Document:

Exhibit 10.1

SUBSCRIPTION AGREEMENT AND LETTER OF INVESTMENT INTENT

 

Founders

Food & Firkins Ltd.

5831

Cedar Lake Road

St.

Louis Park, MN  55416

 

Gentlemen:

 

THIS

AGREEMENT, made effective as of the 25th day of July, 2002, between

Granite City Food & Brewery Ltd., (formerly known as Founders Food &

Firkins Ltd.), a Minnesota corporation (the “Company”), and Bluestem Capital

Partners III Limited Partnership, a South Dakota limited partnership.

 

1.                        The Company agrees to sell to the undersigned, and the undersigned

agrees to purchase from the Company, 10,000 shares of Series A Convertible

Preferred Stock (the “Preferred”) and warrants to purchase common stock (the

“Warrants”) at a purchase price equal to $100.00 per Preferred share.  The Preferred and the Warrants are

collectively referred to herein as the “Securities.”  The conversion price of the Preferred and the exercise price of

the Warrants will be the price established at the initial closing of the sale

of the Securities, which will be the lower of (a) 90% of the average closing

price of the common stock on Nasdaq for the ten trading days preceding the

closing date, or (b) $1.58.  The

undersigned may, with the written consent of the Company, assign all or any

portion of its subscription rights set forth herein to any accredited investor

who completes, executes and agrees to be bound by this Agreement, and assumes

the obligations of the undersigned hereunder, but such assignment will not

relieve the undersigned Bluestem Capital Partners III Limited Partnership of

the obligation to pay the subscription price if the assignee fails to purchase

the full amount of Securities to be purchased by the undersigned under this

Agreement.  The Company will not

unreasonably withhold its consent to such assignment.  The undersigned acknowledges that this subscription is contingent

upon acceptance in whole or in part by the Company.  Once accepted by the Company, this subscription is irrevocable.

 

2.                        The undersigned will purchase the Securities in three installments on

September 20, 2002, December 20, 2002 and March 20, 2003 (each a

“Purchase Date”).  On or before

September 19, 2002, the undersigned will deliver to Highland Bank, St. Paul,

Minnesota, as escrow agent for the Company, the sum of $333,400 in payment for

3,334 shares of Preferred and the related Warrants.  On or before December 20, 2002, the undersigned shall deliver the

second installment payment to the escrow agent in the amount of $333,300 in

payment for 3,333 shares of the Preferred and the related Warrants; and on or

before March 20, 2003, the undersigned shall deliver the third installment

payment in the amount of $333,300 in payment for the remaining 3,333 shares of

the Preferred and the related Warrants. 

Purchase and delivery of the Securities shall take place at a time and

place specified by the Company on each Purchase Date or such earlier date as

undersigned shall specify in writing to the Company.  Payment for each installment shall be made by check or wire

transfer payable to “Highland Bank – Founders Food Escrow Account,” at least

one business day prior to each Purchase Date.

 

3.                        The undersigned acknowledges and represents as follows:

 

(a)               That it has received and

carefully reviewed the Confidential Private Placement Memorandum of the Company

dated February 25, 2002 (the “Memorandum”), as amended August 16, 2002, and all

documents delivered therewith;

 

(b)               That the undersigned is able to

bear the economic risk of the investment in the Securities;

 

(c)               That the undersigned believes

that it has knowledge and experience in financial and business matters, that it

is capable of evaluating the merits and risks of the prospective investment in

the Securities and that it is able to bear such risks;

 

 

(d)               That it understands an investment

in the Securities is highly speculative but believes that the investment is

suitable for it based upon its investment objectives and financial needs, and

has adequate means for providing for its current financial needs and personal

contingencies and has no need for liquidity of investment with respect to the

Securities;

 

(e)               That the undersigned has been

given access to full and complete information regarding the Company (including

the opportunity to meet with Company officers and review such documents as it

may have requested in writing) and has utilized such access to its satisfaction

for the purpose of obtaining information in addition to, or verifying

information included in, the Memorandum;

 

(f)                That the undersigned recognizes

that the Securities, as an investment, involve a high degree of risk,

including, but not limited to, the risks described in the “Cautionary

Statement” which is part of “Management’s Discussion and Analysis or Plan of

Operation” in the Company’s Form 10-KSB included within the Memorandum; and

 

(g)               That the undersigned realizes

that (i) the purchase of the Securities is a long–term investment; (ii)

the purchasers of the Securities must bear the economic risk of investment for

an indefinite period of time because the Securities have not been registered

under the Securities Act of 1933, as amended (the “Act”) and, therefore, cannot

be sold unless they are subsequently registered under the Act or an exemption

from such registration is available; and (iii) the transferability of the

Securities is restricted, and (A) requires the written consent of the Company,

(B) requires conformity 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

been registered under the Act and referring to the restrictions on

transferability of the Securities, and by stop transfer orders or notations on

the Company’s records referring to the restrictions on transferability.

 

4.                        The undersigned has been advised that the Securities are not being

registered under the Act or relevant state securities laws pursuant to

exemptions from the Act and such laws, and that the Company’s reliance upon

such exemptions is predicated in part on the undersigned’s representations to

the Company as contained herein.  The

undersigned represents and warrants that the Securities are being purchased for

its own account and for investment and without the intention of reselling or

redistributing the same, that it has made no agreement with others regarding

any of such Securities and that its financial condition is such that it is not

likely that it will be necessary to dispose of any of such Securities in the

foreseeable future.  The undersigned is

aware that, in the view of the Securities and Exchange Commission and

applicable state bodies that administer state securities laws, a purchase of

Securities with an intent to resell by reason of any foreseeable specific

contingency or anticipated change in market value, or any change in the

condition of the Company or its business, or in connection with a contemplated

liquidation or settlement of any loan obtained for the acquisition of the

Securities and for which the Securities were pledged as security, would

represent an intent inconsistent with the representations set forth above.  The undersigned further represents and

agrees that if, contrary to its foregoing intentions, it should later desire to

dispose of or transfer any of such Securities in any manner, it shall not do so

without first obtaining (a) the opinion of counsel designated by the Company

that such proposed disposition or transfer lawfully may be made without the

registration of such Securities for such purpose pursuant to the Act, as then

in effect, and applicable state securities laws, or (b) such registrations (it

being expressly understood that the Company shall not have any obligation to

register the shares for such purpose). 

The undersigned agrees that the Company may place a restrictive legend

on the certificate(s) representing the Securities, containing substantially the

following language:

 

The

securities represented by this Certificate were issued without registration

under the Securities Act of 1933, as amended (the “Act”), and without

registration under state securities laws, in reliance upon exemptions contained

in the Act and such laws.  No

 

2

 

transfer

of these securities or any interest therein may be made except pursuant to

effective registration statements under said laws unless this Corporation has

received an opinion of counsel satisfactory to it that such transfer or

disposition does not require registration under said laws and, for any sales

under Rule 144 of the Act, such evidence as it shall request for compliance

with that rule.

 

The undersigned agrees and consents that the Company

may place a stop transfer order on the Certificate(s) representing the

Securities to assure the undersigned’s compliance with this Agreement and the

matters referenced above.

 

The undersigned agrees to save and hold harmless,

defend and indemnify the Company and its directors, officers and agents from

any claims, liabilities, damages, losses, expenses or penalties arising out of

any misrepresentation of information furnished by the undersigned to the

Company in this Subscription Agreement.

 

5.                        The Subscriber understands that the Company at a future date may file a

registration or offering statement with the Securities and Exchange Commission

to facilitate a public offering of its securities.  The Subscriber agrees, for the benefit of the Company, that

should such a public offering be made and should the managing underwriter of

such offering require, the undersigned will not, without the prior written

consent of the Company and such underwriter, during the Lock Up Period as

defined herein: (i) sell, transfer or otherwise dispose of, or agree to sell,

transfer or otherwise dispose of any of the Securities beneficially held by the

undersigned during the Lock Up Period; (ii) sell, transfer or otherwise dispose

of, or agree to sell, transfer or otherwise dispose of any options, rights or

warrants to purchase any of the shares beneficially held by the undersigned

during the Lock Up Period; or (iii) sell or grant, or agree to sell or grant,

options, rights or warrants with respect to any of the Securities.  The foregoing does not prohibit gifts to

donees or transfers by will or the laws of descent to heirs or beneficiaries

provided that such donees, heirs and beneficiaries shall be bound by the

restrictions set forth herein.  The term

“Lock Up Period” shall mean the lesser of (x) 180 days or (y) the period during

which Company officers and directors are restricted by the managing underwriter

from effecting any sales or transfers of the Company’s common stock.  The Lock Up Period shall commence on the

effective date of the applicable registration statement.

 

6.                        The undersigned represents and warrants that the undersigned is a bona

fide resident of, and is domiciled in, the state listed in the Recital to this

Agreement and that the Securities are being purchased solely for the beneficial

interest of the undersigned and not as nominee, for, or on behalf of, or for

the beneficial interest of, or with the intention to transfer to, any other

person, trust or organization, except as specifically set forth in paragraph 11

of this Agreement.

 

PARAGRAPH

7 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE ACT AND STATE LAWS

BEING RELIED ON BY THE COMPANY WITH RESPECT TO THE OFFER AND SALE OF THE

SECURITIES.  ALL OF SUCH INFORMATION

WILL BE KEPT CONFIDENTIAL AND WILL BE REVIEWED ONLY BY THE COMPANY AND ITS

COUNSEL.  The undersigned agrees to

furnish any additional information which the Company deems necessary in order

to verify the responses set forth below.

 

7.                        Accredited Status.  The undersigned 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

  

 

3

 

	

   

  	

   

  	

   

  	

   

  	

  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.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  ý

  	

   

  	

  4.

  	

   

  	

  The

  undersigned is a Small Business Investment Company licensed by the United

  States Small Business Administration under Section 301(c) or (d) of the Small

  Business Investment Act of 1958.

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  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

  

 

4

 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  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 the following meanings:

 

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

 

“Affiliate” means, with respect to any specified person, any

other person who, directly or indirectly, controls, is controlled by, or is

under common control with such specified person.

 

“Exchange Act” means the Securities Exchange Act of 1934, as

amended from time to time, or any successor statute, and the rules and

regulations of the Securities and Exchange Commission promulgated thereunder.

 

5

 

“Holder” means the undersigned.

 

 

“Prospectus” means the prospectus included in any Registration

Statement (including without limitation, a prospectus that discloses

information previously omitted from a prospectus filed as part of an effective

Registration Statement in reliance upon Rule 430A promulgated under the Act),

as amended or supplemented by any prospectus supplement, and by all other

amendments and supplements to the prospectus, including post–effective

amendments, and in each case including all material incorporated by reference

or deemed to be incorporated by reference in such prospectus.

 

“Registrable Securities” means the shares of common stock

issuable upon exercise or conversion of the Securities and any shares of common

stock issued as payment in lieu of cash dividends on the Series A Convertible

Preferred Stock; provided, however, that such securities shall

cease to be Registrable Securities when (i) a Registration Statement covering

the Registrable Securities has been declared effective and such Registrable

Securities have been disposed of pursuant to such effective Registration

Statement, or (ii) the Registrable Securities become eligible for sale pursuant

to Rule 144 (or any similar rule then in force) under the Act, or (iii) the

Securities cease to be outstanding.

 

“Registration Statement” means any registration statement of the

Company that covers any of the Registrable Securities pursuant to the

provisions of this Agreement and all amendments and supplements to any such

registration statement, including post–effective amendments, in each case

including the Prospectus, all exhibits, and all material incorporated by

reference or deemed to be incorporated by reference in such registration

statement.

 

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

 

(b)                                 Resale Registration.  The rights described in this paragraph 8(b)

will be available to holders of Registrable Securities until the second

anniversary of the expiration of the warrants to purchase common stock issued

with the Series A Convertible Preferred Stock.

 

(i)                                     Demand

Registration.  If holders of at least

one-third of the Registrable Securities request that the Company file a

registration statement having 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 be registered; provided, however, that the Company will not be

obligated to effect more than two such registrations, and will not be obligated

to effect more than one such registration during any 12-month period.  If registration is demanded under any

subsection of paragraph 8(b), the Company may elect to register all of the

Registrable Securities.  The number of

demand registrations available under this paragraph 8(b)(i) will be reduced by

the number of Form S-3 registrations demanded under paragraph 8(b)(iii).

 

(ii)                                  Incidental

Registration.  If the Company proposes

to register under the Act (except by a Form S-4 or Form S-8 Registration

Statement or any successor forms thereto) or qualify for a public distribution

under Section 3(b) of the Act, any of its equity securities or debt with

equity features, it will give written notice to all Holders of Registrable

Securities of its intention to do so and, on the written request of any such

Holder given within twenty (20) days after receipt of any such notice (which

written request shall specify the interest in the Registrable

 

6

 

Securities intended to be sold or disposed of

by such Holder and describe the nature of any proposed sale or other

disposition thereof), the Company will use its best efforts to cause all such

Registrable Securities, the Holders of which shall have requested the

registration or qualification thereof, to be included in such Registration

Statement proposed to be filed by the Company; provided, however, that if a

greater number of Registrable Securities is offered for participation in the

proposed offering than in the reasonable opinion of the managing underwriter of

the proposed offering can be accommodated without adversely affecting the

proposed offering, then the amount of Registrable Securities proposed to be

offered by such Holders for registration, as well as the number of securities

of any other selling shareholders participating in the registration, shall be proportionately

reduced to a number deemed satisfactory by the managing underwriter.

 

(iii)                               S-3 Registration.  Holders of Registrable Securities are

entitled to demand up to three registrations on Form S-3 (if available to the

Company) so long as each such offering is in an amount of at least $500,000

(based upon the closing bid price of the common stock on the trading day before

the demand is made).  The Company will

not be obligated to file more than one Form S-3 in any six-month period.

 

(c)                                  Registration

Procedures.  In connection with the

obligations of the Company to effect or cause the registration of any

Registrable Securities pursuant to the terms and conditions of this Agreement,

the Company shall use reasonable efforts to effect the registration and sale of

such Registrable Securities in accordance with the intended method of

distribution thereof, and in connection therewith:

 

(i)                                     The Company shall

prepare and file with the Securities and Exchange Commission a Registration

Statement on Form S-3 or other similar form under the Act which permits

secondary sales of securities in a “shelf registration,” and use reasonable

efforts to cause such Registration Statement to become effective and remain

effective in accordance with the provisions of this Agreement;

 

(ii)                                  The Company shall

promptly prepare and file with the Securities and Exchange Commission such

amendments and post-effective amendments to each Registration Statement as may

be necessary to keep such Registration Statement effective and shall timely

file with the Securities and Exchange Commission all required filings under the

Exchange Act as are necessary to keep the Registration Statement effective for

as long as such registration is required to remain effective pursuant to the

terms hereof; shall cause the Prospectus to be supplemented by any required

Prospectus supplement, and, as so supplemented, to be filed pursuant to Rule

424 under the Act; and shall comply with the provisions of the Act applicable

to it with respect to the disposition of all Registrable Securities covered by

such Registration Statement during the applicable period in accordance with the

intended methods of disposition by Holder set forth in such Registration

Statement or supplement to the Prospectus;

 

(iii)                               The Company shall

promptly furnish to Holder such number of copies of the Prospectus (including

each preliminary Prospectus) and any amendments or supplements thereto, as

Holder may reasonably request in order to facilitate the

 

7

 

public sale or other disposition of the

Registrable Securities being sold by Holder;

 

(iv)                              The Company shall

promptly notify Holder, (A) when a Prospectus or any Prospectus 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 and Exchange Commission or any state

securities authority for amendments and supplements to a Registration Statement

and Prospectus or for additional information after the Registration Statement

has become effective, (C) of the issuance by the Securities and Exchange

Commission of any stop order suspending the effectiveness of a Registration

Statement, (D) of the issuance by any state securities commission or other

regulatory authority of any order suspending the qualification or exemption

from qualification of any of the Registrable Securities under state securities

or “blue sky” laws, and (E) of the happening of any event which makes any

statement made in a Registration Statement or related Prospectus untrue or

which requires the making of any changes in such Registration Statement or

Prospectus so that they will not contain any untrue statement of a material

fact or omit to state any material fact required to be stated therein or

necessary to make the statements therein, in light of the circumstances under

which they were made, not misleading. 

As soon as practicable following expiration of the Suspension Period (as

defined below), the Company shall prepare and file with the Securities and

Exchange Commission and furnish a supplement or amendment to such Prospectus so

that, as thereafter deliverable to the purchasers of such Registrable

Securities, such Prospectus will not contain any untrue statement of a material

fact or omit to state a material fact necessary to make the statements therein,

in light of the circumstances under which they were made, not misleading.

 

Upon receipt of any notice (a “Suspension Notice”) by Holder from the

Company of the happening of any event of the kind described in paragraph

8(c)(iv), Holder shall forthwith discontinue disposition of the Registrable

Securities pursuant to the Registration Statement covering such Registrable

Securities until such Holder’s receipt of the copies of the supplemented or

amended Prospectus contemplated 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 has received copies of any additional or supplemental

filings which are incorporated by reference in the Prospectus, and, if so

directed by the Company, will, or will request any broker–dealer acting

as Holder’s agent to, deliver to the Company (at the Company’s expense) all

copies, other than permanent file copies then in Holder’s or broker–dealer’s

possession, of the Prospectus covering such Registrable Securities current at

the time of receipt of such notice; provided, however, that in no

event shall the period from the date on which Holder receives a Suspension

Notice to the date on which Holder receives either the Advice or copies of the

supplemented or amended Prospectus contemplated by paragraph 8(c)(iv) (the

“Suspension Period”) exceed 90 days.

 

(d)                                 Registration

Expenses.  The Company shall bear all

expenses incurred in connection with the registration of Registrable Securities

pursuant to paragraph 8(b).  Such

expenses shall include, without limitation, all printing, legal and accounting

expenses incurred by the Company and all registration and filing fees imposed

by the Securities and Exchange

 

8

 

Commission, any state securities commission or The Nasdaq Stock

Market.  Each Holder shall be

responsible for any underwriting discounts, brokerage fees or commissions and

taxes of any kind (including, without limitation, transfer taxes) with respect

to any disposition, sale or transfer of Registrable Securities and for any

legal, accounting and other expenses incurred by such Holder.

 

(e)                                                                                 Indemnification

and Contribution.

 

(i)                                     Indemnification by

the Company.  The Company agrees to

indemnity and hold harmless, to the full extent permitted by law, each Holder

from and against all losses, claims, damages, liabilities and expenses

(including without limitation reasonable 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 are based upon any untrue statement of material fact

contained in any Registration Statement (or any amendment thereto) pursuant to

which Registrable Securities were registered under the Act, or caused by any

omission to state therein a material fact necessary to make the statements

therein in light of the circumstances under which they were made not

misleading, or caused by any untrue statement of a material fact contained in

any Prospectus (as amended or supplemented if the Company shall have furnished

any amendments or supplements thereto), or caused by any omission to state

therein a material fact necessary to make the statements therein in light of

the circumstances under which they were made not misleading, except insofar as

such Damages arise out of or are based upon any such untrue statement or

omission based upon information relating to Holder furnished in writing to the

Company by Holder specifically for use therein; provided, however,

that the Company shall not be liable to Holder under this paragraph 8(e)(i) to

the extent that any such Damages were caused by the fact that Holder sold

securities to a person as to whom it shall be established that there was not

sent or given, at or prior to the written confirmation of such sale, a copy of

the Prospectus as then amended or supplemented if, but only if, (A) the Company

has previously furnished copies of such amended or supplemented Prospectus to

Holder and (B) such Damages were caused by any untrue statement or omission

contained in the Prospectus so delivered which was corrected in such amended or

supplemented Prospectus.

 

(ii)                                  Indemnification by

the Holder.  Holder agrees to indemnify

and hold harmless the Company, its stockholders, directors, officers and each

person, if any, who controls the Company within the meaning of either Section

15 of the Act or Section 20 of the Exchange Act to the same extent as the

foregoing indemnity from the Company to Holder, but only with reference to

information relating to Holder furnished in writing to the Company by Holder

specifically for use in any Registration Statement (or any amendment thereto)

or any Prospectus (or any amendment or supplement thereto); provided, however,

that Holder shall not be obligated to provide such indemnity to the extent that

such Damages result from the failure of the Company to promptly amend or take

action to correct or supplement any such Registration Statement or Prospectus

on the basis of corrected or supplemental information provided by Holder to the

Company expressly for such purpose.  In

no event shall the liability of Holder hereunder be greater in amount than the

amount of the proceeds received by Holder upon the sale of the Registrable

Securities giving rise to such indemnification obligation.

 

9

 

(iii)                               Contribution.  To the extent that the indemnification

provided for in paragraph 8(e)(i) or paragraph 8(e)(ii) is unavailable to an

indemnified party or insufficient in respect of any Damages, then each

indemnifying party under such paragraph, in lieu of indemnifying such

indemnified party thereunder, shall contribute to the amount paid or payable by

such indemnified party as a result of such Damages in such proportion as is

appropriate to reflect the relative fault of the Company on the one hand and

Holder on the other hand in connection with the statements or omissions that

resulted in such Damages, as well as any other relevant equitable

considerations.  The relative fault of

the Company on the one hand and of Holder on the other hand shall be determined

by reference to, among other things, whether the untrue statement of a material

fact or the omission to state a material fact relates to information supplied

by the Company or by Holder and the parties’ relative intent, knowledge, access

to information and opportunity to correct or prevent such statement or

omission.

 

If indemnification is available under subsection (i) or (ii) of this

paragraph 8(e), the indemnifying parties shall indemnify each indemnified party

to the full extent provided in such paragraphs without regard to the relative

fault of said indemnifying party or indemnified party or any other equitable

consideration provided for in this paragraph 8(e)(iii).  The Company and Holder agree that it would

not 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 allocation

that does not take account of the equitable considerations referred to herein.

 

9.                                       NASD Affiliation.  The

undersigned is affiliated or associated, directly or indirectly, with a

National Association of Securities Dealers, Inc. (“NASD”) member firm or

person.

 

Yes  o                                    No  ý

 

If

yes, list the affiliated member firm or person:

 

Your

relationship to such member firm or person:

 

10.                                 Entities.  If the undersigned is an

entity, the individual signing on behalf of such entity and the entity jointly

and severally agree and certify that:

 

A.                                   The undersigned was not organized for the

specific purpose of acquiring securities of the Company; and

 

B.                                     This Agreement has been duly authorized by

all necessary action on the part of the undersigned, has been duly executed by

an authorized officer or representative of the undersigned, and is a legal,

valid and binding obligation of the undersigned enforceable in accordance with

its terms.

 

11.                                  Covenant.

 

In consideration of the investment by the

undersigned, Brew Buddies, LLC or its designee, Bluestem Capital Partners III

Limited Partnership, may designate one nominee to the Company’s board of

directors.  Brewing Ventures LLC, the

principal shareholder of the Company, shall

 

10

 

execute and deliver a voting agreement which

shall provide that Brewing Ventures 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        Individual

Ownership

o        Joint

Tenants with Right of Survivorship*

o        Partnership*

o        Tenants

in Common*

o        Corporation

o        Trust

ý        Other  limited partnership (describe)

 

B.                                     The undersigned agrees that the undersigned

understands 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 and effect

after the execution hereof and payment for the shares, and further agrees to

indemnify and hold harmless the Company, each current and future officer,

director, employee, agent and shareholder from and against any and all loss,

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 the

undersigned has retained his, her or its own independent legal counsel to the

extent that the undersigned determined it to be necessary or helpful.  The undersigned further acknowledges that

the undersigned was not represented by counsel for Aethlon Capital, LLC.

 

C.                                     This Agreement shall be construed and

interpreted in accordance with Minnesota law without regard to conflict of law

provisions.

 

D.                                    The agreements and covenants of the parties

hereto shall survive the delivery of the Securities and be binding upon the

parties and their respective successors, personal representatives and assigns.

 

E.                                      The undersigned agrees to furnish to the

Company or the Agent, if applicable, upon request, such additional information

as may be deemed necessary to determine the undersigned’s suitability as an

investor.

 

F.                                      This Agreement supersedes all previous

Subscription Agreements by the undersigned and all previous Subscription

Agreements are hereby withdrawn.

 

G.                                     In event of a party’s default or breach of

this Agreement, the prevailing party in any action to enforce this Agreement or

to recover damages as a result of a breach or default, shall be entitled to

recover its reasonable costs and expenses therein, including reasonable

attorneys fees.

 

[NOTE: SIGNATURE PAGES TO FOLLOW]

 

*Multiple

signatures required.

 

11

 

SIGNATURE PAGE

 

	

  Dated: September 19, 2002.

  
	

   

  
	

  BLUESTEM

  CAPITAL PARTNERS III

  
	

  LIMITED PARTNERSHIP

  
	

   

  
	

  By:

  Bluestem Capital Company III, L.L.C.

  
	

  Its:  General Partner

  
	

   

  
	

  By

  

  	

  /s/

  Sandy Horst

  	

   

  
	

  Its

  Authorized Officer

  
	

   

  
	

   

  
	

  Sandy

  Horst

  	

   

  
	

  Name

  Typed or Printed

  
	

   

  
	

   

  
	

   

  	

   

  
	

  Residence

  Address

  
	

   

  
	

   

  	

   

  
	

   

  
	

   

  	

   

  
	

  City,

  State and Zip Code

  
	

   

  
	

   

  	

   

  
	

  Mailing

  Address

  
	

   

  
	

  122

  S. Phillips Ave., Ste 300

  	

   

  
	

   

  
	

  Sioux

  Falls, SD  57104

  	

   

  
	

  City,

  State and Zip Code

  
	

   

  
	

   

  
	

  46-0456561

  	

   

  
	

  Tax

  Identification or Social

  Security Number

  
				

 

12

 

CERTIFICATE

OF SIGNATORY

 

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

 

I,

Sandy Horst, am the Authorized Officer of the General Partner of Bluestem

Capital Partners III Limited Partnership (the “Entity”).

 

I

certify that I am empowered and duly authorized by the Entity to execute and

carry out the terms of the Subscription Agreement and Letter of Investment

Intent and to purchase and hold the Securities, and certify further that the

Subscription Agreement and Letter of Investment Intent has been duly and

validly executed on behalf of the Entity and constitutes a legal and binding

obligation of the Entity.

 

IN WITNESS WHEREOF, I have set my hand this 19th day of September, 2002.

 

 

	

   

  	

  /s/

  Sandy Horst 

  	

   

  
	

   

  	

  (Signature)  

  
	

   

  	

   

  
	

   

  	

  Authorized

  Officer  

  
	

   

  	

  (Title)

  
	

   

  	

   

  
	

   

  	

  Sandy

  Horst 

  	

   

  
	

   

  	

  (Please

  Print Name)

  

 

13

 

Acceptance

by the Company

 

Founders Food & Firkins

Ltd.  hereby accepts the foregoing

Subscription Agreement to the extent of 3,334 shares of Series A Convertible

Preferred Stock and warrants to purchase 105,506 shares of common stock.

 

	

   

  	

  Granite City Food &

  Brewery Ltd.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By 

  	

  /s/ Steven J. Wagenheim

  	

   

  
	

   

  	

   

  	

  Steven J. Wagenheim

  
	

   

  	

   

  	

  Chief Executive Officer

  
					

 

14Exhibit 10.2

 

[BREW BUDDIES, LLC]

 

SUBSCRIPTION AGREEMENT

AND

LETTER OF INVESTMENT INTENT

Founders

Food & Firkins Ltd.

5831

Cedar Lake Road

St.

Louis Park, MN  55416

 

Gentlemen:

 

THIS AGREEMENT, made

effective 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 the

undersigned, and the undersigned agrees to purchase from the Company, 20,500

shares of Series A Convertible Preferred Stock (the “Preferred”) and warrants

to purchase common stock (the “Warrants”) at a purchase price equal to $100.00

per Preferred share (the “Firm Securities”). 

The Preferred and the Warrants are collectively referred to herein as

the “Securities.”  The conversion price

of the Preferred and the exercise price of the Warrants will be the price

established at the initial closing of the sale of the Securities, which will be

the lower of (a) 90% of the average closing price of the common stock on Nasdaq

for the ten trading days preceding the closing date, or (b) $1.58.  The undersigned acknowledges that this

subscription is contingent upon acceptance in whole or in part by the Company.

 

2.                                       On or before October 1, 2002, the undersigned

will (a) deliver to Highland Bank as escrow agent for the Company cash or a

check 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% per

annum (but not to exceed the legal rate of interest which may be charged to the

undersigned, in the amount of $1,366,600 in payment of 13,666 shares of

Preferred, 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 wire

transfer to “Highland Bank – Founders Food Escrow Account” and the promissory

note shall be payable to the Company. 

At the initial closing, the Company will issue the Firm Securities.  Of the Firm Securities, the Company will

deliver 6,834 shares of Preferred (and 216,265 Warrants) to the undersigned and

retain 13,666 shares of Preferred (and 432,468 Warrants) in its

possession.  It is agreed and understood

that the Company will have and retain a security interest in the Firm

Securities until the full purchase price of the Firm Securities has been paid

by cash or check.  Upon payment in full

by cash or check for the Firm Securities, the Company will deliver such

securities to the undersigned and the Company will return the promissory note

to the undersigned.

 

3.                                       The undersigned acknowledges and represents

as follows:

 

 

(a)                                  That it has received and carefully reviewed

the 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;

 

 

(b)                                 That the undersigned is able to bear the

economic risk of the investment in the Securities;

 

(c)                                  That the undersigned believes that it has

knowledge and experience in financial and business matters, that it is capable

of evaluating the merits and risks of the prospective investment in the

Securities and that it is able to bear such risks;

 

(d)                                 That it understands an investment in the

Securities is highly speculative but believes that the investment is suitable

for it based upon its investment objectives and financial needs, and has

adequate means for providing for its current financial needs and personal

contingencies and has no need for liquidity of investment with respect to the

Securities;

 

(e)                                  That the undersigned has been given access to

full and complete information regarding the Company (including the opportunity

to meet with Company officers and review such documents as it may have

requested in writing) and has utilized such access to its satisfaction for the

purpose of obtaining information in addition to, or verifying information

included in, the Memorandum;

 

(f)                                    That the undersigned recognizes that the

Securities, as an investment, involve a high degree of risk, including, but not

limited to, the risks described in the “Cautionary Statement” which is part of

“Management’s Discussion and Analysis or Plan of Operation” in the Company’s

Form 10-KSB included within the Memorandum; and

 

(g)                                 That the undersigned realizes that (i) the

purchase of the Securities is a long–term investment; (ii) the purchasers

of the Securities must bear the economic risk of investment for an indefinite

period of time because the Securities have not been registered under the

Securities Act of 1933, as amended (the “Act”) and, therefore, cannot be sold

unless they are subsequently registered under the Act or an exemption from such

registration is available; and (iii) the transferability of the Securities is

restricted, and (A) requires the written consent of the Company, (B) requires

conformity 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 been

registered under the Act and referring to the restrictions on transferability

of the Securities, and by stop transfer orders or notations on the Company’s

records referring to the restrictions on transferability.

 

4.                                       The undersigned has been advised that the

Securities are not being registered under the Act or relevant state securities

laws pursuant to exemptions from the Act and such laws, and that the Company’s

reliance upon such exemptions is predicated in part on the undersigned’s

representations to the Company as contained herein.  The undersigned represents and warrants that the Securities are

being purchased for its own account and for investment and without the intention

of reselling or redistributing the same, that it has made no agreement with

others regarding any of such Securities and that its financial condition is

such that it is not likely that it will be necessary to dispose of any of such

Securities in the foreseeable future. 

The undersigned is aware that, in the view of the Securities and

Exchange Commission and applicable state bodies that administer state

securities laws, a purchase of Securities with an intent to resell by reason of

any foreseeable specific contingency or anticipated change in market value, or

any change in the condition of the Company or its business, or in connection

with a contemplated liquidation or settlement of any loan obtained for the

acquisition of the Securities and for which the Securities were pledged as

security, would represent an intent inconsistent with the representations set

forth above.  The

 

2

 

undersigned

further represents and agrees that if, contrary to its foregoing intentions, it

should later desire to dispose of or transfer any of such Securities in any

manner, it shall not do so without first obtaining (a) the opinion of counsel

designated by the Company that such proposed disposition or transfer lawfully

may be made without the registration of such Securities for such purpose

pursuant to the Act, as then in effect, and applicable state securities laws,

or (b) such registrations (it being expressly understood that the Company shall

not have any obligation to register the shares for such purpose).  The undersigned agrees that the Company may

place a restrictive legend on the certificate(s) representing the Securities,

containing substantially the following language:

 

The

securities represented by this Certificate were issued without registration

under the Securities Act of 1933, as amended (the “Act”), and without

registration under state securities laws, in reliance upon exemptions contained

in the Act and such laws.  No transfer

of these securities or any interest therein may be made except pursuant to effective

registration statements under said laws unless this Corporation has received an

opinion of counsel satisfactory to it that such transfer or disposition does

not require registration under said laws and, for any sales under Rule 144 of

the Act, such evidence as it shall request for compliance with that rule.

 

The

undersigned agrees and consents that the Company may place a stop transfer

order on the Certificate(s) representing the Securities to assure the

undersigned’s compliance with this Agreement and the matters referenced above.

 

The

undersigned agrees to save and hold harmless, defend and indemnify the Company

and its directors, officers and agents from any claims, liabilities, damages,

losses, expenses or penalties arising out of any misrepresentation of

information furnished by the undersigned to the Company in this Subscription

Agreement.

 

5.                                       The Subscriber understands that the Company

at a future date may file a registration or offering statement with the

Securities and Exchange Commission to facilitate a public offering of its

securities.  The Subscriber agrees, for

the benefit of the Company, that should such a public offering be made and

should the managing underwriter of such offering require, the undersigned will

not, without the prior written consent of the Company and such underwriter,

during the Lock Up Period as defined herein: (i) sell, transfer or otherwise

dispose of, or agree to sell, transfer or otherwise dispose of any of the

Securities beneficially held by the undersigned during the Lock Up Period; (ii)

sell, transfer or otherwise dispose of, or agree to sell, transfer or otherwise

dispose of any options, rights or warrants to purchase any of the shares

beneficially held by the undersigned during the Lock Up Period; or (iii) sell

or grant, or agree to sell or grant, options, rights or warrants with respect

to any of the Securities.  The foregoing

does not prohibit gifts to donees or transfers by will or the laws of descent

to heirs or beneficiaries provided that such donees, heirs and beneficiaries

shall be bound by the restrictions set forth herein.  The term “Lock Up Period” shall mean the lesser of (x) 180 days

or (y) the period during which Company officers and directors are restricted by

the managing underwriter from effecting any sales or transfers of the Company’s

common stock.  The Lock Up Period shall

commence on the effective date of the applicable registration statement.

 

6.                                       The undersigned represents and warrants that

the undersigned is a bona fide resident of, and is domiciled in, the state

listed in the Recital to this Agreement and that the Securities are being

purchased solely for the beneficial interest of the undersigned and not as

nominee, for, or on behalf of, or for the beneficial interest of, or with the

intention to transfer to, any other person, trust or organization, except as

specifically set forth in paragraph 11 of this Agreement.

 

3

 

PARAGRAPH

7 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE ACT AND STATE LAWS

BEING RELIED ON BY THE COMPANY WITH RESPECT TO THE OFFER AND SALE OF THE

SECURITIES.  ALL OF SUCH INFORMATION

WILL BE KEPT CONFIDENTIAL AND WILL BE REVIEWED ONLY BY THE COMPANY AND ITS

COUNSEL.  The undersigned agrees to

furnish any additional information which the Company deems necessary in order

to verify the responses set forth below.

 

7.                                       Accredited Status.  The

undersigned 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.

  

 

4

 

	

   

  	

   

  	

   

  	

   

  	

  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 the

following meanings:

 

“Advice”

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

 

5

 

“Affiliate”

means, with respect to any specified person, any other person who, directly or

indirectly, controls, is controlled by, or is under common control with such

specified person.

 

“Exchange

Act” means the Securities Exchange Act of 1934, as amended from time to

time, or any successor statute, and the rules and regulations of the Securities

and Exchange Commission promulgated thereunder.

 

“Holder”

means the undersigned.

 

“Prospectus”

means the prospectus included in any Registration Statement (including without

limitation, a prospectus that discloses information previously omitted from a

prospectus filed as part of an effective Registration Statement in reliance

upon Rule 430A promulgated under the Act), as amended or supplemented by any

prospectus supplement, and by all other amendments and supplements to the

prospectus, including post–effective amendments, and in each case

including all material incorporated by reference or deemed to be incorporated

by reference in such prospectus.

 

“Registrable

Securities” means the shares of common stock issuable upon exercise or

conversion of the Securities and any shares of common stock issued as payment

in lieu of cash dividends on the Series A Convertible Preferred Stock; provided,

however, that such securities shall cease to be Registrable Securities

when (i) a Registration Statement covering the Registrable Securities has been

declared effective and such Registrable Securities have been disposed of

pursuant to such effective Registration Statement, or (ii) the Registrable

Securities become eligible for sale pursuant to Rule 144 (or any similar rule

then in force) under the Act, or (iii) the Securities cease to be outstanding.

 

“Registration

Statement” means any registration statement of the Company that covers any

of the Registrable Securities pursuant to the provisions of this Agreement and

all amendments and supplements to any such registration statement, including

post–effective amendments, in each case including the Prospectus, all

exhibits, and all material incorporated by reference or deemed to be

incorporated by reference in such registration statement.

 

“Suspension

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

 

(b)                               Resale Registration.  The rights

described in this paragraph 8(b) will be available to holders of Registrable

Securities until the second anniversary of the expiration of the warrants to

purchase common stock issued with the Series A Convertible Preferred Stock.

 

(i)                                     Demand Registration.  If holders of at least one-third of the

Registrable Securities request that the Company file a registration statement

having 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 be

registered; provided, however, that the Company will not be obligated to effect

more than two such registrations, and will not be obligated to effect more than

one such registration during any 12-month period.  If registration is demanded under any subsection of paragraph

8(b), the Company may elect to register all of the Registrable Securities.  The number of demand registrations available

under this paragraph 8(b)(i) will be reduced by the number of Form S-3

registrations demanded under paragraph 8(b)(iii).

 

(ii)                                  Incidental Registration.  If the Company proposes to register under

the Act (except by a Form S-4 or Form S-8 Registration Statement or any

successor forms thereto) or qualify for a public distribution under

Section 3(b) of the Act, any of its equity securities or debt with equity

features, it will give written notice to all Holders of

 

6

 

Registrable

Securities of its intention to do so and, on the written request of any such

Holder given within twenty (20) days after receipt of any such notice (which

written request shall specify the interest in the Registrable Securities

intended to be sold or disposed of by such Holder and describe the nature of

any proposed sale or other disposition thereof), the Company will use its best

efforts to cause all such Registrable Securities, the Holders of which shall

have requested the registration or qualification thereof, to be included in

such Registration Statement proposed to be filed by the Company; provided,

however, that if a greater number of Registrable Securities is offered for

participation in the proposed offering than in the reasonable opinion of the

managing underwriter of the proposed offering can be accommodated without

adversely affecting the proposed offering, then the amount of Registrable

Securities proposed to be offered by such Holders for registration, as well as

the number of securities of any other selling shareholders participating in the

registration, shall be proportionately reduced to a number deemed satisfactory

by the managing underwriter.

 

(iii)                               S-3 Registration.  Holders of

Registrable Securities are entitled to demand up to three registrations on Form

S-3 (if available to the Company) so long as each such offering is in an amount

of at least $500,000 (based upon the closing bid price of the common stock on

the trading day before the demand is made). 

The Company will not be obligated to file more than one Form S-3 in any

six-month period.

 

(c)                                  Registration Procedures.  In connection with the obligations of the

Company to effect or cause the registration of any Registrable Securities

pursuant to the terms and conditions of this Agreement, the Company shall use

reasonable efforts to effect the registration and sale of such Registrable

Securities in accordance with the intended method of distribution thereof, and

in connection therewith:

 

(i)                                     The Company shall prepare and file with the

Securities and Exchange Commission a Registration Statement on Form S-3 or

other similar form under the Act which permits secondary sales of securities in

a “shelf registration,” and use reasonable efforts to cause such Registration

Statement to become effective and remain effective in accordance with the

provisions of this Agreement;

 

(ii)                                  The Company shall promptly prepare and file

with the Securities and Exchange Commission such amendments and post-effective

amendments to each Registration Statement as may be necessary to keep such

Registration Statement effective and shall timely file with the Securities and

Exchange Commission all required filings under the Exchange Act as are

necessary to keep the Registration Statement effective for as long as such

registration is required to remain effective pursuant to the terms hereof;

shall cause the Prospectus to be supplemented by any required Prospectus

supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the

Act; and shall comply with the provisions of the Act applicable to it with

respect to the disposition of all Registrable Securities covered by such

Registration Statement during the applicable period in accordance with the

intended methods of disposition by Holder set forth in such Registration

Statement or supplement to the Prospectus;

 

(iii)                               The Company shall promptly furnish to Holder such number of copies of the

Prospectus (including each preliminary Prospectus) and any amendments or

supplements thereto, as Holder may reasonably request in order to facilitate

the public sale or other disposition of the Registrable Securities being sold

by Holder;

 

7

 

(iv)                              The Company shall promptly notify Holder, (A) when a Prospectus or any

Prospectus 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 and

Exchange Commission or any state securities authority for amendments and

supplements to a Registration Statement and Prospectus or for additional

information after the Registration Statement has become effective, (C) of the

issuance by the Securities and Exchange Commission of any stop order suspending

the effectiveness of a Registration Statement, (D) of the issuance by any state

securities commission or other regulatory authority of any order suspending the

qualification or exemption from qualification of any of the Registrable

Securities under state securities or “blue sky” laws, and (E) of the happening

of any event which makes any statement made in a Registration Statement or

related Prospectus untrue or which requires the making of any changes in such

Registration Statement or Prospectus so that they will not contain any untrue

statement of a material fact or omit to state any material fact required to be

stated therein or necessary to make the statements therein, in light of the

circumstances under which they were made, not misleading.  As soon as practicable following expiration

of the Suspension Period (as defined below), the Company shall prepare and file

with the Securities and Exchange Commission and furnish a supplement or

amendment to such Prospectus so that, as thereafter deliverable to the

purchasers of such Registrable Securities, such Prospectus will not contain any

untrue statement of a material fact or omit to state a material fact necessary

to make the statements therein, in light of the circumstances under which they

were made, not misleading.

 

Upon

receipt of any notice (a “Suspension Notice”) by Holder from the Company of the

happening of any event of the kind described in paragraph 8(c)(iv), Holder

shall forthwith discontinue disposition of the Registrable Securities pursuant

to the Registration Statement covering such Registrable Securities until such

Holder’s receipt of the copies of the supplemented or amended Prospectus

contemplated 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 has

received copies of any additional or supplemental filings which are

incorporated by reference in the Prospectus, and, if so directed by the

Company, will, or will request any broker–dealer acting as Holder’s agent

to, deliver to the Company (at the Company’s expense) all copies, other than

permanent file copies then in Holder’s or broker–dealer’s possession, of

the Prospectus covering such Registrable Securities current at the time of

receipt of such notice; provided, however, that in no event shall

the period from the date on which Holder receives a Suspension Notice to the

date on which Holder receives either the Advice or copies of the supplemented

or amended Prospectus contemplated by paragraph 8(c)(iv) (the “Suspension

Period”) exceed 90 days.

 

(d)                                 Registration Expenses.  The Company shall bear all expenses incurred

in connection with the registration of Registrable Securities pursuant to

paragraph 8(b).  Such expenses shall

include, without limitation, all printing, legal and accounting expenses

incurred by the Company and all registration and filing fees imposed by the

Securities and Exchange Commission, any state securities commission or The

Nasdaq Stock Market.  Each Holder shall

be responsible for any underwriting discounts, brokerage fees or commissions

and taxes of any kind (including, without limitation, transfer taxes) with respect

to any disposition, sale or transfer of Registrable Securities and for any

legal, accounting and other expenses incurred by such Holder.

 

(e)                                  Indemnification and Contribution.

 

 

8

 

(i)                                     Indemnification by the Company.  The Company agrees to indemnity and hold

harmless, to the full extent permitted by law, each Holder from and against all

losses, claims, damages, liabilities and expenses (including without limitation

reasonable 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 are

based upon any untrue statement of material fact contained in any Registration

Statement (or any amendment thereto) pursuant to which Registrable Securities

were registered under the Act, or caused by any omission to state therein a

material fact necessary to make the statements therein in light of the

circumstances under which they were made not misleading, or caused by any

untrue statement of a material fact contained in any Prospectus (as amended or

supplemented if the Company shall have furnished any amendments or supplements

thereto), or caused by any omission to state therein a material fact necessary

to make the statements therein in light of the circumstances under which they

were made not misleading, except insofar as such Damages arise out of or are

based upon any such untrue statement or omission based upon information

relating to Holder furnished in writing to the Company by Holder specifically

for use therein; provided, however, that the Company shall not be

liable to Holder under this paragraph 8(e)(i) to the extent that any such

Damages were caused by the fact that Holder sold securities to a person as to

whom it shall be established that there was not sent or given, at or prior to

the written confirmation of such sale, a copy of the Prospectus as then amended

or supplemented if, but only if, (A) the Company has previously furnished

copies of such amended or supplemented Prospectus to Holder and (B) such

Damages were caused by any untrue statement or omission contained in the

Prospectus so delivered which was corrected in such amended or supplemented

Prospectus.

 

(ii)                                  Indemnification by the Holder.  Holder agrees to indemnify and hold harmless

the Company, its stockholders, directors, officers and each person, if any, who

controls  the Company within the meaning

of either Section 15 of the Act or Section 20 of the Exchange Act to the same

extent as the foregoing indemnity from the Company to Holder, but only with

reference to information relating to Holder furnished in writing to the Company

by Holder specifically for use in any Registration Statement (or any amendment

thereto) or any Prospectus (or any amendment or supplement thereto); provided,

however, that Holder shall not be obligated to provide such indemnity to

the extent that such Damages result from the failure of the Company to promptly

amend or take action to correct or supplement any such Registration Statement

or Prospectus on the basis of corrected or supplemental information provided by

Holder to the Company expressly for such purpose.  In no event shall the liability of Holder hereunder be greater in

amount than the amount of the proceeds received by Holder upon the sale of the

Registrable Securities giving rise to such indemnification obligation.

 

(iii)                               Contribution.  To the extent

that the indemnification provided for in paragraph 8(e)(i) or paragraph

8(e)(ii) is unavailable to an indemnified party or insufficient in respect of

any Damages, then each indemnifying party under such paragraph, in lieu of

indemnifying such indemnified party thereunder, shall contribute to the amount

paid or payable by such indemnified party as a result of such Damages in such

proportion as is appropriate to reflect the relative fault of the Company on

the one hand and Holder on the other hand in connection with the statements or

omissions that resulted in such Damages, as well as any other relevant

equitable considerations.  The relative

fault of the Company on the one hand and of Holder on the other hand shall be

determined by reference to, among other things, whether the untrue statement of

a

 

9

 

material

fact or the omission to state a material fact relates to information supplied

by the Company or by Holder and the parties’ relative intent, knowledge, access

to information and opportunity to correct or prevent such statement or

omission.

 

If

indemnification is available under subsection (i) or (ii) of this paragraph

8(e), the indemnifying parties shall indemnify each indemnified party to the

full extent provided in such paragraphs without regard to the relative fault of

said indemnifying party or indemnified party or any other equitable

consideration provided for in this paragraph 8(e)(iii).  The Company and Holder agree that it would

not 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 allocation

that does not take account of the equitable considerations referred to herein.

 

9.                                       NASD Affiliation.  The

undersigned is affiliated or associated, directly or indirectly, with a

National Association of Securities Dealers, Inc. (“NASD”) member firm or

person.

 

Yes  o                                   No  ý

 

If

yes, list the affiliated member firm or

person:                                                                    

 

 

Your

relationship to such member firm or person:                                                                    

 

10.                                 Entities.  If the undersigned is an

entity, the individual signing on behalf of such entity and the entity jointly

and severally agree and certify that:

 

A.                                   The undersigned was not organized for the

specific purpose of acquiring securities of the Company; and

 

B.                                     This Agreement has been duly authorized by

all necessary action on the part of the undersigned, has been duly executed by

an authorized officer or representative of the undersigned, and is a legal,

valid and binding obligation of the undersigned enforceable in accordance with

its terms.

 

11.                                 Covenant.

 

In

consideration of the investment by the undersigned, Brew Buddies, LLC or its

designee, Bluestem Capital Partners III Limited Partnership, may designate one

nominee to the Company’s board of directors. 

Brewing Ventures LLC, the principal shareholder of the Company, shall

execute and deliver a voting agreement which shall provide that Brewing

Ventures 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            Individual

Ownership

o            Joint

Tenants with Right of Survivorship*

o            Partnership*

o            Tenants

in Common*

o            Corporation

o            Trust

ý            Other  limited liability company (describe)

 

10

 

B.                                     The undersigned agrees that the undersigned

understands 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 and

effect after the execution hereof and payment for the shares, and further

agrees to indemnify and hold harmless the Company, each current and future

officer, director, employee, agent and shareholder from and against any and all

loss, 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 the

undersigned has retained his, her or its own independent legal counsel to the

extent that the undersigned determined it to be necessary or helpful.  The undersigned further acknowledges that

the undersigned was not represented by counsel for Aethlon Capital, LLC.

 

C.                                     This Agreement shall be construed and

interpreted in accordance with Minnesota law without regard to conflict of law

provisions.

 

D.                                    The agreements and covenants of the parties

hereto shall survive the delivery of the Securities and be binding upon the parties

and their respective successors, personal representatives and assigns.

 

E.                                      The undersigned agrees to furnish to the

Company or the Agent, if applicable, upon request, such additional information

as may be deemed necessary to determine the undersigned’s suitability as an

investor.

 

F.                                      This Agreement supersedes all previous

Subscription Agreements by the undersigned and all previous Subscription

Agreements are hereby withdrawn.

 

[NOTE: SIGNATURE PAGES TO FOLLOW]

 

*Multiple

signatures required.

 

11

 

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

  
							

 

12

 

CERTIFICATE

OF 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”).

 

I

certify that I am empowered and duly authorized by the Entity to execute and

carry out the terms of the Subscription Agreement and Letter of Investment

Intent and to purchase and hold the Securities, and certify further that the

Subscription Agreement and Letter of Investment Intent has been duly and validly

executed on behalf of the Entity and constitutes a legal and binding obligation

of 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)

  	

   

  

 

13

 

Acceptance by the Company

 

Founders Food & Firkins

Ltd.  hereby accepts the foregoing

Subscription Agreement to the extent of 20,500 shares of Series A Convertible

Preferred 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

  
					

 

14

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