SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
Preferred Networks, Inc.
(Name of Issuer)
Common Stock, par value $.0001 per share
(Title of Class of Securities)
73990510
(CUSIP Number)
Thomas R. Stephens, Esq.
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street Suite 700
Denver, Colorado 80202
(303) 592-3100
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 31, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
Page 1 of 12 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Primus Capital Fund III Limited Partnership
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E)
[ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,824,583
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,824,583
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,824,583
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.42%
14 TYPE OF REPORTING PERSON*
PN
* SEE INSTRUCTIONS BEFORE FILLING OUT!
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Primus Venture Partners III Limited Partnership
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,824,583
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,824,583
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,824,583
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.42%
14 TYPE OF REPORTING PERSON*
PN
* SEE INSTRUCTIONS BEFORE FILLING OUT!
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Primus Venture Partners, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,824,583
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,824,583
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,824,583
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.42%
14 TYPE OF REPORTING PERSON*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
INTRODUCTORY STATEMENT
Primus Capital Fund III Limited Partnership, an Ohio limited
partnership ("Primus III") Primus Venture Partners III Limited Partnership
("Primus Venture III"), an Ohio limited partnership, and Primus Venture
Partners, Inc. ("Primus"), an Ohio corporation,) (collectively, the "Reporting
Persons") previously filed a Statement on Schedule 13D in connection with the
securities of Preferred Networks, Inc., a Delaware corporation (the "Company")
as a member of a group of investors acting together for the purpose of acquiring
certain of the Company's securities. On July 30, 1997, the group members ceased
to act together as a group when the group s option to acquire additional
securities of the Company expired. Accordingly, this Statement on Schedule 13D
constitutes the initial filing of a Statement on Schedule 13D filed solely by
the Reporting Persons, and shall be deemed an amendment to and restatement of
the prior group filing to the extent information in such prior group filing
relates to the Reporting Persons.
ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (the "Statement") relates to the
Common Stock, par value $.0001 per share (the "Shares") of the Company (as
defined above). The principal executive offices of the Company are located at
850 Center Way, Norcross, Georgia 30071.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Statement is filed by each of Primus III (as defined
above), Primus Venture III (as defined above) by virtue of being the sole
general partner of Primus III, and Primus (as defined above) by virtue of being
the sole general partner of Primus Venture III.
James T. Bartlett, Jonathan E. Dick, Kevin J. McGinty, William C.
Mulligan, Steven Rothman and Loyal Wilson (collectively, the "Primus Officers")
are each Managing Directors of Primus and limited partners of Primus Venture
III. The Primus Officers other than Mr. Rothman are also shareholders of
Primus.
(b) The principal executive offices of Primus III, Primus Venture
III and Primus, and the business address of each Primus Officer, are located at
1375 E. Ninth Street, Suite 2700, Cleveland, Ohio 44114.
(c) Primus III is a venture capital investment partnership.
Primus Venture III's principal business is acting as the general partner of
Primus III. Primus' principal business is acting as the general partner of
Primus Venture III. Each of the Primus Officers is a Managing Director of
Primus.
(d) None of the Reporting Persons or, to the knowledge of the
Reporting Persons, any of the Primus Officers, has been convicted in a criminal
proceeding in the past five years (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, none of the Reporting Persons or,
to the knowledge of the Reporting Persons, any of the Primus Officers, was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws of finding any
violation with respect to such laws.
(f) Primus III and Primus Venture III are Ohio limited
partnerships. Primus is an Ohio corporation.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The total amount of funds required by Primus III to acquire the
Shares reported in Item 5(a) was $1,657,905, and the total amount of funds
required by Primus III to acquire the 1,133,333 shares of the Company's Class A
Redeemable Preferred Stock (the "Preferred Stock") and the 1,303,333 warrants to
purchase Shares (the "Warrants") held by Primus III was $1,700,000. Such funds
were provided by Primus III's capital available for investment.
ITEM 4. PURPOSE OF TRANSACTION.
Primus III holds the Shares and Warrants described in Item 5 of this
Statement for investment only. Depending upon their evaluation of the Company's
investments and prospects, and upon future developments (including, but not
limited to, performance of the Shares in the market, the effective yield on the
Shares, availability of funds, alternative uses of funds, and money, stock
market and general economic conditions), each of the Reporting Persons may from
time to time purchase Shares (including through the exercise of all or part of
the Warrants) or Warrants, dispose of all or a portion of the Shares or Warrants
it holds, or cease buying or selling Shares and Warrants. Any such additional
purchases or sales of the Shares or Warrants may be in open market or privately-
negotiated transactions or otherwise.
Except as described in this Item 4, none of the Reporting Persons
nor any of the Primus Officers has formulated any plans or proposals which
relate to or would result in any matter required to be disclosed in response to
paragraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Primus III is the direct beneficial owner of 521,250 Shares
and 1,303,333 Warrants, or approximately 10.42% of the sum of (i) the 16,193,534
Shares deemed outstanding as of August 5, 1997, according to information
received from the Company (the "Outstanding Shares") plus (ii) such Warrants.
By virtue of the relationships previously reported under Item 2 of this
Statement, Primus Venture III and Primus may be deemed to have indirect
beneficial ownership of the Shares and Warrants directly beneficially owned by
Primus III.
(b) Primus III has the direct power to direct the disposition of
and vote the Shares and Warrants held by it. By virtue of the relationships
previously described in Item 2 of this Statement, Primus Venture III and Primus
may be deemed to have the indirect power to vote and direct the disposition of
the Shares and Warrants held by Primus III.
(c) On June 17, 1997, Primus III acquired the Preferred Stock and
Warrants described in Item 3 of this Statement in a privately negotiated
transaction with the Company for aggregate consideration of $1,700,000.
Except as set forth above, none of the Reporting Persons or the
Primus Officers has effected any transaction in the Shares during the past 60
days.
(d) Primus III has the right to receive and the power to direct
the receipt of dividends from, and proceeds from the sale of, the Shares and
Warrants held by it, and, by virtue of the relationships reported in Item 2 of
this Statement, each of Primus Venture III and Primus has the power to direct
receipt of dividends from, and the proceeds from the sale of, the Shares and
Warrants held by Primus III.
(e) Not applicable. As indicated in the Introductory Statement of
this Statement, the Reporting Persons were previously part of a group of
investors acting together for the purpose of acquiring the Preferred Stock and
Warrants from the Company. On July 30, 1997, the group members ceased to act
together as a group when the group s option to acquire additional securities of
the Company expired.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Pursuant to a Purchase Agreement dated as of June 21, 1995, among
each of Primus III and certain other investors in the Company (the
"Stockholders") and the Company, as amended December 12, 1995 (the "Purchase
Agreement"), the Stockholders acquired certain securities of the Company and the
Company agreed, among other things, (i) to provide the Stockholders with certain
inspection and information rights, (ii) comply with certain covenants, and (iii)
reimburse the Stockholders for certain expenses. The foregoing summary of the
Purchase Agreement is qualified in its entirety by reference to the Purchase
Agreement attached as Exhibits 1 and 2 to this Statement.
Pursuant to a Stockholders Agreement dated as of June 21, 1995 among
each of the Stockholders, the Company and certain other persons (the
"Stockholders Agreement"), the Stockholders agreed to certain holdback
restrictions in connection with their sale of Shares. The foregoing summary of
the Stockholders Agreement is qualified in its entirety by reference to the
Stockholders Agreement attached as Exhibit 3 to this Statement.
Pursuant to a Registration Rights Agreement dated as of June 21,
1995, as amended June 17, 1997, among each of the Stockholders, the Company and
certain other persons, as amended (the "Registration Rights Agreement"), the
Stockholders have the right to exercise certain demand and piggyback
registration rights with respect to, and, subject to certain restrictions, the
Company is required to register, the Shares owned by the Stockholders. The
foregoing summary of the Registration Rights Agreement is qualified in its
entirety by reference to the Registration Rights Agreement attached as Exhibits
4 and 5 to this Statement.
Pursuant to a Class A Redeemable Preferred Stock Purchase Agreement
dated as of May 21, 1997, among each of the Stockholders and the Company, (the
"Preferred Stock Purchase Agreement"), the Stockholders acquired the Warrants
and the Preferred Stock and the Company agreed, among other things, (i) made
certain representations and warranties to the Stockholders, (ii) agreed to
provide the Stockholders with certain inspection and information rights, and
(iii) agreed to reimburse the Stockholders for certain expenses. The foregoing
summary of the Preferred Stock Purchase Agreement is qualified in its entirety
by reference to the Class A Redeemable Preferred Stock Purchase Agreement
attached as Exhibit 6 to this Statement.
The Preferred Stock held by Primus III and the other Stockholders is
entitled to a liquidation preference of $1.50 per share plus accrued dividends.
Dividends on the Preferred Stock will accrue at the rate of $.15 per share
annually, in preference to any dividends on the Shares and any other class
ranking junior to the Preferred Stock. The Preferred Stock will be entitled to
one vote per share and will be entitled to vote together with the Shares on
matters submitted to a vote of the Company's stockholders. In addition, the
Preferred Stock will be entitled to a class vote on certain matters, including
without limitation repurchases of Shares, material changes in the Company s line
of business, entering into any merger, consolidation or amalgamation, sale of
all or substantially all of the Company's assets, acquisitions of more than
$5,000,000, and incurring certain indebtedness. The Preferred Stock is
redeemable at any time by the Company at a price equal to $1.50 plus accrued
dividends, and each holder of Preferred Stock may require that its Preferred
Stock be redeemed at any time after the fifth anniversary of the First Closing.
The holders of Preferred Stock are entitled to preemptive rights in connection
with any new issuance of equity securities by the Company in a private
placement. In addition, the holders of Preferred Stock are entitled to elect
one director other than Messrs. Jeffrey Schutz and Robert Van Degna. The
foregoing summary of the rights and preferences of the Preferred Stock is
qualified in its entirety by reference to the terms of the Preferred Stock
attached as Exhibit 7 to this Statement.
Each Warrant held by Primus III and the other Stockholders permits a
holder to acquire, at any time during the five year period commencing on the
initial issuance of the Warrant, one Share for an exercise price of $1.50 per
Share, subject to adjustment as provided in the form of the Warrant. Payment of
the exercise price may be made in cash, Shares of Common Stock or shares of
Preferred Stock. The Company has the right to cancel Warrants to acquire up to
500,000 Shares upon redemption of all of the Preferred Stock and, if such
redemption occurs following the first year after issuance of the Warrants,
payment of $750,000 (if such redemption and payment occurs during the second
year following such issuance) or $1,500,000 (if such redemption and payment
occurs during the third year following such issuance or thereafter). Under some
circumstances the holders of the Warrants may be required to exercise the
Warrants prior to their expiration. The Reporting Persons understand there are
a total of 11,500,000 Warrants outstanding, and any such redemption or payment
would be made pro rata among holders of the then outstanding Warrants. The
foregoing summary of the Warrants is qualified in its entirety by reference to
the form of the Warrant attached as Exhibit 8 to this Statement.
Other than set forth above, none of the Reporting Persons or any of
the Primus Officers has any contract, arrangement, understanding or relationship
(legal or otherwise) with any person with respect to securities of the Company,
including, but not limited to, transfer or voting of any such securities,
finder's fees, joint ventures, loans or option arrangements, puts or calls,
guarantees of profits, division of profits or losses, or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Purchase Agreement dated June 21, 1995 among Centennial
Fund IV, L.P., Fleet Equity Partners VI, L.P., Fleet Venture
Resources, Inc., Chisholm Partners II, L.P., Saugatuck Capital
Company Limited Partnership III, PNC Capital Corp., Primus Capital
Fund III Limited Partnership and Preferred Networks, Inc.,
incorporated by reference to Exhibit 10.6 to Preferred Networks,
Inc.'s Registration Statement on Form S-1 (No. 33-80507).
Exhibit 2. Amendment dated December 12, 1995 to Purchase Agreement
dated June 21, 1995 among Centennial Fund IV, L.P., Fleet Equity
Partners VI, L.P., Fleet Venture Resources, Inc., Chisholm Partners
II, L.P., Saugatuck Capital Company Limited Partnership III, PNC
Capital Corp., Primus Capital Fund III Limited Partnership and
Preferred Networks, Inc., incorporated by reference to Exhibit 4 to
the Statement on Schedule 13D filed on April 21, 1997 by Centennial
Fund IV, L.P. and certain other investors in connection with common
stock of Preferred Networks, Inc.
Exhibit 3. Stockholders Agreement dated June 21, 1995 among
Centennial Fund IV, L.P., Fleet Equity Partners VI, L.P., Fleet
Venture Resources, Inc., Chisholm Partners II, L.P., Saugatuck
Capital Company Limited Partnership III, PNC Capital Corp., Primus
Capital Fund III limited partnership, Preferred Networks, Inc., and
certain other persons, incorporated by reference to Exhibit 10.7 to
Preferred Networks, Inc.'s Registration Statement on Form S-1 (No.
33-80507).
Exhibit 4. Registration Rights Agreement dated June 21, 1995 among
Centennial Fund IV, L.P., Fleet Equity Partners VI, L.P., Fleet
Venture Resources, Inc., Chisholm Partners II, L.P., Saugatuck
Capital Company Limited Partnership III, PNC Capital Corp., Primus
Capital Fund III limited partnership, Preferred Networks, Inc., and
certain other persons, incorporated by reference to Exhibit 10.8 to
Preferred Networks, Inc. s Registration Statement on Form S-1 (No.
33-80507).
Exhibit 5. Form of Amendment to Registration Rights Agreement dated
June 21, 1995 among Centennial Fund IV, L.P., Fleet Equity Partners
VI, L.P., Fleet Venture Resources, Inc., Chisholm Partners II, L.P.,
Saugatuck Capital Company Limited Partnership III, PNC Capital
Corp., Primus Capital Fund III limited partnership, Preferred
Networks, Inc., and certain other persons, incorporated by reference
to exhibit E to Exhibit A to Preferred Networks, Inc.'s proxy
statement dated May 21, 1997.
Exhibit 6. Class A Redeemable Preferred Stock Purchase Agreement
dated as of May 21, 1997 among Centennial Fund IV, L.P., Fleet
Equity Partners VI, L.P., Fleet Venture Resources, Inc., Chisholm
Partners II, L.P., Saugatuck Capital Company Limited Partnership
III, PNC Capital Corp., Primus Capital Fund III Limited Partnership
and Preferred Networks, Inc., incorporated by reference to Exhibit A
to Preferred Networks, Inc.'s proxy statement dated May 21, 1997.
Exhibit 7. Rights and Preferences of the Class A Redeemable
Preferred Stock of Preferred Networks, Inc., incorporated by
reference to exhibits C and D to Exhibit A to Preferred Networks,
Inc.'s proxy statement dated May 21, 1997.
Exhibit 8. Form of Common Stock Purchase Warrant to be issued
pursuant to the Class A Redeemable Preferred Stock Purchase
Agreement dated as of May 21, 1997 among Centennial Fund IV, L.P.,
Fleet Equity Partners VI, L.P., Fleet Venture Resources, Inc.,
Chisholm Partners II, L.P., Saugatuck Capital Company Limited
Partnership III, PNC Capital Corp., Primus Capital Fund III Limited
Partnership and Preferred Networks, Inc., incorporated by reference
to exhibit C to Exhibit A to Preferred Networks, Inc.'s proxy
statement dated May 21, 1997.
Signature
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Date: August 6, 1997 /s/ Steve Rothman
Steve Rothman, Managing Director and Chief Financial
Officer of Primus Venture Partners, Inc., general
partner of Primus Venture Partners III Limited
Partnership, general partner of Primus Capital Fund III
limited partnership
