SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
Grow Biz International, Inc.
-----------------------------------
(Name of Issuer)
Common Stock, no par value
-----------------------------------
(Title of Class of Securities)
908315
--------------------
(CUSIP Number)
Patrick Delaney, Esq.
Lindquist & Vennum, PLLP
4200 IDS Center
Minneapolis, MN 55402
Telephone: (612) 371-3281
Fax no.: (612) 371-3207
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
March 22, 2000
--------------------------------------------------
(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 ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 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 the
disclosures provided in a prior cover page.
The information required in 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 23 Pages
<PAGE>
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CUSIP No. 908315 13D Page 2 of 23 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
John L. Morgan
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Mr. Morgan is a citizen of the United States.
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
422,300
SHARES ----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 144,300
----------------------------------------------------------
EACH
9 SOLE DISPOSITIVE POWER
REPORTING
422,300
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
144,300
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
566,600
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
Page 2 of 23 Pages
<PAGE>
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CUSIP No. 908315 13D Page 3 of 23 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
Rush River Group LLC, a Minnesota limited liability company;
FEIN: 41-1920090
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Rush River Group LLC is a Minnesota limited liability company
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
140,000
SHARES ----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
----------------------------------------------------------
EACH
9 SOLE DISPOSITIVE POWER
REPORTING
140,000
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
140,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- --------------------------------------------------------------------------------
Page 3 of 23 Pages
<PAGE>
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CUSIP No. 908315 13D Page 4 of 23 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
Kirk A. MacKenzie
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Mr. MacKenzie is a citizen of the United States.
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
70,000
SHARES ----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 140,000
----------------------------------------------------------
EACH
9 SOLE DISPOSITIVE POWER
REPORTING
70,000
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
140,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
210,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
Page 4 of 23 Pages
<PAGE>
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CUSIP No. 908315 13D Page 5 of 23 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
Jack A. Norqual
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Mr. Norqual is a citizen of the United States.
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
70,000
SHARES ----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 140,000
----------------------------------------------------------
EACH
9 SOLE DISPOSITIVE POWER
REPORTING
70,000
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
140,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
210,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
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Page 5 of 23 Pages
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D (the "Statement") relates to the Common Stock, no
par value per share (the "Common Stock"), of Grow Biz International, Inc., a
Minnesota corporation (the "Company"). The principal executive office of the
Company is located at 4200 Dahlberg Drive, Minneapolis, MN 55422-4837.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Schedule 13D is being filed on behalf of John L. Morgan, an
individual, Rush River Group LLC, a Minnesota limited liability company, Kirk A.
MacKenzie, an individual, and Jack A. Norqual, an individual. Messrs. Morgan,
MacKenzie and Norqual are members of Rush River Group LLC. Rush River Group LLC
and Messrs. Morgan, MacKenzie and Norqual are sometimes referred to herein as
the "Reporting Persons." Mr. Morgan and Rush River Group LLC are making this
filing because, collectively, they are beneficial owners, pursuant to Rule 13d-3
under the Securities Exchange Act of 1934, of more than five percent of the
outstanding shares of Common Stock of the Issuer. Messrs. MacKenzie and Norqual
are included in this filing as Reporting Persons due to their beneficial
ownership of shares of Common Stock of the Issuer, individually and as members
of Rush River Group LLC. This Schedule 13D also pertains to 4,300 shares of
Common Stock of the Issuer owned by Sheila Morgan, the spouse of John L. Morgan,
which are deemed beneficially owned by Mr. Morgan. Such shares are included
within the references herein.
(b) The business address of Mr. Morgan is 4200 Dahlberg Drive,
Minneapolis, Minnesota 55422-4837.
(c) Mr. Morgan's present principal employment is as Chairman and Chief
Executive Officer of the Company, which is located at the address set forth in
Item 1 above. Mr. Morgan is also a member of Rush River Group LLC, which is
located at 4200 Dahlberg Drive, Minneapolis, Minnesota 55422-4837.
(d)-(e) During the last five years, Mr. Morgan (1) has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), nor (2) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he 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
or finding any violation with respect to such laws.
(f) Mr. Morgan is a citizen of the United States.
Page 6 of 23 Pages
<PAGE>
IDENTITY AND BACKGROUND - REPORTING PERSONS HOLDING LESS THAN 5% OF
THE ISSUER'S OUTSTANDING SECURITIES
RUSH RIVER GROUP LLC
(a) This Schedule 13D is also being filed by Rush River Group LLC.
(b) The business address of Rush River Group LLC is 10400 Viking
Drive, Suite 160, Eden Prairie, Minnesota 55344.
(c) Rush River Group LLC is a Minnesota limited liability company
organized in December 1998. Its principal business activities involve investing
in equity securities of privately owned and publicly traded companies, as well
as other types of securities.
(d)-(e) During the last five years, Rush River Group LLC (1) has not
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), nor (2) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which the it 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 or finding any violation with respect to such laws.
(f) Rush River Group LLC is a limited liability company organized
under the laws of the State of Minnesota.
KIRK A. MACKENZIE
(a) This Schedule 13D is also being filed by Kirk A. MacKenzie.
(b) The business address of Mr. MacKenzie is 10400 Viking Drive, Suite
160, Eden Prairie, Minnesota 55344.
(c) Mr. MacKenzie's present principal employment is as a member of
Rush River Group LLC, which is located at the address set forth in Item 2(b)
above.
(d)-(e) During the last five years, Mr. MacKenzie (1) has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), nor (2) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he 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
or finding any violation with respect to such laws.
(f) Mr. MacKenzie is a citizen of the United States.
JACK A. NORQUAL
(a) This Schedule 13D is also being filed by Jack A. Norqual.
(b) The business address of Mr. Norqual is 10400 Viking Drive, Suite
160, Eden Prairie, Minnesota 55344.
Page 7 of 23 Pages
<PAGE>
(c) Mr. Norqual's present principal employment is as a member of Rush
River Group LLC, which is located at the address set forth in Item 2(b) above.
(d)-(e) During the last five years, Mr. Norqual (1) has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), nor (2) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he 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
or finding any violation with respect to such laws.
(f) Mr. Norqual is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On or about March 22, 2000, Mr. Morgan purchased a total of 420,000
shares of Common Stock of the Issuer, at $7.00 per share, for cash in the amount
of $2,940,000 and Rush River Group LLC purchased a total of 140,000 shares of
Common Stock the Issuer, at $7.00 per share, for cash in the amount of $980,000.
Also on or about March 22, 2000, Mr. MacKenzie purchased a total of 70,000
shares of Common Stock of the Issuer, at $7.00 per share, for cash in the amount
of $490,000 and Mr. Norqual purchased a total of 70,000 shares of Common Stock
of the Issuer, at $7.00 per share, for cash in the amount of $490,000. The
shares purchased by Messrs. Morgan, MacKenzie and Norqual were purchased using
personal funds. The shares purchased by Rush River Group LLC were purchased with
working capital. All of the shares were purchased for investment purposes in
privately negotiated transactions. In addition, on March 23, 2000, Mr. Morgan
purchased an additional 2,300 shares of Common Stock of the Issuer, at $6.75 per
share, for cash in the amount of $15,525 and his wife, Sheila Morgan, purchased
4,300 shares, at $6.875 per share, for cash in the amount of $29,562.50. These
purchases were also made in open market transactions for investment purposes and
were purchased using personal funds.
ITEM 4. PURPOSE OF TRANSACTION.
Mr. Morgan acquired the shares of Common Stock that are the subject
of this Schedule 13D for himself for personal investment purposes, in connection
with his appointment as Chairman and Chief Executive Officer of the Company, and
Sheila Morgan, his wife, acquired 4,300 shares for personal investment purposes.
Rush River Group LLC, of which Mr. Morgan is a member, acquired the shares of
Common Stock that are the subject of this Schedule 13D with respect to it for
investment purposes. Messrs. MacKenzie and Norqual each purchased 70,000 shares
of Common Stock of the Issuer in connection with the foregoing purchases. The
Reporting Persons may, individually or collectively, increase their investments
in the Company through the acquisition of additional shares of Common Stock in
the open market or otherwise, subject to availability at prices deemed favorable
by them. Alternatively, they may decide to sell any or all of the shares of
Common Stock beneficially owned by them in the open market or otherwise. The
foregoing represents the range of activities presently contemplated by Mr.
Page 8 of 23 Pages
<PAGE>
Morgan and the other Reporting Persons. Their plans, proposals and activities
are subject to change at any time depending on, among other things, the actions
of the Company's Board of Directors, the Company's performance and conditions in
the public securities markets.
Except as set forth above, none of Mr. Morgan, Rush River Group LLC,
Mr. MacKenzie or Mr. Norqual has any present plans or intentions that would
result in or relate to any of the transactions described in subparagraphs (a)
through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Set forth below are the shares of Common Stock of the Company
beneficially owned by each of the Reporting Persons and the percentage of the
total outstanding shares as of the date of this filing. The foregoing percentage
is based upon 5,381,119 shares of Common Stock outstanding on March 13, 2000, as
set forth in the Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1999, as filed by the Company with the Securities and Exchange
Commission on March 22, 2000.
Percentage of Total
Reporting Person No. Shares Purchased Shares Outstanding
---------------- -------------------- ------------------
John L. Morgan 566,600*,** 10.5%
Rush River Group LLC 140,000 2.6%
Kirk A MacKenzie 210,000* 3.9%
Jack A. Norqual 210,000* 3.9%
- ------------------
* Includes beneficial ownership of shares held by Rush River Group LLC
** Includes 4,300 shares purchased by Sheila Morgan, his wife, for which he
disclaims beneficial ownership.
(b) With the exception of 4,300 shares purchased by Sheila Morgan,
his wife, Mr. Morgan has the sole power to vote and dispose of the shares of
Common Stock which he beneficially owns. Mr. Morgan also has shared voting and
dispositive power, together with Messrs. MacKenzie and Norqual, over the shares
of the Company beneficially owned by Rush River Group LLC, due to their
respective positions as members of the LLC. Rush River Group LLC holds 140,000
shares of record of the Company and shares voting and dispositive power to vote
or dispose of such shares with each of the other Reporting Persons. Each of
Messrs. Morgan, MacKenzie and Norqual disclaim any beneficial ownership of the
shares held by the other persons, either individually or in their respective
capacities as members of Rush River Group, LLC. Mr. Morgan disclaims beneficial
ownership with respect to the 4,300 shares purchased by Sheila Morgan, his wife.
(c) Transactions in the Common Stock effected by Mr. Morgan, Rush
River Group LLC and Messrs. MacKenzie and Norqual in the last 60 days are as set
forth in Item 3 above. Other than as described above, the Reporting Persons have
not effected any transactions in the securities of the Company during the past
sixty days.
Page 9 of 23 Pages
<PAGE>
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Neither Mr. Morgan nor Rush River Group LLC, Kirk A. MacKenzie or Jack
A. Norqual has any contracts, arrangements, understandings or relationships
(legal or otherwise) with any person with respect to any securities of the
Company other than the following:
On March 22, 2000, Mr. Morgan purchased 420,000 shares of Common Stock
of the Company at a purchase price of $7.00 per share, for a total purchase
price of $2,940,000. Effective March 22, 2000, he entered into an Employment
Agreement with the Company to serve as its Chairman and Chief Executive
Officer. As a condition of his employment, Mr. Morgan also entered into a side
agreement whereby he agreed to comply with the Minnesota Business Combination
Act and not to effect or attempt to effect a business combination of the
Company, without prior approval of a committee of the board of directors of the
Company, as long as his beneficial ownership of shares in the Company equaled or
exceeded 10%. Copies of the Employment Agreement and side agreement are attached
hereto as Exhibits 2 and 3, respectively.
Effective March 22, 2000, Mr. Morgan also was granted options to
purchase an additional 600,000 shares of Common Stock of the Company at an
exercise price of $5.00 per share. The shares vest as to 120,000 shares
annually, beginning on the first anniversary of the date of grant. A copy of the
Stock Option Agreement is attached hereto as Exhibit 4.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No. Description
- ----------- -----------
1. Joint Filing Agreement.
2. Employment Agreement dated March 22, 2000 between Grow Biz
International, Inc. and John L. Morgan.
3. Letter Agreement dated March 22, 2000 between Grow Biz
International, Inc. and John L. Morgan.
4. Nonqualified Stock Option Agreement dated March 22, 2000 between
Grow Biz International, Inc. and John L. Morgan.
Page 10 of 23 Pages
<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.
Dated: March 29, 2000
/s/ John L. Morgan
-------------------------------------
John L. Morgan, individually
RUSH RIVER GROUP LLC
By: /s/ John L. Morgan
-------------------------------------
John L. Morgan
Its: Member
/s/ Kirk A. MacKenzie
-------------------------------------
Kirk A. MacKenzie, individually
/s/ Jack A. Norqual
-------------------------------------
Jack A. Norqual, individually
Page 11 of 23 Pages
EXHIBIT 1
JOINT FILING AGREEMENT
The undersigned hereby agree that this Schedule 13D relating to
securities of Grow Biz International, Inc. shall be filed on behalf of each of
them.
March 29, 2000 /s/ John L. Morgan
---------------------------------------
John L. Morgan, individually
RUSH RIVER GROUP LLC
By: /s/ John L. Morgan
---------------------------------------
John L. Morgan
Its: Member
/s/ Kirk A. MacKenzie
---------------------------------------
Kirk A. MacKenzie, individually
/s/ Jack A. Norqual
---------------------------------------
Jack A. Norqual, individually
Page 12 of 23 Pages
EXHIBIT 2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("AGREEMENT") is made as of March 22, 2000,
between Grow Biz International, Inc. ("EMPLOYER") and John L. Morgan
("EMPLOYEE").
INTRODUCTION
Employer desires to employ Employee under the terms of this Agreement,
including the non-solicitation, registration rights and other covenants stated
below, and Employee is willing to enter into such covenants in return for the
benefits hereunder.
AGREEMENT
In consideration of the foregoing, the parties agree as follows:
1. NATURE AND CAPACITY OF EMPLOYMENT. Employer agrees to employ Employee as
Chief Executive Officer of Employer under the terms of this Agreement.
Employee agrees to perform, or be available to perform, on a full-time
basis, the functions of this position, under the terms of this
Agreement.
2. TERM OF EMPLOYMENT. The term of this Agreement will commence as of March
23, 2000 and continue until such time as terminated under Section 9
below.
3. ANNUAL BASE SALARY. The annual base salary, exclusive of any benefits or
bonuses, which Employer agrees to pay to Employee for the first year of
this Agreement will be Fifty Thousand Dollars ($50,000). All amounts
paid under this Agreement will be paid consistent with Employer's normal
payroll practice and will be subject to all normal and required
withholdings.
4. BONUS. The Compensation Committee of Employer's Board of Directors may,
in its sole discretion, establish certain criteria under which Employee
may become eligible to receive an annual bonus payment, and will also
maintain the right to adjust such criteria in its sole discretion,
however the Committee is not obligated to grant any bonus to Employee.
5. EMPLOYEE EXPENSES. Employer agrees to reimburse Employee for the
reasonable business expenses Employee incurs on behalf of Employer upon
proof of expenditure.
6. EMPLOYEE BENEFITS. Employee will be eligible for those benefits provided
to executive management employees.
7. EMPLOYEE FRINGE BENEFITS. Employee will receive the following fringe
benefits ("EMPLOYEE FRINGE BENEFITS"):
Page 13 of 23 Pages
<PAGE>
7.1 STOCK OPTIONS. Employee will be issued a six year option (the
"OPTION"), under the terms of the stock option agreement
attached hereto as EXHIBIT A, to purchase 600,000 shares of
Employer's common stock (the "OPTION SHARES"), at an exercise
price of $5 per share, vesting at the rate of 120,000 shares per
year on the anniversaries of this Agreement.
7.2 REGISTRATION RIGHTS. Employer has agreed to register under the
Securities Act of 1993, as amended ("SECURITIES ACT"), the
Option, the Option Shares and the 700,000 shares of Employer's
common stock which Employee and others are purchasing from K.
Jeffrey Dahlberg, for resale by Employee.
8. UNDERTAKINGS OF EMPLOYEE. Employee agrees to spend Employee's full
working time and effort in performing Employee's duties with Employer so
long as employed by Employer, and will not, during the course of
employment by Employer, without prior written approval of Employer,
become an employee, director, officer, agent, partner of or consultant
to, or a stockholder of (except a stockholder of a public company in
which Employee owns less than five percent (5%) of the issued and
outstanding capital stock of such company) any company or other business
entity which is a significant competitor, supplier, or customer of
Employer.
9. TERMINATION OF EMPLOYMENT AGREEMENT. Employee's employment under this
Agreement may be terminated, by either party for any reason or no reason
upon 30 days written notice to Employee.
10. CONFIDENTIAL INFORMATION. For purposes hereof, "CONFIDENTIAL
INFORMATION" means any information that Employee learns or develops
during the course of employment that derives independent economic value
from being not generally known by the public and includes trade secrets,
methods of research and testing, customer lists, vendor lists and
financial information, and information relating to such matters as
management systems and sales or marketing techniques. Employee will not
directly or indirectly use or disclose any Confidential Information for
anyone other than Employer either during the course of employment or
after the termination of employment. Employee recognizes that the
Confidential Information constitutes a valuable asset of Employer and
agrees to act in such a manner as to prevent its disclosure and use by
any person unless such use is for Employer. Employee's obligations under
this paragraph are unconditional and will not be excused by any Employer
conduct, except prior voluntary disclosure by Employer of this
information.
11. INVENTIONS. Employee agrees to promptly disclose to Employer in writing
any invention, improvement, work of authorship, discovery or idea
(including those which may be subject to copyright protection)
generated, conceived, or reduced to practice by Employee alone or in
conjunction with others, during or after working hours, while an
employee of Employer ("INVENTIONS"); and all such Inventions will be
Employer's exclusive property
Page 14 of 23 Pages
<PAGE>
and are hereby assigned to Employer. Further, Employee will, at
Employer's expense, give Employer all assistance it reasonably requires
to perfect, protect, and use its rights to Inventions. In particular,
Employee will sign all documents, do all things, and supply all
information that Employer may deem necessary to: (i) transfer or record
the transfer of Employee's entire right, title and interest in
Inventions; and (ii) enable Employer to obtain copyright or trademark
protection for Inventions. Employee's obligations under this Section
will continue beyond the termination of employment with respect to
Inventions and will be binding on assigns, executors, and other legal
representatives.
NOTICE: PURSUANT TO MINNESOTA STATUTES SS. 181.78, EMPLOYEE IS NOTIFIED
THAT THE AGREEMENT DOES NOT APPLY TO ANY INVENTION FOR WHICH NO
EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF EMPLOYER
WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON EMPLOYEE'S OWN TIME, AND
WHICH DOES NOT RELATE DIRECTLY TO EMPLOYER'S BUSINESS OR TO ITS ACTUAL
OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR WHICH DOES NOT
RESULT FROM ANY WORK EMPLOYEE PERFORMED FOR EMPLOYER.
12. NON-SOLICITATION. Employee covenants that during the term of his
employment by Employer, and for one year after the termination of his
employment, regardless of the cause of termination, Employee will not,
without Employer's prior written consent, directly or indirectly, employ
or seek to employ, in any capacity, any person who, within the preceding
six months, has been an employee of Employer, or any franchisee of
Employer.
13. INDEMNIFICATION BY EMPLOYER. In addition to any indemnification to which
Employee may be entitled in his capacity as an officer and director of
Employer, Employer shall indemnify, defend and hold harmless Employee
from and against any and all costs, expenses, losses, damages, claims,
liabilities, obligations, actions or causes of action (including,
without limitation, reasonable attorneys' fees and expenses) incurred,
sustained or suffered by him as a result of any claim, suit, cause of
action, investigation or proceeding, whenever instituted or commenced,
against Employee by a third party that is not directly or indirectly
affiliated or related to Employee, arising out of the actions or
inactions of Employer with respect to Employer's business prior to March
22, 2000. Should any claim covered by the indemnity provided in Section
13 be asserted, Employee shall promptly notify Employer and give
Employer an opportunity to defend the same either in Employer's name or,
as required by applicable laws and regulations, in Employee's name;
provided, that the failure to give prompt notice shall not affect the
rights of Employee to indemnification hereunder except to the extent
that such failure either shall have materially prejudiced Employer in
the defense of such claim or shall have increased the amount of the
obligation of Employer. Employee shall extend reasonable cooperation in
connection with such defense and shall have the right, at his own
expense, to participate in, but not to control, any such defense by
Employer. If Employer shall fail, after notice from Employee, to defend
against such claim within a reasonable time, then Employee shall be
entitled to assume the defense thereof, and
Page 15 of 23 Pages
<PAGE>
Employer shall be liable to repay Employee for all of his expenses
reasonably incurred in connection with such defense, including
reasonable attorney's fees and settlement payments. No settlement shall
be made by Employee of any claim which Employer has assumed pursuant to
this Section 13, or of any other claim or actions with respect to which
indemnification is claimed hereunder, without the prior written consent
of Employer, so long as such consent is not unreasonably withheld or
delayed.
14. NO RESTRICTIONS. Employee represents and warrants to Employer that he is
not subject to any covenant, agreement, understanding or restriction of
any kind or nature which would prohibit, restrict or interfere in any
way with his ability to perform the functions of his positions with
Employer.
15. MISCELLANEOUS.
15.1 INTEGRATION. This Agreement and the Stock Option Agreement of
even date herewith contains the entire agreement and
understanding among the parties relative to the subject matter
hereof and supersedes all prior agreements and understandings
relating thereto.
15.2 APPLICABLE LAW. This Agreement and the rights of the parties
will be governed by and construed and enforced under the laws of
the state of Minnesota. The venue for any action hereunder will
be in the state of Minnesota, and the parties consent to the
jurisdiction of the courts of the state of Minnesota, County of
Hennepin, and the U.S. District Court, District of Minnesota.
15.3 BINDING EFFECT. Except as herein provided, this Agreement will
be binding upon and will benefit the parties and their
respective heirs, successors, assigns and personal
representatives; provided, however, that Employee may not assign
his rights or obligations hereunder without Employer's prior
written consent. Employer may assign its rights and obligations
under this Agreement, provided the assignee agrees to fulfill
Employer's obligations hereunder.
15.4 NOTICES. All notices, requests and other communications
hereunder will be given in writing and deemed to have been given
if personally delivered, or sent by first class, certified mail,
return receipt requested, postage prepaid, to the party at the
address as provided below, or to such other address as such
party may hereafter designate by written notice to the other
party:
(a) If to Employer, to the address of its then principal
office.
(b) If to Employee, to the address last shown in Employer's
records.
Page 16 of 23 Pages
<PAGE>
15.5 MODIFICATION. This Agreement will not be modified or amended
except by a written instrument signed by the parties.
15.6 SEVERABILITY. The invalidity or partial invalidity of any
portion of this Agreement will not invalidate the remainder
thereof. If any provision of this Agreement is, for any reason,
held to be excessively broad as to scope, activity, subject or
otherwise, so as to be unenforceable at law, such provision will
be construed by the appropriate judicial body by limiting or
reducing it, so as to be enforceable to the maximum extent
compatible with then applicable law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date herein first above written.
EMPLOYER
Grow Biz International, Inc.
Dated: March 22, 2000 By: /s/ Ronald G. Olson
--------------------------------------
Ronald G. Olson, Vice Chairman
EMPLOYEE:
Dated: March 22, 2000 By: /s/ John L. Morgan
--------------------------------------
John L. Morgan
Page 17 of 23 Pages
EXHIBIT 3
March 22, 2000
John L. Morgan
c/o Lindquist & Vennum P.LL.P.
4200 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402-2205
Dear Mr. Morgan:
This letter is an agreement between you and Grow Biz International,
Inc. (the "Company") regarding your proposal for you, Kirk MacKenzie, Jack
Norqual and Rush River Group LLC to acquire from K. Jeffrey Dahlberg
approximately 700,000 shares of outstanding capital stock of the Company (the
"Proposed Purchase"). Unless otherwise defined herein, each term in this letter
agreement for which a definition is provided in the Minnesota Business
Corporation Act (Minnesota Statutes, Chapter 302A) shall have such definition.
You have requested, pursuant to Section 302A.673 of the Minnesota
Business Corporation Act, that a committee of disinterested directors approve
the Proposed Purchase. In response to your request and in reliance on your
obligations under this letter agreement, the committee of disinterested
directors has indicated its intention to approve the Proposed Purchase.
In consideration of such approval, you have agreed to the following:
1. While your beneficial ownership equals or exceeds 10% of all
outstanding shares of common stock of the Company, neither you nor any of your
associates or affiliates will effect (or attempt to effect) any business
combination without the prior approval of a committee of the board of directors
consisting of all disinterested directors.
2. Because the Company may suffer irreparable harm as a result of any
breach of this letter agreement by you, the Company shall be entitled to obtain
all available remedies (including without limitation injunctive relief and
specific performance) to prevent any actual or threatened breach by you of this
letter agreement, without proving any damages or posting any bond or other
security. Such remedies are in addition to all other remedies available for
breach of an agreement, whether at law or in equity.
3. This letter agreement may be executed in one or more counterparts,
and all such counterparts taken together will constitute one and the same
instrument.
Sincerely,
GROW BIZ INTERNATIONAL, INC.
By: /s/ Ronald G. Olson
-------------------------------------
Its: Vice Chairman
-------------------------------------
The undersigned hereby agrees as
set forth above.
/s/ John L. Morgan
- --------------------------------
John L. Morgan
Page 18 of 23 Pages
EXHIBIT 4
GROW BIZ INTERNATIONAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
March 22, 2000
TO: John L. Morgan (the "OPTIONEE")
As the new Chief Executive Officer of Grow Biz International, Inc., a
Minnesota corporation (the "COMPANY"), you are hereby granted an option (the
"OPTION"), pursuant to a resolution of the Board of Directors of the Company
adopted on March 22, 2000.
The Option entitles you to purchase up to 600,000 shares of Common
Stock(the "STOCK") of the Company at a price of $5.00 per share, which was in
excess of the sales price of the Stock as reported on the NASDAQ SmallCap Market
as of the time of the approval of the grant of this Option and as of the close
of business on the date immediately prior to the date of the grant of this
Option.
Your Option is in all respects limited and conditioned by the following
terms and conditions:
1. DEFINITIONS. In addition to definitions that may be contained elsewhere
herein, for purposed of this Agreement and the Option, the following
terms, when capitalized, shall have the following meanings:
(a) "AGREEMENT" means this written agreement evidencing the Option
granted hereunder which is signed by both the Company and
Optionee.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(d) "DISABILITY" means disability as defined in Section 22(e)(3) of
the Code.
(e) "FAIR MARKET VALUE" means, as of any given date, unless
otherwise determined by the Board in good faith, the closing
sales price of the Stock for that date as reported on the NASDAQ
SmallCap Market.
2. OPTION TERMS. You will be entitled to purchase up to 120,000 shares of
Stock on March 22, 2001, and an additional 120,000 shares on each of
March 22, 2002, March 22, 2003, March 22, 2004 and March 22, 2005, so
long as you are still serving as Chief Executive Officer of the Company
on such date. If you cease serving as Chief Executive Officer of the
Company, any nonvested portion of the Option is terminated immediately,
and any
Page 19 of 23 Pages
<PAGE>
vested portion is exercisable for thirty (30) days following the last
day on which you served as Chief Executive Officer of the Company or
until the expiration of the Option, whichever period is shorter.
3. TERM. This Option expires in its entirety on March 22, 2006. Subject to
the vesting schedule set forth in Section 2 hereof, the Option may be
exercised in whole or in part at any time during the term of the Option.
4. EXERCISE. The Option may be exercised by delivery of the attached Notice
of Exercise to the Company. The exercise price may be paid in cash, by
certified check, or by transfer to the Company of shares of Stock having
a Fair Market Value, as of the date of exercise, not less than the
purchase price of the Stock being acquired pursuant to your Option, or
any combination thereof. The Company's obligation to deliver shares upon
the exercise of the Option will be subject to applicable federal, state,
and local tax withholding requirements. Unless otherwise determined by
the Board, withholding obligations may be settled with Stock, including
Stock received as part of the exercise giving rise to the withholding
requirement.
5. DEATH. If Optionee's service to the Company as Chief Executive Officer
of the Company terminates by reason of death, the Option held by
Optionee may thereafter by exercised by the legal representative of
Optionee's estate or by any person who acquires the Option by will or
the laws of descent and distribution for a period of one year from the
date of such death or until the expiration of the stated term of the
Option, whichever period is shorter. The Option shall be exercisable
only to the extent that the Option was exercisable as of the date of
death.
6. DISABILITY. If Optionee's service to the Company as Chief Executive
Officer of the Company terminates by reason of Disability, Optionee may
exercise such portion of the Option as was exercisable at the date of
termination for a period of one year from the date of termination or
until the expiration of the stated term of the Option, whichever period
is shorter. The Option shall be exercisable only to the extent that the
Option was exercisable as of the date of termination.
7. NONTRANSFERABILITY. The Option is transferable only by will or the laws
of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act ("ERISA"), or the rules thereunder.
Except as permitted by the preceding sentence, neither the Option nor
any of the rights and privileges thereby conferred may be transferred,
assigned, pledged, or hypothecated in any way (whether by operation of
law or otherwise), and no such option, right, or privilege will be
subject to execution, attachment, or similar process. The Option may be
exercised during Optionee's lifetime only by Optionee or his or her
guardian or legal representative.
8. INVESTMENT INTENT. Unless a registration statement under the Securities
Act of 1933 (and applicable state securities laws) is in effect with
respect to Stock to be purchased pursuant
Page 20 of 23 Pages
<PAGE>
to this Option, you agree with, and represent to, the Company that you
are acquiring the Option and Stock for the purpose of investment and
with no present intention to transfer, sell, or otherwise dispose of the
Stock. In the absence of such registration, no shares of Stock acquired
pursuant to the exercise, in whole or in part, of the Option may be
transferred unless, in the opinion of counsel to the Company, such
transfer is in compliance with applicable securities laws, and each
certificate representing any shares of Stock issued to Optionee
hereunder will have endorsed thereon an appropriate legend referring to
the restrictions against transfer. Prior to the transfer of any Stock to
you, the Company may require an opinion of counsel satisfactory to it
that at all times the Company will be in compliance with applicable
federal and state securities laws.
9. ADJUSTMENT IN CAPITALIZATION. In the event of any merger,
reorganization, consolidation, recapitalization, Stock dividend, Stock
split, or other change in corporate structure affecting the Stock, such
substitution or adjustment will be made in the number and option price
of shares purchasable hereunder, in the aggregate number of shares
reserved for issuance with respect to the Option, and in the number and
option price of shares subject to any outstanding portion of the Option
as may be determined to be appropriate by the Board to prevent dilution
or enlargement of Option rights granted hereunder, provided that the
number of shares subject to the Option will always be a whole number.
10. NONQUALIFIED OPTION. This Option is not intended to be an "incentive
stock option" as defined in the Code and is granted outside any stock
option plan adopted by the Company.
11. NONEXCLUSIVITY. The granting of the Option will not be construed as
limiting the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including the granting of other
stock options. Such arrangements may be either generally applicable or
applicable only in specific cases.
12. GOVERNING LAW. The Option and this Agreement will be governed by and
construed in accordance with the laws of the State of Minnesota without
regard to conflicts of laws principles, and all terms will be
interpreted and construed so that there will not be committed any
violation of applicable state or federal securities laws.
13. NO RIGHT TO SERVE. The granting of the Option does not grant Optionee
any right of service as a director, and the Company retains the right to
terminate service of Optionee as its Chief Executive Officer, or
otherwise, pursuant to the Company's Articles of Incorporation, Bylaws
and applicable law.
Page 21 of 23 Pages
<PAGE>
IN WITNESS WHEREOF, Company and Optionee have each executed this
Agreement effective as of the date first above written.
COMPANY OPTIONEE:
GROW BIZ INTERNATIONAL, INC.
/s/ Ronald G. Olson /s/ John L. Morgan
- ---------------------------------- ----------------------------------
By: Ronald G. Olson John L. Morgan
Its: Vice Chairman
Page 22 of 23 Pages
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE OF STOCK OPTION
AND RECORD OF STOCK TRANSFER
TO: Grow Biz International, Inc.
4200 Dahlberg Drive
Golden Valley, MN 55422-4837
I hereby exercise my stock option granted by Grow Biz International,
Inc. ("COMPANY"), effective March 22, 2000, subject to all terms and provisions
thereof and notify you of my desire to purchase _________ shares of Common Stock
of the Company ("SHARES"), offered to me pursuant to said Option. Enclosed is a
certified check in the sum of $___________ or payment in such other form as the
Company has specified.
[THIS SECTION IS APPLICABLE IF THE SHARES ARE NOT REGISTERED UNDER THE
SECURITIES ACT OF 1933.] I hereby represent that the Shares are being acquired
by me as an investment and not with a view to, or for resale in connection with,
the distribution of any shares of the Company. I understand that the Shares are
not registered under the Securities Act of 1933, as amended ("ACT"), or
applicable state securities laws, that the Shares may not be sold or otherwise
transferred except pursuant to an effective registration statement under the Act
and said laws, unless the Company has received an option of counsel satisfactory
to it that such transfer or disposition does not require registration under the
Act or said laws and, for any sales under Rule 144 of the Act, such evidence as
it shall request for compliance with that rule or applicable state securities
laws. I further understand that the certificate representing the Shares will
contain a legend referring to such restrictions.
I acknowledge that I am responsible for payment of any taxes for which I
may become liable as a result of the exercise of this Option.
,
- ---------------------------------- ----------------------------------
John L. Morgan
RECEIPT is hereby acknowledged of the delivery to me by Grow Biz
International, Inc. on ________________________, ____ of stock certificate no.
___________ for ___________ shares of Common Stock purchased by me pursuant to
the terms and conditions of the option agreement referred to above.
----------------------------------
John L. Morgan
Page 23 of 23 Pages
