UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[ X] Preliminary Information Statement
[__] Confidential, for use of the Commission
only (as permitted by Rule 14c-5(d)(2)
[__] Definitive Information Statement
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CONVERGENCE COMMUNICATIONS, INC.
(Name of Registrant as Specified In Its Charter)
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Payment of Filing Fee (Check the appropriate box):
[ X] No fee required
[__] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[__] Fee paid previously with preliminary materials.
[__] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: Not Applicable
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(2) Form, Schedule or Registration Statement No.: Not Applicable
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(3) Filing Party: Not Applicable
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(4) Date Filed: Not Applicable
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<PAGE>
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GENERAL INFORMATION
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Convergence Communications, Inc. is a facilities-based provider of
high-quality, low-cost integrated communications services through its own
metropolitan area networks. We operate in recently deregulated and high growth
markets, principally Mexico, the Andean region of South America and Central
America.
This information statement is first being furnished on or about May 20,
2000, to our stockholders of record as of the close of business on April 1, 2000
in connection with our creation of a wholly-owned subsidiary to which we will
transfer substantially all of our assets. This transaction, which we will refer
to throughout the remainder of this information statement as the "Transaction,"
will be effected as a condition to our closing of a $175 million vendor
financing package with Alcatel Corporation. The Transaction and the Alcatel
transaction are described in greater detail below.
Our Board of Directors has approved, and a total of eleven stockholders
holding 9,654,910 shares of our common stock and 8,395,576 shares of our Series
C preferred stock (representing approximately 84.3% of our equity securities on
a voting basis) as of the record date have consented in writing to the
Transaction. That approval and consent are sufficient under ss.ss. 78.320 and
78.565 of the Nevada Revised Statutes and our Bylaws and Amended and Restated
Articles of Incorporation to approve the Transaction. Accordingly, the
Transaction will not be submitted to our other stockholders for a vote and this
information statement is being furnished to you solely to provide you with
information concerning the Transaction in accordance with the requirements of
the Securities Exchange Act of 1934, as amended, and the regulations promulgated
under the Act, including Regulation 14C.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
ONE. WE ARE SENDING THIS INFORMATIONAL STATEMENT TO YOU ONLY FOR INFORMATIONAL
PURPOSES. THE TRANSACTION HAS ALREADY BEEN APPROVED BY WRITTEN CONSENT OF
HOLDERS OF A MAJORITY OF THE VOTES OF OUR OUTSTANDING CAPITAL STOCK. A VOTE OF
OUR REMAINING STOCKHOLDERS IS NOT NECESSARY.
For additional information about us, reference is made to our Annual
Report on Form 10-KSB for the year ended December 31, 1999, and the other
periodic filings (including proxy statements, quarterly reports on Form 10-QSB
and periodic reports on Form 8-K) we have made with the Securities and Exchange
Commission, or SEC, which are incorporated herein by this reference. If you
would like copies of any of those documents, you can request (by phone or in
writing) copies of them by sending your request to our principal office:
Convergence Communications, Inc., 102 West 500 South, Suite 320, Salt Lake City,
Utah 84101, telephone (801) 328-5618, Attn: Anthony Sansone, Secretary. We will
not charge you for any of the copies. You can also obtain copies of those
documents from the electronic filing site maintained by the SEC on the
world-wide web (www.sec.gov/archives/edgar), from the SEC's office at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or the various
regional SEC offices.
This information statement contains forward-looking statements relating
to our operations, which involved risks and uncertainties. Our actual operating
results may differ significantly from the results discussed in those
forward-looking statements.
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THE TRANSACTION
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In March 2000, we entered into a preliminary agreement with Alcatel
Corporation, under which Alcatel agreed to design, build and assist us in
integrating a pan-regional broadband telecommunications network in our market
areas and finance up to $175 million of the network costs. Under the terms of
the agreement, we will work with Alcatel to expand our networks in 17 cities
across Mexico, Guatemala, El Salvador, Costa Rica, Panama and Venezuela. Alcatel
has operations in over 130 countries and annual revenues of over $22 billion,
and is a world-wide recognized builder of telecommunications networks.
The preliminary agreement is contingent on our negotiating with Alcatel
the terms of separate turnkey contracts for the various segments of our network.
It is also contingent on our being able to provide Alcatel with comprehensive
security interests in our assets to secure our payment obligations under the
amounts Alcatel loans to us. Those security interests will include security
interests in, or pledges of, the stock we hold in our subsidiaries, pledges (for
security purposes) of our material contracts, security interests in our accounts
receivable and security interests (to the extent permitted by law) in our
licenses and permits for the operation of our networks and systems. In order for
Alcatel to obtain a comprehensive and more easily enforceable security interest
in our assets while providing us with sufficient flexibility in the future to
acquire investment capital through the sale of our debt or equity securities,
Alcatel has also required that we create a new wholly-owned subsidiary which
will hold substantially all of the assets that we currently hold in Convergence
Communications, Inc., our parent corporation. The Alcatel financing will be made
in favor of that new subsidiary (and two of our other subsidiaries). We
anticipate that any additional debt or equity financings will be made at our
parent corporation level.
The creation of the new wholly-owned subsidiary will be accomplished
through the contribution by Convergence Communications, Inc. (our parent
corporation) of its stock ownership in its various subsidiaries throughout Latin
America to the new subsidiary in exchange for all of the outstanding stock of
the new subsidiary. The stock ownership interests that will be transferred to
the new subsidiary represent substantially all of the assets of our parent
corporation, Convergence Communications, Inc. As a result of the Transaction,
Convergence Communications, Inc. will own 100% of the new subsidiary, and the
new subsidiary will own the interests in our Latin American subsidiaries that
our parent corporation formerly owned.
The Transaction will not change in any substantive manner the way in
which we own and operate our assets, will not result in the disposition of any
of our assets to any third party or change the type or mix of our assets, and
will not substantively modify the management of our operations, business or
assets. The Transaction will also not result in any change in the equity
ownership rights you hold as a stockholder in Convergence Communications, Inc.
or your relative proportional interest in its outstanding securities.
We anticipate that the officers and directors of the new subsidiary
will be substantially the same as the officers and directors of our parent
company, Convergence Communications, Inc., and that Convergence Communications,
Inc. will, to the extent permissible, treat the new subsidiary as simply an
intermediary subsidiary in its operation of the Latin American operations. The
new subsidiary will be a Delaware corporation and will engage in no operations
or enter into no agreements until the Transaction. The organizational documents
of the new subsidiary will be structured to provide Convergence Communications,
Inc. (the corporation in which you hold your stock) with the maximum flexibility
in conducting the new subsidiary's business operations and to prohibit the new
subsidiary from taking any extraordinary action without the appropriate approval
of our parent corporation, Convergence Communication, Inc.
We reserve the right, upon notice to our stockholders, to abandon or
modify the specific terms of the Transaction at any time prior to the
consummation of the Alcatel transactions upon consent of our Board of Directors.
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APPROVAL OF THE TRANSACTION
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On May 4, 2000, our Board of Directors approved the Transaction. In
approving the Transaction, our Board of Directors considered a number of
factors, including the benefits that we will receive from the Alcatel financing
(including Alcatel's network design, engineering and integration experience,
Alcatel's willingness to loan us the amounts necessary to build-out our
pan-regional network and the business and marketing synergies created by the
Alcatel relationship), various alternative structures for providing Alcatel with
the security package that it requires as a condition for its loans to us, and
the benefits we will derive from the Alcatel transaction certain administrative
efficiencies that will be created as a result of the Transaction.
Under Nevada law, the sale, exchange or disposition of all of a
corporation's assets requires both board of director and shareholder approval.
The statutory provision governing those types of transactions, Nevada Revised
Statute ss. 78.565, contains an exception to the stockholder approval
requirement, however, for transfers of assets by way of mortgage or in trust, or
by pledge to secure indebtedness of the corporation.
As described above, we are effecting the Transaction at the request of
Alcatel and for the sole purpose of providing Alcatel with a more comprehensive
security package for its loans to us under the Alcatel transaction. Accordingly,
we believe the Transaction constitutes a form of "pledge" or "security"
arrangement as contemplated by ss. 78.565, and that we do not need to obtain
stockholder approval for the Transaction. Nevertheless, we have obtained written
consents to the Transaction from a total of eleven of our stockholders who own a
total of 9,654,910 shares of our common stock and 8,395,576 shares of our Series
C preferred stock. Those shares collectively represent approximately 84.3% of
the votes that could be cast at any meeting of our stockholders.
Under the provisions of the Nevada Revised Statutes and our Amended and
Restated Articles of Incorporation, any action required or permitted to be taken
at a meeting of our stockholders may be taken without a meeting if, before or
after that action, a written consent to the action is signed by stockholders
holding at least a majority of the votes represented by our outstanding equity
securities. The Nevada Revised Statutes also provide that, where action is taken
by written consent, no stockholder meeting with respect to that action need be
called.
None of the corporate actions described in this information statement,
including the consummation of the Transaction, will afford our stockholders the
opportunity to dissent from the actions described herein, or to receive an
agreed or judicially determined value for their stock.
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TAX CONSEQUENCES
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The consummation of the Transaction should not result in any taxable
gain or loss to our parent corporation, Convergence Communications, Inc., you as
a stockholder of Convergence Communications, Inc., or to the to-be-formed
wholly-owned subsidiary that will acquire the assets pursuant to the
Transaction. The tax basis for your stock in Convergence Communications, Inc.
should also not be affected by the Transaction, nor should the holding period
for your stock. The federal income tax discussion included in this section is
included as general information only. You are urged to consult with your own tax
advisor to determine your tax effects, if any, from the consummation of the
Transaction.
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BENEFICIAL OWNERSHIP
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The following table sets forth certain information regarding the
beneficial ownership of our outstanding securities as of April 1, 2000 by the
following parties:
o all those persons or entities known by us to be beneficial owners of
5% or more of each class of our outstanding securities, or "5%
Shareholders"
o each director and each of our Chief Executive Officer and the next
four highest paid officers, or our Named Executive Officers
o all directors and our executive officers as a group.
The data presented are based on information provided to us by the parties
specified above and are being included in this information statement to provide
you with information regarding the relative ownership interests of the parties
who have consented in writing to the Transaction and who hold management
positions with us.
<TABLE>
<CAPTION>
Name of Number of Percentage of
Beneficial Owner Class Shares Class (1)
----------------- ----- --------- -------------
<S> <C> <C> <C>
TCW/CCI Holding LLC (2) Common -0- (*)
(5% Shareholder) ** Series C Preferred 4,666,666 42.2%
Telematica EDC, C.A (3) Common -0- (*)
(5% Shareholder) ** Series C Preferred 4,666,666 42.2%
FondElec Essential Services (4) Common 2,733,597 22.6%
Growth Fund, L.P. Series C Preferred 933,332 9.3%
(5% Shareholder) **
Raquel Emilse Oddone De Ostry (5) Common 1,230,617 10.35%
(5% Shareholder) ** Series C Preferred 930,237 9.05%
Norberto Pireu (6) (5% Shareholder) ** Common 1,230,617 10.35%
Series C Preferred 930,237 9.05%
Estate of George S. D'Ambrosio (7) Common 1,003,286 8.7%
(5% Shareholder) ** Series C Preferred -0- (*)
International Finance Corporation (8) Common -0- (*)
(5% Shareholder) Series C Preferred 933,332 9.3%
Glacier Latin-America LTD (9) Common -0- (*)
(5% Shareholder) ** Series C Preferred 560,000 5.7%
Lance D'Ambrosio (10) Common 3,564,552 30.8%
(CEO, Director) ** Series C Preferred -0- (*)
Brian Reynolds (11) Common 183,333 1.6%
(Pres. and COO) Series C Preferred -0- (*)
Jerry Slovinski (12) Common 100,000 (*)
(Sr. VP and CFO) Series C Preferred -0- (*)
Troy D'Ambrosio Common 580,336 5.0%
(Sr. VP/Director) ** Series C Preferred -0- (*)
William Levan (13) Common 50,000 (*)
(Sr. VP) Series C Preferred -0- (*)
Jose Miguel Padron (14) Common 33,333 (*)
(VP/CEO of Central America Series C Preferred -0- (*)
Operations)
Luis de la Fuente (15) Common 34,000 (*)
(VP/CEO of Mexico Operations) Series C Preferred -0- (*)
Anthony Sansone (16) Common 165,555 1.4%
(Vice President Series C Preferred -0- (*)
Treasurer/Secretary) **
Gaston Acosta-Rua (17) Common 4,000 (*)
(Director) Series C Preferred -0- (*)
Jorge Fucaraccio (18) Common -0- (*)
(Director) Series C Preferred -0- (*)
Mario Baeza (19) Common -0- (*)
(Director) Series C Preferred 10,000 (*)
Norberto Corredor (20) Common -0- (*)
(Director) Series C Preferred -0- (*)
George Sorenson (21) Common -0- (*)
(Director) Series C Preferred -0- (*)
Peter Schiller (22) Common -0- (*)
(Director) Series C Preferred -0- (*)
Salomon Magan (23) Common -0- (*)
(Director) Series C Preferred -0- (*)
Alfonso Bahamonde (24) Common -0- (*)
(Director) Series C Preferred -0- (*)
All directors and officers as a group Common 4,719,455 39.3%
(16 persons) (25) Series C Preferred 10,000 (*)
</TABLE>
----------------------
* Less than 1%
** Indicates a party that has delivered a written consent to the
Transaction.
1. Based on 11,717,701 outstanding shares of common stock and 9,728,909
outstanding shares of Series C preferred stock. We also have 101,374
shares of Series B preferred stock outstanding, but have not included
that stock in this chart. The Series B preferred stock is held by
approximately nine holders, and two of those holders (Donald Williams
and his affiliate, Caribbean Communications, S.A., own approximately
65% of all the Series B preferred stock). The inclusion of any stock as
"beneficially owned" does not constitute an admission of beneficial
ownership (which has a broad definition under the securities laws) of
that stock. Unless otherwise indicated, each person listed has sole
investment and voting power with respect to the stock listed. Also,
each person is deemed to beneficially own any stock issuable on
exercise of stock options or warrants held by that person that are
currently exercisable or that become exercisable within 60 days after
April 1, 2000.
2. Includes an option to acquire 1,333,333 shares of Series C preferred
stock. Does not include 833,333 shares of common stock that may be
acquired under the terms of a warrant issued to the stockholder in
October 1999, but which may not be exercised until the occurrence of
certain specified corporate events.
3. Includes an option to acquire 1,333,333 shares of Series C preferred
stock. Does not include 833,333 shares of common stock that may be
acquired under the terms of a warrant issued to the stockholder in
October 1999, but which may not be exercised until the occurrence of
certain specified corporate events.
4. Includes an option to acquire 266,666 shares of Series C preferred
stock. Includes 513,006 shares of common stock under warrants granted
to the stockholder prior to October 1999. Does not include 426,666
shares of common stock that may be acquired under the terms of warrants
issued to the stockholder in October 1999, but which may not be
exercised until the occurrence of certain specified corporate events.
5. Represents one half of the capital stock beneficially held by
Internexus S.A., Argentine corporation, as of December 31, 1999.
Internexus S.A. has notified us that it transferred the beneficial
ownership of its capital stock and related interests to Raquel Emilse
Oddone De Ostry and Norberto Pireu (see footnote 6 below), equally,
effective December 31, 1999. Includes an option to acquire 265,782
shares of Series C preferred stock. Includes 141,322 shares of common
stock under warrants granted to the predecessor in interest to the
stockholder prior to October 1999. Also includes options to acquire
4,000 shares of common stock which were granted to the stockholder's
designees to our Board of Directors under our Director Stock Plan, but
which were assigned to the stockholder under the terms of the
designees' arrangements with the stockholder. Does not include 296,114
shares of common stock that may be acquired under the terms of warrants
issued to the predecessor in interest in October 1999, but which may
not be exercised until the occurrence of certain specified corporate
events.
6. Represents one half of the capital stock beneficially held by
Internexus S.A., Argentine corporation, as of December 31, 1999.
Internexus S.A. has notified us that it transferred the beneficial
ownership of its capital stock and related interests to Raquel Emilse
Oddone De Ostry and Norberto Pireu (see footnote 5 above), equally,
effective December 31, 1999. Includes an option to acquire 265,782
shares of Series C preferred stock. Includes 141,322 shares of common
stock under warrants granted to the predecessor in interest to the
stockholder prior to October 1999. Also includes options to acquire
4,000 shares of common stock which were granted to the stockholder's
designees to our Board of Directors under our Director Stock Plan, but
which were assigned to the stockholder under the terms of the
designees' arrangements with the stockholder. Does not include 296,114
shares of common stock that may be acquired under the terms of warrants
issued to the predecessor in interest in October 1999, but which may
not be exercised until the occurrence of certain specified corporate
events.
7. George D'Ambrosio was the father of Lance D'Ambrosio and Troy
D'Ambrosio. Lance D'Ambrosio has been appointed the personal
representative of the Estate of George S. D'Ambrosio. Lance D'Ambrosio
disclaims beneficial ownership of the stock held by the Estate.
8. Includes an option to acquire 266,666 shares of Series C preferred
stock. Does not include 166,666 shares of common stock that may be
acquired under the terms of warrants issued to the stockholder in
October 1999, but which may not be exercised until the occurrence of
certain specified corporate events.
9. Includes an option to acquire 160,000 shares of Series C preferred
stock. Does not include 100,000 shares of common stock that may be
acquired under the terms of warrants issued to the stockholder in
October 1999, but which may not be exercised until the occurrence of
certain specified corporate events.
10. Includes stock held in the name of Mr. D'Ambrosio and held in the name
of entities over which Mr. D'Ambrosio has voting and/or beneficial
control and for which he does not disclaim beneficial ownership. Does
not include 1,003,286 shares of common stock held by the Estate of
George S. D'Ambrosio, for which Lance D'Ambrosio acts as personal
representative and for which he disclaims beneficial ownership.
11. Includes options to acquire 183,333 shares of common stock.
12. Includes options to acquire 100,000 shares of common stock.
13. Includes options to acquire 50,000 shares of common stock.
14. Includes options to acquire 33,333 shares of common stock.
15. Includes options to acquire 34,000 shares of common stock.
16. Stock shown is held by a limited liability company for which Mr.
Sansone acts as the managing member. Mr. Sansone does not disclaim
beneficial ownership of such stock. Also includes options to acquire
50,000 shares of common stock.
17. Mr. Acosta-Rua is a principal of FondElec and certain of its
affiliates. Mr. Acosta-Rua disclaims beneficial interest in the shares
held by FondElec and its affiliates. Also includes options to acquire
4,000 shares common stock.
18. Mr. Fucaraccio is an officer of an affiliate of Internexus. Mr.
Fucaraccio disclaims beneficial interest in the stock held by
Internexus, or its affiliates.
19. Mr. Baeza is a principal of TCW/CCI Holding or its affiliates, and is
an officer and sole member of a company that is a member of an entity
that controls TCW/CCI Holding. The shares of Series C preferred stock
shown for Mr. Baeza reflect his indirect interest in TCW/CCI Holding's
stock. Mr. Baeza disclaims beneficial interest in the stock held by
TCW/CCI Holding except to the extent of that indirect interest.
20. Mr. Corredor is an officer of Telematica or its affiliates. Mr.
Corredor disclaims beneficial interest in the stock held by Telematica
except to the extent shown.
21. Mr. Sorenson is a principal of FondElec. Mr. Sorenson disclaims
beneficial interest in the stock held by FondElec. Also includes
options to acquire 4,000 shares of common stock.
22. Mr. Schiller is an officer of one or more affiliates of Internexus. Mr.
Schiller disclaims beneficial
interest in the stock held by Internexus and its affiliates.
23. Mr. Magan is an officer of an affiliate of Telematica. Mr. Magan
disclaims beneficial interest in the stock held by Telematica.
24. Mr. Bahamonde is a principal of an affiliate of TCW/CCI Holding. Mr.
Bahamonde disclaims beneficial interest in the stock held by TCW/CCI
Holding.
25. Assumes the matters set forth in notes 1 through 23. Includes options
to acquire 466,666 shares of common stock.
By Order of the Directors
/s/ Anthony Sansone
------------------------------------
Anthony Sansone
Secretary
Dated 5/9/00
