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File No. 70-8341
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 5 (POST-EFFECTIVE) TO
FORM U-1 APPLICATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_____________________________
PUBLIC SERVICE COMPANY OF OKLAHOMA
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(Name of company or companies filing this statement and address
of principal executive offices)
_______________________________
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
________________________________
Mary M. Polfer
Vice President, Administration
Public Service Company of Oklahoma
212 East 6th Street
Tulsa, Oklahoma 74119-1212
Stephen J. McDonnell,
Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
(Names and addresses of agents for service)
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Public Service Company of Oklahoma ("PSO" or the "Company"), an
Oklahoma corporation, is a wholly owned electric public utility subsidiary of
Central and South West Corporation ("CSW"), a Delaware corporation and a
registered holding company under the Public Utility Holding Company Act of
1935, as amended (the "Act"). PSO hereby amends the Form U-1 Application in
File No. 70-8341 as provided below; in all other respects the Application as
previously filed will remain the same.
Item 1. Description of Proposed Transactions.
BACKGROUND
By Order of the Commission dated March 31, 1994 (HCAR No. 35-26016;
File No. 70-8341) (the "Order"), PSO was authorized to invest up to $2.5
million, through capital stock purchases, in Excel Energy Technologies, Ltd.
("Excel"), a Delaware corporation, pursuant to an October 14, 1993 Debenture,
Common Stock and Preferred Stock Purchase Agreement ("Purchase Agreement"),
which was signed by Excel, PSO, and ML Oklahoma Venture Partners, Limited
Partnership ("ML Partnership"), an unaffiliated Oklahoma limited partnership.
The Purchase Agreement provided for PSO's acquisition from Excel of
(i) 3,882 shares (19.23%) of Series A Preferred Stock at $30.67 per share (an
aggregate of $119,060.94), (ii) 61,336 shares (100%) of Series B Preferred
Stock at $30.67 per share (an aggregate of $1,881,175.12), and (iii) 4,334
shares (3%) of voting common stock ("Class A Common Stock") for $625. In
addition, under the Purchase Agreement, PSO paid Excel $200,000 to finance
further development of Excel's proprietary micro-processor based technology
for energy control at the customer location (the "Technology").
Both series of preferred stock are convertible into shares of common
stock upon the terms and conditions set forth in the Certificate of
Designations, Voting Powers and Rights of Series A and Series B Convertible
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Participating Preferred Stock of Excel Energy Technologies, Ltd. ("Certificate
of Designations") with respect thereto. Series B Preferred Stock is
convertible into non-voting common stock ("Class B Common Stock"). Upon
conversion of the Series A Preferred Stock into Class A Common Stock, PSO will
own 4.99% of the voting securities of Excel; Excel is not and will not be a
subsidiary company under Section 2(a)(8)(A) of the Act nor an affiliate under
Section 2(a)(11)(A) of the Act.
PSO is to divest its equity interest in Excel once PSO has achieved
its objectives under its demand-side management ("DSM") program or, in any
event, prior to December 31, 2004, unless PSO receives Commission approval to
retain the equity interest for an additional period of time.
On September 14, 1993, PSO, ML Partnership, certain other
shareholders of Excel and Excel executed a Registration Agreement, which
provides certain rights to registration of Class A and B Common Stock
(collectively, "Common Stock") under the Securities Act of 1993, as amended.
Finally, PSO and certain other shareholders of Excel executed on October 14,
1993 a Shareholder Agreement that allows PSO to elect a single member of the
six-member Excel board of directors, and provides PSO with certain rights to
information. The Shareholder Agreement also provides for certain preemptive
rights, rights of first offer, rights of co-sale and other rights relating to
the ownership of Excel's securities.
Excel is engaged in research, development, and installation of the
Technology. On April 9, 1993, PSO and Excel entered into a Consulting and
Research and Development Agreement, as amended through October 14, 1993
("Consulting Agreement"), to enhance jointly the application of the
Technology. Under the Consulting Agreement, PSO is to provide Excel with, for
example, commercial and industrial usage patterns and Excel is to provide PSO
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with product research and development expertise, sales experience, a database
of information on installed energy management systems and is to otherwise
consult on DSM issues.
In consideration for services and energy management systems under the
Consulting Agreement, PSO will pay Excel up to $1.35 million. Of such amount,
$225,000 has been paid for consulting services, $125,000 has been paid for
purchases of proto-type energy management systems, and $366,000 of the
authorized $1 million is currently outstanding for purchases of energy
management systems installed in PSO customer locations for conservation and
DSM study purposes.
PSO entered into the original agreements based on its belief that
Excel and the Technology can provide its commercial and residential customers,
especially middle-market commercial customers, with significant DSM
opportunities. Under the agreements, PSO is to purchase and Excel is to
install and maintain "pilot" Excel energy management systems, thereby
providing data to gauge results and evaluate customer perceptions. PSO is to
acquire no energy management systems outside of its service territory. More
than 50% of the sales of the Technology are expected to be outside of PSO's
service territory.
In the Application requesting authority for the above transactions,
PSO also requested authorization to invest an additional $500,000 in Excel
through capital stock purchases, to finance further technological development,
but requested the Commission to reserve jurisdiction over the additional
investment in Excel. The Order authorizing the above transactions also
reserved jurisdiction over such additional investment. PSO now wishes to make
a portion of such additional investment in an amount equal to $350,000 for the
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purchase of Excel's 9% Subordinated Debentures convertible into preferred
stock and a warrant exercisable for Class B Common Stock, each as more fully
described below.
RESULTS TO DATE
Based upon limited test data, the Excel's energy management system is
producing significant reduction's in customer energy consumption. Excel
installed 24 systems from the time of PSO's initial investment through
December 1994. Approximately 45% of Excel's installed base is within PSO's
service territory. However, during the period from July 1994 through December
1994, only 21% of the systems sold were installed within PSO's service
territory. Excel anticipates this trend to accelerate as further market
distribution channels are developed.
NEW INVESTMENT
Terms. PSO requests authorization to invest an additional $350,000
in Excel. Under the Debenture and Warrant Purchase Agreement dated December
8, 1994 (the "Investment Agreement"), among Excel, ML Partnership, The John
and Donnie Brock Foundation, Spavinaw Partners Limited Partnership, and PSO,
if approved by the Commission, PSO will receive in exchange for its investment
(i) $350,000 in principal amount of 9% Subordinated Debentures with a maturity
of one year (the "New Debentures"), and (ii) a warrant (the "New Warrant") to
purchase 5,706 shares of Class B Common Stock or 16.33 shares of Class B
Common Stock for each $1,000 in principal amount of New Debentures purchased
under the Investment Agreement, exercisable at a strike price of $30.67 per
share for a five-year term commencing upon issuance. Class B Common Stock is
non-voting while held by PSO.
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The New Debentures will be secured by a security interest in all
patents, goodwill and certain other general intangibles of Excel. The New
Debentures will be subordinated to specified debt obligations which currently
totals $1.2 million.
At maturity, the New Debentures will be convertible into shares of a
new series of preferred stock of Excel ("New Preferred Stock") at Excel's
option. In such event, the number of shares issuable upon conversion will be
equal to the principal amount of New Debentures to be converted divided by a
conversion price equal to the fair market value per share of the New Preferred
Stock. If Excel and the New Debenture holder are unable to agree on a fair
market value, then the New Debentures will be redeemable in cash. If,
however, prior to maturity of the New Debentures Excel sells its equity
securities for a total purchase price equalling or exceeding $850,000, the New
Debentures automatically will convert into New Preferred Stock. In this
event, the number of shares of New Preferred Stock issuable upon conversion
will be equal to the principal amount of New Debentures to be converted
divided by a conversion price equal to the lowest price at which Excel sells
its shares in the transaction or transactions giving rise to the automatic
conversion. All New Debentures will convert into shares of New Preferred
Stock with terms and conditions equivalent to Excel's Series A Preferred Stock
except those shares that would cause PSO's ownership in Excel's voting
securities to exceed 4.99%. Those shares will have terms and conditions
equivalent to Excel's Series B Preferred Stock.
The New Debentures and the New Warrant contain anti-dilution
provisions, which adjust the number of shares issuable upon exercise if Excel
consummates transaction(s) impacting per share capitalization such as stock
splits, stock dividends, recapitalization, reorganizations, reclassifications,
consolidations, mergers and similar transactions.
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Conditions. PSO's obligations to consummate the transactions under
the Investment Agreement is subject to customary closing conditions, including
without limitation, approval of the Commission and Excel's amendment of its
Certificate of Incorporation (i) to authorize Class A Common Stock (voting)
and Class B Common Stock (non-voting), (ii) to authorize a sufficient number
of shares of Class A and Class B Common Stock for consummation of the
transactions contemplated under the Investment Agreement, and (iii) to permit
PSO to convert its shares of Common Stock from one class to the other as often
as may be necessary, at no cost to PSO, to allow it to maintain the maximum
voting power available with respect to its ownership of Excel's capital stock,
as long as such voting power does not exceed 4.99 percent of the voting power
available under all of Excel's outstanding voting securities, and (iv) to
permit PSO or its transferee to convert all of its shares of Class B Common
Stock to Class A Common Stock, at no cost to PSO or its transferee, upon PSO's
transfer of such shares of Class B Common Stock to any person or entity that
is not a "PSO Affiliate," as such term is defined in Section 6.2 of Excel's
Certificate of Designations.
Indemnification. The Investment Agreement contains customary
indemnification provisions, under which Excel agrees to indemnify each of the
Investors, including PSO, for losses exceeding $100,000 arising out of
breaches of the Investment Agreement and the warranties thereunder and
contains PSO's reciprocal agreement to indemnify Excel for losses from any
similar breaches by PSO.
Other Parties. The other Investors who are parties to the Investment
Agreement have made additional investments. ML Partnership has invested an
additional $150,000 and The John and Donnie Brock Foundation and Spavinaw
Partners Limited Partnership together have invested an additional
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$350,000, for a total investment by the Investors of $850,000. In exchange
for their respective investments, ML Partnership will receive $150,000 in
principal amount of New Debentures and a warrant to purchase 2,445 shares of
Class A Common Stock, Brock will receive $350,000 in principal amount of New
Debentures, and Spavinaw will receive a warrant to purchase 5,706 shares of
Class A Common Stock. In contrast to PSO's New Debentures convertible into
Series B Preferred Stock, the New Debentures purchased by ML Partnership and
Brock will be convertible into Series A Preferred Stock.
Use of Proceeds. Excel plans to use the funds to complete project
development of a smaller version (XLT-8000) of the currently developed micro-
processor based energy management system applicable for smaller commercial
customers, to develop several market distribution channels to facilitate a
national marketing program and for other general corporate purposes.
Item 3. Applicable Statutory Provisions.
Sections 9, 10, and 11 of the Act and Rule 23 thereunder are or may
be applicable to the proposed transactions described herein. In addition, PSO
is requesting that the Commission (i) authorize PSO's acquisition of Class B
Common Stock and Series B Preferred Stock upon conversion or exercise of the
New Debentures and the New Warrant as described above, in the latter case, if
PSO determines it is in PSO's best interest to do so, and (ii) reaffirm that
Excel is not a subsidiary or affiliate of PSO under Section 2(a)(8) or
2(a)(11) of the Act, respectively.
Upon consummation of the transactions proposed in this Application,
Excel will not be a direct or indirect subsidiary of PSO within the meaning of
Section 2(a)(8) of the Act. The direction of the management of Excel still
will not be subject, directly or indirectly, to control or a controlling
influence of the type referred to in Section 2(a)(8)(B) of the Act by PSO.
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PSO will not make or hold any investments in any "public utility company"
within the meaning of Section 2(a)(5) of the Act by virtue of the Investment
Agreement.
Approval of the Commission is required under Sections 9(a)(1) and 10
of the Act prior to the direct or indirect acquisition of any securities or
any "interest in any business" by a registered holding company. Under these
Sections, the Commission is required to assess the appropriateness of each
such acquisition by a registered holding company. These provisions provide in
pertinent part that the Commission shall approve the relevant acquisition
unless the Commission finds that "(1) such acquisition will tend towards
interlocking relations or the concentration of control of public-utility
companies, of a kind or to an extent detrimental to the public interest or the
interest of investors or consumers; (2) . . . the consideration . . . to be
given . . . in connection with such acquisition is not reasonable . . . ; or
(3) such acquisition will unduly complicate the capital structure of the
holding company system of the applicant or will be detrimental to the public
interest or the interest of investors or consumers of the proper functioning
of such holding company system." Section 10(c) further provides that the
Commission shall not approve the relevant acquisition if the Commission finds
that such acquisition is unlawful under the provisions of Section 8 of the Act
or is detrimental to the carrying out of the provisions of Section 11 of the
Act or unless the Commission finds that such acquisition will "serve the
public interest by tending towards the economical and efficient development of
an integrated public utility system."
Sections 9(a)(1) and 10 are or may be applicable to PSO's acquisition
of the New Debentures and the New Warrant, and conversion and exercise
thereof, as described herein. PSO believes that each of the
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applicable criteria specified in Section 10 of the Act are or will be
satisfied with respect to the transactions for which authority is requested in
this Application. No aspect of the transactions for which authority is now
sought will be unlawful under Section 8 of the Act. Furthermore, not only
will consummation of the transactions for which authority is sought in this
Application not be detrimental to the carrying out of the provisions of
Section 11 of the Act, rather, consummation of such transactions is directly
intended to make PSO a more efficient provider of electric energy at a lower
cost and with less deleterious effects on the environment. The additional
investment for which PSO seeks authority hereunder is intended to fund
development of DSM equipment serving an additional class of customer. Excel
already has successfully developed such equipment for another class of
customer. Few other forms of business investment are as clearly related to
the operations of an integrated public utility system. Furthermore, as with
PSO's initial investment in Excel, the Commission will be in a position to
monitor compliance by PSO with the terms of an order through the reporting
mechanisms under the Act.
To the extent any other sections of the Act may be applicable to the
proposed transactions, the Company hereby requests appropriate orders
thereunder.
Item 4. Regulatory Approval.
No state regulatory authority and no federal regulatory authority,
other than the Commission under the Act, have jurisdiction over the proposed
transaction.
Item 5. Procedure.
It is requested that the Commission issue and publish, no later than
February 10, 1995, the requisite notice under Rule 23 with respect to the
filing of this Application, such notice to specify a date not later than
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February 27, 1995 as the date after which an order granting and permitting
this Application to become effective may be entered by the Commission and that
the Commission enter, not later than February 28, 1995, an appropriate order
granting and permitting this Application to become effective.
The Company respectfully requests that appropriate and timely action
be taken by the Commission in this matter.
No recommended decision by a hearing officer or other responsible
officer of the Commission is necessary or required in this matter. The
Division of Investment Management of the Commission may assist in the
preparation of the Commission's decision in this matter. There should be no
thirty-day waiting period between the issuance and the effective date of any
order issued by the Commission in this matter; and it is respectfully
requested that any such order be made effective immediately upon the entry
thereof.
Item 6. Exhibits and Financial Statements.
Exhibit 15 - Debenture and Warrant Purchase Agreement dated December
8, 1994, among Excel, ML Partnership, The John and
Donnie Brock Foundation, Spavinaw Partners Limited
Partnership, and PSO (Confidential Exhibit) (to be
filed by amendment).
Exhibit 16 - Form of Amendment to Shareholder Agreement among Excel,
ML Partnership, Jordan, Hildenbrand, Bullard, and the
other Shareholders (Confidential Exhibit) (to be filed
by amendment).
Exhibit 17 - Form of Amendment to Registration Agreement among
Excel, ML Partnership, Jordan, Hildenbrand, Bullard,
and the other Shareholders (Confidential Exhibit) (to
be filed by amendment).
Exhibit 18 - Form of Excel 9% Subordinated Debenture (Confidential
Exhibit) (to be filed by amendment).
Exhibit 19 - Form of Excel Stock Subscription Warrant (Confidential
Exhibit) (to be filed by amendment).
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Exhibit 20 - Form of Third Amendment to Debenture, Common Stock and
Preferred Stock Purchase Agreement among Excel, ML
Partnership and PSO (Confidential Exhibit) (to be filed
by amendment).
Exhibit 21 - Preliminary opinion of Milbank, Tweed, Hadley & McCloy,
counsel to CSW and the Company (to be filed by
amendment).
Exhibit 22 - Final or "past tense" opinion of Milbank, Tweed, Hadley
& McCloy, counsel to CSW and the Company (to be filed
with Certificate of Notification).
Exhibit 23 - Financial Statements per books and pro forma as of
December 31, 1994 of Excel, PSO, and CSW and
consolidated subsidiaries (to be filed by amendment).
Exhibit 24 - Amended and Restated Certificate of Incorporation of
Excel (to be filed by amendment).
Item 7. Information as to Environmental Effects.
The proposed transactions do not involve major federal action having
a significant effect on the human environment. To the best of PSO's knowledge
no federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transactions.
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S I G N A T U R E
- - - - - - - - -
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, as amended, the undersigned company has duly caused this document
to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: February 1, 1995
PUBLIC SERVICE COMPANY OF OKLAHOMA
By: /s/ MARY M. POLFER
Mary M. Polfer
Vice President, Administration
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INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER ENTER METHOD
- ------- ----- ------------
15 Debenture and Warrant Purchase Agreements ---
dated December 8, 1994, among Excel, ML
Partnership, The John and Donnie Brock
Foundation, Spavinaw Partners Limited
Partnership, and PSO (Confidential
Treatment) (to be filed by amendment).
16 Form of Amendment to Shareholder Agreement ---
among Excel, ML Partnership, Jordan,
Holdenbrand, Bullard, and the other
Shareholders (Confidential Exhibit) (to be
filed by amendment).
17 Form of Amendment to Registration Agreement ---
among Excel, ML Partnership, Jordan,
Hildenbrand, Bullard, and the other
Shareholders (Confidential Exhibit) (to be
filed by amendment).
18 Form of Excel 9% Subordinated Debenture ---
(Confidential Treatment) (to be filed by
amendment).
19 Form of Excel Stock Subscription Warrant ---
(Confidential Exhibit) (to be filed by
amendment).
20 Form of Third Amendment to Debenture, ---
Common Stock and Preferred Stock Purchase
Agreement among Excel, ML Partnership and
PSO (Confidential Exhibit) (to be filed
by amendment).
21 Preliminary opinion of Milbank, Tweed, ---
Hadley & McCloy, counsel to CSW and the
Company (to be filed by amendment).
22 Final or "past tense" opinion of Milbank, ---
Tweed, Hadley & McCloy, counsel to CSW and
the Company (to be filed with Certificate
of Notification).
23 Financial Statements per books and pro ---
forma as of December 31, 1994 of Excel,
PSO, and CSW and consolidated subsidiaries
(to be filed by amendment).
24 Amended and Restated Certificate of ---
Incorporation of Excel (to be filed by
amendment).
