Dealer-Manager Agreement
AEI LLC Fund 24
AEI
INCOME & GROWTH FUND 24 LLC
DEALER-MANAGER AGREEMENT
_________ 2001
AEI Securities, Inc.
1300 Minnesota World Trade Center
00 Xxxx Xxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Dear Sirs:
AEI Income & Growth Fund 24 LLC, a Delaware limited
liability company (the "Fund") for which AEI Fund Management XXI,
Inc. ("AFM") and Xxxxxx X. Xxxxxxx, are managing members (the
"Managers") proposes to issue and sell up to $24,000,000
aggregate principal amount of units of limited liability company
interest (the "Units"). Such Units are to be sold for cash for
$1,000 each and the minimum purchase by any one person shall be
two and one-half Units ($2,500), except that tax-qualified
retirement plans will be permitted to purchase two Units ($2,000)
unless applicable state law requires a larger purchase for such
plans. In connection therewith, the Fund hereby agrees with each
of you (the "Dealer-Managers") as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Dealer-Manager, and
to each dealer with whom the Dealer-Manager has entered into, or
will enter into, a Dealer Agreement in the form attached as
EXHIBIT A to this Agreement (said dealers being hereinafter
called the "Dealers"), that:
1.1 A registration statement (File No. ) with
respect to the Fund has been prepared by the Managers in
accordance with applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "SEC") thereunder, covering the
Units. Said registration statement, which includes a preliminary
prospectus, was filed with the SEC on . Copies of such
registration statement and each amendment thereto, and copies of
each preliminary prospectus included in such registration
statement and each such amendment, have been or will be delivered
to the Dealer-Manager. (The registration statement and the
prospectus included therein at such date as finally amended and
revised at the effective date of the registration statement are
hereinafter referred to, respectively, as the "Registration
Statement" and the "Prospectus," except that if the prospectus
first filed by the Fund pursuant to Rule 424(b) under the
Securities Act shall differ from the Prospectus, the term
"Prospectus" shall also include the prospectus filed pursuant to
Rule 424(b)).
1.2 AFM has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Minnesota with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus. The authorized and outstanding capital stock and the
financial position of AFM is as set forth in the Prospectus as of
the dates stated therein, and there has been no material adverse
change therein since such dates.
1.3 The Fund has been duly and validly organized and formed
as a limited liability company under the Delaware Limited
Liability Company Act. The Fund intends to use the funds received
from the sale of the Units as set forth in the Prospectus.
1.4 The Registration Statement and Prospectus comply or
will comply with the Securities Act and the Rules and Regulations
and do not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein not misleading; provided however, that the foregoing
provisions of this Section 1.4 do not extend to such statements
contained in or omitted from the Registration Statement or
Prospectus as are primarily within the knowledge of the Dealer-
Manager or any of the Dealers and are based upon information
furnished by the Dealer-Manager in writing to the Managers
specifically for inclusion therein.
1.5 No consent, approval, authorization or other order of
any governmental authority is required in connection with the
execution or delivery by the Managers of this Agreement or the
issuance and sale by the Fund of the Units, except such as may be
required under the Securities Act or state securities laws.
1.6 There are no actions, suits or proceedings pending, or
to the knowledge of the Managers threatened, against the Fund or
the Managers or any of their property, at law or in equity or
before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or
foreign, which will have a material adverse effect on the
business or property of the Fund or the Managers.
1.7 The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and
compliance with the terms of this Agreement by the Fund through
its Managers will not conflict with, or constitute a default
under, any charter, bylaw, indenture, mortgage, deed of trust,
lease or rule or regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Fund or the Managers, or
any of their property, except to the extent that the
enforceability of the indemnity or contribution provisions
contained in Section 4 of this Agreement may be limited under
applicable securities laws.
1.8 The Fund has full legal right, power and authority to
enter into this Agreement and to perform the transactions
contemplated hereby, except to the extent that the enforceability
of the indemnity or contribution provisions contained in Section
4 of this Agreement may be limited under applicable securities
laws.
1.9 At the time of the issuance of the Units, the Units
will have been duly authorized and validly issued, and upon
payment therefor, will be fully paid and nonassessable, subject
to the requirement that the limited members not participate in
the management or control of the business of the Fund, and will
conform to the description thereof contained in the Prospectus.
1.10 The financial statements contained in the Registration
Statement and the Prospectus fairly present the financial
condition of the Fund and AFM and the results of their respective
operations as of the dates and for the periods therein specified;
such financial statements have been prepared in accordance with
generally accepted principles of accounting consistently
maintained throughout the period involved; and Boulay, Heutmaker,
Xxxxxx & Co. who have rendered an opinion on certain of such
financial statements, are independent public accountants within
the meaning of the Securities Act and the Rules and Regulations.
2. COVENANTS OF THE FUND
The Fund covenants and agrees with the Dealer-Manager that:
2.1 It will, at no expense to the Dealer-Manager, furnish
to each Dealer-Manager such number of printed copies of the
Registration Statement, including all amendments and exhibits
thereto, as such Dealer-Manager may reasonably request. It will
similarly furnish to the Dealer-Manager, and others designated by
the Dealer-Manager, as many copies as it may reasonably request
of (i) the Prospectus in final form and of every form of
supplemental or amended prospectus, (ii) this Agreement, and
(iii) any other printed sales literature or other materials
(provided that the use of said sales literature and other
materials has been first approved for use by the Managers and all
appropriate regulatory agencies) which the Dealer-Manager may
reasonably request in connection with the offering of the Units.
2.2 It will furnish such proper information and execute and
file such documents as may be necessary to qualify the Units for
offer and sale under the "blue sky" laws of such jurisdictions as
the Dealer-Manager may reasonably designate and will file and
make in each year such statements and reports as may be required
under such laws. It will furnish to the Dealer-Manager, upon
request, a copy of all documents filed by the Fund or the
Managers in connection with any such qualification.
2.3 It will: (i) use its best efforts to cause the
Registration Statement to become effective; (ii) furnish copies
of any proposed amendment or supplement of the Registration
Statement or Prospectus to each Dealer-Manager; (iii) file every
amendment or supplement to the Registration Statement or the
Prospectus that may be required by the SEC; and (iv) if at any
time the SEC shall issue any stop order suspending the
effectiveness of the Registration Statement, use their best
efforts to obtain the lifting of such order at the earliest
possible time.
2.4 If at any time when a prospectus relating to the Units
is required to be delivered under the Securities Act any event
occurs as a result of which, in the opinion of either the
Managers on behalf of the Fund or the Dealer-Manager, the
Prospectus or any other prospectus then in effect would include
an untrue statement of a material fact or, in view of the
circumstances under which they were made, omit to state any
material fact necessary to make any statement therein not
misleading, they will promptly notify the Dealer-Manager thereof
(unless the information shall have been received from the Dealer-
Manager) and will effect the preparation of an amended or
supplemental prospectus which will correct such statement or
omission. The Fund will then promptly prepare such amended or
supplemental prospectus or prospectuses as may be necessary to
comply with the requirements of Section 10 of the Securities Act.
3. OBLIGATIONS AND COMPENSATION OF DEALER-MANAGERS
3.1 The Fund hereby appoints the Dealer-Manager as its
agent and principal distributor for the purposes of selling for
cash up to 24,000 Units through the Dealers, all of whom shall be
members of the National Association of Securities Dealers, Inc.
("NASD"). The Dealer-Manager may also sell Units for cash
directly to its own clients and customers at the public offering
price and subject to the terms and conditions stated in the
Prospectus. The Dealer-Manager hereby accepts such agency and
distributorship and agrees to use its best efforts to sell the
Units on said terms and conditions. The Dealer-Manager represents
to the Fund and the Managers that it is a member of the NASD and
that it and its employees and representatives have all the
required licenses, registrations and approvals necessary to act
under this Agreement.
3.2 Promptly after the effective date of the Registration
Statement, the Dealer-Manager and the Dealers shall commence the
offering of the Units for cash to the public in jurisdictions in
which the Units are registered or qualified for sale or in which
such offering is otherwise permitted. The Dealer-Manager shall be
the processing broker-dealer responsible for handling, processing
and documentation of investor funds. The Dealer-Manager agrees
that it will cause each Dealer with whom it executes a Dealer
Agreement to transmit all checks received from investors for
Units, together with a subscription agreement in the form
attached to the Prospectus as Exhibit D properly completed by the
investor and the investor's registered representative and all
other investor documentation, to the Dealer-Manager by noon of
the business day following receipt. The Dealer-Manager shall
transmit to Fidelity Bank, Edina, Minnesota, each prospective
investor's check in payment of Units by noon of the second
business day following receipt by the Dealer-Manager. All checks
shall be made payable to "Fidelity Bank --AEI Fund 24 Escrow,"
and if the Dealer-Manager receives checks made payable to any
other person or entity it shall promptly return such checks to
the investor. All subscriptions shall be subject to acceptance by
the Managers on behalf of the Fund. No subscription agreement
will be accepted unless the broker's representation contained
therein has been duly completed by the registered representative
soliciting such subscription. The Dealer-Manager and the Dealers
will suspend or terminate offering of the Units upon request of
the Managers at any time and will resume offering the Units upon
subsequent request of the Managers.
3.3 (a) As compensation for the services rendered by the
Dealer-Manager, and as reimbursement for any expenses incurred by
Dealer-Manager, the Fund shall pay to the Dealer-Manager a
selling commission and a non-accountable expense allowance from
the gross proceeds of all Units sold by the Dealer-Manager,
and/or any Dealers with whom such Dealer-Manager has executed a
Dealer Agreement, and accepted and confirmed by the Fund, equal
to 10% of the Gross Proceeds of sale of Units.
(b) The Fund will reimburse the Dealer-Manager for the due
diligence expenses of Dealers charged to the Dealer-Manager to
the extent such expenses do not exceed 1/2 of one percent (0.5%)
of the Gross Proceeds from sale of Units.
(c) Notwithstanding the foregoing, no commission payments,
due diligence expense reimbursement or accountable expense
reimbursement or amounts whatsoever with respect to the Fund will
be paid or owing to the Dealer-Manager under this Section 3.3
unless and until subscriptions for 1,500 Units in the Fund have
been accepted by the Fund. The Fund and the Managers will not be
liable or responsible to any Dealer for direct payment of
commissions to such Dealer, it being the sole and exclusive
responsibility of the Dealer-Manager for payment of commissions
to such Dealers.
3.4 The Dealer-Manager represents and warrants to the Fund,
the Managers, and each person and firm which signs the
Registration Statement, that the information under the caption
"Plan of Distribution" in the Prospectus and all other
information furnished to the Managers by the Dealer-Manager in
writing expressly for the use in the Registration Statement, any
preliminary prospectus, the Prospectus, or any amendment or
supplement thereto, does 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 not
misleading.
3.5 The Dealer-Manager represents that it has reasonable
grounds to believe, based on information obtained from the Fund
and the Managers through the Prospectus or other materials, that
all material facts relating to a sale of the Units (including
facts relating to the items set forth in Section 3(b) of NASD
Rule 2810) are adequately and accurately disclosed and provide a
basis for evaluating an investment in the Fund.
3.6 The Dealer-Manager covenants not to execute any
subscriptions in the Fund on behalf of a customer for which it
holds a discretionary account without the prior written approval
of such customer.
3.7 The Dealer-Manager covenants that it will maintain
subscription agreements with respect to Investors in the Fund and
other documents relating to the suitability of the Investors in
the Fund for a period of not less than six years after the
termination of the offering with respect to the Fund.
3.8 In recommending the purchase of Units, and before
confirming any sale of such Units to a customer, the Dealer-
Manager shall have reasonable grounds to believe, on the basis of
information obtained from such customer concerning his or her
investment objectives, other investments, financial condition and
needs, and any other information known to the Dealer-Manager,
that (a) the customer is or will be in a financial position
appropriate to enable him to realize to a significant extent the
benefits described in the Prospectus, including the benefits
described under the caption "Income Tax Aspects;" (b) the
customer has a fair market net worth sufficient to sustain the
risks inherent in an investment in the Fund, including loss of
investment and lack of liquidity; and (c) an investment in the
Fund is otherwise suitable for the customer.
3.9 The Dealer-Manager covenants not to execute any
subscription in the Fund prior to informing the subscribing
customer of all pertinent facts relating to the liquidity and
marketability of the Units during the term of the investment.
4. INDEMNIFICATION
4.1 Subject to the limitations contained in Section 6.5(b)
of the Operating Agreement of the Fund, the Fund will indemnify
and hold harmless the Dealers, their officers and directors and
each person, if any, who controls such Dealers within the meaning
of Section 15 of the Securities Act, from and against any losses,
claims, damages or liabilities, joint or several, to which such
Dealers, their officers and directors, or such controlling
persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Registration Statement, or any
post-effective amendment thereto or in the Prospectus or any
amendment or supplement to the Prospectus or (B) in any "blue
sky" application or other document executed by the Fund on its
behalf specifically for the purpose of qualifying any or all of
the Units for sale under the securities laws of any jurisdiction
based upon written information furnished by the Fund under the
securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"),
or (ii) the omission or alleged omission to state in the
Registration Statement, the Prospectus or any supplement therein
or any post-effective amendment therein, or in any Blue Sky
Application, a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; and will
reimburse each such Dealer, its officers and directors and each
such controlling person for any legal or other expenses
reasonably incurred by such Dealer, its officers and directors,
or such controlling person in connection with investigating or
defending such loss, claim, damage, liability or action;
provided, however, that the Fund will not be liable in any such
case to the extent that such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the
Fund or the Managers by or on behalf of any Dealer specifically
for use with reference to such Dealer in the preparation of the
Registration Statement or any such post-effective amendment
therein or any such Blue Sky Application or any such preliminary
prospectus or the Prospectus or any such amendment or supplement
thereto; and provided further that the Fund will not be liable in
any case if it is determined that such Dealer was at fault in
connection with the loss, claim, damage, liability or action.
This Indemnity Agreement will be in addition to any liability
which the Fund may otherwise have.
4.2 The Dealer-Manager, jointly and severally, agrees to
indemnify and hold harmless the Fund, the Managers, its officers
and directors, each person or firm which has signed the
Registration Statement and each person, if any, who controls the
Fund or the Managers within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or
liabilities to which any of the aforesaid parties may become
subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereto,
the Prospectus or any amendment or supplement thereto, or any
Blue Sky Application, or the omission or alleged omission to
state in the Registration Statement or any post-effective
amendment thereto, the Prospectus or any amendment or supplement
thereto, or in any Blue Sky Application, 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; in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Managers by
or on behalf of such Dealer-Manager specifically for use with
reference to the Dealer-Manager in the preparation of the
Registration Statement or any such preliminary prospectus or the
Prospectus or any such amendment or supplement thereto, or (ii)
any unauthorized use of sales materials or use of unauthorized
verbal representations concerning the Units by the Dealer-
Manager, and will reimburse the aforesaid parties, in connection
with investigating or defending such loss, claim, damage,
liability or action. This Indemnity Agreement will be in addition
to any liability that the Dealer-Manager may otherwise have.
4.3 Each Dealer severally will indemnify and hold harmless
the Fund, the Dealer-Manager, the Managers, and each of their
directors and officers who has signed the Registration Statement
and each person, if any, who controls the Fund, the Dealer-
Manager and the Managers within the meaning of Section 15 of the
Securities Act from and against any losses, claims, damages or
liabilities to which the Fund, the Dealer-Manager, the Managers,
or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereto,
the Prospectus or any amendment or supplement thereto, or any
Blue Sky Application, or the omission or alleged omission to
state in the Registration Statement or any post-effective
amendment thereto, the Prospectus or any amendment or supplement
thereto, or in any Blue Sky Application any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the
extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Fund,
Managers or Dealer-Manager by or on behalf of such Dealer
specifically for use with reference to such Dealer in the
preparation of the Registration Statement or any such post-
effective amendments thereto or any such Blue Sky Application or
the Prospectus or any such amendment or supplement thereto, or
(ii) any unauthorized use of sales materials or use of
unauthorized verbal representations concerning the Units by such
Dealer, and will reimburse the Fund, the Dealer-Manager, the
Managers, any director or officer or controlling person thereof,
in connection with investigating or defending any such loss,
claim, damage, liability or action. This Indemnity Agreement will
be in addition to any liability which such Dealer may otherwise
have.
4.4 Promptly after receipt by an indemnified party under
this Section 4 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 4, notify
in writing the indemnifying party of the commencement thereof,
and the omission so to notify the indemnifying party will relieve
it from any liability under this Section 4 as to the particular
item for which indemnification is then being sought, but not from
any other liability which it may have to any indemnified party.
In case any such action is brought against any indemnified party,
and it notifies any indemnifying party of the commencement
thereof, the indemnifying party will be entitled, to the extent
it may wish, jointly with any other indemnifying party similarly
notified, to participate in the defense thereof, with separate
counsel. Such participation shall not relieve such indemnifying
party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses (subject to Section 4.5)
incurred by such indemnified party in defending himself, except
for such expenses incurred after the indemnifying party has
deposited funds sufficient to effect the settlement, with
prejudice, of the claim in respect of which indemnity is sought.
Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or
action effected without the consent of such indemnifying party.
4.5 The indemnifying party shall pay all legal fees and
expenses of the indemnified party in the defense of such claims
or actions; provided, however, that the indemnifying party shall
not be obliged to pay legal expenses and fees to more than one
law firm in connection with the defense of similar claims arising
out of the same alleged acts or omissions giving rise to such
claims notwithstanding that such actions or claims are alleged or
brought by one or more parties against more than one indemnified
party. In the case such claims or actions are alleged or brought
against more than one indemnified party, then the indemnifying
party shall only be obliged to reimburse the expenses and fees of
the one law firm which has been selected by a majority of the
indemnified parties against which such action is finally brought,
and in the event a majority of such indemnified parties are
unable to agree on which law firm for which expenses or fees will
be reimbursable by the indemnifying party then payment shall be
made to the first law firm of record representing an indemnified
party against the action or claim. Such law firm shall be paid
only to the extent of services performed by such law firm and no
reimbursement shall be payable to such law firm on account of
legal services performed by another law firm.
4.6 The Indemnity Agreements contained in this Section 4
shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Dealer-Manager
or the Managers or the Fund, or any officer or director of any of
them, or by or on behalf of the Fund, the Dealer-Manager or the
Managers, (ii) delivery of any Units and payment therefor, and
(iii) any termination of this Agreement. A successor of any
Dealer or of any of the parties to this Agreement, as the case
may be, shall be entitled to the benefits of the Indemnity
Agreements contained in this Section 4.
5. SURVIVAL OF PROVISIONS
The respective agreements, representations and warranties of
the Fund and the Dealer-Manager set forth in this Agreement shall
remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by
or on behalf of the Dealer-Manager or any Dealer or any person
controlling the Dealer-Manager or any Dealer or by or on behalf
of the Managers or any person controlling the Managers, to (iii)
the acceptance of any payment for the Units.
6. APPLICABLE LAW
This Agreement is executed and delivered in, and its
validity, interpretation and construction shall be governed by,
the laws of the State of Minnesota.
7. COUNTERPARTS
This Agreement may be executed in any number of
counterparts. Each counterpart, when executed and delivered,
shall be an original contract; but all counterparts, when taken
together, shall constitute one and the same Agreement.
8. SUCCESSORS AND AMENDMENT
8.1 This Agreement shall inure to the benefit of, and be
binding upon, the Dealer-Manager, the Managers, the Fund and its
respective successors. Nothing in this Agreement is intended or
shall be construed to give to any other person any right, remedy
or claim, except as otherwise specifically provided herein. This
Agreement shall inure to the benefit of the Dealers to the extent
set forth in Sections 1 and 4 hereof.
8.2 This Agreement may be amended by the written Agreement
of the Dealer-Managers and the Managers.
9. TERM
Any party to this Agreement shall have the right to
terminate this Agreement on ten (10) days' written notice.
10. DISTRIBUTION REINVESTMENT PLAN
Notwithstanding any other provision in this Agreement, if
any customer of a Dealer participates in the distribution
reinvestment plan of the Fund (the "Plan") and has designated a
Dealer as a broker-dealer entitled to receive commissions on
reinvestment of Net Cash Flow of the Fund, the Dealer-Manager
shall be entitled to receive commissions on such reinvestment at
the rates set forth in paragraph 3.3(a) (and no other
reimbursement or commission), all or a portion of which shall be
reallowed to the relevant Dealer, but only if Dealer-Manager
confirms that such Dealer has complied with the following
conditions:
a. Neither Dealer-Manager, the Fund nor the Managers
have received any notification from such customer of
the customer's election to revoke the designation of
Dealer as a broker-dealer entitled to such commission;
b. Dealer-Manager has confirmed that Dealer
reasonably believes, based on information received from
the customer within the previous twelve months, that
the customer continues to meet the suitability
requirements set forth in the Prospectus and as
required by paragraph 8(f) of this Agreement;
c. Dealer has forwarded all communications to such
customers, including annual and quarterly reports,
distributed for such purpose to Dealer from the Dealer
Manager.
11. CONFIRMATION
The Managers hereby agree and assume the duty to confirm on
behalf of themselves, and on behalf of dealers or brokers who
sell the Units, all orders for purchase of Units accepted by the
Managers. Such confirmations will comply with the applicable
rules of such other jurisdictions to the extent the Managers are
advised of such laws in writing by the Dealer-Manager.
If the foregoing correctly sets forth our
understanding, please indicate your acceptance thereof in the
space provided below for that purpose, whereupon this letter and
your acceptance shall constitute a binding Agreement between us
as of the date first above written.
Very truly yours,
AEI INCOME & GROWTH FUND 24 LLC
By AEI Fund Management XXI, Inc.
By:
Xxxxxx X. Xxxxxxx
Its President
We hereby agree to the terms hereof.
AEI SECURITIES, INC.
By:
Xxxxxx X. Xxxxxxx
Its President
