SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: January 28, 2004
(Date of earliest event reported)
CAPITAL GROWTH SYSTEMS, INC.
(Exact name of registrant as specified in the charter)
Florida 0-30831 65-0953505
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
980 North Michigan Avenue, Suite 1120
Chicago, Illinois 60611
(Address of Principal Executive Offices)
(312) 640-2975
Registrant's telephone number including area code)
(Former name or former address, if changed since last report)
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
On January 28, 2004, Capital Growth Systems, Inc. (the "Company")
completed its acquisition of Nexvu Technologies, L.L.C. ("Nexvu"). The form of
the transaction was a merger in which the Company issued 8,558,500 shares of
common stock of the Company in exchange for 100% of the membership interests in
Nexvu. In addition, pursuant to a Loan Conversion Agreement, the Company agreed
to issue: (i) an additional number of shares of common stock equal to the amount
of new bridge loans funded by Nexvu members from November 15, 2003 through the
merger closing priced at $0.9523809 per share, for a total of 577,500 shares;
and (ii) warrants expiring December 31, 2006 to purchase common stock at $1.35
per share based upon 50% warrant coverage with respect to all bridge loans
funded, for a total of 288,750 warrants. The Merger Agreement also required a
simultaneous closing of the issuance of the Company of a private offering of the
Company's common stock of not less than $2,000,000, up to a maximum of
$7,000,000 (subject to increase in the sole discretion of the Company) at $1.35
per share, and the conversion of bridge loan principal amounts to equity so that
the Company would own 100% of Nexvu which would be substantially debt free as of
the merger closing. The Company has raised a total of approximately $5,345,000
from the sale of its common stock in the private offering through January 28,
2004, the closing date of the merger.
The Merger Agreement further provided that on closing of the merger, at
least three designees of Nexvu, all of whom were Nexvu's principal officers,
would become members of the Company's board of directors and will be elected to
the following positions: President and CEO - Scott Allen; Chief Technology
Officer - Rory Herriman; and Secretary, Treasurer and Chairman of the Board -
Robert T. Geras. This was effected on the merger date. The Company also entered
into an indemnification agreement at the Closing in which it agreed to indemnify
and hold harmless its five directors against certain liabilities.
The Company and Nexvu accomplished the combination through a forward
triangular merger whereby a newly created, fully owned subsidiary of the Company
merged with and into Nexvu, with Nexvu the surviving corporation. The Company
expects to continue to operate Nexvu as a wholly-owned subsidiary of the
Company.
Nexvu is a software company which has generated a suite of application
performance management products which address the problem of how to measure and
ensure that a company's hardware, software and telecommunications equipment
provide the intended functionality and speed. It has generated sales of product
to a small number of relatively large companies, and is in beta testing with a
number of additional large companies.
The Company granted registration rights to all investors in its private
offering which obligates the Company to file a registration statement to
register for resale all of the newly issued shares of the investors in the
private offering no later than 60 days following the Company's receipt of
Nexvu's audited financial statements. The Contribution Agreement also provides
for similar registration rights with respect to the shares of common stock
underlying the warrants issued to former holders of Nexvu's bridge notes and to
one other individual holding a warrant to purchase 162,500 shares of common
stock at $1.35 per share (similar to the bridge warrants).
The consideration for this transaction was at arms-length between the
Company and Nexvu and includes a premium over the net book value of the assets
acquired based upon the Company's own assessment of the market value of Nexvu's
assets and the benefits of combining Nexvu with the Company.
A copy of the merger agreement, contribution agreement, registration
rights agreement and indemnification agreement are filed as exhibits to this
Form 8-K and are incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial statements of the business acquired will be filed by
amendment not later than 60 days from the due date of this filing.
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(b) Exhibits
Exhibit 10.1 - Agreement and Plan of Merger Agreement By and Among
Capital Growth Systems, Inc., Nexvu MergerSub, LLC, and Nexvu Technologies,
L.L.C. dated January 28, 2004.
Exhibit 10.2 - Loan Conversion Agreement by and among Nexvu
Technologies, L.L.C., Robert T. Geras, Balkin Family L.P, Carl Greer Trust,
David J. Lies, Linda M. Lies and Karen Jaimovich dated as of December 31, 2003.
Exhibit 10.3 - Registration Rights Agreement by and among Capital
Growth Systems, Inc. and certain shareholders of the Company dated as of
December 16, 2003.
Exhibit 10.4 - Indemnification Agreement by and among Capital Growth
Systems, Inc., Nexvu Technologies, L.L.C., Rory Herriman, Douglas Stukel and Lee
Wiskowski dated as of January 28, 2004.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 11, 2004
CAPITAL GROWTH SYSTEMS, INC.
By: /s/ Lee Wiskowski
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Its: President
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