**Exhibit 10.2**

 

**[BREW BUDDIES, LLC]**

 

**SUBSCRIPTION AGREEMENT**

**AND**

**LETTER OF INVESTMENT INTENT**

FoundersFood & Firkins Ltd.

5831Cedar Lake Road

St.Louis Park, MN  55416

 

Gentlemen:

 

THIS AGREEMENT, madeeffective this 30th day of September, 2002, between Founders Food& Firkins Ltd., a Minnesota corporation (the “Company”), and Brew Buddies,L.L.C., a South Dakota limited liability company.

 

1.                                       The Company agrees to sell to theundersigned, and the undersigned agrees to purchase from the Company, 20,500shares of Series A Convertible Preferred Stock (the “Preferred”) and warrantsto purchase common stock (the “Warrants”) at a purchase price equal to $100.00per Preferred share (the “Firm Securities”). The Preferred and the Warrants are collectively referred to herein asthe “Securities.”  The conversion priceof the Preferred and the exercise price of the Warrants will be the priceestablished at the initial closing of the sale of the Securities, which will bethe lower of (a) 90% of the average closing price of the common stock on Nasdaqfor the ten trading days preceding the closing date, or (b) $1.58.  The undersigned acknowledges that thissubscription is contingent upon acceptance in whole or in part by the Company.

 

2.                                       On or before October 1, 2002, the undersignedwill (a) deliver to Highland Bank as escrow agent for the Company cash or acheck in the amount of $683,400 in payment of 6,834 shares of Preferred and (b)deliver to the Company a promissory note bearing interest at the rate of 8% perannum (but not to exceed the legal rate of interest which may be charged to theundersigned, in the amount of $1,366,600 in payment of 13,666 shares ofPreferred, payable in two installments of $683,300 each, plus accrued interest,due on December 20, 2002 and March 20, 2003, respectively.  All payments shall be payable by wiretransfer to “Highland Bank – Founders Food Escrow Account” and the promissorynote shall be payable to the Company. At the initial closing, the Company will issue the Firm Securities.  Of the Firm Securities, the Company willdeliver 6,834 shares of Preferred (and 216,265 Warrants) to the undersigned andretain 13,666 shares of Preferred (and 432,468 Warrants) in itspossession.  It is agreed and understoodthat the Company will have and retain a security interest in the FirmSecurities until the full purchase price of the Firm Securities has been paidby cash or check.  Upon payment in fullby cash or check for the Firm Securities, the Company will deliver suchsecurities to the undersigned and the Company will return the promissory noteto the undersigned.

 

3.                                       The undersigned acknowledges and representsas follows:

 

 

(a)                                  That it has received and carefully reviewedthe Confidential Private Placement Memorandum of the Company dated February 25,2002 (the “Memorandum”), as amended July 29, 2002, and as amended August 16,2002, and all documents delivered therewith;

 

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(b)                                 That the undersigned is able to bear theeconomic risk of the investment in the Securities;

 

(c)                                  That the undersigned believes that it hasknowledge and experience in financial and business matters, that it is capableof evaluating the merits and risks of the prospective investment in theSecurities and that it is able to bear such risks;

 

(d)                                 That it understands an investment in theSecurities is highly speculative but believes that the investment is suitablefor it based upon its investment objectives and financial needs, and hasadequate means for providing for its current financial needs and personalcontingencies and has no need for liquidity of investment with respect to theSecurities;

 

(e)                                  That the undersigned has been given access tofull and complete information regarding the Company (including the opportunityto meet with Company officers and review such documents as it may haverequested in writing) and has utilized such access to its satisfaction for thepurpose of obtaining information in addition to, or verifying informationincluded in, the Memorandum;

 

(f)                                    That the undersigned recognizes that theSecurities, as an investment, involve a high degree of risk, including, but notlimited to, the risks described in the “Cautionary Statement” which is part of“Management’s Discussion and Analysis or Plan of Operation” in the Company’sForm 10-KSB included within the Memorandum; and

 

(g)                                 That the undersigned realizes that (i) thepurchase of the Securities is a long–term investment; (ii) the purchasersof the Securities must bear the economic risk of investment for an indefiniteperiod of time because the Securities have not been registered under theSecurities Act of 1933, as amended (the “Act”) and, therefore, cannot be soldunless they are subsequently registered under the Act or an exemption from suchregistration is available; and (iii) the transferability of the Securities isrestricted, and (A) requires the written consent of the Company, (B) requiresconformity with the restrictions contained in paragraphs 4 and 5 below, and (C)will be further restricted by a legend placed on the certificate(s)representing the Securities stating that the Securities have not beenregistered under the Act and referring to the restrictions on transferabilityof the Securities, and by stop transfer orders or notations on the Company’srecords referring to the restrictions on transferability.

 

4.                                       The undersigned has been advised that theSecurities are not being registered under the Act or relevant state securitieslaws pursuant to exemptions from the Act and such laws, and that the Company’sreliance upon such exemptions is predicated in part on the undersigned’srepresentations to the Company as contained herein.  The undersigned represents and warrants that the Securities arebeing purchased for its own account and for investment and without the intentionof reselling or redistributing the same, that it has made no agreement withothers regarding any of such Securities and that its financial condition issuch that it is not likely that it will be necessary to dispose of any of suchSecurities in the foreseeable future. The undersigned is aware that, in the view of the Securities andExchange Commission and applicable state bodies that administer statesecurities laws, a purchase of Securities with an intent to resell by reason ofany foreseeable specific contingency or anticipated change in market value, orany change in the condition of the Company or its business, or in connectionwith a contemplated liquidation or settlement of any loan obtained for theacquisition of the Securities and for which the Securities were pledged assecurity, would represent an intent inconsistent with the representations setforth above.  The

 

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undersignedfurther represents and agrees that if, contrary to its foregoing intentions, itshould later desire to dispose of or transfer any of such Securities in anymanner, it shall not do so without first obtaining (a) the opinion of counseldesignated by the Company that such proposed disposition or transfer lawfullymay be made without the registration of such Securities for such purposepursuant to the Act, as then in effect, and applicable state securities laws,or (b) such registrations (it being expressly understood that the Company shallnot have any obligation to register the shares for such purpose).  The undersigned agrees that the Company mayplace a restrictive legend on the certificate(s) representing the Securities,containing substantially the following language:

 

Thesecurities represented by this Certificate were issued without registrationunder the Securities Act of 1933, as amended (the “Act”), and withoutregistration under state securities laws, in reliance upon exemptions containedin the Act and such laws.  No transferof these securities or any interest therein may be made except pursuant to effectiveregistration statements under said laws unless this Corporation has received anopinion of counsel satisfactory to it that such transfer or disposition doesnot require registration under said laws and, for any sales under Rule 144 ofthe Act, such evidence as it shall request for compliance with that rule.

 

Theundersigned agrees and consents that the Company may place a stop transferorder on the Certificate(s) representing the Securities to assure theundersigned’s compliance with this Agreement and the matters referenced above.

 

Theundersigned agrees to save and hold harmless, defend and indemnify the Companyand its directors, officers and agents from any claims, liabilities, damages,losses, expenses or penalties arising out of any misrepresentation ofinformation furnished by the undersigned to the Company in this SubscriptionAgreement.

 

5.                                       The Subscriber understands that the Companyat a future date may file a registration or offering statement with theSecurities and Exchange Commission to facilitate a public offering of itssecurities.  The Subscriber agrees, forthe benefit of the Company, that should such a public offering be made andshould the managing underwriter of such offering require, the undersigned willnot, without the prior written consent of the Company and such underwriter,during the Lock Up Period as defined herein: (i) sell, transfer or otherwisedispose of, or agree to sell, transfer or otherwise dispose of any of theSecurities beneficially held by the undersigned during the Lock Up Period; (ii)sell, transfer or otherwise dispose of, or agree to sell, transfer or otherwisedispose of any options, rights or warrants to purchase any of the sharesbeneficially held by the undersigned during the Lock Up Period; or (iii) sellor grant, or agree to sell or grant, options, rights or warrants with respectto any of the Securities.  The foregoingdoes not prohibit gifts to donees or transfers by will or the laws of descentto heirs or beneficiaries provided that such donees, heirs and beneficiariesshall be bound by the restrictions set forth herein.  The term “Lock Up Period” shall mean the lesser of (x) 180 daysor (y) the period during which Company officers and directors are restricted bythe managing underwriter from effecting any sales or transfers of the Company’scommon stock.  The Lock Up Period shallcommence on the effective date of the applicable registration statement.

 

6.                                       The undersigned represents and warrants thatthe undersigned is a bona fide resident of, and is domiciled in, the statelisted in the Recital to this Agreement and that the Securities are beingpurchased solely for the beneficial interest of the undersigned and not asnominee, for, or on behalf of, or for the beneficial interest of, or with theintention to transfer to, any other person, trust or organization, except asspecifically set forth in paragraph 11 of this Agreement.

 

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PARAGRAPH7 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE ACT AND STATE LAWSBEING RELIED ON BY THE COMPANY WITH RESPECT TO THE OFFER AND SALE OF THESECURITIES.  ALL OF SUCH INFORMATIONWILL BE KEPT CONFIDENTIAL AND WILL BE REVIEWED ONLY BY THE COMPANY AND ITSCOUNSEL.  The undersigned agrees tofurnish any additional information which the Company deems necessary in orderto verify the responses set forth below.

 

7.                                       Accredited Status.  Theundersigned represents and warrants as follows (CHECK IF APPLICABLE):

 
| o      |   | A.     |   | The  undersigned is an individual with a net worth, or a joint net worth together  with its spouse, in excess of $1,000,000.   (In calculating net worth, you may include equity in personal property  and real estate, including your principal residence, cash, short-term investments,  stock and securities.  Equity in personal  property and real estate should be based on the fair market value of such  property minus debt secured by such property.) |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| o      |   | B.     |   | The  undersigned is an individual with income in excess of $200,000 in each of the  prior two years and reasonably expects an income in excess of $200,000 in the  current year.                                                                                                                                                                                                                                                                                          |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| o      |   | C.     |   | The  undersigned is an individual who, with its spouse, had joint income in excess  of $300,000 in each of the prior two years and reasonably expects joint  income in excess of $300,000 in the current year.                                                                                                                                                                                                                                                            |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| o      |   | D.     |   | The  undersigned is a director or executive officer of Founders Food & Firkins  Ltd.                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| ý |   | E.     |   | The  undersigned, if other than an individual, is an entity all of whose equity  owners meet one of the tests set forth in (A) through (D) above.                                                                                                                                                                                                                                                                                                                         |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| o      |   | F.     |   | The  undersigned is an entity, and is an “Accredited Investor” as defined in Rule  501(a) of Regulation D under the Act.   This representation is based on the following (check one or more, as  applicable):                                                                                                                                                                                                                                              |

 
|   |   |   |   | o      | 1.     | The  undersigned (or, in the case of a trust, the undersigned trustee) is a bank  or savings and loan association as defined in Sections 3(a)(2) and  3(a)(5)(A), respectively, of the Act acting either in its individual or  fiduciary capacity. |
|--------|--------|--------|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |   |   |                                                                                                                                                                                                                                               |
|   |   |   |   | o      | 2.     | The  undersigned is an insurance company as defined in section 2(13) of the Act.                                                                                                                                                                   |
|   |   |   |   |   |   |                                                                                                                                                                                                                                               |
|   |   |   |   | o      | 3.     | The  undersigned is an investment company registered under the Investment Company  Act of 1940 or a business development company as defined in Section 2(a)(48)  of that act.                                                                      |
|   |   |   |   |   |   |                                                                                                                                                                                                                                               |
|   |   |   |   | o      | 4.     | The  undersigned is a Small Business Investment Company licensed by the United  State s Small Business Administration under Section 301(c) or (d) of the  Small Business Investment Act of 1958.                                                   |

 

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|   |   |   |   | o      | 5.     | The  undersigned is an employee benefit plan within the meaning of Title I of the  Employee Retirement Income Security Act of 1974 (“ERISA”) and either (check  one or more, as applicable):                                                                                                                                                                                                                                                                                                                                     |
|--------|--------|--------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |   |   |   | o      | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | the  investment decision is made by a plan fiduciary, as defined in Section 3(21)  of ERISA, which is either a bank, savings and loan association, insurance  company, or registered investment advisor; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |   |   |   | o      | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | the  employee benefit plan has total assets in excess of $5,000,000; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |   |   |   | o      | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | the  plan is a self-directed plan with investment decisions made solely by persons  who are “Accredited Investors” as defined under the Act. |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |   |   | o      | 6.     | The  undersigned is a private business development company as defined in Section  202(a)(22) of the Investment Advisors Act of 1940.                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |   |   | o      | 7.     | The  undersigned has total assets in excess of $5,000,000, was not formed for the  specific purpose of acquiring securities of the Company and is one or  more of the following (check one or more, as appropriate):                                                                                                                                                                                                                                                                                                                       |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |   |   |   | o      | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | an  organization described in Section 501(c)(3) of the Internal Revenue Code; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |   |   |   | o      | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | a  corporation; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |   |   |   | o      | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | a  Massachusetts or similar business trust; or |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |   |   |   | o      | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | a  partnership. |
|   |   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |   |   | o      | 8.     | The  undersigned is a trust with total assets exceeding $5,000,000 which was not  formed for the specific purpose of acquiring securities of the Company and  whose purchase is directed by a person who has such knowledge and experience  in financial and business matters that it is capable of evaluating the merits  and risks of the investment in the shares.   (IF ONLY THIS RESPONSE IS CHECKED, please contact the Company to  receive and complete an information statement before this subscription can be  considered). |
|        |        |        |        |        |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  |  |

 

8.             Registration Rights.

 

(a)                                  Definitions. As used in this paragraph 8, the following terms shall have thefollowing meanings:

 

“Advice”has the meaning set forth in paragraph 8(c).

 

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“Affiliate”means, with respect to any specified person, any other person who, directly orindirectly, controls, is controlled by, or is under common control with suchspecified person.

 

“ExchangeAct” means the Securities Exchange Act of 1934, as amended from time totime, or any successor statute, and the rules and regulations of the Securitiesand Exchange Commission promulgated thereunder.

 

“Holder”means the undersigned.

 

“Prospectus”means the prospectus included in any Registration Statement (including withoutlimitation, a prospectus that discloses information previously omitted from aprospectus filed as part of an effective Registration Statement in relianceupon Rule 430A promulgated under the Act), as amended or supplemented by anyprospectus supplement, and by all other amendments and supplements to theprospectus, including post–effective amendments, and in each caseincluding all material incorporated by reference or deemed to be incorporatedby reference in such prospectus.

 

“RegistrableSecurities” means the shares of common stock issuable upon exercise orconversion of the Securities and any shares of common stock issued as paymentin lieu of cash dividends on the Series A Convertible Preferred Stock; provided,however, that such securities shall cease to be Registrable Securitieswhen (i) a Registration Statement covering the Registrable Securities has beendeclared effective and such Registrable Securities have been disposed ofpursuant to such effective Registration Statement, or (ii) the RegistrableSecurities become eligible for sale pursuant to Rule 144 (or any similar rulethen in force) under the Act, or (iii) the Securities cease to be outstanding.

 

“RegistrationStatement” means any registration statement of the Company that covers anyof the Registrable Securities pursuant to the provisions of this Agreement andall amendments and supplements to any such registration statement, includingpost–effective amendments, in each case including the Prospectus, allexhibits, and all material incorporated by reference or deemed to beincorporated by reference in such registration statement.

 

“SuspensionNotice” has the meaning set forth in paragraph 8(c).

 

(b)                               Resale Registration.  The rightsdescribed in this paragraph 8(b) will be available to holders of RegistrableSecurities until the second anniversary of the expiration of the warrants topurchase common stock issued with the Series A Convertible Preferred Stock.

 

(i)                                     Demand Registration.  If holders of at least one-third of theRegistrable Securities request that the Company file a registration statementhaving an aggregate offering price to the public of not less than $1.0 million,the Company will use its best efforts to cause such common stock to beregistered; provided, however, that the Company will not be obligated to effectmore than two such registrations, and will not be obligated to effect more thanone such registration during any 12-month period.  If registration is demanded under any subsection of paragraph8(b), the Company may elect to register all of the Registrable Securities.  The number of demand registrations availableunder this paragraph 8(b)(i) will be reduced by the number of Form S-3registrations demanded under paragraph 8(b)(iii).

 

(ii)                                  Incidental Registration.  If the Company proposes to register underthe Act (except by a Form S-4 or Form S-8 Registration Statement or anysuccessor forms thereto) or qualify for a public distribution underSection 3(b) of the Act, any of its equity securities or debt with equityfeatures, it will give written notice to all Holders of

 

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RegistrableSecurities of its intention to do so and, on the written request of any suchHolder given within twenty (20) days after receipt of any such notice (whichwritten request shall specify the interest in the Registrable Securitiesintended to be sold or disposed of by such Holder and describe the nature ofany proposed sale or other disposition thereof), the Company will use its bestefforts to cause all such Registrable Securities, the Holders of which shallhave requested the registration or qualification thereof, to be included insuch Registration Statement proposed to be filed by the Company; provided,however, that if a greater number of Registrable Securities is offered forparticipation in the proposed offering than in the reasonable opinion of themanaging underwriter of the proposed offering can be accommodated withoutadversely affecting the proposed offering, then the amount of RegistrableSecurities proposed to be offered by such Holders for registration, as well asthe number of securities of any other selling shareholders participating in theregistration, shall be proportionately reduced to a number deemed satisfactoryby the managing underwriter.

 

(iii)                               S-3 Registration.  Holders ofRegistrable Securities are entitled to demand up to three registrations on FormS-3 (if available to the Company) so long as each such offering is in an amountof at least $500,000 (based upon the closing bid price of the common stock onthe trading day before the demand is made). The Company will not be obligated to file more than one Form S-3 in anysix-month period.

 

(c)                                  Registration Procedures.  In connection with the obligations of theCompany to effect or cause the registration of any Registrable Securitiespursuant to the terms and conditions of this Agreement, the Company shall usereasonable efforts to effect the registration and sale of such RegistrableSecurities in accordance with the intended method of distribution thereof, andin connection therewith:

 

(i)                                     The Company shall prepare and file with theSecurities and Exchange Commission a Registration Statement on Form S-3 orother similar form under the Act which permits secondary sales of securities ina “shelf registration,” and use reasonable efforts to cause such RegistrationStatement to become effective and remain effective in accordance with theprovisions of this Agreement;

 

(ii)                                  The Company shall promptly prepare and filewith the Securities and Exchange Commission such amendments and post-effectiveamendments to each Registration Statement as may be necessary to keep suchRegistration Statement effective and shall timely file with the Securities andExchange Commission all required filings under the Exchange Act as arenecessary to keep the Registration Statement effective for as long as suchregistration is required to remain effective pursuant to the terms hereof;shall cause the Prospectus to be supplemented by any required Prospectussupplement, and, as so supplemented, to be filed pursuant to Rule 424 under theAct; and shall comply with the provisions of the Act applicable to it withrespect to the disposition of all Registrable Securities covered by suchRegistration Statement during the applicable period in accordance with theintended methods of disposition by Holder set forth in such RegistrationStatement or supplement to the Prospectus;

 

(iii)                               The Company shall promptly furnish to Holder such number of copies of theProspectus (including each preliminary Prospectus) and any amendments orsupplements thereto, as Holder may reasonably request in order to facilitatethe public sale or other disposition of the Registrable Securities being soldby Holder;

 

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(iv)                              The Company shall promptly notify Holder, (A) when a Prospectus or anyProspectus supplement or post–effective amendment has been filed and,with respect to a Registration Statement or any post–effective amendment,when the same has become effective, (B) of any request by the Securities andExchange Commission or any state securities authority for amendments andsupplements to a Registration Statement and Prospectus or for additionalinformation after the Registration Statement has become effective, (C) of theissuance by the Securities and Exchange Commission of any stop order suspendingthe effectiveness of a Registration Statement, (D) of the issuance by any statesecurities commission or other regulatory authority of any order suspending thequalification or exemption from qualification of any of the RegistrableSecurities under state securities or “blue sky” laws, and (E) of the happeningof any event which makes any statement made in a Registration Statement orrelated Prospectus untrue or which requires the making of any changes in suchRegistration Statement or Prospectus so that they will not contain any untruestatement of a material fact or omit to state any material fact required to bestated therein or necessary to make the statements therein, in light of thecircumstances under which they were made, not misleading.  As soon as practicable following expirationof the Suspension Period (as defined below), the Company shall prepare and filewith the Securities and Exchange Commission and furnish a supplement oramendment to such Prospectus so that, as thereafter deliverable to thepurchasers of such Registrable Securities, such Prospectus will not contain anyuntrue statement of a material fact or omit to state a material fact necessaryto make the statements therein, in light of the circumstances under which theywere made, not misleading.

 

Uponreceipt of any notice (a “Suspension Notice”) by Holder from the Company of thehappening of any event of the kind described in paragraph 8(c)(iv), Holdershall forthwith discontinue disposition of the Registrable Securities pursuantto the Registration Statement covering such Registrable Securities until suchHolder’s receipt of the copies of the supplemented or amended Prospectuscontemplated by paragraph 8(c)(iv) or until Holder is advised in writing (the“Advice”) by the Company that the use of the Prospectus may be resumed, and hasreceived copies of any additional or supplemental filings which areincorporated by reference in the Prospectus, and, if so directed by theCompany, will, or will request any broker–dealer acting as Holder’s agentto, deliver to the Company (at the Company’s expense) all copies, other thanpermanent file copies then in Holder’s or broker–dealer’s possession, ofthe Prospectus covering such Registrable Securities current at the time ofreceipt of such notice; provided, however, that in no event shallthe period from the date on which Holder receives a Suspension Notice to thedate on which Holder receives either the Advice or copies of the supplementedor amended Prospectus contemplated by paragraph 8(c)(iv) (the “SuspensionPeriod”) exceed 90 days.

 

(d)                                 Registration Expenses.  The Company shall bear all expenses incurredin connection with the registration of Registrable Securities pursuant toparagraph 8(b).  Such expenses shallinclude, without limitation, all printing, legal and accounting expensesincurred by the Company and all registration and filing fees imposed by theSecurities and Exchange Commission, any state securities commission or TheNasdaq Stock Market.  Each Holder shallbe responsible for any underwriting discounts, brokerage fees or commissionsand taxes of any kind (including, without limitation, transfer taxes) with respectto any disposition, sale or transfer of Registrable Securities and for anylegal, accounting and other expenses incurred by such Holder.

 

(e)                                  Indemnification and Contribution.

 

 

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(i)                                     Indemnification by the Company.  The Company agrees to indemnity and holdharmless, to the full extent permitted by law, each Holder from and against alllosses, claims, damages, liabilities and expenses (including without limitationreasonable legal fees and expenses incurred by Holder (collectively, the“Damages”) to which Holder may become subject under the Act or otherwise,insofar as such Damages (or proceedings in respect thereat) arise out of or arebased upon any untrue statement of material fact contained in any RegistrationStatement (or any amendment thereto) pursuant to which Registrable Securitieswere registered under the Act, or caused by any omission to state therein amaterial fact necessary to make the statements therein in light of thecircumstances under which they were made not misleading, or caused by anyuntrue statement of a material fact contained in any Prospectus (as amended orsupplemented if the Company shall have furnished any amendments or supplementsthereto), or caused by any omission to state therein a material fact necessaryto make the statements therein in light of the circumstances under which theywere made not misleading, except insofar as such Damages arise out of or arebased upon any such untrue statement or omission based upon informationrelating to Holder furnished in writing to the Company by Holder specificallyfor use therein; provided, however, that the Company shall not beliable to Holder under this paragraph 8(e)(i) to the extent that any suchDamages were caused by the fact that Holder sold securities to a person as towhom it shall be established that there was not sent or given, at or prior tothe written confirmation of such sale, a copy of the Prospectus as then amendedor supplemented if, but only if, (A) the Company has previously furnishedcopies of such amended or supplemented Prospectus to Holder and (B) suchDamages were caused by any untrue statement or omission contained in theProspectus so delivered which was corrected in such amended or supplementedProspectus.

 

(ii)                                  Indemnification by the Holder.  Holder agrees to indemnify and hold harmlessthe Company, its stockholders, directors, officers and each person, if any, whocontrols  the Company within the meaningof either Section 15 of the Act or Section 20 of the Exchange Act to the sameextent as the foregoing indemnity from the Company to Holder, but only withreference to information relating to Holder furnished in writing to the Companyby Holder specifically for use in any Registration Statement (or any amendmentthereto) or any Prospectus (or any amendment or supplement thereto); provided,however, that Holder shall not be obligated to provide such indemnity tothe extent that such Damages result from the failure of the Company to promptlyamend or take action to correct or supplement any such Registration Statementor Prospectus on the basis of corrected or supplemental information provided byHolder to the Company expressly for such purpose.  In no event shall the liability of Holder hereunder be greater inamount than the amount of the proceeds received by Holder upon the sale of theRegistrable Securities giving rise to such indemnification obligation.

 

(iii)                               Contribution.  To the extentthat the indemnification provided for in paragraph 8(e)(i) or paragraph8(e)(ii) is unavailable to an indemnified party or insufficient in respect ofany Damages, then each indemnifying party under such paragraph, in lieu ofindemnifying such indemnified party thereunder, shall contribute to the amountpaid or payable by such indemnified party as a result of such Damages in suchproportion as is appropriate to reflect the relative fault of the Company onthe one hand and Holder on the other hand in connection with the statements oromissions that resulted in such Damages, as well as any other relevantequitable considerations.  The relativefault of the Company on the one hand and of Holder on the other hand shall bedetermined by reference to, among other things, whether the untrue statement ofa

 

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materialfact or the omission to state a material fact relates to information suppliedby the Company or by Holder and the parties’ relative intent, knowledge, accessto information and opportunity to correct or prevent such statement oromission.

 

Ifindemnification is available under subsection (i) or (ii) of this paragraph8(e), the indemnifying parties shall indemnify each indemnified party to thefull extent provided in such paragraphs without regard to the relative fault ofsaid indemnifying party or indemnified party or any other equitableconsideration provided for in this paragraph 8(e)(iii).  The Company and Holder agree that it wouldnot be just or equitable if contribution pursuant to this paragraph 8(e)(iii)were determined by pro rata allocation or by any other method of allocationthat does not take account of the equitable considerations referred to herein.

 

9.                                       NASD Affiliation.  Theundersigned is affiliated or associated, directly or indirectly, with aNational Association of Securities Dealers, Inc. (“NASD”) member firm orperson.

 

Yes  o                                   No  ý

 

Ifyes, list the affiliated member firm orperson:                                                                    

 

 

Yourrelationship to such member firm or person:                                                                    

 

10.                                 Entities.  If the undersigned is anentity, the individual signing on behalf of such entity and the entity jointlyand severally agree and certify that:

 

A.                                   The undersigned was not organized for thespecific purpose of acquiring securities of the Company; and

 

B.                                     This Agreement has been duly authorized byall necessary action on the part of the undersigned, has been duly executed byan authorized officer or representative of the undersigned, and is a legal,valid and binding obligation of the undersigned enforceable in accordance withits terms.

 

11.                                 Covenant.

 

Inconsideration of the investment by the undersigned, Brew Buddies, LLC or itsdesignee, Bluestem Capital Partners III Limited Partnership, may designate onenominee to the Company’s board of directors. Brewing Ventures LLC, the principal shareholder of the Company, shallexecute and deliver a voting agreement which shall provide that BrewingVentures LLC will vote its shares in favor of the election of such nominee.

 

12.                                 Miscellaneous.

 

A.       Manner in which title is to be held: (check one)

 

o            IndividualOwnership

o            JointTenants with Right of Survivorship*

o            Partnership*

o            Tenantsin Common*

o            Corporation

o            Trust

ý            Other  limited liability company (describe)

 

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B.                                     The undersigned agrees that the undersignedunderstands the meaning and legal consequences of the agreements,representations and warranties contained herein, agrees that such agreements,representations and warranties shall survive and remain in full force andeffect after the execution hereof and payment for the shares, and furtheragrees to indemnify and hold harmless the Company, each current and futureofficer, director, employee, agent and shareholder from and against any and allloss, damage or liability due to, or arising out of, a breach of any agreement,representation or warranty of the undersigned contained herein.  The undersigned acknowledges that theundersigned has retained his, her or its own independent legal counsel to theextent that the undersigned determined it to be necessary or helpful.  The undersigned further acknowledges thatthe undersigned was not represented by counsel for Aethlon Capital, LLC.

 

C.                                     This Agreement shall be construed andinterpreted in accordance with Minnesota law without regard to conflict of lawprovisions.

 

D.                                    The agreements and covenants of the partieshereto shall survive the delivery of the Securities and be binding upon the partiesand their respective successors, personal representatives and assigns.

 

E.                                      The undersigned agrees to furnish to theCompany or the Agent, if applicable, upon request, such additional informationas may be deemed necessary to determine the undersigned’s suitability as aninvestor.

 

F.                                      This Agreement supersedes all previousSubscription Agreements by the undersigned and all previous SubscriptionAgreements are hereby withdrawn.

 

[NOTE: SIGNATURE PAGES TO FOLLOW]

 

----

*Multiplesignatures required.

 

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**SIGNATURE PAGE**

 
| Dated: September 30, 2002.                     |                                           |
|------------------------------------------------|------------------------------------------------|
|                                           |                                           |
| BREW  BUDDIES, L.L.C.                          |                                           |
|                                           |                                           |
|                                           |                                           |
| By                                             | /s/  Donald A. Dunham, Jr.                     |   |   |   |
|                                           | Donald  A. Dunham, Jr.                         | Signature |
|                                           | Authorized  Member of Brew Buddies, L.L.C.     |   |
|                                           |                                           |
|                                           |                                           |
| DONALD  A. DUNHAM, JR.                         |                                           |   |   |
| Name  Typed or Printed                         | Name  Typed or Printed                         |
|                                           |                                           |
|                                           |                                           |
| 5222  SOUTH SWEETBRIAR                         |                                           |   |   |
| Residence  Address                             | Residence  Address                             |
|                                           |                                           |
|                                           |                                           |
| SIOUX  FALLS, SD 57108                         |                                           |   |   |
| City,  State and Zip Code                      | City,  State and Zip Code                      |
|                                           |                                           |
|                                           |                                           |
| 230  SOUTH PHILLIPS AVE #202                   |                                           |   |   |
| Mailing  Address                               | Mailing  Address                               |
|                                           |                                           |
|                                           |                                           |
| SIOUX  FALLS, SD 57104                         |                                           |   |   |
| City,  State and Zip Code                      | City,  State and Zip Code                      |
|                                           |                                           |
|                                           |                                           |
| ###-##-####                                    |                                           |   |   |
| Tax  Identification or Social  Security Number | Tax  Identification or Social  Security Number |
|                                                |                                                |  |  |  |  |  |

 

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CERTIFICATEOF SIGNATORY

 

(To be completed if the Securities are being subscribed by an Entity.)

 

I,Donald A. Dunham, Jr., am an authorized member of Brew Buddies, L.L.C. (the“Entity”).

 

Icertify that I am empowered and duly authorized by the Entity to execute andcarry out the terms of the Subscription Agreement and Letter of InvestmentIntent and to purchase and hold the Securities, and certify further that theSubscription Agreement and Letter of Investment Intent has been duly and validlyexecuted on behalf of the Entity and constitutes a legal and binding obligationof the Entity.

 

**IN WITNESS WHEREOF**, I have set my hand this 30th day of September, 2002.

 

 

 
|   | /s/  Donald A. Dunham, Jr. |   |
|--------|----------------------------|--------|
|   | Donald  A. Dunham, Jr.     |   |
|   |                       |   |
|   | AUTHORIZED MEMBER          |   |
|   | (Title)                    |   |
|   |                       |   |
|   | DONALD A. DUNHAM, JR.      |   |
|   | (Please  Print Name)       |   |

 

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Acceptance by the Company

 

Founders Food & FirkinsLtd.  hereby accepts the foregoingSubscription Agreement to the extent of 20,500 shares of Series A ConvertiblePreferred Stock and warrants to purchase 648,733 shares of common stock.

 
|   | Founders Food &  Firkins Ltd. |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | By                                | /s/ Steven J. Wagenheim |   |
|   |                              | Steven J. Wagenheim |
|   |                              | Chief Executive Officer |
|        |                                   |  |  |  |

 

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