AEI INCOME & GROWTH FUND 26 LLC
IMPOUNDMENT AGREEMENT
THIS IMPOUNDMENT AGREEMENT, is made and entered into by and
among AEI Income & Growth Fund 26 LLC (the "Fund"), AEI
Securities, Inc. ("AEI") and Fidelity Bank, Edina, Minnesota (the
"Bank");
WITNESSETH THAT:
WHEREAS, the Fund proposes to issue and sell up to
10,000,000 units of limited liability company interest (the
"Units"), at a subscription price of $10.00 per unit, and has
entered into an agreement (the "Dealer-Manager Agreement") with
AEI Securities, Inc. (the "Dealer-Manager") pursuant to which the
Dealer-Manager and various members of the National Association of
Securities Dealers, Inc. (collectively, the "Dealers") will offer
the Units for sale for and on behalf of the Fund; and
WHEREAS, the Dealer-Manager Agreement provides that all
funds received by Dealers in connection with the sale of Units
shall be transmitted to the Dealer-Manager as processing broker-
dealer and promptly deposited in an escrow account with the Bank
until the offering of Units is terminated or until (i) the
minimum $1,500,000 of subscription proceeds have been obtained;
and
WHEREAS, the Fund desires to have the Bank deposit such
funds in an escrow account until the termination of the offering
of Units, and the Bank has agreed to serve as Impoundment Agent
for such purpose.
NOW, THEREFORE, for and in consideration of the covenants
and agreements set forth below, the parties agree as follows:
1. APPOINTMENT OF IMPOUNDMENT AGENT; DELIVERY OF FUNDS TO
ESCROW ACCOUNT.
The Fund hereby appoints the Bank as Impoundment Agent to
receive and hold all proceeds from the sale of Units for the term
of this Impoundment Agreement, and to invest the same in such
manner as it shall be directed to in writing by the Fund. Prior
to initial release of funds in accordance with Section 3(a) and
3(c), all proceeds will be invested in a bank account, bank
certificate of deposit or money market account issued by a bank,
or in short-term securities issued by or guaranteed by the United
States Government. All subscription checks shall be payable to
"Fidelity Bank - AEI Fund 26 Escrow." Dealers shall transmit all
subscription checks for Units to the Dealer-Manager by noon of
the business day following receipt of such checks and the Dealer-
Manager shall transmit all such checks, or return unaccepted
checks to subscribers, as soon as practicable thereafter but in
any event by the end of the second business day following receipt
of such checks by the Dealer-Manager.
2. IDENTITY OF SUBSCRIBERS: OWNERSHIP OF FUNDS DEPOSITED.
The Dealer-Manager shall deliver to the Impoundment Agent,
with each deposit of checks, a list that contains the names and
addresses of all persons who have subscribed for Units, the
amount of money tendered by each subscriber and the date on which
the funds were received from each subscriber. The Impoundment
Agent shall hold all funds identified by the Dealer-Manager. The
funds, as well as any interest or income earned thereon, shall
remain the property of the subscribers until released to the Fund
as hereinafter provided, and shall not be subject to any liens by
the Impoundment Agent or judgments or claims against Dealers, the
Dealer-Manager or the Fund.
3. DISBURSEMENT OF FUNDS.
(a) After such time as the Impoundment Agent has received
not less than $1,500,000 in subscription amounts, the Impoundment
Agent shall notify the Commissioner of Securities for the State
of Minnesota or an agent thereof (the "Commissioner") in writing
of the escrow of such amounts. Upon receipt by the Impoundment
Agent of written authorization from the Commissioner, said
Impoundment Agent, on demand of AEI, shall pay over to the Fund
all or any portion of the impounded funds. If $1,500,000 in
subscription proceeds is not received by the Impoundment Agent
during the term of this Impoundment Agreement, then, within a
reasonable time, but in no event more than thirty (30) days after
the last day of the term of this Impoundment Agreement,
Impoundment Agent shall refund to each subscriber the face amount
of payments made in subscriptions for Units, together with his or
her pro-rata share of interest or income, if any, earned on the
funds deposited in escrow. After receipt by the Impoundment
Agent of written authorization for the initial release of funds
hereunder, the Impoundment Agent shall release to the Fund, from
time to time, any funds deposited pursuant to this Agreement,
upon the written request of the Fund.
(b) The Fund shall send written notice of each request for
disbursement of funds which shall specify the subscriptions that
have been accepted on behalf of the Fund, the commissions and
non-accountable expenses payable on such subscriptions, the
subscriptions that have been rejected, and the subscriptions that
have been deposited in escrow but upon which acceptance by the
Fund remains pending. In accordance with such notice, the
Impoundment Agent shall disburse funds:
(i) representing commissions and non-accountable expenses
on accepted subscriptions directly to the Dealer-
Manager;
(ii) representing accepted subscription proceeds net of
commissions and non-accountable expenses - directly to
the account of the Fund as authorized in such notice;
(iii) representing interest accrued on accepted
subscriptions proceeds - directly to the subscribers;
and
(iv) representing rejected subscription proceeds and
interest accrued thereon - directly to the subscribers.
All subscription proceeds upon which acceptance remains
pending shall be held by the Impoundment Agent for disbursement
in accordance with the direction contained in the next succeeding
notice.
4. TERM OF IMPOUNDMENT.
This Impoundment Agreement shall terminate on the 365th day
following the effective date of the registration statement
relating to the Units or on such earlier date as all funds are
released to the Fund as provided in Section 3 above, provided,
however, that if $1,500,000 in subscription amounts have been
received prior to the 365th day and the Fund elects to extend the
offering of Units in accordance with the registration statement
relating thereto, this Impoundment Agreement shall terminate upon
the expiration of such extension (but not, in any event, later
than the 730th day after the effective date). The Fund and the
Dealer-Manager may also terminate this Impoundment Agreement at
any time upon notice to the Impoundment Agent that the Fund has
made a decision to terminate the offer and sale of Units.
5. CONSENT OF COMMISSIONER TO RELEASE FUNDS.
Until the Impoundment Agent has received $1,500,000 in
subscription amounts, no funds shall be released to the Fund
hereunder except upon the express written authorization of the
Commissioner. If the Commissioner finds that any conditions of
this Impoundment Agreement have not been satisfied, or that any
provisions of the Minnesota Securities Laws or regulations have
not been complied with, then he may withhold such authorization
for release of funds by the Impoundment Agent to the Fund and may
direct the Impoundment Agent to return the funds to the
subscribers. After the initial release of funds is authorized by
the Commissioner, the Impoundment Agent shall release funds, from
time to time, to the Fund upon written request.
6. FEE OF IMPOUNDMENT AGENT.
The Impoundment Agent shall receive reasonable compensation
for its services as Impoundment Agent. Such compensation shall
be paid by the Fund and shall not be subtracted from the funds
held in escrow by the Impoundment Agent. The fee agreed upon for
services rendered hereunder shall constitute full compensation
for the services of the Impoundment Agent performed pursuant to
this Impoundment Agreement; provided, however, that if the
Impoundment Agent renders any material services not contemplated
by this Impoundment Agreement, the Impoundment Agent shall be
reasonably compensated for such service.
7. REPRESENTATIONS OF IMPOUNDMENT AGENT. The Impoundment
Agent represents and warrants that:
(a) subscription proceeds deposited on behalf of each
subscriber will be insured by the Federal Deposit Insurance
Corporation to the maximum extent such proceeds would be insured
if deposited in individual accounts for each such subscriber; and
(b) it will distribute to subscribers within the time
period prescribed by the Internal Revenue Code of 1986, as
amended, reports of all interest income earned on escrowed funds.
Except as provided in this Section 7, the sole duty of the
Impoundment Agent shall be to receive funds from the sale of the
Units and hold them for release in accordance with the terms of
this Impoundment Agreement.
8. LIABILITY OF IMPOUNDMENT AGENT.
The Impoundment Agent may conclusively rely upon and shall
have no duty to verify any statement, certificate, notice,
request, consent, order or other document believed by it to be
genuine and to have been signed or presented by the proper party
or parties. The Impoundment Agent shall be under no obligation
to institute or defend any action, suit or proceeding in
connection with this Impoundment Agreement unless first
indemnified to its satisfaction by the Fund. The Impoundment
Agent may consult counsel with respect to any question arising
under this Impoundment Agreement, and the Impoundment Agent shall
not be liable for any action taken or omitted in good faith on
advice of such counsel. All funds held by the Impoundment Agent
pursuant to this Impoundment Agreement shall constitute trust
property for the purposes for which they are held.
9. INSPECTION OF RECORDS.
The Fund may, at any time during regular business hours,
inspect the records of the Impoundment Agent, insofar as they
relate to this Impoundment Agreement, for the purpose of
determining that the Impoundment Agent is acting in compliance
with the provisions of this Impoundment Agreement.
10. BINDING EFFECT AND SUBSTITUTION OF IMPOUNDMENT AGENT.
The terms and conditions of this Impoundment Agreement shall
be binding upon the parties hereto and their respective
creditors, transferees, successors in interest and assigns,
whether by operation of law or otherwise. If for any reason the
bank should be unable or unwilling to continue to assume its
duties as Impoundment Agent, nothing in this Impoundment
Agreement shall prevent the Fund from appointing an alternative
Impoundment Agent.
IN WITNESS WHEREOF, the parties hereto have executed this
Impoundment Agreement on the ____ day of _________________, 2005.
AEI INCOME & GROWTH FUND 26 LLC
By AEI Fund Management XXI, Inc.
Managing Member
By:
Its President
FIDELITY BANK
By:
Its
AEI SECURITIES, INC.
By:
Its President
Accepted for filing
_____________________________
Commissioner of Commerce
