempt  to treat the Fund as an  association
taxable as a corporation. If such challenge were successful, the Investors would
be treated as if they were corporate  shareholders and, therefore,  would not be
entitled to deduct their proportionate share of the Fund's operating losses.

(B) State and Local Taxes
     Each Investor may be liable for state and local income taxes payable in the
state or locality in which the Investor is a resident or doing  business or in a
state or locality in which the Fund  conducts or is deemed to conduct  business.
Thus each Investor may be required to file multiple  state income tax returns as
a result of his investment in the Fund.

     The state of  California  has  instituted  a  withholding  requirement  for
distributions  from  organizations  taxed as partnerships  (such as the Fund and
limited  partnerships or limited liability  companies used by the Fund to invest
in Projects)  to tax  partners  located  outside  California.  If the Fund earns
income in  California,  the portion of each  distribution  to a  non-California,
taxable  Investor that is attributable to California is subject to a withholding
tax of 7%, whether or not the Investor files a California income tax return. The
Fund believes that other states may follow  California's  example, in which case
much of the income component of distributions to an Investor would be subject to
state withholding taxes.

     Each  prospective  Investor  is urged  and  expected  to  consult  with his
personal  tax advisor  with respect to the tax  consequences  connected  with an
investment in the Fund.

 (3)  Business Plan and Development of Projects

Business Plan.
     As  deregulation   of  the  electricity   industry  in  the  United  States
progresses,  the uncertainties and the financial  stresses that deregulation may
create may have the effect of depressing  the stock price of companies that have
long-term  value.  Opportunities  may arise to invest  in  undervalued  industry
participants or in other businesses having unique technological  advantages.  If
so, the Fund may invest  its funds in  acquiring  majority  or  minority  equity
stakes in those companies.

Advantages of Investing in the Independent Power Industry
         Because of historical factors, many existing independent power Projects
have long-term power sales  contracts that can provide  consistent cash flows to
Project  owners  over long  periods of time.  Further,  the side  effects of the
deregulation of the electricity industry,  which is just beginning,  are tending
to depress the purchase  price of these  Projects.  Finally,  in several  years,
those side effects  might make these  Projects  more  valuable  than the current
prices for the Projects would indicate. The Fund's decision to invest its assets
in the independent power industry is based on these trends.

         In 1978,  Congress passed the Public Utilities  Regulatory Policies Act
("PURPA"),  which was intended to create  additional  sources of electricity and
which also created the ability for companies  other than  electric  utilities to
generate and sell electricity.  Under PURPA, each electric utility must purchase
electricity   generated  by  certain  non-utility   electric  generating  plants
("Independent Power Projects") at a price equal to the utility's "avoided cost."
This avoided cost basically is the estimated  highest cost the utility would pay
otherwise to purchase  additional  electricity.  PURPA also exempts  Independent
Power Projects from many federal and state restrictions.

         PURPA does not require  utilities to enter into long-term  contracts to
buy electricity  from  Independent  Power Projects,  but in the 1980's and early
1990's many  utilities  entered into  long-term  power  purchase  contracts from
Independent  Power  Projects.  With  changes  in the  industry,  few if any  new
long-term power purchase contracts are being entered into today.

         Generating  facilities  with  existing  long-term  contracts  thus have
unique  advantages in that those  contracts are for extended terms at rates that
are  often  equal  to  or  higher  than  current  spot  rates  for  electricity.
Nevertheless,  the Fund believes that these facilities are sometimes undervalued
and can be excellent investment opportunities.

         First, the deregulatory movement has made many potential competitors of
the Fund uncertain about the value of small generating facilities with long-term
contracts.  The federal  government and state  governments are  deregulating the
electric  power  industry.  These changes will allow any company that  generates
electricity  to sell its  output to any  utility  to which it can  transmit  the
electricity,  and,  in most  states,  eventually  to any retail  customer.  This
movement will create pressures on local utilities to buy their  electricity from
the cheapest  competitive source. As a result,  local electrical  utilities with
high-cost generating facilities,  such as malfunctioning nuclear power plants or
inefficient fossil-fuel units, will find that they will not be able to use those
facilities  economically.  Even so, those utilities will be obligated to pay off
the capital costs incurred to build and maintain those uneconomic plants.  Those
costs are called "stranded costs."

         Many long-term  power purchase  contracts  between local  utilities and
independent  power  producers  now  provide  for  rates  in  excess  of  current
short-term  rates for  purchased  power and the  utilities  are  treating  their
contractual  obligations  as a form  of  stranded  cost.  There  has  been  much
speculation  that in the course of  deregulating  the electric  power  industry,
federal or state regulators or utilities would attempt to invalidate these power
purchase  contracts as a means of throwing some of the costs of  deregulation on
the owners of independent  power plants.  To date, the Federal Energy Regulatory
Commission and each state regulator that has addressed the issue have ruled that
existing  power purchase  contracts  will not be affected by their  deregulation
initiatives.  To date,  the  regulators  have  rejected  the  requests  of a few
utilities to  invalidate  existing  power  purchase  contracts.  There can be no
assurance that existing power purchase contracts will not be modified.  However,
because of the  consistent  position  of the  regulatory  authorities,  the Fund
believes that so long as it performs its  obligations  under the power  purchase
contracts, it will be entitled to the benefits of those contracts.

         Facilities  without  long-term  power  purchase  contracts  may also be
attractive  investments.  Deregulation is encouraging electric utilities to sell
off many of their existing  generating  plants. In many cases,  state regulators
are  requiring  electric  utilities  to sell many of their  plants  to  separate
electric  generating  companies,  so that a  competitive  market  for buying and
selling  electricity  can be created.  In other cases,  electric  utilities  are
voluntarily selling their generating plants because they believe they can obtain
power on the open market more efficiently.  As a result, there is a large number
of generating plants for sale today and it is expected that many more will be on
the  market  soon.  This  tends to  depress  the price of all  existing  plants.
Further,  small electric generating plants may be less attractive  purchases for
large  corporations  and  investment  groups  with  large  amounts of capital to
invest,  which may further depress their current prices.  The Fund believes that
these market  conditions may allow it to acquire small  independent power plants
at attractive prices.

         Finally,  the uncertainties caused by deregulation and by past failures
of  demand to meet  projections  have  deterred  investments  in new  generating
capacity.  Further,  as a competitive market in generating  capacity is created,
market forces are  discouraging  many utilities and  generators  from keeping as
much generating capacity in reserve as they did in prior years. While some power
marketing  groups are claiming that  efficiencies  created by deregulation  will
meet  needs for  additional  capacity,  many  electric  industry  engineers  and
consultants  have  expressed  fears that there will be shortages  of  generating
capacity within the next 10 years in many areas of the United States.  It should
also be noted that as deregulation  forces electricity prices lower,  demand for
electricity   should  rise,   other  things  being  equal.  In  addition,   many
nuclear-powered  and conventional  electric  generating plants are coming to the
end of their useful lives.

         With these factors shaping the future market,  a few large  independent
electric power  companies and their backers have announced  plans to build large
new  generating  stations  without  long term  power  purchase  contracts.  They
apparently  think by the time those large  investments  in power  plants go into
operation  (currently  estimated through 2002) those plants will be needed.  The
Fund does not intend to join in building large new power  generating  facilities
without firm  contracts for sale of the  electricity,  although if an attractive
opportunity  existed  it would do so.  Instead,  the  Fund  believes  that if it
economically and efficiently  operates and maintains small generating  Projects,
those  Projects  will increase in value from their  current  somewhat  depressed
levels if reserve capacity tightens in the industry.

         In addition, many small independent power Projects have environmentally
beneficial  features.  For example,  some small  independent  power Projects use
landfill  gas to power  their  generators.  Instead  of having the  methane  gas
produced by rotting garbage flow into the atmosphere, where it may have powerful
"greenhouse"  effects that  increase  global  warming,  the methane is burned to
produce electricity and water and carbon dioxide, which are less environmentally
destructive.  Small independent  cogeneration  power Projects can save fuel. The
Fund  will look for  small  Projects  that  have  these  kinds of  environmental
benefits, not only because of the benefit to the environment but also because it
believes that its  experience  with these kinds of small  Projects can make them
good investments.

Advantages to Investing in Other Capital Facilities
         Environmentally   beneficial  independent  power  Projects  often  have
similar,  non-electric power facilities related to them. For example, a trash-to
energy power plant may have a waste transfer  station nearby.  In  investigating
small independent power Projects, Ridgewood Power has found that there are other
capital  projects that are similar to independent  power Projects and that often
(but not necessarily)  have  environmental  benefits.  These may meet the Fund's
goals for investment  because they are expected to provide  long-term,  reliable
cash flows and have potential for long-term  appreciation.  Some of the types of
Projects that may fit this profile include:

Projects  to convert  waste  fuel or biomass  into  useful  fuels or  chemicals;
Projects  to  generate  electricity  or  heat  to  process  or  destroy  harmful
industrial  wastes;  Projects  that provide  pumping power or other motive power
more efficiently than electric or other motors;  infrastructure  facilities such
as waste transfer  stations;  or other types of capital  projects,  such as fuel
plants,  processing  facilities and recycling  facilities,  that are expected to
have consistent cash flows similar to those from Independent Power Projects.

Advantages to Investing in Other Companies
         Deregulation of the electricity industry,  like the deregulation of the
natural  gas  industry  in the last 15 years,  is  likely to have  unpredictable
effects on many utilities and electric generating  companies.  Instead of having
assured markets and  government-determined  pricing, both electric utilities and
independent  power producers without long-term Power Contracts will face rapidly
changing demand and supply for electricity. Smaller companies and companies with
long-term  or  unconventional   business  strategies  may  find  that  they  are
undervalued  by the stock  market  or that  deregulatory  uncertainties  make it
difficult to attract  capital and grow.  This may create  opportunities  for the
Fund to acquire  majority or minority  equity  interests  in those  companies on
favorable conditions. Although this type of investment is not the Fund's primary
goal, the Fund will take advantage of these opportunities if they arise.

         Although  the  Fund's   primary   focus  is  to  invest  for  long-term
appreciation,  it might  also  elect to  invest in  equity  securities  with the
purpose of gaining  control of a company,  or for effecting a merger or business
combination  with the Fund, its  affiliates or  non-affiliated  parties,  or for
effecting the  acquisition of assets,  or for sale to a successful  bidder.  The
Fund  might  effect  any  of  these  transactions  on  its  own,  together  with
Affiliates,  or  together  with  non-Affiliates,   and  might  do  so  with  the
encouragement  or consent of management or  con-trolling  equity  holders of the
company or without such consent.

         If the Fund were to invest a substantial amount of its assets in equity
securities of other companies and did not actively own and operate power plants,
it might  become an  "investment  company"  subject to the  requirements  of the
Investment  Company Act of 1940.  The Fund does not intend to do so and will not
make  investments  that would  require  it to be  regulated  under that  statute
without the prior  consent of the holders of a majority of the  Investor  Shares
and  the  Incentive  Shares  issued  under  the  Key  Employees  Incentive  Plan
(collectively, the "Voting Shares").

Basic Investment Approach
         When the Fund makes  investments in  Independent  Power Projects and in
other capital Projects,  it concentrates on smaller Projects in which it can buy
at least a controlling  equity interest (either together or with another program
sponsored  by the  Managing  Shareholders).  Those  investments  should be small
enough for the Fund to make several  investments and to diversify its purchases.
Therefore,  these types of investments  are expected to be in the range of $2 to
$20  million  per  investment.   Many  institutional  investors  will  not  make
investments of less than $10 to $15 million,  which may reduce  competition  for
the investments the Fund is focusing on. Also, larger companies may want to sell
their smaller  Projects so they can focus their  capital and other  resources on
other investments.  In some cases,  electric utilities may wish to sell all or a
portion of their  interest  in a Project so that they can  comply  with  federal
requirements  limiting their  investment in certain  facilities  regulated under
PURPA to 50% of the equity.

         By making equity investments, the Fund often deleverages Projects. This
decreases risk to Investors and reduces financing expenses for the Projects, and
usually  frees  up  funds  held in  amortization,  maintenance  or debt  service
reserves  that  lenders  required.  This can make more cash flow  available  for
distribution  to  Investors  and in the long term if the Fund is  successful  in
improving  the  operating  results of the Project.  After a period of successful
operation,  or based on other factors,  the Fund might conclude that the balance
of returns and risks to Investors  would be improved if a Project was leveraged.
In that case,  the strong equity  position of the Fund might make such financing
easier to obtain.

         Another  advantage  of the Fund's  approach  is that it is  prepared to
provide  equity  financing  of up to 100% of the  amount  needed to  acquire  or
develop  a  Project  and  can do so  quickly,  without  the  need  of  obtaining
additional  financing  from  institutions.   Institutional  debt  financing  for
projects in North America can be difficult to obtain quickly.

         Where possible, the Fund prefers to invest in Projects that are already
operating to reduce  development  risks and delays in earning cash flow.  If the
Fund  commits  money to  develop a  Project,  it  prefers  to invest in  smaller
Projects or Projects with short development periods.

         Where  possible,  the Fund will seek to have  operating  control over a
Project (or share  operating  control  with  another  program  sponsored  by the
Managing  Shareholders).  Ridgewood  Electric Power Trusts I through V (the five
other independent power industry programs sponsored by the Managing Shareholders
and referred to as the "Prior  Programs") now own interests in over 40 Projects,
primarily in California,  New York and New England.  Over half of these Projects
(by number and by revenues) are managed by RPMCo,  which is also controlled by
Robert E. Swanson.

         RPMCo  has  over  35  employees,   including  engineering,   operating,
accounting  and legal  specialists.  The Managing  Shareholders  have found that
hiring other  participants  in or developers of Projects to manage the Projects,
or hiring third party managers, often leads to inefficient management and lesser
total returns to the Funds.  Further,  common  management allows savings in fuel
purchasing,  cash  management and personnel,  creates  incentives for efficiency
over the  entire  portfolios  of  Projects,  and allows  RPMCo to gain  valuable
operating and industry experience.  RPMCo is only reimbursed for its costs, with
no profit factor.

         The Fund may hire other persons to manage Projects,  typically in cases
where the Projects are small and  difficult to manage  centrally.  In some cases
the prior owner or  developer  may retain a  significant  ownership  interest or
insist on  continuing  to operate  Projects as a condition  for selling them. In
those  situations,  the Fund will seek to obtain a  preferred  right to net cash
flow from the Project  before the other owner or  developer  is entitled to cash
flow or compensation materially in excess of its costs.

         The Fund will also  attempt  to  include  incentive  provisions  in any
management  contract that will encourage the manager or operator to maximize the
return to the Fund.  These types of provisions often give the manager a bonus if
it exceeds performance targets while reducing compensation somewhat (or allowing
the  Fund to fire  the  manager)  if the  Project's  performance  does  not meet
specified minimums.

         Finally,  in  acquiring a Project,  the Fund  ordinarily  will create a
subsidiary with limited  liability for its owners to hold the Project or a small
group of similar  Projects.  This  should  reduce the Fund's  liability  for its
subsidiaries'  operations and should isolate each Project to a reasonable extent
from liabilities of other Projects.

Investment Approach for Larger Projects
         The Fund  might  be able to  invest  in  Projects  larger  than the $20
million size described above. If it participated with larger companies in buying
or  developing a Project,  the Fund would  probably buy a minority,  non-control
equity interest. These types of transactions are heavily negotiated and there is
no typical structure for the Fund.

         However,  the Fund believes that it could be an attractive  participant
in a  purchase  of a  larger  facility,  because  its  investment  objective  is
long-term  appreciation  for its  Investors  and  because  it has ready cash for
investment.   The  Fund  thus  can   participate   quickly  and  effectively  in
negotiations.  Moreover,  it can enter  into  complicated  arrangements  such as
partnerships  with special  allocations of accounting  earnings or tax benefits,
where the Fund can receive  cash flow while  other  participants  are  allocated
disproportionate  amounts of earnings or tax items that may be more  valuable to
them. Further,  because the Fund is not related to any electric utilities,  when
it invests in a Project it can help any  electric  utility  co-owners  to comply
with the 50% utility ownership limitation for certain Projects.

Timetable for Trust Investments
         The Fund  anticipates  that its  offering of Shares will  continue  for
about 16 to 20 months and that it will start buying major Projects in the second
or third  quarters of 1999,  approximately  14 to 18 months  after the  offering
began.  Although the amount of time needed to invest all the funds raised varies
significantly  from  program  to  program,  the  Fund  estimates  that  it  will
substantially  complete  its  investments  between  12 and 18  months  after the
offering closes.

     These time  estimates for the length of the offering and the amount of time
needed to complete buying Projects may change  significantly  depending upon the
progress of the  offering,  the amount of funds raised and the  availability  of
attractive  investments.  One of the Prior Programs had a total of approximately
$36 million of uninvested funds as of the date of this  Registration  Statement.
As  described  below,   Ridgewood  Power's  policy  is  to  present   investment
opportunities  first to the  earliest-organized  program with  available  funds.
Therefore,  the Fund may have to wait until Prior  Programs  are fully  invested
before its funds can be applied to Project investments.  See Item 1(c)(2) - Risk
Considerations - Identifying Projects for additional factors that may affect the
Fund's ability to invest funds quickly.

         Until  funds from the  offering  of Shares are  invested,  they will be
deposited in bank  accounts,  in securities  issued by or guaranteed by the U.S.
Government  or its agencies or in money market funds or other funds  invested in
those  securities,  or in  investments  rated AAA or Aaa or A1P1 or higher  (for
money  market  or  commercial  paper   instruments)  by  nationally   recognized
securities  rating  organizations,  or in  securities  that  are  prior to those
investments.

Distributions from Operating Projects
         Until  the Fund has  invested  in a  significant  amount  of  operating
Projects,  it generally  will make  distributions  of  available  cash flow from
interim investments and initial Projects quarterly to Investors.  When cash flow
available from operating  Projects reaches an appropriate  level (usually within
18 to 36 months after the offering of Shares begins), the Fund will seek to make
quarterly or monthly distributions.

         Distributions  of available  cash flow can vary  depending upon Project
operating  performance,  fuel prices,  unexpected  operating  or  administrative
costs,  environmental  requirements,  scheduled and unscheduled  maintenance and
costs of equipment,  fees and expenses  payable to outside  operators or Project
participants and Trust operating costs and liabilities.

         The  Fund's   primary  goal  is  to  provide  a  capital   appreciation
opportunity  for  Investors,  both by  investing  in  assets  with  appreciation
potential  and by  positioning  itself for a future public  offering,  merger or
other  corporate  event.  Subject to these and other  factors  described  in the
remainder of this filing, the Fund's secondary goal is to provide Investors with
annual  distributions  of net cash flow, as defined in the Declaration of Trust,
of 12% of their Capital  Contributions to the Fund. Because the Fund's policy is
to distribute net cash flow, a substantial  portion of many  distributions  will
include funds that  represent  depreciation  and  amortization  charges  against
assets. Occasionally,  distributions may include funds derived from operating or
debt  service  reserves  or  proceeds  of sales of  Projects.  For  purposes  of
generally accepted accounting principles,  amounts of distributions in excess of
accounting  income may be  considered  to be capital in nature,  even though the
Fund is  organized  to return net cash flow  rather  than  accounting  income to
Investors.

         Under  current law and  conditions  Independent  Power  Projects have a
relatively  assured  source of revenues  for the length of their power  purchase
contracts. When those contracts expire or terminate, or if the Independent Power
Projects do not have fixed or formula price  contracts,  the cash flow prospects
for the Projects will depend on market  conditions  and are not  predictable  at
this time.

Sale or Disposition of Projects
         The Fund's  business  plan is not currently  geared  toward  selling or
otherwise disposing of Projects before the expiration or termination of existing
power purchase contracts. The Fund believes that at or before the termination of
those  contracts  there may be  opportunities  to sell or  otherwise  dispose of
Projects at a positive return for Investors and two Prior Programs have done so.
However, any estimate at this time of potential returns is speculative.

Future Liquidity Alternatives

         Investor Shares are an illiquid investment.  However,  after the Fund's
business is  well-established,  which is anticipated to be approximately  two to
five  years  after  this  offering  terminates,  the Fund  will seek to make the
Investor  Shares more  liquid.  Among the  alternatives  that might be available
would be events  ("Liquidity  Events")  such as a change in the Fund to create a
publicly  traded  entity,  either as the result of a business  combination  with
other similar programs  sponsored by Ridgewood Power or by altering the existing
securities,  tax and  organizational  law limitations on transfer and trading of
Investor  Shares.  Because these types of changes have  significant and possibly
adverse  federal  income tax,  federal  and state  securities  law and  business
effects,  the Fund cannot and does not assure Investors that any such change can
be made and will do so only  with the  consent  of a  majority  in  interest  of
Investors.

         Ridgewood  Power  intends  that  the five  Prior  Programs  (the  prior
business trusts organized by Ridgewood Power to invest in the independent  power
industry)  will  eventually  combine  into a single  corporation  that will have
tradable shares that will be listed or quoted on a major U.S. securities market.
The combined  corporation,  which would have more equity owners,  greater assets
and  more   diversification  of  assets  than  any  single  program,   might  be
significantly  more likely to develop a market for those equity interests.  This
type of  Liquidity  Event has become a  possibility  because  of the  success of
Ridgewood  Power since 1991 in organizing  five Prior Programs with  significant
assets and investor bases that could join with the Fund. One consequence of this
type of  combination  would be that  unlike the Prior  Programs,  the  resulting
combined corporation would not be treated as a partnership for tax purposes.  As
a  result,  it would  be  taxed  as a  separate  entity  on its  income  and its
stockholders would pay income tax as well on any dividends it paid to them.

         It is thus  possible  for the  Fund at some  future  date to  merge  or
combine  with the  successor  public  corporation  to the Prior  Programs  or to
participate in the original  combination.  Ridgewood Power currently  intends to
include the Fund together with the five Prior Programs in the conversion  into a
single  corporation.  If the Fund were large  enough on its own,  the Fund might
also convert itself into a taxable  corporation with tradable  shares,  although
under current conditions this second alternative is unlikely.

         As an  alternative  Liquidity  Event,  the  Managing  Shareholders  and
Investors could amend the Declaration to permit free transferability of Investor
Shares. If the Fund is registered under the Securities  Exchange Act of 1934, as
it  anticipates,  this would allow most Investors to offer their Investor Shares
to potential purchasers under Rule 144 of the Securities and Exchange Commission
as long as the sale takes  place at least two years after  purchase  and several
prerequisites are met, or in most cases without  prerequisites three years after
purchase.  Finally,  subject to further review of legal and tax issues, the Fund
might change its structure into one that continues to be taxed as a flow-through
entity (a business  entity that is not taxed as a corporation and thus, like the
Fund currently,  avoids double taxation of amounts  distributable  to Investors)
but that permits free  transferability  of Investor Shares.  This might, but not
necessarily  would,  permit the  creation of a trading  market for the  Investor
Shares.

         Under current law and business conditions, there are significant legal,
tax and business  consequences from electing any of these alternative  Liquidity
Events and the Fund  accordingly will not do so without amending the Declaration
after soliciting and receiving the consent of the holders of at least a majority
of the Investor  Shares.  Before the Fund  undertakes  any action or change that
would result in a Liquidity  Event,  it will solicit each Investor in writing by
means of a disclosure  document  describing all material aspects of the proposed
action.

         In general,  actions that would allow Investor  Shares to be marketable
would  raise the  question  for  federal  income tax  purposes as to whether the
Investor Shares were readily  tradable on a secondary  market or its equivalent.
In that case, the Fund would be considered to be an  "association"  taxable as a
corporation.  A combination of the Fund with other programs would raise the same
tax issues as to the combined entity and its securities.

         Corporation  tax  status  might  have  adverse  effects on the net cash
return to an Investor,  in part because a  corporation's  income is taxed at the
corporate  level and  dividends  derived  from that income are then taxed at the
Investor  level.  It is also  possible,  however,  that because of  depreciation
deductions  or other tax  provisions  that the Fund  might not have  significant
taxable income so that these adverse  effects would be less  significant.  It is
impossible  to  predict  these  factors at this time.  It might be  possible  to
convert the Fund to a different  type of taxable entity that is not taxable as a
corporation,  but under  current  law it is likely that a  restructuring  of the
Fund's investments to a more passive form and reduction of the Fund's management
rights, if any, over Projects would be required.

         In  addition,  if the  Fund is to be  combined  with  other  investment
programs,  the process of combining  the  entities,  obtaining  necessary  owner
consents and making  regulatory  filings may be protracted and expensive and may
involve significant conflicts of interest between the combining programs.  These
transactions,  which are  sometimes  referred to as "rollups,"  require  special
disclosure and fairness procedures to be undertaken,  may require  supermajority
votes of  shareholders  in each  program to be obtained  for approval and can be
extremely complex.

         There are other  alternatives that the Fund currently believes are less
desirable to Investors but that might be suggested if future  market  conditions
were favorable.  The Fund might propose to the Investors that the Declaration be
amended to provide  redemption  rights to Investors.  If the  Investors  were to
approve that proposal,  the Investors would be offered the opportunity to redeem
their  Investor  Shares  or  to  remain  as  equity  owners  in  the  Fund.  The
attractiveness of this option depends upon the market at that time for minority,
non-control  interests in the Projects owned by the Fund. Finally, a majority of
the  Investor  Shares may cause the  dissolution  of the Fund,  either  with the
Managing  Shareholders'  consent  or by removal  of the  Managing  Shareholders.
Dissolution  would cause the mandatory  liquidation  of the Fund's  investments,
although  the  time  constraints  of a  dissolution  and the  need  to sell  all
investments concurrently tend to significantly reduce total return.

         No Investor should purchase  Investor Shares with the expectation  that
the Fund will elect to take or will be able to take any steps to make the Shares
tradable  on any market or that any other  means of allowing an Investor to sell
or "cash-out" his or her investment will be available.

Potential Investments
         From time to time the Fund may identify  potential  investments for its
available funds. The Managing Shareholder  anticipates that the Fund will review
and enter into  preliminary  investigations  or  indications  of interest  for a
significant  number of potential  investments that in fact the Fund will decline
to pursue or that will not be  available  for the Fund to invest  in.  This is a
necessary part of the process of winnowing  potential  investments to those that
the Managing  Shareholder believes are the most advantageous for the Fund. Thus,
the identification of any potential investment is not an assurance that the Fund
will  acquire the  investment  or that it will even enter into  negotiations  to
effect the purchase.  Further, in Ridgewood Power's  experience,  as a result of
investigations  of the investment and the process of negotiating an acquisition,
the terms of the transaction tend to change frequently and unpredictably.  There
is no assurance that any proposed investment or any variant will occur, that the
terms of the  investment  will be the same or similar to those  proposed  by any
party from time to time or that any investment will be economically advantageous
to  the  Fund.  Investors  who  purchase  Investor  Shares  while  any  proposed
investment  transaction  is pending must do so with the  understanding  that the
final terms and conditions of the transaction may differ from those described in
this  Registration  Statement or elsewhere  and that their  purchases  cannot be
contingent upon the final terms, if any, of the transaction.

 (4)  The Fund's Investments.

(i)  ZAP Power Systems, Inc.

     The Fund invested  $2,000,000 in Ridgewood  ZAP, LLC  ("Ridgewood  ZAP") in
March 1999 as a holding company for its  investments in ZAP Power Systems,  Inc.
("ZAP"). ZAP is headquartered in Sebastopol, California, north of San Francisco.
ZAP designs,  assembles,  manufactures  and distributes  electric  bicycle power
kits,  electric bicycles and tricycles,  electric  scooters,  and other electric
transportation  vehicles. ZAP's common stock is quoted on the OTC Bulletin Board
under the symbol "ZAPP".

     Because ZAP's  management  believed that the primary  barrier to widespread
use of  electric  vehicles  was their high cost,  its  activity  and revenue was
initially  derived from development  contracts from a foreign private entity and
from domestic  government  agencies.  These contracts were set up to develop low
cost Zero Air Pollution (or ZAP) type electric vehicles.  Now ZAP is focusing on
the manufacturing and distribution of these electric vehicle products.

     ZAP  manufactures  an  electric  motor  system  that is sold as a kit to be
installed  by the  customer  on their own  bicycle.  The system was  designed to
assist the rider  during  more  difficult  riding  situations,  rather than as a
replacement  for  pedaling.  ZAP also  installs  the motor  system on  specially
designed  bicycles  that  the  Company  has  manufactured  under  contract.  The
completed bicycles, with motor, are then sold to the customer. Additionally, ZAP
produces an electric scooter,  known as the ZAPPY(TM),  which is manufactured by
the Company, using parts manufactured by various subcontractors.  ZAP also is an
U.S. distributor of the Electricycle(TM) scooter that is imported from China and
is a distributor of an electric motorcycle.

     Further information on ZAP is contained in its Annual Report on Form 10-KSB
and Quarterly  Reports on Form 10-QSB,  filed with the  Securities  and Exchange
Commission.

     On March 30, 1999,  Ridgewood ZAP purchased  678,808 shares of ZAP's common
stock for a total  purchase  price of $2,050,000  ($3.02 per share) in a private
placement.

     As part of the transaction, Ridgewood ZAP was granted a warrant to purchase
additional shares of Common Stock of ZAP. If the warrant is exercised,  the Fund
will  contibute to Ridgewood  ZAP the  $2,000,000  necessary to do so. The total
exercise  price under the warrant is $2,000,000 and the exercise price per share
equals 85% of the average  daily  closing  price of the Common Stock over the 20
day period prior to the date of exercise,  but not more than $4.50 per share and
not  less  than  $3.50  per  share.  The  warrant  has  customary  anti-dilution
provisions.  The warrant is  exercisable at any time but only in its full amount
by Ridgewood  ZAP through  December 29, 1999, if in its  reasonable  judgment it
decides that all of the following conditions have been met:

     ZAP  has  not  experienced  a  material  adverse  change  in its  financial
condition or business prospects; and

          ZAP has satisfied all of the following milestones of performance:

     (x)  Completion  of the  acquisition  of a model bike rental unit which has
gross income of at least $400,000 per annum for the last two calendar years;

     (y)  Completion  of at least  three of the  following  six joint  marketing
agreements  that are  currently  being  pursued by the  Company:  MTV  Networks;
Baywatch Television Series; Ford Motor Company; KOA, Disney and Huffy Bikes; and

     (z)  Completion  of the  following  financial  milestones  for  the  period
commencing  on  January  1,  1999:  net  sales of  $8,500,000;  gross  profit of
$2,500,000; and net profit of $350,000.

         If ZAP informs  Ridgewood ZAP that all the above  conditions  have been
met  and  if  Ridgewood  ZAP in  its  reasonable  judgment  concludes  that  the
conditions have been met,  Ridgewood ZAP will exercise the Warrant no later than
December 29, 1999.

         The  conditions  have not been met as of the date of this  Schedule 13D
and Ridgewood ZAP is unable at this time to anticipate  whether it will exercise
the warrant.

     Ridgewood ZAP and ZAP entered into four  agreements as of March 30, 1999: a
Stock and Warrant Purchase Agreement,  a Common Stock Purchase Warrant, a letter
agreement  regarding exercise of the warrant and an Investor's Rights Agreement.
The Stock and Warrant Purchase Agreement provided for the purchase of the Common
Stock and the issuance of the warrant and contained conventional representations
and warranties by the parties.  The warrant and the letter  agreement  contained
the warrant provisions described above.

     The Investor's  Rights Agreement grants Ridgewood ZAP the following rights:
two demand  registrations  (provided that each registration is for at least $7.5
million  of  Common  Stock),   piggyback   registration  rights  and  S-3  shelf
registration  rights. ZAP has the right to prohibit demand  registrations within
specified   periods  of  its  own  registrations  and  to  delay  or  limit  any
registration  under certain  conditions.  The Investor's  Rights  Agreement also
requires  ZAP to provide  Ridgewood  ZAP with  quarterly  and  annual  financial
information,   an  annual   financial   plan,   audit   information  and  public
announcements.  Ridgewood ZAP is also granted first  refusal  rights  similar to
preemptive  rights  (except for stock  issuances in  connection  with mergers or
acquisitions,  loan or lease transactions,  employee benefit plans, stock splits
or dividends, or registered public offerings of $7.5 million or more). The first
refusal  rights expire on the earliest of a registered  public  offering of $7.5
million or more, an acquisition of ZAP or March 30, 2003.

     The  Investor's  Rights  Agreement  generally  terminates  at such  time as
Ridgewood  ZAP owns less than 5% of ZAP's Common Stock.  Ridgewood  ZAP's rights
also relate to Common Stock that it may transfer to its affiliates.

     ZAP's two largest  shareholders have agreed with Ridgewood ZAP that as long
as Ridgewood ZAP owns at least 5% of ZAP's voting stock, the  shareholders  will
vote their shares in favor of up to two  directors  nominated by Ridgewood  ZAP.
Ridgewood ZAP will nominate two directors,  Douglas Wilson and Thomas Brown (who
are  officers of the Fund and  Ridgewood  Power,  see Item 5(b) - Directors  and
Executive  Officers of the  Registrant - Managing  Shareholder)  for election to
ZAP's Board of Directors at its coming annual meeting of shareholders, scheduled
for May 16, 1999.

(iii)  Proposed Investments,

     Ridgewood Power is considering two additional investments for the Fund: the
purchase  of an  interest in up to 12  landfill-gas-fueled  electric  generating
stations in the United Kingdom in partnership  with Power V and the  development
of several electric generating  stations at resort hotels in Egypt.  Preliminary
negotiations for these  transactions are underway but no commitment has yet been
made to invest in these Projects.  Ridgewood Power is also  considering a number
of potential investments for the Fund that are at earlier stages of evaluation.

     The Fund is actively seeking additional Projects for investment,  either by
itself  or  in  conjunction  with  other  programs  sponsored  by  the  Managing
Shareholder if such programs are authorized to do so.

(iv) Co-investment Issues and Conflicts of Interest.

     Ridgewood  Power is also the  managing  shareholder  of the Prior  Programs
(Power I,  Power II,  Power  III,  Power IV and Power V),  which  have  business
objectives  similar  to  those  of the  Fund.  In the  future,  Ridgewood  Power
anticipates that it will continue to sponsor other  investment  programs similar
or  identical in objective  to that of the Fund.  Further,  it is possible  that
affiliates  of  Ridgewood  Power will  sponsor,  manage or advise other types of
investment  programs.  Ridgewood  Capital,  which is under  common  control with
Ridgewood  Power and the Fund, is currently  sponsoring two investment  programs
that are making venture capital investments in a variety of industries.  In this
discussion the Prior Programs,  the Fund, and any other investment programs that
are sponsored by Ridgewood  Power,  Ridgewood  Capital or their  Affiliates  are
referred to as "Ridgewood Programs."

     These  relationships  could result in  conflicts  of interest  arising from
competing demands of the Fund and other Ridgewood  Programs on Ridgewood Power's
management  resources,  those of RPMCo  or  those  of other  Ridgewood  Managing
Persons.  However, as required under the Declaration,  the Managing  Shareholder
will  devote  as  much  attention  to the  Fund's  activities  as is  reasonably
necessary to manage the Fund.

     The Managing  Shareholder  of the Fund will use its best efforts to conduct
Fund affairs for the benefit of the  Investors.  However,  the  interests of the
Fund, its officers and agents, the Managing Shareholder,  the Corporate Trustee,
the  affiliates  of the Managing  Shareholder  and their  respective  directors,
officers and agents when acting for the Managing Shareholder or their affiliates
on behalf of the Fund (collectively,  "Ridgewood Managing Persons"),  as well as
those of the Prior Programs,  any future investment programs affiliated with the
Fund,  and the  Investors  may be subject to a variety of  potential  conflicts,
including but not limited to the following.

Co-Investment and Similar Conflicts
     A conflict of interest  might arise if at any given time an  opportunity to
invest in a Project would be suitable for more than one program,  thus requiring
Ridgewood  Power to choose among the  suitable  programs.  It is also  possible,
though unlikely,  that in a future competitive electricity sales market programs
would be competing  against each other for sales of power or that an opportunity
to dispose of Projects would be suitable for more than one program. Finally, the
Managing Shareholder may determine that more than one program should invest in a
Project or Projects, in which case those programs will be co-owners.

     If the Fund and another  program with similar  investment  objectives  have
funds available at the same time for investment in the same or similar Projects,
and a  conflict  of  interest  thus  arises  as to which  program  will make the
investment,  the Managing  Shareholder  will review the investment  portfolio of
each  program.  They  will  make the  investment  decision  on the basis of such
factors,  among others, as the effects of the investment on the  diversification
of each program's  portfolio,  potential  alternative  investments,  the effects
investment by either  program would have on the program's  risk-return  profile,
the estimated tax effects of the investment on each program, the amount of funds
available and the length of time those funds have been available for investment.
If more than one  program has funds  available  for  investment  and the factors
discussed  above  and  other  considerations   indicate  that  the  Project  has
approximately  equal benefit for each Program,  Ridgewood  Power will  generally
allocate  the  opportunity  first  to  the  Ridgewood  Program  that  was  first
organized,  to the extent of its funds that can be  prudently  invested  in that
opportunity.  In general Ridgewood Power will seek to apply all uninvested funds
of that program to the  opportunity,  unless doing so would cause the program to
be  significantly   over-committed  to  a  Project.   Any  remaining  investment
opportunity  would then be offered  successively  to  later-organized  Ridgewood
Programs on the same basis. A similar  process would be followed for divestiture
opportunities or competitive electricity sales.

         Ridgewood  Power  will seek to allow  Ridgewood  Programs  that  invest
concurrently  to  participate  on similar  terms in a Project,  but reserves the
ability to have programs  participate on dissimilar terms in order to meet their
investment objectives or to conform to transactional requirements. Further, if a
Ridgewood Program is only able to invest in a particular  Project at a different
time  than do  other  Ridgewood  Programs  because  of  legal  or  transactional
requirements  or  because  the  Program  has a  delayed  availability  of funds,
considerations of equity between  Ridgewood  Programs and the structuring of the
transaction may cause the Ridgewood Programs to invest on differing terms.

         A similar  conflict could arise where the entities make  investments in
different forms, which would be the case where one entity's  investment took the
form of equity and the other's took the form of debt. The Managing  Shareholders
believe that in most cases these potential conflicts of interest are unlikely to
cause material  adverse effects on the Fund. In cases where the Fund and another
Ridgewood  Program invest  concurrently in a Project,  the material terms of the
transaction  normally are the product of arm's  length  dealing with the seller,
creditors and other interested parties or regulators.  Because in such instances
the Ridgewood  Programs normally invest on the same terms and take proportionate
interests in the Project, conflicts between them are effectively limited only to
determining how much of the Project will be bought by each, as described  above.
In cases where other Ridgewood Programs and the Fund were to invest at differing
times or on  different  terms,  the Fund would face more  difficult  conflict of
interest questions. The Managing Shareholders, if practicable,  would attempt to
resolve  these  issues by  reference  to the terms  negotiated  by other debt or
equity participants in the Project or similar Projects,  by reference to similar
transactions,  or by  reference  to current  interest  rates and other  measures
relating to the time value of money or to risk/reward  considerations.  Finally,
in any material co-investment transaction,  the transaction would be a Ridgewood
Program  Transaction  that would be  reviewed  by the Panel and  approved  by it
before consummation.  Although the Managing Shareholders believe these practices
may  reduce  potential  conflicts  of  interest  of this  type,  there can be no
assurance that the interests of the entities will not diverge.

Dispositions of Assets
         If the Managing  Shareholders take on the responsibility of acting as a
broker or finder at the time the Fund decides to dispose of a property and if no
third  person  is  retained  by  the  Fund  for  those  purposes,  the  Managing
Shareholders  are entitled to receive  (but may waive) a brokerage  fee from the
proceeds  of  successful  dispositions  of  Fund  property  only.  The  Managing
Shareholders believe that any potential conflict of interest in this event would
be minimal,  because  the  Managing  Shareholders  have  incentives  to maximize
returns to the Fund  (including  but not limited to the  Managing  Shareholders'
interest in the proceeds of the  disposition)  and because any fee so earned may
not exceed 2% of gross proceeds.

Additional Investments in Projects
         As  a  Project  in  which  the  Fund  has  participated  continues  its
development or expands its operations, or if a Prior Program offers its interest
in a  Project  to the  Fund,  the Fund may be  requested  or may wish to  commit
additional  funds to the Project or the purchase.  If the Managing  Shareholders
determine  in  their  sole  discretion  that the Fund  will  participate  in the
opportunity,  it may determine to apply the Fund's funds  available at that time
to the Project or the purchase,  seek to raise additional Fund capital or borrow
the necessary funds. If the Managing  Shareholders  determine that the Fund will
not participate  and applicable  regulatory  requirements  are met, the Managing
Shareholders  may make or cause  another  Ridgewood  Managing  Person or another
program to make the additional commitment of funds, which might be on terms that
are  different  from  those  of the  Fund's  prior  investment  in the  Project.
Ridgewood Power  accordingly may have potential  conflicting  duties to the Fund
and to those other entities in determining  whether the Fund will participate in
the  opportunity or waive or assign rights to contribute  additional  capital to
the Project.

Other Potential Conflicts of Interest
         The Fund  will  reimburse  RPMCo  for the  Fund's  share  of the  costs
incurred by RPMCo in managing  Projects.  This may create  conflicts of interest
among the Fund and other  programs as to the allocation of costs and between the
Managing  Shareholder and RPMCo, on the one hand, and the Fund and the programs,
on the other, as to the services  provided by RPMCo,  the expenses of RPMCo, and
the division of  responsibilities  between RPMCo and the Managing  Shareholders.
The Managing  Shareholders  believe that any  conflicts  among  programs will be
minimized  by the method of  allocation,  which will be based where  possible on
actual  time and  expenses  incurred on behalf of the Fund and in other cases on
the relative  amount of the  investment  of each  program in the Projects  being
managed.  Conflicts  between the  interests  of RPMCo and the  programs  will be
limited by the requirement that reimbursement not exceed actual cost.

         The  Managing   Shareholders,   key  employees,   RPMCo  and  Ridgewood
Securities  are  entitled  to  the  compensation,  reimbursements  and  payments
described  below at Item 5 --  Directors  and  Officers of the  Registrant.  The
amount and terms of those  arrangements were not determined through a process of
arm's  length  bargaining  and thus do not  necessarily  reflect the fair market
value of the services to be rendered to the Fund.

     Some of the Ridgewood  Managing  Persons might have business  dealings with
institutional  investors  that may  participate in competing  Independent  Power
Projects.  The Fund might also invest in certain Projects or Project development
companies  owned,  developed or operated by a Ridgewood  Managing  Person,  or a
Ridgewood Managing Person may invest in certain Projects or Project  development
companies  in which the Fund has  participated.  In  addition,  the terms of the
agreements  governing  Ridgewood  Managing Persons  investing in the independent
power  business  may be more or less  favorable  to their  investors  than those
pertaining to Investors under the Declaration.

         The Managing  Shareholders have the discretion at any time to cause the
Fund to make  advances  of  costs  of  defense  or  settlement  to the  Managing
Shareholders,  their personnel and other Ridgewood Managing Persons,  regardless
of the existence of a conflict of interest.

         The Managing  Shareholders have provided no independent  representation
of prospective Investors in connection with this offering,  and each prospective
Investor should seek independent  advice and counsel before making an investment
in the Fund.

         While  potential  conflicts  of  interest,  including  those  described
herein,  cannot be eliminated,  the Fund believes any actual  conflicts that may
arise will not materially affect the obligations of the Managing  Shareholder to
act in the best interests of the Investors and the Fund.

(5) Trends in the Electric Utility and Independent Power Industries

         There are numerous  references for further  information on the electric
power industry.  Interested  persons may particularly  wish to refer to the U.S.
Department of Energy's Annual Energy Outlooks and special  studies,  prepared by
the department's  Energy Information  Administration  (the "EIA").  Much of this
information is available on EIA's World Wide Web site at  http://www.eia.doe.gov
under the "Electric"  heading.  Neither the Department of Energy nor EIA nor any
other agency of the United States  Government  has endorsed or approved the Fund
or the Investor Shares and the Fund takes no responsibility  for the preparation
or content of the Department of Energy's publications.

Overview
         The independent power industry has evolved as a result of Congressional
action to require  electric  utilities to purchase  electricity from non-utility
generators,  the perceived  need for new and  replacement  power capacity on the
part of utilities and industrial customers and regulatory and economic pressures
to increase  competition in the electric power  industry.  In the decades before
1978, electricity that was sold to persons other than who produced it was almost
exclusively  generated in the United  States by electric  utilities.  The energy
crises  of  the  1970's  led to the  enactment  of  PURPA,  which,  by  reducing
regulatory  procedures,  encouraging  more efficient use of energy and requiring
electric  utilities  to buy  electricity  from  companies  other  than  electric
utilities,  encouraged  non-utility  generators  to  enter  the  electric  power
business.  PURPA and the  subsequent  Energy  Policy  Act of 1992  forced  state
regulators  and electric  utilities to consider the  advantages  of  electricity
generation  by  Independent  Power  Projects  and to make room in the market for
those  Projects by requiring the utilities to purchase the output of "Qualifying
Facilities"  at the  "avoided  cost" that the utility  would  otherwise  pay for
incremental power supplies. PURPA did not, however, require that the purchase be
made for any particular period of time.

         Until very  recently in the United  States,  local  electric  utilities
combined the functions of generating  electricity,  transmitting it to the areas
where  it was to be  used,  and  distributing  that  electricity  to  customers.
Electric  utilities created regional power pools,  which are organizations  that
administer  interconnections  among utilities and provide systems for exchanging
power among the  members.  Members of a power pool can buy and sell  electricity
among themselves and transport  electricity on a barter basis to any area served
by the pool or interconnected  pools.  Sales through power pools or otherwise to
utilities  or  other  organizations  (such  as  municipal  power  systems)  that
distribute to customers are referred to as "wholesale" transactions, while sales
from the ultimate supplier to the user of electricity are "retail" transactions.

         The  regulatory  structure  governing  these  transactions  is complex.
Although many federal  agencies have  jurisdiction  over aspects of the electric
power industry,  FERC is the primary regulator,  with the powers to regulate the
prices,  volumes and  conditions of all  interstate  sales and  transmission  of
electricity,  to  authorize  hydroelectric  licenses  and  supervise  nationwide
reliability and service  concerns.  State public utility  commissions or similar
state  regulators  generally have granted  exclusive  franchises to utilities to
serve  geographic  areas,  set  prices  charged  and  conditions  of  service to
consumers of electricity  and determine the need for and method of cost recovery
for new generating, transmission and distribution facilities. The Securities and
Exchange  Commission has broad  authority over all financial  aspects of "public
utility  holding  companies,"  which  include  owners of electric  utilities  in
multiple states.

         In the early 1980's, projections of significant increases in demand for
electricity  and  forecasts of  continually  increasing  prices for fossil fuels
(which  made   cogeneration  and  other  small  power  production   technologies
attractive),  as well as regulatory and economic pressures on electric utilities
that  inhibited  their  ability to raise  capital for new power plant  capacity,
caused those  utilities and their  governmental  regulators  to favor  wholesale
purchases of electricity  from  non-utility  generators  under  long-term  Power
Contracts.  With these  contracts  available,  developers of  Independent  Power
Projects were enabled to obtain significant  financing and to expand rapidly. By
summer of 1995, an industry trade  magazine  estimated  that  independent  power
producers  represented 7% of total U.S. generating capacity and 9-10% maximum of
total wholesale sales.

         Government  reviews  of the  industry  anticipate  continued  long-term
expansion of the  independent  power industry in the United States.  The EIA, in
its The Changing  Structure of the Electric Power Industry - An Update (December
1996),  estimated  that  non-utility  capacity  in 1995  was  70,300  Megawatts,
representing  approximately  8.5% of total output capacity in the United States.
Five years earlier, non-utility capacity was only 42,900 Megawatts. As to energy
capacity additions,  the EIA forecasts in its Annual Energy Outlook 1997 that by
the year 2015, non-utility generating capacity (including  self-generation) will
increase  to  approximately  245,000  Megawatts.  According  to  EIA  forecasts,
non-utility generating capacity will represent approximately 25% of total output
capability  in the United  States by the year 2015 and will account for at least
58% of new capacity from all sources.  The EIA  projections  are based on, among
other  assumptions,  a continuation of current  applicable law and  regulations,
including  wholesale  and retail  deregulation.  The EIA  projections  also have
significant uncertainties, as described in the underlying publications.

         A large part of non-utility  capacity will replace worn-out or outdated
generating  capacity.  The EIA estimates that an additional 319,000 Megawatts of
capacity will have to be added by 2015, of which 38,000 Megawatts will be needed
to replace  retiring  nuclear power plants and 71,000 Megawatts to replace steam
plants fired by fossil fuels.

         Although  these studies  indicate a continuing  long-term need for more
investment in Independent  Power Projects,  investment in new Independent  Power
Projects  in the United  States  has  fluctuated  significantly  in the last two
decades.  In the early 1990's  economic  recessions and increased  efficiency by
electricity users and utilities caused the demand for new generating capacity to
be  less  than  anticipated.  Further,  fossil  fuel  prices  did  not  increase
consistently  and in some cases went to and remained at depressed  levels.  Many
utilities  concluded  that they could acquire  additional  capacity more cheaply
than  through  long-term  Power  Contracts  with  non-utility  generators,   and
regulators,  as described below,  initiated  changes that will tend to emphasize
short-term electricity supply arrangements.  Finally,  electricity  deregulation
added uncertainties that deterred investment.

         Although  there are still  significant  uncertainties  in the industry,
during 1997 and 1998 a  significant  amount of proposed new  capacity  additions
were announced,  almost all of which is to be fueled by natural gas as described
below.  Many utilities are auctioning off their  generating  assets and many new
participants are entering national and local electricity markets.  Further, many
industry  observers  believe  that  competition  and  shifts  to more  efficient
generating  technologies  will drive down the cost of generation,  especially at
large, natural-gas fueled generating plants.

         The  investment  strategies  of the Fund and the other  electric  power
programs being  sponsored by the Managing  Shareholder  aim to take advantage of
these  market  trends by  acquiring  Projects  developed  in the period of rapid
growth, purchasing interests in smaller-size Projects that are being sold off by
utilities  and building new  capacity in niche  markets or in foreign  countries
where the new pressures of competition may be less intense.  It is also possible
that those same  pressures  may make it possible  for the Fund to acquire  other
generating companies that are underperforming or that need additional capital.

         For success, among other matters discussed earlier in this Registration
Statement,  these  strategies  will  require  that  the  Fund  and the  Managing
Shareholders be able to identify attractive Projects, to negotiate  advantageous
terms, and in many cases to operate the acquired  Projects more efficiently than
before.  There can be no assurance  that all of these  conditions  can be met or
that other factors will not prevent success.

Recent Industry Trends
         As a consequence  of federal and state moves to deregulate  large areas
of the electric power industry and the existence,  spurred by PURPA,  of private
competitors to electric  utilities in the market for generating  electricity,  a
number of interrelated trends are occurring.

Continued Deregulation of the Generating Market
         The  Comprehensive  Energy  Policy Act of 1992 (the "1992  Energy Act")
encourages  electric utilities to expand their wholesale  generating capacity by
removing  some,  but not  all,  of the  limitations  on their  ownership  of new
generating  facilities that qualify as "exempt wholesale  generators"  ("EWG's")
and on their ability to participate in Independent  Power  Projects.  Many state
electric  utility   regulators  are  considering   plans  to  further  encourage
investment in wholesale  generators and to facilitate  utility decisions to spin
off  or  divest  generating  capacity  from  the  transmission  or  distribution
businesses of the  utilities.  As a result,  Independent  Power  Projects in the
future will face  competition  not only from other  Independent  Power  Projects
seeking to sell  electricity on a wholesale basis but also from EWG's,  electric
utilities with excess capacity and independent  generators spun off or otherwise
separated from their parent utilities.

Wholesale-level Access to Transmission Capacity
         Without access to transmission  capacity,  an Independent Power Project
or other wholesale generator can only sell to the local electric utility or to a
facility  on  which  it is  located  (or,  in some  states,  which  adjoins  its
location).  The most important  changes occurring in the electric power industry
are the  efforts  of  FERC to  compel  utilities  and  power  pools  to  provide
nationwide access to transmission  facilities to all wholesale power generators.
When combined with the increased  competition in the generating  area,  this new
electricity  supply  market is  profoundly  changing the  operations of electric
utilities, consumers and Independent Power Projects.

         The 1992 Energy Act empowered  FERC to require  electric  utilities and
power pools to transmit  electric power generated by other wholesale  generators
to wholesale  customers.  This process is referred to as "wheeling" the electric
power.  Essentially,  the generator contributes power to a utility or power pool
and is credited  with that  contribution,  and the utility or power pool serving
the wholesale  customer  makes  available  that amount of electric  power to the
customer and debits the generator. Wheeling is effected between power pools on a
similar basis.

         FERC initially dealt with wheeling requests on a case-by-case  basis as
constrained  by  provisions of the 1992 Energy Act that require all costs of the
transmitting  utility  to be  recovered  in the  transmission  charge  and  that
prohibit  wholesale  competitors from wheeling power to customers of an electric
utility  under  generating  contracts or tariffs.  On April 24, 1996 the Federal
Energy  Regulatory   Commission  adopted  Order  888,  which  requires  electric
utilities  and power  pools to provide  wholesale  transmission  facilities  and
information to all power producers on the same terms,  and endorses the recovery
by utilities of  uneconomic  capital costs from  wholesale  customers who change
suppliers.  The utilities would also be required to furnish ancillary  services,
such as  scheduling,  load dispatch,  and system  protection,  as needed.  These
rights,  however, would apply only to sales of new electric power over and above
existing  utility  supply  arrangements.  Non-utility  wholesale  deliveries  of
electricity  have grown  vigorously and according to the EIA grew at the rate of
21% per year in the ten years from 1986 to 1996.

         Numerous  regulatory  issues must be addressed  under this  proposal of
which  one  of the  most  contentious  is the  treatment  of  utility  so-called
"stranded  costs."  Utilities that own generating  plants with  relatively  high
costs of production would be under severe competitive and regulatory pressure to
purchase cheaper  wholesale  electricity,  but in that event the utilities would
not  receive  sufficient  revenue  to meet debt  service  requirements  or other
capital costs (the stranded costs) relating to the high-cost plants.  This might
significantly  impair utility cash flows and some utilities  might be at risk of
insolvency in that event. The FERC order requires some mitigation efforts on the
utility's  part,  but  primarily  requires   wholesale   customers  who  acquire
electricity  from a new supplier to compensate their former utility supplier for
revenue  lost.  This might  require a customer  who changes  suppliers  to pay a
substantial  additional  fee to the  prior  utility  supplier,  thus  inhibiting
changes of supplier.

         The order takes no action to modify existing power purchase  contracts.
The  order  intends  to create a  competitive  national  market  in  electricity
generation and thus may create additional pressure on electric utilities to seek
changes to long-term power purchase  contracts,  as described further below. The
Fund has  developed  its  business  plan in  anticipation  of the order and will
pursue its investment  program to take advantage of  opportunities as they arise
in  the  changing  industry.  The  Fund  is  unable  to  predict  the  long-term
consequences of the order on its eventual operations or on the independent power
industry.

         State public utility  regulatory  agencies must also review and approve
certain  aspects  of  wholesale  power  deregulation,  and  those  agencies  are
currently holding proceedings and making determinations.

         In  addition  to the FERC order or other  Congressional  or  regulatory
actions that may result in freer  access to  transmission  capacity,  agreements
with Canada,  and to a lesser extent with Mexico,  are leading toward access for
those countries'  generators to U.S.  markets.  In particular,  certain Canadian
suppliers,  such as  HydroQuebec  (the Quebec  provincial  utility)  are already
offering substantial amounts of electricity in the U.S., and more may be offered
if sufficient  transmission capacity can be approved and built. These agreements
may also afford access to those countries' markets in the future for Independent
Power  Projects.  As a result,  there is the  possibility  that a North American
wholesale  market will  develop for  electricity,  with  additional  competitive
pressures on U.S. generators.

Proposals to Modify PURPA and Existing Power Contracts
         The small-scale  segment of the independent power industry in which the
Fund is likely  to invest  remains a  creature  of PURPA in many  respects.  The
prospects  of  increased  competition  to supply  electricity,  availability  of
wheeling of  wholesale  power,  supply  alternatives  through  the  conservation
initiative  described above and reduced rates of increase in electricity  demand
have caused many  electric  utilities and other  industry  observers to advocate
repeal or  modification  of PURPA and, in a few cases,  to  advocate  changes to
existing  long-term  Power  Contracts with  Independent  Power  Projects.  These
utilities  have  alleged that PURPA  requires  them to purchase  electricity  at
higher prices than they could acquire new capacity  themselves and that existing
Power Contracts,  signed when utilities anticipated much higher fuel and capital
costs  and  higher  demand,  provide  for  prices  substantially  above  current
wholesale prices. The independent power industry has pointed out that PURPA does
not require  utilities to purchase new supplies from Independent  Power Projects
at rates above alternative sources' prices (although a few state regulators have
imposed such requirements  from time to time) and that existing  long-term Power
Contracts  were generally  entered into on the basis of good faith  estimates by
the utilities of future conditions with the expectation that sponsors would rely
upon them.

         To date, FERC has rejected proposals to modify existing Power Contracts
(except for contracts entered into under state regulations  mandating payment of
prices  greater  than  utility  avoided  costs at the time  the  contracts  were
executed),  and FERC's rulemaking proposals are expressly based on the principle
that  existing  Power  Contracts  that  comply  with  current  law should not be
modified by FERC.  Although  proposals have been introduced in Congress to amend
or repeal PURPA, no such proposal has yet been reported.  However,  there can be
no  assurance  that  FERC or the  Congress  will not take  action  to  reduce or
eliminate  the  benefits or PURPA for  Independent  Power  Projects or that they
would not take action purporting to change or cancel existing Power Contracts or
that  they  would  not  take  action  making  compliance  with  those  contracts
economically or practically infeasible. If any such action were to be taken, the
value of existing  Independent  Power  Projects with long-term  Power  Contracts
might be significantly  impaired or even  eliminated.  If such action were to be
proposed with any significant prospect of adoption,  the consequent  uncertainty
might have similar effects.

         In a related  phenomenon,  some electric  utilities that are parties to
long-term Power  Contracts with rates  substantially  above current  replacement
costs  have  entered  into  buy-out   arrangements  with  the  owners  of  those
Independent  Power  Projects.  Under these  agreements,  the Power Contracts are
terminated  in exchange  for a payment by the utility to the  Project.  The Fund
does not anticipate  investing in Projects with the expectation of soliciting or
receiving a buy-out arrangement,  but it will consider potential arrangements if
conditions warrant.

Retail-level Competition
         An even more  radical  prospect  for the  electric  power  industry  is
retail-level  competition,  in which  generators are allowed to sell directly to
customers  by using  (and  paying a fee for) the  local  utility's  distribution
facilities.  Retail-level  competition presupposes the ability to wheel power in
the  appropriate  amounts at economic costs from the  generating  Project to the
electric  utility  whose wires link to the retail  customer  (typically  a large
industrial,  commercial or  governmental  unit) and the ability to use the local
utility's facilities to deliver the electricity to the customer.  In addition to
the business and regulatory issues arising from wholesale wheeling, retail-level
competition  raises  fundamental  concerns  as to the  ability of  utilities  to
recover  stranded  costs  at  the  generating  and  distribution   levels,   the
possibility  that smaller  customers  will have less  ability to demand  pricing
concessions,  incentives for governmental  agencies to act as intermediaries for
consumers  and  the   functions  of   state-level   regulatory   agencies  in  a
price-competitive  environment  which may be inconsistent with their traditional
price-setting and service-prescribing roles.

         Although  retail  deregulation  is  being  implemented  currently  on a
state-by-state  basis, there are some common elements.  First, most deregulating
states will require that local utilities will be the "suppliers of last resort,"
which are required to serve any customers in their existing  territories  who do
not purchase generated electricity from another source and which are required to
obtain  adequate  generating   capacity  to  meet  those  needs.   Second,  most
deregulating  states  are  requiring  that  utilities  and  other  suppliers  of
electricity work through  "independent  system operators"  ("ISO's"),  which are
non-profit   associations  who  operate  regional  transmission  grids  and  who
coordinate purchase, transmission and sale of electricity between generators and
distribution  utilities.   ISO's  have  significant  responsibility  for  supply
reliability.

         Third,  most  deregulating  states  are  requiring  that  utilities  be
compensated  for stranded costs (which include  long-term  Power  Contracts with
Independent Power Project that are above current and anticipated  market prices)
for a transition period.  This is typically done by imposing a transition fee or
surcharge on rates that is paid to the utility.  In some states,  utilities  are
being  encouraged or ordered to issue bonds or other  financial  instruments  to
retire  stranded  cost assets or  contracts,  supported by  transition  charges.
Fourth,  many states are requiring  local utilities to divest a large portion or
all of their  generating  assets or to sell their rights under  long-term  Power
Contracts.  The states have cited concerns such as the anti-competitive  effects
of allowing  the  utilities,  which  retain a monopoly  over the wires that take
electricity the last stages to the customer, to own generating assets.  Further,
the sale of assets (or  above-market  Power  Contracts)  sets a market price for
those assets and allows a somewhat  objective  computation of the stranded costs
related to those assets or contracts.  For example,  the true stranded cost of a
nuclear plant is approximately  the difference  between the value assigned to it
under state regulation and the price someone will pay for it at auction.

         Fifth,  utilities  having stranded costs are expected to mitigate those
costs by buying out contracts or selling costly assets. Finally, many states are
attempting  to  protect  generators  who  use  "renewable  fuels"  or  that  are
considered to have environmental or social benefits.

Price and Cost Pressures
         The  pricing  pressures  that  retail and  wholesale  deregulation  are
bringing are expected to decrease the marginal cost of electricity.  Competition
will force utilities and generators to reduce overhead and administrative costs,
to trim  operation and  maintenance  costs and to more  efficiently  buy and use
fuel. Further, wholesale and retail deregulation and new generating technologies
discussed below are expected to significantly reduce capital costs. For example,
electric utilities  currently  maintain large amounts of generating  capacity in
reserve to meet peak loads (for example,  to serve customers  during a heat wave
in July).  According to the EIA, competition may lead to pricing strategies that
reduce  these  peak  loads.   Competition  may  also  force  utilities  to  stop
maintaining  high-cost reserve capacity and to take greater risks.  Finally, the
widening  wholesale  market for electricity may increase  efficiency by allowing
utilities and power consumers to obtain distant, lower-cost capacity for reserve
purposes  rather  than  maintain  local,  higher  cost,   underutilized  reserve
capacity. For these and other reasons, the EIA currently estimates that national
average electricity rates in real terms (adjusted for inflation) will decline to
about 6.3 cents per  kilowatt-hour  in 2015 from the 1996  average  level of 7.1
cents per kilowatt-hour.

         As these trends  continue,  high-cost  generators will be disadvantaged
and may fail. If the Fund were to invest in small-scale  generating  plants that
in the past have tended to have higher  per-kilowatt  hour costs than new, large
scale generating plants, it may have difficulty  competing.  The Fund recognizes
these pressures and intends to invest only in facilities  that have  competitive
costs of fuel,  capital  and  operation  or  facilities  that offer  significant
opportunities  for  improvement.  The  Fund  will  also  attempt  to  invest  in
facilities,  such as landfill gas power plants,  that have tax or  environmental
advantages  that offset price  pressures  or that are located  abroad where such
pressures may be less.

New Generating Technologies and New Industry Participants
         Recent improvements in turbine technology, coupled with what is seen as
the ample supply and relative  cheapness of natural gas,  have made gas turbines
the favored  technology for new electric  generating  plants.  The EIA estimates
that 80% of the new electric  generating  capacity to be added from 1995 to 2015
will be fueled  by  natural  gas and that the  amount  of  generation  fueled by
natural gas will increase from the current 10% to 29%. According to the EIA, new
gas turbines only need 15 days per year of maintenance, on the average, compared
with 30 days a year for steam turbines.  Although gas turbines historically have
been used to meet peak demand rather than baseload demand,  new "combined cycle"
units (which use heat from the turbine's  exhaust to drive a second steam or gas
turbine)  have  thermal  efficiencies  approaching  60% (60% of the  theoretical
maximum heat from the burning gas is converted to  electricity)  and can be used
as baseload units. In contrast,  steam turbines fired by coal have  efficiencies
in the 36% range and have operating and  maintenance  costs higher than those of
combined cycle plants.  The EIA estimates that combined cycle gas turbine plants
alone will account from 96,000 to 143,000  Megawatts of the 319,000 Megawatts of
additional capacity to be added in the next 17 years.

         Combined  cycle gas turbine  plants reach their  maximum  efficiency at
sizes of 400  Megawatts.  Projects  of that  size are too  large for the Fund to
acquire or construct  with its own capital and,  even if the Fund were to borrow
to  finance  a  combined  cycle  Project,  it is likely  that the Fund  would be
overcommitted  to a single Project if it tried to develop a combined cycle plant
on its own. Accordingly, the Fund could only participate in this type of Project
as a  minority  investor.  The Fund might also  invest in  smaller  gas  turbine
Projects  (which  according  to the  EIA  can be as  small  as 10  Megawatts  in
capacity), although smaller turbines are more suited for peak load, short period
operations.

         The new  emphasis  on natural  gas-fired  generation  is causing  large
natural  gas  transmission  or  brokering  companies  to enter  the  electricity
generation market rapidly. They have access to large volumes of gas and have the
ability to raise large amounts of capital.  Accordingly,  most new investment in
combined cycle gas Projects and other  large-scale gas turbine Projects is being
made by  these  natural  gas/energy  companies  or by large  utilities  that are
entering the competitive generation industry.

         Many of the proposed natural  gas-fired  generating plants are intended
to be merchant  power  plants  that are not built with the benefit of  long-term
Power Contracts. There have also been reports,  especially from the northeastern
states, that large non-utility  generating  companies and utilities entering the
competitive  generating  market outside their existing  service  territories are
buying large numbers of older plants from local  utilities with the intention of
replacing them on site with new, large, natural gas-fueled plants. It is unclear
whether many of the  announced  merchant  power  plants will  actually be built,
given the  uncertainties  of the market for electricity and the possibility that
there may be insufficient  gas pipeline  capacity or supplies to fuel all of the
recently announced plants.

         Many companies,  including  affiliates of fuel suppliers and utilities,
have applied to FERC to act as electric power marketers, because they anticipate
that if wholesale  wheeling becomes  significant there will be strong demand for
brokers or market  makers in  electric  power.  It is  uncertain  whether  power
marketers  will become  significant  factors in the  electric  power  market.  A
related  development is the creation of derivative  contracts for hedging of and
speculation in electricity supplies,  which may offer generators,  utilities and
large industrial or commercial consumers the ability to reduce the volatility of
competitive  prices. To date, the effects of derivative  contracts on the market
for electricity have not been material.

Renewable Power
         The pressures of competition are expected to harm the "renewable power"
segment  of the  industry.  "Renewable  power" is a  catchphrase  that  includes
Projects (such as solar,  wind, biomass and landfill-gas) that do not use fossil
fuels or nuclear fuels and, in some cases, some other types of small Independent
Power Plants that are Qualifying Facilities (such as small hydroelectric plants,
cogeneration  plants and small  fossil  fuel  plants).  Renewable  power  plants
typically have high capital costs and often have total costs that are well above
current  costs for new  gas-turbine  production.  Many  observers  believe  that
renewable  power plants  without  existing  Power  Contracts  (with the possible
exception of biomass plants with very low fuel costs) will be non-competitive in
the new  markets  unless  they are given  governmental  protection.  A number of
states are requiring that retailers of  electricity  purchase a certain  minimum
amount  of  electricity  (often  5% to 10% of  their  total  requirements)  from
renewable power sources and the Clinton  Administration  has proposed a national
7.5% minimum  requirement.  Although this will tend to protect  renewable  power
Projects,  unless  there  is  a  shortage  of  renewable  capacity  these  state
requirements  will still make low total cost an essential  if a renewable  power
Project is to have any ability to succeed.

Initial Effects of Trends
         With  these   conditions  in  mind,  many  observers  see  two  primary
strategies  for  Independent  Power  Projects  to succeed in the United  States:
first, Projects that have existing,  firm, long-term Power Contracts may do well
so long as  regulatory  or  legislative  actions do not abrogate the  contracts.
Second,  Projects  that are  low-cost  producers  of  electricity,  either  from
efficiencies  or good  management  or as the result of  successful  cogeneration
technologies,  will have advantages in the market.  The Fund intends to focus on
both possibilities and to maintain a focus on  medium-to-long-term  results.  It
also  will  consider  Projects  selling  power to  large  retail  users  such as
industries rather than utilities.

         Finally,  there have been industry-wide  moves toward  consolidation of
participants  and  divestiture of Projects.  A number of utilities and equipment
suppliers  have  proposed or entered  into joint  ventures  to reduce  risks and
mobilize  additional  capital for the more competitive  environment,  while many
electric  utilities  are in the  process  of  combining,  either  as a means  of
reducing costs and capturing  efficiencies,  or as a means of increasing size as
an organizational  survival tactic.  One recent observer has described the drive
by electric  utilities to sell their  existing  plants and  purchase  comparable
plants from other  utilities in areas  outside  their  historic  service  areas,
combined with frequent  mergers,  as an industry game of "musical  chairs." This
consolidation tends to create additional  competitive  pressures in the electric
power  industry;  however,  this trend is also  encouraging  the  divestiture of
smaller  Projects or Projects that are deemed less central to the  operations of
large, consolidated businesses.  This may make attractive Projects available for
investment by the Fund.

(6).  Competition

     There are a large number of participants in the independent power industry.
Several  large  corporations  specialize in  developing,  building and operating
independent power plants. Equipment manufacturers, including many of the largest
corporations in the world,  provide  equipment and planning services and provide
capital through finance affiliates. Many regulated utilities are preparing for a
competitive  market,  and a  significant  number of them already have  organized
subsidiaries  or affiliates to  participate in  unregulated  activities  such as
planning,  development,  construction and operating services or in owning exempt
wholesale  generators or up to 50% of  independent  power  plants.  In addition,
there are many  smaller  firms whose  businesses  are  conducted  primarily on a
regional or local basis.  Many of these companies  focus on limited  segments of
the cogeneration and independent  power industry and do not provide a wide range
of products and services.  There is significant  competition  among  non-utility
producers,  subsidiaries of utilities and utilities themselves in developing and
operating  energy-producing projects and in marketing the power produced by such
projects.

     The Fund is unable to  accurately  estimate the number of  competitors  but
believes that there are many competitors at all levels and in all sectors of the
industry.  Many of those  competitors,  especially  affiliates  of utilities and
equipment manufacturers, may be far better capitalized than the Fund.

     Please also review the discussion of changes in the industry above at (6) -
Trends in the Electric Utility and Independent Power Industries.

(7).  Regulatory Matters.

         Projects are subject to energy and  environmental  laws and regulations
at the federal, state and local levels in connection with development, ownership
and operation. Federal laws and regulations developed by administrative agencies
govern  transactions  with  utility  companies,  the types of fuel  which may be
utilized by a Project, the type of energy which may be produced by a Project and
the ownership of a Project.  State utility  regulatory  commissions must approve
the rates and, in some  instances,  other terms and  conditions  on which public
utilities  purchase  electric power from Projects.  Under certain  circumstances
where specific  exemptions are otherwise  unavailable,  state utility regulatory
commissions may have broad jurisdiction over Projects. Projects are also subject
to federal, state and local laws and administrative regulations which govern the
emissions  and  other  substances  produced  by a Project  and the  geographical
location,  zoning,  land use and  operation  of a  Project.  Applicable  federal
environmental laws typically have state and local enforcement and implementation
provisions.  These  environmental laws and regulations  generally require that a
wide variety of permits and other approvals be obtained before the  commencement
of  construction  or  operation  of an  energy-producing  facility  and that the
facility then operate in compliance with such permits and approvals.

Energy Regulation
         PURPA.  The enactment in 1978 of PURPA and the adoption of  regulations
thereunder by FERC  provided  incentives  for the  development  of  cogeneration
facilities and small power production facilities meeting certain criteria.

         Qualifying  Facilities  under  PURPA  are  generally  exempt  from  the
provisions  of the Holding  Company Act, the Federal  Power Act, as amended (the
"FPA"),  and, except under certain limited  circumstances,  state laws regarding
rate  or  financial  regulation.  In  order  to  be  a  Qualifying  Facility,  a
cogeneration  facility must (i) produce not only  electricity but also a certain
quantity of heat energy (such as steam or hot water) which is used for a purpose
other than power generation,  (ii) meet certain energy efficiency standards when
natural gas or oil is used as a fuel source and (iii) not be  controlled or more
than 50% owned by an electric utility or electric utility holding company. Other
types  of  Independent   Power  Projects,   known  as  "small  power  production
facilities," can be Qualifying  Facilities if they meet  regulations  respecting
maximum size (in certain  cases),  primary energy source and utility  ownership.
Recent  federal  legislation  has eliminated  the maximum size  requirement  for
solar, wind, waste and geothermal small power production facilities (but not for
hydroelectric or biomass) for a fixed period of time.

         PURPA provides three primary benefits to Qualifying Facilities.  First,
Qualifying  Facilities are relieved of compliance with extensive federal,  state
and local  regulation which control not only the development and operation of an
energy-producing  Project,  but also the prices and terms on which energy may be
sold by the Project. A Project that is not a Qualifying Facility will be subject
to the extensive  regulatory  requirements  of the FPA,  other federal and state
utility legislation and regulation,  and possibly the Holding Company Act. These
requirements  can  delay  or  even  preclude  development  of  a  non-Qualifying
Facility.

         Second,  PURPA requires that electric  utilities  purchase  electricity
generated by Qualifying  Facilities at a price equal to the purchasing utility's
full "avoided  costs."  Avoided  costs are defined by PURPA as the  "incremental
costs to the electric  utility of electric energy or capacity or both which, but
for the purchase from the  Qualifying  Facility or Qualifying  Facilities,  such
utility  would  generate  itself or  purchase  from  another  source."  The FERC
regulations  also  permit  Qualifying  Facilities  and  utilities  to  negotiate
agreements  for utility  purchases  of power at rates other than the  purchasing
utility's  avoided  cost.  While public  utilities  are not required by PURPA to
enter into long-term Power Contracts to meet their  obligations to purchase from
Qualifying Facilities, until recently utilities and regulators encouraged use of
long-term Power Contracts.

         Third,  PURPA  requires that each electric  utility  interconnect  with
Qualifying  Facilities  and that the utility sell backup or standby power to the
Qualifying Facility on a non-discriminatory basis. This requirement enhances the
reliability   of  Qualifying   Facilities   and  is  especially   important  for
inside-the-fence  facilities,  whose  customers  would otherwise be left without
power in the event that the facility required off-line maintenance or repair.

         The exemptions from extensive federal and state regulation  afforded by
PURPA to Qualifying  Facilities  are important to the Fund and its  competitors.
The  Fund  expects  that  most of the  Projects  in  which  it  invests  will be
Qualifying Facilities.  Although some Projects may not be Qualifying Facilities,
the Fund intends to participate  only in Projects that avoid the restrictions of
the Holding Company Act and most state regulation.

         The Holding Company Act.
         Under  the  Holding   Company  Act,  any  person  (defined  to  include
corporations  and  partnerships and other legal entities) which owns or controls
10% or more of the outstanding  voting  securities of a "public utility company"
or a company  which is a "holding  company"  of a "public  utility  company"  is
subject to  registration  with the Commission  and regulation  under the Holding
Company Act. A holding  company of a public  utility  company is required by the
Holding Company Act to limit its operation to a single integrated utility system
and to divest any other operations not functionally  related to the operation of
that  utility  system.  Under  PURPA,  Qualifying  Facilities  are  exempt  from
regulation  under  the  Holding  Company  Act,  and the  Fund  anticipates  that
substantially all of its investments will be in Qualifying Facilities.

         Structuring  the  Fund's  own  activities  to  ensure  that it is not a
"holding company" of a "public utility company" under the Holding Company Act is
also important in providing financing and financial reporting flexibility to the
Fund. If the Fund pursues the  development  of Exempt  Wholesale  Generators (as
defined  below) or other  Independent  Power Projects which will not qualify for
the benefits  provided by PURPA and which  ordinarily  would subject the Fund to
the  provisions  of the Holding  Company Act, it intends to do so in a manner to
qualify  for  exemptions  under the  Holding  Company  Act or certain  no-action
positions taken by the Commission.  Such a structure could, for example, consist
of the Fund's holding a limited partner interest in a limited  partnership which
owns a non-Qualifying Facility.

         The 1992 Energy Act.
         The  Comprehensive  Energy  Policy Act of 1992 (the "1992  Energy Act")
empowered  FERC  to  require   electric   utilities  to  make  available   their
transmission  facilities to and wheel power for Independent Power Projects under
certain  conditions  and created an exemption for electric  utilities,  electric
utility  holding  companies and other  independent  power producers from certain
restrictions  imposed by the Holding Company Act. The  transmission and wheeling
provisions  of the act were  described  above  at Item  1(c)(6).  The  exemptive
provisions are described below.

         The 1992 Energy Act created an  additional  exemption  from the Holding
Company Act for EWG's, which are defined basically as entities certified by FERC
as  engaged  exclusively  in the  business  of  owning  and  operating  electric
generation  facilities  which  generate  electricity  for resale.  EWG's  remain
subject to rate and tariff regulation by FERC and by state regulators.  Further,
EWG's may not sell  electricity to electric  utilities  affiliated or associated
with them unless state regulators  approve,  and state regulators must determine
whether  purchases by electric  utilities  from EWG's are fair to consumers  and
utilities and affect utility reliability.

         One set of primary  beneficiaries  of the EWG's category is expected to
be electric  utilities  and their  holding  companies,  which are released  from
Holding Company Act restrictions on owning interests in wholesale generators and
Qualifying  Facilities  (but which  will  still be  subject  to certain  Holding
Company Act restrictions on financing EWG's and PURPA  restrictions on ownership
in Qualifying Facilities). The other primary beneficiaries of the EWG provisions
of the 1992 Energy Act are expected to be developers  and Project  Sponsors that
wish to construct  Independent Power Projects that are not Qualifying Facilities
(often because the fuel,  heat energy,  production or ownership  requirements of
PURPA are  impractical to meet).  By releasing them from the Holding Company Act
regulatory environment, these developers and Project Sponsors may be better able
to proceed and in particular to enlist electric  utilities and holding companies
as  co-venturers.  By exempting  electric  utilities,  electric  utility holding
companies, and other developers from certain restrictions imposed by the Holding
Company Act, the 1992 Energy Act has expanded the potential  pool of Projects in
which they are able to invest.  Although the Fund  believes  that the  exemptive
provisions of the 1992 Energy Act will not materially  and adversely  affect its
business  plan,  it may result in increased  competition  from such  entities to
develop  promising  Projects  and  in  increased  competition  in  the  sale  of
electricity by Independent Power Projects.

         Regulations  under the 1992  Energy Act have  clarified  the ability of
electric  utilities and holding  companies to invest in EWG's and electric power
plants outside the United States.

         Federal   Power  Act.  The  FPA  grants  FERC   exclusive   rate-making
jurisdiction over wholesale sales of electricity in interstate commerce. The FPA
provides  FERC with ongoing as well as initial  jurisdiction,  enabling  FERC to
revoke  or  modify  previously  approved  rates.  Such  rates  may be based on a
cost-of-service   approach  or  determined   through   competitive   bidding  or
negotiation.  While  Qualifying  Facilities  under  PURPA  are  exempt  from the
rate-making and certain other provisions of the FPA,  non-Qualifying  Facilities
are subject to the FPA and to FERC rate-making jurisdiction.  Although EWG's are
subject to FERC ratemaking  jurisdiction,  their owners do not by virtue of that
ownership come under FERC jurisdiction.

         Companies whose  facilities are subject to regulation by FERC under the
FPA  because  they do not  meet the  requirements  of PURPA  may be  limited  in
negotiations  with power purchasers.  However,  since such projects would not be
bound by PURPA's heat energy use requirement for cogeneration  facilities,  they
may have greater  latitude in site  selection and facility size. Any Projects in
which the Fund may participate that are  non-Qualifying  Facilities are expected
to comply with the FPA.

         Fuel Use Act.  Projects may also be subject to the Fuel Use Act,  which
limits the ability of power  producers  to burn  natural  gas in new  generation
facilities  unless such  facilities  are also coal capable within the meaning of
the Fuel Use Act.  The Fund  anticipates  that  natural  gas-fired  cogeneration
Projects in which it may  participate  will be coal capable and thus qualify for
exemption from the Fuel Use Act.

         State   Regulation.   State  public  utility   commissions  have  broad
jurisdiction over Independent Power Projects which are not Qualifying Facilities
under PURPA,  and which are  considered  public  utilities in many states.  Such
jurisdiction  results in state  requirements  to obtain  certificates  of public
convenience and necessity to construct a facility and could result in regulation
of  organizational,  accounting,  financial  and other  corporate  matters on an
ongoing basis. Although FERC generally has exclusive jurisdiction over the rates
charged by a non-Qualifying  Facility to its wholesale  customers,  state public
utility commissions have the practical ability to influence the establishment of
such rates by asserting  jurisdiction  over the purchasing  utility's ability to
pass through the resulting cost of purchased power to its retail  customers.  In
addition,  states may assert  jurisdiction  over the siting and  construction of
non-Qualifying  Facilities  and,  among other  things,  issuance of  securities,
related party  transactions and sale and transfer of assets. The actual scope of
jurisdiction over  non-Qualifying  Facilities by state public utility regulatory
commissions varies from state to state.

         In recent  years,  many states have  required  or  encouraged  electric
utilities to undertake least cost utility  planning and demand-side  management.
Utilities engaging in least cost utility planning consider the costs, advantages
and  disadvantages  of multiple  means of meeting  electricity  demand,  such as
purchasing  electric power from  Independent  Power Projects or other utilities,
efficiency and conservation  investments,  load management,  renewable resources
such as hydroelectric,  solar and wind power and conventional  generation by the
utility, all with a view toward determining the least-cost mix of supplies. Rate
requests and accounting are to treat the  alternatives  on an equally  favorable
basis. The 1992 Energy Act and related statutes do not compel least cost utility
planning but require it to be considered and require periodic  updating of plans
adopted andpublic access to the planning process.

         Demand-side  management involves  cooperative efforts between utilities
and large customers to change the customers' patterns of demand for electricity.
Because demand for electricity  changes  substantially  according to the time of
day or the season,  utilities  must  maintain  large amounts of capacity to meet
peak loads that may only occur for a portion of the day or  occasionally  during
the year.  Utilities can thus save  significant  capital and operating  costs if
large  customers  can move their demand to off-peak  times,  or restrict  demand
during peak periods, or otherwise conserve electricity.  Demand-side  management
has the  effect  of  reducing  utility  needs  for  capacity  generally  and for
purchasing  electricity  to meet peak loads at premium  prices from  Independent
Power Projects.

Environmental Regulation
         The  construction  and operation of energy and fuel producing  projects
and the  exploitation  of natural  resource  properties are subject to extensive
federal,  state and local laws and  regulations  adopted for the  protection  of
human  health  and the  environment  and to  regulate  land  use.  The  laws and
regulations  applicable  to the  Fund  and  Projects  in  which  it will  invest
primarily  involve the  discharge  of  emissions  into the water and air and the
disposal  of  waste,  but can  also  include  wetlands  preservation  and  noise
regulation.  These  laws and  regulations  in many cases  require a lengthy  and
complex process of obtaining licenses, permits and approvals from federal, state
and local agencies.  Obtaining  necessary  approvals  regarding the discharge of
emissions  into the air is critical to the  development  of a Project and can be
time-consuming  and difficult.  Each Project requires  technology and facilities
which comply with federal,  state and local requirements and sometimes extensive
negotiations  with  regulatory  agencies.   Meeting  the  requirements  of  each
jurisdiction  with authority  over a Project may delay or sometimes  prevent the
completion of a proposed Project, as well as require extensive  modifications to
existing Projects.

         The Clean Air Act Amendments of 1990 contain  provisions which regulate
the amount of sulfur  dioxide and oxides of  nitrogen  which may be emitted by a
Project.  These emissions may be a cause of "acid rain."  Qualifying  Facilities
are  currently  exempt from the acid rain  control  program of the Clean Air Act
Amendments.  However, other Independent Power Projects will require "allowances"
to emit  sulfur  dioxide  after  the year  2000.  Under  the  Amendments,  these
allowances may be purchased from utility  companies then emitting sulfur dioxide
or from the  Environmental  Protection  Agency.  Further,  an Independent  Power
Project subject to the  requirements  has a priority over utilities in obtaining
allowances directly from the Environmental  Protection Agency if (i) it is a new
facility or unit used to generate electricity, (ii) 80% or more of its output is
sold at wholesale; (iii) it does not generate electricity sold to affiliates (as
determined  under the Holding Company Act) of the owner or operator  (unless the
affiliate   cannot  provide   allowances  in  certain  cases)  and  (iv)  it  is
"nonrecourse  project-financed." A Project is nonrecourse project-financed if it
is 100% equity  financed  or if only its assets and part or all of its  revenues
from power sales contracts  serve as collateral for the Project's  financing and
if the  providers of financing do not have the legal right to pursue an electric
utility, the assets of other Projects,  or owners or other participants for loan
repayments.

         The market price of an allowance  cannot be predicted with certainty at
this time and  there is no  assurance  that a market  for such  allowances  will
develop.  Projects  fueled by  natural  gas are not  expected  to be  materially
burdened by the acid rain provisions of the Clean Air Act Amendments.

         Title  IV  of  the  Clean  Air  Act  Amendments  requires   significant
reductions  in nitrogen  oxide  emissions  from power  plants.  The first set of
standards became applicable in 1996 for large-scale steam boilers and large coal
and oil-fired plants. The standards require reductions of 25% to 50% in nitrogen
oxide emissions. Standards for other large generating plants become effective in
2000 and would  require 40% to 50%  reductions.  States are imposing  additional
restrictions.   Nitrogen  oxide  emissions  can  be  particularly  difficult  or
expensive to reduce  because  nitrogen  oxides are produced at higher  operating
temperatures,   while  plant   efficiencies  tend  to  increase  with  operating
temperatures.   The  Fund  anticipates  that  nitrogen  oxide  regulations  will
materially  increase the operating  costs of generating  plants and will tend to
disadvantage  small Projects using internal  combustion  engines and fossil fuel
boilers,  but that the expected costs will not cause many Projects that the Fund
will invest in to become unprofitable.

         Based  on  current  trends,  the  Managing   Shareholder  expects  that
environmental  and land use regulation will become more stringent.  The Fund and
the  Managing  Shareholder  have  not  developed  expertise  and  experience  in
obtaining  necessary  licenses,   permits  and  approvals,  which  will  be  the
responsibility of each Project's  managers and Project  Sponsors.  The Fund will
rely upon qualified environmental consultants and environmental counsel retained
by it or by  developers  of  Projects  to assist  in  evaluating  the  status of
Projects regarding such matters.

Potential Legislation and Regulation
         All federal,  state and local laws and  regulations,  including but not
limited to PURPA, the Holding Company Act, the 1992 Energy Act, the FPA, and the
Clean Air Act Amendments are subject to amendment or repeal.  Future legislation
and regulation is uncertain, and could have material effects on the Fund.

         It is likely  that the  federal  government  and a number of states may
consider  schemes of  environmental  taxation that will penalize  carbon dioxide
emissions or other environmental detriments.  These proposals, if enacted, could
impose  additional costs on the operation of the Fund's  Projects.  Although the
President  and Vice  President  have  announced  that the  United  States  will,
together with other nations, reduce greenhouse gas emissions  significantly,  it
is  extremely  unclear  whether  or how this  initiative  will be adopted by the
Congress. If greenhouse gas emissions were penalized, landfill gas, cogeneration
and  biomass  Projects  of the types  owned by the Prior  Programs  might have a
relative advantage because they reduce methane or carbon dioxide emissions.

Impact of Energy Price Changes
         Market prices for natural gas, oil and, to a lesser  extent,  coal have
fluctuated significantly over the last few years. Such fluctuations may directly
inhibit  the  development  of  Projects  because of the  anticipated  effects on
Project  profitability  and may deter  lenders to  Projects  or result in higher
costs of financing.

         In recent years there have been extraordinary fluctuations in the price
of crude  oil.  Because  natural  gas is  substitutable  for  crude  oil and oil
products under certain  conditions and in certain  applications,  oil prices are
capable of  affecting  natural  gas  prices.  It is  impossible  at this time to
determine if the fluctuations  will have further effects on the supply and price
of petroleum products.

         Natural  Gas.  The  price of  natural  gas is  subject  to  significant
fluctuation for reasons that are not yet fully understood. Nonetheless, over the
last few years the price of natural  gas has  frequently  been low  relative  to
other  fuels,  although  there can be no  assurance  that any these  trends will
continue.  The effect of fluctuating natural gas prices on Projects will vary on
a Project-by-Project basis depending on the customer to which the electric power
is being sold, the terms of the Power Contracts and steam contracts (in the case
of  cogeneration  facilities)  for the  Project,  the price of natural gas to be
purchased  by the Project and the effect of any  long-term  commitments  for the
purchase of natural gas by the Project's  customers.  In general,  cogeneration,
due to its higher  efficiency,  tends to be relatively more profitable as energy
costs  (including  natural gas) increase and relatively  less profitable as such
costs  decrease.  Projects which use natural gas as a fuel source may attempt to
reduce the risk of gas price  fluctuations  adversely  affecting their economics
through long-term gas purchase arrangements and possibly acquiring gas reserves.

         Crude Oil.  Fluctuations  in the price of crude oil are not expected to
affect the cost of  operations  of  cogeneration  Projects  directly  since such
Projects  are usually  based on energy  sources  other than crude oil.  However,
gas-fired  cogeneration  Projects typically use distillate oil as a back-up fuel
at times  when gas is not  available.  Certain  Projects  use  surplus  fuels or
wastes.  The prices for these fuels and wastes are affected by  fluctuations  in
primary fuel prices but tend to be less volatile.

         Coal. Traditionally, coal prices have been more stable than oil and gas
prices  due,  in part,  to the fact that coal is usually  sold  under  long-term
contracts to utilities.  During the 1980's coal prices trended lower as a result
of the surplus of crude oil and lower oil prices.  The Clean Air Act Amendments,
which are expected to be fully  implemented  as to most coal  burning  plants by
1996, may cause prices for lower sulfur coal to increase in the future. The Fund
believes,  however,  that future coal prices will generally  remain  competitive
with the price of crude oil and natural gas and should  continue to be available
to Independent Power Projects under long-term contracts.

     (d) Financial  Information about Foreign and Domestic Operations and Export
     Sales.

     The Fund has  invested  its funds to date only in ZAP,  which is located in
California.

     The Fund is considering investments in Projects in Egypt and Great Briitain
and from  time to time has  investigated  potential  investments  in East  Asia,
Europe and South America.  No material  operations or income have yet been taken
or earned outside the United States.

(e)  Employees.

     The  Fund  has no  employees.  The  persons  described  below  at  Item 5 -
Directors and Executive  Officers of the Registrant serve as executive  officers
of the Fund and have  the  duties  and  powers  usually  applicable  to  similar
officers of a Delaware corporation in carrying out the Fund business.

Item 2.  Financial Information

     (a)  Selected Financial Data.

     The following data is qualified in its entirety by the financial statements
presented elsewhere in this Registration Statement on Form 10.



                                      As of and for the
                                   Period from Commencement
                                     of Share Offering
                                     (February 9, 1998)
                                           through
                                      December 31, 1998

                              
Interest income                     $   494,002
Total revenue                           494,002
Net income (loss)                      (851,745)
Net assets (shareholders'
  equity)                            24,354,681
Total assets                         25,733,430
Long-term obligations                         0
Per Share of Trust
 Interest:
  Revenues                                1,664
  Net income (loss)                      (2,869)
  Net asset value                        82,035
Distributions to Investors                    0



     (b) Management's Discussion and Analysis of Financial Condition and Results
     of Operations.

Introduction

The following  discussion and analysis  should be read in  conjunction  with the
Fund's  financial  statements  and the notes  thereto  presented  below.  Dollar
amounts in this  discussion  are generally  rounded to the nearest  $1,000.  The
financial statements include only the accounts of the Fund.

Results of Operations

The period from February 9, 1998 to December 31, 1998

In 1998, the Fund had a net loss of $852,000.  The Fund's sole source of revenue
in 1998 was interest  income of $494,000.  Expenses of $1,346,000 were primarily
composed of $578,000 of  investment  fees paid to the  Managing  Shareholder  on
capital  contributions and $709,000 of due diligence costs on potential projects
that were ultimately rejected.

Liquidity and Capital Resources

As of December  31, 1998,  the Fund had  $25,257,000  of cash on hand.  The Fund
anticipates  investing  most of these  funds  in new  projects  in  1999.  As of
December 31, 1998, the Fund had not invested in any power generation projects.

Other  than  investments  of  available  cash  in  power  generation   Projects,
obligations  of the Fund are or will be generally  limited to payment of Project
operating  expenses,  payment of a management  fee to the Managing  Shareholder,
payments  for  certain  accounting  and  legal  services  to third  persons  and
distributions to shareholders of available  operating cash flow generated by the
Fund's  investments.  The  Fund's  policy  is to  distribute  as much cash as is
prudent to  Shareholders.  Accordingly,  the Fund has not found it  necessary to
retain a material  amount of  working  capital.  

The Fund  anticipates  that,  during  1999,  its cash flow from  operations  and
unexpended offering proceeds will be adequate to fund its obligations.

Financial instruments

The Fund's  investments in financial  instruments are short-term  investments of
working capital or excess cash. Those short-term  investments are limited by its
Declaration  of Trust to  investments  in United  States  government  and agency
securities  or to  obligations  of banks  having at least $5  billion in assets.
Currently  the Fund invests only in bank  obligations.  Because the Fund invests
only in short-term  instruments  for cash  management,  its exposure to interest
rate changes is low.

Year 2000 Remediation

     The Managing Shareholder and its affiliates began year 2000 and planning in
early 1997. After initial  remediation was , a more intensive review  discovered
additional  issues  and the  Managing  Shareholder  began a  formal  remediation
program in late 1997.  The Managing  Shareholder  has assessed  problems,  has a
written plan for remediation and is implementing the plan.

     The accounting,  network and financial packages for the Ridgewood companies
are basically  off-the-shelf packages that will be remediated,  where necessary,
by obtaining patches or updated versions.  The Managing Shareholder expects that
updating  will be  complete  before  the end of May  1999  with  ample  time for
implementation,  testing  and  custom  changes  to  some  modifications  made by
Ridgewood to those programs.  To a large extent,  these software  packages would
have been upgraded within a three to five year time frame,  even absent the Year
2000  problem.  The Managing  Shareholder  estimates  that the Fund's  allocable
portion of the cost of upgrades that were  accelerated  because of the Year 2000
problem is less than $1,000.

     The Managing  Shareholder  has identified  two major systems  affecting the
Fund that rely on custom-written software, the  subscription/investor  relations
and investor  distribution  systems,  which maintain individual investor records
and effect  disbursement  of  distributions  to  Investors.  In late  1998,  the
Managing  Shareholder's  outside  computer  consultant  reviewed the remediation
completed for those systems and advised the Managing  Shareholder  that material
additional work was required for these systems to work  efficiently  after 1999.
The Managing  Shareholder  accordingly  employed a new  specialist for Year 2000
remediation  of those  systems and other  software and for  information  systems
support  generally.  The Managing  Shareholder's  plan calls for  completion  of
changes to the distribution  system and testing of that system by the end of May
1999  and the  Managing  Shareholder  believes  that  this  effort  is  ahead of
schedule.  The plan also targets  completion by the end of the second quarter of
1999 of minor  changes to the  elements of the  subscription/investor  relations
system that will allow it to handle individual  investors'  records,  and of all
testing  of  those  modifications.  Elements  of that  system  used to  generate
internal  sales  reports  and other  internal  reports  (but which do not affect
investors' records) will require major remediation.  Remediation of the internal
report  generating  programs is expected to be completed by the end of the third
quarter of 1999 with testing and any additional modifications to be completed no
later than the end of 1999.

     The Managing  Shareholder is confident that all software systems  necessary
to maintain  investor  records will be remediated and tested well before the end
of  1999.   If  the  systems  used  to  generate   internal   reports  from  the
subscription/investor  relations  system are not  remediated by the end of 1999,
the Managing  Shareholder  is developing a contingency  plan to use the existing
systems  together  with  manual  entry of data and  checking  of  results  until
remediation is complete. The Managing Shareholder has done this in the past when
system  problems  have  occurred  and it thus  believes  that  there  will be no
material or  noticeable  effect on the accuracy of its records or  generation of
internal  reports,  although it may  experience  delays in  generating  internal
reports of a few days.

     Some systems are being remediated using the "sliding window" technique,  in
which two digit  years less than a  threshold  number  are  assumed to be in the
2000's and higher two digit  numbers are  assumed to be in the 1900's.  Although
this will allow  compliance  for several years beyond the year 2000,  eventually
those  systems  will  have to be  rewritten  again  or  replaced.  The  Managing
Shareholder expects that the ordinary course of system upgrading will eventually
cure this problem.

     The Fund's share of the incremental  cost for Year 2000 remediation of this
custom written  software and related items for 1998 and prior years is estimated
to be less than $12,250 and is estimated to be approximately $11,500 for 1999.

     ZAP has advised the Fund that it has  reviewed  its  products for Year 2000
problems and has found that they are Year 2000 compliant.  ZAP has also reviewed
its principal  supply chains and has determined  that all essential  sources are
Year 2000  compliant  or that there are  adequate  alternate  sources  for those
supplies.

     The Managing  Shareholder and its affiliates do not  significantly  rely on
computer input from  suppliers and customers and thus are not directly  affected
by other companies' year 2000 compliance. However, if customers' payment systems
or suppliers'  systems were adversely  affected by year 2000 problems,  the Fund
could be affected.  For example,  if  customers  were unable to accept  products
because of system  malfunctions  or  transmission  failures  caused by Year 2000
non-compliance by them or other persons, the Fund would lose revenues that could
not be recouped at a later date.  Similarly,  if customers' payment systems were
to  malfunction,  the Fund's revenues might be delayed.  In addition,  suppliers
might be unable to provide  necessary fuel or parts.  Because the Fund currently
does not own any  operating  businesses  other than ZAP,  it is not  possible to
predict the probability or magnitude of any such problems.

     Based on its internal  evaluations and the risks and contexts identified by
the  Commission  in its rules and  interpretations,  the Fund believes that Year
2000  issues  relating  to its assets and  remediation  program  will not have a
material effect on its facilities,  financial  position or operations,  and that
the costs of addressing the Year 2000 issues will not have a material  effect on
its future  consolidated  operating results,  financial condition or cash flows.
However,  this  belief is based upon  current  information,  and there can be no
assurance that unanticipated problems will not occur or be discovered that would
result in material adverse effects on the Fund.

     The Fund is unable to predict reliably what, if anything, will happen after
December 31, 1999 with regard to Year 2000  problems  caused by the inability of
other businesses and government agencies to complete Year 2000 remediation.  The
Fund knows of no specific  problems  identified  by customers or suppliers  that
would have a material adverse effect on the Fund.

Quantitative and Qualitative Disclosures Concerning Market Risk

     Qualitative Information About Market Risk.
     The Fund's investments in financial instruments are short-term  investments
of working capital or excess cash. Those  short-term  investments are limited by
its  Declaration of Trust to investments in United States  government and agency
securities  or to  obligations  of banks  having at least $5  billion in assets.
Because the Fund invests only in short-term instruments for cash management, its
exposure to interest rate changes is low. The Fund has limited exposure to trade
accounts  receivable and believes that their carrying  amounts  approximate fair
value.

     The Fund's  primary  market  risk  exposure is limited  interest  rate risk
caused  by  fluctuations  in  short-term  interest  rates.  The  Fund  does  not
anticipate  any changes in its primary market risk exposure or how it intends to
manage it. The Fund does not trade in market risk sensitive instruments.

     Quantitative Information About Market Risk

         This table provides information about the Fund's financial  instruments
that are  defined by the  Securities  and  Exchange  Commission  as market  risk
sensitive instruments.  These include only short-term U.S. government and agency
securities and bank  obligations.  The table  includes  principal cash flows and
related weighted average interest rates by contractual maturity dates.

                              December 31, 1998

                                        Expected Maturity Date
                                                 1999
                                              (U.S. $)

Bank Deposits and Commercial
  Paper                                   $ 25,256,560
  Average interest rate                          5.225%

Item 3.  Properties.

     Pursuant to the  Management  Agreement  between  the Fund and the  Managing
Shareholder  (described at Item 10(c)),  the Managing  Shareholder  provides the
Fund with office space at the  Managing  Shareholder's  principal  office at The
Ridgewood Commons, 947 Linwood Avenue, Ridgewood, New Jersey 07450.

     The Fund and its  subsidiaries  do not own any  material  real  property or
buildings.

Item 4.  Security Ownership of Certain Beneficial Owners and Management.

     Ridgewood  Power  purchased for cash one full Investor  Share. By virtue of
its  purchase  of an  Investor  Share,  Ridgewood  Power is entitled to the same
ratable  interest in the Fund as all other  purchasers  of Investor  Shares.  No
other  executive  officers of the Fund  acquired  Investor  Shares in the Fund's
offering and neither the  executive  officers  (other than Mr.  Swanson) nor the
Independent  Panel  Members  nor  the  Corporate  Trustee  beneficially  own any
securities of the Fund. No person  beneficially  owns 5% or more of the Investor
Shares.

     Ridgewood  Power received 10 Preferred  Participation  Rights in connection
with its purchase of an Investor Share. No person  beneficially  owns 5% or more
of the Preferred Participation Rights.

     Power VI Co was issued one Management  Share in the Fund  representing  the
beneficial  interests and management rights of the Managing  Shareholders in its
capacity  as the  Managing  Shareholder  (excluding  its  interest  in the  Fund
attributable  to Investor  Shares it acquired in the offering).  Mr. Swanson has
beneficial  ownership  of the  Management  Share issued to Power VI Co. No other
Management  Shares are issuable and neither any other executive  officer nor any
Independent  Panel  Member  nor the  Corporate  Trustee  beneficially  owns  any
Management Share.

     The management rights of the Managing  Shareholder are described in further
detail above at Item 1 - Business and below in Item 5 - Directors  and Executive
Officers of the Registrant. Its beneficial interest in cash distributions of the
Fund and its allocable  share of the Fund's net profits and net losses and other
items attributable to the Management Share are described in further detail below
at Item 7 -- Certain  Relationships  and Related  Transactions.  The  Management
Share does not have voting rights but the consent of the Managing Shareholder is
required  for certain  actions  affecting it as described at Item 11(b) - Voting
Rights.

Item 5.  Directors and Executive Officers of the Registrant.

(a)  General.

     As Managing  Shareholder of the Fund,  Ridgewood Power (and Power VI Co, if
Ridgewood  Power turns over  management  rights to it) has direct and  exclusive
discretion in management and control of the affairs of the Fund. The Independent
Panel  Members  only  review  certain  transactions  between  the Fund and other
investment  programs  sponsored by Ridgewood  Power or  affiliates  of Ridgewood
Power.  The  Managing  Shareholder  will  be  entitled  to  resign  as  Managing
Shareholder  of the Fund 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.

     The purpose for having two Managing Shareholders, Ridgewood Power and Power
VI Co,  was to have  continuity  of  management.  When the  Fund was  organized,
Ridgewood  Power was  considering  that it might  cause the five Prior  Programs
(Power I through  Power V) to combine  into a  publicly  traded  business.  That
process  might  require  Ridgewood  Power to be a part of the  combination,  and
management fees paid by the Fund to the Managing  Shareholder  might pass to the
combined five Prior Programs in a way that might benefit the shareholders of the
five Prior Programs while leaving fewer  resources for the managers of the Fund.
Therefore,  when it organized  the Fund,  Ridgewood  Power created Power VI Co's
predecessor as a stand-in entity that could replace Ridgewood Power.

     Ridgewood  Power now expects  (although no assurance can be given) that the
Fund would also join any combination of the five Prior Programs. Accordingly, it
currently  seems unlikely that it will be necessary to activate Power VI Co as a
Managing Shareholder, if a combination were to occur.

     Ridgewood  Holding,  which was incorporated in April 1992, is the Corporate
Trustee of the Fund.

(b)  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  Fund and  acted  as  managing
shareholder  until April 1999. On or about April 20, 1999 it was merged into the
current  co-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.

     At the same  time,  Ridgewood  Power VI  Corporation,  which  was the other
Managing  Shareholder,  was  merged  into  Ridgewood  Power VI LLC, a New Jersey
limited  liability  company  designated  as  Power  VI Co in  this  Registration
Statement.  Ridgewood  Power VI LLC was also newly organized and has no business
other than being the successor to the dormant Ridgewood Power VI Corporation.

     Robert E. Swanson was 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 each  Managing  Shareholder.
Approximately 98% of the equity in each 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
remaining 2% of the equity  interests in each are expected to be owned by Robert
L. Gold and Randall D. Holmes.  Mr. Swanson is designated as the manager of each
Managing  Shareholder  in  its  operating  agreement.   If  he  were  to  become
incapacitated,   insolvent   or  unable  to   personally   manage  the  Managing
Shareholders  (and  thus  the  Fund),  it  is  anticipated  that  the  operating
agreements of the Managing  Shareholders  will provide that Mr. Gold, Mr. Holmes
and/or  possibly  other  persons to be designated  would become the  controlling
persons of the Managing Shareholders and thus the Fund. The members of Ridgewood
Capital  and the  Investors  in the Fund would not be  entitled  to vote on this
question.

     The Managing  Shareholder  has also organized Power I, Power II, Power III,
Power  IV  and  Power  V 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 Fund.

     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, each was merged into a limited liability company
with a similar  name and Mr.  Swanson  became the sole  manager and  controlling
owner of each limited liability company. For convenience,  the remainder of this
Registration  Statement  will  discuss each  limited  liability  company and its
corporate predecessor as a single entity.

     Ridgewood Power 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 17 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  Corporation  ("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"), organized in 1998, which assists in offerings made by the
Managing  Shareholder and which is the sponsor of two privately  offered venture
capital  funds   (Ridgewood   Capital  Venture   Partners,   LLC  and  Ridgewood
Institutional Venture Partners, LLC) and RPMCo.

     Set forth below is certain  information  concerning  Mr.  Swanson and other
executive officers of the Managing Shareholders.

     Robert E.  Swanson,  age 52, has also served as President of the Fund since
its  inception in February  1998 and as  President of RPMCo,  Power I, Power II,
Power III, Power IV and Power V 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 Ridgewood  Capital  Venture  Partners,
LLC and Ridgewood  Institutional Venture Partners, LLC. In addition, he has been
President and sole or controlling  owner 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 Fund and  Investment  Division  of Morgan  Guaranty  Fund
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 40,  has served as  Executive  Vice  President  of the
Managing  Shareholders,  RPMCo, Power I, the Fund, Power II, Power III, Power IV
and Power V 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 Ridgewood  Capital  Venture
Partners, LLC and Ridgewood  Institutional Venture Partners,  LLC. 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 44, joined the Managing  Shareholder in November 1994
as Senior Vice  President and holds the same  position with the Fund,  RPMCo and
each of the other trusts sponsored by the Managing Shareholder.  He became Chief
Operating Officer of the Managing  Shareholder,  RPMCo and the Power I through V
trusts in October 1996,  and is the Chief  Operating  Officer of the Fund. He is
also Senior Vice President of Ridgewood  Capital and of the two venture  capital
funds it manages. 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 51, assumed the duties of Chief Financial  Officer of
the  Managing  Shareholder,  the prior five  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
became  Chief  Financial  Officer of the Fund at its  inception.  He is also the
Chief Financial  Officer of Ridgewood  Capital and of Ridgewood  Capital Venture
Partners, LLC and Ridgewood Institutional Venture Partners, LLC.

     Mr. Quinn has 30 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 Price  Waterhouse,  and a Bachelor of Science
degree in Accounting and Finance from the University of Scranton (1969).

     Mary Lou  Olin,  age 46,  has  served  as Vice  President  of the  Managing
Shareholder,  RPMCo,  Ridgewood Capital, the Fund, Power I, Power II, Power III,
Power IV and Power V 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  Fund  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 Fund under the terms of
the Declaration. Specifically, the Managing Shareholder will perform (or arrange
for the performance of) the management and administrative  services required for
the operation of the Fund. Among other services, it will administer the accounts
and handle  relations  with the  Investors,  provide the Fund with office space,
equipment  and  facilities  and other  services  necessary for its operation and
conduct  the  Fund'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  (except that  Ridgewood  Program
Transactions  require the approval of the Independent Panel Members as described
below).

     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  Fund  will pay all  other  expenses  of the  Fund,
including  transaction  expenses,  valuation  costs,  expenses of preparing  and
printing  periodic  reports for Investors and the  Commission,  postage for Fund
mailings,  Commission fees,  interest,  taxes, legal,  accounting and consulting
fees, litigation expenses,  expenses of operating Projects and costs incurred by
the Managing  Shareholder in so doing and other expenses properly payable by the
Fund.  The Fund will  reimburse the Managing  Shareholder  for all such Fund and
other expenses paid by it.

     As  compensation  for the  Managing  Shareholder's  performance  under  the
Management  Agreement,  the Fund is obligated to pay the Managing Shareholder an
annual  management  fee,  beginning on the  Termination  Date of the offering of
Investor  Shares  as  described  below at Item 7 --  Certain  Relationships  and
Related Transactions.

     The   responsibilities  of  the  Managing  Shareholder  and  the  fees  and
reimbursements  of expenses  it is  entitled to are set out in the  Declaration.
Each  Investor  consented  to the terms and  conditions  of the  Declaration  by
subscribing to acquire Investor Shares in the Fund.

     The Fund 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 Fund  concerning  the operations of
Projects in which it invests, to review proposals for additional  development or
financing,  and to represent  the Fund's  interests.  The Fund will rely on such
persons to review proposals to sell its interests in Projects in the future.

(d) Executive Officers of the Fund.

     Pursuant  to  the  Declaration,  the  Managing  Shareholder  has  appointed
officers of the Fund to act on behalf of the Fund and sign  documents  on behalf
of the Fund as  authorized  by the Managing  Shareholder.  Mr.  Swanson has been
named the President of the Fund and the other executive officers of the Fund 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 Fund  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 Fund has full power to act on
behalf of the Fund. The Managing  Shareholder expects that most actions taken in
the  name of the  Fund  will be taken by Mr.  Swanson  and the  other  principal
officers in their  capacities as officers of the Fund under the direction of the
Managing Shareholder rather than as officers of the Managing Shareholder.

(e)  The Independent Panel Members.

     The  Declaration  provides for an  Independent  Review Panel (the "Panel"),
with   responsibility   for  independently   reviewing  and  approving  material
transactions  ("Ridgewood Program  Transactions") between the Fund and any other
investment  programs  sponsored by the Managing  Shareholder  or its  Affiliates
("Ridgewood Programs").

     All Ridgewood  Program  Transactions  (which include material  transactions
between  the Fund or entities in which the Fund  invests,  on the one hand,  and
other  Ridgewood  Programs or entities in which they invest or have control,  on
the other),  must be  approved by a majority of the Panel  Members (if there are
only two Panel Members, both must approve) or by a Majority of the Investors. In
reviewing and approving a Ridgewood Program  Transaction,  the Panel Members are
be guided by the  provisions of Delaware law regarding the  responsibilities  of
directors  of a  business  corporation  who  pass  upon a  transaction  with  an
affiliated corporation.  In so doing, the Panel Members are subject to duties of
loyalty to the Fund and its Investors and care in reviewing the transaction, and
are obligated to consider the entire  fairness of the  transaction  to the Fund.
There is no requirement,  however,  that the Fund participate in the transaction
on identical terms with the other Ridgewood Programs. The Declaration specifies,
in  addition,  that the Panel  Members  will be entitled to the  benefits of the
"business  judgment rule" of Delaware law, which exonerates  directors for their
negligence or mistaken  decisions in the absence of bad faith or clear conflicts
of interest.

     The Independent Review Panel provisions were included in the Declaration in
recognition  that  the  Fund's  investment   program   anticipates   significant
co-investment  by the Fund in Projects in which other  Ridgewood  Programs  will
invest. The Managing Shareholder concluded that given the potential conflicts of
interest and the additional  complexities and responsibilities that characterize
co-investment  decisions,  the Fund should  create a mechanism  for  independent
review and approval of co-investments.

     The Managing  Shareholder  has  designated the initial Panel of three Panel
Members. A majority of the incumbent Panel Members must consent for the Panel to
take action.  A majority of the Managing  Shareholder  and the  incumbent  Panel
Members,  acting together, may authorize an increase to no more than eight Panel
Members  (or a  decrease  to not fewer than two) and may fill  vacancies  on the
Panel within 180 days. If there is no incumbent Panel Member, however, vacancies
must be filled by the  Managing  Shareholder  with the approval of a Majority of
the Investors. A Panel Member may not be an Affiliate of the Fund and may not be
an investment advisor or underwriter for the Fund, a person  beneficially owning
five  percent  or more of the  Investor  Shares,  an  entity  in which  the Fund
beneficially owns five percent or more of the outstanding equity securities,  an
agent or employee  of the Fund or its  subsidiaries,  a member of the  immediate
family of any  individual  described  above,  or a person who served at any time
after the beginning of the second-to-last full calendar year as legal counsel to
the Fund or the  Managing  Shareholder,  or a partner,  principal or employee of
that legal counsel.

     The Panel is not required to review other  transactions  that might involve
the Managing  Shareholder or its Affiliates and the Fund, such as the Management
Agreement or  temporary  advances of funds by the  Managing  Shareholder  to the
Fund. The Managing  Shareholder,  in its sole  discretion,  may refer such other
transactions to the Panel for advice, and the Panel, in its sole discretion, may
elect  to  review  and  report  to the  Managing  Shareholder  on  the  referred
transaction,  or to decline to review it. Neither the Managing  Shareholder  nor
the Panel Members shall incur  liability to the Fund or any Shareholder by their
decisions  to  refer  or not to  refer,  or to  review  or  not to  review,  any
transaction that is not a Ridgewood Program Transaction.

     The Panel Members are not trustees of the Fund,  have no general  fiduciary
responsibility for the Fund's investments or operations,  and have no continuing
oversight responsibilities for the Fund. The Panel meets only on the call of the
Managing  Shareholder.  Panel  Members may resign and may be removed  either for
cause by action of at least two-thirds of the remaining Panel Members or for any
reason by action of the holders of at least two-thirds of the Investor Shares.

     Compensation  of the Panel Members is set in the  Declaration at $5,000 per
year,  plus  out-of-pocket  expenses  incurred..  If  the  Managing  Shareholder
certifies in the Fund's records that there is no reasonable probability that the
Fund will engage in further  Ridgewood Program  Transactions,  the Panel will be
suspended  and will  take no  further  action.  During  that  period,  the Panel
Members'  compensation  will cease.  A suspended  Panel may be reinstated by the
Managing Shareholder at any time.

     The current  Panel  Members are Richard  Propper,  M.D.,  John  Belknap and
Seymour Robin. Dr. Propper and Mr. Belknap also serve as independent trustees of
two  Prior  Programs,  Ridgewood  Power  I and  Ridgewood  Power  IV.  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.  Belknap  nor  Mr.  Robin  is  otherwise
affiliated  with the Fund,  any of the Fund'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.
Dr.  Propper acts as an adviser to the two venture  capital  funds  sponsored by
Ridgewood Capital as described below.

     John C. Belknap, age 52, has been chief financial officer of three national
retail chains and their parent companies. Since July 1997, he has been Executive
Vice  President  and Chief  Financial  Officer of  Richfood  Holdings,  Inc.,  a
Virginia-based  food  manufacturer.  From December 1995 to June 1997 Mr. Belknap
was Executive Vice President and Chief Financial Officer of OfficeMax,  Inc., an
office  products  superstore  chain.  From February 1994 to February  1995,  Mr.
Belknap  was  Executive  Vice  President  and Chief  Financial  Officer  of Zale
Corporation, a retail jewelry store chain. From January 1990 to January 1994 and
from February 1995 to December 1995,  Mr.  Belknap was an independent  financial
consultant.  From  January 1989 through May 1993 he also served as a director of
and consultant to Finlay  Enterprises,  Inc., an operator of leased fine jewelry
departments in major department stores nationwide.

     Seymour (Si) Robin,  age 71, has been the Executive  Vice President and CEO
of Sensor Systems, Inc., an antenna manufacturing company located in Chatsworth,
California.  He has held this position  since 1972.  From 1949 to 1953, he owned
and operated United  Manufacturing  Company,  which  specialized in aircraft and
missile antennas.  From 1953 to 1957, he managed Bendix Antenna Division,  which
specialized in aircraft and space antennas and avionics. In 1957, he started SRA
Antenna Company as a manufacturer and technical consultant to wordlwide aircraft
maufacturers  of  commercial,  space and military  aircraft.  He remained at SRA
Antenna Company until 1971, at which time he became Executive Vice President and
CEO of Sensor Systems, Inc.

     Mr.  Robin  holds  degrees in  Mechanical  and  Electric  Engineering  from
Montreal   Technical   Institute   and  UCLA.   He  is  a  certified  FAA  pilot
(multi-engine,  instruments,  land and sea) since 1966.  He has received the AMC
Airline Voltaire Award for the Most Outstanding Contribution to Airline Avionics
in the Past 50 Years.  He also owns  significant  interests  in  commercial  and
residential real estate in the Soutwest U.S.

     Dr. Richard D. Propper,  age 48,  graduated from McGill  University in 1969
and received his medical  degree from Stanford  University in 1972. He completed
his internship  and residency in Pediatrics in 1974,  and then attended  Harvard
University  for  post  doctoral  training  in   hematology/oncology.   Upon  the
completion of such training,  he joined the staff of the Harvard  Medical School
where he served as an assistant  professor until 1983. In 1983, Dr. Propper left
academic  medicine  to found  Montgomery  Medical  Ventures,  one of the largest
medical  technology  venture  capital firms in the United  States.  He served as
managing general partner of Montgomery Medical Ventures until 1993.

     Dr. Propper is currently a consultant to a variety of companies for medical
matters,  including  international  opportunities in medicine.  In June 1996 Dr.
Propper agreed to an order of the  Commission  that required him to make filings
under  Sections  13(d)  and (g) and 16 of the 1934 Act and that  imposed a civil
penalty of $15,000.  In entering into that agreement,  Dr. Propper did not admit
or deny any of the alleged  failures to file recited in that order.  Dr. Propper
is also an acquisition  consultant for Ridgewood Capital Venture  Partners,  LLC
and Ridgewood Institutional Venture Partners, LLC, the two venture capital funds
sponsored by Ridgewood  Capital.  He receives a fixed  consulting fee from those
funds and contingent compensation from Ridgewood Capital.

 (f)  Corporate Trustee

     The Corporate Trustee of the Fund is Ridgewood Holding. Legal title to Fund
property is now and in the future will be in the name of the Fund,  if possible,
or Ridgewood Holding as trustee. Ridgewood Holding is also a trustee of Power I,
Power II,  Power III,  Power IV,  Power V 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 Ridgewood  Power 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.  The principal office of Ridgewood  Holding is at 1105 North Market
Street, Suite 1300, Wilmington, Delaware 19899.

(g)  RPMCo.

     RPMCo is controlled  by Robert E. Swanson.  For Projects for which the Fund
decides to take operating  responsibility itself, the Fund will cause the Fund's
subsidiary  that owns the Project to enter into an "Operation  Agreement"  under
which RPMCo, under the supervision of the Managing Shareholder, will provide the
management,  purchasing,  engineering,  planning and administrative services for
the Project.  RPMCo will charge the Fund at its cost for these  services and for
the Fund'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 Fund and other  programs.  Common
expenses that are not so allocated will be borne by the Managing Shareholder.

     The Fund does not currently  own any  Independent  Power  Projects or other
facilities managed by RPMCo and accordingly no Operation Agreement is in effect.
The Fund has not made any material payments to RPMCo.

     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 Fund 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 will not provide any services  related to the  administration  of the
Fund, 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 Fund's name or to bind the
Fund,  which  will  be  exercised  by the  Managing  Shareholder  or the  Fund's
officers.

     The Operation  Agreements will not have a fixed term and will be terminable
by RPMCo,  by the Managing  Shareholder  or by vote of a majority in interest of
Investors,  on 60 days' prior notice. The Operation Agreements may be amended by
agreement of the Managing  Shareholder  and RPMCo;  however,  no amendment  that
materially  increases the obligations of the Fund or that  materially  decreases
the  obligations  of RPMCo shall become  effective  until at least 45 days after
notice of the amendment,  together with 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 51, 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 6.  Executive Compensation.

     The Fund will  reimburse  RPMCo at cost for  services  provided  by RPMCo's
employees and reimburses the Managing Shareholder at allocated cost for services
outside  the  scope  of the  Management  Agreement;  no such  reimbursement  per
employee  exceeded  $60,000 in 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  Fund,  pursuant  to the
Declaration,  each  Independent  Panel Member is entitled to be paid by the Fund
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 Fund.  Accordingly  in March 1998 and  January  1999 the Fund paid
each  Independent  Panel Member $5,000 for his services.  The Independent  Panel
Members and the Managing  Shareholder  are  entitled to review the  compensation
payable to the Independent Panel Members annually and increase or decrease it as
they see  reasonable.  The  consent of a majority  of the Panel  Members and the
consent of the Managing  Shareholder is necessary for a change in  compensation.
The Fund is not entitled to pay the Independent  Panel Members  compensation for
consulting  services  rendered to the Fund  outside the scope of their duties to
the Fund without similar approval.

     Ridgewood  Holding,  the Corporate  Trustee of the Fund, is not entitled to
compensation for serving in such capacity,  but is entitled to be reimbursed for
Fund  expenses  incurred  by  it  which  are  properly  reimbursable  under  the
Declaration.

     For information concerning the Fund's Key Employee Incentive Plan, see Item
11(j) of this Registration Statement. No awards or determinations of eligibility
have been made under the Plan.

Item 7.  Certain Relationships and Related Transactions.

     The  Declaration  provides  that  cash flow of the  Fund,  less  reasonable
reserves which the Fund deems necessary to cover  anticipated Fund expenses,  is
to be  distributed  to the  Shareholders  from  time to time as the  Fund  deems
appropriate.  The  allocation  of  distributions  between the  Investors and the
Managing  Shareholder is described at Item 11(a) - Description  of  Registrant's
Securities to be Registered - Distribution and Dissolution Rights.

     The Fund did not make any distributions in 1998 to the Managing Shareholder
(which is a member of the Board of the Fund) or any other person.  The Fund paid
fees to the Managing Shareholder and its affiliates as follows:

Fee                    Paid to        1998

Investment fee        Ridgewood
                      Power          $577,813
Placement agent fee   Ridgewood
 and sales commis-    Securities
 sions                Corporation     304,031
Organizational,       Ridgewood
 distribution and     Power
 offering fee                       1,776,189
Due diligence         Ridgewood
 expenses             Power

     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.

     In addition to the foregoing,  the Fund reimbursed the Managing Shareholder
and RPMCo at cost for expenses and fees of  unaffiliated  persons engaged by the
Managing  Shareholder  for Fund  business  and for certain  expenses  related to
management of Projects.

     Other  information in response to this item is reported in response to Item
6. Executive  Compensation,  which information is incorporated by reference into
this Item 7.

Item 8.  Legal Proceedings.

     There are no legal proceedings involving the Fund.

Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.

(a)  Market Information.

     The Fund has sold approximately 380 Investor Shares of beneficial  interest
in the  Fund in its  private  placement  offering,  which is  ongoing.  There is
currently no established  public trading market for the Investor  Shares and the
Fund does not intend to allow a public trading market to develop. As of the date
of this  Registration  Statement on Form 10, all such Investor  Shares have been
issued and are  outstanding.  There are no  outstanding  options or  warrants to
purchase, or securities convertible into, Investor Shares.

     Investor Shares are restricted as to transferability under the Declaration,
as well as under federal and state laws regulating securities.  See Item 11(d) -
Description  of  Registrant's  Securities  to be  Registered -  Restrictions  on
Transfer  of  Investor  Shares.  The  Investor  Shares have not been and are not
expected to be  registered  under the  Securities  Act of 1933,  as amended (the
"1933  Act"),  or under any other  similar law of any state  (except for certain
registrations  that do not permit free  resale) in  reliance  upon what the Fund
believes to be exemptions from the registration  requirements contained therein.
Because the  Investor  Shares  have not been  registered,  they are  "restricted
securities"  as defined  in Rule 144 under the 1933 Act.  As of the date of this
Registration  Statement,  no Investor Shares are sellable under Rule 144 because
the requirements of Rule 144(c) have not been met.

     The Managing Shareholder is considering the possibility of a combination of
the  Fund  and  five  other  investment   programs  sponsored  by  the  Managing
Shareholder (Power I through Power V) into a publicly traded entity.  This would
require the approval of the Investors in the Fund and the other  programs  after
proxy  solicitations  complying with requirements of the Securities and Exchange
Commission,  compliance  with the "rollup"  rules of the Securities and Exchange
Commission and other regulations,  and a change in the federal income tax status
of the Fund from a partnership  (which is not subject to tax) to a  corporation.
The process of considering and effecting a combination,  if the decision is made
to do so,  will be  very  lengthy.  There  is no  assurance  that  the  Managing
Shareholder  will  recommend a  combination,  that the  Investors of the Fund or
other programs will approve it, that economic conditions or the business results
of the  participants  will be favorable for a combination,  that the combination
will be effected or that the  economic  results of a  combination,  if effected,
will be favorable to the Investors of the Fund or other programs.

(b)  Holders

     As of April 22, 1999,  there were 743 record holders of Investor Shares and
566 record holders of Preferred Participation Rights.

(c)  Dividends

     The Fund made no  distributions  in 1998. The Fund's ability to make future
distributions  to Investors and their timing will depend on the net cash flow of
the Fund and retention of reasonable reserves as determined by the Fund to cover
its anticipated expenses.

Item 10.  Recent Sales of Unregistered Securities.

     (a)  Securities  sold.  As of April  22,  1999 the Fund had sold a total of
381.6015 Investor Shares in a best-efforts offering under Rule 506 of Regulation
D that began April 12, 1996. The Fund also has issued a total of 1,890 Preferred
Participation  Rights for no additional  consideration  to certain  Investors in
connection  with their  purchases  of  Investor  Shares that  occurred  prior to
December 31,  1998.  The Fund also  granted the  Managing  Shareholder  a single
Management Share representing the Managing  Shareholder's  management rights and
rights to distributions of cash flow.

     (b) Underwriters and other purchasers. Ridgewood Securities Corporation, an
affiliate of the Fund and the Managing Shareholder,  was the placement agent for
the best efforts  offering.  The Regulation D offering was limited to accredited
investors  and to a limited  number of persons  described  in Rule 501(e)  under
Regulation D.

     (c)  Consideration.  All  Investor  Shares were sold for cash at a price of
$100,000 per Investor Share. No additional  consideration was paid for Preferred
Participation Rights. The following amounts are as of April 22, 1999.

Aggregate offering price of Investor Shares            $   38,160,150
Aggregate sales commissions                                 3,052,812
Placement agent fees                                          381,602

     The Management Share was issued in exchange for the Managing  Shareholder's
services under the Declaration.

     (d)  Exemption  from  registration  claimed.  The  offering of the Investor
Shares and associated  Preferred  Participation  Rights was exempt under Section
4(2) of the  Securities  Act of 1933,  as provided by Rule 506 of  Regulation  D
under that Act. The offering was made only to accredited investors and a limited
number of persons  described in Rule 501(e) of  Regulation D, without the use of
general advertising or solicitation.

     The issuance of the  Management  Share was exempt under Section 4(2) of the
Securities Act of 1933 as an issuance to a controlling person of the Fund.

     (e)  Not applicable

     (f) Use of proceeds. Although this subitem is required under Item 701(f) of
Regulation S-K only for offerings  registered  under the Securities Act of 1933,
the Fund is voluntarily including this information.

          This information is as of December 31, 1998.




                                         Amounts Paid to
                                              Related Persons*     Other
Source or use                    Amount          of Fund         Persons
 of proceeds

                                                    
Sale of 296.8815
 Investor Shares             $29,688,150         n/a             n/a

Less: Sales
 commissions and
 placement agent fee           2,630,853           304,031     $2,326,822

Organizational,
 offering and
 distribution fee              1,850,871         1,850,871              0

Investment fee                   577,813           577,813              0

Net offering
 proceeds to Fund             24,628,613          n/a             n/a

Temporary investments**       23,479,389                 0     23,479,389

Due diligence expenses         1,089,848                 0      1,089,848

Accounting and legal fees         31,000                 0         31,000

Other expenses                    28,276                 0         28,276



* Related  persons  are the  following:  the  Managing  Shareholders,  Ridgewood
Securities  Corporation,  RPMCo,  Ridgewood Energy, the director and officers of
each of those corporations and their associates, and all other affiliates of the
Fund.  No  person  beneficially  owns  10% or more of any  class  of the  equity
securities of the Fund.

** As of December 31, 1998. All temporary  investments mature less than one year
from the date of issuance.  Temporary  investments are limited to U.S.  Treasury
securities and obligations of banks with at least $5 billion in assets.

Item 11.  Description of Registrant's Securities to be Registered.

     The Fund is registering Investor Shares and Preferred Participation Rights.
Each of these is a class of shares of beneficial  interest in the Fund without a
par value.  The  Investor  Shares  are the only  securities  having  most of the
characteristics  of an equity security and are described in Items 11(a)-(i.  The
Preferred  Participation Rights have limited rights. The Preferred Participation
Rights are described at Item 11(a) - Preferred Participation Rights.

     (a)  Distribution and dissolution rights.

     Net Cash Flow of the Fund,  defined as the Fund's gross  receipts less cash
operating  expenses and other cash  expenditures of the Fund, less debt service,
if any,  and less  reasonable  reserves as  determined  by the Fund to cover its
anticipated expenses,  will be distributed to the Shareholders to the extent and
at such times as the Fund deems advisable.

     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 Fund,  other than  distributions  of the  revenues  from
dispositions  of Fund 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 12% of  their  total  capital  contributions  (a "12%
Priority  Distribution"),  and thereafter all remaining  distributions  from the
Fund during the year, other than distributions of the revenues from dispositions
of Fund  Property,  are to be allocated 75% to Investors and 25% to the Managing
Shareholder.  If the Key Employees Incentive Plan is activated,  up to 5% of the
distributions  that  otherwise  would  go to the  Managing  Shareholder  will be
allocated to plan  participants.  See Item 11(j).  The Managing  Shareholder may
Revenues  from  dispositions  of  Fund  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 75% of all distributions and the Managing
Shareholder 25% (subject to allocations to plan participants).

     Net Cash Flow that the Fund determines to distribute from the proceeds of a
sale or other  disposition  of Fund  Property  that  (a) is not in the  ordinary
course of the operation of the Fund  Properties  and (b) is not from the sale or
exchange of temporary investments will be distributed as follows:  until Payout,
99% of this Net Cash Flow will be  distributed  to the  Investors  and 1% to the
Managing  Shareholder,  and  after  Payout,  75% of this Net Cash  Flow  will be
distributed to Investors,  20% to the Managing  Shareholder and the remaining 5%
either to the Managing  Shareholder  or to key employees  designated by it as an
equity incentive.

     On  liquidation  of the  Fund,  the  remaining  assets  of the  Fund  after
discharge  of its  obligations,  including  any  loans  owed by the  Fund to the
Shareholders,  will be distributed, first, to the Investors entitled to declared
but unpaid distributions under the 12% priority return provisions, in proportion
to the amounts due to them, until all such accrued but unpaid  distributions are
satisfied  and then to the  Shareholders,  in  proportion  to  their  respective
positive  capital  accounts,  after taking  account of all  adjustments  thereto
through the time of dissolution. See -Capital Accounts and Allocations below.

General Provisions

     Distributions   to  Investors  under  the  foregoing   provisions  will  be
apportioned  among them in proportion to their ownership of Investor Shares,  as
the case may be. The Managing  Shareholder  has the sole discretion to determine
the  amount  and  frequency  of any  distributions;  provided,  however,  that a
distribution  may  not be  made  selectively  to one  Shareholder  or  group  of
Shareholders but must be made ratably to all Shareholders  entitled to that type
of  distribution  at that  time.  The  Managing  Shareholder  in its  discretion
nevertheless may credit select persons with a portion of its  compensation  from
the Fund or distributions otherwise payable to it.

     Because  distributions,  if any,  will be  dependent  upon the earnings and
financial  condition  of the Fund,  its  anticipated  obligations,  the Managing
Shareholder's  discretion and other factors, there can be no assurance as to the
frequency or amounts of any distributions that the Fund may make.

     If the Fund creates additional  classes or series of Shares,  distributions
of net cash flow  generated  by Fund  Properties  acquired  with the proceeds of
those  additional  classes or series of Shares  will be made as  provided in the
instruments creating those classes or series.

Return of Capital

     If the  Fund for any  reason  at any time  does  not find it  necessary  or
appropriate  to  retain  or  expend  all  Capital  Contributions,  in  its  sole
discretion it may return any or all such excess Capital Contributions ratably to
Investors. The Investors will be notified of the source of the payment and as to
the amounts of fees charged against the original Capital  Contributions that are
being  returned  therewith.  Any  such  return  of  capital  will  decrease  the
Investors'  Capital  Contributions  and thus  will  affect  the  computation  of
Investor preferences to distributions.

Capital Accounts and Allocations

     Each Shareholder  will have a capital  account,  which will have an initial
balance equal to the Shareholder's Capital  Contribution.  Capital accounts will
be adjusted in accordance with  Regulations  under Internal Revenue Code Section
704. The capital  account  balance will be increased by any  additional  Capital
Contributions by the Shareholder and by profits allocated to the Shareholder; it
will be decreased by the amount of distributions to the Shareholder,  returns of
capital  and by losses  allocated  to the  Shareholder.  An  Investor's  Capital
Contribution  includes  the  amount  of any fees or  commissions  on the sale of
Shares to the  Investor  that are waived or reduced  by the Fund,  the  Managing
Shareholder or their Affiliates.  Contributions of property by a Shareholder, if
any, or distributions  of property to a Shareholder,  if any, are valued at fair
market value,  net of liabilities.  The Fund does not currently  anticipate that
any contributions or distributions of property will be made.  Certain additional
adjustments  to capital  accounts  will be made if  necessary to account for the
effects of non-recourse  debt incurred by the Fund or contributions of property,
if any, to the Fund.

     For any fiscal period, all net profits,  if any, earned by the Fund will be
allocated first 100% to the Managing  Shareholder until the profits so allocated
in that  period and all prior  periods in which  there  were  profits  equal the
cumulative  distributions payable to the Managing Shareholder for those periods.
Then, 100% of such net profits will be allocated to the Investors, first ratably
among  holders  of  Rights  until  such  allocations  cumulatively  equal  total
distributions  in respect of those Rights,  and then ratably among  Investors in
proportion to their ownership of Shares. If the Fund has net losses for a fiscal
period, the losses will be allocated 99% to the Investors and 1% to the Managing
Shareholder,  except that if an  allocation of a loss would cause an Investor to
have a  negative  amount in the  Investor's  capital  account,  the loss will be
allocated to the Managing Shareholder instead in the amount necessary to prevent
the  creation  of  a  negative  balance  in  the  Investor's   capital  account.
Allocations in respect of additional series of Shares will be made in accordance
with the terms thereof.

     If, however,  the application of the allocation rules causes or would cause
the Managing  Shareholder to have a negative  capital account balance at the end
of  any  fiscal  period,  gains  from  any  concurrent  or  subsequent  sale  or
disposition  of Fund  Property  outside the normal  course of operation  will be
allocated 100% to the Managing Shareholder until the deficit is eliminated,  and
thereafter in accordance with the rules described above.  Gain or loss allocable
to Shareholders  from such sales or dispositions  will be adjusted  accordingly.
For federal income tax purposes  only, any deduction  allowed to the Fund on the
ground that the Managing  Shareholder received its Fund interest as compensation
for services will be allocated solely to the Managing Shareholder.

Preferred Participation Rights and Early Investment Incentive.

     In   recognition   of  the  benefits  the  Fund  will  receive  from  early
subscriptions  for Investor Shares,  the Fund provided  Investors who subscribed
promptly with an "Early  Investment  Incentive." The Early Investment  Incentive
was given to each Investor whose  subscription  was fully completed and paid for
and accepted  prior to December 31, 1998.  Investor  Shares  subscribed to after
such date are not eligible for the  incentive.  An Investor  qualifying  for the
incentive (an "Early Investor") was entitled to preferred  distributions payable
out  of the  Fund's  distributable  operating  net  cash  flow  (which  includes
investment  interest on unapplied  funds)  beginning in 1999.  The amount of the
Early   Investment   Incentive  was  determined  by  the  number  of  "Preferred
Participation  Rights" granted to each Early  Investor.  Each Right entitled the
holder to an aggregate distribution priority of $1,000 (i.e., 1% of the purchase
price of one $100,000 Investor Share). The number of Rights earned by each Early
Investor  was  determined  by  multiplying  the  number  of whole or  fractional
Investor Shares  subscribed to by the Investor by the number of whole or partial
months from the date of the acceptance of the subscription to December 31, 1998,
except that subscriptions from December 1 through December 31, 1998 were treated
on the same basis as  subscriptions  received  in November  1998.  Approximately
1,890 Rights were issued.

     During calendar years 1999 and 2000, all  distributable  operating net cash
flow of the Fund will be  distributed  99% to the Early  Investors and 1% to the
Managing  Shareholder  until  the  Qualifying  Investors  receive  in each  year
distributions equal to $500 for each Right earned. Thereafter, all distributable
operating net cash flow will be  distributed to all  Shareholders  in accordance
with the normal distribution allocation provisions of the Declaration.

     (b) Voting rights.

     The Fund  does  not  have a board  of  directors  or  trustees  elected  by
Investors and the Investors have no rights to vote on the management of the Fund
except through amending the Declaration or removing the Managing  Shareholder as
described below.

     The Managing  Shareholder  may amend the  Declaration  without notice to or
approval of the Investors for the following  purposes:  to cure  ambiguities  or
errors;  to conform  the  Declaration  to the  description  in the  Confidential
Registration Statement for the offering of Investor Shares, to equitably resolve
issues arising under the Declaration so long as similarly situated Investors are
not treated  materially  differently;  to comply with law; to make other changes
that will not  materially  and  adversely  affect any  Investor's  interest;  to
maintain the federal income tax status of the Fund; or to make  modifications to
the  computation of items  affecting the Investors'  capital  accounts to comply
with the Code or to reflect  the  creation of an  additional  class or series of
Shares and the terms thereof.

     Other  amendments to the Declaration may be proposed either by the Managing
Shareholder or holders of at least 10% of the Investor Shares, either by calling
a meeting of the Shareholders or by soliciting  written consents.  The procedure
for such meetings or  solicitations is found at Section 15.2 of the Declaration.
Such proposed  amendments  require the approval of a majority in interest of the
Investors  given at a  meeting  of  Shareholders  or by  written  consents.  Any
amendment   requiring   Investor  action  may  not  increase  any  Shareholder's
liability,  change  the  Capital  Contributions  required  of  him or her or the
Investor's  rights  in  interest  in the  Fund's  profits,  losses,  deductions,
credits,  revenues or distributions in more than a de minimis matter,  or change
his  rights on  dissolution  or any  voting  rights  without  the  Shareholder's
consent.  Any  amendment  which  changes the Managing  Shareholder's  management
rights requires its consent.

     The consent of all  Investors  is  required  for the  following  additional
actions by the Fund: actions  contravening the Declaration or the Certificate of
Fund of the Fund;  actions  making it impossible to carry on ordinary  business;
confessing  a judgment  in excess of 10% of the  Fund's  assets;  dissolving  or
terminating the Fund,  other than as provided by the  Declaration;  allowing the
Managing  Shareholder  to  possess or hold Fund  Property  for other than a Fund
purpose or adding a new Managing Shareholder except as described below.

Removal of Managing Shareholder

     The holders of at least 10% of the Investor  Shares may propose the removal
of a Managing Shareholder, either by calling a meeting or soliciting consents in
accordance with the terms of the Declaration.  Removal of a Managing Shareholder
requires the affirmative  vote of a majority of the Investor  Shares  (excluding
Investor  Shares held by the  Managing  Shareholder  which is the subject of the
vote  or  by  its  affiliates).  Removal  of a  Managing  Shareholder  causes  a
dissolution of the Fund unless any remaining Managing Shareholder and a majority
in interest of the Investors (or if there is no remaining Managing  Shareholder,
a majority  in  interest  of the  Investors)  elect to  continue  the Fund.  The
Investors may replace a removed  Managing  Shareholder or fill a vacancy by vote
of a majority in interest of the Investors.

     If a Managing  Shareholder  is removed,  resigns  (other  than  voluntarily
without  cause) or is unable to serve,  it may elect to exchange its  Management
Share  for a series  of cash  payments  from the  Fund in  amounts  equal to the
amounts of distributions to which the Managing  Shareholder would otherwise have
been entitled under the  Declaration in respect of investments  made by the Fund
prior to the date of any such  removal,  resignation  or other  incapacity.  The
Managing  Shareholder  would  continue  to  receive  its pro  rata  share of all
allocations to Investors as provided in the Declaration  which are  attributable
to Investor Shares owned by the Managing Shareholder.

     Alternatively,  the  Managing  Shareholder  may elect to engage a qualified
independent appraiser and cause the Fund to engage another qualified independent
appraiser (at the Fund's  expense in each case) to value the Fund Property as of
the date of such removal, resignation or other incapacity as if the property had
been sold at its fair  market  value so as to include all  unrealized  gains and
losses.  If the two  appraisers  cannot agree on a value,  they would  appoint a
third  independent  appraiser  (whose  cost  would be borne by the  Fund)  whose
determination, made on the same basis, would be final and binding.

     Based on the  appraisal,  the Fund would make  allocations  to the Managing
Shareholder's capital account of Profits,  Losses and other items resulting from
the appraisal as of the date of such removal, resignation or other incapacity as
if the Fund's fiscal year had ended,  solely for the purpose of determining  the
Managing  Shareholder's  capital  account.  If the  Managing  Shareholder  has a
positive  capital  account  after  such  allocation,  the Fund  would  deliver a
promissory note of the Fund to the Managing Shareholder, the principal amount of
which would be equal to the  Managing  Shareholder's  capital  account and which
would  bear  interest  at a rate per annum  equal to the prime rate in effect at
Chase  Manhattan  Bank,  N.A.  on the  date of  removal,  resignation  or  other
incapacity,  with interest payable  annually and unpaid  principal  payable only
from 20% of any available cash before any distributions  thereof are made to the
Investors under the Declaration.

     If the capital account of the Managing  Shareholder has a negative  balance
after such allocation, the Managing Shareholder would be obligated to contribute
to the capital of the Fund in its sole discretion either cash in an amount equal
to the negative  balance in its capital account or a promissory note to the Fund
in such  principal  amount  maturing  five years after the date of such removal,
resignation or other  incapacity,  bearing interest at the rate specified above.
If the Managing Shareholder chose to elect the appraisal alternative, its entire
interest  in the Fund would be  terminated  other than the right to receive  the
promissory note and payments thereunder as provided above.

     (c) Other rights and obligations.

     The Investor Shares have no preemptive  rights. The Fund intends but is not
required to give existing  Investors the first opportunity for a limited time to
purchase any additional  Shares offered  unless,  in the sole  discretion of the
Fund, market conditions or the need to raise additional  capital on an expedited
basis  precludes an offering to all  Investors.  In those cases,  the Fund shall
determine, in its sole discretion, the persons to whom additional Shares will be
offered and sold.  Investors  have no liability for further calls for capital or
to assessment by the Fund. No liabilities  of the Fund can be generally  imposed
on its Shareholders under Delaware law. See - Liability of Investors below.

     (d)  Restrictions on Transfer of Investor Shares

     No Investor  may assign or transfer  all or any part of his interest in the
Fund and no transferee  will be deemed a substituted  Investor or be entitled to
exercise or receive any of the rights,  powers or benefits of an Investor  other
than the right to receive distributions attributable to the transferred interest
unless (i) such  transferee  has been  approved and accepted by the Fund, in its
sole and absolute discretion,  as a substituted Investor, and (ii) certain other
requirements  set forth in the  Declaration  have been  satisfied.  As explained
below at - Tax Aspects,  the Fund does not intend to allow free  transferability
of  Investor  Shares or to allow the  creation  of a trading  market in Investor
Shares.

     (e)  Liability of Investors

     Assuming  compliance  with the  Declaration  and  applicable  formative and
qualifying requirements in Delaware and any other jurisdiction in which the Fund
conducts its business,  an Investor will not be personally liable under Delaware
law for any obligations of the Fund,  except to the extent of any unpaid Capital
Contributions  that he or she  agrees to  contribute  to the Fund and except for
indemnification  liabilities arising from any  misrepresentation  made by him or
her in the Investor  Subscription  Booklet submitted to the Fund. The Fund will,
to the extent  practicable,  endeavor to limit the liability of the Investors in
each jurisdiction in which the Fund operates.

     The law governing whether a jurisdiction other than Delaware will honor the
limitation  of  liability  extended  under  Delaware  law  to the  Investors  is
uncertain.  A number of states  have  adopted  specific  legislation  permitting
business trusts to limit the liability of their  beneficiaries  and it is likely
that those states would similarly  honor the Fund's  limitations on liability of
Investors.  In other  states,  there has been no  authoritative  legislative  or
judicial  determination  as to whether  the  limitation  of  liability  would be
honored  and in some  states the courts  have held that the  beneficiaries  of a
business  trust could be liable for the Fund's  activities,  regardless of their
lack  of  participation  in  its  management.  The  Fund  intends  to  make  all
investments in Projects through  subsidiaries,  such as limited  partnerships or
limited liability  companies,  that afford their owners limited liability in the
relevant jurisdictions. Therefore, regardless of the local treatment of business
trusts,  the Fund believes  that the  Investors  will not be subject to personal
liability for Project  liabilities  and that with regard to the operation of the
Fund itself the  limitation  of  Investors'  liability  under  Delaware law will
govern.

     Under certain federal and state environmental laws of general  application,
entities that own or operate properties  contaminated with hazardous  substances
may be  liable  for  cleanup  liabilities  regardless  of other  limitations  of
liability.  The  Fund  is  not  aware  of  any  case  where  such  environmental
liabilities were imposed on non-management participants in a business trust.

     The Delaware Act does not contain any  provision  imposing  liability on an
Investor for participation in the control of the Fund,  although no Investor has
any rights to do so except  through  the  rights to propose  and vote on matters
described  above.  The  Delaware  Act does not require an Investor  who receives
distributions  that are made when the Fund is or would be rendered  insolvent to
return those distributions under equitable  principles enforced by courts. Under
Delaware decisions,  a trust beneficiary who receives  overpayments from a trust
is obligated  to return  those  payments,  with  interest,  subject to equitable
defenses. The application of these cases to beneficiaries of a business trust is
uncertain.

     (f) Issuance of additional classes of shares.

     The  Fund  intends  that  all of its  activities  will be  funded  from the
proceeds of this offering and earnings thereon. In the future, the Fund may deem
it to be necessary  or in the Fund's best  interests,  however,  for the Fund to
commit  additional funds to Projects in which it has previously  participated or
to further  diversify its activities by  participating  in new Projects.  If the
Fund determines that these  additional  commitments  should not be financed from
Fund earnings, and, as is currently anticipated,  the Fund does not borrow funds
for these purposes, the Fund may sell additional Shares.

     Beginning six months and one day after the Termination  Date, the Fund from
time to time may  create  and sell  additional  Investor  Shares  or  additional
classes or series of Shares if the Managing Shareholder determines that the best
interests of the Fund so require.  Additional  classes or series may but are not
required  to be  limited  to the  assets  and cash flow of  Projects  or Project
Entities that represent less than all of the entire Fund Property.  The Managing
Shareholder  is  authorized  to  determine  or alter  any or all of the  powers,
preferences  and rights,  and the  qualifications,  limitations or  restrictions
granted to or imposed upon any unissued  class or series of  additional  Shares,
and to fix,  alter or reduce the number of Shares  comprising  any such class or
series and the  designation  thereof,  or any of them,  and to  provide  for the
rights and terms of  redemption or conversion of the Shares of any such class or
series. The Managing  Shareholder's  designation of the Shares and the terms and
conditions  of any new class or series of Shares shall be deemed an amendment of
the  Declaration  and shall be  effective  without  any notice to,  action by or
approval of the Investors.  Any Shares so designated or any additional  Investor
Shares may be offered to such  persons and on such terms and  conditions  as the
Fund may determine.

     Any  additional  Shares or  classes or series of Shares  shall have  voting
rights as designated by the Managing  Shareholder;  however, no such Share shall
have more than one vote per $100,000 of Capital  Contributions for that Share on
matters in which the  holders of those  Shares vote with the holders of Investor
Shares, without the consent of the holders of a Majority of the Investor Shares.

     All Profits,  Losses and other items  attributable to additional classes or
series of Shares shall be allocated  as  specified in the  determination  of the
Managing  Shareholder  creating  those Shares,  except that any such  allocation
shall not  unreasonably  reduce  allocations  to existing  Investors of Profits,
Losses,  Net Cash  Flow and  other  items to the  extent  attributable  to their
Capital  Contributions.  The  Managing  Shareholder's  election in good faith of
allocation methods (which may include  subjective  elements) shall be conclusive
in the absence of willful misconduct or gross negligence.

     If the Fund does not raise sufficient  additional capital to participate in
additional  activities  or does not  choose  to do so,  the Fund may  offer  the
Managing  Shareholder,  its affiliates or partnerships or funds organized by any
of them the right to so participate in place of the Fund.

     (g) Tax  matters.  There are many  material  tax  aspects  to the  Investor
Shares.  The Fund is an entity  treated as a partnership  for federal income tax
purposes and under many state income tax laws. As such,  its income is not taxed
separately and its income, gains, losses,  deductions and tax credits are passed
through  to the  Investors  and the  Managing  Shareholder  as  described  at --
Distribution  and  Liquidation  Rights  above.  The Fund would lose  partnership
status  for  federal  income  tax  purposes  if it  became  a  "publicly  traded
partnership."

     In order  not to become a  publicly  traded  partnership,  the Fund may not
permit any of the following to occur:

     (i) Interests in the partnership are regularly  quoted by any person,  such
as a broker or dealer, making a market in the interests;

     (ii)  Any  person  regularly  makes  available  to  the  public  (including
customers or  subscribers)  bid or offer quotes with respect to interests in the
partnership  and stands ready to effect buy or sell  transactions  at the quoted
prices for itself or on behalf of others;

     (iii) the holder of an interest in the partnership has a readily available,
regular  and ongoing  opportunity  to sell or exchange  the  interest  through a
public means of obtaining or providing  information  of offers to buy,  sell, or
exchange interests in the partnership; or

     (iv) Prospective  buyers and sellers otherwise have the opportunity to buy,
sell or  exchange  interests  in the  partnership  in a time  frame and with the
regularity  and  continuity  that is comparable  to that  described in the other
provisions of this paragraph . .
 . .

     The Managing  Shareholder  has  represented to its tax counsel that it will
not allow any  transfer of Shares  which,  in the opinion of its  counsel,  will
cause the Fund's Shares to be treated as readily tradable on such market without
the consent of a Majority of the Investors.

     (i) Provisions that might impede a change of control.

     As discussed above at -- Voting Rights, the Investors do not have the right
to vote  routinely  upon  the  management  of the  Fund.  Any  amendment  to the
Declaration  that would  modify the  Managing  Shareholder's  management  rights
requires the Managing  Shareholder's  consent. A decision to remove the Managing
Shareholder  requires  the  calling  of a special  meeting  or  solicitation  of
consents from Investors,  a majority vote of the Investor Shares. Removal of the
Managing  Shareholder  causes a  dissolution  of the Fund unless a new  Managing
Shareholder is concurrently elected. Because the removed Managing Shareholder is
entitled  to  compensation  for its  equity  interest  in the Fund,  it might be
difficult for the Fund to offer a new Managing  Shareholder a comparable  equity
interest  in the Fund.  All these  provisions  may have the effect of impeding a
change of control of the Fund.

     (j)  Key Employees Incentive Plan.

     The Key Employees  Incentive  Plan was adopted by the Fund in February 1998
as a means of giving key employees incentives to improve the value of the Fund's
equity,  to better align their  financial  interests with those of the Investors
and to encourage  superior  employees to remain  long-term with the Fund and the
Managing Shareholders, especially because of the new opportunities being created
for independent power executives by industry deregulation.

     The Plan permits the Managing  Shareholder  to designate key executives and
employees of the Fund and its operating companies to receive "Incentive Shares."
Mr.  Swanson is not eligible to  participate in the Plan. As of the date of this
Registration  Statement,  approximately  five officers and  executives and up to
five other employees might be eligible for participation  under the Plan, but no
decision has yet been made as to eligibility or participation.  As of that date,
it was not possible to determine  the amount of benefits,  if any, that might be
allocated  to any  individual  or group.  The  Managing  Shareholder  expects to
include the other officers and executives of the Fund named in this Registration
Statement as the initial participants in the Plan.

     Power  VI Co and  persons  granted  Incentive  Shares  under  the  Plan are
entitled to receive a portion of the Fund's cash flow as follows:


                   Prior to Payout     After Payout

 Net Operating     Power VI Co.         Power VI Co.
 Cash Flow         Up to 20%            20%
 after Investors
 obtain 12%        Plan Participants    Plan Participants
 cumulative        Up to 5%             5%
 return

 Net Cash          Power VI Co.         Power VI Co
 Flow from         1%                   20%
 Dispositions
                   Plan Participants    Plan Participants
                   0%                   5%

     The Managing  Shareholder  and Plan  participants  will be entitled to cash
flow on a proportionate  basis,  meaning that if the cash flow allocable to them
is less than the maximum percentages stated in the table, that cash flow will be
distributed pro rata between Power VI Corporation and Plan participants. (The 1%
minimum  amount of cash flow allocable to the Managing  Shareholder  will not be
split with Plan participants.)

     At the closing of the private  placement  offering of Investor Shares,  the
Fund will create a number of Incentive  Shares equal to 1/15 of the total number
of Investor  Shares sold in the offering.  Thus,  if 1000  Investor  Shares (the
expanded  maximum) are sold,  66-2/3  Incentive  Shares will be created.  If the
minimum  of 15  Investor  Shares  were sold,  only 1  Incentive  Share  would be
created.  Each Incentive  Share will be entitled to a pro-rata share of the cash
flow  distributable to Plan participants in the table above. This computation is
intended to make the cash flow distributable to the holder of an Incentive Share
after  Payout  equivalent  to the cash flow  distributable  after  Payout to the
holder of an Investor Share.

     Under the Key Employees Incentive Plan, the Managing  Shareholder may grant
the Incentive  Shares or fractional  Incentive  Shares to  participants as share
bonuses, without any payment by the recipient to the Fund or further obligation,
restricted  shares,  under which the recipient would pay an amount per Incentive
Share specified by the Managing  Shareholder (which could be nominal),  but with
the shares  being  forfeitable  by the  recipient  if he or she did not continue
employment or meet performance  standards for a period of up to five years after
grant,  pursuant  to  tax-advantaged  incentive  share  options  granted  by the
Managing  Shareholder at exercise  prices and for terms (not exceeding 10 years)
specified by it, pursuant to non-qualified share options granted by the Managing
Shareholder at exercise prices and for terms (not exceeding 10 years)  specified
by it, or stock  appreciation  rights,  which entitle the participant to receive
the difference  between the fair market value of the Incentive Shares subject to
the rights on the date of exercise and the fair market value of those  Incentive
Shares on the date the rights were  granted.  Stock  appreciation  rights may be
granted  in tandem  with  share  options  at any time  before  the  options  are
exercised.  This  permits the  participant  to  surrender  the  related  option,
exercise the rights and receive the difference  between the fair market value of
the  Incentive  Shares  subject  to the rights on the date of  exercise  and the
option exercise price (which might be more or less than the fair market value of
the  Incentive  Shares on the date of grant).  In all cases,  the  recipient may
elect to receive Incentive Shares or a cash payment.

     The Plan will be administered and participation and grant decisions will be
made  by  the  Managing   Shareholder's  Manager  (Mr.  Swanson)  or  a  special
compensation  committee,  which  will be  composed  of a person or  persons  not
eligible to be granted  Incentive Shares or options under the Plan. The Managing
Shareholder  may at any  time  amend,  suspend  or  terminate  the Key  Employee
Incentive  Plan or any grant made under the Plan.  If any change in or affecting
Investor  Shares or Incentive  Shares occurs (such as a rollup,  initial  public
offering, merger or acquisition),  the Managing Shareholder may make appropriate
amendments  to or  adjustments  to the  Plan or  grants  made  under  the  Plan,
including  changes in the  number or class of shares  that may be issued and the
price per share subject to outstanding options or stock appreciation rights. The
Managing Shareholder may not cancel or reduce any grant after it is made (except
to make  adjustments  described  above)  without the consent of the  participant
affected.  Further, the Managing Shareholder may not change the class of persons
eligible to receive  incentive  share options,  increase the number of Incentive
Shares that may be issued or transferred  under the Plan (unless those shares or
the equity interest  underlying  them are transferred  from Power VI Co) or make
any other change that materially increases the benefits available under the Plan
without the approval of a Majority of the Investors.

     Until  Incentive  Shares  are  actually  issued,  the  cash  flow,  if any,
distributable to those Shares will be distributed to Power VI Co.

     Tax  Matters.   A  brief  summary  of  the  material   federal  income  tax
consequences of benefits under the Key Employees Incentive Plan
follows:

     The fair market value of any  Incentive  Shares  granted as bonuses will be
ordinary income to the recipient in the year of grant.

     Participants  normally do not  recognize  taxable  income  when  restricted
Incentive  Shares  are  awarded.   As  the  restrictions  end,  the  participant
recognizes ordinary income equal to the difference between the fair market value
of the  unrestricted  Incentive  Shares  and the amount he or she paid for them,
plus  the  amount  of any  accumulated  distributions  paid  at that  time.  The
participant may elect to recognize ordinary income at the time of award equal to
the  difference  between fair market value and the amount paid for the Incentive
Shares, determined without regard to the restrictions.

     The grant of an incentive share option will not result in any immediate tax
consequences to  participants or Investors.  The exercise of the option will not
result in any taxable income to participants  and Investors will not be entitled
to a deduction,  but the excess of the fair market value of the Incentive Shares
over  the  option  exercise  price  will  be  includable  in  the  participant's
"alternative  minimum taxable  income" for purposes of the  alternative  minimum
tax.  Incentive  share  options  may not be  issuable  by the Fund so long as it
remains taxable as a partnership rather than as a corporation for federal income
tax purposes.

     If the participant  disposes of Incentive Shares that he or she acquired on
the exercise of an  incentive  share  option  within one year after  exercise or
within two years after the option was granted, he or she will recognize ordinary
income  equal to the  lesser of (i) the excess of the fair  market  value of the
Incentive  Shares on the date of exercise  over the  exercise  price or (ii) the
amount of any gain realized. If the participant holds those Incentive Shares for
a longer period before disposing of them, any gain recognized by the participant
will be  taxable  at a capital  gain rate of not more than 28% if the  Incentive
Shares  were held for 18  months  or less or not more than 20% if the  Inventive
Shares were held for a longer period.

     The grant of a non-qualified stock option has no immediate tax consequences
to the  participant  or  Investors.  On  exercise,  the  participant  recognizes
ordinary  income equal to the difference  between the option  exercise price and
the  fair  market  value  of the  Incentive  Shares  acquired  as of the date of
exercise.

     The grant of a stock  appreciation  right has no immediate tax consequences
to the  participant  or  Investors.  On  exercise,  the  participant  recognizes
ordinary income equal to the fair market value of the Incentive  Shares acquired
as of the date of exercise plus any cash received.

     Until  the  Fund  becomes  a  public  company  with  tradable  shares,  the
Investors,  Power VI Co and plan  participants will be entitled to deductions in
the same  amounts,  of the same type  (ordinary or capital loss) and at the same
time as the  participants  realize  income  or  gain.  To the  extent  that  any
deductions  allocable to Investors constitute capital losses, the Investors will
be able to use those  deductions only against their capital gains, if any, and a
very limited  amount,  if any, of ordinary  income.  After such an event,  it is
unlikely that deductions will be passed through to Investors.  The Fund does not
anticipate that any substantial amount of Incentive Shares will be sold prior to
such an event in a way that would generate capital losses for Investors,  but no
assurance can be made that this will be the case.

Other Matters.
     The  Managing  Shareholders  may increase  the cash flow  distributable  to
participants  in the  Plan by  granting  to the  Plan a  portion  of  cash  flow
otherwise  distributable  to  Power  VI Co (but  not in  excess  of 3% of  Trust
distributable  cash flow).  A grant may be  temporary or  permanent.  Additional
Incentive  Shares will be created in proportion to the  additional  cash flow so
granted.

     Each issued and outstanding  Incentive Share has voting rights equal to one
Investor Share. Restricted Incentive Shares, whether vested or not, have all the
voting and distribution  rights of Incentive Shares,  but distributions  will be
held by the Fund for the participant's account until the Shares vest.

Item 12.  Indemnification of Directors and Officers.

     Under the  Declaration,  the  Fund's  officers  and  agents,  the  Managing
Shareholder, RPMCo, the Corporate Trustee, the Panel Members and other Ridgewood
Managing Persons when acting on behalf of the Fund (provided they act within the
scope of the  Declaration)  may be  indemnified by the Fund as determined by the
Managing Shareholder in its sole discretion, which may be exercised at any time,
regardless of whether or not a claim is pending or threatened, against liability
for errors in  judgment or other acts or  omissions  taken in good faith and not
amounting to recklessness or willful  misconduct.  The Managing  Shareholder may
make such determination regardless of the existence of a conflict of interest.

     Expenses of defense or settlement  may be advanced to a Ridgewood  Managing
Person in advance of a determination  that  indemnification  will be provided if
(i)  the  Ridgewood  Managing  Person  provides  appropriate  security  for  the
undertaking;  (ii) the Ridgewood  Managing  Person is insured  against losses or
expenses of defense or settlement so that the advances may be recovered or (iii)
independent legal counsel in a written opinion  determines,  based upon a review
of the then  readily-available  facts,  that there is reason to believe that the
Managing  Person will be found to be entitled  to  indemnification.  Counsel may
rely as to matters of  business  judgment or as to other  matters not  involving
determinations  of law upon the advice of a committee of persons not  affiliated
with the  Fund  that  may be  appointed  by the  Managing  Shareholder  for that
purpose.

     In addition,  the Placement  Agent will be indemnified and held harmless by
the Fund  against  any  losses or  claims,  based  upon the  assertion  that the
Placement  Agent  has any  continuing  duty  or  obligation,  subsequent  to any
offering of Shares, to the Fund, the Panel Members, the Corporate Trustee or any
Shareholder  or  otherwise  to monitor  Fund  operations  or report to Investors
concerning Fund operations.

     It is the position of the  Securities  and Exchange  Commission and certain
state  securities  administrators  that any attempt to limit the  liability of a
general  partner or persons  controlling an issuer under the federal  securities
laws or state securities laws,  respectively,  is contrary to public policy and,
therefore, unenforceable.

     The  Managing  Shareholder  is not required to take action on behalf of the
Fund unless the Fund has sufficient  funds to meet  obligations that might arise
from that action. The Managing  Shareholder is not required to advance or expend
its own funds for ordinary Fund business but is entitled to  reimbursement  from
the Fund if it does so consistent with the Declaration. The Managing Shareholder
is not required to devote its time exclusively to the Fund and may engage in any
other venture.

     The Managing  Shareholder has obtained  directors' and officers'  liability
insurance  covering the Fund, the Managing  Shareholder  and all other Ridgewood
Managing Persons.

Item 13.  Financial Statements and Supplementary Data.

Index to Financial Statements
Report of Independent Accountants                   F-2
Balance Sheets at December 31, 1998                 F-3
Statement of Operations for Period
  from Commencement of Share Offering
  (February 9, 1998) through December 31, 1998      F-4
Statement of Changes in Shareholders'
  Equity for Period from Commencement of
  Share Offering through December 31, 1998          F-5
Statement of Cash Flows for Period
  from Commencement of Share Offering
  through December 31, 1998                         F-6
Notes to Financial Statements                F-7 to F-8


     All schedules are omitted  because they are not  applicable or the required
information is shown in the financial statements or notes thereto.

     The  financial  statements  are  presented  in  accordance  with  generally
accepted accounting principles for operating companies,  using consolidation and
equity method accounting principles.

Item 14. Changes in and  Disagreements  with  Accountants on Accounting and
Financial Disclosure.

     Neither  the  Fund  nor the  Managing  Shareholder  has had an  independent
accountant  resign  or  decline  to  continue  providing  services  since  their
respective inceptions and neither has dismissed an independent accountant during
that period.  During that period of time no new independent  accountant has been
engaged by the Fund or the Managing Shareholder,  and the Managing Shareholder's
current accountants, PricewaterhouseCoopers LLP, have been engaged by the Fund.

Item 15.  Financial Statements and Exhibits

 (a)  Financial Statements.

     See the Index to Financial Statements in Item 13 hereof.

 (b)  Exhibits

     3.A.  Certificate of Trust of the Registrant.       Page 59

     3.B.  Amendment No. 1 to Certificate of Trust.      Page 60

     3.C.  Declaration of Trust of the Registrant.       Page 61

     10.A. Stock and Warrant Purchase Agreement for
           ZAP Power Systems, Inc.                       Page 83

     10.B. Warrant for Purchase of Common Stock of
           ZAP Power Systems, Inc.                       Page 96

     10.C  Investors' Rights Agreement with ZAP
           Power Systems, Inc.                           Page 102

     10.D. Milestone letter agreement with ZAP Power 
           Systems, Inc.                                 Page 113

     10.E. Letter agreement re board representation 
           with ZAP Power Systems, Inc.                  Page 114

     10.F. Management Agreement between the Fund and 
           Ridgewood Power.                              Page 115

     10.G. Key Employees' Incentive Plan                 Page 118

     10.H. Agreement of Merger between Ridgewood Power 
           Corporation and Ridgewood Power LLC           Page 127

     10.I  Agreement of Merger between Ridgewood Power 
           VI Corporation and Ridgewood Power VI LLC     Page 132

     21.   Subsidiaries of the Registrant                Page 138

     27.   Financial Data Schedule                       Page 139



SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Signature                     Title                          Date



THE RIDGEWOOD POWER GROWTH FUND (Registrant)

By:/s/ Martin V. Quinn    Senior Vice President and    April 30, 1999
       Martin V. Quinn     Chief Financial Officer


                         The Ridgewood Power Growth Fund

                              Financial Statements

                                December 31, 1998



                                     -F1-

                  Report of Independent Accountants

  PricewaterhouseCoopers LLP
  1301 Avenue of the Americas
  New York, NY 10036

  [Letterhead of PricewaterhouseCoopers LLP]

  March 23, 1999

  To the Shareholders and Trustee of
  Ridgewood Power Growth Fund


  In our opinion,  the accompanying  balance sheet and the related statements of
  operations,  changes in shareholders' equity and of cash flows present fairly,
  in all material  respects,  the financial  position of Ridgewood  Power Growth
  Fund (the "Fund") at December 31,  1998,  and the results of their  operations
  and their cash flows for the period  February 9, 1998  (commencement  of share
  offering)  through  December 31, 1998, in conformity  with generally  accepted
  accounting  principles.  These financial  statements are the responsibility of
  the Fund's  management;  our  responsibility is to express an opinion on these
  financial  statements  based on our  audit.  We  conducted  our audit of these
  statements in accordance  with generally  accepted  auditing  standards  which
  require  that we plan and  perform  the audit to obtain  reasonable  assurance
  about whether the financial statements are free of material  misstatement.  An
  audit includes examining, on a test basis, evidence supporting the amounts and
  disclosures in the financial  statements,  assessing the accounting principles
  used and significant estimates made by management,  and evaluating the overall
  financial  statement  presentation.  We  believe  that our  audit  provides  a
  reasonable basis for the opinion expressed above.

/s/  PricewaterhouseCoopers LLP

                                     -F2-




The Ridgewood Power Growth Fund
Balance Sheet
- --------------------------------------------------------------------------------
                                                              December 31, 1998
                                                                   ------------
Assets:
Cash and cash equivalents .....................................   $ 25,256,560
Due from affiliates ...........................................          9,330
Interest receivable ...........................................         80,500
Other current assets ..........................................          5,848
                                                                  ------------

         Total current assets .................................     25,352,238

Deferred due diligence costs ..................................        381,192
                                                                  ------------

         Total assets .........................................   $ 25,733,430
                                                                  ------------

Liabilities and shareholders' equity:

Liabilities:
Accounts payable and accrued expenses .........................   $    264,620
Due to affiliates .............................................      1,114,129
                                                                  ------------

         Total current liabilities ............................      1,378,749
                                                                  ------------

Commitments and contingencies

Shareholders' equity:
Shareholders' equity (296.8815 shares issued and outstanding )      24,363,198
Managing shareholders' accumulated deficit ....................         (8,517)
                                                                  ------------

         Total shareholders' equity ...........................     24,354,681
                                                                  ------------

         Total liabilities and shareholders' equity ...........   $ 25,733,430
                                                                  ------------






















      See   accompanying    notes   to   the financial statements.

                                  -F3-




The Ridgewood Power Growth Fund
Statement of Operations                                                      
- --------------------------------------------------------------------------------



                              Commencement
                            of Share Offering
                           (February 9, 1998)
                          Through December 31, 1998
                          ------------------------

Revenue:
Interest income ...........   $   494,002
                              -----------

Expenses:
Investment fee ............       577,813
Project due diligence costs       708,658
Accounting and legal fees .        31,000
Other expenses ............        28,276
                              -----------

      Total expenses ......     1,345,747
                              -----------

      Net loss ............   $  (851,745)
                              -----------
































        See   accompanying    notes   to   the financial statements.

                                   -F4-








The Ridgewood Power Growth Fund
Statement of Changes in Shareholders' Equity
For The Period February 9, 1998 (Commencement of 
Share Offering) To December 31, 1998
- --------------------------------------------------------------------------------


                                                     Managing
                                     Shareholders  Shareholders      Total
                                     ------------  ------------  ------------

Initial capital contributions, net 
  (296.8815 shares) .................   $25,206,426       --    $25,206,426

Net loss for the period .............      (843,228) $ (8,517)     (851,745)
                                        -----------    ------    ----------

Shareholders' equity, December 
  31, 1998 (296.8815 shares) ........   $24,363,198  $  (8,517) $24,354,681
                                        -----------    -------   ----------


































    See   accompanying    notes   to   the financial statements.

                                 -F5-


The Ridgewood Power Growth Fund
Statement of Cash Flows                                          
- --------------------------------------------------------------------------------

                                                           Commencement
                                                          of Share Offering
                                                     (February 9, 1998) Through
                                                           December 31, 1998
                                                    ----------------------------

Cash flows from operating activities:
     Net loss ..........................................   $   (851,745)
                                                           ------------

Adjustments to reconcile  net loss to net cash 
  flows from operating activities: 
  Changes in assets and liabilities:
    Increase in due from affiliates ....................         (9,330)
    Increase in interest receivable ....................        (80,500)
    Increase in other current assets ...................         (5,848)
    Increase in accounts payable and accrued expenses ..        264,620
    Increase in due to affiliate .......................      1,114,129
                                                           ------------
 Total adjustments .....................................      1,283,071
                                                           ------------
                                 
 Net cash provided by operating activities .............        431,326
                                                           ------------

Cash flows from investing activities:
  Increase in deferred due diligence costs .............       (381,192)
                                                           ------------
  Net cash used in investing activities ................       (381,192)
                                                           ------------

Cash flows from financing activities:
  Proceeds from shareholders' contributions ............     29,613,468
  Selling commissions and offering costs paid ..........     (4,407,042)
                                                           ------------
  Net cash provided by financing activities ............     25,206,426
                                                           ------------

Net increase in cash and cash equivalents ..............     25,256,560

Cash and cash equivalents, beginning of period .........           --   
                                                           ------------

Cash and cash equivalents, end of period ...............   $ 25,256,560
                                                           ------------















          See   accompanying    notes   to   the financial statements.

                                  -F6-


The Ridgewood Power Growth Fund
Notes to Financial Statements                                          
- --------------------------------------------------------------------------------

1.       Organization and Purpose

The Ridgewood  Power Growth Fund (the "Fund") was formed as a Delaware  business
trust in February 1997 by Ridgewood  Energy  Holding  Corporation  acting as the
Corporate  Trustee.  The managing  shareholders  of the Fund are Ridgewood Power
Corporation ("RPC") and Ridgewood Power VI Corporation ("RP6C").  The Fund began
offering  shares on  February  9,  1998 and may  issue up to a maximum  of 1,000
shares.  Ridgewood Capital  Corporation ("RCC") provides most services needed to
support the offering. RPC, RP6C and RCC are related through common ownership.

The Fund has been organized to invest primarily in independent  power generation
facilities and in the development of these  facilities.  These independent power
generation facilities will include cogeneration  facilities,  which produce both
electricity and heat energy and other power plants that use various fuel sources
(except nuclear).

2.       Summary Of Significant Accounting Policies

Use of estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities,  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from the estimates.

Cash and cash equivalents
The Fund considers all highly liquid  investments with maturities when purchased
of three months or less as cash and cash equivalents.

Income taxes
No provision is made for income taxes in the accompanying  financial  statements
as the income or losses of the Fund are passed  through and  included in the tax
returns of the individual shareholders of the Fund.

Offering costs
Costs  associated with offering Fund shares (selling  commissions,  distribution
and offering  costs) are reflected as a reduction of the  shareholders'  capital
contributions.

Due diligence costs relating to potential power projects
Costs  relating  to the due  diligence  performed  on  potential  power  project
investments  are  initially  deferred,  until  such time as the Fund  determines
whether or not it will make an  investment  in the  project.  Costs  relating to
completed  projects are capitalized and costs relating to rejected  projects are
expensed at the time of rejection.

Subscriptions receivable
Capital contributions are recorded upon receipt of the appropriate  subscription
documents.  Subscriptions  receivable  from  shareholders  are  reflected  as  a
reduction  of  shareholders'   equity.  At  December  31,  1998,  the  Fund  had
subscriptions receivable of $25,000.

3.       Fair Value of Financial Instruments

At  December  31,  1998,  the  carrying  value  of  the  Fund's  cash  and  cash
equivalents, receivables and accounts payable approximated their fair value.

                                -F7-




4.       Transactions With Managing Shareholder and Affiliates

The Fund pays RCC an  organizational,  distribution and offering fee up to 6% of
each capital contribution made to the Fund. This fee is intended to cover legal,
accounting,  consulting,  filing,  printing,  distribution,  selling and closing
costs for the offering of the Fund.  For the period ended December 31, 1998, the
Fund paid fees for these services to RCC of $1,776,189.  These fees are recorded
as a reduction in the shareholders' capital contribution.

The Fund also pays to RPC, one of the managing  shareholders,  an investment fee
up to 2% of each capital  contribution  made to the Fund.  The fee is payable to
RPC for its services in investigating  and evaluating  investment  opportunities
and effecting transactions for investing the capital of the Fund. For the period
ended  December  31,  1998,  the  Fund  paid  investment  fees  to the  managing
shareholder of $577,813.

The Fund  entered  into a management  agreement  with RP6C,  one of the managing
shareholders,  under which RP6C renders certain  management,  administrative and
advisory services and provides office space and other facilities to the Fund. As
compensation  to the  RP6C  for  such  services,  the  Fund  pays  it an  annual
management  fee equal to 2.5% of the  total  capital  contributions  to the Fund
payable  monthly  upon the  closing  of the Fund.  The Fund is not closed and no
management fees were paid for the period ending December 31, 1998.

Under the  Declaration of Fund,  RP6C is entitled to receive each year 1% of all
distributions made by the Fund (other than those derived from the disposition of
Fund property) until the shareholders  have been distributed each year an amount
equal to 12% of their  equity  contribution.  Thereafter,  RP6C is  entitled  to
receive 25% of the distributions for the remainder of the year. RP6C is entitled
to receive 1% of the proceeds from  dispositions  of Fund  properties  until the
shareholders  have received  cumulative  distributions  equal to their  original
investment  ("Payout").  After  Payout,  RP6C is  entitled to receive 25% of all
remaining distributions of the Fund.

Where permitted, in the event the managing shareholders or an affiliate performs
brokering  services  in  respect of an  investment  acquisition  or  disposition
opportunity for the Fund, the managing shareholders or such affiliate may charge
the Fund a brokerage  fee.  Such fee may not exceed 2% of the gross  proceeds of
any such  acquisition  or  disposition.  No such fees  have  been  paid  through
December 31, 1998.

RPC  purchased one share of the Fund for $83,000 in 1998.  Through  December 31,
1998,  commissions  and  placement  fees of $304,031  were  earned by  Ridgewood
Securities Corporation, an affiliate of the managing shareholders.

5.       Subsequent Event (unaudited)

On March 30,  1999,  the  Fund,  through a wholly  owned  subsidiary,  purchased
678,808 shares of common stock of ZAP Power Systems, Inc ("ZAP") for $2,050,000.
ZAP, headquartered in Sebastopol,  California, designs, assembles,  manufactures
and distributes electric power bicycle kits, electric bicycles and tricycles and
electric scooters.  ZAP's common stock is quoted on the OTC Bulletin Board under
the symbol  "ZAPP".  The Fund also  received a warrant  to  purchase  additional
shares of ZAP's common stock at a price between  $3.50 and $4.50 per share.  The
total  exercise  price of the warrant is $2,000,000 and the Fund can be required
to exercise  the warrant by December 31, 1999 if ZAP meets  certain  performance
goals. If the Fund were to exercise its warrant,  it would own approximately 30%
of the outstanding common stock of ZAP.

                                  -F8-

EX-3.A

STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED

CERTIFICATE OF TRUST
OF
RIDGEWOOD ELECTRIC POWER TRUST VI

     This Certificate of Trust ("Certificate") is being executed
as of February 6, 1997, for the purpose of forming a business trust
pursuant to the Delaware Business Trust Act, Del. Code. Ann. Tit.
12, ch. 38, Sections 3810 et seq.

     NOW, THEREFORE, the undersigned hereby certifies as follows:

     1. Name.  The name of the trust is Ridgewood Electric Power
Trust VI (the "Trust").

     2. Name and Business Address of the Trustee. The name of the Trustee of the
Trust is Ridgewood Energy Holding Corporation,  a Delaware  corporation,  having
its  principal  place of  business  at 1105 North  Market  Street,  Suite  1300,
Wilmington, Delaware
19899.

     IN WITNESS  WHEREOF,  the undersigned has duly executed this Certificate as
of the day and year first above written.

RIDGEWOOD ENERGY HOLDING CORPORATION

/s/Robert E. Swanson
Robert E. Swanson,
President

EX-3.B

FIRST AMENDMENT TO
CERTIFICATE OF TRUST OF
RIDGEWOOD ELECTRIC POWER TRUST VI


     This First  Amendment to Certificate  of Trust of Ridgewood  Electric Power
Trust VI, a Delaware business trust (the "Trust"), is executed as of February 6,
1998 pursuant to Section 3810(b) of the Delaware Business Trust Act.

         NOW, THEREFORE, the undersigned certifies as follows:

         1. The undersigned is the sole trustee of the Trust.

     2. The name of the Trust is changed to "The Ridgewood Power Growth Fund."

         IN WITNESS  WHEREOF,  the undersigned has executed this First Amendment
to Certificate of Trust on February 6, 1998.


                                            RIDGEWOOD ENERGY HOLDING
                                             CORPORATION


                                            By  /s/Mary Louise Olin
                                                Mary Louise Olin, Vice President
                                                 and Secretary

EX-3.C

THESE  SECURITIES HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
AMENDED,  OR APPLICABLE  STATE SECURITIES ACT. THESE SECURITIES MUST BE ACQUIRED
FOR INVESTMENT,  ARE RESTRICTED AS TO TRANSFERABILITY AND MAY NOT BE TRANSFERRED
OR SOLD EXCEPT IN CONFORMANCE WITH THE  RESTRICTIONS  CONTAINED IN ARTICLE 13 OF
THIS AGREEMENT.

DECLARATION OF TRUST
FOR
THE RIDGEWOOD POWER GROWTH FUND

     This  DECLARATION  OF TRUST (the  "Declaration"),  is made as of January 4,
1998 by Ridgewood Energy Holding Corporation, a Delaware corporation ("Ridgewood
Holding"),  who, with its  successors  as trustees  under this  Declaration,  is
referred to as the "Corporate Trustee," for the benefit of those persons who are
accepted as holders of shares of beneficial interest under this Declaration.
     WHEREAS,  the Corporate  Trustee has  organized THE RIDGEWOOD  POWER GROWTH
FUND (the "Fund") as a business trust under the Delaware  Business Trust Act, to
provide  for  the  management  of  the  Fund  by  Ridgewood  Power   Corporation
("Ridgewood Power"), a Delaware corporation,  and Ridgewood Power VI Corporation
("Ridgewood  Power  VI"),  a  Delaware   corporation   (collectively   "Managing
Shareholders" and individually a "Managing Shareholder" when acting hereunder in
such capacity), and to provide for the sale of beneficial interests in the Fund,
the operation of the Fund and the rights of the Corporate  Trustee and owners of
beneficial interests; and
     WHEREAS,  a  Certificate  of Trust  (the  "Certificate")  was  filed by the
Corporate  Trustee on February 18, 1997 with the  Secretary of State of Delaware
to evidence the  existence of the Fund and a First  Amendment  thereto was filed
February 6, 1998 to change the Fund's name; and
     WHEREAS,  the  Corporate  Trustee is  executing  this  Declaration  for the
benefit of those persons accepted as holders of shares of beneficial interest.
     NOW,  THEREFORE,  the Corporate  Trustee  declares that it constitutes  and
appoints  itself  trustee of the sum of $10.00  owned by it,  together  with all
other property that it acquires under this Declaration as trustee, together with
the  proceeds  thereof,  to hold,  IN TRUST,  to manage  and  dispose of for the
benefit of the holders,  from time to time, of beneficial interests in the Fund,
subject to the provisions of this Declaration as follows: ARTICLE 1 ORGANIZATION
AND POWERS
     1.1 Trust Estate;  Name.  The Fund,  comprised of the trust estate  created
under this Declaration and the business conducted hereunder, shall be designated
as "The Ridgewood Power Growth Fund," which name shall refer to the trust estate
and to the Corporate  Trustee in its capacity as trustee of the trust estate but
not in any other  capacity  and which shall not refer to the  officers,  agents,
other  trustees or beneficial  owners of the Fund. To the extent  possible,  the
Corporate Trustee shall conduct all business and execute all documents  relating
to the Fund in the name of the Fund and not as trustee.  The  Corporate  Trustee
may conduct the business of the Fund or hold its  property  under other names as
necessary  to comply  with law or to further the affairs of the Fund as it deems
advisable in its sole  discretion.  This  Declaration,  the  Certificate and any
other documents, and any amendments of any of the foregoing,  required by law or
appropriate,  shall be recorded in all offices or  jurisdictions  where the Fund
shall  determine  such recording to be necessary or advisable for the conduct of
the business of the Fund.
     1.2 Purpose.  (a) The Fund's purposes are to invest in and to operate where
appropriate projects in the independent  electric power,  energy,  environmental
compliance and capital facilities development industries. However, the Fund will
not invest in, develop or operate nuclear  facilities that produce  electricity.
The Fund may participate in pre-development or preparatory activities for any of
these types of projects,  including  without  limitation  evaluation,  planning,
permitting  or  development.  Illustrations  of some of the types of projects in
which the Fund may invest, without limitation,  include cogeneration  facilities
producing  electricity  and  useful  heat  energy;  other  independent  electric
generation facilities using non-nuclear sources of energy; facilities related to
the   production,   transmission,   distribution   or   disposal  of  energy  or
environmentally  sensitive  substances;  motive  power  facilities,   processing
facilities; or infrastructure facilities.
     (b) The Fund may also invest in debt or equity securities of another entity
which is not in common  control with the Fund.  It may do so for the purposes of
making a long-term passive or active  investment,  gaining control of a company,
effecting a merger or business  combination  with the Fund,  its  affiliates  or
non-affiliated  parties,  effecting the  acquisition  of assets,  or selling the
entity,  its assets, or those of the Fund to a third person by bid or otherwise.
The Fund  may  effect  any of  these  transactions  on its  own,  together  with
Affiliates,   or  together  with   non-Affiliates,   and  may  do  so  with  the
encouragement  or consent of management  or  controlling  equity  holders of the
entity or without such  consent.  Without the prior consent of a Majority of the
Investors,  the Fund will not make any  investment in assets that would cause it
to become an "investment  company" subject to the requirements of the Investment
Company Act of 1940 and will not hold itself out as an "investment company."
     (c) In carrying out its purposes, the Fund has the power to perform any act
that is necessary,  advisable, customary or incidental thereto. It may invest in
a passive or active  manner  in,  develop,  plan,  construct,  manage,  operate,
advise,  transfer or dispose of any  facility or interest  and produce or market
products  or  services.  The  Fund  may act  independently,  through  subsidiary
organizations,  in cooperation with others or through business entities in which
others have  interests  whether as principal,  agent,  partner,  owner,  member,
associate,  joint venturer or otherwise. When related to its trust purposes, the
Fund may also  guarantee  obligations of other  persons,  supply  collateral for
those  obligations  or for the  issuance  of letters  of credit or surety  bonds
benefiting other persons, enter into leases as lessor or lessee or acquire goods
or services for the use or benefit of other persons.
     (d) The Fund may make interim investments of funds in any vehicle permitted
by this Declaration and may take all action necessary,  advisable or appropriate
to maintain its existence, enforce this Declaration and its rights or the rights
of the Shareholders and comply with legal requirements.

     1.3 Relationship among Shareholders; No Partnership. As among the Fund, the
Corporate  Trustee,  the Shareholders and the officers and agents of the Fund, a
trust and not a  partnership  is created  by this  Declaration  irrespective  of
whether any different status may be held to exist as far as others are concerned
or for tax  purposes or in any other  respect.  The  Shareholders  hold only the
relationship  of trust  beneficiaries  to the  Corporate  Trustee with only such
rights as are conferred on them by this Declaration.
     1.4  Organization  Certificates.  The  parties  hereto  shall  cause  to be
executed and filed (a) the Certificate,(b)  such certificates as may be required
by so-called  "assumed name" laws in each  jurisdiction  in which the Fund has a
place of business, (c) all such other certificates, notices, statements or other
instruments  required by law or appropriate for the formation and operation of a
Delaware  business  trust in all  jurisdictions  where  the Fund may elect to do
business,  and (d) any  amendments  of any of the  foregoing  required by law or
appropriate.
     1.5 Principal  Place of Business.  The  principal  place of business of the
Fund shall be The Ridgewood Commons, 947 Linwood Avenue,  Ridgewood,  New Jersey
07450 or such other place as the Fund may from time to time  designate by notice
to all  Investors.  The Fund's office in the State of Delaware and the principal
place of business of Ridgewood Holding are 1105 North Market Street, Suite 1300,
Wilmington,  Delaware  19899, or such other place as the Fund may designate from
time to time by  notice  to all  Investors.  The Fund may  maintain  such  other
offices  at such  other  places  as the  Fund  may  determine  to be in the best
interests of the Fund.
     1.6 Admission of Investors.  (a) The Fund shall have the unrestricted right
at all times prior to the Termination Date (as defined in Article 2) to admit to
the  Fund  such  Investors  as it may deem  advisable,  provided  the  aggregate
subscriptions  received for Capital  Contributions  (as defined in Article 2) of
the  Investors  and accepted by the Fund do not exceed  $50,000,000  immediately
following the admission of such  Investors.  The Fund in its sole discretion may
increase the $50,000,000  amount to not more than $100,000,000 at any time prior
to the Termination  Date. One Investor Share will be issued for each $100,000 of
Capital  Contributions  and  fractional  Shares  may be issued  in the  Managing
Shareholders' sole discretion for proportional amounts of Capital Contributions.
After the Termination  Date, the sale of Shares or different series of Shares is
governed by Section 9.5.
     (b) Each  Investor  shall execute a  Subscription  Agreement (as defined in
Article 2) and make such Capital  Contributions to the Fund as subscribed by the
Investor.  Subject to the  acceptance  thereof by the Fund,  each  Investor  who
executes a Subscription  Agreement shall be admitted to the Fund as an Investor.
All funds received from such  subscriptions will be deposited in the Fund's name
in an interest-bearing escrow account at a commercial bank until the Escrow Date
(as defined in Article 2).
     (c) If,  by the  close  of  business  on July  31,  1998,  Investor  Shares
representing  Capital   Contributions  in  the  aggregate  amount  of  at  least
$1,500,000  have not been sold or if the Fund withdraws the offering of Investor
Shares in  accordance  with the  terms of this  Declaration,  the Fund  shall be
immediately  dissolved  at the  expense  of the  Managing  Shareholders  and all
subscription  funds shall be forthwith  returned to the  respective  subscribers
together with any interest earned thereon. As soon after the Termination Date as
practicable, the Fund shall advise each Investor of the Termination Date and the
aggregate amount of Capital Contributions made by all Investors.
     (d) The full cash price for Shares  must be paid to the Fund at the time of
subscription,  unless,  after  subscriptions  for at  least an  aggregate  of 15
Investor Shares have been accepted by the Fund, a subsequent  subscriber obtains
the consent of the Fund (which may be refused in its sole  discretion)  to delay
full  payment  until not later  than the  Termination  Date in  anticipation  of
obtaining financing from other sources.
     1.7 Term of the Fund. For all purposes, this Declaration shall be effective
on and  after  its date and the Fund  shall  continue  in  existence  until  the
fortieth anniversary of that date, at which time the Fund shall terminate unless
sooner terminated under any other provision of this Declaration.
     1.8 Powers of the Fund.  Without  limiting  any powers  granted to the Fund
under this  Declaration or applicable law, in carrying out its purposes the Fund
has all powers granted to a corporation  incorporated under the Delaware General
Corporation Law, including, without limitation:
     (a) To borrow  money or to loan money and to pledge or mortgage any and all
Fund  Property  and to  execute  conveyances,  mortgages,  security  agreements,
assignments and any other contract or agreement deemed proper and in furtherance
of the Fund's purposes and affecting it or any Fund Property  (including without
limitation  the  Management  Agreement  (as  defined in Article  2));  provided,
however,  that the Fund shall not loan money to the Managing  Shareholders,  any
Trustee or any other Managing Person;
     (b) To pay all  indebtedness,  taxes and  assessments due or to be due with
regard  to Fund  Property  and to give or  receive  notices,  reports  or  other
communications  arising out of or in connection with the Fund's business or Fund
Property;
     (c) To collect all monies due the Fund;
     (d) To  establish,  maintain  and  supervise  the  deposit of funds or Fund
Property  into,  and the  withdrawals  of the same from,  Fund bank  accounts or
securities accounts;
     (e) To employ accountants to prepare required tax returns and provide other
professional services and to pay their fees as a Fund expense;
     (f) To make any election  relating to adjustments in basis on behalf of the
Fund  or  the  Shareholders  which  is or  may  be  permitted  under  the  Code,
particularly with respect to Sections 743, 754 and 771 of the Code;
     (g) To employ  legal  counsel for Fund  purposes  and to pay their fees and
expenses as a Fund expense; and
     (h) To  conduct  the  affairs  of the Fund with the  general  objective  of
achieving  capital  appreciation  and  distributable  cash  flow  from  the Fund
Property.
     1.9. Preferred  Participation Rights. (a) Investors whose subscriptions are
accepted by the Fund and who have made full  payment for those  Shares not later
than July 31,  1998 (or at an  earlier  or later  date  chosen  by the  Managing
Shareholders  in their  sole  discretion  if by that date the Fund has  accepted
Share   subscriptions  for  at  least  $5  million)  will  be  issued  Preferred
Participation  Rights for those Shares.  Each  qualifying  Investor will receive
Preferred  Participation  Rights at the rate of one  right  for each  qualifying
Share,  multiplied  by the  number of whole  months (a  fractional  month  being
considered  to be a whole month) from the date the  subscription  is accepted by
the Fund through December 31, 1998.  Fractional  Preferred  Participation Rights
will be issued.  If for any reason a subscription  or full payment for Shares is
not received by the deadline,  Preferred  Participation  Rights for those Shares
will not be issued.
     (b) The  holders of  Preferred  Participation  Rights  shall be entitled to
distributions  as  provided  under  Section  8.1(d)  but shall  have no  voting,
liquidation  or other rights in respect of the Preferred  Participation  Rights,
except for the class voting  provision  of this Section  1.9(b) and the right to
receive,  if  available,   any  unpaid  balance  in  respect  of  the  Preferred
Participation Rights.  Preferred Participation Rights are not transferable apart
from and must be  transferred  with the Shares  with which they are  associated.
Each Preferred  Participation  Right may be repurchased at any time by the Fund,
subject to applicable law, at a price per Preferred Participation Right equal to
$1,000 minus any distributions  made in respect of that Preferred  Participation
Right.  The  rights of  holders  of  Preferred  Participation  Rights may not be
modified except by an amendment to this Declaration that is also consented to by
the  affirmative  vote of the holders of at least a majority of the  outstanding
Preferred Participation Rights, voting as a class.
     1.10.  Incentive  Shares.  At the time that the  offering  of the  Investor
Shares is closed, a number of Incentive Shares shall be authorized equal to 1/15
of the total  number of Investor  Shares  issued and  outstanding  at that date.
Incentive  Shares shall be issued solely under the Key Employees  Incentive Plan
as described in Section 9.7 and Capital Contributions,  if any, shall be made in
respect of the Incentive Shares as specified in the Plan. ARTICLE 2 DEFINITIONS
     The following terms, whenever used herein, shall have the meanings assigned
to them in this Article 2 unless the context indicates otherwise.  References to
sections and articles without further qualification denote sections and articles
of this  Declaration.  The singular  shall  include the plural and the masculine
gender shall include the feminine,  and vice versa, as the context requires, and
the terms  "person" and "he" and their  derivations  whenever  used herein shall
include   natural   persons  and  entities,   including,   without   limitation,
corporations, partnerships and trusts, unless the context indicates otherwise.
     "Act"-The  federal  Securities  Act of 1933, as amended,  and any rules and
regulations promulgated thereunder.
     "Adjusted  Capital  Account"-A  Shareholder's  Capital  Account at any time
(determined  before any allocations for the current fiscal period) (a) increased
by (i) the amount of the  Shareholder's  share of  partnership  minimum gain (as
defined in Regulation  Section  1.704-2(d)) at such time, (ii) the amount of the
Shareholder's  share of the minimum gain  attributable to a partner  nonrecourse
debt (as defined in Regulation  Section  1.704-2(b)(4))  and (iii) the amount of
the deficit balance in the  Shareholder's  Capital Account which the Shareholder
is obligated to restore under Regulation Section  1.704-1(b)(2)(ii)(c),  if any,
and  (b)  decreased  by  reasonably   expected   adjustments,   allocations  and
distributions described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4),  (5) and
(6)  (taking  into  account the  adjustments  required  by  Regulation  Sections
1.704-2(g)(ii) and 1.704-2(i)(5)).
     "Affiliate"-An  "Affiliate"  of, or person  "Affiliated"  with, a specified
person  is  a  person  that  directly,   or  indirectly   through  one  or  more
intermediaries,  controls, or is controlled by, or is under common control with,
the person specified.
     "Average  Annual  Capital  Contributions"-For  any calendar year or shorter
period,  the Fund  will  compute  as of each day an  amount  equal to the  total
Capital  Contributions of the Investors (excluding Capital Contributions made in
respect of  additional  classes or series of Shares under Section 9.5) minus all
prior distributions made under Section 8.1(c) to Investors and minus all amounts
of  Capital  Contributions  that are  returned  to  Investors  under  Section to
Investors.  The "Average Annual Capital Contributions" will equal the sum of the
amounts computed under the preceding sentence on each day in the year or period,
divided by the actual number of days in the year or period.
     "Capital Account"-The amount representing a Shareholder's capital interest 
in the Fund, as determined under Article 6 hereof.
     "Capital   Contributions"-The   aggregate  capital   contributions  of  the
Investors  accepted by the Fund in payment of the purchase  price of one or more
whole or fractional Investor Shares (inclusive of the amount of any fee or other
compensation  waived by the Fund,  the Managing  Shareholders  or the  Placement
Agent) plus any amounts  contributed  by the Managing  Shareholders  pursuant to
Section 14.7,  plus any amounts  contributed by Incentive Plan  Participants  in
respect of Incentive Shares and minus any return of capital by the Fund.
     "Certificate"-The Certificate of Trust of the Fund, as amended from time to
 time.
     "Code"-The Internal Revenue Code of 1986, as amended from time to time, and
 any rules and regulations promulgated thereunder.
     "Corporate  Trustee"-Ridgewood  Holding  or  its  successors  as  Corporate
Trustee.  The Corporate Trustee acts as legal title holder of the Fund Property,
subject to the terms of this Declaration.
     "Declaration"-This Declaration of Trust, as amended from time to time.
     "Delaware  Act"-The  Delaware  Business  Trust Act, as amended from time to
time (currently codified as title 12, Chapter 38 of the Delaware Code).
     "Escrow  Date"-The  later of the  dates on which the Fund (i)  accepts  the
subscription  that  causes  Capital  Contributions  in the  initial  offering to
Investors  to be at least  $1,500,000,  (ii)  deposits  at least  $1,500,000  in
collected funds in escrow under Section 1.6(b),  provided,  however,  the Escrow
Date shall not be later than July 31, 1998.
     "Fund"-The Ridgewood Power Growth Fund, a Delaware business trust.
     "Fund Property"-All property owned or acquired by the Corporate Trustee as 
part of the trust estate underthis Declaration.
     "Incentive Plan  Participant"-A  key executive or employee of the Fund, its
subsidiaries  or companies  operating  Projects  for the Fund who is  designated
under the Key Employees Incentive Plan as a participant.
     "Incentive  Share"-A  beneficial interest in the Fund granted under the Key
Employees Incentive Plan representing the right to receive a pro rata portion of
cash flow allocable to participants in that Plan.
     "Investor"-A  purchaser of Investor  Shares (which will includes a Managing
Shareholder to the extent it acquires  Investor  Shares) whose  subscription  is
accepted by the Fund.
     "Investor  Share"-Beneficial  interests in the Fund representing an initial
     Capital  Contribution  of  $100,000.  "Key  Employees  Incentive  Plan"-The
     employee equity incentive plan authorized under Section 9.7.
     "Losses"-Defined at "Profits or Losses."
     "Majority"-A majority in interest of a class of Shares for voting purposes,
 subject to the requirements ofSection 15.2(d).
     "Management  Agreement"-The  management  agreement between the Fund and the
Managing Shareholders as described in the Memorandum, and as may be amended.
     "Management  Share"-An  interest in the Fund that represents the beneficial
interests and management  rights of the Managing  Shareholders in their capacity
as Managing Shareholders,  but excluding a Managing  Shareholder's  interest, if
any, attributable to Investor Shares acquired by it.
     "Managing  Person"-Any of the  following:  (a) Fund  officers,  agents,  or
Affiliates, a Managing Shareholder, the Corporate Trustee, Panel Members, RPMC ,
Ridgewood  Capital,  or other  Affiliates  of the Managing  Shareholders  or the
Corporate Trustee and (b) any directors, officers or agents of any organizations
named in (a) above when acting for the Corporate Trustee, a Managing Shareholder
or any of their Affiliates on behalf of the Fund.
     "Managing Shareholder"-Ridgewood Power or Power VI Corp. and any substitute
or different Managing Shareholder as may subsequently be created under the terms
of this Declaration.
     "Memorandum"-The  Confidential  Memorandum  dated  February  9, 1998 of the
Fund,  as the same may be amended or  supplemented  from time to time,  to which
this Declaration is an Exhibit.
     "Net Cash Flow"-The  total gross receipts of the Fund,  less cash operating
expenses,  all other cash  expenditures  of the Fund and reasonable  reserves as
determined  by the Fund to cover  anticipated  Fund  expenses.  For  purposes of
determining  Net Cash Flow,  gross  receipts shall mean proceeds from any source
whatsoever,  including,  but not limited  to,  income  from  operations  and the
temporary  investment of Fund funds under Section 10.5 and any proceeds from the
sale,  exchange,  financing or refinancing  of Fund Property,  but excluding any
Capital Contributions of the Shareholders.
     "1940 Act"-The federal Investment Company Act of 1940, as amended, and any 
rules and regulations promulgated thereunder.
     "Operation Agreement"-Any Operation Agreement, by and among the Fund or its
Project  Entities,  the Managing  Shareholders  and RPMC,  under which RPMC will
operate specified Projects for the Fund.
     "Panel"-The  Independent  Review  Panel  created by  Section  12.14 of this
Declaration,  comprised  of the Panel  Members,  for the  purpose  of  reviewing
Ridgewood Program Transactions.
     "Panel Member"-An individual serving under Section 12.14 as a member of the
Panel. Panel Members are not trustees of the Fund.
     "Plan  Holder"-An  Incentive Plan  Participant  who has acquired  Incentive
Shares (whether as restricted  shares, as bonus shares or on exercise of options
or share appreciation rights).
     "Payout"-The  point at which total  cumulative  distributions  to Investors
from the Fund (exclusive of distributions in respect of Preferred  Participation
Rights  and   distributions   under  Section  9.5)  equal  their  total  Capital
Contributions  (exclusive  of  Capital  Contributions  made on the sale of a new
series of Shares under Section 9.5).
     "Placement Agent"-Ridgewood Securities Corporation, a Delaware corporation,
with its  principal  place of business  at The  Ridgewood  Commons,  947 Linwood
Avenue, Ridgewood, New Jersey 07450.
     "Power VI  Corp."-Ridgewood  Power VI Corporation,  a Delaware  corporation
that is one of the initial Managing Shareholders.
     "Preferred  Participation  Right"-A  right issued by the Fund under Section
1.9 to an  Investor.  A Preferred  Participation  Right  entitles  the holder to
special  distributions under Section 8.1(d) in recognition of the extra benefits
the Fund receives from early subscriptions for Shares.
     "Profits" or  "Losses"-For  a given fiscal  period,  an amount equal to the
Fund's  taxable  income or loss for such period,  determined in accordance  with
Code Section 703(a) (for this purpose, all items of income, gain, expense, loss,
deduction or credit  required to be stated  separately  pursuant to Code Section
703(a)(1)  shall be  included  in taxable  income or loss),  with the  following
adjustments:
     (a) Any income of the Fund that is exempt from  federal  income tax and not
otherwise  taken into  account in computing  Profits or Losses  pursuant to this
definition   and  any  income  and  gain   described   in   Regulation   Section
1.704-1(b)(2)(iv)(i)(1) shall be added to such taxable income or loss;
     (b) Any expenditures of the Fund described in Code Section  705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulation Section
1.704-1(b)(2)(iv)(i),  and not otherwise taken into account in computing Profits
or Losses  pursuant to this  definition  shall be  subtracted  from such taxable
income or loss;
     (c) In the event of a distribution in kind under Section 8.2, the amount of
any  unrealized  gain or loss  deemed  to have  been  realized  on the  property
distributed shall be added or subtracted from such taxable income or loss; and
     (d) Notwithstanding any other provision of this definition, any items which
are specially  allocated pursuant to Sections 4.5, 4.6, 4.7 and 7.4 shall not be
taken into account in computing Profits or Losses.
     "Project"-A  facility that  generates,  transmits or  distributes  electric
power or heat energy  (including  a  cogeneration  facility),  or that  supplies
products or services for the environmental remediation, energy or public service
or capital facilities development industries, except for nuclear facilities that
produce  electricity.  Projects  include the  preparatory,  engineering,  legal,
siting, financial and permitting work undertaken in anticipation of construction
or acquisition of any such facility.
     "Project  Entity"-The  limited liability company or other legal entity that
develops or will own a Project and holds title to its assets.
     "Purchase  Right"-A  right to  purchase  additional  Shares  granted  to an
Investor pursuant to Section 9.5(c).
     "Regulation"-A final or temporary Treasury regulation promulgated under the
Code.
     "Ridgewood   Capital"-Ridgewood  Power  Capital  Corporation,   a  Delaware
corporation that is an Affiliate of the Managing Shareholders.
     "Ridgewood   Holding"-Ridgewood  Energy  Holding  Corporation,  a  Delaware
corporation having its principal office at 1105 North Market Street, Suite 1300,
Wilmington, Delaware 19899, which is the initial Corporate Trustee.
     "RPMC"-Ridgewood Power Management Corporation, a Delaware corporation which
     is  an  Affiliate  of  Ridgewood  Power  and  Power  VI  Corp.   "Ridgewood
     Power"-Ridgewood  Power Corporation,  a Delaware corporation that is one of
     the initial Managing Shareholders.  "Ridgewood  Program"-Another investment
     program sponsored by a Managing Shareholder or an Affiliate of the Managing
     Shareholders.   "Ridgewood   Program   Transaction"-A   "Ridgewood  Program
     Transaction" is any transaction material to the Fund in which both the Fund
(or an entity in which the Fund has invested) and either (a) a Ridgewood Program
or (b) an entity  controlled by a Ridgewood Program or Programs or (c) an entity
in  which a  Ridgewood  Program  has  invested  is a  party.  Ridgewood  Program
Transactions do not include any  transaction  authorized by Section 12.5 of this
Declaration.
     "Share"-An Investor Share, an Incentive Share or a Management Share.
     "Shareholder"-An owner of a beneficial interest in the Fund.
     "Subscription  Agreement"-The form of subscription  agreement (contained in
Exhibit F to the Memorandum,  which is separately  bound) which each prospective
Investor must execute in order to subscribe for an interest in the Fund.
     "Termination  Date"-The  date on which the  initial  offering  of  Investor
Shares is ended,  as set or  extended  from time to time by the Fund in its sole
discretion,  provided that the Termination  Date may not occur before the Escrow
Date, and that if the offering is withdrawn,  the  Termination  Date is the date
the Fund elects to do so.
ARTICLE 3
LIABILITIES
     3.1  Liability and  Obligations  of Corporate  Trustee.  (a) To the fullest
extent permitted by the Delaware Act, the Corporate Trustee in its capacity as a
trustee of the Fund shall not be personally  liable to any person other than the
Fund and its Shareholders for any act or omission of the Fund, or any obligation
of the Fund.  The trust  estate  shall be  directly  liable  for the  payment or
satisfaction  of all  obligations  and  liabilities  of the Fund incurred by the
Corporate Trustee, the Managing Shareholders, and the officers and agents of the
Fund  within  their  authority  or  in a  manner  that  would  entitle  them  to
indemnification under Section 3.6.
     (b)  The   Corporate   Trustee   shall  not  exercise  any   management  or
administrative  powers in respect  of the Fund  except on the  direction  of the
Managing Shareholders.
     (c) The  Corporate  Trustee,  as trustee,  may be made party to any action,
suit or proceeding to enforce an obligation, liability or right of the Fund, but
it shall not solely on account  thereof be liable  separate from the Fund and it
shall be a party in that case only  insofar as may be  necessary  to enable such
obligation or liability to be enforced against the trust estate.
     3.2 Liability of Managing  Shareholders to Third Parties.  (a) The Managing
Shareholders  shall be jointly  and  severally  liable for any  wrongful  act or
omission of the  Corporate  Trustee or the Fund taken in the ordinary  course of
the Fund's  business or with the  authority of the Managing  Shareholders,  that
causes loss or injury to any person who is not a Shareholder  or that incurs any
penalty.
     (b) The Managing  Shareholders  shall be jointly and  severally  liable for
losses  resulting from (i) the  misapplication  by the Managing  Shareholders of
money  or  property  received  from a  person  who is not a  Shareholder  by the
Managing  Shareholders within the scope of the Managing  Shareholders'  apparent
authority or (ii) the  misapplication  of money or property received by the Fund
in the course of its business from a person who is not a  Shareholder  while the
money or property is in the custody of the Fund.
     (c) Subject to the  remaining  provisions  of this Article 3, each Managing
Shareholder  shall be  jointly  and  severally  liable  for all other  debts and
obligations of the Fund, but it may enter into a separate  obligation to perform
a Fund contract.
     3.3 Liability of Investors and Plan Holders in General. No Investor or Plan
Holder  in his  capacity  as such  shall  have any  liability  for the debts and
obligations of the Fund in any amount beyond the unpaid  amount,  if any, of the
Capital Contributions subscribed for by him. Each Investor and Plan Holder shall
have the same  limitation on his liability for the Fund's debts and  obligations
as a stockholder of a Delaware  corporation has for debts and obligations of the
corporation.
     3.4  Liability  of  Investors  and  Plan  Holders  to  Trustee,   Fund  and
Shareholders.  No  Investor  or Plan  Holder in his  capacity  as such  shall be
liable,  responsible  or  accountable  in  damages  or  otherwise  to any  other
Shareholder, the Corporate Trustee or the Fund for any claim, demand, liability,
cost,  damage and cause of action of any nature whatsoever that arises out of or
that is incidental to the management of the Fund's affairs.
     3.5 Liability of Managing Persons to Fund and Shareholders. (a) No Managing
Person shall have liability to the Fund or to any other Shareholder for any loss
suffered by the Fund that  arises out of any action or inaction of the  Managing
Person if the Managing  Person,  in good faith,  determined  that such course of
conduct  was in the Fund's  best  interest  and such  course of conduct  did not
constitute recklessness or willful misconduct of the Managing Person.
     (b) No act of the Fund shall be affected or  invalidated by the fact that a
Managing  Person  may be a  party  to or  has an  interest  in any  contract  or
transaction  of the Fund if the (i)  interest  of the  Managing  Person has been
disclosed or is known to the  Shareholders  or (ii) such contract or transaction
is at prevailing rates or is on terms at least as favorable to the Fund as those
available  from  persons  who are not  Managing  Persons or (iii) is a Ridgewood
Program Transaction  authorized under Section 12.14(d) or (iv) has been approved
by the vote of an  Independent  Panel or (v) has been  approved by the vote of a
Majority of Voting Shares.
     3.6 Indemnification of Managing Persons.  (a) Each Managing Person shall be
indemnified from the Fund Property against any losses,  liabilities,  judgments,
expenses  and  amounts  paid in  settlement  of any claims  sustained  by him in
connection with the Fund or claims by the Fund, in right of the Fund or by or in
right of any Shareholders,  if the Managing Person would not be liable under the
standards  of Section 3.5 and, in the case of  Managing  Persons  other than the
Corporate  Trustee and the Managing  Shareholders,  they were acting  within the
scope of authority  validly  delegated to them by the  Corporate  Trustee or the
Managing Shareholders or the Declaration. The termination of any action, suit or
proceeding  by  judgment,  order or  settlement  shall not, of itself,  create a
presumption  that the Managing Person charged did not act in good faith and in a
manner that he  reasonably  believed  was in the Fund's best  interests.  To the
extent that any  Managing  Person is  successful  on the merits or  otherwise in
defense of any action,  suit or proceeding or in defense of any claim,  issue or
matter  therein,  the Fund shall  indemnify  that  Managing  Person  against the
expenses,  including attorneys' fees, actually and reasonably incurred by him in
connection  therewith.  The Managing  Shareholders  shall have full and complete
discretion to authorize  indemnification  of any Managing Person consistent with
the requirements of this Declaration at any time,  regardless of whether a claim
is pending or threatened and regardless of any conflict of interest  between the
Managing  Shareholders  and the Fund that may arise in regard to the decision to
indemnify a Managing Person.
     (b) Notwithstanding the foregoing, no Managing Person nor any broker-dealer
shall be  indemnified,  nor shall  expenses be  advanced on its behalf,  for any
losses,  liabilities or expenses arising from or out of an alleged  violation of
federal  or state  securities  laws,  unless  (i)  there  has been a  successful
adjudication  on the  merits of each  count  involving  alleged  securities  law
violations  as to the  particular  indemnity,  or (ii)  those  claims  have been
dismissed with prejudice on the merits by a court of competent  jurisdiction  as
to the particular indemnity or (iii) a court of competent  jurisdiction approves
a settlement of the claims  against the particular  indemnity.  In any claim for
federal or state  securities law violations,  the party seeking  indemnification
shall  place  before the court the  positions  of the  Securities  and  Exchange
Commission and other  securities  administrators  to the extent required by them
with respect to the issue of indemnification for securities law violations.
     (c) Notwithstanding any other provision of this Declaration,  Panel Members
shall be indemnified by the Fund against any loss, liability,  judgment, expense
or amount paid in settlement of any claim  sustained by them in connection  with
the Fund or claims  by the  Fund,  in right of the Fund or by or in right of any
Shareholders,  if the Panel Member  would not be liable  under the  standards of
Section 3.5. The last three  sentences of Section  3.6(a),  the last sentence of
Section  3.6(b) and  Section  3.7(a)  shall  apply to Panel  Members'  rights to
indemnification,   regardless   of   whether   any   condition   under   Section
3.7(a)(i)-(iii) is fulfilled.
     3.7 General Provisions.  The following provisions shall apply to all rights
of  indemnification  and  advances of  expenses  under this  Declarationand  all
liabilities described in this Article 3:
     (a) Expenses,  including  attorneys' fees, incurred by a Managing Person in
defending any action, suit or proceeding shall be paid by the Fund in advance of
the final  disposition  of the action,  suit or  proceeding  upon  receipt of an
undertaking  by the  recipient  to repay such amount if it shall  ultimately  be
determined  that the Managing  Person is not entitled to be  indemnified  by the
Fund under this  Declaration  or otherwise  and if at least one of the following
conditions is satisfied:
     (i) The Managing Person provides  appropriate security for the undertaking;
or
     (ii) The Managing  Person is insured  against losses or expenses of defense
or settlement so that the advances may be recovered or
     (iii) Independent legal counsel in a written opinion determines, based upon
a review of the then  readily-available  facts,  that there is reason to believe
that the Managing Person will be found to be entitled to  indemnification  under
Section  3.6.  In so doing,  it shall not be  necessary  to  employ  hearing  or
trial-like procedures. Counsel may rely as to matters of business judgment or as
to other  matters  not  involving  determinations  of law upon the advice of the
Independent  Review Panel or a committee of persons not affiliated with the Fund
that may be appointed by the Managing Shareholders for that purpose.
     (b)  Rights  to  indemnification   and  advances  of  expenses  under  this
Declaration are not exclusive of any other rights to indemnification or advances
to which a Managing  Person or Investor may be entitled,  both as to action in a
representative  capacity  or  as to  action  in  another  capacity  taken  while
representing another.
     (c) Each  Managing  Person  shall be  entitled  to rely upon the opinion or
advice of or any statement or computation by any counsel, engineer,  accountant,
investment  banker or other person  retained by such Managing Person or the Fund
which he believes to be within such person's  professional or expert competence.
In so doing, he will be deemed to be acting in good faith and with the requisite
degree of care unless he has actual knowledge  concerning the matter in question
that would cause such reliance to be unwarranted.
     3.8  Dealings  with  Trust.  With  regard to all rights of the Fund and all
actions to be taken on its behalf, the Fund and not the Corporate  Trustee,  nor
the Managing  Shareholders,  nor the Panel Members,  nor the Fund's officers and
agents,  nor the  Investors or Plan Holders  shall be the principal and the Fund
shall be  entitled as such to the extent  permitted  by law to enforce the same,
collect  damages and take all other  action.  All  agreements,  obligations  and
actions of the Fund shall be  executed  or taken in the name of the Fund,  by an
appropriate  nominee,  or by the  Corporate  Trustee as  trustee  but not in its
individual  capacity.  Money  may be paid  and  property  delivered  to any duly
authorized  officer or agent of the Fund who may receipt therefor in the name of
the Fund and no person  dealing in good faith  thereby  shall be bound to see to
the application of any moneys so paid or property so delivered.  No entity whose
securities  are held by the Fund shall be  affected by notice of such fact or be
bound to see to the  execution of the Fund or to ascertain  whether any transfer
of its securities by or to the Fund or the Corporate Trustee is authorized.
ARTICLE 4
ALLOCATION OF PROFIT AND LOSS
     4.1.  Profits.  Profits for any fiscal period shall be allocated  among the
Shareholders as follows:
     (a) First,  100% to Power VI Corp.  until the Profits so allocated to Power
VI Corp.  plus the  cumulative  Profits  allocated  to Power VI Corp.  for prior
fiscal periods during which a Profit was earned by the Fund equal the cumulative
amounts  distributable  to Power VI Corp. under Article 8 hereof for the current
and prior periods; and
     (b) The  balance,  if  any,  to the  Investors  and to the  Incentive  Plan
Participants in proportion to the distributions made to the Investors and to the
Incentive Plan Participants for the fiscal period.
     4.2.  Losses.  Losses for any fiscal  period shall be allocated  99% to the
Investors and 1% to Power VI Corp.;  provided that Losses shall not be allocated
pursuant to this Section 4.2 to the extent that such allocation  would cause any
Investor to have a negative amount in the Investor's Adjusted Capital Account at
the end of this fiscal period.
     4.3 General Allocation Provisions. (a) Except as otherwise provided in this
Declaration, all items of Fund income, gain, expense, loss, deduction and credit
for a particular fiscal period and any other allocations not otherwise  provided
for shall be divided  among the  Shareholders  in the same  proportions  as they
share Profits or Losses, as the case may be, for the fiscal period.
     (b) The  Shareholders  shall be bound by the provisions of this Declaration
in reporting their shares of Fund income and loss for income tax purposes.
     (c) The Fund may use any  permissible  method under Code Section 706(d) and
the  Regulations  thereunder to determine  Profits,  Losses and other items on a
daily,  monthly or other basis for any fiscal  period in which there is a change
in a Shareholder's interest in the Fund.
     (d) The  definition of "Capital  Account" and certain  other  provisions of
this Declaration are intended to comply with Regulations Sections 1.704-1(b) and
1.704-2 and shall be interpreted  and applied in a manner  consistent  with such
Regulations. These Regulations contain additional rules governing maintenance of
Capital  Accounts  that  may not  have  been  provided  for in this  Declaration
because,  in part, these rules may relate to transactions  that are not expected
to occur and in some instances are prohibited by this  Declaration.  If the Fund
after  consultation with its regular  accountants or tax counsel determines that
it is prudent to modify the manner in which the Capital Accounts,  or any debits
or credits thereto, are computed in order to comply with such Regulations, or to
avoid the  effects  of  unanticipated  events  that might  otherwise  cause this
Declaration  not to  comply  with such  Regulations,  the Fund  shall  make such
modification  without the need of prior notice to or consent of any Shareholder;
so long as no such  modification  is  likely  to have a  material  effect on the
amounts distributable to any Shareholder.
     4.4 Among Investors.  Each Investor shall be allocated that percentage part
of  the  aggregate  amounts  allocated  to all  Investors  or to a  subgroup  of
Investors,  as the case may be, as the  number of Shares  owned by the  Investor
bears to the  aggregate  number of Shares owned by all Investors or Investors in
the subgroup.  Allocations  under Section  4.1(b) of Profits shall be made among
Investors as follows:  first, all Profits so allocated shall be allocated to the
holders of Preferred  Participation Rights in proportion to their holdings until
the amounts so allocated,  together with prior  allocations under this sentence,
equal the cumulative  distributions  made in respect of Preferred  Participation
Rights.  All remaining Profits allocated under Section 4.1(b) to Investors shall
be allocated  among the Investors as  prescribed  by the first  sentence of this
Section 4.4.
     4.5 Minimum  Allocation.  Notwithstanding  anything to the contrary in this
Declaration, in no event shall Power VI Corp.'s allocable share of each material
item of Fund income, gain, expense, loss, deduction or credit be less than 1% of
such item.
     4.6  Tax  Allocation.  Notwithstanding  anything  to the  contrary  in this
Declaration, to the extent that Power VI Corp. is treated for federal income tax
purposes as having received an interest in the Fund as compensation for services
which  constitutes  income to Power VI Corp.  under Code  Section 61, any amount
allowed as a deduction  for federal  income tax purposes to the Fund (whether as
an ordinary and necessary  business expense or as a depreciation or amortization
deduction) as a result of such  characterization  shall be allocated  solely for
federal income tax purposes to Power VI Corp.
     4.7  Allocation  of Gains from  Dispositions.  Prior to the  allocation  of
Profits  under  Section  4.1,  all gains  derived by the Fund  during any fiscal
period from any sale, transfer, injury, destruction or other disposition of Fund
Property or an interest therein,  other than in the ordinary course of operation
of Fund  Property  (including,  without  limitation,  proceeds  from  insurance,
refinancing or condemnation)  shall be allocated to Power VI Corp. to the extent
that the Capital Account of Power VI Corp. would have otherwise been negative as
of the end of such fiscal  period.  Gain or loss  allocable to each  Shareholder
will be adjusted accordingly.
     4.8. Among Incentive Plan  Participants.  Profits and other items allocable
to the  Incentive  Plan  Participants  shall be allocated  among the  authorized
Incentive  Shares  on  a  pro  rata  basis.  Amounts  allocable  to  issued  and
outstanding  Incentive  Shares  shall be  allocated  to their  holders.  Amounts
allocable to authorized Incentive Shares that are not issued and not outstanding
shall be allocated to Power VI Corp. in respect of its Management Share. ARTICLE
5 CAPITAL CONTRIBUTIONS OF SHAREHOLDERS
     5.1 Additional Capital Contributions.  There shall be no additional Capital
Contributions by the Investors except as provided in Section 9.5.
     5.2  Managing  Shareholders'  Capital  Contributions.  Power VI Corp.  as a
Managing Shareholder shall make Capital Contributions in accordance with Section
14.7.
     5.3. Incentive Plan  Participants'  Capital  Contributions.  Incentive Plan
Participants  shall make Capital  Contributions  in respect of Incentive  Shares
solely as specified by the Key Employees Incentive Plan.
     5.4.  Returns of  Capital.  If the Fund for any reason at any time does not
find it necessary or appropriate  to retain or expend all Capital  Contributions
made by Investors or Incentive Plan Participants,  the Managing  Shareholders in
their  sole  discretion  may  cause the Fund to  return  any or all such  excess
Capital  Contributions  ratably to Investors or those Participants,  as the case
may be. The Investors will be notified of the source of the payment. The Fund is
not  obligated to return the amount of any fees charged in  connection  with the
Capital Contribution and the return of a Capital Contribution is net of any fees
so charged.
ARTICLE 6
CAPITAL ACCOUNTS
     6.1 Capital Accounts. A Capital Account shall be established and maintained
for each Shareholder and shall be adjusted as follows:
     (a) The Capital Account of each Shareholder shall be increased by:
     (1) The amount of such Shareholder's Capital Contributions to the Fund;
     (2) The  amount  of  Profits  allocated  to such  Shareholder  pursuant  to
Articles 4 and 7 and Section 9.5;
     (3) The fair market value of property contributed by the Shareholder to the
Fund (net of liabilities secured by the contributed property that the Fund under
Code Section 752 is considered to have assumed or taken subject to); and
     (4) Any items in the nature of revenues,  income or gain that are specially
allocated to such Shareholder or adjusted pursuant to Sections 4.5, 4.6, 4.7 and
7.4.
     (b) The Capital Account of each Shareholder shall be decreased by:
     (1) The amount of Losses allocated to such Shareholder pursuant to Articles
4 and 7 and Section 9.5;
     (2) All  amounts of money and the fair  market  value of  property  paid or
distributed  to such  Shareholder  pursuant  to the  terms  hereof  (other  than
payments made with respect to loans made by such  Shareholder to the Fund),  net
of liabilities  secured by that property that the Shareholder under Code Section
752 is  considered  to have  assumed or taken  subject to, as well as returns of
capital under Section 5.3;
     (3) Any  items in the  nature of  expenses  or  losses  that are  specially
allocated to such Shareholder pursuant to Sections 4.5, 4.6, 4.7 and 7.4; and
     (4) Any return of a Capital Contribution under Section 5.4.
     6.2 Calculation of Capital  Account.  Whenever it is necessary to determine
the Capital Account of any Shareholder,  the Capital Account of such Shareholder
shall be determined in accordance with the rules of Regulation  Sections 1.704-1
(b) (2) (iv) and 1.704-2 (as amended from time to time).  If necessary to comply
with the Code, an Adjusted Capital Account may be employed.
     6.3  Effect of Loans.  Loans by any  Shareholder  to the Fund  shall not be
     considered  contributions  to the capital of the Fund.  6.4  Withdrawal  of
     Capital.  No  Shareholder  shall be entitled  to  withdraw  any part of his
     Capital Account or to receive any
distribution from the Fund, except as specifically provided herein.
     6.5 Capital  Accounts  of New  Shareholders.  Any person who shall  acquire
Shares in  accordance  with the  terms  and  conditions  of  Article  13 of this
Declaration  shall have the Capital Account of his transferor after  adjustments
reflecting the transfer, if any, except as specifically provided herein.
     6.6 Limitation.  Neither the Corporate Trustee,  the Managing  Shareholders
nor any other  Managing  Person  shall be  required  or shall have any  personal
liability to fund any or all of any negative  Capital Account of any Investor or
Incentive Plan Participant,  including without limitation Capital Contributions.
ARTICLE 7 ADDITIONAL PROVISIONS APPLICABLE TO ALLOCATIONS
     7.1  Determination of Income and Loss. At the end of each Fund fiscal year,
and at such other times as the Fund shall deem  necessary or  appropriate,  each
item of Fund  income,  gain,  expense,  loss,  deduction  and  credit  shall  be
determined  for the period  then  ending and shall be  allocated  to the Capital
Account of each Shareholder in accordance with this Declaration. With respect to
the  admission of  Shareholders,  the Fund will use the "interim  closing  date"
method of accounting as permitted by the Regulations.
     7.2 Determination of Income and Loss in the Event of Transfer. In the event
that a Shareholder  transfers  his interest in the Fund in  accordance  with the
terms of this Declaration, the determination and allocation described in Section
7.1  shall  be made as of the  date of such  transfer  and  thereafter  all such
allocations  shall be made to the account of the  transferee  of such  interest;
provided,  however,  that the Fund may  determine  that such  determination  and
allocation shall be pro rata to the Shareholders based upon the actual number of
days in such  fiscal  year that each such  Shareholder  held an  interest in the
Fund. In the event of a pro rata  determination  and  allocation,  the foregoing
provisions of this Section relating to a pro rata  determination  and allocation
will not be applicable to the  distributive  shares,  with respect to the Shares
transferred,  of items of Fund income, gain, expense, loss, deduction and credit
arising out of (a) the sale or other  disposition  of all or  substantially  all
Fund Property, or (b) other extraordinary  nonrecurring items, all of which will
be allocated to the holder of such Trust interest on the date such items of Fund
income, gain, expense, loss, deduction and credit are earned or incurred.
     7.3  Allocation  of Net Income and Net Losses.  All items of income,  gain,
expense,  loss,  deduction  and  credit of the Fund from  operations  and in the
ordinary  course of operation  of Fund  Property  shall be  allocated  among the
Shareholders in accordance with Article 4.
     7.4 Qualified Income Offset and Other Allocation  Provisions.  (a) If there
is a  net  decrease  in  "partnership  minimum  gain"  (within  the  meaning  of
Regulation  Section  1.704-2(d))  during a fiscal  period,  then there  shall be
allocated to each  Shareholder  items of income and gain for such fiscal  period
(and,  if necessary,  subsequent  fiscal  periods) in proportion  to, and to the
extent of, an amount equal to the portion of such Shareholder's share of the net
decrease in partnership minimum gain during such fiscal period that is allocable
to  the  disposition  of  Fund  Property  subject  to one  or  more  nonrecourse
liabilities of the Fund. However, such allocation shall be reduced to the extent
(i) the  Shareholder  contributes  capital to the Fund that is used to repay the
nonrecourse  liability and (ii) the  Shareholder's  share of the net decrease in
partnership  minimum gain is caused by the repayment.  The foregoing is intended
to be a "minimum gain chargeback"  provision as described in Regulation  Section
1.704-2(f),  and shall be interpreted  and applied in all respects in accordance
with  such  Regulation.  If  there  is  a  net  decrease  in  the  minimum  gain
attributable to a "partner  nonrecourse debt" (as defined in Regulation  Section
1.704-2(b) (4)) for a fiscal period,  then, in addition to the amounts,  if any,
allocated pursuant to the first sentence of this Subsection 7.4(a),  there shall
be allocated to each Shareholder with a share of such minimum gain  attributable
to a "partner  nonrecourse debt" items of income and gain for such fiscal period
(and,  if necessary,  subsequent  fiscal  periods) in proportion  to, and to the
extent of, an amount equal to the portion of such Shareholder's share of the net
decrease in the minimum gain  attributable to a partner  nonrecourse debt during
such fiscal  period  that is  allocable  to the  disposition  of Trust  Property
subject to one or more nonrecourse liabilities of the Fund. However, such amount
shall be reduced to the extent (i) the  Shareholder  contributes  capital to the
Fund that is used to repay the nonrecourse  liability and (ii) the Shareholder's
share  of the  net  decrease  in the  minimum  gain  attributable  to a  partner
nonrecourse debt is caused by the repayment.
     (b) If during  any  fiscal  period of the Fund a  Shareholder  unexpectedly
receives an  adjustment,  allocation  or  distribution  described in  Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a deficit
balance in the Shareholder's  Adjusted Capital Account, there shall be allocated
to the Shareholder items of income and gain (consisting of a pro rata portion of
each item of Fund income,  including gross income,  and gain for such period) in
an amount and manner  sufficient to eliminate such deficit balance as quickly as
possible.  The foregoing is intended to be a "qualified income offset" provision
as  described  in  Regulation   Section   1.704-1(b)(2)(ii)(d),   and  shall  be
interpreted and applied in all respects in accordance with such Regulation.
     (c)  Notwithstanding  anything to the contrary in Article 4 or this Article
7, any item of deduction,  loss or Code Section 705(a)(2)(B) expenditure that is
attributable to "partner nonrecourse debt" shall be allocated in accordance with
the manner in which the  Shareholders  bear the  economic  risk of loss for such
debt (determined in accordance with Regulation Section 1.704-2(i)).
     (d) To the extent that any item of income, gain, loss or deduction has been
specially  allocated  pursuant to paragraph  (a), (b) or (c) of this Section 7.4
("Required  Allocations")  and such allocation is inconsistent with how the same
amount  otherwise  would  have  been  allocated  under  Sections  4.1  and  4.2,
subsequent  allocations  under Sections 4.1 and 4.2 shall be made, to the extent
possible,  in a  manner  consistent  with  paragraphs  (a),  (b) and (c) of this
Section  7.4 which  negates as rapidly as  possible  the effect of all  previous
Required Allocations.
     (e) Solely for federal,  state and local income and  franchise tax purposes
and not for book or Capital Account purposes,  income,  gain, loss and deduction
with  respect to property  carried on the Fund's books at a value other than its
tax basis shall be allocated (i) in the case of property contributed in kind, in
accordance with the  requirements of Code Section 704(c) and such Regulations as
may be promulgated  thereunder  from time to time, and (ii) in the case of other
property,  in  accordance  with the  principles  of Code Section  704(c) and the
Regulations thereunder,  in each case, as incorporated among the requirements of
the relevant provisions of the Regulations under Code Section 704(b).
     (f) All or a portion of the remaining  items of Fund income or gain for the
fiscal  period,  if any,  shall  be  specially  allocated  to the  Investors  in
proportion to the cumulative distributions each has received pursuant to Section
8.1(e) from the commencement of the Fund, until the aggregate  amounts allocated
to each Investor  pursuant to this Section  7.4(f) for such period and all prior
periods equal the  cumulative  amount of such  distributions  to such  Investor.
ARTICLE 8 INTEREST OF SHAREHOLDERS IN CASH DISTRIBUTIONS
     8.1  Distribution  of  Net  Cash  Flow.   Subject  to  the  terms  of  this
Declaration,  the Fund  shall  make  distributions  of Net Cash  Flow out of the
Fund's  cash,  to the  extent and at such  times as it deems  advisable,  in the
following manner:
     (a) Indebtedness to Shareholders. First, Net Cash Flow shall be applied pro
rata (in  accordance  with the  percentage of total loans that are owing to each
Shareholder) to the payment to the  Shareholders  of interest and principal,  in
that order, on loans, if any, made by the Shareholders to the Fund.
     (b)  Special  Provisions.  Distributions  of Net Cash Flow in respect of an
additional  series of Shares  under  Section 9.5 are  governed  by the  Managing
Shareholders'   designation  under  that  Section  and  distributions   made  in
connection  with the  dissolution and termination of the Fund under Section 14.1
are governed by Section 8.1(g). Net Cash Flow distributed under those provisions
shall be excluded from consideration under Sections 8.1(c)-(f).
     (c) Proceeds from  Dispositions  of Property.  All Net Cash Flow  remaining
after the  application  of  Sections  8.1(a)  and (b) from the  sale,  transfer,
injury,  destruction  or  other  disposition  of Fund  Property  or an  interest
therein,  other than in the ordinary  course of operation of Fund  Property (and
including,   without  limitation,   proceeds  from  insurance,   refinancing  or
condemnation,  but  excluding  sales or  resales of  interim  investments  under
Section 10.5) which the Fund  determines to distribute,  shall be distributed as
follows:
     (1) Prior to Payout, 99% to the Investors and 1% to Power VI Corp.; and
     (2) After Payout,  75% to the Investors,  5% to Incentive Plan Participants
and 20% to Power VI Corp.
     (d)  Satisfaction  of  Preferred  Participation  Rights.  All Net Cash Flow
remaining after the application of Sections  8.1(a)-(c) that the Fund determines
to distribute during a calendar year or shorter period shall first be applied to
the  redemption  of  any  outstanding  Preferred  Participation  Rights  in  the
following order:
     (1) Ninety-nine percent of Net Cash Flow subject to this Section 8.1(d) and
distributed  during  1999 shall be  distributed  pro rata  among the  holders of
Preferred  Participation  Rights and the  remaining 1% shall be  distributed  to
Power VI Corp. until total cumulative  distributions to those holders under this
Section 8.1(d) equal $500 per outstanding Preferred Participation Right, and the
remaining Net Cash Flow  distributed  during 1999, if any,  shall be distributed
under Sections 8.1(e)-(f);
     (2) Ninety-nine percent of Net Cash Flow subject to this Section 8.1(d) and
distributed  during  2000 shall be  distributed  pro rata  among the  holders of
Preferred  Participation  Rights and the  remaining 1% shall be  distributed  to
Power VI Corp. until total cumulative  distributions to those holders under this
Section 8.1(d) equal $1,000 per outstanding  Preferred  Participation Right, and
the  remaining  Net  Cash  Flow  distributed  during  2000,  if  any,  shall  be
distributed under Sections 8.1(e)-(f); and
     (3) If after 2000  cumulative  distributions  under this Section  8.1(d) to
holders of Preferred  Participation  Rights are less than $1,000 per outstanding
Preferred  Participation Right, 99% of all Net Cash Flow subject to this Section
8.1(d)  that is  distributed  thereafter  shall be  distributed  pro rata to the
holders of outstanding Preferred Participation Rights and the remaining 1% shall
be distributed to Power VI Corp.  until total  cumulative  distributions  to the
holders  under this  Section  8.1(d) equal  $1,000 per  Preferred  Participation
Right, and all remaining Net Cash Flow shall be distributed  under the remaining
provisions of this Article 8.
     (e)  Investor  Priority  for  Distributions-Pre-Payout.   Until  Payout  is
achieved,  all Net Cash Flow that  remains  after the  application  of  Sections
8.1(a)-(d)  and that the Fund  determines to distribute  shall be distributed as
follows:
     (1) Until  total  distributions  of Net Cash Flow  subject to this  Section
8.1(e) during a calendar  year to Investors  equal the greater of (A) 12% of the
Investors'  Average  Annual  Capital  Contributions  or (B) 75% of Net Cash Flow
distributed  in  that  year  after  deducting   amounts   governed  by  Sections
8.1(a)-(d), 99% of all distributions made under this Section 8.1(e) in that year
(or shorter  period  ending on Payout)  shall be made to the  Investors  and the
remaining 1% shall be made to Power VI Corp.; and
     (2)  Thereafter,  80% of  distributions  made during the  remainder  of the
calendar  year (or shorter  period  ending on Payout)  shall be made to Power VI
Corp. and 20% shall be made to the Incentive Plan Participants.
     (f)  Distributions-Post-Payout.  After  Payout  is  achieved,  75%  of  all
distributions made in any calendar year or portion thereof after the application
of Sections  8.1(a)-(e) shall be made to the Investors,  5% shall be made to the
Incentive  Plan  Participants  and the  remaining  20% shall be made to Power VI
Corp.
     (g) Proceeds  Available Upon Dissolution.  Upon dissolution and termination
of the Fund under Section 14.1, the proceeds of the sale or other disposition of
the  Fund  Property  shall  be  paid or  distributed  in the  following  orderof
priority:
     (1)  First,  there  shall  be  paid to the  Fund's  creditors,  other  than
Shareholders,  funds, to the extent available,  sufficient to extinguish current
Fund  liabilities and  obligations,  including costs and expenses of liquidation
(or  provision  for  payment  shall be  made,  which  provision  may  include  a
distribution  of assets  subject  to the  obligations  in  question);  provided,
however,  that all loans made to fund  expenditures  under  Section 9.5 shall be
paid only from assets  allocable to the  Shareholders  who  benefited  from such
expenditures and only in proportion to such benefit;
     (2) Second, any loans owed by the Fund to the Shareholders shall be paid in
proportion thereto; provided,  however, that all loans made to fund expenditures
under Section 9.5 shall be paid only from assets  allocable to the  Shareholders
who benefited from such expenditures and only in proportion to such benefit;
     (3) Third,  to the  Shareholders in proportion to, and to the extent of the
excess,  if any, of (i) the cumulative  distributions  to which a Shareholder is
entitled under Sections  8.1(d) and (e) from the inception of the Fund until the
date on which  the  liquidating  distribution  is made  over (ii) the sum of all
prior  distributions  made to the  Shareholders  under  Sections  8.1(d),(e) and
(g)(3); provided, however, that no distribution shall be made under this Section
8.1(g)(3) that creates or increases a negative amount in the Investor's Adjusted
Capital  Account  at the  end of this  fiscal  period.  This  proviso  shall  be
determined  as  follows:  distributions  shall be first  determined  tentatively
pursuant to this Section 8.1(g)(3)  without regard to the Shareholders'  Capital
Accounts  and then the  allocation  provisions  of  Article  4 shall be  applied
tentatively  as if such tentative  distributions  had been made. If any Investor
shall thereby have a negative amount in the Investor's Adjusted Capital Account,
the actual  distribution  to the Investor under this Section  8.1(g)(3) shall be
equal to the tentative  distribution to the Investor less the negative amount in
the Adjusted Capital Account after application of the tentative allocation; and
     (4) Fourth,  the balance,  if any, to the Shareholders,  in accordance with
their  Capital  Accounts,  after  giving  effect to all  adjustments  to Capital
Accounts for all fiscal periods through and including the fiscal period in which
dissolution occurs.
     (h) Limitation. Notwithstanding any other provision of this Declaration, no
distribution may be made selectively to one Shareholder or group of Shareholders
but  must  be  made  ratably  to all  Shareholders  entitled  to  that  type  of
distribution at that time, except as provided by Section 12.11(b).  This Section
8.1(h)  does not waive any claim,  right of set-off,  right to receive  money or
other right that the Fund may have against any  Shareholder  and does not compel
the Fund to make  distributions  to a  Shareholder  notwithstanding  the Trust's
assertion of such claims or rights.
     8.2  Distribution in Kind. If the Fund elects to make  distribution in kind
of any of the assets of the Fund,  it shall give notice of its  election to each
Shareholder,  specifying  the  nature  and  value  of  all  such  assets  to  be
distributed  in kind,  the  deadline  for  giving  notice of refusal to accept a
distribution in kind and to the extent  advisable,  the estimated time necessary
for the Fund to liquidate  assets if those assets are not  distributed and other
information as required. In making such election, the Fund shall not arbitrarily
value  assets  to be  distributed  in kind nor  shall it  specify  assets  to be
distributed  in  kind  in  such  a  manner  as  to  unreasonably   advantage  or
disadvantage any Shareholder.  A Shareholder may refuse to accept a distribution
in kind by giving  written  notice to the Fund not later  than 30 days after the
effective date of the Fund's notice of  distribution.  If a Shareholder  refuses
distribution  in kind,  the Fund shall  retain in the Fund's name the portion of
the assets which were to be  distributed  in kind and which were to be allocated
to the refusing  Shareholder  (the  "Retained  Assets") and shall  liquidate the
Retained Assets in accordance  with this  Declaration.  Upon  liquidation of the
Retained  Assets,  the sum  realized  shall be  distributed  to the  Shareholder
refusing  distribution  in kind in full  discharge of the Fund's  obligation  to
distribute  the Retained  Assets.  In  determining  the Capital  Accounts of the
Shareholders, a distribution of assets in kind shall be considered a sale of the
property  distributed so that any  unrealized  gain or loss with respect to such
property  shall  be  deemed  to have  been  realized  and  allocated  among  the
Shareholders in accordance with Article 4.
     8.3  Amounts  Withheld.  All amounts  withheld  pursuant to the Code or any
provision  of any  state  or  local  tax law  with  respect  to any  payment  or
distribution  to the  Fund or the  Shareholders  shall  be  treated  as  amounts
distributed  to the  Shareholders  pursuant to this  Article 8 for all  purposes
under  this  Declaration.  The Fund may  allocate  any such  amounts  among  the
Shareholders in any manner that is in accordance with applicable law.

     8.4  Limitation.  Distributions  to  Shareholders  shall not be made to the
extent they are  prohibited  by  restrictions  contained  in the Delaware Act or
other provisions of this Declaration.
ARTICLE 9
OPERATION OF TRUST
     9.1 Investment Fee. The Fund shall pay Ridgewood Power out of Fund Property
an investment fee in an amount equal to 2% of each Capital Contribution from the
initial offering or any future offering of Investor  Shares.  The investment fee
payable in respect of Investors whose  subscriptions  for Shares are accepted by
the  Managing  Shareholders  in  1998  is  for  Ridgewood  Power's  services  in
investigating and evaluating investment opportunities and effecting transactions
for  investing  the capital  contributed  through  1998,  and the fee payable by
Investors  whose   subscriptions   for  Shares  are  accepted  by  the  Managing
Shareholders  in a later year is for those  services for capital  contributed in
that year.  The fee shall be payable on the Escrow  Date as to Shares  purchased
through  that date and on each date  thereafter  on which the Fund  receives and
collects  full payment for  additional  accepted  subscriptions  for Shares.  In
addition,  an investment fee shall be paid to Ridgewood Power in an amount equal
to 2% of  additional  Capital  Contributions  received  under  Section  9.5, for
similar services rendered by Ridgewood Power during the year in which such funds
are received by the Fund. The fee in respect of services  performed by Ridgewood
Power  during any year in which such  additional  funds are received by the Fund
under  Section 9.5 shall be payable upon the later of each date on which payment
is accepted by the Fund or the fulfillment of any applicable escrow conditions.
     9.2 Selling  Commissions and Placement Agent Fee. The Fund shall pay out of
Fund Property to Ridgewood  Securities  Corporation or to any  broker-dealer who
effects  the  sale of one or more  whole  or  fractional  Shares,  cash  selling
commissions in an aggregate amount equal to 8% of each Capital Contribution. For
serving as  Placement  Agent,  Ridgewood  Securities  Corporation  shall also be
entitled to receive out of Fund  Property a fee in an amount equal to 1% of each
Capital  Contribution.  Such commissions and fees payable in respect of sales of
Shares under the initial  offering of Shares  shall be due and payable  promptly
after  the  latest  to occur  of (i)  acceptance  by the  Fund of an  Investor's
subscription, (ii) the Escrow Date or (iii) the receipt by the Fund of the gross
purchase  price  for  the  Shares.  Such  commissions  and  fees in  respect  of
additional Capital Contributions shall be due and payable upon the later of such
date  on  which  funds  are  accepted  by the  Fund  or the  fulfillment  of any
applicable escrow conditions.
     9.3  Other  Expenses.  (a) The Fund  shall  enter  into an  agreement  with
Ridgewood  Capital  under which  Ridgewood  Capital will  provide  informational
materials and services,  support for marketing  efforts by  broker-dealers,  and
coordination  for the  offering  of the  Investor  Shares.  The Fund  shall  pay
Ridgewood  Capital out of Fund  Property  an  organizational,  distribution  and
offering fee in an amount equal to 6% of each Capital  Contribution to cover all
expenses incurred in the offer and sale of Shares,  including legal, accounting,
and consulting fees, printing,  filing, postage and other expenses of organizing
the Fund, distribution and selling costs and closing costs for the offering. The
fee shall be payable on the Escrow Date as to Shares purchased through that date
and on each date thereafter on which the Fund receives and collects full payment
for additional accepted subscriptions for Shares. If these expenses exceed 6% of
the aggregate Capital Contributions, Ridgewood Power shall pay such excess.
     (b) The Fund shall reimburse the Managing Shareholders for all other actual
and necessary  direct expenses paid or incurred in connection with the operation
of the Fund, including but not limited to accounting, legal and consulting fees,
to the extent that those expenses were incurred by the Managing  Shareholders in
carrying  out  responsibilities  assigned  to  them by  this  Declaration,  were
consistent  with  this   Declaration  and  do  not  constitute   Organizational,
Distribution  and Offering Fees. The Fund shall reimburse the Corporate  Trustee
for all actual and necessary  expenses  paid or incurred in connection  with the
operation of the Fund,  including  the Fund's  allocable  share of the Corporate
Trustee's overhead.
     (c) In respect of the  disposition  of all or a portion of the  investments
that the Fund may make in Projects or Project Entities on its own behalf (rather
than  through its  participation  in any entity  organized  to develop  multiple
Projects),  the Fund may be  required  to or may  find it most  advantageous  to
engage a broker or similar  adviser and to pay a brokerage  fee to the broker or
other persons responsible for bringing the disposition opportunity to the Fund's
attention or for  investigating,  evaluating or negotiating  the  acquisition or
disposition of the Fund's interest therein.  However, if a Managing  Shareholder
or an Affiliate performs those services in respect of an investment  acquisition
or  disposition  opportunity  for the Fund  relating to a particular  Project or
Project  Entity,  the Managing  Shareholder  or  Affiliate  so  providing  those
services  shall be entitled  to receive a  brokerage  fee from the Fund for such
services  in an  amount  not in  excess  of 2% of the  gross  proceeds  of  that
disposition.
     (d) If the Fund engages RPMC or another Affiliate of a Managing Shareholder
to manage  Projects under Section 12.5 of this  Declaration,  it shall reimburse
that  person for its actual  costs  incurred  (which  may  include a  reasonable
allocation of overhead items and of expenses incurred commonly with the Managing
Shareholder or their Affiliates) as an expense of the Fund.
     9.4.  Management Fee. For each 12-month period beginning on the Termination
Date and ending upon the winding up of the Fund's  business,  the Fund shall pay
Power VI Corp. from Fund Property a Management Fee,  payable in advance in equal
monthly  installments,  at the  annual  rate of 2.5%  of the  aggregate  Capital
Contributions.  The Management Fee shall be in lieu of any  reimbursement to the
Managing  Shareholders  for  administrative  and  overhead  expenses,  including
without  limitation  postage,   communication,   computer  service,  accounting,
regulatory  reporting  and  compensation  costs  of  the  Managing  Shareholders
allocable to the Fund. Those administrative and overhead expenses do not include
fees,  expenses and payments made by the Fund to persons other than the Managing
Shareholders  (such as legal,  outside  accounting and  consulting  expenses) or
extraordinary expenses incurred by the Managing Shareholder.  The Fund may enter
into a  management  agreement  with  the  Managing  Shareholders  regarding  the
services to be provided and compensated from the Management Fee.
     9.5 Additional Offers of Shares. (a) Beginning six months and one day after
the Termination  Date, the Fund from time to time may create and sell additional
Investor  Shares or  additional  classes  or  series  of Shares if the  Managing
Shareholders  determine  that  the  best  interests  of  the  Fund  so  require.
Additional  classes  or series  may but are not  required  to be  limited to the
results of Projects or Project Entities that are not coextensive with the entire
Fund Property.  The Managing  Shareholders  are authorized to determine or alter
any or all of the  powers,  preferences  and  rights,  and  the  qualifications,
limitations  or  restrictions  granted to or imposed upon any unissued  class or
series of additional  Shares,  and to fix,  alter or reduce the number of Shares
comprising any such class or series and the designation thereof, or any of them,
and to provide  for the  rights and terms of  redemption  or  conversion  of the
Shares of any such class or series.  The Managing  Shareholders'  designation of
the  Shares  and the terms and  conditions  of any new class or series of Shares
shall be deemed an amendment of this Declaration and shall be effective  without
any notice to, action by or approval of the Investors.  Any Shares so designated
may be offered to such persons and on such terms and  conditions as the Fund may
determine.
     (b) Any additional  Shares or classes or series of Shares shall have voting
rights as designated by the Managing Shareholders;  however, no such Share shall
have more than one vote per $100,000 of Capital  Contributions for that Share on
matters in which the  holders of those  Shares vote with the holders of Investor
Shares, without the consent of the holders of a Majority of the Investor Shares.
     (c) The Fund may but is not  required to offer all  Investors  the right (a
"Purchase Right") to acquire  additional Shares of any type to be offered by the
Fund;  however,  no Investor who  declined to subscribe to a previous  series of
Shares whose net proceeds were invested in a Project or Project  Entity in which
any net proceeds of the proposed  series are to be invested shall be entitled to
a Purchase  Right for the proposed  series.  A Purchase Right may be exercisable
prior to or concurrent with the offering of the series to other persons.  If the
Fund offers a Purchase Right, the Fund shall give each Investor entitled thereto
a notice  specifying  the  total  Shares  of the  additional  series  that it is
offering and the terms and  conditions of the offering,  together with any other
required information.  The Fund will require the Investors to notify the Fund of
their  decision to exercise the Purchase  Right and to deliver the  subscription
documents and the price for the Shares offered within a reasonable period set by
the Fund and specified in the notice, which shall not be less than 10 days after
the effective date of the notice.
     (d) If a Purchase  Right is offered and the  Investors  do not purchase all
the offered Shares within the period  specified in the Fund's  notice,  the Fund
may dispose of the remaining offered Shares in its sole discretion or may modify
its plan of activity accordingly.
     (e) All Profits,  Losses and other items  attributable to additional Shares
shall  be  allocated  as  specified  in  the   determination   of  the  Managing
Shareholders  creating those Shares,  except that any such allocation  shall not
unreasonably  reduce allocations to existing  Investors of Profits,  Losses, Net
Cash  Flow  and  other  items  to  the  extent  attributable  to  their  Capital
Contributions.  The Managing  Shareholders' election in good faith of allocation
methods  (which may include  subjective  elements)  shall be  conclusive  in the
absence of willful misconduct or gross negligence.
     9.6 Payment and  Recoupment of Fees. As soon as funds have been released to
the Fund from the escrow account referred to in Section 1.6, they may be used to
pay the fees  referred to in Sections 9.1, 9.2 and 9.3 then due. If the Managing
Shareholders  withdraw  the  offering of Shares,  any person  that has  received
payments  from the  proceeds of the offering  shall return such  payments to the
Fund upon demand by the Managing Shareholders.
     9.7. Key Employee Incentive Plan. (a) The Managing Shareholders at any time
may institute a Key Employee  Incentive Plan as a means of allowing key officers
and  employees  of the Fund and its  subsidiaries,  or employees of the Managing
Shareholders and Affiliates of the Managing Shareholders who perform significant
duties for the Fund or its  subsidiaries,  to obtain an equity  interest  in the
Fund  through the  issuance  of  Incentive  Shares.  At the close of the initial
offering of Investor  Shares,  a number of Incentive  Shares shall be authorized
for  issuance  under the Plan  equal to 1/15 of the  number of  Investor  Shares
issued and  outstanding.  The  interest  in  distributions  appertaining  to the
Incentive  Shares is specified in Article 8. Until  Incentive  Shares are issued
and outstanding,  the  distributions  appertaining  thereto shall be assigned to
Power VI Corp. The  consideration,  if any, for the issuance of Incentive Shares
or rights to  acquire  Incentive  Shares  shall be  determined  by the  Managing
Shareholders.
     (b) In its sole  discretion,  Power VI Corp.  may transfer a portion of its
interest in any  distributions  and a  proportionate  part of its allocations of
Profits  (but not  Losses)  to the  Plan,  whereupon  an  additional  number  of
Incentive  Shares shall be created in proportion to the ratio of the interest in
post-Payout  distributions  so  transferred  to the 5% interest  in  post-Payout
distributions  allotted to the Plan under other provisions of this  Declaration.
Power VI Corp.  shall  not  transfer  an  interest  that  causes  the  number of
Incentive Shares to increase by more than 60%. ARTICLE 10 ACCOUNTING
     10.1 Elections.  The Fund shall elect the calendar year as its fiscal year.
The Fund shall adopt the accrual  method of  accounting  or such other method of
accounting as the Fund shall determine. The Fund shall elect to be taxed only as
a partnership.  The Fund may but shall not be required to make an election under
Section 754 of the Code or  corresponding  state  taxation  laws.  The  Managing
Shareholders  are  empowered  to  make  any  other  election  permitted  by law,
including  without  limitation an election under Code Section 771, without prior
notice to or consent by any other Shareholder.
     10.2 Books and Records.  The Fund's books and records  shall be kept at the
principal  place of business of the Fund and shall be  maintained  in accordance
with generally accepted accounting  principles,  consistently  applied. The Fund
shall  maintain  supplemental  records on the basis  utilized in  preparing  the
Fund's  federal  income tax return with such  adjustments  in  accounting as are
required  by this  Declaration  or as the Fund  determines  would be in the best
interests of the Fund.
     10.3 Reports.  (a) The Fund will keep each Investor and assignees complying
with  Article  13  currently  advised  as to  activities  of the Fund by reports
furnished at least quarterly.  An independent  certified public  accounting firm
selected by the Fund will prepare the Fund's  federal  income tax return as soon
as practicable  after the conclusion of each year and each  Shareholder  will be
furnished,  at that time,  with the necessary  accounting  information  for each
Shareholder  to take into  account  and  report  separately  such  Shareholder's
distributive  share of the income and  deductions of the Fund. The Fund will use
its  reasonable  best  efforts  to  obtain  the  information  necessary  for the
accounting firm as soon as practicable and to transmit the resulting  accounting
and tax  information to the  Shareholders as soon as possible after receipt from
the accounting  firm. The Fund shall make available to each  Shareholder as soon
as practicable after the conclusion of each year annual financial  statements of
the Fund which have been  audited by the  Fund's  independent  certified  public
accounting  firm.  The annual  financial  statements  will  include in the notes
thereto  a  reconciliation  of net  income as  reported  therein  to the  annual
reported cash flow from operations and to net income for tax purposes.
     (b)  Within  180 days  after  the end of each  year  following  the  fourth
anniversary  of the  Termination  Date,  the Fund  shall make  available  to the
Investors an estimated valuation per Share based, if possible,  upon a generally
accepted method or methods of valuation of the Fund Property.
     10.4 Bank Accounts. The Fund shall maintain separate segregated accounts in
its name at one or more commercial  banks,  and the cash funds of the Fund shall
be kept in any of those accounts as determined by the Fund.
     10.5 Interim Assets. The Fund may purchase,  to the extent the Fund's funds
are not  otherwise  committed to  transactions  or required for other  purposes,
either or both of the following:
     (a) Obligations of banks or savings and loan  associations  that either (i)
have  assets in excess of $5 billion or (ii) are  insured in their  entirety  by
agencies of the United States government;
     (b)  Obligations  of or guaranteed  by the United States  government or its
agencies; and
     (c) Money market or other short-term obligations (having a maturity of nine
months or less) rated at least A1 or P1 by a  nationally  recognized  securities
rating organization.
ARTICLE 11
RIGHTS AND OBLIGATIONS OF INVESTORS
     11.1  Participation  in  Management.  No Investor  (other than the Managing
Shareholders  acting in their  capacity  as such)  shall have the right,  power,
authority  or   responsibility  to  participate  in  the  ordinary  and  routine
management of the Fund's affairs or to bind the Fund in any manner.
     11.2 Rights to Engage in Other  Ventures.  No Investor  or  Incentive  Plan
Participant  or any officer,  director,  shareholder  or other person  holding a
legal or beneficial  interest in any Investor  shall, by virtue of his ownership
of a direct or indirect  interest in the Fund, be in any way prohibited  from or
restricted  in engaging in, or  possessing  an interest  in, any other  business
venture  of a like  or  similar  nature  including  any  venture  involving  the
independent power industry.
     11.3 Limitations on Transferability.  The interest of an Investor shall not
be transferable except under the conditions set forth in Article 13 hereof.
     11.4 Information. (a) Each Investor's rights to obtain information from the
Fund from time to time are set forth in this Section. In addition to information
provided under Section 10.3, each Investor shall be provided on request with the
following:
     (1) True and full  information  regarding the status of the Fund's business
and financial condition;
     (2) Promptly after becoming available,  a copy of the Fund's federal, state
and local income tax returns or  information  returns for the preceding year and
prior years to the extent reasonably available;
     (3) A  current  list of the name  and last  known  business,  residence  or
mailing address of each  Shareholder and of any confidential  representative  of
each  Shareholder,  if  specifically  designated as such in writing (unless such
Shareholder has specified that the Fund is not to disclose such information,  in
which  case  the  Fund,  at  the  requesting   Investor's  cost,  shall  forward
communications,  sealed  or  unsealed,  from  the  requesting  Investor  to such
Shareholder or  representative  upon assertion by the Investor in writing to the
Fund of a proper purpose for the communication);
     (4) A copy of the  Certificate  and  this  Declaration  and all  amendments
thereto;
     (5)  True  and  full  information  regarding  the  amount  of  cash  and  a
description  and statement of the agreed value of any other property or services
contributed  by each  Shareholder  and  which  any  Shareholder  has  agreed  to
contribute  in the  future,  and the  date on  which  each  current  Shareholder
acquired his Shares; and
     (6) Such other  information  regarding  the  Fund's  affairs as is just and
reasonable.
     (b)  The  Fund  shall  establish  reasonable  standards  governing  without
limitation  the  information  and documents to be furnished and the time and the
location, if appropriate, of furnishing that information and documents. Costs of
providing  information and documents  shall be borne by the requesting  Investor
except for de minimis amounts consistent with the Fund's ordinary practices. The
Fund shall be entitled to reimbursement for its direct,  out-of-pocket  expenses
incurred  in  declining   unreasonable  requests  (in  whole  or  in  part)  for
information.
     (c) The Fund may keep  confidential  from Investors for such period of time
as it deems reasonable any information that it reasonably  believes to be in the
nature  of trade  secrets  or  other  information  that  the Fund in good  faith
believes  would not be in the best  interests  of the Fund to  disclose  or that
could  damage the Fund or its business or that the Fund is required by law or by
agreement with a third party to keep confidential.
     (d) The Fund may keep its records in other than  written form if capable of
conversion into written form within a reasonable time.
     (e) All demands or requests for  information  under this  Section  shall be
solely for a purpose reasonably related to the Investor's  interest in the Fund.
All requests or demands for  information  under this Section shall be in writing
and shall  state the  purpose  of the  demand;  the  Fund's  acceptance  of oral
requests  shall not waive or limit the scope of this  provision.  Any  action to
enforce  rights  under this  Section  may be brought  in the  Delaware  Court of
Chancery. ARTICLE 12 POWERS, DUTIES AND LIMITATIONS OF MANAGING SHAREHOLDERS AND
CORPORATE TRUSTEE
     12.1 Management of the Fund. (a) The Managing Shareholders shall have full,
exclusive  and complete  discretion in the  management  and control of the Fund,
except as otherwise provided herein.  The Managing  Shareholders agree to manage
and  control  the  affairs of the Fund to the best of its ability and to conduct
the  operations  contemplated  under this  Declaration  in a careful and prudent
manner and in accordance with good industry practice.  The Managing Shareholders
may bind the Fund.
     (b) Each Managing  Shareholder  has full  authority to act on behalf of the
Fund without notice to or consent by the other.  The fact that this  Declaration
or  another  document  states  that  action  is to be  taken  by  "the  Managing
Shareholders"  does not  preclude  a single  Managing  Shareholder  from  acting
unilaterally.  If the  Managing  Shareholders  disagree  on a course of  action,
decision or other determination, the decision of Ridgewood Power will control.
     12.2 Acceptance of Subscriptions. The Managing Shareholders shall not cause
the Fund to accept any  subscription  for Shares except as provided in Article 1
or in Sections 9.5 or 9.7, as the case may be.
     12.3 Specific Limitations. (a) The Managing Shareholders shall not take any
of the following actions without the approval of all Investors:
     (1) Any act that would make it impossible  to carry on the Fund's  ordinary
business;
     (2)  Causing  the  dissolution  or  termination  of the  Fund  prior to the
     expiration of its term, except as provided under Article 14; (3) Possessing
     Fund Property or assigning  rights in specific Fund Property for other than
     a  Fund  purpose;  or (4)  Constituting  any  other  person  as a  Managing
     Shareholder,   except  as  provided   in  Article  14.  (b)  The   Managing
     Shareholders shall not sell, exchange,  lease, mortgage, pledge or transfer
     all or substantially all of the
Fund's assets  if not in the  ordinary  course  of  operation  of Fund  Property
     without  the  approval of a Majority of Voting  Shares.  (c) The  Corporate
     Trustee,  the Fund and the Fund's  agents shall not take any action that is
     prohibited to the Managing
Shareholders by this or any other provision of this Declaration.
     12.4  Specific  Powers.  In  addition  to the powers  and duties  otherwise
provided for in this Declaration,  the Managing  Shareholders have the following
powers and duties:
     (a) To direct or supervise the Corporate  Trustee,  the Fund and the Fund's
agents in the exercise of any action relating to the Fund's  affairs,  including
without limitation the powers described in Section 1.8;
     (b) To  take  the  actions  specified  in  Section  12.3  if the  approvals
     specified therein are obtained;  (c) To amend this Declaration as specified
     in Section  15.8(a) or other  provisions of this  Declaration;  (d) To lend
     money to the Fund  (without  being  obligated  to do so) if such loan bears
     interest at a reasonable rate not exceeding
the interest  cost to the Managing  Shareholder  lending the money or the amount
that would be charged to the Fund by an unrelated  lender on a  comparable  loan
for the same purpose (without reference to the financial abilities or guarantees
of the Managing Shareholder lending the money). The Managing Shareholder may not
receive  points or other  financing  charges  or fees  regardless  of the amount
loaned to the Fund.  Before a Managing  Shareholder makes any loans to the Fund,
the Managing Shareholders will attempt to obtain a loan from an unrelated lender
secured, if at all, only by Fund Property;
     (e) To approve in their sole discretion any transfer of Investor Shares;
     (f)  To  terminate  the  offering  of  Shares  at  any  time  prior  to the
     Termination  Date,  provided  that the  Escrow  Date has  occurred;  (g) To
     withdraw the offering of Shares at any time as provided in Section 1.6; (h)
     To acquire such assets or  properties,  real or  personal,  as the Managing
     Shareholders in their sole discretion deem necessary
or appropriate for the conduct of the Fund's  business and to sell,  exchange or
distribute to Shareholders in kind or otherwise  dispose of any part of the Fund
Property;
     (i) To operate any Project or other Fund Property  acquired by the Fund, or
to contract for operation  under Section  12.5, or to engage  non-Affiliates  to
operate any Project or other Fund  Property on such terms as they may  determine
in their sole discretion;
     (j) To waive any fees or  compensation  payable to them and to credit  such
waived  amount in their  discretion  against  any  obligations  they may have to
contribute capital under Section 14.7;
     (k) To provide,  or arrange for the provision of, managerial  assistance to
     those  persons in which the Fund  invests;  and (l) To establish  valuation
     principles  and  to  periodically  apply  such  principles  to  the  Fund's
     investment portfolio.  12.5. Operation by Affiliate. The Fund, by action of
     the Managing Shareholders, may engage RPMC or another Affiliate of a
Managing   Shareholder   to  provide   management,   purchasing,   planning  and
administrative  services for any or all Projects operated by the Fund. A manager
under this Section  12.5 shall act under the  supervision  and  direction of the
Managing  Shareholders  and does not have the  authority to bind the Fund or act
directly in its name except as  authorized  by the Managing  Shareholders  or an
officer of the Fund. A manager under this Section 12.5 shall be  reimbursed  for
all costs incurred by it as provided in Section 9.3(d) but shall not receive any
compensation  in excess of its  costs.  A manager  under this  Section  12.5 may
provide  services  to the  Managing  Shareholders,  their  Affiliates  or  other
entities  sponsored by the Managing  Shareholders or their  Affiliates and costs
and expenses shall be reasonably  allocated among those  entities.  The Fund may
enter into an Operation  Agreement or other agreements to implement this Section
12.5. A manager under this Section 12.5 shall not be  compensated  or reimbursed
for any  services  related  to the  administration  of the Fund as a  whole,  to
relations  with  Investors or the  offering of Shares or to the  identification,
acquisition or disposition of Projects.
     12.6  Officers of Trust.  (a) The  Managing  Shareholders  shall  appoint a
President,   one  or  more  Vice   Presidents  as  designated  by  the  Managing
Shareholders,  a Secretary and such other officers and agents of the Fund as the
Managing Shareholders may from time to time consider  appropriate,  none of whom
need  be  a  Shareholder.   Except  as  otherwise  prescribed  by  the  Managing
Shareholders  or in this  Declaration,  each  officer  shall have the powers and
duties usually appertaining to a similar officer of a Delaware corporation under
the  direction of the  Managing  Shareholders  and shall hold office  during the
pleasure of the  Managing  Shareholders.  Any two or more offices may be held by
the same person.  Any officer may resign by delivering a written  resignation to
the Managing  Shareholders and such resignation  shall take effect upon delivery
or as specified therein.
     (b) All  conveyances  of real property or any interest  therein by the Fund
may be made by the Corporate Trustee,  which shall execute on behalf of the Fund
any  instruments  necessary  to effect  the  conveyance.  A  certificate  of the
Secretary of the Fund stating  compliance  with this  Section  12.6(b)  shall be
conclusive in favor of any person relying thereon.
     (c) All other documents, agreements,  instruments and certificates that are
to be made,  executed or endorsed on behalf of the Fund shall be made,  executed
or endorsed by such officers of the Fund, or a Managing  Shareholder  or persons
as the  Managing  Shareholders  shall  from  time to  time  authorize  and  such
authority  may be general or confined to specific  instances.  In the absence of
other provisions,  the President is authorized to execute any document,  to take
any action on behalf of the Fund within this Section  12.6(c),  and to authorize
other officers to execute confirmatory documents or certificates.
     12.7  Presumption  of Power.  The execution by the Corporate  Trustee,  the
Managing  Shareholders  or the  officers  on  behalf  of  the  Fund  of  leases,
assignments,  conveyances,  contracts or agreements of any kind whatsoever shall
be sufficient to bind the Fund. No person dealing with the Managing Shareholders
or the Fund's officers shall be required to determine their authority to make or
execute any  undertaking  on behalf of the Fund,  nor to  determine  any fact or
circumstances  bearing  upon the  existence  of their  authority  nor to see the
application or distribution of revenues or proceeds  derived  therefrom,  unless
and until such person has received written notice to the contrary.
     12.8  Obligations  Not  Exclusive.  The  Managing  Shareholders,  the Panel
Members and the Corporate  Trustee shall be required to devote only such part of
their  time as is  reasonably  needed  to  manage  the  business  of the Fund or
discharge their duties, it being understood that the Managing Shareholders,  the
Panel  Members  and the  Corporate  Trustee  have and shall have other  business
interests and therefore  shall not be required to devote their time  exclusively
to the Fund.  The Managing  Sharehollders,  the Panel  Members and the Corporate
Trustee  shall in no way be  prohibited  from or  restricted  in engaging in, or
possessing  an  interest  in,  any other  business  venture of a like or similar
nature including any venture involving the independent  power industry.  Nothing
in this Section 12.8 shall relieve the Managing  Shareholders of other fiduciary
obligations  to the Investors,  except as limited in Article 3.  Notwithstanding
anything  to the  contrary  contained  in  this  Article  or  elsewhere  in this
Declaration,   the  Managing  Shareholders  shall  have  no  duty  to  take  any
affirmative  action with respect to  management of the Fund business or the Fund
Property  which  might  require  the  expenditure  of  monies by the Fund or the
Managing Shareholders unless the Fund is then possessed of such monies available
for  the  proposed  expenditure.  Under  no  circumstances  shall  the  Managing
Shareholders be required to expend their own funds in connection with the day to
day operation of Fund business.
     12.9.  Allocation of Duties and Fees. The Managing  Shareholders  may agree
between themselves as to the working division of responsibilities and may assign
or transfer amounts payable to a Managing Shareholder among them.
     12.10 Management Share.  Power VI Corp. shall be credited with a Management
Share which shall have no voting  rights and shall be deemed to have attached to
it  the  distribution  and  allocation  rights   appertaining  to  the  Managing
Shareholders  under this  Declaration.  No Management  Share shall be held by or
transferred to a person who is not a Managing  Shareholder except as provided by
Section 13.1.
     12.11 Removal or Incapacity of a Managing  Shareholder.  (a) The holders of
at least 10% of the  Investor  Shares  may  propose  the  removal  of a Managing
Shareholder,  either by calling a meeting or  soliciting  consents in accordance
with the terms of this Declaration. On the affirmative vote of a Majority of the
Voting Shares that  Managing  Shareholder  shall be removed  effective as of the
date the vote is completed.
     (b) In the event of a removal or other  incapacity  (other  than  voluntary
resignation  without  cause) of a Managing  Shareholder as enumerated in Section
14.1(c),  the former  Managing  Shareholder  may elect in its sole discretion to
take and to cause the Fund to take one of the following courses of action:
     (1) The former  Managing  Shareholder  may elect to exchange its Management
Share  for a  series  of cash  payments  from the  Fund to the  former  Managing
Shareholder in amounts equal to the amounts of distributions to which the former
Managing  Shareholder  would otherwise have been entitled under this Declaration
in respect of  investments  made by the Fund prior to the date of the removal or
other  incapacity.  Such payments  shall be payable out of the Fund's  available
cash  before  any  distributions  are  made to the  Investors  pursuant  to this
Declaration.  For purposes of this Section 12.11(b)(1),  from and after the date
of any such removal or other incapacity:  (i) the former Managing  Shareholder's
interest in the Fund  attributable  to its Management  Share shall be terminated
and its Capital  Account shall be reduced by the amount which is attributable to
its Management Share and (ii) the former Managing  Shareholder shall continue to
receive  its pro rata share of all  allocations  to  Investors  provided in this
Declaration  that are  attributable  to Investor Shares acquired by the Managing
Shareholder.
     (2) In the alternative, the former Managing Shareholder may elect to engage
a  qualified  independent  appraiser  and cause  the Fund to  engage a  separate
qualified  independent appraiser (at the Fund's expense in each case), who shall
value the Fund Property as of the date of such removal or other incapacity as if
the Fund  Property  had been sold at its fair market  value so as to include all
unrecognized  gains or losses.  If the two  appraisers  cannot agree on a value,
they shall appoint a third  independent  appraiser (whose cost shall be borne by
the  Fund)  whose  determination,  made on the same  basis,  shall be final  and
binding.  Based on the appraisal,  the Fund shall make allocations to the former
Managing  Shareholder's  Capital  Account of  Profits,  Losses  and other  items
resulting from the appraisal as of the date of such removal or other  incapacity
as if the Fund's fiscal year had ended solely for the purpose of determining the
former  Managing   Shareholder's   Capital  Account.   If  the  former  Managing
Shareholder has a positive Capital Account after such allocation, the Fund shall
deliver a promissory note of the Fund to the former Managing Shareholder, with a
principal amount equal to the former Managing  Shareholder's Capital Account and
which shall bear  interest at a rate per annum equal to the prime rate in effect
at Chase Manhattan Bank, N.A. on the date of removal or other  incapacity,  with
interest payable  annually and principal  payable only from 20% of any available
cash  before any  distributions  thereof  are made to the  Investors  under this
Declaration.  If the Capital  Account of the former  Managing  Shareholder has a
negative balance after such allocation,  the former Managing  Shareholder  shall
contribute to the capital of the Fund in its discretion either cash in an amount
equal to the negative balance in its Capital Account or a promissory note to the
Fund in such principal amount maturing five years after the date of such removal
or other incapacity,  bearing interest at the rate specified above. For purposes
of this  Section  12.11(b)(2),  from and after the date of any such  removal  or
other incapacity,  the former Managing  Shareholder's interest in the Fund shall
be  terminated  and the former  Managing  Shareholder  shall no longer  have any
interest  in the Fund other than the right to receive  the  promissory  note and
payments thereunder as provided above.
     (c) In the event that a Managing Shareholder is removed or no longer serves
as a Managing  Shareholder due to an incapacity  enumerated in Section  14.1(c),
the former Managing  Shareholder  shall not be entitled to any uncollected  fees
specified in Article 9 to the extent not accrued before the date of such removal
or other incapacity.
     12.12 Indemnification of Placement Agent. (a) The Placement Agent shall not
have any duty,  responsibility or obligation to the Fund, the Panel Members, the
Corporate  Trustee or any  Shareholder  as a consequence of its right to receive
any selling commissions or placement agent fees from the Fund in connection with
any  offering  of  Shares,  except to the  extent  provided  under the Act.  The
Placement Agent has not assumed,  and will not assume, any  responsibility  with
respect to the Fund nor will it be  permitted  by the Fund to assume any duties,
responsibilities or obligations  regarding the management,  operations or any of
the business affairs of the Fund, subsequent to any offering of Shares.
     (b) The Placement  Agent shall be indemnified and held harmless by the Fund
against any losses,  damages,  liabilities or costs (including  attorneys' fees)
arising  from any  threatened,  pending  or  completed  action,  suit,  claim or
proceeding  by any  Shareholder  against the  Placement  Agent (except as may be
limited by the Act or applicable state statutes,  including, but not limited to,
the Massachusetts  Securities Act and the Tennessee  Securities Act), based upon
the assertion that the Placement  Agent has any  continuing  duty or obligation,
subsequent  to any  offering  of Shares,  to the Fund,  the Panel  Members,  the
Corporate Trustee or any Shareholder or otherwise to monitor Trust operations or
report to Investors concerning Trust operations.
     12.13  Contribution.   Each  of  the  initial  Managing   Shareholders  and
subsequent Managing  Shareholders agrees that it shall remain jointly or jointly
and severally liable as required by law for any obligation or recourse liability
of the Fund  incurred  during the period in which it is a Managing  Shareholder.
However,  the existing and subsequent  Managing  Shareholders hereby agree among
themselves  to  contribute  to each  other  the  amount  of funds  necessary  to
effectuate a sharing of Fund obligations and recourse  liabilities in proportion
to each Managing Shareholder's share of such obligations and liabilities as they
accrue.
     12.14.  Independent Review Panel. (a) There shall be a standing Independent
Review  Panel  comprised  of at least two  Panel  Members.  The  number of Panel
Members may be increased  (but to not more than eight) or decreased  (but to not
fewer than two) from time to time by action of both of the Managing Shareholders
and at least one-half of the incumbent Panel Members. No Panel Member shall be
     (i) an Affiliate  of the Fund  (although by serving as such he or she shall
     not  be  deemed  to  be  an  Affiliate);  (ii)  an  investment  advisor  or
     underwriter of the Fund; (iii) a person beneficially owning five percent or
     more of the Investor Shares, or an entity, five percent or more of whose
outstanding equity securities are beneficially owned by the Fund;
     (iv) any officer,  director, general partner or employee of the Fund or its
     subsidiaries;  (v) any  member of the  immediate  family of any  individual
     named in (i)-(iv); or
     (vi) any person who has acted as legal  counsel  for the Fund or a Managing
Shareholder  at any time since the  beginning  of the  second-to-last  completed
fiscal year of the Fund, or a principal,  officer,  partner, counsel or employee
of that counsel.
     (b) If at any time a Panel Member fails to meet the foregoing requirements,
either he or she or the Fund will take action under Section  12.14(c) within 180
days to correct that condition. The Panel Members shall have terms of indefinite
duration, subject only to removal,  incapacity or resignation under this Section
12.14.
     (c) Vacancies,  however caused,  in the authorized  number of Panel Members
shall be filled by a majority of the  remaining  Panel  Members and the Managing
Shareholders. If no Panel Member remains and if the Managing Shareholders do not
elect to suspend the Panel under  Section  12.14(i),  the Managing  Shareholders
shall  nominate Panel Members and not later than 120 days after the last vacancy
results they shall either  request  written  consents  from  Investors or call a
special meeting of Investors for the purpose of electing Panel Members.
     (d) The Fund shall not consummate any Ridgewood Program Transaction without
the  approval of a majority  of the  incumbent  Panel  Members (if there are two
Panel  Members,  both shall be required to approve) or approval by a Majority of
the Voting Shares.  The Managing  Shareholders,  in their sole  discretion,  may
elect to refer to the Panel other  transactions in which a Managing  Shareholder
or Affiliates of a Managing Shareholder may have an interest. In that event, the
Panel in its sole  discretion  may elect not to review  the  transaction,  or to
review the transaction and report to the Managing Shareholder. The Panel Members
shall incur no liability to the Fund or any  Shareholders  by their  decision to
review or not to review and the  concurrence  of the Panel shall not be required
for  the  consummation  of  any  transaction  other  than  a  Ridgewood  Program
Transaction referred to the Panel.
     (e)  The  Panel   Members  are  not  trustees  of  the  Fund  and  have  no
responsibility  for any action or failure to take  action by the Fund other than
to review Ridgewood Program Transactions  referred to them. They have no general
responsibility  for  oversight  of the Fund and are not charged  with  fiduciary
responsibility for the investments of the Fund.
     (f) The Panel shall meet on the call of the Managing  Shareholders.  Except
to the extent conflicting with the Delaware Act or this Declaration,  the law of
Delaware  governing meetings of directors of corporations shall govern meetings,
voting and consents by the Panel Members.
     (g) As  compensation  for services  rendered to the Fund, each Panel Member
shall be paid by the Fund the sum of $5,000  annually in quarterly  installments
and shall be reimbursed for all reasonable  out-of-pocket  expenses  relating to
attendance  at  meetings  or  otherwise  performing  his duties  hereunder.  The
Managing  Shareholders and the Panel may review the compensation  payable to the
Panel  Members no more often than  annually  and may  increase or decrease it as
they find to be reasonable,  upon approval by both the Managing Shareholders and
a majority of the  incumbent  Panel  Members.  No  compensation  for  consulting
services  shall be paid to a Panel  Member  without  prior  approval of both the
Managing Shareholders and a majority of the remaining Panel Members.
     (h) Any Panel  Member may  resign if he or she gives  notice to the Fund of
the  intent to resign  and  cooperates  fully with any  successor  Panel  Member
appointed under Section  12.5(b),  effective on the designation of the successor
Panel Member.
     (i) Any Panel Member may be removed (x) for cause by the action of at least
two-thirds of the remaining  Panel Members or (y) by action of the holders of at
least  two-thirds  of the  Voting  Shares.  The  Panel may be  suspended  by the
Managing  Shareholders,  upon their certification recorded in the minutes of the
Fund that there is no reasonable probability that the Fund will engage in future
Ridgewood  Program  Transactions.  In that  case the  annual  stipend  for Panel
Members shall cease during the period of suspension.  The Managing  Shareholders
may  reinstate  the Panel at any time  after a  suspension.  Removal  of a Panel
Member shall not affect the  validity of any actions  taken prior to the date of
removal. ARTICLE 13 TRANSFERS OF SHARES
     13.1  Transfer or  Resignation  by a Managing  Shareholder.  (a) A Managing
Shareholder shall not sell, assign or otherwise transfer its Management Share or
resign   without   cause  (which  cause  shall  not  include  the  fact  or  the
determination  that  continued  service  would be  unprofitable  to the Managing
Shareholder)  without  first  obtaining  the consent of a Majority of the Voting
Shares, except that (i) Section 13.1(b) permits certain withdrawals by Ridgewood
Power; (ii) a Managing Shareholder may pledge its Management Share for a loan to
either Managing  Shareholder  provided that such pledge does not reduce the cash
flow of the Fund  distributable to other  Shareholders and (iii) either Managing
Shareholder may waive or assign compensation or fees payable to it.
     (b) If each of the following conditions is satisfied:
     (i) Ridgewood Power is a party to any  transaction or proposed  transaction
with a Prior  Program  described in Rule  901(c)(1) of and not excepted by Rules
901(c)(2) and (3) of Regulation S-K of the  Securities and Exchange  Commission,
or otherwise is a party to a  transaction  or proposed  transaction  involving a
Prior  Program  which will cause the  securities  of the Prior Program to become
freely  tradable  (either by  registration  under the  Securities Act of 1933 or
through a business combination or by a change in business entity or tax status),
and
     (ii) Power VI Corp.  has assets of at least $100,000 and is, in the written
opinion  of its Board of  Directors,  adequately  capitalized  and has  adequate
resources (either of its own or by contractual  access to personnel and property
of its Affiliates) to carry out all duties and  responsibilities of the Managing
Shareholders, then Ridgewood Power may withdraw as a Managing Shareholder in its
sole  discretion by giving prior  written  notice to Power VI Corp. on behalf of
the Fund, specifying the effective date of the withdrawal.  The withdrawal shall
be effective as of the  effective  date of the  transaction  unless  counsel for
Ridgewood  Power  advises it and the Fund that an earlier date is advisable  for
consummating the transaction or reducing conflicts of interest, in which case an
earlier  date may be  specified.  The Fund  shall  give  written  notice  to all
Investors  and  Plan  Holders  (which  may be in  periodic  communications  with
Investors) of the  withdrawal not later than 60 days after receipt of the notice
of withdrawal from Ridgewood Power.
     (c)  Ridgewood  Power shall cease to have any authority to act on behalf of
the Trust or to receive any compensation for periods  beginning on and after the
effective date of its withdrawal under Section 13.1(b),  but it will be entitled
to accrued but unpaid compensation for periods ending before the effective date.
Ridgewood Power shall have no obligation to compensate the Trust in the event of
its withdrawal under Section 13.1(b). Power VI Corp. shall succeed to all rights
and  responsibilities  of  Ridgewood  Power in the event of a  withdrawal  under
Section  13.1(b)  and on and  after the  effective  date of the  withdrawal  any
reference in this  Declaration to Ridgewood Power, to action by Ridgewood Power,
to the Managing  Shareholders or action by the Managing Shareholders shall refer
to Power VI Corp. alone.
     13.2  Transfers by Investors and Incentive Plan  Participants.  An Investor
may sell,  exchange  or transfer  his Shares  except as  restricted  by and upon
compliance with all applicable laws and all of the following  provisions of this
Section 13.2:
     (a) Shares may not be transferred to any person or entity if, as determined
by the Fund, such assignment would have adverse  regulatory  consequences to the
Fund or any Fund Property.
     (b) Within 30 days after written notice of a proposed sale or assignment is
received  by the  Fund  from an  Investor,  the  Fund  may  request  in its sole
discretion  an  opinion  of  counsel  acceptable  to the Fund that the  proposed
transfer (i) would not invalidate the exemption  afforded by Section 4(2) of the
Act or by Regulation D promulgated  under the Act and the exemption  afforded by
any applicable state securities laws as to any offering of interests in the Fund
and (ii)  complies  with the  exemption  afforded by Section 4(1) of the Act and
qualifies  for  an  exemption  from  registration  under  any  applicable  state
securities laws (including any investor  suitability  standard applicable to the
transferee or the Fund).
     (c) The written approval of the Managing Shareholders must be obtained, the
granting or denial of which shall be within their sole and absolute discretion.
     (d) The transferor  and  transferee  must deliver a dated notice in writing
signed by each,  confirming that (i) the transferee accepts and agrees to comply
with  all the  terms of this  Declaration  and  (ii)  the  transfer  was made in
compliance with this Declaration and all applicable laws and regulations.
     (e) The  transferor,  transferee  and  the  Fund  must  execute  all  other
certificates,  instruments and documents and take all such additional  action as
the Fund may deem appropriate.
     (f) The Fund may require as a condition to any  transfer  that may create a
future  interest that an opinion of counsel  acceptable to the Fund be delivered
to the Fund confirming that the proposed  transfer does not have adverse effects
on the Fund under the rule against  perpetuities  or similar  provisions of law.
Transfers shall be effective and recognized upon fulfillment of the requirements
of clauses (a) through (f) above and the transferee  shall be an Investor owning
Investor  Shares  with the same rights as  appertained  to the  transferor.  Any
purported sale or transfer consummated without first complying with this Section
13.2 shall be void.
     (g) Transfers of Incentive  Shares are subject to the  restrictions  of the
Key  Employees   Incentive  Plan  and  any  instrument  or  agreement  of  grant
thereunder.  In addition to those restrictions,  no transfer of Incentive Shares
may be made without compliance with Sections 13.2(a)-(f) above.
     13.3  Assignments by Operation of Law. If any Investor or Plan Holder shall
die, with or without  leaving a will, or become non compos  mentis,  bankrupt or
insolvent, or if a corporate, partnership or trust Investor dissolves during the
Fund term or if any other involuntary transfer of an Investor's or Plan Holder's
Shares is made, the legal  representatives,  heirs and legatees (and spouse,  if
the Shares have been community property of such Investor and his or her spouse),
bankruptcy assignees,  successors,  assigns and corporate,  partnership or trust
distributees or such other involuntary  transferees shall not become transferees
but shall have (subject to the other terms and provisions hereof) such rights as
are provided with respect to such persons under the law; provided, however, that
such legal representatives,  heirs and legatees,  spouse,  bankruptcy assignees,
successors,  assigns  and  corporate,   partnership  or  trust  distributees  or
involuntary transferees may become transferees in accordance with the provisions
of Section 13.2.
     13.4 Expenses of Transfer.  In the sole  discretion of the Fund, the person
acquiring  Shares  pursuant to any of the  provisions  of this Article 13 may be
required to bear all costs and  expenses  necessary to effect a transfer of such
Shares including,  without  limitation,  reasonable  attorney's fees incurred in
preparing any required  amendments to this  Declaration  and the  Certificate to
reflect such transfer or acquisition and the cost of filing such amendments with
the appropriate governmental officials.
     13.5 Survival of Liabilities. No sale or assignment of Shares shall release
the transferor from those  liabilities to the Fund which survive such assignment
or sale as a matter of law or that are imposed under Section 3.4.
     13.6 No Accounting.  No transfer of Shares, whether voluntary,  involuntary
or by operation of law,  shall entitle the transferor or transferee to demand or
obtain immediate valuation, accounting or payment of the transferred Shares.
ARTICLE 14
DISSOLUTION, TERMINATION AND LIQUIDATION
     14.1  Dissolution.  Unless the provisions of Section 14.2 are elected,  the
Fund shall be dissolved and its business  shall be wound up upon the decision of
the Managing  Shareholders  to withdraw the offering of Shares  described in the
Memorandum in accordance with Section 12.4(g) or on the earliest to occur of:
     (a) Forty years from the effective date of this  Declaration;  (b) The sale
     of all or substantially all of the Fund Property;
     (c) The death, removal, dissolution, resignation, insolvency, bankruptcy or
other legal  incapacity of both Managing  Shareholders  or any other event which
would legally disqualify both Managing Shareholders from acting hereunder;
     (d) The  decision  of all  Investors  or the  Managing  Shareholders  and a
     Majority of Investors;  or (e) The occurrence of any other event which,  by
     law, would require the Fund to be dissolved. 14.2 Continuation of the Fund.
     Upon the occurrence of any event of dissolution  described in Sections 14.1
     (a) through (e),
inclusive,  the Fund shall be  dissolved  and wound up unless  (i) the  Managing
Shareholders  and a  Majority  of the  Voting  Shares  within 90 days  after the
occurrence of any such event of dissolution  elect to continue the Fund or, (ii)
if there  are no  remaining  Managing  Shareholders  within  90 days  after  the
occurrence of any such event of dissolution, holders of a Majority of the Voting
Shares  shall elect,  in writing,  that the Fund shall be continued on the terms
and conditions  herein contained and shall designate one or more persons willing
to be substituted as a Managing  Shareholder  or Managing  Shareholders.  In the
event there are no remaining Managing  Shareholders and a Majority of the Voting
Shares elect to continue the Fund,  it shall be continued  with the new Managing
Shareholder or Managing  Shareholders who shall succeed to and assume all of the
powers,  privileges  and  obligations  of the previous  Managing  Shareholder or
Managing  Shareholders  hereunder  except as specified in Section 12.11.  In the
event of a dissolution under this Section 14.2, the former Managing  Shareholder
or Managing Shareholders shall have the rights specified in Section 12.11.
     14.3  Obligations  on  Dissolution.  The  dissolution of the Fund shall not
release any of the parties hereto from their contractual  obligations under this
Declaration.
     14.4 Liquidation Procedure. Upon dissolution of the Fund for any reason:
     (a) A reasonable  time shall be allowed for the orderly  liquidation of the
assets of the Fund and the discharge of liabilities to creditors so as to enable
the Fund to minimize the losses normally attendant to a liquidation;
     (b) The  Shareholders  shall continue to receive Net Cash Flow,  subject to
the other provisions of this Declaration and to the provisions of subsection (c)
hereof, and shall share Profits and Losses for all tax and other purposes during
the period of liquidation; and
     (c) Ridgewood Power shall act as liquidating  Managing  Shareholder (or, in
its absence,  any other  Managing  Shareholder  shall act) and shall  proceed to
liquidate  the Fund  Properties  to the extent that they have not  already  been
reduced  to cash  unless the  liquidating  Managing  Shareholder  elects to make
distributions  in kind to the extent and in the manner herein  provided and such
cash,  if any,  and  property  in kind,  shall be  applied  and  distributed  in
accordance with Article 8 and Section 9.5 (if applicable).
     14.5 Liquidating  Trustee.  (a) If the dissolution of the Fund is caused by
circumstances  under which no Managing  Shareholders shall be acting as Managing
Shareholders or if all liquidating Managing Shareholders are unable or refuse to
act, the holders of a Majority of the Voting  Shares shall appoint a liquidating
trustee who shall  proceed to wind up the  business  affairs of the Fund.  If no
liquidating trustee is appointed within 180 days after the event of dissolution,
any  Shareholder  may  petition  the Court of  Chancery of Delaware to appoint a
liquidating trustee. The liquidating trustee shall have no liability to the Fund
or to any  Shareholder for any loss suffered by the Fund which arises out of any
action or inaction of the  liquidating  trustee if the liquidating  trustee,  in
good faith,  determined that such course of conduct was in the best interests of
the  Shareholders  and such course of conduct did not  constitute  negligence or
misconduct  of  the  liquidating  trustee.  The  liquidating  trustee  shall  be
indemnified by the Fund against any losses, judgments, liabilities, expenses and
amounts paid in settlement of any claims  sustained by it in connection with the
Fund,  provided that the same were not the result of negligence or misconduct of
the liquidating trustee.
     (b)  Notwithstanding  the  above,  the  liquidating  trustee  shall  not be
indemnified  and no  expenses  shall be  advanced  on its behalf for any losses,
liabilities or expenses  arising from or out of an alleged  violation of federal
or state securities laws, unless (1) there has been a successful adjudication on
the merits of each count involving  alleged  securities law violations as to the
particular indemnitee,  or (2) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee,
or (3) a court of competent  jurisdiction  approves a  settlement  of the claims
against a particular indemnitee.
     (c) In any claim for  indemnification  for federal or state  securities law
violations,  the party seeking  indemnification shall place before the court the
position  of  the  Securities  and  Exchange   Commission  or  other  applicable
securities   administrators   if   required,   with  respect  to  the  issue  of
indemnification for securities law violations.
     (d) The Fund  shall not incur the cost of that  portion  of any  insurance,
other than public  liability  insurance,  which  insures  any party  against any
liability the indemnification of which is herein prohibited.
     14.6 Death, Insanity,  Dissolution or Insolvency of an Investor or Trustee.
The  death,   insanity,   dissolution,   winding  up,  insolvency,   bankruptcy,
receivership or other legal  termination of a Trustee,  an Investor who is not a
Managing  Shareholder or an Incentive Plan  Participant  shall have no effect on
the life of the Fund and the Fund shall not be dissolved thereby.
     14.7 Managing  Shareholders'  Capital  Contributions.  Upon or prior to the
first  distribution  in  liquidation,  Power VI Corp.  shall  contribute  to the
capital of the Fund an amount  equal to any  deficit in the  Capital  Account of
such Power VI Corp.  calculated just prior to the date of such distribution,  to
the extent not previously contributed.
     14.8  Withdrawal  of  Offering.  Dissolution  of the  Fund  resulting  from
withdrawal  of the offering of Shares is governed by Section  1.6(c) and Section
12.4(g).
ARTICLE 15
MISCELLANEOUS
     15.1  Notices.  Notices  or  instruments  of any kind  which  may be or are
required to be given  hereunder by any person to another shall be in writing and
deposited in the United States Mail,  certified or registered,  postage prepaid,
addressed to the  respective  person at the address  appearing in the records of
the Fund. Any Investor or Plan Holder may change his address by giving notice in
writing,  stating his new  address,  to the Fund.  Any notice shall be deemed to
have been given  effective  as of 72 hours,  excluding  Saturdays,  Sundays  and
holidays,  after the depositing of such notice in an official United States Mail
receptacle. Notice to the Fund may be addressed to its principal office.
     15.2 Meetings of Shareholders.  (a) Meetings. The Managing Shareholders may
call  meetings  of the  Shareholders,  the  Investors,  the Plan  Holders or any
subgroup  thereof  concerning  any matter on which they may vote as  provided by
this  Declaration  or by law or to receive and act upon a report of the Managing
Shareholders  on matters  pertaining  to the  Fund's  business  and  activities.
Investors  holding 10% or more of the outstanding  securities or Shares entitled
to vote on the  matter  may also  call  meetings  by  giving  notice to the Fund
demanding a meeting and stating the purposes  therefor.  After calling a meeting
or within 20 days after  receipt of a written  request or  requests  meeting the
requirements of the preceding sentence,  the Fund shall mail to all Shareholders
entitled to vote on the matter  written  notice of the place and purposes of the
meeting,  which  shall be held on a date not less  than 15 days nor more than 45
days  after  the Fund  mails the  notice of  meeting  to the  Shareholders.  Any
Shareholder  entitled  to vote on the matter may appear and vote or consent at a
meeting by proxy, provided that such authority is granted by a writing signed by
the Shareholder and delivered to the Fund at or prior to the meeting.
     (b)  Consents.  Any  consent  required by this  Declaration  or any vote or
action by the  Shareholders  or any subgroup  thereof may be effected  without a
meeting by a consent or  consents in writing  signed by the persons  required to
give such  consent,  to vote or to take action.  The Managing  Shareholders  may
solicit consents or Investors holding 10% or more of the outstanding  securities
or Shares  entitled to vote on the matter may demand a solicitation  of consents
by giving  notice to the Fund stating the purpose of the consent and including a
form of  consent.  The Fund shall  effect a  solicitation  of consents by giving
those Shareholders who may vote a notice of solicitation  stating the purpose of
the  consent,  a form of consent  and the date on which the  consents  are to be
tabulated,  which shall be not less than 15 days nor more than 45 days after the
Fund transmits the notice of solicitation for consents. If Investors holding 10%
or more of the  outstanding  securities or Shares entitled to vote on the matter
demand a solicitation,  the Fund shall transmit the notice of  solicitation  not
later than 20 days after receipt of the demand.
     (c) General. To the extent not inconsistent with this Declaration, Delaware
law  governing  stockholders'  meetings,  proxies and consents for  corporations
shall  apply as to the  procedure,  validity  and use of  meetings,  proxies and
consents.  Any  Shareholder  may waive notice of or attendance at any meeting or
notice of any consent,  whether before or after any action is taken. The date on
which the Fund  transmits  the notice of meeting or notice  soliciting  consents
shall be the record date for determining the right to vote or consent. A list of
the names,  addresses and shareholdings of all Shareholders  shall be maintained
as part of the Fund's books and records.
     (d) Interested  Parties.  A Shareholder  may vote Shares owned by it on any
question   permitted   under  this   Declaration   regardless  of  whether  that
Shareholder,  Affiliates of that Shareholder or other persons associated with or
related to that  Shareholder  have a personal  interest in the subject matter of
the  transaction.  Delaware law  governing the voting of shares in a corporation
shall  determine the legal effect of a vote by a Shareholder  having an interest
described in the preceding sentence.
     15.3 Loan to Trust by Shareholder. If any Shareholder shall, in addition to
his Capital Contribution to the Fund, lend any monies to the Fund, the amount of
any such loan shall not increase his Capital Account nor shall it entitle him to
any increase in his share of the  distributions  of the Fund,  but the amount of
any such loan shall be an obligation on the part of the Fund to such Shareholder
and shall be repaid to him on the terms and at the interest  rate  negotiated at
the time of the loan,  and the loan  shall be  evidenced  by a  promissory  note
executed by the Fund except that no Shareholder shall be personally obligated to
repay the loan, which shall be payable and collectible only out of the assets of
the Fund.
     15.4 Delaware Laws Govern. This Declaration shall be governed and construed
in  accordance  with  the laws of the  State  of  Delaware,  and  venue  for any
litigation between or against any of the parties hereto may be maintained in New
Castle County, Delaware.
     15.5 Power of Attorney.  Each Investor irrevocably constitutes and appoints
the Managing Shareholders as his true and lawful attorneys-in-fact and agents to
effectuate and to act in his name, place and stead, in effectuating the purposes
of the Fund including the  execution,  verification,  acknowledgment,  delivery,
filing and recording of this  Declaration as well as all  authorized  amendments
thereto and hereto, all assumed name and doing business certificates, documents,
bills of  sale,  assignments  and  other  instruments  of  conveyances,  leases,
contracts,  loan documents and  counterparts  thereof,  and all other  documents
which may be  required to effect a  continuation  of the Fund and which the Fund
deems necessary or reasonably  appropriate,  including  documents required to be
executed  in order to  correct  typographical  errors  in  documents  previously
executed by such Investor and all  conveyances  and other  instruments  or other
certificates  necessary or appropriate to effect an authorized  dissolution  and
liquidation of the Fund. The power of attorney granted herein shall be deemed to
be coupled with an interest,  shall be irrevocable  and shall survive the death,
incompetency or legal disability of an Investor.
     15.6  Disclaimer.  In forming this Fund,  all Investors  recognize that the
independent  power business is highly  speculative and that neither the Fund nor
the  Managing  Shareholders  nor the  Corporate  Trustee nor any other  Managing
Person  makes  any  guaranty  or  representation  to  any  Investor  as  to  the
probability or amount of gain or loss from the conduct of Fund business.
     15.7  Corporate   Trustee   Resignation  and   Replacement.   The  Managing
Shareholders  may increase or decrease the number of Corporate  Trustees so long
as there is at least one  Corporate  Trustee  which  meets the  requirements  of
Section 3807 of the Delaware Act. A Corporate Trustee may resign by delivering a
written resignation to the Managing  Shareholders not less than 60 days prior to
the effective date of the  resignation.  The Managing  Shareholders may remove a
Corporate Trustee at any time, provided that if there is no incumbent,  at least
one new  Corporate  Trustee  is  concurrently  appointed.  In the  event  of the
absence, death, resignation,  removal,  dissolution,  insolvency,  bankruptcy or
legal incapacity of a Corporate Trustee or if an additional Corporate Trustee is
to be appointed,  the Managing  Shareholders shall appoint the Corporate Trustee
in writing and shall  subsequently  give notice to the Investors,  although such
notice is not necessary to the validity of the appointment.  A Corporate Trustee
so  appointed  shall  qualify by filing  his  written  acceptance  at the Fund's
principal place of business.  If there are multiple Corporate Trustees,  each is
vested with an  undivided  interest  in the trust  estate and may  exercise  all
powers vested in the Corporate Trustee as directed by the Managing Shareholders.
     15.8 Amendment and Construction of Declaration. (a) This Declaration may be
amended by the Managing  Shareholders,  without notice to or the approval of the
Investors,  from  time  to time  for the  following  purposes:  (1) to cure  any
ambiguity,  formal defect or omission or to correct or supplement  any provision
herein that may be inconsistent with any other provision  contained herein or in
the  Memorandum  or to effect any  amendment  without  notice to or  approval by
Investors or Incentive Plan  Participants,  as specified in other  provisions of
this  Declaration;  (2) to make such other  changes or  provisions  in regard to
matters or questions arising under this Declaration that will not materially and
adversely  affect the interest of any Investor or Incentive  Plan  Participants;
(3) to otherwise  equitably  resolve issues arising under the Memorandum or this
Declaration  so  long  as  similarly   situated   Investors  or  Incentive  Plan
Participants are not treated materially differently; (4) to maintain the federal
tax status of the Fund and any of its  Shareholders (so long as no Investor's or
Incentive  Plan  Participant's  liability is  materially  increased  without his
consent) or as provided in Section 4.3(d); (5) to authorize additional Shares or
new classes or series of Shares under Section 9.5, (6) as otherwise  provided in
this Declaration or (7) to comply with law.
     (b) Other  amendments  to this  Declaration  may be  proposed by either the
Managing  Shareholders or persons owning 10% or more of the  outstanding  Voting
Shares,  in each case by calling a meeting or requesting  consents under Section
15.2 and  specifying  the text of the  amendment  and the reasons  therefor.  No
amendment under this Section 15.8(b) that increases any Shareholder's liability,
changes the Capital  Contributions  required of him or his rights in interest in
the Profits, Losses, deductions,  credits, revenues or distributions of the Fund
in more than a de minimis manner,  his rights on  dissolution,  or any voting or
management  rights set forth in this  Declaration  shall become  effective as to
that Shareholder without his written approval thereof. Unless otherwise provided
herein,  all other  amendments  must be approved by the holders of a Majority of
the  outstanding  Voting  Shares  and,  if the  terms of a series  of  Shares or
securities so require, by the vote of the holders of such class, series or group
specified therein.
     (c) The Managing  Shareholders  have power to construe this Declaration and
to act upon any such  construction.  Its construction of the same and any action
taken pursuant  thereto by the Fund or a Managing  Person in good faith shall be
final and conclusive.
     15.9 Bonds and Accounting. The Corporate Trustee and other Managing Persons
shall  not be  required  to  give  bond  or  otherwise  post  security  for  the
performance  of their duties and the Fund waives all provisions of law requiring
or  permitting  the same. No person shall be entitled at any time to require the
Corporate Trustee, the Panel Members, the Fund or any Shareholder to submit to a
judicial or other accounting or otherwise elect any judicial,  administrative or
executive supervisory proceeding applicable to non-business trusts.
     15.10  Binding  Effect.  This  Declaration  shall be binding upon and shall
inure to the  benefit of the  Shareholders  (and their  spouses if the Shares of
such  Shareholders  shall be  community  property)  as well as their  respective
heirs,  legal   representatives,   successors  and  assigns.   This  Declaration
constitutes  the entire  agreement  among the Fund, the Corporate  Trustee,  the
Panel Members,  and the Shareholders with respect to the formation and operation
of the Fund, other than the Subscription Agreement entered into between the Fund
and each Investor and the Management Agreement.
     15.11  Headings.  Headings of  Articles  and  Sections  used herein are for
descriptive  purposes  only and shall not  control or alter the  meaning of this
Declaration as set forth in the text.
     15.12 Tax Matters Partner. Power VI Corp. is the tax matters partner of the
     Fund under Code Section  6221. IN WITNESS  WHEREOF,  the  undersigned  have
     signed this Declaration as of the date first above written.

RIDGEWOOD ENERGY HOLDING CORPORATION,
Grantor and Corporate Trustee

By: /s/     ROBERT E. SWANSON
     Robert E. Swanson, President


RIDGEWOOD POWER CORPORATION,
Managing Shareholder
By: /s/     ROBERT E. SWANSON
     Robert E. Swanson, President


RIDGEWOOD POWER VI CORPORATION,
Managing Shareholder
By: /s/     ROBERT E. SWANSON
     Robert E. Swanson, President

EX-10.A

     STOCK AND WARRANT PURCHASE AGREEMENT

THIS  AGREEMENT (the  "Agreement")  is entered into as of the 29th day of March,
1999 by and between  ZAP Power  Systems,  a  California  corporation  having its
principal place of business at 117 Morris Street,  Sebastopol,  California 95472
("Seller"),  and Ridgewood ZAP, LLC, a Delaware limited liability company having
its principal  place of business at 947 Linwood  Avenue,  Ridgewood,  New Jersey
07450 ("Buyer").

Preliminary Statement.  Buyer desires to purchase and acquire and Seller desires
to issue and sell to Buyer a variable number of shares of Common Stock of Seller
(depending  on the price of the  stock in the open  market)  and a  Warrant  for
Common Stock of Seller in the amount, for the consideration and on the terms and
conditions set forth in this Agreement.

Agreement.  In consideration of the mutual covenants and agreements contained in
this  Agreement  and other good and  valuable  consideration,  the  receipt  and
sufficiency of which is hereby  acknowledged,  the parties covenant and agree as
follows:

     ARTICLE ONE
     Definitions and Construction

1.1 Definitions. The following terms shall have the meanings set forth below:

"Affiliate"  shall mean,  when used with  reference to a specified  person,  any
person that  directly or  indirectly  controls or is  controlled  by or is under
common control with the specified person.  For purposes of this definition,  the
term "person" means an  individual,  corporation,  partnership,  proprietorship,
limited liability  company,  limited liability  partnership or other entity, and
the term "control"  means the power to direct the management and policies of the
specified person.

"Articles of  Incorporation"  means the Articles of Incorporation of Seller,  as
amended, dated September 25, 1994.

"Audited Balance Sheet" shall have the meaning given in Section 4.14.

"Balance Sheets" shall have the meaning given in Section 4.14.

"Buyer" shall have the meaning given in the first paragraph hereof.

"Closing" shall have the meaning given in Section 2.4.

"Closing Date" shall have the meaning given in Section 2.4.

"Closing Documents" mean this Agreement, the Warrant and the Investor's Rights 
Agreement.

"Contract" shall have the meaning given in Section 4.27.

"Environmental Laws" means,  collectively,  all federal,  state, local and other
applicable  laws,  statute  and  regulation,  which in any way relate to health,
safety or the environment.

"Financial Statements" shall have the meaning given in Section 4.14.

"GAAP"  means  generally  accepted  accounting  principles,  applied  on a basis
consistent with Seller's most recent audited financial statements.

"Governmental Approval" means any applicable authorization,  approval,  consent,
license, lease, ruling, permit, tariff, certification, exemption, notice, filing
or registration by or with any Governmental Person.

"Governmental Person" means any federal,  state, local or other government,  any
political  subdivision  or  any  governmental,  judicial,  public  or  statutory
instrumentality,  tribunal, agency (including those pertaining to health, safety
or the  environment),  authority,  body or entity,  or other regulatory  bureau,
authority, body or entity having legal jurisdiction over the matter or Person in
question.

"Governmental  Rule" means any applicable  federal,  state,  local or other law,
statute,  treaty, rule, regulation,  ordinance,  order, code, judgment,  decree,
directive,  injunction, writ or similar action or decision duly implementing any
of the foregoing by any Governmental  Person, but does not include  Governmental
Approvals.

"Hazardous  Substances" means any material which by reason of its composition or
characteristics  is a hazardous  substance,  toxic  substance or hazardous waste
under any  Environmental  Law or which would give rise to liability to the owner
or operator of the Facility under any Environmental Law.

"Investment Company Act" means the Investment Company Act of 1940, as amended.

"Investor's Rights Agreement" means the Investor's Rights Agreement of even date
herewith  by and between  Seller and Buyer  substantially  in the form  attached
hereto as Exhibit A.

"Knowledge,"  "known" and "knows,"  whether or not  capitalized  herein and when
used with respect to matters covered by any representation,  warranty,  covenant
or other  provision of this Agreement  applicable to any party to this Agreement
means the actual knowledge and beliefs of each of the officers of such party who
are responsible for such matters.

"Laws" shall mean all federal, state, territorial,  municipal or local statutes,
regulations or by-laws  applicable to the parties hereto,  including all orders,
notices, rules, decisions,  codes, guidelines,  policies,  directions,  permits,
approvals,  licenses and similar authorizations  issued,  rendered or imposed by
any level of government including any ministry,  department or administrative or
regulatory agency or authority.

"Licensed Intellectual Property" has the meaning given in Section 4.24.

"Lien" means any lien, mortgage,  encumbrance,  charge,  pledge, lease, security
interest,  claim, option or right of any kind (including any conditional sale or
other title retention agreement).

"Person" shall mean a natural person, corporation,  limited partnership, general
partnership,  joint stock company, joint venture,  association,  company, trust,
bank, trust company, and trust, business trust or other organization, whether or
not a legal  entity,  or a  government  or agency or any  political  subdivision
thereof.

"Purchase Price" shall have the meaning given in Section 2.2 of this Agreement.

"Schedules" means the schedules appended to this Agreement.

"Securities"  shall mean the Shares and all Common Stock of the Company issuable
upon exercise of the Warrant.

"Securities Act" means the Securities Act of 1933, as amended, and all rules and
regulations adopted thereunder.

"Seller" shall have the meaning given in the first paragraph hereof.

"Seller's Intellectual Property" has the meaning given in Section 4.23.

"Shares" shall have the meaning given in Section 2.1.

"Tax Liabilities" means all income,  excise, sales,  unemployment,  employer and
employee withholding, social security, occupation,  franchise, customs and other
taxes,  duties or charges that are levied,  assessed or imposed upon, or accrued
or attributed to the operation of Seller.

"Tax Returns" has the meaning set forth in Section 4.17(a).

"Unaudited Balance Sheet" shall have the meaning given in Section 4.14.

"Warrant" shall have the meaning given in Section 2.3.

1.2 Interpretations.2 Interpretations. For purposes of this Agreement, except as
otherwise  expressly  provided  or  unless  the  context  otherwise  necessarily
requires:

(a)       the terms "herein," "herewith" and "hereof" are references to this 
Agreement, taken as a whole;

(b) the terms  "include,"  "includes"  and  "including"  shall mean  "including,
without limitation";

(c) references to a "Section,"  "Article",  "Exhibit" or "Schedule" shall mean a
Section, Article, Exhibit or Schedule of this Agreement, as the case may be;

(d)  references to a given  agreement,  instrument or other  document shall be a
reference  to that  agreement,  instrument  or  other  document  (including  all
exhibits and schedules) as modified, amended,  supplemented and restated through
the date as of which such reference is made;

(e)      references to a Person includes its permitted successors and permitted 
assigns;

(f) the singular  shall include the plural and the  masculine  shall include the
feminine and neuter, and vice versa;

(g) reference to a given  Governmental  Rule is a reference to that Governmental
Rule as amended, modified,  supplemented or restated as of the date on which the
reference is made; and

(h)  accounting  terms  have  the  meaning  given to them by GAAP  applied  on a
consistent basis by the Person to which they relate.

ARTICLE TWO
     Agreement to Sell; Actions at Closing

2.1 Agreement to Purchase and Sell the Shares. Upon the terms and subject to the
conditions  set  forth  in this  Agreement  and  upon  the  representations  and
warranties made herein, Seller shall sell, grant, convey,  assign,  transfer and
deliver to Buyer,  and Buyer shall purchase and acquire from Seller,  the number
of shares of Common  Stock of  Seller,  having no par  value,  with the  rights,
preferences,   privileges  and   restrictions  set  forth  in  the  Articles  of
Incorporation  (the "Shares") that result from the division of $2,050,000 by the
number equal to  seventy-five  percent (75%) of the average closing price of the
Shares as reported on the "Bulletin Board" for the twenty (20) days prior to the
date of the Closing,  subject to a maximum cap on the average  closing  price of
$4.50 per share and a minimum  floor on the average  closing  price of $3.50 per
share.  Proceeds of  Ridgewood's  investment  shall be used in  accordance  with
Schedule 2.1 to this Agreement.

2.2 Purchase  Price.  In  consideration  for issuance of the Shares and Warrant,
Buyer agrees to pay to Seller Two Million Fifty  Thousand  Dollars  ($2,050,000)
(the "Purchase Price") on the Closing Date.

2.3 Warrant.  Buyer is  purchasing  a Warrant in form and  substance as attached
hereto as Exhibit B. The  warrant  must be  exercised  in whole for Two  Million
Dollars ($2,000,000) in the event Seller meets the milestones  prescribed in the
Warrant.  The period in which the  milestones  must be met ends on December  29,
1999.  Buyer  may,  at its  option,  exercise  the  Warrant at any time prior to
December 29, 1999.

The  number  of Shares to be  received  upon  exercise  of the  Warrant  will be
determined by dividing Two Million  Dollars  ($2,000,000)  by 85% of the average
closing  price of the shares for the twenty  (20) days prior to the  exercise of
the Warrant,  subject to a maximum cap on the average closing price of $4.50 per
share and a minimum floor on the average closing price of $3.50 per share.

2.4 Closing.  The closing of the purchase and sale of the Shares provided herein
(the  "Closing")  will be at the office of seller  located at 117 Morris Street,
Sebastopol,  California at 10:00 a.m., local time, on April 15, 1999, or at such
other  place or at such  other  date and time as Seller  and Buyer may  mutually
agree.  Such date and time of  Closing  is herein  referred  to as the  "Closing
Date."

2.5     Closing Actions.  Subject to the conditions set forth in this Agreement,
 at the Closing:

(a)     Seller shall:

(i)     execute and deliver to Buyer this Agreement and the other Closing 
Documents to be signed by it;

(ii)  deliver  to  Buyer  an  original  stock  certificate  executed  by  Seller
evidencing the shares issued in the name of Buyer or its designee; and

(iii) deliver to Buyer or its designee the original  Warrant  executed by Seller
issued in the name of Buyer or its designee.

(b)     Buyer shall:

(i)      execute and deliver to Seller this Agreement and the other Closing 
Documents to be signed by it; and

(ii) pay the Purchase Price to Seller by wire transfer to an account  designated
by Seller. (iii)
     ARTICLE THREE
     Conditions to Closing

3.1 Buyer's  Conditions of Closing.  The obligation of Buyer to purchase and pay
for the Shares and the  Warrant  shall be  subject to and  conditioned  upon the
satisfaction at the Closing of each of the following conditions:

(a) All  representations  and  warranties of Seller  contained in this Agreement
shall be true and correct as of the Closing Date and Seller shall have performed
all  agreements  and covenants  and  satisfied all  conditions on its part to be
performed  or  satisfied  by the  Closing  Date  pursuant  to the  terms of this
Agreement.

(b) Seller shall have  completed the actions  referenced  in Sections  2.4(a) of
this Agreement to the  satisfaction of Buyer, and Seller shall have performed in
all material  respects all of its covenants and agreements  under this Agreement
and the other Closing Documents prior to the Closing Date.

(c) There  shall  have been no  material  adverse  change  since the date of the
Unaudited  Balance  Sheet in the  financial  condition,  business  or affairs of
Seller,  and Seller shall not have  suffered any material  loss  (whether or not
insured) by reason of physical  damage caused by fire,  earthquake,  accident or
other calamity which substantially  affects the value of its assets,  properties
or business.

(d) Seller shall have delivered to Buyer:

(i)     copies of all instruments, agreements, certificates and other documents 
referenced in the Schedules;

(ii)  evidence of all  necessary  corporate  action of Seller to  authorize  and
approve the  execution,  delivery and  performance  of the Closing  Documents by
Seller and all other  documents  and  agreements  contemplated  thereby  and the
consummation of the transactions contemplated thereby;

(iii)     a certificate of incumbency of its officers executing the Closing 
Documents;

(iv) a certificate of good standing from the office of the Secretary of State of
California and the department of taxation for each  jurisdiction in which Seller
is required to qualify to do business or file a Tax Return; and

(v) such other documents as Buyer may reasonably  request in connection with the
consummation of the  transactions  contemplated at the Closing.  (e) Buyer shall
have  received  from  Seller's  counsel  opinion with respect to the matters set
forth in Exhibit C attached hereto,  addressed to Buyer,  dated the Closing Date
and in form and substance satisfactory to Buyer.

(f) Seller shall have obtained all  government  consents,  if any,  necessary to
allow the transaction to be completed.

(g) No action or proceeding  before any court or government body will be pending
wherein  a  judgment,  decree or order  would  prevent  any of the  transactions
contemplated  hereby or cause  such  transactions  to be  declared  unlawful  or
rescinded.

(h) All proceedings to be taken by Seller in connection with the consummation of
the Closing on the Closing Date and the other transactions  contemplated  hereby
and all  documents  required to be  delivered by Seller in  connection  with the
transactions  contemplated  hereby shall be reasonably  satisfactory in form and
substance to Buyer.

(i) The  management  team of Seller  shall  have  entered  into  employment  and
non-competition agreements and invention assignments and proprietary information
agreements acceptable to Buyer.

(j) Seller  shall have  delivered a  certificate  to Buyer  certifying  that all
conditions  set forth in this  Section  3.1 have been  satisfied  (except to the
extent waived by Buyer in writing).

Any condition specified in this Section 3.1 may be waived by Buyer provided that
no such waiver will be effective  unless it is set forth in writing  executed by
Buyer.

3.2 Seller's Conditions of Closing.  The obligation of Seller to sell the Shares
shall be subject to and conditioned upon the satisfaction at the Closing of each
of the following conditions:

(a) All  representations  and  warranties of Buyer  contained in this  Agreement
shall be true and correct as of the Closing Date and Buyer shall have  performed
all  agreements  and covenants  and satisfied all  conditions on its part to the
performed  or  satisfied  by the  Closing  Date  pursuant  to the  terms of this
Agreement.

(b) Buyer shall have completed the actions  referenced in Section 2.4(b) of this
Agreement to the satisfaction of Seller and shall have performed in all material
respects all of its covenants and agreements  under this Agreement and the other
Closing Documents prior to the Closing Date.

(c) Buyer shall have delivered to Seller:
(i)  resolutions  of  its  Manager  authorizing  the  execution,   delivery  and
performance of the Closing  Documents and of all other  agreements  contemplated
thereby  to which  Buyer is a party  and the  consummation  of the  transactions
contemplated thereby;

(ii) such other  documents as Seller may reasonably  request in connection  with
the consummation of the transactions contemplated at the Closing.

(d) No action or proceeding  before any court or government body will be pending
wherein  a  judgment,  decree or order  would  prevent  any of the  transactions
contemplated  hereby or cause  such  transactions  to be  declared  unlawful  or
rescinded.

(e) All proceedings to be taken by Buyer in connection with the  consummation of
the Closing on the Closing Date and the other transactions  contemplated  hereby
and all  documents  required to be  delivered  by Buyer in  connection  with the
transactions  contemplated  hereby shall be reasonably  satisfactory in form and
substance to Seller.

(f) Buyer shall have a delivered a  certificate  to Seller  certifying  that all
conditions  set forth in this  Section  3.2 have been  satisfied  (except to the
extent waived by Seller in writing).

Any condition specified in this Section 3.2  may be waived by Seller provided 
that no such waiver will be effective unless it is set
forth in writing executed by Seller.

     ARTICLE FOUR
     Representations and Warranties of Seller

As of the date of this  Agreement and the Closing Date,  Seller  represents  and
warrants to Buyer as follows:

4.1 Organization and Authority.  Seller is a corporation validly existing and in
good  standing  under the laws of the State of  California,  with full power and
authority  to enter into and perform  this  Agreement  and the other  agreements
contemplated hereby to which it is a party. Seller is duly licensed or qualified
to do  business  as a  foreign  corporation  and  is in  good  standing  in  all
jurisdictions  in which the  character of the  properties  owned or leased by it
therein or in which the  transaction  of its business  makes such  qualification
necessary,  except for  jurisdictions  where  failure  to so  qualify  could not
reasonably  be expected to have a material  adverse  effect on the  business and
operations of the Seller taken as a whole.  Seller has all  requisite  corporate
power and  authority  to own its  properties,  to carry on its  business  as now
conducted,  and to enter into and  perform  its  obligations  under the  Closing
Documents.

4.2 Authorization;  Binding Effect. Seller has taken all corporate actions which
are  necessary to authorize  the  execution,  delivery and  performance  of this
Agreement and the other agreements  contemplated  hereby to which it is a party,
and the consummation of the transactions  contemplated hereby and thereby.  This
Agreement  and the other  agreements  contemplated  hereby to which  Seller is a
party constitute the legal and binding obligations of such party, enforceable in
accordance with their respective  terms,  except as such  enforceability  may be
limited  by  applicable  bankruptcy,  insolvency,  moratorium  or  similar  laws
affecting   creditors'  rights  and  the  enforcement  of  debtors'  obligations
generally and by general principles of equity, regardless of whether enforcement
is pursuant to a proceeding in equity or at law.

4.3 No Breach;  No Default.  Neither the  execution,  delivery or performance of
this Agreement or the other agreements  contemplated hereby to which Seller is a
party, nor the consummation of the transactions  contemplated  hereby or thereby
by Seller,  (a)  conflicts  with or results in any breach of, (b)  constitutes a
default  under,  (c) results in a violation of, or (d) gives any third party any
right to  accelerate  any  obligation  under any Contract (as defined  below) to
which Seller is a party or by which any of its assets are bound.

4.4 No Bankruptcy or Insolvency.  Seller has not .4 No Bankruptcy or Insolvency.
Seller has not filed any voluntary  petition in bankruptcy or been adjudicated a
bankrupt or insolvent,  filed any petition or answer seeking any reorganization,
liquidation,  dissolution  or  similar  relief  under  any  federal  bankruptcy,
insolvency,  or other debtor relief law, or sought or consented to or acquiesced
in the appointment of any trustee, receiver, conservator or liquidator of all or
any substantial part of its properties.  No court of competent  jurisdiction has
entered an order,  judgment or decree  approving a petition filed against Seller
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any federal  bankruptcy act, or other debtor
relief law, and no other  liquidator  has been  appointed of Seller or of all or
any substantial part of its properties.

4.5 No  Litigation.  There  are no  actions,  suits or  proceedings  of any type
pending or, to the  knowledge  of Seller,  threatened,  against  Seller which if
adversely  determined  could have an adverse  effect on the Seller's  ability to
perform  the  obligations  contemplated  under  the  Closing  Documents.  To the
knowledge of Seller, Seller is not operating under, or subject to, or in default
with respect to, any order, writ,  injunction or decree affecting the ability of
Seller to enter into this  Agreement  or perform  its  obligations  contemplated
under the Closing Documents to which it is a party.

4.6      Investment Company.  Seller is not, and is not controlled by, an 
"Investment Company" within the meaning of the Investment
Company Act.

4.7 Governmental  Consents and Notices. No Governmental Approval is necessary or
appropriate  in  connection  with the  execution  and delivery by Seller of this
Agreement  or  the  other  Closing  Documents  to  which  it is a  party  or the
consummation by Seller of the transactions contemplated hereby and thereby.

4.8 Additional  Consents and Notices.  No filing,  registration,  qualification,
notice,  consent,  approval  or  authorization  to,  with or from any  Person is
necessary or appropriate in connection with the execution and delivery by Seller
of this Agreement or the other Closing  Documents to which it is a party, or the
consummation by Seller of the transactions contemplated hereby and thereby.

4.9 No Brokers. Except as previously disclosed to Buyer regarding the fees to be
paid to Preferred Capital Equities Corporation and Harry Kraatz,  Seller has not
entered into any contract,  arrangement or understanding with any person or firm
which may result in the obligation of Seller to pay any finder's fees, brokerage
or  agent's   commissions  or  other  like  payments  in  connection   with  the
negotiations  leading to this Agreement or the  consummation of the transactions
contemplated hereby, and Seller is not aware of any claim or basis for any claim
for payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection  with the  negotiations  leading to this Agreement or the
consummation of the transactions contemplated hereby.

4.10 Compliance with Laws. Seller is not in violation of or in default under any
order of any court,  governmental  authority or arbitration board or tribunal to
which Seller is a party or is subject. To the Seller's knowledge, except for any
violations  that  individually  or in the  aggregate  would not have a  material
adverse impact on the Seller's  business,  Seller is in compliance with all Laws
applicable to it, its business operations and its properties,  including without
limitation Environmental Laws. Seller has made all filings,  registrations,  has
obtained all governmental  consents,  permits and other authorizations,  and has
taken all actions  required by  applicable  Laws or  governmental  approvals and
regulations in connection with its business as now conducted.

4.11 Business Activities;  Affiliates. Seller has not engaged in any business or
activities other than the manufacture, sale and marketing of two and three wheel
bicycles  and  scooters  and  components  therefor.  Seller  does  not  have any
Affiliates  other  than its  individual  shareholders,  which are  disclosed  on
Schedule 4.18 hereto.

4.12 Jurisdiction.  California is the only jurisdiction in which Seller is doing
business  to the  extent  necessary  to be  qualified  and  Seller is  presently
licensed or qualified to do business in  California.  Seller has not been denied
admission to conduct any type of business in any jurisdiction in which it is not
presently admitted, has not had its license or qualification to conduct business
in any  jurisdiction  revoked or  suspended,  and has not been  involved  in any
proceeding to revoke or suspend a license or qualification.

4.13 Corporate  Records.  The corporate minute book of Seller delivered to Buyer
at Closing  contains true and complete copies of the articles of  incorporation,
bylaws,  and the  minutes of all  meetings of  directors  and  shareholders  and
consent   resolutions   reflecting   all  actions  taken  by  the  directors  or
shareholders without a meeting,  from the date of incorporation of Seller to the
Closing Date.  The officers and directors of Seller are as set forth in Schedule
4.13.

4.14 Financial  Statements.  Seller has furnished to Buyer (a) an audited income
statement  and balance  sheet and notes  thereto of Seller as of the fiscal year
ended December 31, 1998 (the "Audited Balance Sheet"),  (b) an audited statement
of operations of Seller for the fiscal year ended  December 31, 1998, and (c) an
unaudited  income  statement  and balance sheet and notes thereto for the period
ending   ________________   (the  "Unaudited  Balance  Sheet").   The  documents
referenced  in (a),  (b) and  (c)  above  are  collectively  referred  to as the
"Financial  Statements."  The Audited  Balance Sheet and the  Unaudited  Balance
Sheet are  collectively  referred  to as the  "Balance  Sheets."  The  Financial
Statements  present  fairly the  financial  condition  of Seller as of the dates
indicated,  and the  results of its  operations  for the periods  indicated,  in
accordance with GAAP consistently applied, except as otherwise stated therein.

4.15 Indebtedness;  Undisclosed Liabilities. Schedule 4.15 sets forth a true and
complete schedule of all of Seller's indebtedness for borrowed money,  including
amounts  owed  to  shareholders   of  Seller.   Seller  has  no  liabilities  or
obligations,  either accrued,  absolute,  contingent or otherwise, which are not
reflected or provided for in the Financial  Statements,  except (i)  liabilities
not in an excess  of  $25,000  in the  aggregate  arising  after the date of the
Unaudited  Balance Sheet which are incurred in the ordinary  course of business,
and  none  of  which  is  materially  adverse,  and  (ii)  as and to the  extent
specifically described in Schedule 4.15 attached hereto.

4.16     No Adverse Changes.  Except as disclosed on Schedule 4.16,  since the 
date of the Unaudited Balance Sheet, Seller has not:

(a)      except as disclosed in Section 4.15 above, incurred any obligation or 
liability (fixed or contingent);

(b) discharged or satisfied any lien,  security  interest or encumbrance or paid
any obligation or liability  (fixed or  contingent),  other than in the ordinary
course of business and consistent with past practice;

(c)  mortgaged,  pledged or  subjected to any lien,  security  interest or other
encumbrance any of its assets or properties.

(d) transferred, leased or otherwise disposed of any of its assets or properties
except  for a  fair  consideration  in  the  ordinary  course  of  business  and
consistent  with past practice or, except in the ordinary course of business and
consistent with past practice, acquired any assets or properties;

(e) canceled or compromised any debt or claim,  except in the ordinary course of
business and consistent with past practice; (f) waived or released any rights of
material value;

(g)  except  pursuant  to  those  contracts  listed  on  Schedule  4.25  hereto,
transferred  or granted  any rights  under any  concessions,  leases,  licenses,
agreements,  patents,  inventions,  trademarks,  trade names,  service  marks or
copyrights or with respect to any know-how;

(h) made or  granted  any wage or  salary  increase  applicable  to any group or
classification  of employees  generally,  entered into any  employment  contract
with, or made any loan to, or entered into any material transaction of any other
nature with, any officer or employee of Seller;

(i) entered into any transaction, contract, or commitment, except (i)
contracts listed on Schedules 4.24, 4.25 and 4.27 hereto and (ii) this
Agreement and the transactions contemplated hereby;

(j)  suffered any  casualty  loss or damage  (whether or not such loss or damage
shall have been covered by insurance)  which affects in any material respect its
ability to conduct business; or

(k) declared any  dividends or bonuses,  or authorized or affected any amendment
or  restatement  of the  articles of  incorporation  (except for the Articles of
Incorporation)  or  by-laws  of Seller or taken any  steps  looking  toward  the
dissolution or liquidation of Seller.

4.17  Taxes.  Seller  (a) has duly and  timely  filed or  caused to be filed all
federal,  state,  local and foreign tax returns including,  without  limitation,
consolidated  and/or  combined tax returns)  required to be filed by it prior to
the date of this  Agreement  which  relate to Seller  or with  respect  to which
Seller is liable or to which the assets or  properties  of Seller are in any way
subject (the "Tax Returns") (b) has paid or fully accrued for all taxes shown to
be due and  payable  under the laws and  regulations  pursuant  to which the Tax
Returns were filed,  and (c) has properly  accrued for all such taxes accrued in
respect of Seller or the assets and properties of Seller for periods  subsequent
to the periods covered by the Tax Returns. No deficiency in payment of taxes for
any period has been  asserted by any taxing body and  remains  unsettled  at the
date of this  Agreement.  Copies of all of Seller's  Tax Returns  have been made
available for inspection by Buyer.

4.18  Capitalization.   The  Seller's  authorized  capital  consists  solely  of
10,000,000 shares of Common Stock without par value.  There are 2,710,321 shares
of Common Stock outstanding prior to the Closing.  Assuming complete exercise of
all warrants,  options and other rights, including conversion of preferred stock
the total  outstanding  common stock of Seller would consist of 3,762,016 shares
of Common  Stock.  Schedule  4.18(A)  sets forth a true,  accurate  and complete
capitalization  table setting forth (i) all outstanding capital stock of Seller,
including  the name and address of the holders of more than 5% of the issued and
outstanding  stock, the class or series issued,  the price paid, and the date of
issuance; (ii) all outstanding warrants, options,  subscriptions other rights to
purchase  capital  stock of  Seller  or any note or  security  convertible  into
capital stock of the Seller,  including the name and address of the holder,  the
class or series  issuable,  the exercise  price,  and the expiration date of the
instrument;  and (iii) the  common  stock of Seller  reserved  for  issuance  to
holders of instruments  referenced in Subsection (ii) above. Except as set forth
on  Schedule  4.18(A),  Seller has not  authorized  or issued any other class or
series of capital stock and there are no outstanding rights, warrants,  options,
subscriptions,  agreements  or  commitments  giving  anyone any right to require
Seller to sell or issue any capital  stock or other  equity  interest in Seller.
Except as set forth on  Schedule  4.18(B),  neither  Seller,  nor,  to  Seller's
knowledge, any of Seller's shareholders are party to any shareholders agreements
or other agreements providing voting rights,  rights of first refusal or similar
rights.  All  options  to  purchase  stock  granted  by  Seller  are in the form
previously delivered to Buyer.

4.19 Title to Shares.  The Shares are duly  authorized,  and,  upon  issuance to
Buyer  under  this  Agreement,   shall  be  validly   issued,   fully  paid  and
nonassessable. Based in part on the representations and warranties made by Buyer
in Article 5 hereof,  the Shares are subject to no restrictions  with respect to
transferability  to Buyer in accordance with the terms of this  Agreement.  Upon
issuance of the Shares to Buyer by Seller in  accordance  with the terms of this
Agreement,  Buyer will receive good and  marketable  title to all of the Shares,
free  and  clear  of  all  security  interests,  liens,  encumbrances,  charges,
assessments,  restrictions  and  adverse  claims,  except  as set  forth  in the
Investor's Rights Agreement, the Articles of Incorporation and applicable law.

4.20 Title to Property and Assets.  Seller has good and marketable  title to all
of the  properties  and  assets  used  by it in  the  conduct  of  its  business
(including,  without  limitation,  the  properties  and assets  reflected in the
Balance  Sheets except any thereof  since  disposed of for value in the ordinary
course  of  business).  Except  as set  forth  on  Schedule  4.20,  none of such
properties or assets is subject to a contract of sale not in the ordinary course
of business, or subject to security interests, mortgages, encumbrances, liens or
charges,  except for (i)  statutory  liens for the payment of current taxes that
are not yet delinquent and (ii) liens, encumbrances and security interests which
arise in the  ordinary  course of business  (other than in  connection  with the
incurrence of debt by the Seller),  and which, in the case of (i) or (ii) above,
do not affect material properties and assets of the Seller.

4.21 Condition of Personal Property. All tangible personal property,  equipment,
fixtures and inventories  included within the assets of Seller or required to be
used  in the  ordinary  course  of  business  are in  good,  merchantable  or in
reasonably repairable condition and are suitable for the purposes for which they
are used.  No value in  excess  of  applicable  reserves  has been  given to any
inventory  with  respect  to  obsolete  or  discontinued  products.  All  of the
inventories  and  equipment,  including  equipment  leased to  others,  are well
maintained and in good operating  condition.  4.22 Real Property.  Schedule 4.22
contains a list of all real  property  owned by Seller or in which  Seller has a
leasehold  or other  interest  and of any Lien  thereupon.  Schedule  4.22  also
contains a legal  description of all such real property and the principal  terms
(including rents, termination dates and renewal conditions) of any rental, lease
or other  arrangements  affecting  such  property.  The  improvements  upon such
properties and use thereof by Seller  conforms to all applicable  land use laws,
regulations  and  ordinances  and  any  applicable   deed,   easement  or  lease
restrictions.

4.23  Seller's  Intellectual  Property.  Schedule 4.23 sets forth a list of each
patent, trademark, servicemark, tradename, copyright, trade secret or other item
of intellectual  property,  including any and all registrations and applications
therefor, which are owned by Seller. In each case, the registration number, date
of issuance or  registration,  and a brief  description  of such property is set
forth in Schedule 4.23. The property  referenced in Schedule 4.23, together with
all  designs,   methods,   inventions  and  know-how  related  thereto  and  all
trademarks, trade names, service marks, and copyrights claimed or used by Seller
which  have  not  been  registered  is  hereinafter  referred  to  as  "Seller's
Intellectual Property."

4.24 Licensed  Intellectual  Property.  Schedule 4.24 lists all licenses held by
Seller  authorizing  Seller  to  use  computer  software,  patents,  trademarks,
servicemarks,   tradenames,   copyrights,   trade  secrets  or  other  items  of
intellectual   property   used  or  useful  to  Seller's   business   ("Licensed
Intellectual Property").

4.25  Licenses and Rights  Granted by Seller.  Schedule 4.25 lists any licenses,
purchase options or other interests held by any Person in Seller's  Intellectual
Property.

4.26 Intellectual Property Rights and Interests.  Seller's Intellectual Property
and the Licensed  Intellectual  Property constitutes all such proprietary rights
which are owned or held by Seller and which are reasonably necessary to, or used
in the  conduct  of, the  business  of Seller.  Seller has taken all  reasonably
necessary  steps  required  under  applicable  law to protect its trade secrets.
Seller owns or has valid  rights to use Seller's  Intellectual  Property and the
Licensed  Intellectual  Property  without  conflict  with the  rights of others.
Except as set forth in Schedule 4.26, no person or  corporation  has made or, to
the  knowledge  of Seller,  threatened  to make any claim that  Seller's  use of
Seller's  Intellectual  Property  and the Licensed  Intellectual  Property is in
violation of any license held by Seller or infringes  any  proprietary  right or
interest  of any third  party.  To the  knowledge  of Seller,  no third party is
infringing upon any of Seller's  Intellectual Property or is in violation of any
license to use Seller's  Intellectual  Property granted by Seller.  Seller holds
Seller's  Intellectual  Property and the Licensed Intellectual Property free and
clear of all Liens.

4.27 Contracts and Agreements. Schedule 4.27 sets forth a description of each of
the  following,  and,  in each case,  Seller has  furnished  Buyer with true and
complete  copies  of  all  documents  and  complete  descriptions  of  all  oral
agreements  and  understandings,  if  any,  referred  to in  this  Section  4.27
(collectively,  the "Contracts"): (a) deeds, lease agreements or other documents
relating to the ownership or lease of real property;

(b)  equipment  leases or other  documents  permitting  Seller  to use  personal
property owned by a third party (other than leases which in the aggregate do not
require  payment  in excess  of  $10,000  per year and  which are not  otherwise
material to the operation, affairs or prospects of Seller);

(c) all notes,  loan agreements,  indentures,  commitments or debt  arrangements
under which Seller has incurred a debt  obligation  to any person or under which
Seller is entitled to borrow money from any Person;

(d) all collective bargaining agreements,  employment and consulting agreements,
executive  compensation  plans,  bonus  plans,  profit-sharing  plans,  deferred
compensation  agreements,  employee pension or retirement plans,  employee stock
purchase and stock option plans, group life insurance, hospitalization insurance
or other plans or  arrangements  providing  for benefits to employees of Seller;
and

(e) any other  contracts,  understandings  and  commitments to which Seller is a
party, or to which it or any of its assets or properties are subject (other than
contracts,  understandings  and  commitments  which do not  involve  payments in
excess of $10,000  individually  or in excess of $10,000  in the  aggregate  and
which in any event are not  material to the  operation,  affairs or prospects of
Seller)

4.28 No Breach or Default.  Seller is not in default under any Contract to which
it is a party or by which it is bound,  nor has any event occurred which,  after
the giving of notice or the passage of time or both,  would constitute a default
under any such  Contract,  which default could  reasonably be expected to have a
materially  adverse  effect on the Company's  business,  financial  condition or
assets.  Seller has no reason to believe that the parties to such Contracts will
not fulfill their  obligations  under such Contracts in all material respects or
are threatened with insolvency.

4.29 Labor  Controversies.  Seller is not a party to any  collective  bargaining
agreement.  There are no disputes or controversies between Seller and any of its
employees which might reasonably be expected to materially  adversely affect the
conduct of its  business,  or any  unresolved  labor union  grievances or unfair
labor  practice or labor  arbitration  proceedings  pending or, to the  Seller's
knowledge,  threatened relating to its business, and there are no organizational
efforts  presently  being  made or, to the  Seller's  knowledge,  or  threatened
involving any of Seller's employees. Seller has not received notice of any claim
that Seller has not complied with any laws relating to the  employment of labor,
including  any  provisions   thereof  relating  to  wages,   hours,   collective
bargaining,  the payment of social security and similar taxes,  equal employment
opportunity,  employment discrimination and employment safety, or that Seller is
liable for any arrears of wages or any taxes or penalties  for failure to comply
with any of the foregoing.

4.30  Litigation.  Except as set forth in Schedule  4.30,  there are no actions,
suits or  proceedings  with  respect  to Seller  involving  claims by or against
Seller or Seller which are pending,  or to the  knowledge of Seller,  threatened
against  Seller,  at law or in  equity,  or  before  or by any  federal,  state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.  To the knowledge of Seller,  no basis for any action,  suit or
proceeding exists, and there are no orders, judgments, injunctions or decrees of
any court or governmental  agency with respect to which Seller has been named or
to which Seller is a party, which apply, in whole or in part, to the business of
Seller,  or to any of the assets or properties of Seller, or the Shares or which
would  result in any  material  adverse  change in the  business or prospects of
Seller.

4.31 Environmental Matters. Without limiting the generality of Section 4.10, (i)
Seller and its  properties  are in compliance in all material  respects with all
Environmental Laws, and (ii) during the time that Seller has leased or owned its
properties or owned or operated any facilities,  there has not been any release,
emission,  seepage,  disposal,  spill or discharge at or to any property  owned,
leased or operated by Seller,  whether  onto or into the ground,  water,  air or
otherwise,  of any Hazardous Substance,  and to the best of knowledge of Seller,
none is reasonably expected to occur imminently,  other than those which (A) are
not  material,  (B) are  permitted  under  all  applicable  Environmental  Laws,
Governmental  Approvals  and  Governmental  Rules,  and (C)  are not  reasonably
expected to have any material adverse impact on Seller or its properties.

4.32 Bank Accounts. Schedule 4.32 also sets forth the name of each bank, savings
institution or other person with which Seller has an account or safe deposit box
and the names and  identification of all persons  authorized to drawn thereon or
to have access thereto.

4.33  Insurance.  Schedule 4.33 contains a list and description of all insurance
policies  of any type (other than title  insurance  policies)  which are held by
Seller (or which otherwise insure Seller's  properties)  specifying the insurer,
amount of coverage,  type of  insurance,  policy  number and any pending  claims
thereunder.  Except  as  disclosed  on  Schedule  4.31,  no  claim  of any  type
(exceeding  $5,000)  has been  made and  remains  unresolved  under  any of such
policies.

     ARTICLE FIVE
     Representations and Warranties of Buyer

As of the date of this  Agreement and the Closing  Date,  Buyer  represents  and
warrants to Seller as follows:

5.1 Organization  and Authority.  Buyer is a limited  liability  company validly
existing and in good standing under the laws of the State of Delaware, with full
power and  authority  to enter into and  perform  this  Agreement  and the other
agreements contemplated hereby to which it is a party.

5.2 Authorization; Binding Effect. Buyer has taken all limited liability company
actions which are necessary to authorize the execution, delivery and performance
of this Agreement and the other agreements  contemplated hereby to which it is a
party, and the consummation of the transactions contemplated hereby and thereby.
This Agreement and the other agreements  contemplated hereby to which Buyer is a
party constitute the legal and binding obligations of such party, enforceable in
accordance with their respective  terms,  except as such  enforceability  may be
limited  by  applicable  bankruptcy,  insolvency,  moratorium  or  similar  laws
affecting   creditors'  rights  and  the  enforcement  of  debtors'  obligations
generally and by general principles of equity, regardless of whether enforcement
is pursuant to a proceeding in equity or at law.

5.3 No Breach;  No Default.  Neither the  execution,  delivery or performance of
this Agreement or the other agreements  contemplated  hereby to which Buyer is a
party, nor the consummation of the transactions  contemplated  hereby or thereby
by Buyer,  (a)  conflicts  with or results in any breach of, (b)  constitutes  a
default  under,  (c) results in a violation of, or (d) gives any third party any
right to accelerate  any  obligation  under any agreement or instrument to which
Buyer is a party or by which any of its assets are bound.

5.4 No Bankruptcy or  Insolvency.  Buyer has not .4 No Bankruptcy or Insolvency.
Buyer has not filed any voluntary  petition in bankruptcy or been  adjudicated a
bankrupt or insolvent,  filed any petition or answer seeking any reorganization,
liquidation,  dissolution  or  similar  relief  under  any  federal  bankruptcy,
insolvency,  or other debtor relief law, or sought or consented to or acquiesced
in the appointment of any trustee, receiver, conservator or liquidator of all or
any substantial part of its properties.  No court of competent  jurisdiction has
entered an order,  judgment or decree  approving a petition  filed against Buyer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any federal  bankruptcy act, or other debtor
relief law, and no other liquidator has been appointed of Buyer or of all or any
substantial part of its properties.

5.5 No  Litigation.  There  are no  actions,  suits or  proceedings  of any type
pending or, to the knowledge of Buyer,  threatened,  against  Buyer,  which,  if
adversely  determined  could have an adverse  effect on the  Buyer's  ability to
perform the obligations  contemplated under the Closing Documents.  Buyer is not
operating under, or subject to, or in default with respect to, any order,  writ,
injunction or decree affecting the ability of Buyer to enter into this Agreement
or perform its obligations  contemplated under the Closing Documents to which it
is a party.

5.6 Investment Company. Buyer is not, and is not controlled by, an "Investment 
Company" within the meaning of the Investment Company Act.

5.7 Governmental Approvals. No Governmental Approval is necessary or appropriate
in connection  with the execution and delivery by Buyer of this Agreement or the
other Closing  Documents to which it is a party or the  consummation by Buyer of
the transactions contemplated hereby and thereby.

5.8 Additional  Consents and Notices.  No filing,  registration,  qualification,
notice,  consent,  approval  or  authorization  to,  with  or  from  any  Person
(excluding  Governmental Persons) is necessary or appropriate in connection with
the  execution  and  delivery by Buyer of this  Agreement  or the other  Closing
Documents  to  which  it is a  party,  or  the  consummation  by  Buyer  of  the
transactions contemplated hereby and thereby.

5.9 No  Brokers.  Buyer  has not  entered  into  any  contract,  arrangement  or
understanding  with any  person or firm which may  result in the  obligation  of
Seller to pay any finder's fees,  brokerage or agent's commissions or other like
payments in connection  with the  negotiations  leading to this Agreement or the
consummation  of the  transactions  contemplated  hereby,  and , other  than the
Preferred  Capital  Equities  Corporation  and Harry  Kraatz  fees to be paid by
Seller,  Buyer is not aware of any claim or basis for any claim for  payment  of
any finder's  fees,  brokerage or agent's  commissions or other like payments in
connection with the  negotiations  leading to this Agreement or the consummation
of the transactions contemplated hereby.

5.10 Purchase for Own Account.  The  Securities  will be acquired for investment
purposes and for Buyer's own account,  not as a nominee or agent, and not with a
view to the public resale or distribution thereof within the meaning of the 1933
Act, and Buyer has no present  intention of selling,  granting any participation
in, or otherwise distributing the same.

5.11 Disclosure of Information. Buyer has received or has had full access to all
the  information  it  considers  necessary  or  appropriate  to make an informed
investment  decision with respect to the  Securities to be purchased by it under
this  Agreement.  Buyer  further has had an  opportunity  to ask  questions  and
receive  answers from Seller  regarding the terms and conditions of the offering
of the Securities  and to obtain  additional  information  (to the extent Seller
possessed such  information or could acquire it without  unreasonable  effort or
expense)  necessary to verify any information  furnished to Buyer or to which it
had  access.  The  foregoing,  however,  does not in any way limit or modify the
representations and warranties made by Seller in Section 4.

5.12  Investment  Experience.   Buyer  understands  that  the  purchase  of  the
Securities  involves  substantial  risk. Buyer has experience as an investors in
securities of companies in the development  stage and acknowledges that Buyer is
able to fend for itself,  can bear the economic  risk of its  investment  in the
Securities  and has such  knowledge  and  experience  in  financial  or business
matters  that  Buyer is  capable  of  evaluating  the  merits  and risks of this
investment in the Securities and protecting its own interests in connection with
this investment.

5.13 Accredited  Investor Status.  Buyer is an "accredited  investor" within the
meaning  of  Regulation  D  promulgated  under  the 1933  Act.  5.14  Restricted
Securities.   Buyer   understands  that  the  Securities  are  characterized  as
"restricted  securities"  under the 1933 Act inasmuch as they are being acquired
from Seller in a transaction  not involving a public offering and that under the
1933 Act and applicable  regulations  thereunder  such  Securities may be resold
without  registration under the 1933 Act only in certain limited  circumstances.
In this  connection,  Buyer  represents that it is familiar with Rule 144 of the
U.S. Securities and Exchange Commission (the "SEC"), as presently in effect, and
understands  the resale  limitations  imposed thereby and by the 1933 Act. Buyer
understands that Seller is under no obligation to register any of the Securities
sold hereunder except as provided in the Investor's Rights Agreement.

     ARTICLE SIX
     Pre-Closing Covenants

6.1     Pre-Closing Covenants.  Prior to the Closing, Seller hereby covenants 
and agrees to take the following actions:

(a)  Conduct  the  business of Seller in the  ordinary  course and refrain  from
taking any action that would cause any representation or warranty made herein to
be untrue or materially misleading;

(b) Comply in all material  respects with contractual  obligations of Seller and
legal requirements applicable to Seller;

(c) Permit Buyer and any of its employees,  agents and representatives and their
representatives  to have  reasonable  access to  Seller's  books and  records of
account;

(d) Permit Buyer and any of its employees,  agents and representatives and their
representatives  to contact  Seller's  accountants  and certain key employees of
Seller for the purpose of completing its due diligence;

(e)  Provide  Buyer with copies of all  documents  referenced  on the  Schedules
(including, without limitation, contracts, deeds, lease agreements, intellectual
property license agreements, intellectual property registrations,  environmental
site assessments, and real property title search results); and

(f) Provide Buyer with such other instruments, agreements and documents as Buyer
may reasonably request in order to complete its due diligence review of Seller.

     ARTICLE SEVEN
     Termination

7.1     Termination Prior to Closing.  This Agreement may be terminated at any 
time prior to the Closing:
(a)     by mutual written consent of the parties;

(b) by Buyer on one hand,  or by Seller on the other  hand,  if there has been a
material  misrepresentation  or  material  breach of warranty or covenant on the
part of the other  party with  respect  to the  representations,  warranties  or
covenants set forth in this Agreement given by such other party or parties; or

(c) by any party if the Closing has not occurred on or before June 1,1999.

7.2 Effect of  Termination.  In the event of  termination  of this  Agreement as
provided in Section 7.1 hereof,  this Agreement  will forthwith  become void and
there will be no  continuing  liability  on the part of Buyer or Seller,  except
that,   to  the   extent   that  any  of  such   parties   has   made   material
misrepresentations  or has  committed a material  breach of warranty or covenant
prior to the date of termination, such party shall remain fully liable therefor.
Notwithstanding  any termination of this  Agreement,  the parties shall treat as
confidential  and not disclose,  or use  whatsoever,  or permit others under its
control to  disclose or use any  information  concerning  another  party to this
transaction  obtained pursuant to or in connection with the transaction which is
the subject of this  Agreement  which is not  generally  known to the trade or a
matter of public knowledge, for a period of one year after termination.

     ARTICLE EIGHT
     Additional Provisions

8.1 Survival. The representations, warranties, covenants and agreements of Buyer
and Seller set forth in this  Agreement  will  survive the Closing  Date and the
consummation  of  the  transactions  contemplated  hereby,  notwithstanding  any
examination made for or on behalf of Buyer or Seller,  the knowledge of Buyer or
Seller, or any of their officers, directors, shareholders,  employees or agents,
or the acceptance of any certificate or opinion.

8.2     Indemnification.

(a) Seller  agrees to  indemnify  Buyer and hold it  harmless  against any loss,
liability,  damage or expense  (including  reasonable  legal expenses and costs)
which Buyer may suffer,  sustain or become subject to, as the result of a breach
of any representation,  warranty,  covenant, or agreement by Seller contained in
this  Agreement  or in any other  agreement,  instrument,  certificate  or other
document  delivered in connection  with the  transactions  contemplated  in this
Agreement.


(b) Buyer  agrees to  indemnify  Seller and hold it  harmless  against any loss,
liability,  damage or expense  (including  reasonable  legal expenses and costs)
which Seller may suffer, sustain or become subject to, as the result of a breach
of any representation,  warranty,  covenant,  or agreement by Buyer contained in
this  Agreement  or in any other  agreement,  instrument,  certificate  or other
document  delivered in connection  with the  transactions  contemplated  in this
Agreement.

(c) Any party seeking  indemnity  pursuant to this Section 8.2 shall give notice
to the other  party  promptly  after such  party  seeking  indemnity  has actual
knowledge  of any  claim as to which  indemnity  may be  sought  hereunder.  The
failure of the party  seeking  indemnity to give such notice  shall  relieve the
party that does not receive  such notice of its  obligations  under this Section
8.2 to the extent that such failure to give notice is prejudicial.

(d)  After  the  indemnifying  party  has  acknowledged  in  writing  that it is
indemnifying  another  party  to  this  Agreement  with  respect  to  litigation
involving  any claim to the full extent of such claim,  the  indemnifying  party
will be entitled to assume the defense of any such litigation, provided that the
other party may at its  election  participate  in any such defense to the extent
that it in its sole  discretion  believes that such  litigation  will materially
affect its ongoing business. At the indemnifying party's reasonable request, the
other party will cooperate with the indemnifying party in the preparation of any
such defense,  and the indemnifying party will reimburse the other party for any
expenses incurred in connection with such request.  The indemnifying party shall
not  enter  into  any   settlement   of  any  claim  which  is  the  subject  of
indemnification without the written consent of the indemnified party.

(e) Payment with respect to either party's indemnification obligations hereunder
shall be due and payable within thirty (30) days of receipt of written notice by
the indemnifying  party. The rights of the parties  hereunder are cumulative and
shall be in addition to all other  rights and  remedies  available  at law or in
equity.

8.3  Expenses.  At Closing,  Seller will pay Buyer the sum of $50,000 as partial
reimbursement of expenses  incurred by Buyer in connection with the transactions
contemplated herein. Except as otherwise provided in this Agreement or the other
Closing Documents, each party will pay all of its expenses, including attorneys'
and accountants'  fees, in connection with the negotiation of this Agreement and
the other Closing  Documents,  the performance of its obligations  hereunder and
thereunder,  and  the  consummation  of the  transactions  contemplated  by this
Agreement and the other Closing Documents.

8.4 Press Releases and Announcements.  Neither party shall issue a press release
or  announcement  regarding this Agreement  without the prior written consent of
the other parties to this Agreement.

8.5     Third-Party Beneficiaries.  This Agreement does not create any rights in
 any parties who are not otherwise a party to this Agreement.
ARTICLE NINE
Miscellaneous

9.1 Entire Agreement;  Amendment and Waiver.  This Agreement,  together will all
exhibits  and  schedules  referenced  herein,  constitutes  the full and  entire
understanding  and  agreement  between  the  parties  with regard to the subject
hereof and thereof.  Neither this  Agreement nor any term hereof may be amended,
waived,  discharged  or  terminated,  except by a written  instrument  signed by
Seller and Buyer.

9.2 Notices.  Except as otherwise  expressly  set forth in this  Agreement,  all
notices,  demands and other  communications to be given or delivered under or by
reason of the provisions of this Agreement will be in writing and will be deemed
to have  been  given  when  delivered  personally,  or by  documented  overnight
delivery service.  Notices,  demands and communications to Buyer or Seller will,
unless another address is specified in writing, be sent to the address indicated
below. All such notices and other written  communications shall be effective (i)
if mailed, five (5) days after mailing,  (ii) if sent by a nationally recognized
overnight courier, one business day after delivery to such courier, and (iii) if
faxed or delivered, upon fax or delivery.

Notices to Buyer                          with a copy to:

Ridgewood ZAP, LLC                    Downs Rachlin & Martin PLLC
Ridgewood Commons                     199 Main Street
947 Linwood Avenue                    PO Box 190
Ridgewood, NJ  07450                  Burlington, VT  05402-0190
Attn:  Robert E. Swanson, President   Attn:  Thomas H. Moody, Esq.
Fax:  (201) 947-0474                         Fax:  (802) 860-3948

Notices to Seller:                         with a copy to:

ZAP Power Systems                         Evers & Hendrickson, LLP
117 Morris Street                         155 Montgomery St., 12th Floor
Sebastopol, California  95472             San Francisco, CA 94104
Attn: Gary Starr                          Attn: William D. Evers, Esq.
Fax: 707-824-4159                          Fax: 415-772-8101

9.3 Assignment.  This Agreement and all of the provisions hereof will be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors and permitted assigns.  Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by either party without prior
written consent of the other party; provided, however, that Buyer may assign its
rights but not its obligations hereunder to an Affiliate.

9.4 Severability.  Whenever  possible,  each provision of this Agreement will be
interpreted  in such manner as to be effective and valid under  applicable  law,
but if any  provision of this  Agreement is held to be  prohibited by or invalid
under  applicable law, such provisions will be ineffective only to the extent of
such  prohibition  or  invalidity,  without  invalidating  the remainder of such
provision or the remaining provisions of this Agreement.

9.5 No Strict  Construction.  The language used in this Agreement will be deemed
to be the language  chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any party.

9.6  Captions.  The  captions  used in this  Agreement  are for  convenience  of
reference  only and do not  constitute a part of this  Agreement and will not be
deemed  to  limit,  characterize  or in any way  affect  any  provision  of this
Agreement,  and all  provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.

9.7 Governing Law.  Disputes  arising under this Agreement  shall be governed by
and  interpreted  and construed in accordance  with the substantive law (and not
the law of conflicts) of the State of California.

9.8  Jurisdiction and Venue. The parties hereto agree that courts located within
the State of  California  shall have  exclusive  jurisdiction  over any  dispute
arising under this  Agreement and the parties  hereby  consent to such courts as
having  venue and  personal and subject  matter  jurisdiction  as to all matters
arising  under this  Agreement  and to service  of process by  registered  mail,
return  receipt  requested,  or by any other  manner  provided  by law,  and the
prevailing  party or  parties in a suit for  breach of this  Agreement  shall be
entitled to all costs of such suit, including attorneys' fees.

9.9  Counterparts.  This Agreement may be executed in one or more  counterparts,
any one of which need not contain the signatures of more than one party, but all
such  counterparts  taken together will constitute one and the same  instrument.
Confirmation of execution of this Agreement by telefax shall be binding upon any
party so confirming.

9.10 Further  Assurances.  The parties  recognize that the  consummation of this
Agreement  and the  transactions  contemplated  hereby will  require the ongoing
cooperation of the parties,  and each hereby agrees to comply in good faith with
the  reasonable  requests of any other party which may be made from time to time
in furtherance of the objectives of the parties in entering into this Agreement.



IN WITNESS  WHEREOF,  the parties  hereto have  executed  this Stock and Warrant
Purchase Agreement on the day and year first above written.


ZAP POWER SYSTEMS

By:_____________________________
Name:___________________________
Title:____________________________


RIDGEWOOD ZAP, LLC
By: Ridgewood Management Corporation,
Manager


By:_____________________________
Name:___________________________
Title:____________________________



::ODMA\PCDOCS\BURLINGTON\126824\4

EX-10.B

THIS WARRANT AND ANY SHARES  ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE
SOLD OR  OTHERWISE  TRANSFERRED  EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION
STATEMENT  FILED UNDER SUCH ACT OR PURSUANT TO AN  EXEMPTION  FROM  REGISTRATION
UNDER SUCH ACT.

*****************************************

ZAP POWER SYSTEMS

COMMON STOCK PURCHASE WARRANT

*****************************************

This certifies that, for good and valuable  consideration,  ZAP Power Systems, a
California corporation (the "Company"), grants to Ridgewood ZAP, LLC, a Delaware
limited liability company (the "Warrantholder"),  the right to subscribe for and
purchase from the Company the number of fully paid and nonassessable shares (the
"Warrant  Shares") of the  Company's  Common  Stock,  no par value (the  "Common
Stock")  specified  herein,  at the  purchase  price  per share  Exercise  Price
determined as set forth herein,  exercisable,  subject to the  restrictions  set
forth herein, during the Exercise Period (as such term is defined in Section 1.4
hereof), all subject to the terms,  conditions and adjustments herein set forth.
Capitalized  terms used  herein  shall  have the  meanings  assigned  to them in
Section 8 hereof.

1.     Exercise of Warrant.

1.1     Duration and Exercise of Warrant.

(a) Cash  Exercise.  This Warrant may be exercised by the  Warrantholder  at any
time during the  Exercise  Period by (i) the  surrender  of this  Warrant to the
Company,  with a duly  executed  Exercise  Form  (attached  hereto as Exhibit A)
specifying the number of Warrant Shares to be purchased,  during normal business
hours on any Business  Day during the  Exercise  Period and (ii) the delivery of
payment to the  Company,  for the account of the  Company,  by wire  transfer of
immediately  available  funds to a bank  account  specified by the Company or by
certified  or bank  cashier's  check,  of the  Exercise  Price for the number of
Warrant  Shares  specified  in the  Exercise  Form in lawful money of the United
States of America.


The  Company  agrees  that  Warrant  Shares  shall be deemed to be issued to the
Warrantholder  as the record  holder of such  Warrant  Shares as of the close of
business  on the date on which  this  Warrant  shall have been  surrendered  and
payment made for the Warrant Shares as aforesaid.  As promptly as practicable on
or after such date and in any event within ten (10) days thereafter, the Company
at its expense shall issue and deliver to the  Warrantholder a stock certificate
or certificates  for the Warrant Shares  specified in the Exercise Form. If this
Warrant shall have been exercised  only in part, the Company shall,  at the time
of  delivery  of  the  stock   certificate  or  certificates,   deliver  to  the
Warrantholder  a new Warrant  evidencing  the rights to purchase  the  remaining
Warrant Shares,  which new Warrant shall in all other respects be identical with
this Warrant.  No adjustments  shall be made on Warrant  Shares  issuable on the
exercise of this  Warrant for any cash  dividends  paid or payable to holders of
record of Common Stock prior to the date as of which the Warrantholder  shall be
deemed to be the record holder of such Warrant Shares.

1.2 Number of Warrant Shares.  This Warrant shall entitle the  Warrantholder  to
purchase  that  number of  Warrant  Shares  as is  determined  according  to the
following  formula,  as such number shall be adjusted from time to time pursuant
to Section 6 hereof:

X=  $2,000,000  divided by the Exercise  Price (as defined  below) Where X = the
number of shares of Common Stock which may be purchased.

1.3 Exercise Price. The price at which this Warrant may be exercised shall be an
amount equal to eighty-five  percent (85%) of the average daily closing price of
the Common Stock for the twenty (20) days prior to the date of exercise (or, for
purposes of Section 6 hereof, twenty (20) days prior to the relevant measurement
date)  (provided  that, for purposes of this  calculation,  the average  closing
price  shall be no higher  than  $4.50 per  share  and no lower  than  $3.50 per
share),  as such exercise  price shall be adjusted from time to time pursuant to
Section 6 hereof (the "Exercise Price").

1.4     Term of Warrant and Exercisability.

(a) Term of Warrant.  Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, during the term commencing on
the date hereof and ending at 5 p.m., Pacific Standard Time on December 29, 1999
and shall be void thereafter (the "Exercise Period").

(b) Exercisability. This Warrant shall be exercisable in whole or in part during
the Exercise Period.

1.5 Payment of Taxes.  The issuance of certificates  for Warrant Shares shall be
made  without  charge  to the  Warrantholder  for any  stock  transfer  or other
issuance tax in respect thereto; provided, however, that the Warrantholder shall
be  required  to pay any and all taxes  which may be  payable  in respect of any
transfer  involved in the  issuance and  delivery of any  certificate  in a name
other than that of the then  Warrantholder  as  reflected  upon the books of the
Company.

1.6  Information.  Upon receipt of a written request from a  Warrantholder,  the
Company agrees to deliver promptly to such Warrantholder a copy of its currently
available financial statements and to provide such other information  concerning
the Company as such  Warrantholder may reasonably request in order to assist the
Warrantholder  in evaluating  the merits and risks of exercising the Warrant and
to make an informed investment decision in connection with such exercise.

2.     Restrictions on Transfer; Restrictive Legends.

2.1 Restrictions on Transfer;  Compliance with Securities Laws. This Warrant and
the  Warrant  Shares  issued  upon  the  exercise  of  the  Warrant  may  not be
transferred  or  assigned  in  whole  or in part  without  compliance  with  all
applicable  federal and state  securities  laws by the transferor and transferee
(including the delivery of investment  representation letters and legal opinions
reasonably  satisfactory to the Company,  if such are requested by the Company).
The Warrantholder,  by acceptance hereof, acknowledges that this Warrant and the
Warrant Shares to be issued upon exercise  hereof are being acquired  solely for
the  Warrantholder's  own account and not as a nominee for any other party,  and
for investment,  and that the  Warrantholder  will not offer,  sell or otherwise
dispose of any Warrant  Shares to be issued upon  exercise  hereof  except under
circumstances  that will not result in a violation of the  Securities Act or any
state securities laws. Upon exercise of this Warrant,  the Warrantholder  shall,
if requested by the Company,  confirm in writing,  in a form satisfactory to the
Company,  that the Warrant Shares so purchased are being acquired solely for the
Warrantholder's  own  account  and not as a  nominee  for any other  party,  for
investment, and not with a view toward distribution or resale.

2.2  Restrictive  Legends.  This  Warrant  shall (and each  Warrant  issued upon
transfer  in whole or in part of this  Warrant  pursuant  to this  Section  2 or
issued in substitution  for this Warrant pursuant to Section 4 shall) be stamped
or otherwise imprinted with a legend in substantially the following form:

"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE
SOLD OR  OTHERWISE  TRANSFERRED  EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION
STATEMENT  FILED UNDER SUCH ACT OR PURSUANT TO AN  EXEMPTION  FROM  REGISTRATION
UNDER SUCH ACT."

Except as  otherwise  permitted by this  Section 2, each stock  certificate  for
Warrant  Shares  issued  upon  the  exercise  of  any  Warrant  and  each  stock
certificate  issued  upon the direct or indirect  transfer  of any such  Warrant
Shares shall be stamped or otherwise  imprinted  with a legend in  substantially
the following form:

"THE SHARES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT FILED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."  Notwithstanding the
foregoing,   the  Warrantholder  may  require  the  Company  to  issue  a  stock
certificate for Warrant Shares without a legend if (i) such Warrant  Shares,  as
the case may be, have been  registered  for resale under the  Securities  Act or
sold pursuant to Rule 144 under the Securities Act (or a successor rule thereto)
or (ii)  the  Warrantholder  has  received  an  opinion  of  counsel  reasonably
satisfactory to the Company that such  registration is not required with respect
to such Warrant Shares.

3.     Reservation and Registration of Shares, Etc.

The Company covenants and agrees that all Warrant Shares which are issuable upon
the exercise of this Warrant will, upon issuance,  be validly issued, fully paid
and nonassessable and free from all taxes, liens,  security  interests,  charges
and other  encumbrances  with respect to the issue thereof,  other than taxes in
respect of any transfer occurring contemporaneously with such issue. The Company
further covenants and agrees that, during the Exercise Period,  the Company will
at all  times  have  authorized  and  reserved,  and keep  available  free  from
preemptive  rights, a sufficient number of shares of Common Stock to provide for
the exercise of the rights represented by this Warrant and will, at its expense,
upon each such  reservation  of shares,  procure  such listing of such shares of
Common Stock (subject to issuance or notice of issuance) as then may be required
on all stock  exchanges  on which the Common  Stock is then listed or on Nasdaq.
The Company  agrees that its  issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates  to  execute  and issue the  necessary  certificates  for shares of
Common Stock upon the exercise of this Warrant.

4.     Exchange, Loss or Destruction of Warrant.

Upon receipt by the Company of evidence  satisfactory to it of the loss,  theft,
destruction  or  mutilation  of this Warrant and, in the case of loss,  theft or
destruction, of such bond or indemnification as the Company may require, and, in
the case of such  mutilation,  upon surrender and  cancellation of this Warrant,
the Company will execute and deliver a new Warrant of like tenor and amount. The
term "Warrant" as used in this Agreement shall be deemed to include any Warrants
issued in substitution or exchange for this Warrant.

5.     Ownership of Warrant.

The  Company  may deem and  treat  the  person in whose  name  this  Warrant  is
registered  as the holder and owner  hereof  (notwithstanding  any  notations of
ownership  or writing  hereon  made by anyone  other than the  Company)  for all
purposes and shall not be affected by any notice to the contrary.

6.     Certain Adjustments.  The Exercise Price and the number of shares 
purchasable hereunder are subject to adjustment from time to time as follows:

6.1  Merger,  Sale of Assets,  etc.  If at any time while this  Warrant,  or any
portion   thereof,   is  outstanding   and  unexpired   there  shall  be  (a)  a
reorganization  (other  than  a  combination,   reclassification,   exchange  or
subdivision  of  shares  otherwise  provided  for  herein),   (b)  a  merger  or
consolidation  of the  Company  with or into  another  corporation  in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving  entity but the shares of the  Company's  capital stock
outstanding  immediately  prior to the  merger  are  converted  by virtue of the
merger  into  other  property,  whether  in the  form  of  securities,  cash  or
otherwise,  or (c) a sale or transfer of the Company's properties and assets as,
or  substantially  as, an entirety to any other person,  then, as a part of such
reorganization,  merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this  Warrant  shall  thereafter  be  entitled  to
receive upon exercise of this Warrant,  during the period  specified  herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization,  merger,  consolidation,  sale or transfer  that a holder of the
shares  deliverable  upon  exercise of this Warrant  would have been entitled to
receive in such reorganization,  consolidation, merger, sale or transfer if this
Warrant  had been  exercised  immediately  before such  reorganization,  merger,
consolidation,  sale or transfer,  all subject to further adjustment as provided
in this Section 6. The foregoing  provisions of this Section 6.1 shall similarly
apply  to  successive  reorganizations,   consolidations,   mergers,  sales  and
transfers and to the stock or securities  of any other  corporation  that are at
the  time  receivable  upon  the  exercise  of this  Warrant.  If the  per-share
consideration  payable to the holder  hereof for shares in  connection  with any
such transaction is in a form other than cash or marketable securities, then the
value of such  consideration  shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's  Board of Directors)  shall be made in the application of
the  provisions  of this Warrant with respect to the rights and interests of the
Holder after the  transaction,  to the end that the  provisions  of this Warrant
shall be applicable  after that event, as near as reasonably may be, in relation
to any shares or other  property  deliverable  after that event upon exercise of
this Warrant.

6.2  Reclassification,  etc. If the Company,  at any time while this Warrant, or
any portion thereof,  remains  outstanding and unexpired by  reclassification of
securities or otherwise, shall change any of the securities as to which purchase
rights  under  this  Warrant  exist  into  the  same or a  different  number  of
securities  of any  other  class  or  classes,  this  Warrant  shall  thereafter
represent  the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the  securities  that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification  or other  change  and the  Exercise  Price  therefor  shall be
appropriately  adjusted,  all subject to further  adjustment as provided in this
Section 6.

6.3 Split,  Subdivision  or  Combination  of Shares.  If the Company at any time
while this Warrant,  or any portion thereof,  remains  outstanding and unexpired
shall split,  subdivide or combine the  securities as to which  purchase  rights
under this Warrant  exist,  into a different  number of  securities  of the same
class,  then (a) in the case of a split or  subdivision,  the Exercise Price for
such securities shall be proportionately  decreased and the securities  issuable
upon exercise of this Warrant shall be proportionately increased, and (b) in the
case  of a  combination,  the  Exercise  Price  for  such  securities  shall  be
proportionately  increased  and the  securities  issuable  upon exercise of this
Warrant shall be proportionately decreased.

6.4 Adjustments for Dividends in Stock or Other Securities or Property. If while
this  Warrant,  or any portion  hereof,  remains  outstanding  and unexpired the
holders of the securities as to which  purchase  rights under this Warrant exist
at the time shall have  received,  or, on or after the record date fixed for the
determination of eligible  stockholders,  shall have become entitled to receive,
without  payment  therefor,  other or  additional  stock or other  securities or
property  (other than cash) of the Company by way of dividend,  then and in each
case,  this Warrant  shall  represent  the right to acquire,  in addition to the
number of shares of the security  receivable upon exercise of this Warrant,  and
without  payment of any additional  consideration  therefor,  the amount of such
other or additional  stock or other  securities or property (other than cash) of
the Company that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Warrant on
the date  hereof and had  thereafter,  during the period from the date hereof to
and including the date of such  exercise,  retained such shares and/or all other
additional stock available by it as aforesaid during such period,  giving effect
to all  adjustments  called for during  such  period by the  provisions  of this
Section 6.

6.5  Certificate as to  Adjustments.  Upon the occurrence of each  adjustment or
readjustment  pursuant  to this  Section  6, the  Company at its  expense  shall
promptly  compute such  adjustment or  readjustment in accordance with the terms
hereof and furnish to each Holder of this Warrant a  certificate  setting  forth
such adjustment or readjustment  and showing in detail the facts upon which such
adjustment  or  readjustment  is based.  The  Company  shall,  upon the  written
request,  at any time,  of any such Holder,  furnish or cause to be furnished to
such  Holder  a  like  certificate  setting  forth:  (a)  such  adjustments  and
readjustments;  (b) the Exercise Price at the time in effect; and (c) the number
of shares and the amount,  if any, of other  property  that at the time would be
received upon the exercise of the Warrant.

6.6 No Impairment.  The Company will not, by any voluntary action, avoid or seek
to avoid the  observance  or  performance  of any of the terms to be observed or
performed  hereunder by the Company,  but will at all times in good faith assist
in the carrying out of all the provisions of this Section 6 and in the taking of
all such  action as may be  necessary  or  appropriate  in order to protect  the
rights of the Holders of this Warrant against impairment.

6.7 Fractional  Shares.  No fractional  shares of Common Stock or scrip shall be
issued to any  Warrantholder  in  connection  with the exercise of this Warrant.
Instead  of any  fractional  shares of Common  Stock  that  would  otherwise  be
issuable to such  Warrantholder,  the Company will pay to such  Warrantholder  a
cash  adjustment  in respect of such  fractional  interest in an amount equal to
that  fractional  interest of the fair market value of one share of Common Stock
as of the date of exercise.  6.8 Carryover.  Notwithstanding any other provision
of this Section 6, no adjustment shall be made to the number of shares of Common
Stock to be delivered to the  Warrantholder  (or to the Exercise  Price) if such
adjustment  represents  less than 1% of the number of shares to be so delivered,
but any lesser adjustment shall be carried forward and shall be made at the time
and  together  with the  next  subsequent  adjustment  which  together  with any
adjustments  so  carried  forward  shall  amount to 1% or more of the  number of
shares to be so delivered.

7.     Notices of Corporate Action.

In the event of:

(a) any  taking  by the  Company  of a record  of the  holders  of any  class of
securities for the purpose of determining  the holders  thereof who are entitled
to receive any dividend or other  distribution,  or any right to subscribe  for,
purchase  or  otherwise  acquire  any  shares of stock of any class or any other
securities or property, or to receive any other right, or

(b)  any  capital   reorganization  of  the  Company,  any  reclassification  or
recapitalization  of the capital  stock of the Company or any Change of Control,
or

(c)     any voluntary or involuntary dissolution, liquidation or winding-up of 
the Company, or

(d)     any redemption or conversion of any outstanding Preferred Stock or 
Common Stock, or

(e)     the filing of the Company's first registration statement with the SEC,

the Company will mail to the  Warrantholder a notice  specifying (i) the date or
expected  date on which any such  record is to be taken for the  purpose of such
dividend,  distribution  or  right  and the  amount  and  character  of any such
dividend,  distribution  or right,  (ii) the date or expected  date on which any
such  reorganization,  reclassification,  recapitalization,  Change of  Control,
dissolution,  liquidation  or  winding-up  is to take place and the time, if any
such time is to be fixed,  as of which the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other  securities)  for the securities or other property  deliverable  upon such
reorganization,   reclassification,   recapitalization,   Change   of   Control,
dissolution,  liquidation  or winding-up and (iii) that in the event of a Change
of Control,  the Warrants are exercisable  immediately prior to the consummation
of such Change of Control. Such notice shall be mailed at least 20 days prior to
the date therein specified, in the case of any date referred to in the foregoing
subdivision  (i), and at least 20 days prior to the date therein  specified,  in
the case of the date referred to in the foregoing subdivision (ii).

8.     Definitions.

As used herein, unless the context otherwise requires,  the following terms have
the following respective meanings:

Business Day:  any day other than a Saturday, Sunday or a day on which national 
banks are authorized by law to close in the City of
San Francisco, State of California.

Change of  Control:  shall mean (i) the  consolidation  of the  Company  with or
merger of the Company  with or into any other person in which the Company is not
the  surviving  corporation,  (ii) the sale of all or  substantially  all of the
assets of the  Company to any other  person or (iii) any sale or transfer of any
capital stock of the Company after the date of this Warrant, following which 50%
of the combined  voting power of the Company becomes  beneficially  owned by one
person or group (other than the Warrantholder) acting together.  For purposes of
this  definition  of Change of Control,  "group"  shall have the meaning as such
term is used in Section 13(d)(1) under the Exchange Act.

Common Stock:  the meaning specified on the cover of this Warrant.

Company:  ZAP Power Systems, a California corporation.

Exchange Act: the Securities  Exchange Act of 1934, as amended, or any successor
federal statute, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect at the time.  Reference to a  particular  section of the
Securities  Exchange  Act of 1934,  as amended,  shall  include a reference to a
comparable section, if any, of any successor federal statute.

Exercise Form:  an Exercise Form in the form annexed hereto as Exhibit A.

Exercise Period:  the meaning specified in Section 1.4(a).

Exercise Price:  the meaning specified on the cover of this Warrant, as such 
price may be adjusted pursuant to Section 1 or Section 6
hereof.

Nasdaq: the Nasdaq National Market or the Nasdaq SmallCap Market.

Preferred Stock:  shall mean any and all series of Preferred Stock of the 
Company, whether currently existing or created in the
future.

SEC:  the Securities and Exchange Commission or any other federal agency at the 
time administering the Securities Act or the Exchange Act, whichever is the
relevant statute for the particular purpose.

Securities Act: the Securities Act of 1933, as amended, or any successor federal
statute, and the rules and regulations of the Commission thereunder,  all as the
same shall be in effect at the time.  Reference to a  particular  section of the
Securities Act of 1933, as amended,  shall include a reference to the comparable
section, if any, of any successor federal statute.

Trading Day:  any day other than a day on which securities are not traded, 
listed or reported on the principal securities exchange or
securities market on which the Common Stock is traded, listed or reported.

Warrantholder:  the meaning specified on the cover of this Warrant.

Warrant Shares:  the meaning specified on the cover of this Warrant, subject to 
the provisions of Section 1 or Section 6 hereof.

9.     Miscellaneous.

9.1     Entire Agreement.  This Warrant constitutes the entire agreement between
 the Company and the Warrantholder with respect to
this Warrant.

9.2 Binding  Effects;  Benefits.  This Warrant shall inure to the benefit of and
shall be binding  upon the Company and the  Warrantholder  and their  respective
successors.  Nothing in this  Warrant,  expressed or implied,  is intended to or
shall  confer on any person  other than the  Company and the  Warrantholder,  or
their respective successors,  any rights,  remedies,  obligations or liabilities
under or by reason of this Warrant.

9.3 Amendments  and Waivers.  This Warrant may not be modified or amended except
by an  instrument  or  instruments  in  writing  signed by the  Company  and the
Warrantholder.  Either the Company or the Warrantholder may, by an instrument in
writing,  waive compliance by the other party with any term or provision of this
Warrant on the part of such other party hereto to be performed or complied with.
The  waiver  by any  such  party of a breach  of any term or  provision  of this
Warrant shall not be construed as a waiver of any subsequent breach.

9.4 Section and Other Headings. The section and other headings contained in this
Warrant are for reference  purposes only and shall not be deemed to be a part of
this Warrant or to affect the meaning or interpretation of this Warrant.

9.5 Further  Assurances.  Each of the Company and the Warrantholder shall do and
perform all such  further acts and things and execute and deliver all such other
certificates, instruments and documents as the Company or the Warrantholder may,
at any time and from time to time,  reasonably  request in  connection  with the
performance of any of the provisions of this Agreement.

9.6 Notices.  All notices and other  communications  required or permitted to be
given  under this  Warrant  shall be in writing and shall be deemed to have been
duly  given if  delivered  personally  or sent by United  States  mail,  postage
prepaid,   or  by  facsimile   (with   electronic   confirmation  of  successful
transmission) to the parties hereto at the following  addresses or to such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:

(a)     if to the Company, addressed to:

ZAP Power Systems
117 Morris Street
Sebastopol, CA  95472
Attention:  Managing Director
Telecopier:  (707) 824-4159

(b)     if to the Warrantholder, addressed to:

Ridgewood ZAP, LLC
c/o Ridgewood Capital Corporation
947 Linwood Avenue
Ridgewood, NJ  07450
Attention:  President
Telecopier:  (201) 447-0474

Except as otherwise provided herein,  all such notices and communications  shall
be deemed to have been  received on the date of delivery  thereof,  if delivered
personally, or on the third Business Day after the mailing thereof.

9.7  Separability.  Any term or provision  of this  Warrant  which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or  unenforceability  without rendering invalid
or  unenforceable  the terms and  provisions  of this Warrant or  affecting  the
validity or  enforceability of any of the terms or provisions of this Warrant in
any other jurisdiction.

9.8 Governing  Law. This Warrant shall be deemed to be a contract made under the
laws of the State of California (irrespective of its choice of law principles).

9.9 No Rights or Liabilities as Stockholder.  Nothing  contained in this Warrant
shall be  determined  as  conferring  upon the  Warrantholder  any  rights  as a
stockholder of the Company or as imposing any  liabilities on the  Warrantholder
to purchase any securities  whether such liabilities are asserted by the Company
or by creditors or stockholders of the Company or otherwise.



IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer.

Dated:  March 29, 1999.

ZAP POWER SYSTEMS


By:__________________________
Gary Starr
Managing Director





     Exhibit A

THIS WARRANT AND ANY SHARES  ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE
SOLD OR  OTHERWISE  TRANSFERRED  EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION
STATEMENT  FILED UNDER SUCH ACT OR PURSUANT TO AN  EXEMPTION  FROM  REGISTRATION
UNDER SUCH ACT.

EXERCISE FORM

(To be executed upon exercise of this Warrant)

The undersigned hereby irrevocably elects to exercise the right,  represented by
this Warrant, to purchase Warrant Shares:

___ herewith  tenders  payment for _______ of the Warrant Shares to the order of
ZAP Power Systems in the amount of  $_________  in accordance  with the terms of
this Warrant.

The undersigned  requests that a certificate (or  certificates) for such Warrant
Shares be registered in the name of the  undersigned  and that such  certificate
(or certificates) be delivered to the undersigned's address below.

In exercising  this Warrant,  the undersigned  hereby confirms and  acknowledges
that the  Warrant  Shares  are being  acquired  solely  for the  account  of the
undersigned  and not as a nominee for any other party,  or for  investment,  and
that the  undersigned  will not  offer,  sell or  otherwise  dispose of any such
Warrant Shares except under circumstances that will not result in a violation of
the Securities Act of 1933, as amended, or any state securities laws.

Dated:  ___________________.
RIDGEWOOD ZAP, LLC

By:_____________________
Name:___________________
Title:____________________

If said  number of  shares  shall not be all the  shares  purchasable  under the
within  Warrant,  a new Warrant is to be issued in the name of said  undersigned
for the balance remaining of the shares purchasable thereunder.


::ODMA\PCDOCS\BURLINGTON\126822\3

EX-10.C

INVESTOR'S RIGHTS AGREEMENT

THIS AGREEMENT  made and entered into as of the 29th day of March,  1999, by and
between ZAP Power Systems, a California  corporation having a principal place of
business at 117 Morris Street, Sebastopol, California 95472 (the "Company"), and
Ridgewood ZAP LLC, a Delaware limited liability company having a principal place
of business at 947 Linwood Avenue, Ridgewood, New Jersey 07450 (the "Investor").

     W I T N E S S E T H:

WHEREAS,  the Company and the Investor  have  entered  into a certain  Stock and
Warrant  Purchase  Agreement of even date herewith (the  "Purchase  Agreement"),
under which the Investor has agreed to purchase  Common Stock of the Company and
the  Company  has agreed to issue a warrant  to  purchase  additional  shares of
Common Stock of the Company;

WHEREAS, the Company and the Investor desire to set forth their agreement as to 
registration rights and other matters;

NOW, THEREFORE,  in consideration of the mutual promises and covenants set forth
herein,  and other good and valuable  consideration  the sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

     SECTION 1
     Restrictions on Transferability of Securities; Registration Rights

1.1     Certain Definitions.  As used in this Agreement, the following terms 
shall have the meanings set forth below:

(a) "Commission" shall mean the Securities and Exchange  Commission or any other
federal agency at the time administering the Securities Act.

(b) "Exchange Act" shall mean the  Securities  Exchange Act of 1934, as amended,
or  any  similar  successor  federal  statute  and  the  rules  and  regulations
thereunder, all as the same shall be in effect from time to time.

     (c) "Holder" shall mean the Investor (to the extent that the Investor holds
Registrable  Securities),  and any other holder of Registrable  Securities  that
have  not  been  sold to the  public  or sold  pursuant  to Rule 144 to whom the
registration  rights conferred by this Agreement have been transferred by Holder
in accordance with Section 1.11 hereof.

(d) "Indemnified Party" shall have the meaning given in Section 1.7(c) hereof.

(e) "Indemnifying Party" shall have the meaning given in Section 1.7(c) hereof.


(f)  "Initiating  Holders" shall mean any Holder or Holders who in the aggregate
hold not less than  twenty-five  percent  (25%) of the  outstanding  Registrable
Securities.

(g)  "Investor"  shall  have  the  meaning  set  forth in the  preamble  of this
Agreement.

(h)  "Purchase  Agreement"  shall have the meaning set forth in the  recitals of
this Agreement.

(i)  "Registrable  Securities"  shall  mean (i)  Shares  issued to  Investor  in
accordance  with the  Purchase  Agreement  and  shares  issued  pursuant  to the
Warrant),  and (ii) any Shares issued as a dividend or other  distribution  with
respect to or in exchange  for or in  replacement  of such Shares  described  in
clause (i) of this subsection;  provided,  however, that Registrable  Securities
shall not include (x) any Shares which have  previously been registered or which
have been sold to the public, (y) any Registrable Securities sold by a person in
a transaction in which registration  rights have not been assigned in accordance
with this Agreement,  or (z) any Registrable  Securities that may immediately be
sold under Rule 144 during any 90-day period.

(j) The terms  "register,"  "registered"  and  "registration"  shall  refer to a
registration  effected  by  preparing  and filing a  registration  statement  in
compliance  with  the  Securities  Act  and  applicable  rules  and  regulations
thereunder,  and  the  declaration  or  ordering  of the  effectiveness  of such
registration statement.

(k)  "Registration  Expenses" shall mean all expenses  incurred in effecting any
registration  pursuant to this Agreement,  including,  without  limitation,  all
registration,  qualification,  and filing fees, printing expenses,  escrow fees,
fees and  disbursements of counsel for the Company,  blue sky fees and expenses,
and  expenses  of any regular or special  audits  incident to or required by any
such  registration,  but  shall  not  include  Selling  Expenses  and  except as
otherwise  provided  herein,  fees and  disbursements of counsel for the Holders
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).

(l) "Rule 144" shall mean Rule 144 as promulgated  by the  Commission  under the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
successor rule that may be promulgated by the Commission.

(m) "Rule 145" shall mean Rule 145 as promulgated  by the  Commission  under the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
successor rule that may be promulgated by the Commission.

(n) "Securities  Act" shall mean the Securities Act of 1933, as amended,  or any
similar successor federal statute and the rules and regulations thereunder,  all
as the same shall be in effect from time to time.

(o)  "Selling  Expenses"  shall  mean all  underwriting  discounts  and  selling
commissions  applicable  to the sale of  Shares  and fees and  disbursements  of
counsel  for any  Holder  (other  than  the fees and  disbursements  of  counsel
included in Registration Expenses).

(p) "Shares" means shares of the Common Stock of the Company.

(q) "Significant Holder" shall have the meaning given in Section 3.2 hereof.

(r)  "Warrant"  shall mean the Warrant  issued to the  Investor  pursuant to the
Purchase Agreement.

1.2     Demand Registration.

(a) Request for Registration. Upon receipt by the Company of written demand from
the Initiating  Holders that the Company  effect a registration  with respect to
all or a part of the  Registrable  Securities  having an  anticipated  aggregate
offering  price,  net of  underwriting  discounts and  commissions,  equal to or
greater than $7,500,000, the Securities Act), the Company shall:

(i) within  twenty (20) days after the  receipt of such  request,  give  written
notice of the proposed registration to all other Holders; and

(ii) as soon as practicable after receipt of such demand (and if possible within
90 days  after such  demand),  use its best  efforts to effect the  registration
(including,  without limitation,  filing post-effective amendments,  appropriate
qualifications  under  applicable blue sky or other state  securities  laws, and
appropriate  compliance with the Securities Act) of such Registrable  Securities
as would permit or facilitate the sale and  distribution  of all or such portion
of the  Registrable  Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within twenty (20)
days after such written notice from the Company is mailed or delivered.

The Company  shall not be obligated to effect,  or to take any action to effect,
any such registration pursuant to this Section 1.2:

(A)     Made sooner than March 15, 2000;

(B) After the  Company has  initiated  two such  registrations  pursuant to this
Section 1.2(a) (counting for these purposes only  registrations  which have been
declared or ordered effective);

(C)  During  the  period  starting  with the date  sixty  (60) days prior to the
Company's good faith estimate of the date of filing of, and ending on a date one
hundred  eighty  (180) days  after the  effective  date of, a Company  initiated
registration;  provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;

(D) If the Initiating Holders propose to dispose of Registrable Securities which
may be  immediately  registered  on Form S-3  pertinent  to a request made under
Section 1.6 hereof;

(E) If the  Initiating  Holders  do not  request  that such  offering  be firmly
underwritten by underwriters  selected by the Initiating Holders (subject to the
consent of the Company,  which consent will not be unreasonably withheld) or the
Company and the  Initiating  Holders are unable to obtain the commitment of such
underwriter to firmly underwrite such offering.

(b) Deferral by Company.  Subject to the foregoing  clauses (A) through (E), the
Company shall file a registration  statement covering the Registrable Securities
so  requested  to be  registered  as soon as  practicable  after  receipt of the
request or requests of the Initiating Holders; provided, however, that if (i) in
the  good  faith  judgment  of the  Board  of  Directors  of the  Company,  such
registration  would be  seriously  detrimental  to the  Company and the Board of
Directors of the Company concludes,  as a result,  that it is essential to defer
the filing of such  registration  statement  at such time,  and (ii) the Company
shall furnish to such Holders a certificate  signed by the Managing  Director of
the Company  stating that, in the good faith  judgment of the Board of Directors
of the  Company,  it would be  seriously  detrimental  to the  Company  for such
registration statement to be filed in the near future and that it is, therefore,
essential to defer the filing of such registration  statement,  then the Company
shall have the right to defer  such  filing  for the  period  during  which such
disclosure would be seriously detrimental,  provided that (except as provided in
clause (C) above) the Company may not defer the filing for a period of more than
one hundred  eighty  (180) days after  receipt of the request of the  Initiating
Holders,  and, provided further, that the Company shall not defer its obligation
in this  manner  more  than  once in any  twelve-month  period.(b)  Deferral  by
Company.  Subject to the  foregoing  clauses (A) through (E), the Company  shall
file a registration  statement covering the Registrable  Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the  Initiating  Holders;  provided,  however,  that if (i) in the good faith
judgment of the Board of Directors of the Company,  such  registration  would be
seriously  detrimental  to the Company and the Board of Directors of the Company
concludes,  as a  result,  that it is  essential  to defer  the  filing  of such
registration  statement at such time, and (ii) the Company shall furnish to such
Holders a  certificate  signed by the Managing  Director of the Company  stating
that,  in the good faith  judgment of the Board of Directors of the Company,  it
would be seriously detrimental to the Company for such registration statement to
be filed in the near future and that it is,  therefore,  essential  to defer the
filing of such registration statement,  then the Company shall have the right to
defer such filing for the period during which such disclosure would be seriously
detrimental,  provided that (except as provided in clause (C) above) the Company
may not defer the filing for a period of more than one hundred eighty (180) days
after receipt of the request of the Initiating  Holders,  and, provided further,
that the Company shall not defer its obligation in this manner more than once in
any twelve-month period.

The  registration  statement  filed  pursuant to the  request of the  Initiating
Holders  may,  subject to the  provisions  of  Sections  1.2(b) and (d)  hereof,
include  other  securities  of the Company,  with respect to which  registration
rights have been granted,  and may include  securities of the Company being sold
for the account of the Company.

(c)  Underwriting.  The right of any  Holder to  registration  pursuant  to this
Section  1.2 shall be  conditioned  upon  such  Holder's  participation  in such
underwriting  and the inclusion of such Holder's  Registrable  Securities in the
underwriting  to the extent  provided  herein.  A Holder may elect to include in
such underwritings all or a part of the Registrable Securities he holds.

(d)  Procedure.  If the Company  shall  request  inclusion  in any  registration
pursuant  to Section 1.2 of  securities  being sold for its own  account,  or if
other persons shall request  inclusion in any  registration  pursuant to Section
1.2, the Initiating  Holders shall,  on behalf of all Holders,  offer to include
such  securities  in the  underwriting  and  may  condition  such  offer  on the
acceptance  of and  compliance  with the further  applicable  provisions of this
Agreement by the Company and such other  persons.  The Company  shall  (together
with all Holders and other  persons  proposing to  distribute  their  securities
through such  underwriting)  enter into an  underwriting  agreement in customary
form with the  representative  of the underwriter or underwriters  selected by a
majority  in  interest  of  the  Initiating  Holders,   which  underwriters  are
reasonably  acceptable to the Company.  Notwithstanding  any other  provision of
this  Section  1.2,  if the  representative  of  the  underwriters  advises  the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be  underwritten,  the Initiating  Holders may limit, to the
extent  advised by the managing  underwriter(s),  the amount of securities to be
included  in the  registration  by the  Company's  Shareholders  (including  the
Holders);  provided,  however,  that the aggregate rate of securities (including
Registrable  Securities) to be included in such registrations by the Holders may
not be so reduced to less than thirty-three  percent (33%) of the total value of
all  securities  included in such  registration.  If a person who has  requested
inclusion in such registration as provided herein does not agree to the terms of
any such underwriting, such person shall be excluded therefrom by written notice
from the Company,  the underwriter or the Initiating Holders.  The securities so
excluded shall also be withdrawn from registration.  Any Registrable  Securities
or other securities  excluded or withdrawn from such underwriting  shall also be
withdrawn  from  such  registration.   If  Shares  are  so  withdrawn  from  the
registration and if the number of Shares to be included in such registration was
previously  reduced as a result of  marketing  factors  pursuant to this Section
1.2(d),  then the Company shall offer to all Holders who have retained rights to
include   securities  in  the  registration  the  right  to  include  additional
securities  in the  registration  in an aggregate  amount equal to the number of
Shares  so  withdrawn,  with such  Shares to be  allocated  among  such  Holders
requesting additional inclusion in accordance with this Section 1.12(d).

1.3     Company Registration.

(a)  Piggyback  Rights.  If the Company  shall  determine to register any of its
securities either for its own account or for the account of a security holder or
holders  exercising  their  respective  demand  registration  rights (other than
pursuant  to this  Agreement),  other  than a  registration  relating  solely to
employee benefit plans, or a registration  relating solely to a Rule 145 (or its
successor rule under the Securities Act)  transaction,  or a registration on any
registration form that does not permit secondary sales, the Company will:

(i) at least  thirty (30) days prior to filing any such  registration  statement
under the Securities Act, give to each Holder written notice thereof; and

(ii) use its best  efforts  to  include in such  registration  (and any  related
qualification under blue sky laws or other compliance),  and in any underwriting
involved therein, all the Registrable  Securities specified in a written request
or requests,  made by any Holder and received by the Company  within twenty (20)
days after the written notice from the Company  described in clause (i) above is
mailed or delivered by the  Company.  Such written  request may specify all or a
part of a Holder's Registrable Securities.

(b) Underwriting. If the registration of which the Company gives notice is for a
registered  public  offering  involving an  underwriting,  the Company  shall so
advise the Holders as a part of the  written  notice  given  pursuant to Section
1.3(a)(i).  In such event,  the right of any Holder to registration  pursuant to
this Section 1.3 shall be conditioned  upon such Holder's  participation in such
underwriting  and the inclusion of such Holder's  Registrable  Securities in the
underwriting to the extent provided herein.  All Holders proposing to distribute
their securities  through such underwriting shall (together with the Company and
the other  holders of  securities  of the Company  with  registration  rights to
participate  therein  distributing  their securities  through such underwriting)
enter into an underwriting agreement in customary form for offerings of the type
proposed with the representative of the underwriter or underwriters  selected by
the Company.

(c) Procedures.  Notwithstanding any other provision of this Section 1.3, if the
managing  underwriter(s)  advises the Company in writing that marketing  factors
require a limitation  on the number of Shares to be  underwritten,  the managing
underwriter(s)  may (subject to the  limitations  set forth  below)  exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the  registration and  underwriting.  The Company may limit, to the
extent so advised by the managing underwriter(s), the amount of securities to be
included  in the  registration  by the  Company's  shareholders  (including  the
Holders);  provided,  however, that the aggregate value of securities (including
Registrable  Securities) to be included in such  registration by the Holders may
not be so reduced to less than thirty-three  percent (33%) of the total value of
all securities  included in such  registration.  If any Holder does not agree to
the terms of any such  underwriting,  he shall be excluded  therefrom by written
notice from the Company or the underwriter.  Any Registrable Securities or other
securities  excluded or withdrawn from such underwriting shall be withdrawn from
such  registration.  If securities are so withdrawn from the registration and if
the  number  of  Shares  of  Registrable  Securities  to  be  included  in  such
registration  was  previously  reduced  as a result of  marketing  factors,  the
Company  shall then offer to all persons who have  retained the right to include
securities in the registration the right to include additional securities in the
registration in an aggregate  amount equal to the number of shares so withdrawn,
with  such  shares  to be  allocated  among the  persons  requesting  additional
inclusion in accordance with this Section 1.3 hereof.

1.4 Expenses of Registration.  All registration  expenses incurred in connection
with any registration, qualification or compliance pursuant to Sections 1.2, 1.3
and 1.5 hereof, and reasonable fees of one counsel for all selling  shareholders
in the case of registrations  pursuant to Section 1.2 hereof,  shall be borne by
the  Company  (but   excluding   underwriter(s)   and  banker's   discounts  and
commissions);  provided,  however, that unless the Holders bear the registration
expenses  for any  registration  proceeding  begun  pursuant  to Section 1.2 and
subsequently   withdrawn  by  the  Holders  registering  Shares  therein,   such
registration proceeding shall be counted as a requested registration pursuant to
Section 1.2 hereof for all Holders,  except in the event that such withdrawal is
based  upon  material  adverse  information  relating  to the  Company  that  is
different from the information known or available (upon request from the Company
or  otherwise)  to the  Holders  requesting  registration  at the  time of their
request for registration  under Section 1.2 and have withdrawn their request for
registration with reasonable  promptness after learning of such material adverse
information,  in which event such registration shall not be treated as a counted
registration for purposes of Section 1.2 hereof,  even though the Holders do not
bear the  registration  expenses  for such  registration.  All Selling  Expenses
relating  to  securities  so  registered  shall be borne by the  Holders of such
securities  pro rata on the  basis of the  number of  Shares  of  securities  so
registered on their behalf.

1.5     Registration on Form S-3.

(a) The Company shall use its best efforts to qualify for the use of Form S-3 to
register  its shares or any  comparable  or successor  form or forms.  After the
Company  has  qualified  for the use of Form  S-3 to  register  its  shares,  in
addition to the rights contained in the foregoing  provisions of this Section 1,
the  Holders  of  Registrable   Securities  shall  have  the  right  to  request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of  Registrable  Securities  to be disposed of and the intended
methods of  disposition  of such  shares by such Holder or  Holders),  provided,
however, that the Company shall not be obligated to effect any such registration
if (i) the Holders,  together  with the holders of any other  securities  of the
Company entitled to inclusion in such registration,  propose to sell Registrable
Securities and such other  securities (if any) on Form S-3 at an aggregate price
to the public of less than  $1,000,000,  or (ii) in the event  that the  Company
shall furnish the certification  described in Section 1.2(b)(ii) (but subject to
the limitations set forth therein) or (iii) in a given twelve-month  period, the
Company has effected one (1) such  registration  in such period or (iv) it is to
be effected more than five (5) years after the Company's initial public offering
or (v) in any particular  jurisdiction in which the Company would be required to
do business or execute a general consent to service of process in effecting such
registration,  qualification or compliance or (vi) Form S-3 is not available for
such offering.

(b) If a request  complying  with the  requirements  of Section 1.5(a) hereof is
delivered to the Company,  the  provisions  of Sections  1.2(a)(i)  and (ii) and
hereof  shall  apply  to  such  registration.  If  the  registration  is  for an
underwritten offering, the provisions of Sections 1.2(c) and 1.2(d) hereof shall
apply to such registration.

(c)     Form S-3 registrations shall not be deemed to be demand registrations as
 described in Section 1.2 or 1.3.

1.6 Registration  Procedures.  In the case of each registration  effected by the
Company  pursuant  to Section l, the Company  will keep each  Holder  advised in
writing  as to the  initiation  of each  registration  and as to the  completion
thereof. At its expense, the Company will use its best efforts to:

(a) Keep such  registration  effective for a period of ninety (90) days or until
the  Holder  or  Holders  have  completed  the  distribution  described  in  the
registration  statement  relating  thereto,  whichever  first occurs;  provided,
however,  that (i) such 90-day  period  shall be  extended  for a period of time
equal to the period the Holder refrains from selling any securities  included in
such  registration  at  the  request  of an  underwriter  of  Shares  (or  other
securities)  of the  Company;  and  (ii)  in the  case  of any  registration  of
Registrable  Securities  on Form S-3  which  are  intended  to be  offered  on a
continuous or delayed basis, such 90-day period shall be extended, if necessary,
for a period of up to one year,  to keep the  registration  statement  effective
until all such Registrable  Securities are sold,  provided that Rule 415, or any
successor rule under the Securities Act,  permits an offering on a continuous or
delayed basis,  and provided  further that applicable rules under the Securities
Act governing the obligation to file a post-effective  amendment permit, in lieu
of filing a post-effective  amendment that (I) includes any prospectus  required
by Section  l0(a)(3)  of the  Securities  Act or (II)  reflects  facts or events
representing a material or fundamental  change in the  information  set forth in
the  registration  statement,  the  incorporation  by reference  of  information
required  to be  included  in (I) and (II)  above to be  contained  in  periodic
reports  filed  pursuant  to  Section  13 or  15(d) of the  Exchange  Act in the
registration statement;

(b) Prepare and file with the Commission such amendments and supplements to such
registration   statement  and  the  prospectus  used  in  connection  with  such
registration  statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;

(c) Furnish such number of prospectuses  and other documents  incident  thereto,
including any amendment of or  supplement  to the  prospectus,  as a Holder from
time to time may reasonably request;

(d) Notify each seller of Registrable  Securities  covered by such  registration
statement  at any time when a  prospectus  relating  thereto is  required  to be
delivered  under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes  an untrue  statement  of a material  fact or omits to state a material
fact required to be stated therein necessary to make the statements  therein not
misleading or incomplete in the light of the circumstances then existing, and at
the request of any such seller,  prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that,  as  thereafter  delivered to the  purchasers of such shares,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated  therein or necessary to make the
statements   therein  not   misleading   or  incomplete  in  the  light  of  the
circumstances then existing;

(e) Cause all such Registrable  Securities  registered  pursuant hereunder to be
listed on each  securities  exchange on which similar  securities  issued by the
Company are then  listed;  (f) Provide a transfer  agent and  registrar  for all
Registrable  Securities registered pursuant to such registration statement and a
CUSIP number for all such  Registrable  Securities,  in each case not later than
the effective date of such registration;

(g)  Otherwise  use its best  efforts to comply  with all  applicable  rules and
regulations of the Commission,  and make available to its security  holders,  as
soon as reasonably practicable,  an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective  date of the  registration  statement,  which earnings
statement  shall satisfy the provisions of Section 11(a) of the Securities  Act;
and

(h) In connection  with any  underwritten  offering  pursuant to a  registration
statement  filed  pursuant to Section  1.2  hereof,  the Company and the Holders
registering  Registrable Securities will enter into an underwriting agreement in
form reasonably necessary to effect the offer and sale of Shares,  provided such
underwriting agreement contains customary  underwriting  provisions and provided
further that if the  underwriter  so requests the  underwriting  agreement  will
contain customary contribution provisions.

1.7     Indemnification.

(a) To the extent permitted by law, the Company will indemnify each Holder, each
of its officers, directors and partners, legal counsel, and accountants and each
person  controlling  such  Holder  within  the  meaning  of  Section  15 of  the
Securities Act, with respect to which registration, qualification, or compliance
has been effected  pursuant to this Section 1, and each  underwriter (as defined
in the  Securities  Act) for such  Holder,  if any, and each person who controls
within the  meaning of Section 15 of the  Securities  Act any such  underwriter,
against all expenses,  claims,  losses,  damages,  and  liabilities (or actions,
proceedings,  or settlements in respect  thereof) arising out of or based on any
untrue  statement (or alleged untrue  statement) of a material fact contained in
any  prospectus,  offering  circular,  or other document  (including any related
registration  statement,  notification,  or  the  like)  incident  to  any  such
registration, qualification, or compliance, or based on any omission (or alleged
omission)  to state  therein a material  fact  required to be stated  therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act, Exchange Act or any rule or regulation thereunder
applicable  to the  Company and  relating to action or inaction  required of the
Company in connection with any such registration,  qualification, or compliance,
and will reimburse each such Holder, each of its officers, directors,  partners,
legal counsel,  and accountants and each person  controlling  such Holder,  each
such  underwriter,  and each person who controls any such  underwriter,  for any
legal  and  any  other   expenses   reasonably   incurred  in  connection   with
investigating and defending or settling any such claim, loss, damage, liability,
proceeding,  or action, provided that the Company will not be liable in any such
case to the extent  that any such claim,  loss,  damage,  liability,  or expense
arises out of or is based on any untrue statement (or alleged untrue  statement)
or omission (or alleged  omission) based upon written  information  furnished to
the Company by such Holder,  officer,  director,  partner,  underwriter for such
Holder,  or controlling  person of such Holder and stated to be specifically for
use therein. It is agreed that the indemnity agreement contained in this Section
1.7(a) shall not apply to amounts paid in  settlement  of any such loss,  claim,
damage,  liability, or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).

(b) To the extent permitted by law, each Holder will, if Registrable  Securities
held by him are  included  in the  securities  as to  which  such  registration,
qualification,  or compliance is being effected,  indemnify the Company, each of
its directors,  officers,  partners,  legal counsel,  and  accountants  and each
underwriter,  if any, of the Company's securities covered by such a registration
statement,  each person who controls the Company or such underwriter  within the
meaning of Section 15 of the  Securities  Act,  each other such Holder and Other
Shareholder,  and each of their  officers,  directors,  and  partners,  and each
person  controlling  such Holder or Other  Shareholder,  against  all  expenses,
claims, losses, damages and liabilities (or actions,  proceedings or settlements
in respect  thereof) arising out of or based on any untrue statement (or alleged
untrue  statement)  of a material  fact  contained in any  prospectus,  offering
circular,  or other  document  (including  any related  registration  statement,
notification,  or the like) incident to any such registration,  qualification or
compliance,  or based on any omission (or alleged  omission) to state  therein a
material fact required to be stated  therein or necessary to make the statements
therein not misleading or any violation, by the Company of the Securities Act or
Exchange Act or any rule or regulation  thereunder applicable to the Company and
relating to action or inaction  required of the Company in  connection  with any
such registration,  qualification, or compliance, and will reimburse the Company
and such Holders,  Other  Shareholders,  directors,  officers,  partners,  legal
counsel,  and  accountants,  persons,  underwriters,  or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability,  proceeding, or action, in
each case to the extent, but only to the extent,  that such untrue statement (or
alleged  untrue  statement)  or omission  (or alleged  omission) is made in such
registration statement, prospectus, offering circular, or other document or such
other alleged  violation by the Company of the Securities Act or Exchange Act is
committed in reliance upon and in conformity with written information  furnished
to the  Company by such  Holder and stated to be  specifically  for use  therein
provided, however, that the obligations of such Holder hereunder shall not apply
to  amounts  paid  in  settlement  of  any  such  claims,  losses,  damages,  or
liabilities  (or  actions in respect  thereof)  if such  settlement  is effected
without the consent of such  Holder,  which  consent  shall not be  unreasonably
withheld.

(c)  Each  party  entitled  to  indemnification  under  this  Section  1.7  (the
"Indemnified  Party")  shall  give  notice  to the  party  required  to  provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit  the  Indemnifying  Party to  assume  the  defense  of such  claim or any
litigation  resulting  therefrom,  provided  that  counsel for the  Indemnifying
Party,  who shall conduct the defense of such claim or any litigation  resulting
therefrom,  shall be approved by the Indemnified Party (whose approval shall not
unreasonably  be withheld),  and the  Indemnified  Party may participate in such
defense at such party's  expense.  The failure of any Indemnified  Party to give
notice  as  provided  herein  shall  relieve  the  Indemnifying   Party  of  its
obligations  under this Section 1 to the extent such failure is prejudicial.  No
Indemnifying  Party,  in the  defense  of any such claim or  litigation,  shall,
except  with the  consent  of each  Indemnified  Party,  consent to entry of any
judgment or enter into any settlement that does not include as an  unconditional
term thereof the giving by the claimant or plaintiff to such  Indemnified  Party
of a release  from all  liability in respect to such claim or  litigation.  Each
Indemnified  Party shall furnish such information  regarding itself or the claim
in question as an  Indemnifying  Party may reasonably  request in writing and as
shall be  reasonably  required  in  connection  with  defense  of such claim and
litigation resulting therefrom.

(d) If the  indemnification  provided for in this Section 1.7 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability,  claim, damage, or expense referred to therein, then the
Indemnifying  Party, in lieu of indemnifying  such Indemnified  Party hereunder,
shall  contribute to the amount paid or payable by such  Indemnified  Party as a
result of such loss, liability,  claim, damage, or expense in such proportion as
is appropriate to reflect the relative  fault of the  Indemnifying  Party on the
one  hand and of the  Indemnified  Party on the  other  in  connection  with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other  relevant  equitable  considerations.  The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by  reference  to,  among other  things,  whether  the untrue or alleged  untrue
statement of a material fact or the omission to state a material fact relates to
information  supplied by the Indemnifying  Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information,  and opportunity
to correct or prevent such statement or omission.

(e)  Notwithstanding  the  foregoing,  to the  extent  that  the  provisions  on
indemnification and contribution contained in the underwriting agreement entered
into in connection  with the  underwritten  public offering are in conflict with
the foregoing  provisions,  the provisions in the  underwriting  agreement shall
control.

(f) The foregoing indemnity agreements of the Company and the Holder are subject
to the  condition  that,  insofar as they  relate to any untrue  statement  of a
material fact or an omission of a material fact made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the  registration  statement in question  becomes  effective or the amended
prospectus  filed  with  the  SEC  pursuant  to  SEC  Rule  424(b)  (the  "Final
Prospectus"),  such  indemnity  agreement  shall not inure to be  benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified  party
and was not  furnished to the person  asserting  the loss,  liability,  claim or
damage at or prior to the time such action is required by the Securities Act.

(g) The  obligations  of the Company and the Holder under this Section 1.7 shall
survive  the  completion  of  any  offering  of  Registrable   Securities  in  a
registration statement and otherwise.

1.8  Information  By  Holder.  It is a  condition  precedent  to  the  Company's
obligations  under  Sections  1.2,  1.3 and 1.5 that each Holder of  Registrable
Securities shall furnish to the Company such  information  regarding such Holder
and the  distribution  proposed by such  Holder as the  Company  may  reasonably
request in writing and as shall be reasonably  required in  connection  with any
registration, qualification, or compliance referred to in this Section 1.

1.9 Limitations on Registration of Issues of Securities. From and after the date
of this Agreement,  the Company shall not,  without the prior written consent of
Holders holding a majority of the then outstanding Registrable Securities, enter
into any agreement  with any holder or  prospective  holder of any securities of
the Company giving such holder or  prospective  holder any  registration  rights
which are inconsistent with the provisions of this Agreement.

1.10 Rule 144 Reporting. With a view to making available the benefits of certain
rules  and  regulations  of the  Commission  that  may  permit  the  sale of the
Restricted Securities to the public without  registration,  after such time as a
public  market exists for the Shares of Company,  the Company  agrees to use its
best efforts to:

(a) Make and keep public  information  regarding the Company  available as those
terms are understood  and defined in Rule 144 under the  Securities  Act, at all
times from and after ninety (90) days  following the effective date of the first
registration  under the  Securities  Act filed by the Company for an offering of
its securities to the general public;

(b) File with the Commission in a timely manner all reports and other  documents
required of the Company  under the  Securities  Act and the  Exchange Act at any
time after it has become subject to such reporting requirements;

(c) So long as a Holder owns any Registrable  Securities,  furnish to the Holder
forthwith  upon  written  request a written  statement  by the Company as to its
compliance  with the  reporting  requirements  of Rule 144 (at any time from and
after ninety (90) days  following the effective  date of the first  registration
statement  filed by the Company for an offering of its securities to the general
public),  and of the  Securities  Act and the Exchange Act (at any time after it
has become  subject to such reporting  requirements),  a copy of the most recent
annual or quarterly report of the Company,  and such other reports and documents
so filed as a Holder may  reasonably  request in availing  itself of any rule or
regulation  of the  Commission  allowing  a Holder  to sell any such  securities
without  registration  (at any time after the Company has become  subject to the
reporting requirements of the 1934 Act).

1.11  Transfer or  Assignment of  Registration  Rights.  The rights to cause the
Company to register  securities  granted to a Holder by the  Company  under this
Section 1 may be  transferred  or assigned by a Holder only to a  transferee  or
assignee of not less than 5% of the outstanding  voting stock of the Company (on
a fully diluted basis),  provided that the Company is given written notice prior
to the time of such transfer or assignment,  stating the name and address of the
transferee or assignee and identifying the securities with respect to which such
registration  rights are being  transferred or assigned,  and, provided further,
that the  transferee or assignee of such rights assumes in writing prior to such
transfer or assignment, the obligations of such Holder under this Section 1.

1.12  "Market  Stand-Off"  Agreement.   If  requested  by  the  Company  and  an
underwriter of Shares (or other  securities)  of the Company,  each Holder shall
not sell or otherwise transfer or dispose of any Shares (or other securities) of
the  Company  then  owned by such  Holder  (other  than  those  included  in the
registration)  during the one  hundred  eighty  (180) day period  following  the
effective  date of a  registration  statement  of the  Company  filed  under the
Securities Act, provided that:

(a) such agreement shall only apply to the first such registration  statement of
the Company which covers securities to be sold on its behalf to the public in an
underwritten offering; and

(b) all officers and  directors of the Company then holding  Common Stock of the
Company are bound by and have entered into similar agreements.

The obligations described in this Section 1.12 shall not apply to a registration
relating  solely to  employee  benefit  plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future,  or a registration  relating solely
to a Commission  Rule 145  transaction  on Form S-4 or similar forms that may be
promulgated in the future.  In order to enforce the above covenant,  the Company
shall  have  the  right  to  place  restrictive   legends  on  the  certificates
representing  the Shares  subject to this  Section  and to impose  stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of such one hundred eighty (180) day period.

1.13 Delay of Registration. No Holder shall have any right to take any action to
restrain,  enjoin,  or  otherwise  delay any  registration  as the result of any
controversy   that  might   arise  with   respect  to  the   interpretation   or
implementation of this Section 1.

     SECTION 2
     Financial Information

2.1 Basic Financial  Information.  The Company hereby  covenants and agrees,  so
long as any Holder owns not less than 5% of the outstanding  voting stock of the
Company (on a fully diluted  basis),  it will furnish the  following  reports to
each Holder:

(a) As soon as practicable after the end of each fiscal year of the Company, and
in any event within ninety (90) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as at the end of such fiscal year, and
consolidated  statements  of  income  and  cash  flows  of the  Company  and its
subsidiaries,  if any,  for such year,  prepared in  accordance  with  generally
accepted accounting  principles  consistently  applied and setting forth in each
case in comparative  form the figures for the previous fiscal year (if any), all
in reasonable  detail and certified by Grant Thornton LLP or independent  public
accountants of recognized national standing selected by the Company.

(b) As  soon as  practicable  after  the end of the  first,  second,  and  third
quarterly  accounting  periods in each  fiscal year of the  Company,  and in any
event within  forty-five (45) days thereafter,  a consolidated  balance sheet of
the Company and its  subsidiaries,  if any, as of the end of each such quarterly
period, and consolidated  statements of income and cash flows of the Company and
its  subsidiaries  for such  period  and for the  current  fiscal  year to date,
prepared  in  accordance   with   generally   accepted   accounting   principles
consistently  applied and setting forth in comparative  form the figures for the
corresponding periods of the previous fiscal year and to the Company's operating
plan then in effect and approved by its Board of  Directors,  subject to changes
resulting from normal year-end audit  adjustments,  all in reasonable detail and
certified  by the  principal  financial  or  accounting  officer of the Company,
except that such  financial  statements  need not contain the notes  required by
generally accepted accounting principles.

(c) As soon as  practical  after the end of each  month and in any event  within
thirty (30) days thereafter a consolidated  balance sheet of the Company and its
subsidiaries, if any, as at the end of such month and consolidated statements of
income and cash flows of the  Company and its  subsidiaries,  for each month and
for the  current  fiscal  year of the  Company  to date,  all  subject to normal
year-end  audit  adjustments,  prepared in accordance  with  generally  accepted
accounting  principles  consistently  applied  and  certified  by the  principal
financial or  accounting  officer of the Company,  together with a comparison of
such statements to the corresponding periods of the prior fiscal year and to the
Company's operating plan then in effect and approved by its Board of Directors.

(d)  Annually  (but  in any  event  at  least  thirty  (30)  days  prior  to the
commencement  of each  fiscal year of the  Company)  the  financial  plan of the
Company,  in such manner and form as approved by the Board of  Directors  of the
Company,  which  financial  plan  shall  include a  projection  of income  and a
projected cash flow statement for such fiscal year and a projected balance sheet
as of the end of such fiscal year.  Any material  changes in such  business plan
shall be  submitted  as promptly as  practicable  after such  changes  have been
approved by the Board of Directors of the Company.

(e) Within 30 days of receipt by the  Company,  a copy of the annual  management
review letter of the Company's independent public accountants.

(f) As soon as  practicable  after  transmission  or occurrence and in any event
within ten days thereof,  copies of any reports or  communications  delivered to
any  class  of the  Company's  security  holders  or  broadly  to the  financial
community,  including any filings by the Company with any  securities  exchange,
the Securities and Exchange Commission or the National Association of Securities
Dealers, Inc.

2.2     Limitations on Information Rights.

(a) The provisions of Section 2.1 shall not be in limitation of any rights which
any Holder or Significant  Holder may have with respect to the books and records
of the Company and its  subsidiaries,  or to inspect their properties or discuss
their affairs,  finances and accounts,  under the laws of the  jurisdictions  in
which they are incorporated.

(b)  Anything  in  Section  2 to the  contrary  notwithstanding,  no  Holder  or
Significant  Holder by reason of this  Agreement  shall have access to any trade
secrets or classified information of the Company. Each Significant Holder hereby
agrees to hold in  confidence  and trust and not to  disclose  any  confidential
information  provided  pursuant to this Section 2.2 and to use such confidential
information only in connection with its rights hereunder.

(c) The rights  granted  under Section 2.1 may be  transferred  or assigned by a
Holder only to a transferee  or assignee of not less than 5% of the  outstanding
capital  stock of the  Company (on a fully  diluted  basis),  provided  that the
Company  is  given  written  notice  prior  to the  time  of  such  transfer  or
assignment,  stating the name and  address of the  transferee  or  assignee  and
identifying  the securities with respect to which such  registration  rights are
being transferred or assigned,  and,  provided  further,  that the transferee or
assignee  of  such  rights  assumes  in  writing,  prior  to  such  transfer  or
assignment, the obligations of such Holder under Section 2.1.

     SECTION 3
Right of First Refusal

3. Right of First Refusal.  The Company hereby grants to any Holder who owns not
less than 5% of the  voting  stock of the  Company on a fully  diluted  basis (a
"Significant  Holder"),  the right of first refusal to purchase a pro rata share
of New  Securities  (as defined in this Section 3) which the Company  may,  from
time to time, propose to sell and issue. A Significant  Holder's pro rata share,
for  purposes  of this  right of first  refusal,  is the ratio of the  number of
Shares owned by such Holder immediately prior to the issuance of New Securities,
assuming full  conversion of any  convertible  securities of the Company held by
such Holder, and exercise of any options or warrants held by such Holder, to the
total  number of Shares  outstanding  immediately  prior to the  issuance of New
Securities,  assuming full conversion of any outstanding  preferred stock of the
Company,  including  those held by such Holder,  and exercise of all outstanding
rights,  options and warrants to acquire  Shares of the  Company.  This right of
first refusal shall be subject to the following provisions:

(a) "New Securities"  shall mean any capital stock (including  Shares and/or any
preferred  stock) of the Company  whether  now  authorized  or not,  and rights,
options or warrants to purchase such capital  stock,  and securities of any type
whatsoever  that are, or may become,  convertible  into capital stock;  provided
that the term "New  Securities"  does not include (i) Shares purchased under the
Purchase  Agreement  or  Shares  issuable  upon  exercise  of the  Warrant  (ii)
securities  issued  pursuant to the  acquisition of another  business  entity or
business  segment  of any such  entity by the  Company by  merger,  purchase  of
substantially  all the assets or other  reorganization  whereby the Company will
own more than fifty percent (50%) of the voting power of such business entity or
business segment of any such entity immediately following closing such transfer;
(iii) any borrowings,  direct or indirect,  from financial institutions or other
persons by the Company, whether or not presently authorized,  including any type
of loan or  payment  evidenced  by any type of debt  instrument,  provided  such
borrowings do not have any equity features including warrants,  options or other
rights to purchase  capital stock and are not convertible  into capital stock of
the Company;  (iv)  securities  issued to  employees,  consultants,  officers or
directors of the Company  pursuant to any stock option,  stock purchase or stock
bonus  plan,  agreement  or  arrangement  approved  by the  Company's  Board  of
Directors;  (v) securities issued in connection with any commercial  transaction
or any equipment leases, real property leases,  loans, credit lines,  guarantees
of indebtedness or similar  financing;  (vi) securities issued in any new public
offering pursuant to a registration  under the Securities Act with aggregate net
proceeds of at least $7,500,000;  (vii) securities issued in connection with any
stock split, stock dividend or recapitalization  of the Company;  and (viii) any
right,  option  or  warrant  to  acquire  any  security   convertible  into,  or
exercisable  for, the securities  excluded from the definition of New Securities
pursuant to subsections (i) through (vii) above.  (a) New Securities  shall mean
any capital stock  (including  Shares and/or any preferred stock) of the Company
whether now authorized or not, and rights,  options or warrants to purchase such
capital stock,  and securities of any type  whatsoever  that are, or may become,
convertible  into capital stock;  provided that the term New Securities does not
include (i) Shares  purchased  under the Purchase  Agreement or Shares  issuable
upon exercise of the Warrant (ii) securities  issued pursuant to the acquisition
of another business entity or business segment of any such entity by the Company
by merger,  purchase  of  substantially  all the assets or other  reorganization
whereby the Company will own more than fifty  percent  (50%) of the voting power
of such  business  entity or  business  segment of any such  entity  immediately
following closing such transfer; (iii) any borrowings,  direct or indirect, from
financial institutions or other persons by the Company, whether or not presently
authorized,  including any type of loan or payment evidenced by any type of debt
instrument,  provided such borrowings do not have any equity features  including
warrants,  options  or  other  rights  to  purchase  capital  stock  and are not
convertible  into  capital  stock of the  Company;  (iv)  securities  issued  to
employees,  consultants,  officers or directors  of the Company  pursuant to any
stock  option,  stock  purchase or stock bonus plan,  agreement  or  arrangement
approved  by  the  Company's  Board  of  Directors;  (v)  securities  issued  in
connection  with  any  commercial  transaction  or any  equipment  leases,  real
property  leases,  loans,  credit lines,  guarantees of  indebtedness or similar
financing;  (vi)  securities  issued in any new public  offering  pursuant  to a
registration  under the  Securities  Act with aggregate net proceeds of at least
$7,500,000;  (vii) securities  issued in connection with any stock split,  stock
dividend or  recapitalization  of the Company;  and (viii) any right,  option or
warrant to acquire any  security  convertible  into,  or  exercisable  for,  the
securities   excluded  from  the  definition  of  New  Securities   pursuant  to
subsections  (i) through (vii) above.  (b) In the event the Company  proposes to
undertake an issuance of New Securities,  it shall give each Significant  Holder
written notice of its  intention,  describing  the type of New  Securities,  and
their price and the general  terms upon which the Company  proposes to issue the
same. Each Significant  Holder shall have ten (10) days after any such notice is
mailed or  delivered to agree to purchase  such  Holder's pro rata share of such
New  Securities  for the  price and upon the terms  specified  in the  notice by
giving  written  notice to the Company and stating  therein the  quantity of New
Securities to be purchased.

(c) In the event the  Significant  Holders  fail to exercise  fully the right of
first  refusal  within  such ten (10) day  period,  the  Company  shall have one
hundred  twenty  (120)  days  thereafter  to sell  or  enter  into an  agreement
(pursuant to which the sale of New Securities  covered  thereby shall be closed,
if at all, within one hundred twenty (120) days from the date of such agreement)
to sell the New Securities  respecting which the Holders' right of first refusal
option  set forth in this  Section  3.1 was not  exercised,  at a price and upon
terms  no  more  favorable  to the  purchasers  thereof  than  specified  in the
Company's notice to the Significant  Holders pursuant to Section 3.1(b).  In the
event the Company has not sold within  such  120-day  period or entered  into an
agreement to sell the New Securities in accordance with the foregoing within one
hundred twenty (120) days from the date of such agreement, the Company shall not
thereafter  issue or sell any New Securities,  without first again offering such
securities to the Holders in the manner provided in Section 3.1(b) above.

(d) The rights granted under Section 3 of this  Agreement  shall expire upon the
earliest of, and shall not be  applicable  to (i) the first sale of Common Stock
of the Company to the public after the date of this Agreement  effected pursuant
to  a  registration  statement  filed  with,  and  declared  effective  by,  the
Securities and Exchange  Commission (the "Commission") under the Securities Act,
with proceeds of more than $7,500,000, (ii) four (4) years from the date of this
Agreement,  and (iii) (A) the acquisition of all or substantially all the assets
of the Company or (B) an  acquisition  of the Company by another  corporation or
entity by consolidation,  merger or other reorganization in which the holders of
the Company's  outstanding  voting stock  immediately  prior to such transaction
own, immediately after such transaction, securities representing less than fifty
percent  (50%) or more of the voting  power of the  corporation  or other entity
surviving  such  transaction.  (d) The rights  granted  under  Section 3 of this
Agreement  shall expire upon the earliest of, and shall not be applicable to (i)
the first sale of Common  Stock of the  Company to the public  after the date of
this Agreement  effected  pursuant to a registration  statement  filed with, and
declared  effective by, the Securities and Exchange  Commission (the Commission)
under the Securities Act, with proceeds of more than  $7,500,000,  (ii) four (4)
years from the date of this  Agreement,  and (iii) (A) the acquisition of all or
substantially all the assets of the Company or (B) an acquisition of the Company
by   another   corporation   or  entity  by   consolidation,   merger  or  other
reorganization  in which the holders of the Company's  outstanding  voting stock
immediately  prior to such transaction own,  immediately after such transaction,
securities  representing  less than  fifty  percent  (50%) or more of the voting
power of the  corporation or other entity  surviving such  transaction.  (e) The
right  of  first  refusal  set  forth  in  this  Section  3 may be  assigned  or
transferred  by any Holder only to a transferee  or assignee of not less than 5%
of the  outstanding  capital  stock of the Company (on a fully  diluted  basis),
provided  that the  Company is given  written  notice  prior to the time of such
transfer  or  assignment,  stating  the name and  address of the  transferee  or
assignee  identifying the securities with respect to which  registration  rights
are being  transferred  or assigned and provided  further that the transferee or
assignee  of  such  rights  assumes,  in  writing,  prior  to such  transfer  or
assignment,  the  obligation  of such Holder  under  Section 3. (e) The right of
first refusal set forth in this Section 3 may be assigned or  transferred by any
Holder only to a transferee  or assignee of not less than 5% of the  outstanding
capital  stock of the  Company (on a fully  diluted  basis),  provided  that the
Company  is  given  written  notice  prior  to the  time  of  such  transfer  or
assignment,  stating  the  name  and  address  of  the  transferee  or  assignee
identifying the securities with respect to which  registration  rights are being
transferred or assigned and provided  further that the transferee or assignee of
such rights  assumes,  in writing,  prior to such  transfer or  assignment,  the
obligation of such Holder under Section 3. SECTION 4
     Miscellaneous

4.1 Governing Law. This Agreement  shall be governed in all respects by the laws
of the  State  of  California,  as if  entered  into by and  between  California
residents exclusively for performance entirely within California.

4.2 Successors and Assigns.  Except as otherwise  expressly provided herein, the
provisions  hereof  shall  inure to the  benefit  of, and be binding  upon,  the
successors, assigns, heirs, executors and administrators of the parties hereto.

4.3 Entire Agreement; Amendment; Waiver. This Agreement constitutes the full and
entire  understanding  and  agreement  between  the  parties  with regard to the
subjects  hereof and thereof.  Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Company and the holders in interest of at least  sixty-six and two-thirds
percent  (66 _%) of the then  Registrable  Securities  and any  such  amendment,
waiver,  discharge or termination  shall be binding on all the Holders and other
parties hereto and beneficiaries hereof, but in no event shall the obligation of
any Holder hereunder be materially increased, except upon the written consent of
such Holder.

4.4  Notices,  etc. All notices and other  communications  required or permitted
hereunder  shall be in writing and shall be mailed by United States  first-class
mail, postage prepaid, or delivered personally by hand or nationally  recognized
courier  addressed  (a) if to a Holder,  to the  address  set forth in the first
paragraph  of this  Agreement,  or at such  other  address  as  such  Holder  or
permitted  transferee shall have furnished to the Company in writing,  or (b) if
to the Company, at, or at such other address as the Company shall have furnished
to each holder in writing.  All such  notices and other  written  communications
shall be effective (i) if mailed, five (5) days after mailing, (ii) if sent by a
nationally recognized overnight courier, one business day after delivery to such
courier, and (iii) if faxed or delivered, upon fax or delivery.

4.5 Delays or  Omissions.  No delay or omission to exercise any right,  power or
remedy  accruing to any Holder,  upon any breach or default of the Company under
this Agreement  shall impair any such right,  power or remedy of such Holder nor
shall it be  construed  to be a waiver  of any such  breach  or  default,  or an
acquiescence  therein,  or of or in any  similar  breach or  default  thereafter
occurring;  nor shall any  waiver of any  single  breach or  default be deemed a
waiver of any other breach or default  therefore or  thereafter  occurring.  Any
waiver,  permit, consent or approval of any kind or character on the part of any
Holder of any breach or default  under this  Agreement or any waiver on the part
of any Holder of any  provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing.  All  remedies,  either  under this  Agreement  or By law or  otherwise
afforded to any Holder, shall be cumulative and not alternative.

4.6 Rights; Separability. Unless otherwise expressly provided herein, a Holder's
rights  hereunder are several  rights,  not rights  jointly held with any of the
other Holders. In case any provision of the Agreement shall be invalid,  illegal
or  unenforceable,  the validity,  legality and  enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

4.7  Information  Confidential.  Each Holder  acknowledges  that the information
received by them pursuant hereto may be  confidential  and for its use only, and
it will not use such  confidential  information in violation of the Exchange Act
or  reproduce,  disclose or  disseminate  such  information  to any other person
(other than its  employees or agents  having a need to know the contents of such
information,  and its  attorneys),  except in  connection  with the  exercise of
rights  under this  Agreement,  unless  the  Company  has made such  information
available to the public  generally  or such Holder is required to disclose  such
information by a governmental body.

4.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this
Agreement are for  convenience of reference only and are not to be considered in
construing this Agreement.

4.9 Counterparts.  This Agreement may be executed in any number of counterparts,
each of which shall be an original,  but all of which together shall  constitute
one instrument.

4.10  Severability.  If one or more  provisions of this Agreement are held to be
unenforceable  under  applicable law, then such  provision(s)  shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such  provision(s)  were so excluded and shall be enforceable in accordance with
its terms.

4.11 Third Parties.  Nothing in this Agreement,  express or implied, is intended
to confer upon any person,  other than the parties  hereto and their  successors
and assigns,  any rights or remedies under or by reason of this Agreement.  4.12
Costs  and  Attorneys'  Fees.  In the  event  that  any  action,  suit or  other
proceeding  is  instituted  concerning  or arising out of this  Agreement or any
transaction  contemplated  hereunder,  the prevailing party shall recover all of
such party's costs and  attorneys'  fees  incurred in each such action,  suit or
other proceeding, including any and all appeals or petitions therefrom.

4.13  Adjustment for Stock Splits,  Etc.  Wherever in this Agreement  there is a
reference to a specific  number of shares of Common Stock or preferred  stock of
the  Company  of  any  class  or  series,  then,  upon  the  occurrence  of  any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally  adjusted to reflect the affect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.

4.14 Aggregation of Stock. All shares held or acquired by affiliated entities or
persons  shall  be  aggregated  together  for the  purpose  of  determining  the
availability of any rights under this Agreement.


     [Remainder of Page Intentionally Left Blank]


IN WITNESS  WHEREOF,  the parties  hereto have executed this  Investor's  Rights
Agreement effective as of the day and year first above written.

ZAP POWER SYSTEMS


By:________________________________
Name:_____________________________
Title:______________________________

RIDGEWOOD ZAP, LLC
By:     Ridgewood Management Corporation, Manager


By:_______________________________
Name:____________________________
Title:_____________________________

BTV\125807.4

EX-10.D

     RIDGEWOOD ZAP, LLC
     947 Linwood Avenue
     Ridgewood, New Jersey  07450


as of March 29, 1999


Gary Starr, Managing Director
ZAP Power Systems, Inc.
117 Morris Street
Sebastopol, California  95472

Re:     Common Stock Purchase Warrant

Dear Gary:

This letter  agreement is intended to constitute a binding contract with respect
to our obligation to the exercise of the Common Stock Purchase  Warrant dated as
of March 29, 1999 (the  "Warrant") for the purchase of Common Stock of ZAP Power
Systems, Inc.

We hereby agree that the Warrant shall be exercised totally for all shares,  not
partially,  prior to December 29, 1999  ("Exercise  Date") if, in the reasonable
judgment of the Warrantholder,

1.     The Company has not experienced a material adverse change in its 
financial condition or business prospects; and

2.     The Company has satisfied the following milestones of performance:

(a)  Completion of the  acquisition  of a model bike rental unit which has gross
income of at least $400,000 per annum for the last two calendar years;

(b) Completion of at least three of the following six joint marketing agreements
that  are  currently  being  pursued  by the  Company:  MTV  Networks;  Baywatch
Television Series; Ford Motor Company; KOA, Disney and Huffy Bikes; and

(c) Completion of the following  financial  milestones for the period commencing
on January 1, 1999: Net Sales of $8,500,000; Gross Profit of $2,500,000; and Net
Profit of $350,000.


In the event that we wish to exercise the Warrant  before the Exercise  Date, we
will notify you of the proposed exercise date and you agree to furnish us with a
written  certification from you, as Managing Director of ZAP Power Systems, that
the conditions set forth above have been  satisfied.  To the extent  required by
us, you also agree to furnish us with copies of joint  marketing  agreements and
with a balance  sheet dated within 30 days prior to the proposed  exercise  date
and an income  statement for the 12-month  period ending within 30 days prior to
the proposed exercise date.

Unless we have  exercised the Warrant  sooner,  you agree to furnish us with the
information  referenced in the preceding  paragraph  within 20 days prior to the
Exercise Date. If the conditions set forth in paragraphs  numbered 1 and 2 above
are met, in our reasonable judgment,  we will exercise the Warrant in accordance
with the procedures set forth in the Warrant.

This  letter  agreement  shall be  deemed  a  contract  governed  by the laws of
California.  Please  countersign  below as an indication of your  acceptance and
approval of the terms of this letter.

Sincerely yours,

RIDGEWOOD ZAP, LLC
By: Ridgewood Management Corporation
its Manager


By:_____________________
Authorized Agent
Accepted and Agreed:

ZAP POWER SYSTEMS


By:_____________________
Authorized Agent

BTV\126823.1

EX-10.E

as of March 29, 1999


Ridgewood ZAP, LLC
947 Linwood Avenue
Ridgewood, New Jersey  07450
Attn: Robert L. Gold

Dear Gentlemen:

In order to induce  Ridgewood  ZAP,  LLC  ("Ridgewood")  to enter into a certain
Stock and Warrant  Purchase  Agreement dated as of March 29, 1999 with ZAP Power
Systems  ("ZAP"),  for so long as Ridgewood  owns not less than 5 percent of the
outstanding  voting stock of ZAP,  the  undersigned  shareholders  of ZAP hereby
agree to vote all or such  portion of their stock of ZAP as may be  necessary to
cause to be elected to the Board of Directors of ZAP up to two persons nominated
by  Ridgewood.  In the  event of the  resignation  of a  director  nominated  by
Ridgewood,  or a  vacancy  in any such  position  arising  for any  reason,  the
undersigned  shareholders agree to cause such vacancy to be filled with a person
nominated by Ridgewood.  Ridgewood shall provide written or verbal  notification
to the undersigned shareholders of its nominee(s) at or immediately prior to any
meeting called for the purpose of electing directors.

As  of  the  date  of  this  letter  agreement,  Ridgewood  nominates,  and  the
undersigned  shareholders agree to cause to be elected to the Board of Directors
the following individuals: Robert L. Gold and Douglas Wilson.

This  letter  agreement  shall be  deemed  a  contract  governed  by the laws of
California and shall be binding on the  undersigned  and any purchaser of shares
held by the undersigned.

Sincerely yours,


/s/ Gary D. Starr
Gary D. Starr, individually

/s/ James McGreen
James McGreen, individually

Accepted and Agreed:

RIDGEWOOD ZAP, LLC
By: Ridgewood Management Corporation

By:_____________________

EX-10.F

     MANAGEMENT AGREEMENT


     AGREEMENT  made as of the  9th day of  February,  1998 by and  between  THE
RIDGEWOOD  POWER GROWTH  FUND,  a Delaware  business  trust (the  "Trust"),  and
Ridgewood Power Corporation,  a Delaware corporation (hereinafter referred to as
the "Management Company").

     W I T N E S S E T H:

     WHEREAS,  the  Trust is a  business  trust  organized  under  The  Delaware
Business  Trust Act,  as  amended,  and is engaged in  business to invest in and
operate  independent  electric  power projects and other projects as provided in
its Declaration of Trust, as amended (the "Declaration"); and

     WHEREAS,  the Management  Company is the managing  shareholder of the Trust
and  will  engage  principally  in  rendering  management,   administrative  and
investment advisory services to the Trust; and

     WHEREAS,  the Trust  desires  to retain  the  Management  Company to render
management, administrative and certain investment advisory services to the Trust
in the manner and on the terms hereinafter set forth; and

     WHEREAS,   the  Management  Company  is  willing  to  provide   management,
administrative  and investment  advisory  services to the Trust on the terms and
conditions hereinafter set forth.

     NOW,  THEREFORE,  in  consideration  of  the  premises  and  the  covenants
hereinafter  contained,  the Trust and the  Management  Company  hereby agree as
follows:

     ARTICLE I

     Duties of the Management Company

     The Trust hereby employs the Management Company to furnish,  or arrange for
affiliates of the Management Company to furnish, the management,  administrative
and investment  advisory services described below. The Management Company hereby
accepts such  employment and agrees during such period,  at its own expense,  to
render,  or  arrange  for the  rendering  of,  such  services  and to assume the
obligations herein set forth for the compensation provided for herein.

     (a) Management  Services.  The Management Company shall perform (or arrange
for the performance of) the management and administrative services necessary for
the  operation  of the  Trust,  including  providing  managerial  assistance  to
portfolio  companies of the Trust and such other services related to investments
in non-utility  generating  facilities  which sell electric and/or thermal power
and in other non-utility facilities,  as shall be necessary for the operation of
the Trust.  The  Management  Company  shall  also  perform  services  related to
administering the accounts and handling relations with all holders of beneficial
interests in the Trust.  The  Management  Company  shall  provide the Trust with
office space, equipment and facilities and such other services as the Management
Company  shall from time to time  determine to be necessary or useful to perform
its  obligations  under this  Agreement.  The Management  Company shall also, on
behalf of the Trust, conduct relations with custodians,  depositories,  transfer
agents, other shareholder service agents, accountants,  attorneys, underwriters,
brokers  and  dealers,  corporate  fiduciaries,  insurers,  banks and such other
persons in any such other  capacity  deemed to be  necessary or  desirable.  The
Management Company shall furnish advice and recommendations with respect to such
other aspects of the business and affairs of the Trust as the Management Company
shall determine to be desirable.

     (b)  Investment  Advisory  Services.  Pursuant  to  the  Declaration,   the
Management  Company in its capacity as the managing  shareholder of the Trust is
responsible for providing  investment  advisory  services in connection with the
Trust's power and other  project  investments  and in connection  with the money
market securities or other non-power liquid  investments held by the Trust (such
investments  being  referred  to herein as the  "Investments").  The  Management
Company shall also provide the Trust with such investment  research,  advice and
supervision  as the  latter  may from time to time  consider  necessary  for the
proper  supervision  of the  Investments  and shall  determine from time to time
which Investments shall be purchased,  sold or exchanged and what portion of the
Trust's  assets shall be held in the various  money market  securities  or cash,
subject always to any restrictions of the  Declaration,  as amended from time to
time, and the Trust's investment objectives,  investment policies and investment
restrictions  as the same are set forth in the reports  filed by the Trust under
the Securities  Exchange Act of 1934, as amended.  The Management  Company shall
also make  determinations  with  respect to the manner in which  voting  rights,
rights to consent to  corporate  action and any other rights  pertaining  to the
Trust's  Investments shall be exercised.  The Management  Company shall take, on
behalf of the Trust,  all actions  which it deems  necessary  to  implement  its
investment  policies.  Subject to applicable  provisions of law, the  Management
Company may select  brokers or dealers with which it or the Trust is  affiliated
to effect the purchase or sale of Investments.  The Management  Company,  in its
sole discretion,  may engage professionals,  consultants and other persons whose
expertise or  qualifications  may assist the Management  Company or the Trust in
connection  with the Trust's  business  and, if such persons are not  affiliated
with the Management  Company,  may treat the costs and expenses so incurred as a
Trust expense.

     ARTICLE II

     Allocation of Charges and Expenses

     (a) The Management  Company.  The Management  Company assumes and shall pay
the expense for  maintaining  the staff and  personnel  necessary to perform its
obligations under this Agreement and shall at its own expense, provide the Trust
with office space,  facilities,  equipment and personnel  necessary to carry out
its obligations  hereunder.  The Management Company will bear the administrative
and service  expenses  associated with the management  services it is to provide
for the Investments of the Trust pursuant to the terms of this Agreement.

     (b) The  Trust.  The  Trust  assumes  and shall pay or cause to be paid all
other  expenses of the Trust not expressly  assumed by the  Management  Company,
including,  without limitation:  expenses of portfolio  transactions,  valuation
costs  (including  the quarterly  calculation  of net asset value),  expenses of
printing reports and other documents  distributed to the Securities and Exchange
Commission  and  holders  of  beneficial  interests,   Securities  and  Exchange
Commission  and  other  regulatory  fees,  interest,   taxes,  fees  and  actual
out-of-pocket  expenses of the Independent  Panel Members of the Trust, fees for
legal, auditing and consulting services,  litigation expenses, costs of printing
proxies  and other  expenses  related  to  meetings  of  holders  of  beneficial
interest, postage and other expenses properly payable by the Trust.

     ARTICLE III

     Compensation of the Management Company

     (a) Management Fee. For the services rendered, the facilities furnished and
the  expenses  assumed by the  Management  Company,  the Trust  shall pay to the
Management Company compensation which shall be at the annual rate of 2.5% of the
Capital  Contributions  of the Trust  determined  in the manner set forth in the
Confidential Memorandum ("Memorandum") of the Trust dated February 9, 1998. Such
fee is payable  monthly in  advance.  To the extent that the Trust does not have
cash  or  readily  marketable  securities  in an  amount  sufficient  to pay the
management  fee,  the Trust  will  accrue  such fee as a  liability  and pay the
accrued fee at such time as it has sufficient  cash available to it. Interest on
the amount of the accrued fee will be assessed at the annual rate of ten percent
(10%).

     (b) Other Fees.  In  connection  with the offering of shares of  beneficial
interest in the Trust ("Shares"),  the Management Company is entitled to receive
an  organizational,  distribution  and  offering  fee  of  6%  of  each  capital
contribution to the Trust to defray  expenses  incurred in the offer and sale of
the  shares.   In  connection  with  the  initial   management  of  the  capital
contributions,  the Management Company is also entitled to receive an investment
fee  of  2%  of  each  capital   contribution  to  the  Trust  for  services  in
investigating and evaluating investment opportunities. If the Management Company
or an affiliate  performs  brokerage services in connection with the acquisition
or disposition of Trust  investments in the  independent  power industry  (other
than the  Trust's  participation  in or  investments  made  through  any  entity
organized to develop multiple independent power projects),  the entity providing
those  services  will be entitled  to a  brokerage  fee of up to 2% of the gross
proceeds of the acquisition or disposition. Ridgewood Securities Corporation, an
affiliate  of the  Management  Company,  is  acting as  placement  agent for the
offering  of Shares and is  entitled  to a 1%  placement  fee from each  capital
contribution   and,  to  the  extent  it  effects  the  sales  of  Shares  as  a
broker-dealer,  to an 8% selling  commission on each such Share.  The Trust will
reimburse  Ridgewood Energy Holding  Corporation,  the corporate  trustee of the
Trust, for all actual and necessary expenses paid or incurred in connection with
the  operation  of the  Trust,  including  the  Trust's  allocable  share of the
corporate  trustee's  overhead.  All  these  fees  and  expenses  are to be paid
pursuant to the provisions of the Declaration.

     (c) Expense Limitations.  In the event the operating expenses of the Trust,
including  amounts payable to the Management  Company pursuant to subsection (a)
hereof,  for any  fiscal  year  ending on a date on which this  Agreement  is in
effect  exceed  any  expense  limitations  applicable  to the Trust  imposed  by
applicable state securities laws or regulations thereunder,  as such limitations
may be raised or lowered from time to time, the Management  Company shall reduce
its  management  fee  hereunder  by the extent of such  excess  and, if required
pursuant to any such laws or regulations, will reimburse the Trust in the amount
of such excess;  provided,  however, to the extent permitted by law, there shall
be excluded  from such  expenses the amount of any  interest,  taxes,  portfolio
transaction costs and extraordinary expenses (including but not limited to legal
claims and  liabilities  and litigation  costs and any  indemnification  related
thereto) paid or payable by the Trust. Whenever the expenses of the Trust exceed
a pro rata portion of the applicable annual expense  limitations,  the estimated
amount of reimbursement  under such limitations shall be applicable as an offset
against the monthly payment of the fee due to the Management Company. Should two
or more  such  expense  limitations  be  applicable  as at the  end of the  last
business day of the month, that expense  limitation which results in the largest
reduction in the Management Company's management fee shall be applicable.

     ARTICLE IV

     Limitation of Liability of the Management Company

     (a) As more fully described in Article 3 of the Declaration, the Management
Company  shall not be liable for any loss  suffered by the Trust that arises out
of  any  action  or  inaction  of the  Trust,  any  Trust  officers,  agents  or
affiliates, the Independent Panel Members, the Management Company, the Corporate
Trustee,  or any  affiliate  of the  Management  Company  or a  Trustee,  or any
director, officer or agent of those entities (collectively,  "Managing Persons")
or out of any error of  judgment  or  mistake  of law,  if the  Managing  Person
responsible,  in good  faith,  determined  that such course of action was in the
Trust's  best  interest  and such course of conduct was within the scope of this
Management  Agreement  or the  Declaration  of  Trust  and  did  not  constitute
negligence or misconduct of the Managing Persons involved.

     (b)  Indemnification.  The provisions of Section 3.7 of the Declaration are
hereby incorporated by reference into this Management Agreement.  The Management
Company shall be entitled to  indemnification  hereunder in each instance  where
the "Managing  Shareholder"  is entitled to  indemnification  under said Section
3.7.

     ARTICLE V

     Activities of the Management Company

     The services of the Management  Company of the Trust to be performed  under
this Management Agreement are not deemed to be exclusive, the Management Company
being free to render services to others. It is understood that affiliates of the
Trust  (other than the  Independent  Panel  Members)  and holders of  beneficial
interest of the Trust are or may become interested in the Management  Company as
directors,  officers,  employees or  shareholders  of the Management  Company or
otherwise and that the Management Company or its directors,  officers, employees
or shareholders are or may become interested in the Trust as controlling persons
or officers (other than as an Independent  Panel Member),  holders of beneficial
interests or otherwise.

     ARTICLE VI

     Duration and Termination of this Contract

     This  Agreement  shall become  effective as of the date first above written
and shall remain in force indefinitely.  This Agreement may be terminated at any
time,  without  the  payment  of any  penalty,  by  vote  of a  majority  of the
outstanding  voting  securities of the Trust, or by the Management  Company,  on
sixty days' written notice to the other party.

     ARTICLE VII

     Amendments of this Agreement

     This  Agreement  may be amended by the parties  only if such  amendment  is
specifically  approved by the  Independent  Panel Members of the Trust by a vote
cast in person at a meeting called for the purpose of voting on such approval or
by the vote of a majority of the holders of outstanding voting securities of the
Trust.

     ARTICLE VIII
     Governing Law

     This Agreement  shall be construed in accordance with the laws of the State
of New York.

     IN WITNESS  WHEREOF,  the parties  hereto have executed and delivered  this
Agreement as of the date first above written.

               THE RIDGEWOOD POWER GROWTH FUND

               By:
                    Robert E. Swanson
                    President


               RIDGEWOOD POWER CORPORATION

               By:
                    Robert E. Swanson
                    President

EX-10.G

THE RIDGEWOOD POWER GROWTH FUND
KEY EMPLOYEES INCENTIVE PLAN
     1. General.  This Key Employees  Incentive  Plan (the "Plan") is adopted by
The Ridgewood  Power Growth Fund, a Delaware  business  trust (the "Fund").  The
Plan will give certain  individual key employees  designated  below  ("Incentive
Plan Participants") of the Fund and its subsidiaries and affiliates an incentive
based upon the Fund's Incentive Shares ("Incentive  Shares").  The Plan provides
for the grant of non-transferable  options ("Share Options") for the purchase of
Incentive Shares, the grant of nontransferable  Share appreciation  rights based
on the  appreciation  of Incentive  Shares  ("SAR's"),  the grant of  restricted
Incentive Shares  ("Restricted  Shares") and the grant of bonus Incentive Shares
("Share  Bonuses").  Capitalized  terms not  defined in this Plan shall have the
meanings  assigned to them by the Fund's  Declaration of Trust,  as amended from
time to time.
     1.1.  Incentive Share Options.  Share Options under the Plan may be granted
as incentive  Share  Options  ("Incentive  Share  Options")  that qualify  under
Section 422 of the  Internal  Revenue  Code of 1986,  as amended (the "Code") or
Share  Options  that  do not so  qualify  ("Non-qualified  Share  Options").  No
provision  of the Plan is  intended  or shall be  construed  to grant  employees
alternative rights in any Incentive Share Option granted under the Plan so as to
prevent such Option from qualifying under Section 422 of the Code.
     1.2. Federal Securities Laws. The Plan is intended to conform to the extent
necessary  with all  provisions of the  Securities  Act of 1933, as amended (the
"Securities  Act"),  and the  Securities  Exchange Act of 1934,  as amended (the
"Exchange  Act")  and any and  all  regulations  and  rules  promulgated  by the
Securities and Exchange  Commission  thereunder,  including without  limitation,
Rule 16b-3.  Notwithstanding  anything herein to the contrary, the Plan shall be
administered,  and Share Options shall be granted and may be exercised,  only in
such a manner as to conform to such laws, rules and  regulations.  To the extent
permitted by applicable law, the Plan and Share Options granted  hereunder shall
be deemed  amended to the extent  necessary  to conform to such laws,  rules and
regulations.
     1.3. Definitions. For purposes of the Plan
     "affiliate"  means any person or entity which is controlled by, controls or
is under common control with the Fund, including without limitation the Managing
Shareholders of the Fund;
     "fair  market  value"  of a  Incentive  Share on a  particular  date is the
average of the high and low sale prices on that date or the last  preceding date
on which the  Incentive  Shares are traded (the "Trade  Date") on the  principal
securities  exchange on which they are listed. If no such price exists, the fair
market  value is computed as the average of the lowest bid price and highest ask
price on the  Incentive  Shares on the Trade Date in their  principal  medium of
quotation. If no such price exists, the fair market value shall be determined by
the Fund in good  faith  in a manner  complying  with  the  requirements  of the
Internal  Revenue Code of 1986, as amended,  for  valuation in  connection  with
Share Options, SAR's, Restricted Shares or Share Bonuses;
     "Grants" mean grants of Share Options, SAR's, Restricted Shares or Share 
Bonuses;
     "incentive Share Option  requirements"  mean the provisions of the Internal
Revenue Code of 1986,  as amended,  or any  successor  statute,  and all related
regulations,  revenue rulings,  case law and other legal authority governing the
granting of Incentive Share Options; and
     a "subsidiary"  consists of any corporation or business entity in which the
Fund  directly or  indirectly  owns or controls  50% or more of the  outstanding
stock or equity interests by value.
     2. Effective Date of the Plan. The Plan is effective February 9, 1998. Each
Investor  in the Fund  consents to the Plan as a condition  of  subscribing  for
Investor Shares. No further shareholder  approval shall be required with respect
to the making of Grants  pursuant to the Plan,  except as provided in Section 12
hereof.
     3. Administration of the Plan. The Plan shall be administered by the Boards
of  Directors of the Managing  Shareholders,  acting  together as a single group
(the "Board") or by a committee  selected by the Board.  The  committee,  or the
Board  when  acting in the  absence  of the  committee,  is  referred  to as the
"Committee" in this Plan.
     3.1.  Membership  after  Exchange  Act  Registration.  At  any  time  after
Incentive  Shares are registered  pursuant to the Exchange Act, (a) at least two
members of the Board must be members of the Committee,  (b) the Committee  shall
have no member  who,  during the  one-year  period  immediately  preceding  such
person's election or appointment to the Committee, has received any Grants under
the Plan or any  similar  Share  Option or stock  incentive  plan,  other than a
formula-based  plan as defined in Rule 16b-3 under the Exchange Act,  maintained
by the Fund or any subsidiary or affiliated corporation and (c) no member of the
Committee  shall be eligible  to  participate  in the Plan while  serving on the
Committee.
     3.2. Procedure. A majority of the members of the Committee shall constitute
a quorum.  The acts of a majority of the members present at any meeting at which
a quorum is present (or acts  unanimously  approved in writing by the members of
the Committee) shall constitute binding acts of the Committee.
     3.3.  Powers of the  Committee.  Subject to the terms and conditions of the
     Plan, the Committee is authorized and empowered (a) To select the Incentive
     Plan  Participants  to whom Grants may be made; (b) To determine the number
     of Incentive  Shares to be covered by any Grant; (c) To prescribe the terms
     and  conditions  of any  Grants  made  under  the  Plan,  and the forms and
     agreements used in connection
with such Grants, which shall include agreements governing the granting of Share
Options,  SAR's and Restricted Shares, which may provide that the stock which is
the subject of any such Grant shall be subject to the  restrictions  on transfer
contained  in any  agreement  in  effect  among  the Fund and one or more of its
shareholders;
     (d) To determine the time or times when Share Options  and/or SAR's will be
granted and when they will terminate in whole or in part;
     (e) To  determine  the time or times when Share  Options and SAR's that are
granted may be exercised;
     (f) To  determine,  at the time a Share  Option is granted  under the Plan,
whether such Share Option is an Incentive  Share Option entitled to the Benefits
of Section 422 of the Code;
     (g)  To  establish  any  other  Share  Option   agreement   provisions  not
inconsistent  with the  terms  and  conditions  of the Plan or,  where the Share
Option is an Incentive  Share Option,  with the terms and  conditions of Section
422 of the Code;
     (h) To determine  whether SAR's will be made part of any Grants  consisting
of Share Options;
     (i) To determine the terms and conditions of any Grant of Restricted  Share
     and the  conditions  under which the Grant vests;  and (j) To determine the
     circumstances  under  which  the Trust  will  repurchase  Incentive  Shares
     granted under the Plan upon the
cessation of any Incentive Plan Participant's employment with the Fund or its 
Affiliates.
     4. Employees  Eligible for Grants.  Incentive Plan  Participants  under the
Plan  are key  employees  of the  Fund or a  subsidiary  or an  Affiliate  whose
business  benefits  the Fund  and who are  designated  from  time to time by the
Committee in its sole and exclusive  discretion.  The Committee may designate or
terminate the designation of any individual at any time in its sole and complete
discretion.  Designation,  without more,  shall not entitle any  Incentive  Plan
Participant to a Grant.  Incentive Plan Participants may include,  but shall not
necessarily be limited to, members of the Board of Directors  (excluding members
of the Committee after Exchange Act  registration)  and officers of the Fund and
any subsidiary or Affiliate.  Robert E. Swanson, however, is ineligible to be an
Incentive Plan Participant.
     5. Shares  Subject to the Plan. A number of Incentive  Shares equal to 1/15
of the  number of  Investor  Shares  issued and  outstanding  as of the date the
initial offering of Investor Shares terminates, adjusted thereafter as described
in the Plan,  have been  reserved  for issuance  and are  available  for Grants.
Either  Incentive  Shares  held as treasury  stock or  authorized  and  unissued
Incentive  Shares,  or both, may be so issued,  in such amount or amounts within
the  maximum  limits  of the  Plan  as the  Committee  shall  from  time to time
determine.
     5.1. Exercised Shares not Available for Further Grant. If SAR's are granted
in  tandem  with a Share  Option  pursuant  to  Section  7 and  such  SAR's  are
thereafter  exercised in whole or in part, then such Share Option or the portion
thereof to which the duly  exercised  SAR's  relate shall be deemed to have been
exercised  for  purposes  of such Share  Option.  In the event SAR's are granted
other than in tandem with a Share Option and such SAR's are thereafter exercised
in whole or in part, the number of Incentive Shares available for issuance under
the Plan  shall be reduced by the  number of  Incentive  Shares  covered by such
exercised SAR's.
     5.2.  Adjustments  to Number of Shares.  If, at any time  subsequent to the
date of adoption of the Plan by the Board,  the number of  Incentive  Shares are
increased or decreased,  or changed into or exchanged for a different  number or
kind  of  shares  of  stock  or  other  securities  of the  Fund  or of  another
corporation  (whether as a result of a stock split, stock dividend,  combination
or  exchange  of  shares,  exchange  for  other  securities,   reclassification,
reorganization,   redesignation,  merger,  consolidation,   recapitalization  or
otherwise):
     (a) there shall  automatically  be  substituted  for each  Incentive  Share
available  for  grant  under  the Plan or that have  been  granted  as  unvested
Restricted  Shares,  the number and kind of shares of stock or other  securities
into which each  outstanding  Incentive Share shall be changed or for which each
such Incentive Share shall be exchanged;
     (b) there shall  automatically  be  substituted  for each  Incentive  Share
subject  to an  unexercised  Share  Option or SAR (in whole or in part)  granted
under the Plan, the number and kind of shares of stock or other  securities into
which each  outstanding  Incentive Share shall be changed or for which each such
Incentive Share shall be exchanged and
     (c) the option price per  Incentive  Share or unit of  securities  shall be
increased or decreased  proportionately so that the aggregate purchase price for
the  securities  subject  to a Share  Option  or SAR  shall  remain  the same as
immediately prior to such event.

In addition to the  foregoing,  the Committee  shall be entitled in the event of
any such  increase,  decrease  or  exchange  of  Incentive  Shares to make other
adjustments to unvested  Restricted Shares or the securities  subject to a Share
Option or SAR, the provisions of the Plan, and to any related  Restricted Share,
Share Option or SAR agreements (including  adjustments which may provide for the
elimination of fractional  shares),  where necessary (under Section 422(a)(2) of
the Code or  otherwise)  to  preserve  the terms and  conditions  of any  Grants
hereunder.
     6. Share Option Provisions.
     6.1. Conditions of Grant.
     6.1.1.  General.  The  Committee may grant to Incentive  Plan  Participants
(also  referred to as  "optionees")  nontransferable  Share  Options that either
qualify as Incentive  Share  Options  under Section 422 of the Code or do not so
qualify.  The Committee  may grant more than one Share  Option,  with or without
SAR's,  to the same Incentive Plan  Participant.  The day on which the Committee
approves the granting of a Share  Option shall be  considered  the date on which
such Option is granted.
     6.1.2.  Incentive  Share Options.  Any Incentive Share Option shall only be
granted  within 10 years from  February 9, 1998.  Incentive  Share Options shall
only be granted to Incentive Plan  Participants  while actually  employed by the
Fund or a subsidiary or Affiliate.
     6.2. Share Option Price.
     6.2.1.  Incentive Share Options. The option price per Incentive Share which
may be  purchased  under an  Incentive  Share  Option  under  the Plan  shall be
determined  by the  Committee  at the time of Grant,  but shall not be less than
100% of the fair market value of a Incentive  Share,  determined  as of the date
such Option is granted;  however,  if a Incentive  Plan  Participant  to whom an
Incentive  Share  Option is granted is, at the time of the grant of such Option,
the owner of more than 10% of the combined  voting power of all classes of stock
of the Fund or any parent or subsidiary (a "Substantial Shareholder"), the price
per  Incentive  Share of such  Option  shall  not be less  than 110% of the fair
market value of a Incentive Share on the date such Option is granted.
     6.2.2. Other Share Options. The option price per Incentive Share under each
Share Option granted pursuant to the Plan which is not an Incentive Share Option
shall be determined by the Committee at the time of Grant.
     6.3. Period of Share Option.  The Committee shall determine when each Share
Option is to expire.  However,  no Incentive  Share Option shall be  exercisable
after  the  expiration  of 10 years  from the date  upon  which  such  Option is
granted.  Further,  no Incentive  Share  Option  granted to an employee who is a
Substantial  Shareholder  at the  time of the  grant  of such  Option  shall  be
exercisable  after the  expiration  of five years from the date of grant of such
Option.
     6.4. Limitation on Exercise and Transfer of Share Options.  Only the person
to whom a Share  Option is granted may  exercise  such  Option,  except  where a
guardian or other legal  representative has been duly appointed for such person,
and except as otherwise  provided in the case of the optionee's  death. No Share
Option granted hereunder shall be transferable by an optionee other than by will
or the laws of descent and  distribution.  No Share Option granted hereunder may
be pledged or  hypothecated,  nor shall any such Option be subject to execution,
attachment or similar process.
     6.5.  Employment,  Holding Period  Requirements  For Certain  Options.  The
Committee may condition any Share Option  granted  hereunder  upon the continued
employment  of the  optionee  by the  Fund  or by a  subsidiary  corporation  or
affiliated  corporation,   and  may  make  any  such  Share  Option  immediately
exercisable.  However,  the Committee will require that, from and after the date
of grant of any Incentive  Share Option  granted  hereunder  until the day three
months  prior to the date such Option is  exercised,  such  optionee  must be an
employee of the Fund or of a subsidiary or Affiliate,  but always subject to the
right  of the  Fund or any  such  subsidiary  or  Affiliate  to  terminate  such
optionee's employment during such period (except if the optionee's employment is
terminated due to death or permanent and total  disability,  in which event such
period shall be one year). Each Share Option shall be subject to such additional
restrictions as to the time and method of exercise as shall be prescribed by the
Committee.  Upon  compliance  with any condition or  requirement  imposed by the
Committee pursuant to the foregoing,  a Share Option or the appropriate  portion
thereof may be exercised in whole or in part from time to time during the option
period; however, such exercise right(s) shall be limited to whole shares.
     6.6.  Payment for Share Option Price.  A Share Option shall be exercised by
an optionee  giving  written notice to the Fund of his intention to exercise the
same,  the  exercise  date  and  sufficient  information  to  allow  the Fund to
determine which Grant and the amount of the Grant that are being exercised.  The
notice shall be  accompanied by full payment of the purchase price in cash or by
check  or,  with the  consent  of the  Committee,  in  whole  or in part  with a
surrender of Incentive Shares having a fair market value on the date of exercise
equal to that portion of the purchase  price for which  payment in cash or check
is not made. The Committee may, in its sole discretion, approve other methods of
exercise for a Share  Option or payment of the option  price,  provided  that no
such method shall cause any option granted under the Plan as an Incentive  Share
Option to not  qualify  under  Section 422 of the code,  or cause any  Incentive
Share issued in connection with the exercise of an option not to be a fully paid
and non-assessable Incentive Share.
     6.7.  Cancellation and Replacement of Share Options and Related Rights. The
Committee may at any time or from time to time permit the voluntary surrender by
an optionee who is the holder of any  outstanding  Share Options under the Plan,
where such  surrender is  conditioned  upon the granting to such optionee of new
Share Options for such number of shares as the Committee shall determine, or may
require such a voluntary  surrender as a condition precedent to the grant of new
Share  Options.  The Committee  shall  determine the terms and conditions of new
Share  Options,  including  the prices at and periods  during  which they may be
exercised,  in accordance  with the  provisions of the Plan, all or any of which
may differ from the terms and conditions of the Share Options  surrendered.  Any
such new Share Options  shall be subject to all the relevant  provisions of this
Plan. The Incentive  Shares subject to any Share Option so  surrendered,  and/or
any  Incentive  Shares  subject  to any  Share  Option  that  has  lapsed,  been
forfeited,  or been canceled and extinguished in connection with the exercise of
an SAR, shall no longer be charged against the limitation  provided in Section 5
of this Plan and may again become  shares  subject to the Plan.  The granting of
new Share Options in connection with the surrender of outstanding  Share Options
under this Plan shall be considered for the purposes of the Plan as the granting
of new Share Options and not an  alteration,  amendment or  modification  of the
Plan or of the Share Options being surrendered.
     6.8.  Limitation on Exercisable  Incentive Share Options.  If the aggregate
fair market value of the Incentive  Shares first becoming subject to exercise as
Incentive  Share  Options  by a  Incentive  Plan  Participant  during  any given
calendar  year exceeds the sum of $100,000,  such Share Option shall be treated,
to the  extent  of such  excess,  as an  option  which  does not  qualify  as an
Incentive Share Option.  Such aggregate fair market value shall be determined as
of the date such Option is granted,  taking into account,  in the order in which
granted,  any other  incentive Share Options granted by the Fund, or by a parent
or subsidiary thereof.
     6.9.  Withholding  of Taxes.  The  Committee  may, in its sole  discretion,
require,  as a condition  to any Grant or to the  delivery of  certificates  for
shares  issued  hereunder,  that the  optionee  pay to the  Fund,  in cash,  any
federal,  state or local taxes of any kind  required by law to be withheld  with
respect to any Grant or any delivery of Incentive Shares upon exercise  thereof.
The Committee,  in its sole  discretion,  may permit optionees to pay such taxes
through the  withholding  of  Incentive  Shares  otherwise  deliverable  to such
optionee in connection  with such Grant or the delivery to the Fund of Incentive
Shares  otherwise  acquired by the optionee.  The Fair Market Value of Incentive
Shares withheld by the Fund or tendered to the Fund for the  satisfaction of tax
withholding  obligations under this Section 6.10 shall be determined on the date
such  Incentive  Shares  are  withheld  or  tendered.  The Fund,  to the  extent
permitted or required by law, shall have the right to deduct from any payment of
any kind (including salary,  bonus,  severance or insurance  proceeds) otherwise
due to an optionee any federal, state or local taxes of any kind required by law
to be withheld with respect to any Grant or to the delivery of Incentive  Shares
under the  Plan,  or to retain or sell  without  notice a  sufficient  number of
Incentive Shares to be issued to such optionee to cover any such taxes, provided
that the Fund  shall not sell any such  Incentive  Shares if such sale  would be
considered  a sale by such  optionee  for purposes of Section 16 of the Exchange
Act.
     7. Stock  Appreciation  Rights. A Incentive Plan Participant may be granted
the right to receive a payment  based on the  increase in the value of Incentive
Shares  occurring  after the date of such Grant.  Such rights  shall be known as
Share  Appreciation  Rights ("SAR's").  SAR's may (but need not) be granted to a
Incentive  Plan   Participant  in  tandem  with,  and  exercisable  in  lieu  of
exercising,  a Grant of Share  Options.  No  optionee  shall be  entitled to SAR
rights solely as a result of the grant of a Share Option to him.
     7.1. Procedure for Grant. SAR's will be specifically granted upon terms and
conditions  specified  by the  Committee,  if the  Fund is the  employer  of the
Incentive Plan Participant, or by a subsidiary or affiliated corporation subject
to the Committee's approval, if such subsidiary or affiliated corporation is the
employer of the Incentive Plan Participant. The terms of SAR's granted in tandem
with a Share Option will be  contained  in the Share  Option  agreement in forms
approved by the Committee  and not  inconsistent  with this Plan.  Each of those
agreements  will  include the option  price per share,  which shall be the "Base
Price"  against which the SAR will be valued,  the periods  during which the SAR
can be exercised, the amounts exercisable at each time and any other conditions.
If an SAR is  granted  independent  of Share  Options,  the Base  Price  will be
determined by the Committee and that price and the other  information  described
above will be contained in an SAR agreement to be executed by the holder and the
Fund.
     7.2.  Valuation of SAR's . When granted in tandem with a Share  Option,  an
SAR shall  provide  that the  holder of a Share  Option  shall have the right to
receive an amount equal to 100% of the excess,  if any, of the fair market value
of the  Incentive  Shares  covered by such Option,  determined as of the date of
exercise  of such SAR by the  Committee  (in the same  manner  as such  value is
determined for purposes of the granting of Share Options),  over the price to be
paid  for such  Incentive  Shares  under  such  Option.  If  SAR's  are  granted
independently  of a Share  Option,  they will be granted with respect to a fixed
number of Incentive  Shares  available  for Grant under the Plan. In that event,
the SAR will  entitle  its holder to receive  the  excess,  if any,  of the fair
market value of the Incentive  Shares covered by the SAR as of the exercise date
of the SAR over the SAR Base Price.
     7.3.  Exercise of SAR's.  SAR's,  if granted,  may only be exercised by the
holder thereof,  and, unless otherwise provided in the applicable SAR agreement,
may be exercised either with respect to all, or a portion,  of the amount of the
Grant  exercisable at that time. A SAR shall be exercised by its holder's giving
written  notice to the Fund of the intention to exercise the same,  the exercise
date and sufficient  information to allow the Fund to determine  which Grant and
the amount of the Grant that are being exercised.  If a SAR is granted in tandem
with a Share  Option,  it cannot be  exercised  unless  (i) such  person is then
permitted to exercise  the Share  Option or the portion  thereof with respect to
which such SAR's relate,  and (ii) the fair market value of the Incentive Shares
covered by the Share Option,  determined as provided  above,  exceeds the option
price of such Incentive Shares.
     7.4.  Payment under SAR.  Payment on exercise of a SAR shall be made by the
employer of the  Incentive  Plan  Participant,  in one or more of the  following
manners, as determined by the Committee:
     (a) cash (or check);
     (b) fully paid  Incentive  Shares  having a fair market value equal to such
     amount; or (c) a combination of cash (or check) and Incentive Shares.
A SAR granted in tandem with a Share  Option  shall be modified  under  Sections
6.7-6.9 at the same time and to the extent that the  underlying  Share Option is
modified.  Other SAR's are subject to Sections 6.7 and 6.9 as if the exercise of
the SAR was the exercise of a Share Option.
     7.5. Other Provisions. Upon the exercise of any SAR's, the Share Option, or
that  portion  thereof  to  which  such  SAR's  relate,  shall be  canceled  and
automatically  extinguished.  The granting of a Share Option or SAR shall impose
no obligation upon the optionee to exercise such Share Option or SAR. The Fund's
or a subsidiary corporation's obligation to satisfy SAR's shall not be funded or
secured in any manner.  No SAR granted  hereunder  shall be  transferable by the
Incentive Plan  Participant  granted such SAR, other than by will or the laws of
descent and distribution.
     7.6.  Section  16  Compliance.  After  the  Grant  of an SAR,  an  optionee
intending to rely on an exemption  from Section  16(b) of the Exchange Act shall
be required to hold such SAR for six months from the date the price for such SAR
is fixed to the date of cash settlement. Additionally, in order to remain exempt
from Section  16(b) of the Exchange  Act, a SAR must be exercised by an optionee
subject to such Section only during the period  beginning on the third  business
day  following  the release of a summary  statement  of the Fund's  quarterly or
annual sales and earnings and ending on the twelfth  business day following said
date.
     8. Restricted Shares.
     (a) Grant. The Committee shall determine the Incentive Plan Participants to
whom, and the time or times at which,  Grants of Restricted Shares will be made,
the number of Restricted Shares to be granted,  the price (if any) to be paid by
such Incentive Plan  Participants  (subject to Section 8(b)),  the time or times
within which such Restricted Share grants may be subject to forfeiture,  and the
other  terms and  conditions  of the  grants in  addition  to those set forth in
Section 8(b).  The  Committee may condition the grant of Restricted  Shares upon
the  attainment  of  specified  performance  goals or such other  factors as the
Committee may determine in its sole discretion.
     (b) Terms and  Conditions.  Restricted  Shares granted under the Plan shall
contain any terms and conditions,  not  inconsistent  with the provisions of the
Plan, which are deemed desirable by the Committee.  A Incentive Plan Participant
who receives a grant of Restricted Shares shall not have any rights with respect
to such Grant unless and until such Incentive Plan  Participant  has executed an
agreement  evidencing  such Grant in the form  approved from time to time by the
Committee,  has delivered a fully executed copy thereof to the Company,  and has
otherwise  complied with the applicable  terms and conditions of such Grant.  In
addition,  Restricted  Shares  granted  under the Plan  shall be  subject to the
following terms and conditions:
     (i) The  purchase  price for  Restricted  Shares will be  specified  by the
Committee.
     (ii) Grants of  Restricted  Shares  shall only be  accepted by  executing a
Restricted Share agreement and paying,  in cash or by check,  whatever price (if
any) if required under Section 8(b)(i).
     (iii) Each Incentive Plan Participant  granted  Restricted  Shares shall be
issued  a  Share  certificate  in  respect  of  such  Restricted  Shares.   Such
certificate  shall be registered in the name of such Incentive Plan  Participant
and shall bear an appropriate  legend  referring to the terms,  conditions,  and
restrictions applicable to such Grant.
     (iv) Any Share certificates  evidencing  Restricted Shares shall either (A)
be held in  custody  by the Fund  until the  employment  and other  restrictions
thereon shall all have lapsed; or (B) be affixed with a legend, identifying such
Shares as  Restricted  Shares  and  expressly  prohibiting  the sale,  transfer,
tender, pledge, assignment or encumbrance of such Shares, as the Committee shall
determine.  With respect to any  Restricted  Shares held in custody by the Fund,
the Incentive Plan  Participant  granted such Restricted  Share shall deliver to
the Fund a Share power,  endorsed in blank,  relating to the Restricted  Shares.
With respect to any Restricted Shares held by a Incentive Plan Participant under
legend,  the Incentive Plan  Participant  granted such  Restricted  Shares shall
deliver  to the Fund an  acknowledgment  that such  Shares  remain  subject to a
substantial  risk of forfeiture in the event of termination of employment  under
certain circumstances,  and that the certificates representing ownership of such
Shares will be surrendered to the Fund  immediately upon any such termination of
employment.
     (v)  Subject  to the  provisions  of the  Plan  and  the  Restricted  Share
agreement, during a temporal period set by the Committee and commencing with the
date of such Grant (the  "Restriction  Period"),  a Incentive  Plan  Participant
shall not be permitted to sell, transfer,  tender,  pledge,  assign or otherwise
encumber any Restricted Share granted under the Plan. However, the Committee, in
its  sole  discretion,  may  provide  for the  lapse of such  transfer  or other
restrictions in installments,  or accelerate or waive such restrictions in whole
or in part, based on service, performance or other factors and criteria selected
by the Committee.
     (vi) Except as provided in this Section 8(b)(vi) and in Section 8(b)(v),  a
Incentive Plan Participant shall have, with respect to Restricted Shares granted
to him, all of the rights of a shareholder  of the Fund,  including the right to
vote such Shares. Any distributions  thereon shall be held by the Fund until the
restrictions on those Shares terminate, at which time they shall be paid without
interest  to  the  Incentive  Plan  Participant.  The  Committee,  in  its  sole
discretion  and as determined at the time of a Grant of Restricted  Shares,  may
permit or require  cash  dividends  otherwise  due and payable to be  reinvested
either  in  additional  Restricted  Shares  (to  the  extent  available).  Share
dividends  issued  with  respect  to  Restricted  Shares  shall  be  treated  as
additional  Restricted Shares. As Restricted Shares, such additional Shares will
be subject to the same  restrictions,  terms and  conditions  applicable  to the
Restricted Shares with respect to which such additional Shares were issued.
     (vii)  No  Restricted  Share  shall be  transferable  by a  Incentive  Plan
Participant other than by will or by the laws of descent and distribution.
     (viii) In the event  Restricted  Shares are  forfeited by a Incentive  Plan
Participant,  the Fund  will  refund  to such  Incentive  Plan  Participant  any
payment(s)  made by such  Incentive  Plan  Participant  to purchase  such Share,
promptly  upon  such  forfeiture  (and  any  corresponding  surrender  of  Share
certificates).
     (c) Minimum Value  Provisions.  To ensure that Grants of Restricted  Shares
actually  reflect the  performance of the Fund and service of the Incentive Plan
Participant,  the Committee may provide,  in its sole  discretion,  for a tandem
performance-based  award, or other grant, designed to guarantee a minimum value,
payable in cash or Incentive  Shares,  to the  recipient  of a Restricted  Share
Grant, subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
     9. Share  Bonuses.  The Committee at any time may award a Share Bonus to an
Incentive Plan Participant. Incentive Plan Participants are not required to make
any  payment for Share  Bonuses  but may be required to pay income  taxes on the
fair market value of the Grant.  The Fund may require the  Participant to make a
cash payment to the Fund equal to the amount of tax withholding  required on the
Grant or may  withhold  a  portion  of the Share  Bonus to fund the  withholding
requirement, in the Committee's discretion.
     10. Termination of Employment. If a Incentive Plan Participant ceases to be
an employee of the Fund or any of its  subsidiaries or affiliates,  for a reason
other then death, retirement, permanent and total disability (as defined below),
his Grants of Stock Options and SAR's shall, unless extended by the Committee on
or before his date of termination of employment, terminate on the effective date
of such  termination of employment.  Neither the Incentive Plan  Participant nor
any other  person  shall have any right after such date to  exercise  all or any
part of his Share Options or SAR's.
     10.1.  Automatic Extension of Exercise Period. If termination of employment
is due to death or  permanent  and  total  disability,  then  outstanding  Share
Options  and SAR's may be  exercised  within the one year  period  ending on the
anniversary  of such  death or  permanent  and total  disability  In the case of
death, such outstanding Share Options and SAR's may be exercised by the holder's
personal  representative,  or the  person  designated  by  such  Incentive  Plan
Participant  by will,  or as  otherwise  designated  by the laws of descent  and
distribution.  Notwithstanding the foregoing, in no event shall any Share Option
or SAR be exercisable after the expiration of the option period, and in the case
of exercises made after a Incentive Plan Participant's death, not to any greater
extent than such Incentive Plan Participant would have been entitled to exercise
such Option or SAR at the time of his death..
     10.2. Retirement.  Subject to the discretion of the Committee, in the event
a  Incentive  Plan  Participant  terminates  employment  with  the  Fund and all
subsidiary  or  affiliated  corporations  because of normal or early  retirement
under any pension plan or retirement  plan hereafter  adopted by the Fund or the
employer,  (a) any  then-outstanding  Share  Options  and/or  SAR's held by such
Incentive  Plan  Participant  shall  lapse at the end of the term of such  Share
Option or SAR, or 30 days after such retirement, whichever first occurs.
     10.3.  Definitions.  For purposes hereof,  "permanent and total disability"
means a permanent  and total  disability  as defined in Section  22(e)(3) of the
Code. In the event an employee of the Fund or one of its subsidiary corporations
is  granted a leave of  absence by the Fund or such  subsidiary  corporation  to
enter military  service or because of sickness,  his employment with the Fund or
such subsidiary corporation shall not be considered terminated,  and he shall be
deemed an employee of the Fund or such subsidiary  corporation during such leave
of  absence or any  extension  thereof  granted  by the Fund or such  subsidiary
corporation.
     11.  Amendments to Plan. The Committee is authorized to interpret this Plan
and from time to time adopt any rules and regulations for carrying out this Plan
that it may deem advisable.  The Board may at any time amend, modify, suspend or
terminate  this Plan or the  Committee may take such action with the approval of
the Board. In no event, however, without the approval of shareholders, shall any
action of the Committee or the Board of Directors result in:
     (a) Materially amending, modifying or altering the eligibility requirements
provided in Section 4 hereof;
     (b) Increasing,  except as provided in Section 5 hereof, the maximum number
of Incentive Shares or SAR's that may be made subject to Grants; or
     (c) Materially  increasing the benefits accruing to participants under
this Plan; except to conform this Plan and any agreements made hereunder to
changes in the Code or required by governing law.
     12. Investment Representation, Approvals and Listing. The Committee may, if
 it deems appropriate, condition its grant of any
Share Option,  SAR, Restricted Shares or Share Bonuses hereunder upon receipt of
the following  investment  representation  from the optionee:  "I agree that any
Incentive  Shares of [the issuer] (the "Fund")  which I may acquire by virtue of
this [Share Option] shall be acquired for investment  purposes only and not with
a view to distribution or resale,  and may not be transferred,  sold,  assigned,
pledged,  hypothecated or otherwise  disposed of by me unless (i) a registration
statement or  post-effective  amendment to a  registration  statement  under the
Securities Act, with respect to said Incentive Shares has become effective so as
to permit the sale or other  disposition  of said shares by me; or (ii) there is
presented to the Fund.  an opinion of counsel  satisfactory  to the Fund and its
counsel  to the  effect  that  the sale or other  proposed  disposition  of said
Incentive  Shares by me may  lawfully  be made  otherwise  than  pursuant  to an
effective registration  statement or post-effective  amendment to a registration
statement  relating  to the said shares  under the  Securities  Act of 1933,  as
amended."  The  Fund  shall  not  be  required  to  issue  any   certificate  or
certificates for Incentive Shares on any Grant or upon the exercise of any Share
Option or an SAR  granted  under  this Plan  prior to (a) the  obtaining  of any
approval from any  governmental  agency which the Committee  shall,  in its sole
discretion,  determine to be necessary or  advisable;  (b) the admission of such
shares to listing on any  national  securities  exchange on which the  Incentive
Shares  may  be  listed;  (c)  the  completion  of  any  registration  or  other
qualifications  of the Incentive Shares under any state or federal law or ruling
or regulations of any  governmental  body which the Committee shall, in its sole
discretion,  determine to be necessary or advisable or the  determination by the
Committee, in its sole discretion,  that any registration or other qualification
of the Incentive  Shares is not necessary or advisable;  or (d) the obtaining of
an  investment  representation  from the optionee in the form stated above or in
such other form as the Committee, in its sole discretion,  shall determine to be
adequate.
     13. General Provisions.  The form and substance of Share Option agreements,
SAR agreements and Restricted Stock  agreements made hereunder,  whether granted
at the same or different times,  need not be identical.  Nothing in this Plan or
in any Share Option,  SAR or Restricted  Stock  agreement  shall confer upon any
employee  any  right  to  continue  in  the  employ  of the  Fund  or any of its
subsidiary corporations or Affiliates or to interfere with or limit the right of
the Fund or any subsidiary or Affiliate to terminate his employment at any time,
with or without  cause.  Nothing  contained in this Plan or in any Share Option,
SAR or Restricted  Stock agreement shall be construed as entitling any Incentive
Plan  Participant  to any rights of a shareholder  as a result of the Grant of a
Share Option or an SAR, until such time as Incentive  Shares are actually issued
to such  optionee  pursuant to the exercise of such Option or SAR. This Plan may
be assumed by the  successors and assigns of the Fund. The liability of the Fund
under this Plan and any sale made  hereunder is limited to the  obligations  set
forth  herein with  respect to such sale and no term or  provision  of this Plan
shall be construed to impose any  liability on the Fund in favor of any employee
(or any other party  acting on his behalf or in his stead)  with  respect to any
loss,  cost or expense which such employee or party may incur in connection with
or arising out of any  transaction in connection  with this Plan. The expense of
administering  this Plan shall be borne by the Fund.  The  captions  and section
numbers  appearing  in this Plan are inserted  only as a matter of  convenience.
They do not  define,  limit,  construe  or  describe  the scope or intent of the
provisions of this Plan.  This Plan and the  agreements  issued under it are the
entire agreement among the Fund and the Incentive Plan  Participants.  This Plan
shall be governed by the law of the State of Delaware.  All actions taken by the
Committee  or the Fund under the Plan or with respect to Share  Options,  SAR's,
Restricted  Shares or Incentive  Shares  thereunder are final and binding on all
persons,  and no member of the  Committee or person acting on behalf of the Fund
or an  employer  shall be liable  for any  action  taken or  determination  made
relating to the Plan, except for willful misconduct.
     14.  Provisions  Applicable  Solely to Insiders.  The following  provisions
shall apply only to persons who are  subject to Section 16 of the  Exchange  Act
with respect to securities of the Fund ("Insiders"), and shall apply to Insiders
notwithstanding any provisions of the Plan to the contrary:
     14.1 Compliance with Statute. No Insider shall be permitted to transfer any
security of the Fund acquired by him, except to the extent  permitted by Section
16(b) of the Exchange Act and the regulations promulgated thereunder.
     14.2.  Limitation  on Satisfying  Withholding  Obligations  with  Incentive
Shares.  An Insider  may elect to have  shares  withheld  from a Grant or tender
shares to the Fund in order to satisfy  the tax  withholding  consequences  of a
Grant only during the period  beginning on the third  business day following the
date on which the Fund releases the financial information specified in 17 C.F.R.
Section  240.16b-3(e)(1)(ii)  and ending on the twelfth  business day  following
such date.  Notwithstanding  the foregoing,  an Insider may elect to have shares
withheld from a Grant in order to satisfy tax withholding  consequences  thereof
by providing the Fund with a written election to so withhold at least six months
in advance of the  withholding of shares  otherwise  issuable upon exercise of a
Share Option.
     15. Provisions  Affecting  Incentive Plan  Participants  Prior to Liquidity
Event.  If for any reason a Share Option or SAR becomes  exercisable and is held
by a person who is not, or who does not claim  through,  an employee of the Fund
or its successor or an Affiliate or subsidiary of the Fund or its successor, and
if the  Incentive  Shares  are not  listed or quoted  on a  national  securities
exchange or a national  quotation  system  during the period  beginning  90 days
before the Share Option or SAR becomes  exercisable and ending upon an exercise,
the Fund or the  employer  of the  optionee  shall  have the  option but not the
obligation  to redeem the Share Option or SAR in cash for an amount equal to the
amount, in the case of a Share Option,  payable on an SAR granted in tandem with
the Share Option and  exercised on the later of the date the Share Option became
exercisable  or the date on which the Fund elected to exercise this right,  and,
in the case of an SAR, the value of the SAR.
     16.  Termination  of this Plan.  This Plan shall  terminate  on February 8,
2008, and thereafter no Share Options, Restricted Shares, Share Bonuses or SAR's
shall be granted  hereunder.  All Share  Options,  SAR's and  Restricted  Shares
outstanding at the time of termination of this Plan shall continue in full force
and effect according to their terms and the terms and conditions of this Plan.

EX-10.H

                               AGREEMENT OF MERGER

         This AGREEMENT OF MERGER,  dated, this ___ day of April,  1999, entered
into  pursuant  to  Section  264 of Title 8 of the  General  Corporation  Law of
Delaware and Section  2B-20(b) of Title 42 of the New Jersey  Limited  Liability
Company Act, is between Ridgewood Power Corporation, a Delaware corporation (the
"Non-Surviving  Corporation")  and  Ridgewood  Power LLC,  a New Jersey  limited
liability company (the "Surviving Company").

         WITNESSETH that:

         WHEREAS, the Non-Surviving Corporation and the Surviving Company desire
to merge into a single limited liability company;

         NOW, THEREFORE,  the parties to this Agreement, in consideration of the
mutual covenants,  agreements and provisions  hereinafter  contained,  do hereby
prescribe the terms and  conditions of said merger and mode of carrying the same
into effect as follows:

         FIRST: The Non-Surviving Corporation hereby merges itself into and with
the Surviving  Company,  which shall be the surviving company and which shall be
governed by the laws of the State of New Jersey.

     SECOND:  Upon the filing of the  appropriate  Certificate  of Merger in the
Office of the Secretary of State of Delaware,  the separate corporate  existence
of the Non-Surviving Corporation shall terminate.

         THIRD:  The manner of converting the outstanding  shares of the capital
stock of the  Non-Surviving  Corporation,  and the  membership  interests in the
Surviving  Company  existing  prior to the  effective  date of the merger,  into
membership  interests in the Surviving  Company after the effective  date of the
mergers shall be as follows:





                  (a)  All   shares  of  common   stock  of  the   Non-Surviving
Corporation  which shall be issued and outstanding on the effective date of this
merger,  and all rights in respect  thereof,  shall from and after the effective
date of the merger be  converted  into 100% of the  membership  interests in the
Surviving Company,  with each such share representing a proportional  membership
interest. The rights and obligations of the holders of such shares as members of
the  Surviving  Company  are as set  forth  in the  operating  agreement  of the
Surviving Company.

                  (b) Each  membership  interest of the Surviving  Company which
shall be issued and  outstanding  on the effective  date of the merger,  and all
rights in respect thereof, shall from and after the effective date of the merger
be converted to cash in the amount of $100.00.

         FOURTH:  The terms and conditions of the merger are as follows:

         (a) The operating  agreement of the Surviving Company as it shall exist
on the effective date of this merger shall be and remain the operating agreement
of the Surviving  Company after the effective  date of the merger until the same
shall be altered, amended or repealed as therein provided.

         (b) The manager and officers of the Surviving  Company  holding offices
immediately  prior to the  effective  date of the merger shall  continue in such
offices as the manager and officers of the Surviving Company after the effective
date of the merger until their respective  successors shall have been designated
or elected and qualified.

         (c) The merger  shall become  effective  upon filing a  Certificate  of
Merger with the Secretary of State of Delaware and a Certificate  of Merger with
the Secretary of State of New Jersey.






         (d) Upon the  merger  becoming  effective,  all the  property,  rights,
privileges,  franchises, patents, trademarks,  licenses, registrations and other
assets of every kind and description of the  Non-Surviving  Corporation shall be
transferred to, vested in and devolve upon the Surviving Company without further
act  or  deed  and  all  property,  rights  and  every  other  interest  of  the
Non-Surviving  Corporation and the Surviving Company shall be as effectively the
property of the Surviving Company after the effective date of the merger as they
were of the  Non-Surviving  Corporation and the Surviving  Company  respectively
immediately  prior  to the  effective  date  of the  merger.  The  Non-Surviving
Corporation  hereby  agrees  from  time to time,  as and when  requested  by the
Surviving  Company or by its  successors  or assigns,  to execute and deliver or
cause to be executed and delivered all such deeds and instruments and to take or
cause to be taken such further or other action as the Surviving Company may deem
necessary or desirable in order to vest in and confirm to the Surviving  Company
title  to and  possession  of any  property  of  the  Non-Surviving  Corporation
acquired  or to be  acquired  by reason of or as a result of the  merger  herein
provided for and otherwise to carry out the intent and purposes hereof,  and the
proper  officers and directors of the  Non-Surviving  Corporation and the proper
officers and directors of the Surviving Company are fully authorized in the name
of the Non-Surviving Corporation or otherwise to take any and all such action.






         (e) The  Surviving  Company may be served with  process in the State of
Delaware in any  proceeding for  enforcement of any obligation of  Non-Surviving
Corporation  as well  as for  enforcement  of any  obligation  of the  Surviving
Company  arising  from the merger,  including  any suit or other  proceeding  to
enforce the right of any  stockholder  as  determined  in appraisal  proceedings
pursuant to the  provisions  of Section 262 of the  General  Corporation  Law of
Delaware,  and  the  Surviving  Company  does  hereby  irrevocably  appoint  the
Secretary of State of Delaware as its agent to accept  service of process in any
such suit or other proceeding. The address to which a copy of such process shall
be mailed by the Secretary of State of Delaware is Ms. Mirna  Valdes,  Assistant
Secretary,  Ridgewood  Power LLC,  947 Linwood  Avenue,  Ridgewood,  New Jersey,
07450, until the Surviving Company shall have hereafter designated in writing to
the said  Secretary of State a different  address for such  purpose.  Service of
such  process  may be made by  personally  delivering  to and  leaving  with the
Secretary of State of Delaware  duplicate  copies of such process,  one of which
copies the  Secretary of State of Delaware  shall  forthwith  send by registered
mail to Ridgewood Power LLC at the above address.

         FIFTH:  Anything  herein or elsewhere to the contrary  notwithstanding,
this Agreement may be terminated and abandoned by the President or the Executive
Vice President of any constituent entity at any time prior to the time that this
merger becomes effective.

         IN WITNESS  WHEREOF,  the parties to this Agreement,  have caused these
presents to be executed by the President of each party hereto as the  respective
act,  deed and  agreement  of each of said  entities,  on this ___ day of April,
1999.

                    Ridgewood Power Corporation, a Delaware Corporation


                                   By:__________________________________
                                           Robert E. Swanson, President


                    Ridgewood Power LLC, a New Jersey Limited Liability Company


                                   By: __________________________________
                                          Robert E. Swanson, President

BTV\128508.2

EX-10.I

                               AGREEMENT OF MERGER

         This AGREEMENT OF MERGER,  dated, this ___ day of April,  1999, entered
into  pursuant  to  Section  264 of Title 8 of the  General  Corporation  Law of
Delaware and Section  2B-20(b) of Title 42 of the New Jersey  Limited  Liability
Company Act, is between Ridgewood Power VI Corporation,  a Delaware  corporation
(the  "Non-Surviving  Corporation")  and  Ridgewood  Power VI LLC,  a New Jersey
limited liability company (the "Surviving Company").

         WITNESSETH that:

         WHEREAS, the Non-Surviving Corporation and the Surviving Company desire
to merge into a single limited liability company;

         NOW, THEREFORE,  the parties to this Agreement, in consideration of the
mutual covenants,  agreements and provisions  hereinafter  contained,  do hereby
prescribe the terms and  conditions of said merger and mode of carrying the same
into effect as follows:

         FIRST: The Non-Surviving Corporation hereby merges itself into and with
the Surviving  Company,  which shall be the surviving company and which shall be
governed by the laws of the State of New Jersey.

     SECOND:  Upon the filing of the  appropriate  Certificate  of Merger in the
Office of the Secretary of State of Delaware,  the separate corporate  existence
of the Non-Surviving Corporation shall terminate.

         THIRD:  The manner of converting the outstanding  shares of the capital
stock of the  Non-Surviving  Corporation,  and the  membership  interests in the
Surviving  Company  existing  prior to the  effective  date of the merger,  into
membership  interests in the Surviving  Company after the effective  date of the
mergers shall be as follows:





                  (a)  All   shares  of  common   stock  of  the   Non-Surviving
Corporation  which shall be issued and outstanding on the effective date of this
merger,  and all rights in respect  thereof,  shall from and after the effective
date of the merger be  converted  into 100% of the  membership  interests in the
Surviving Company,  with each such share representing a proportional  membership
interest. The rights and obligations of the holders of such shares as members of
the  Surviving  Company  are as set  forth  in the  operating  agreement  of the
Surviving Company.

                  (b) Each  membership  interest of the Surviving  Company which
shall be issued and  outstanding  on the effective  date of the merger,  and all
rights in respect thereof, shall from and after the effective date of the merger
be converted to cash in the amount of $100.00.

         FOURTH:  The terms and conditions of the merger are as follows:

         (a) The operating  agreement of the Surviving Company as it shall exist
on the effective date of this merger shall be and remain the operating agreement
of the Surviving  Company after the effective  date of the merger until the same
shall be altered, amended or repealed as therein provided.

         (b) The manager and officers of the Surviving  Company  holding offices
immediately  prior to the  effective  date of the merger shall  continue in such
offices as the manager and officers of the Surviving Company after the effective
date of the merger until their respective  successors shall have been designated
or elected and qualified.

         (c) The merger  shall become  effective  upon filing a  Certificate  of
Merger with the Secretary of State of Delaware and a Certificate  of Merger with
the Secretary of State of New Jersey.






         (d) Upon the  merger  becoming  effective,  all the  property,  rights,
privileges,  franchises, patents, trademarks,  licenses, registrations and other
assets of every kind and description of the  Non-Surviving  Corporation shall be
transferred to, vested in and devolve upon the Surviving Company without further
act  or  deed  and  all  property,  rights  and  every  other  interest  of  the
Non-Surviving  Corporation and the Surviving Company shall be as effectively the
property of the Surviving Company after the effective date of the merger as they
were of the  Non-Surviving  Corporation and the Surviving  Company  respectively
immediately  prior  to the  effective  date  of the  merger.  The  Non-Surviving
Corporation  hereby  agrees  from  time to time,  as and when  requested  by the
Surviving  Company or by its  successors  or assigns,  to execute and deliver or
cause to be executed and delivered all such deeds and instruments and to take or
cause to be taken such further or other action as the Surviving Company may deem
necessary or desirable in order to vest in and confirm to the Surviving  Company
title  to and  possession  of any  property  of  the  Non-Surviving  Corporation
acquired  or to be  acquired  by reason of or as a result of the  merger  herein
provided for and otherwise to carry out the intent and purposes hereof,  and the
proper  officers and directors of the  Non-Surviving  Corporation and the proper
officers and directors of the Surviving Company are fully authorized in the name
of the Non-Surviving Corporation or otherwise to take any and all such action.






         (e) The  Surviving  Company may be served with  process in the State of
Delaware in any  proceeding for  enforcement of any obligation of  Non-Surviving
Corporation  as well  as for  enforcement  of any  obligation  of the  Surviving
Company  arising  from the merger,  including  any suit or other  proceeding  to
enforce the right of any  stockholder  as  determined  in appraisal  proceedings
pursuant to the  provisions  of Section 262 of the  General  Corporation  Law of
Delaware,  and  the  Surviving  Company  does  hereby  irrevocably  appoint  the
Secretary of State of Delaware as its agent to accept  service of process in any
such suit or other proceeding. The address to which a copy of such process shall
be mailed by the Secretary of State of Delaware is Ms. Mirna  Valdes,  Assistant
Secretary,  Ridgewood Power VI LLC, 947 Linwood Avenue,  Ridgewood,  New Jersey,
07450, until the Surviving Company shall have hereafter designated in writing to
the said  Secretary of State a different  address for such  purpose.  Service of
such  process  may be made by  personally  delivering  to and  leaving  with the
Secretary of State of Delaware  duplicate  copies of such process,  one of which
copies the  Secretary of State of Delaware  shall  forthwith  send by registered
mail to Ridgewood Power VI LLC at the above address.

         FIFTH:  Anything  herein or elsewhere to the contrary  notwithstanding,
this Agreement may be terminated and abandoned by the President or the Executive
Vice President of any constituent entity at any time prior to the time that this
merger becomes effective.

         IN WITNESS  WHEREOF,  the parties to this Agreement,  have caused these
presents to be executed by the President of each party hereto as the  respective
act,  deed and  agreement  of each of said  entities,  on this ___ day of April,
1999.

                   Ridgewood Power VI Corporation, a Delaware Corporation


                      By:__________________________________
                          Robert E. Swanson, President


                 Ridgewood Power VI LLC, a New Jersey Limited Liability Company


                      By: __________________________________
                          Robert E. Swanson, President

BTV\128508.3

EX-21

  EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT  
Name of Subsidiary    Type of entity              Jurisdiction of organization
ZAP, LLC              limited liability company   Delaware 

EX-27

 


<ARTICLE> 5
<LEGEND>This schedule contains summary financial information extracted
from the Registrant's audited financial statements for the year ended December
31, 1998 and is qualified in its entirety by reference to those
financialstatements.


<CIK> 0001057076
<NAME> THE RIDGEWOOD POWER GROWTH FUND
                                    
<PERIOD-TYPE>                                  YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                    25,256,560     
<SECURITIES>                                       0
<RECEIVABLES>                                      0
<ALLOWANCES>                                       0
<INVENTORY>                                        0
<CURRENT-ASSETS>                          25,352,238
<PP&E>                                             0 
<DEPRECIATION>                                     0
<TOTAL-ASSETS>                            25,733,430
<CURRENT-LIABILITIES>                      1,378,749
<BONDS>                                            0
<PREFERRED-MANDATORY>                              0
<PREFERRED>                                        0
<COMMON>                                           0
<OTHER-SE>                                24,354,681
<TOTAL-LIABILITY-AND-EQUITY>              25,733,430
<SALES>                                            0
<TOTAL-REVENUES>                             494,002
<CGS>                                              0
<TOTAL-COSTS>                                      0
<OTHER-EXPENSES>                           1,345,747
<LOSS-PROVISION>                                   0
<INTEREST-EXPENSE>                                 0
<INCOME-PRETAX>                             (851,745)
<INCOME-TAX>                                       0
<INCOME-CONTINUING>                         (851,745)
<DISCONTINUED>                                     0  
<EXTRAORDINARY>                                    0
<CHANGES>                                          0
<NET-INCOME>                                (851,745)
<EPS-PRIMARY>                                 (2,869)
<EPS-DILUTED>                                 (2,869)


<F1>Includes $9,330 due from affiliates.
<F3>Includes $1,114,129 due to affiliates.
<F4>Represents Investor Shares of beneficial interestin Trust with
capital accounts of $24,363,198 less managing shareholder's accumulated deficit
of $8,517.