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, no par value 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)
March 17, 1998
(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 13 Pages
<PAGE>
CUSIP No. 73990510 13D Page 2 of 13 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Alta Communications, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
NUMBER OF 7 SOLE VOTING POWER
SHARES 3,712,500
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
9 SOLE DISPOSITIVE POWER
EACH
REPORTING 3,712,500
10 SHARED DISPOSITIVE POWER
PERSON
WITH 0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,712,500
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.6%
14 TYPE OF REPORTING PERSON*
IA
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 73990510 13D Page 3 of 13 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Alta Comm S By S, LLC
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
Massachusetts
NUMBER OF 7 SOLE VOTING POWER
SHARES 82,627
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
9 SOLE DISPOSITIVE POWER
EACH
REPORTING 82,627
10 SHARED DISPOSITIVE POWER
PERSON
WITH
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
82,627
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
.5%
14 TYPE OF REPORTING PERSON*
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 73990510 13D Page 4 of 13 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Alta Communications VI, L.P.
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
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 3,629,873
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
9 SOLE DISPOSITIVE POWER
EACH
REPORTING 3,629,873
10 SHARED DISPOSITIVE POWER
PERSON
WITH 0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,629,873
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.2%
14 TYPE OF REPORTING PERSON*
PN
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 73990510 13D Page 5 of 13 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Alta Communications VI Management Partners, L.P.
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
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 3,629,873
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
9 SOLE DISPOSITIVE POWER
EACH
REPORTING 3,629,873
10 SHARED DISPOSITIVE POWER
PERSON
WITH 0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,629,873
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.2%
14 TYPE OF REPORTING PERSON*
PN
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 11 of 13 Pages
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to the Common Stock, no
par value per share (the "Shares"), of Preferred Networks, Inc., a Georgia
corporation (the "Company"). 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 Alta Communications VI, L.P., a
Delaware limited partnership ("Alta VI"), and Alta Comm S by S, LLC, a
Massachusetts limited liability company ("Alta LLC"), by virtue of their direct
beneficial ownership of Shares, by Alta Communications VI Management Partners,
L.P., a Delaware limited partnership ("Alta Management"), by virtue of being the
sole general partner of Alta VI, and by Alta Communications, Inc., a
Massachusetts corporation ("Alta Communications"), by virtue of being the
management advisory company of Alta VI. Alta VI, Alta LLC, Alta Management and
Alta Communications are collectively referred to as the "Reporting Persons."
Robert Benbow, William P. Egan, Brian McNeill and Timothy Dibble are the
managing general partners of Alta Management and officers of Alta Communications
(the "Partners"). By virtue of the relationships described above and their roles
with Alta Communications, each of the Partners may be deemed to control Alta
Communications and Alta Management, and Alta Communications and Alta Management
may be deemed to possess indirect beneficial ownership of the Shares held by
Alta VI. However, none of the Partners, acting alone, has voting or investment
power with respect to the Shares directly beneficially held by Alta VI and, as a
result, the Partners disclaim beneficial ownership of the Shares directly
beneficially owned by Alta VI, except to the extent of their pecuniary interest
in Alta VI. Alta LLC is a side company that makes all investments pro rata to
the capital of Alta VI with all allocations made to its members based on paid-in
capital. Certain of the Partners are members of Alta LLC and certain members of
Alta LLC are affiliates of Alta Communications.
(b) The principal executive offices of Alta Communications,
Alta VI, Alta Management and Alta LLC, and the business address of each Partner,
except Robert Benbow, are located at One Post Office Square, Suite 3800, Boston,
Massachusetts 02109. Robert Benbow's business address is One Embarcadero Center,
Suite 4050, San Francisco, California 94111.
(c) Alta Communications provides investment advisory services
to venture capital firms. Alta VI and Alta LLC's principal business is acting as
venture capital investment vehicles. Alta Management's principal business is
acting as general partner of Alta VI. Each of the Partners' principal business
is acting as a managing general partner of Alta Management and as an officer of
Alta Communications.
(d) None of the Reporting Persons or, to the knowledge of the
Reporting Persons, any of the Partners, 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 Partners, 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) Alta Communications is a Massachusetts corporation. Alta
VI is a Delaware limited partnership. Alta LLC is a Massachusetts limited
liability corporation. Alta Management is a Delaware limited partnership. Each
of the Partners is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
The total amount of funds required by Alta VI to acquire the
3,585,060 shares of Class B Senior Redeemable Preferred Stock (the "Class B
Shares") and the 3,629,873 warrants to purchase Shares (the "Warrants") reported
in Item 5(a) was $5,377,590, and the total amount of funds required by Alta LLC
to acquire the 81,607 shares of Class B Shares and the 82,627 Warrants reported
in Item 5(a) was $122,410.50. Such funds were provided by such person's capital
available for investment.
The Reporting Persons understand that the unvested and
restricted Shares held by Robert Benbow, as reported in Item 5(c), were acquired
by such person in consideration of his service as a director of the Company.
Item 4. Purpose of Transaction.
Alta VI and Alta LLC acquired the Class B Shares and Warrants
reported in Item 5(c) for investment only. Depending upon their evaluation of
the Company's investments and prospects, and upon future developments
(including, but not limited to, market for the Shares, the Class B Shares and
Warrants, the effective yield on the Shares and the Class B 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 the Shares, Class B Shares and/or Warrants, dispose of all or a portion
of the Shares, Class B Shares and/or Warrants that it holds, or cease buying or
selling Shares, Class B Shares and/or Warrants. Any such additional purchases or
sales of the Shares, Class B Shares and/or Warrants may be in open market or
privately-negotiated transactions or otherwise.
On March 17, 1998, Alta VI and Alta LLC entered into a Class B
Senior Redeemable Preferred Stock Purchase Agreement (the "Class B Purchase
Agreement") with the Company and certain other investors pursuant to which Alta
VI and Alta LLC acquired, for an aggregate purchase price of $5,500,000.50, a
total of 3,666,667 Class B Shares and 3,712,500 Warrants.
The Class B Shares are entitled to a liquidation preference of
$1.50 per share plus accrued dividends. Dividends on the Class B Shares will
accrue on the liquidation preference at the rate of 15% per annum, compounded
annually, in preference to any dividends on the Shares and any other class
ranking junior to the Class B Shares. The Class B Shares will be entitled to one
vote per share and will be entitled to vote together with the common stock on
matters submitted to a vote of the Company's stockholders. In addition, the
Class B Shares will be entitled to a class vote on certain matters, including
without limitation repurchases of common stock, 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
Class B Shares are redeemable at any time by the Company at a price equal to
$1.50 plus accrued dividends, and each holder of Class B Shares may require that
its Class B Shares be redeemed at any time after March 17, 2003 or earlier in
certain circumstances. The holders of Class B Shares 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 Class B Shares are entitled
to elect one director.
Each 1998 Warrant permits a holder to acquire, at any time
during the five year period commencing on March 17, 1998, one Share for an
exercise price of $1.50 per Share, subject to adjustment as provided in the form
of the 1998 Warrant. Payment of the exercise price may be made in cash, debt or
equity securities of the Company, or by withholding from the Shares otherwise to
be delivered upon exercise a number of Shares which have a value equal to the
exercise price. Under some circumstances the holders of the Warrants may be
required to exercise the Warrants prior to their expiration.
Pursuant to the Class B Purchase Agreement, Alta VI and Alta
LLC and the Company and certain other stockholders of the Company amended the
Registration Rights Agreement dated as of June 21, 1995, among such persons, as
amended (the "1998 Registration Rights Amendment"), pursuant to which the
holders of Warrants 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.
Pursuant to the Class B Purchase Agreement, the Company, among
other things, (i) made certain representations and warranties to the investors
acquiring Class B Shares and Warrants, (ii) agreed to provide such investors
with certain inspection and information rights, and (iii) agreed to reimburse
such investors for certain expenses.
The foregoing summaries of the Class B Purchase Agreement, the
rights and preferences of the Class B Shares, the terms of the Warrants and the
1998 Registration Rights Amendment are qualified in their entirety by reference
to the Class B Purchase Agreement attached hereto as Exhibit 1, the rights and
preferences of the Class B Shares attached hereto as Exhibit 1, the form of the
1998 Warrant attached hereto as Exhibit 3, and the 1998 Registration Rights
Amendment attached hereto as Exhibit 4, respectively.
Mr. Benbow holds the unvested Shares described in Item 5 of
this Statement for investment only. Depending upon his 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), Mr. Benbow may from time to time
purchase Shares, dispose of all or a portion of the Shares he holds, or cease
buying or selling Shares. Any such additional purchases or sales of the Shares
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 Partners 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) Alta VI is the direct beneficial owner of 3,629,873
Warrants, or approximately 18.24% of the sum of (i) the 16,270,028 Shares deemed
outstanding as of March 17, 1998, according to information received from the
Company, plus (ii) such Warrants. By virtue of the relationships previously
reported under Item 2 of this Statement, Alta Communications and Alta Management
may be deemed to have indirect beneficial ownership of the Warrants directly
beneficially owned by Alta VI.
Alta LLC is the direct beneficial owner of 82,627 Warrants, or
approximately .5% of the sum of (i) the Outstanding Shares plus (ii) such
Warrants. By virtue of the relationships previously reported under Item 2 of
this Statement, the Partners and certain other individuals affiliated with Alta
Communications may be deemed to have indirect beneficial ownership of the
Warrants directly beneficially owned by Alta LLC.
Robert Benbow holds 12,500 unvested Shares, or less than 1% of
the Outstanding Shares. Such Shares are held on behalf of Alta VI. Such Shares
are subject to certain vesting restrictions and were issued to Mr. Benbow in
connection with his services to the Company as a director. Mr. Benbow disclaims
beneficial ownership of such Shares, and Alta IV may be deemed to have indirect
beneficial ownership of such Shares.
Alta VI has the direct power to direct the disposition of and
vote the Warrants held by it. By virtue of the relationships previously reported
under Item 2 of this Statement, Alta Management and Alta Communications may be
deemed to have indirect beneficial ownership of the Warrants directly
beneficially owned by Alta VI.
Alta LLC has the direct power to direct the disposition of and
vote the Warrants held by it. By virtue of the relationships previously reported
under Item 2 of this Statement, the Partners and certain other individuals
affiliated with Alta Communications may be deemed to have indirect beneficial
ownership of the Warrants directly beneficially owned by Alta LLC.
Mr. Benbow has the power to vote the Shares held directly by
him, and the power to direct disposition of vested Shares directly held by him.
Under the restrictions applicable to such Shares, unvested Shares are not
transferable.
(c) On March 17, 1998, Alta VI and Alta LLC acquired the
Warrants described in Item 3 of this Statement in a privately negotiated
transaction with the Company for aggregate consideration of $5,337,590 and
$122,410.50, respectively.
On March 17, 1998, Robert Benbow was appointed as a director
of the Company and was granted 12,500 restricted Shares in connection with his
service to the Company as a director, or less than 1% of the Outstanding Shares.
Such Shares are subject to certain vesting restrictions.
Except as set forth above, neither the Reporting Persons nor
the Partners have effected any transaction in the Shares during the past 60
days.
(d) Alta VI has the right to receive and the power to direct
the receipt of dividends from, and proceeds from the sale of, the Warrants held
by it. By virtue of the relationships reported in Item 2 of this Statement, Alta
Communications and Alta Management may be deemed to have the power to direct the
receipt of dividends from, and the proceeds from the sale of, the Warrants held
by Alta VI.
Alta LLC has the right to receive and the power to direct the
receipt of dividends from, and proceeds from the sale of, the Warrants held by
it. By virtue of the relationships previously reported under Item 2 of this
Statement, the Partners and certain other individuals affiliated with Alta
Communications may be deemed to have indirect beneficial ownership of the
Warrants directly beneficially owned by Alta LLC.
Mr. Benbow has the right to receive and the power to direct
the receipt of dividends from, and the proceeds from the sale of, Shares
directly held by him after tax benefits are paid to Alta VI.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
The information included under Item 4 of this statement on
Schedule 13D in connection with the Class B Purchase Agreement, the Class B
Shares, the 1998 Warrant and the 1998 Registration Rights Amendment is hereby
incorporated in its entirety by this reference.
The unvested Shares held by Mr. Benbow are subject to certain
restrictions set forth in a Director's Restricted Stock Agreement. The foregoing
summary of such agreement is qualified in its entirety by referenced to the form
of the Directors Restricted Stock Agreement attached as Exhibit 5 to this
Statement.
Other than set forth above, none of the Reporting Persons 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. Class B Senior Redeemable Preferred Stock Purchase
Agreement dated as of March 17, 1998 among Alta Communications
IV, Alta Comm S By S, LLC, Centennial Fund IV, L.P., Fleet
Equity Partners VI, L.P., Fleet Venture Resources, Inc.,
Saugatuck Capital Company Limited Partnership III, PNC Capital
Corp., Primus Capital Fund III Limited Partnership, certain
other investors and Preferred Networks, Inc., incorporated by
reference to Exhibit 10 to amendment number 1 to the Schedule
13D filed by Centennial Fund IV, L.P. in connection with the
common stock of Preferred Networks, Inc. on March 24, 1998.
Exhibit 2. Articles of Amendment setting forth the rights and
preferences of the Class B Senior Redeemable Preferred Stock
of Preferred Networks, Inc., incorporated by reference to
Exhibit 11 to amendment number 1 to the Schedule 13D filed by
Centennial Fund IV, L.P. in connection with the common stock
of Preferred Networks, Inc. on March 24, 1998.
Exhibit 3. Form of Common Stock Purchase Warrant to be issued
pursuant to the Class B Senior Redeemable Preferred Stock
Purchase Agreement dated as of March 17, 1998 among Alta
Communications IV, Alta Comm S By S, LLC, Centennial Fund IV,
L.P., Fleet Equity Partners VI, L.P., Fleet Venture Resources,
Inc., Saugatuck Capital Company Limited Partnership III, PNC
Capital Corp., Primus Capital Fund III Limited Partnership,
certain other investors and Preferred Networks, Inc.,
incorporated by reference to Exhibit 12 to amendment number 1
to the Schedule 13D filed by Centennial Fund IV, L.P. in
connection with the common stock of Preferred Networks, Inc.
on March 24, 1998.
Exhibit 4. Form of Amendment to Registration Rights Agreement
dated June 21, 1995 among Alta Communications IV, Alta Comm S
By S, LLC, 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 13 to amendment number 1
to the Schedule 13D filed by Centennial Fund IV, L.P. in
connection with the common stock of Preferred Networks, Inc.
on March 24, 1998.
Exhibit 5. Form of Director's Restricted Stock Award Agreement
between Preferred Networks, Inc. and Robert Benbow,
incorporated by reference to Exhibit 2 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.
<PAGE>
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: March 27, 1998 /s/ Eileen McCarthy
Eileen McCarthy, as Vice President of Alta
Communications, Inc., as general partner of
Alta Communications Management VI, L.P., the
general partner of Alta Communications VI,
L.P., and as a member of Alta Comm S By S,
LLC
