SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
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)
May 21, 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 10 Pages
AMENDMENT NO. 1 TO STATEMENT ON SCHEDULE 13D
This amended statement on Schedule 13D relates to the Common Stock,
par value $.0001 per share (the "Shares") of Preferred Networks, Inc., a
Delaware corporation (the "Company"). Items 4, 5, 6 and 7 of this statement,
previously filed by the Reporting Persons (as defined below) are hereby amended
as set forth below:
The Reporting Persons include:
(i) by virtue of their direct beneficial ownership of Shares, by
each of Centennial Fund IV, L.P., a Delaware limited partnership
("Centennial IV"), Fleet Equity Partners VI, L.P., a Delaware limited
partnership ("FEP VI"), Fleet Venture Resources, Inc., a Rhode Island
Corporation ("FVR"), Chisholm Partners II, L.P., a Delaware limited
partnership ("CP"), Saugatuck Capital Company Limited Partnership III, a
Delaware limited partnership ("Saugatuck III"), PNC Capital Corp., a
Delaware corporation ("PNCCC"), and Primus Capital Fund III Limited
Partnership, an Ohio limited partnership ("Primus III") (collectively, the
"Stockholders"),
(ii) by virtue of being the sole general partner of Centennial IV,
by Centennial Holdings IV, L.P., a Delaware limited partnership,
(iii) by virtue of being the sole general partners of FEP VI, by
Fleet Growth Resources II, Inc., a Delaware corporation ("FGRII") and
Silverado IV Corp., a Delaware corporation ("SCIV"),
(iv) by virtue of the ownership of all of the outstanding common
stock of FGRII, by Fleet Growth Resources, Inc., a Rhode Island
corporation ("FGR"),
(v) by virtue of the ownership of all of the outstanding common
stock of FGR and all of the outstanding common stock of FVR, by Fleet
Private Equity Co., Inc., a Rhode Island corporation ("FPEC")
(vi) by virtue of the ownership of all of the outstanding common
stock of FPEC, by Fleet Financial Group, Inc., a Rhode Island corporation,
(vii) by virtue of being the sole general partner of CP, by
Silverado II, L.P., a Delaware limited partnership ("SLP"),
(viii) by virtue of being the sole general partner of SLP, by
Silverado II Corp., a Delaware corporation ("SCII"),
(ix) by virtue of their ownership of a majority of the outstanding
common stock of SCII and SCIV, and by virtue of their officer and director
positions and roles with FVR, FGR, FGRII, FPEC, SCII and SCIV, by Robert
M. Van Degna and Habib Y. Gorgi,
(x) by virtue of being the sole general partner of Saugatuck III, by
Greyrock Partners Limited Partnership, a Delaware limited partnership,
(xi) by virtue of being the sole general partner of Primus III, by
Primus Venture Partners III Limited Partnership ("Primus Venture III"), an
Ohio limited partnership,
(xii) by virtue of being the sole general partner of Primus Venture
III, by Primus Venture Partners, Inc., an Ohio corporation,
(xiii) by virtue of the ownership of all of the outstanding common
stock of PNCCC, by PNC Holding Corp., a Delaware corporation ("PNCHC") and
(xiv) by virtue of the ownership of all of the outstanding common
stock of PNCHC, by PNC Bank Corp., a Pennsylvania corporation.
Item 3. Source and Amount of Funds or Other Consideration
No change except for the addition of the following:
The funds required by Centennial IV to make the Investment described
in Item 4 may be drawn in part from application of the proceeds of Centennial
IV's bridge loan to the Company (as previously described in this statement on
Schedule 13D) in the amount of $3,133,333. The source of funds for such bridge
loan was Centennial IV's capital available for investment.
The funds required by FEP VI to make the Investment described in
Item 4 may be drawn in part from application of the proceeds of FEP VI's bridge
loan to the Company (as previously described in this statement on Schedule 13D)
in the amount of $1,002,000. The source of funds for such bridge loan was FEP
VI's capital available for investment.
The funds required by FVR to make the Investment described in Item 4
may be drawn in part from application of the proceeds of FVR's bridge loan to
the Company (as previously described in this statement on Schedule 13D) in the
amount of $2,338,000. The source of funds for such bridge loan was FVR's
capital available for investment.
The funds required by CP to make the Investment described in Item 4
may be drawn in part from application of the proceeds of CP's bridge loan to the
Company (as previously described in this statement on Schedule 13D) in the
amount of $60,000. The source of funds for such bridge loan was CP's capital
available for investment.
The funds required by Saugatuck III to make the Investment described
in Item 4 may be drawn in part from application of the proceeds of Saugatuck
III's bridge loan to the Company (as previously described in this statement on
Schedule 13D) in the amount of $1,200,000. The source of funds for such
bridge loan was capital obtained from private investors.
The funds required by Primus III to make the Investment described in
Item 4 may be drawn in part from application of the proceeds of Primus III's
bridge loan to the Company (as previously described in this statement on
Schedule 13D) in the amount of $1,133,333. The source of funds for such bridge
loan was Primus III's capital available for investment.
The funds required by PNCCC to make the Investment described in Item
4 may be drawn in part from application of the proceeds of PNCCC's bridge loan
to the Company (as previously described in this statement on Schedule 13D) in
the amount of $1,133,333. The source of funds for such bridge loan was
PNCCC's capital available for investment.
Item 4. Purpose of Transaction
No change except for the addition of the following:
On May 21, 1997, the Stockholders and the Company entered into a
Class A Redeemable Preferred Stock Purchase Agreement (the "Purchase Agreement")
pursuant to which the Stockholders agreed to acquire, at the first closing
pursuant to the Purchase Agreement, scheduled on or about June 16, 1997 (the
"First Closing"), for an aggregate purchase price of $15,000,000, (i) an
aggregate of 10,000,000 shares of the Company's Class A Redeemable Preferred
Stock (the "Preferred Stock"), and (ii) warrants to purchase an aggregate of
11,500,000 Shares (the "Warrants"). The Preferred Stock and Warrants to be
acquired at the First Closing shall be acquired by the Stockholders in the
proportions set below:
Stockholder Purchase Price Preferred Stock Warrants
Centennial IV $4,700,000 3,133,333 3,603,333
FVR $3,507,000 2,338,000 2,688,700
FEP VI $1,503,000 1,002,000 1,152,300
CP $ 90,000 60,000 69,000
PNCCC $1,700,000 1,133,333 1,303,333
Saugatuck III $1,800,000 1,200,000 1,380,000
Primus III $1,700,000 1,133,333 1,303,333
Total $15,000,000 9,999,999 11,499,999
In addition, the Stockholders have the option, on or prior to July
30, 1997 (the "Second Closing"), to acquire, for an aggregate purchase price of
$5,000,000, (i) an aggregate of 3,333,333 shares of Preferred Stock, and (ii)
Warrants to purchase 3,000,000 Shares. Such option may be assigned by the
Stockholders to other investors by designating such other investors in a notice
to the Company on or before the Second Closing. If the Stockholders and such
other investors desire to invest more than $5,000,000 at the Second Closing, the
first $1,350,000 of such excess will be used to redeem, at $1.50 per share, up
to 900,000 shares of Preferred Stock and 1,035,000 Warrants held by FVR or an
affiliate of FVR.
The Preferred Stock will be 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. Schutz and Van Degna.
Each Warrant 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.
Pursuant to the Purchase Agreement, at the First Closing the
Stockholders and the Company will enter into an Amendment to the Registration
Rights Agreement dated as of June 21, 1995, among each of the Stockholders, the
Company and certain other persons, as amended (the "Registration Rights
Amendment"), pursuant to which the Stockholders will have the right to exercise
certain demand and piggyback registration rights with respect to, and, subject
to certain restrictions, the Company will be required to register, the Shares
obtainable upon exercise of the Warrants.
The Stockholders' obligations to effect the First Closing are
subject to a number of conditions, including, among others, approval of the
Company's stockholders. The Company's obligations to effect the First Closing
and the Second Closing are also subject to certain conditions, including, among
others, approval of the Company's stockholders. The Stockholders understand
that the Company has scheduled an annual meeting of its stockholders to consider
the transactions contemplated by the Purchase Agreement, among other things, on
June 16, 1997.
Pursuant to the Purchase Agreement, the Company, 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 summaries of the Purchase Agreement, the rights and
preferences of the Preferred Stock, the Warrants and the Registration Rights
Amendment are qualified in their entirety by reference to the Purchase Agreement
attached hereto as Exhibit 8, the rights and preferences of the Preferred Stock
attached hereto as Exhibit 9, the form of the Warrant attached hereto as Exhibit
10, and the Registration Rights Amendment attached hereto as Exhibit 11,
respectively.
Each of the Stockholders is acquiring the Preferred Stock and
Warrants described above 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 and the Preferred Stock, availability of funds,
alternative uses of funds, and money, stock market and general economic
conditions), each of the Stockholders may from time to time purchase Shares,
Preferred Stock or Warrants, dispose of all or a portion of the Shares,
Preferred Stock or Warrants it holds, or cease buying or selling Shares,
Preferred Stock and Warrants. Any such additional purchases or sales of the
Shares may be in open market or privately-negotiated transactions or otherwise,
and any such additional purchases or sales of Preferred Stock or Warrants may be
in privately-negotiated transactions.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
No change except for the addition of the following:
The information included under Item 4 of this statement on Schedule
13D in connection with the Purchase Agreement, the Preferred Stock, the Warrant
and the Registration Rights Amendment is hereby incorporated in its entirety by
this reference.
Other than set forth above, neither any of the Reporting Persons nor
any of the Officers and Partners 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.
No change except the addition of the following:
Exhibit 8. 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 9. 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 10. 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.
Exhibit 11. 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.
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: May 28, 1997 /s/ Jeffrey Schutz
Jeffrey Schutz, as general partner of Centennial
Holdings IV, L.P., general partner of Centennial Fund
IV, L.P.
Date: May 28, 1997 /s/ Robert Van Degna
Robert Van Degna, individually and as Chairman and Chief
Executive Officer of Fleet Growth Resources II, Inc.,
general partner of Fleet Equity Partners VI, L.P.; as
Chairman and Chief Executive Officer of Silverado II
Corp., general partner of Silverado II, L.P., general
partner of Chisholm Partners II, L.P.; and as Chairman
and Chief Executive Officer of Fleet Growth Resources,
Inc., Fleet Venture Resources, Inc., Fleet Private
Equity Co., Inc. and Silverado IV Corp.
Date: May 28, 1997 /s/ H. Jay Sarles
H. Jay Sarles, Vice Chairman of
Fleet Financial Group, Inc.
Date: May 28, 1997 /s/ Habib Y. Gorgi
Habib Y. Gorgi, individually
Date: May 28, 1997 /s/ Richard P. Campbell, Jr.
Richard P. Campbell, Jr., as general partner of Greyrock
Partners, general partner of Saugatuck Capital Company
Limited Partnership III
Date: May 28, 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
Date: May 28, 1997 /s/ David McL. Hillman
David McL. Hillman, Executive Vice President and
Principal of PNC Capital Corp.
Date: May 28, 1997 /s/ Robert L. Haunschild
Robert L. Haunschild, Chairman and President of
PNC Holding Corp, and Senior Vice President and Chief
Financial Officer of PNC Bank Corp.
