Exhibit 1.1
AEI INCOME & GROWTH FUND 23 LLC
DEALER-MANAGER AGREEMENT
, 1998
AEI Incorporated
1300 Minnesota World Trade Center
00 Xxxx Xxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Dear Sirs:
AEI Income & Growth Fund 23 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
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 , 1998.
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:
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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
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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
Real Estate 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 from the
gross proceeds of the offering, a selling commission and a non-
accountable expense allowance from the gross proceeds of all Units
sold by the Dealer-Manager, and the 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 from sale of Units.
(b) The Fund will reimburse the Dealer-Manager for the
bona fide due diligence expenses of Dealers charged to the Dealer-
Manager to the extent such expenses do not exceed 1/2 of one percent
(.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
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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
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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
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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
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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 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 23 LLC
By AEI FUND MANAGEMENT XXI, INC.
By
Xxxxxx X. Xxxxxxx
Its President
We hereby agree to the terms hereof.
AEI SECURITIES INCORPORATED
By
Xxxxxx X. Xxxxxxx
Its President
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